Are Accusations of Embezzlement Defamatory?

Not if they are in the course of litigation, a court rules.

Miller v. Second Baptist Church, 2004 WL 1161653 (Cal. App. 2004)

Background. A church's senior pastor believed that certain members of the church board (including the chairman) had diverted $94,000 of church funds earmarked for a remodeling project to other uses. He expressed his concerns at meetings of the church board, and to the entire congregation at a special business meeting. He informed the congregation that he wanted an "accounting" of the funds to determine if they had been used improperly, and he insisted that the board chairman resign his position.

The chairman claimed that the pastor's acts amounted to a "false accusation" that he and other board members had embezzled church funds. The pastor retained an attorney who wrote the board chairman a letter demanding that he "immediately cease and desist from [his] unlawful threats, harassment, blackmail and extortion of the pastor." The attorney's letter continued:

It is a disgrace that a man who holds himself out to be a Christian engages in such conduct. You are upset that the pastor has requested an accounting of the church monies which you have controlled for years and, rather than provide the information, you have launched a personal attack on him. The only conclusion one can reach from such behavior is that you have, in fact, embezzled money from the church. The pastor has referred this matter to the appropriate church board as well as governing bodies. We are confident that they will pursue actions against you to recover all church property.

The deposed board chairman sued the church for defamation. A trial court dismissed the lawsuit and a state appeals court affirmed the trial court's ruling. It noted that the pastor's expressing concerns about the use of designated church funds was not defamatory, and the attorney's letter that accused the board chairman of "embezzlement" was not defamatory since it was protected by the "litigation privilege" (good faith statements made in contemplation of litigation generally cannot be defamatory).

What this means for churches

This case demonstrates an important point. Church leaders should not be dissuaded from asking questions about the appropriate use of designated church funds out of a fear of being liable for defamation. Not only are such inquiries legally appropriate in most cases, but they are essential to the proper discharge of church board members' fiduciary duties.

It is also worth noting that letters written by attorneys on behalf of church clients generally cannot be defamatory if written in good faith and in the course of litigation or in contemplation of litigation.

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