Key point 10-18.2. Many courts have refused to hold denominational agencies liable for the acts of affiliated ministers and churches, either because of First Amendment considerations or because the relationship between the denominational agency and affiliated church or minister is too remote to support liability.
In a potentially significant ruling, a federal district court in Michigan ruled that the United Methodist Church was not a “jural entity” and therefore could not be sued by a family seeking $12 million in damages from various Methodist agencies as a result of the embezzlement of $360,000 of their funds from church accounts.
An adult male (the plaintiff) is a beneficiary of a multimillion-dollar family trust.
He claimed that an employee of a local Methodist church served as trustee of the trust, and allegedly, with the assistance of the church and its pastor, misappropriated trust funds amounting to $360,000.
He alleged that the trustee would disburse amounts of money from the trust to himself, disguising the payments as charitable contributions, and then using the money for personal gain.
In addition to embezzling money from the trust, the plaintiff claimed that the trustee failed to maintain adequate financial statements and transmitted confidential trust documents to third parties.
Based on the foregoing, the plaintiff sued the local church, the United Methodist Church (UMC), and the trustee who embezzled the funds, on the following grounds:
- civil embezzlement,
- civil financial fraud and racketeering,
- fraud,
- misrepresentation,
- concealment,
- aiding and abetting a breach of fiduciary duties, and
- unjust enrichment.
The plaintiff requested $12 million in damages and a permanent injunction barring the defendants from engaging in similar activities in the future.
The General Council on Finance and Administration (GCFA) of the UMC asked the federal district court in Michigan where the lawsuit was filed to dismiss the plaintiff’s claims against the UMC on two grounds.
The UMC “is a denomination, not a jural entity capable of being sued.”
The UMC is not a “true and accurate perpetrator of the alleged wrongdoing against the plaintiff.”
The court observed that
in its motion [to dismiss the case] the GCFA explained that “[the] United Methodist Church is simply a series of separate legal entities — including local churches, conferences, agencies, councils and boards — united by a common religious belief.” It therefore appears that the Michigan Conference of the United Methodist Church is the legal entity that [plaintiff] intended to sue. . . .
The undersigned [judge] respectfully recommends that the Court dismiss the United Methodist Church from this action because it is a religious denomination, not a legal entity. The undersigned further recommends that the Court grant [plaintiff’s] motion for leave to amend insofar as he wishes to name the Michigan Conference of the United Methodist Church as a defendant; it appears that this is the legal entity that [plaintiff] intended to sue in the first place. (emphasis added)
What this case means for churches and religious denominations
This case raises the extraordinary possibility that national religious denominations may not be liable for injuries occurring at affiliated churches if the following conditions are met:
- The national church is a “religious denomination, not a jural entity capable of being sued.”
- The denomination is not a “true and accurate perpetrator of the alleged wrongdoing” against the injured party.
- The denomination is simply “a series of separate legal entities — including local churches, conferences, agencies, councils and boards — united by a common religious belief.”
The court concluded that the Michigan Conference of the UMC was a proper defendant since it supplied the deficiencies preventing the UMC from being a defendant in the underlying litigation.
Whether a court bars other national religious denominations from being sued for injuries over which it was not a “true and accurate perpetrator of the alleged wrongdoing,” remains to be seen.
An instructive example is the liability of national and regional denominational agencies for the numerous lawsuits pending against them for incidents of child sexual abuse occurring in affiliated churches.
Should a national or regional denomination be responsible for such wrongs? Such questions require careful examination of several considerations, including the authority, if any, conferred by a denomination’s governing documents over the activity or personnel causing the abuse, and the willingness of other courts to follow the ruling in the Michigan case summarized above.
Some courts have ruled that national and regional denominational agencies are not “jural entities” that can be sued for the wrongful acts of affiliated churches, clergy, and lay employees and volunteers. Consider the following example.
EXAMPLE. A California appeals court ruled that the UMC could be sued for the alleged misconduct of a subsidiary. The UMC was sued for the alleged improprieties of a subsidiary corporation that operated fourteen nursing homes in California, Arizona, and Hawaii. When the subsidiary encountered financial difficulties, it raised the monthly payments of residents in violation of the terms of their “continuing care agreements” that guaranteed lifetime nursing and medical care for a fixed price. The subsidiary went bankrupt, and a class of nearly 2,000 residents sued the UMC for fraud and breach of contract. Although the case eventually was settled out of court, a California appeals court did rule that the UMC could be sued for the misconduct of its subsidiary. The court emphasized that the UMC was a hierarchical denomination with control over local churches and subsidiary institutions, ranging from restrictions on the purchase or sale of property to the selection of local church pastors. Such control, observed the court, made the UMC responsible for the liabilities of its affiliated churches and subsidiary institutions. The court also found it relevant that the subsidiary organization that operated the nursing homes was engaged in a commercial enterprise.
However, the court suggested that the First Amendment guaranty of religious freedom might prohibit direct actions against the UMC on account of the actions of subsidiary organizations if the allowance of such actions “would affect the distribution of power or property within the denomination, would modify or interfere with modes of worship affected by Methodists or would have any effect other than to oblige UMC to defend itself when sued upon civil obligations it is alleged to have incurred.”
Barr v. United Methodist Church, 153 Cal. Rptr. 322 (1979), cert. denied, 444 U.S. 973 (1979).
Several courts have ruled that national and regional denominational agencies are “jural entities” that can be sued for the wrongful acts of affiliated churches, clergy, and lay employees and volunteers. This often is based on the conclusion that the affiliate is an “agent” of the denomination. Consider the following examples.
EXAMPLE. In 1951 the California Supreme Court ruled that a presbytery was responsible for injuries caused by the negligent driving of the pastor of an affiliated “mission church.” The court concluded that the pastor was an “agent” of the presbytery, since “he was not responsible to the local church but only to the presbytery. The presbytery, not the church, had the power to remove him. Furthermore, he could not transfer to another pastorate without permission of the presbytery, and in fact he was a member of the presbytery rather than of the local church.” The court concluded:
The existence of the right of control and supervision establishes the existence of an agency relationship [making the employer legally responsible for the acts of an employee committed within the scope of his or her employment]. The evidence clearly supports the conclusion of the jury that such control existed in the present case. The right of the presbytery to install and remove its ministers, to approve or disapprove their transfer to other jurisdictions, and to supervise and control the activities of the local churches, particularly those in the mission stage, is inconsistent with a contrary conclusion.
The court emphasized that the presbytery exercised significant control over “missions” churches (it held title to all church property, assisted with the churches’ finances, and paid a portion of clergy salaries). It cautioned that “we are not here called upon to determine the liability of the presbytery for negligence in the activities of a fully established and independently incorporated Presbyterian church which has passed from the mission stage.”
Malloy v. Fong, 232 P.2d 241 (Cal. 1951).
EXAMPLE. In a similar case, a California appeals court ruled that a trial court had improperly dismissed a lawsuit against a denomination (the International Church of the Foursquare Gospel). The denomination had been sued by a person who was injured by the negligent driving of one of the denomination’s pastors while engaged in church business. The court concluded that there was ample evidence demonstrating that the denomination was legally responsible for the injuries since the pastor was its “agent,” and was acting within the scope of church business at the time of the accident. Accordingly, the trial court acted improperly in dismissing the case.
The court based its finding of an agency relationship upon the following factors: (1) The denomination’s charter specified that it was incorporated “to supervise the management of the churches of the [denomination],” and to establish and grant charters to churches which would “be subject at all times to the supervision of [the denomination].” (2) The denomination ordained ministers “for the furtherance of the work of the [denomination].” (3) All property or equipment acquired by any local church is required to be held in the name of the denomination. (4) No church is allowed to execute a general contract to build without the written consent of a denominational official. (5) Each church is required to keep books of account and to prepare full and accurate monthly reports of activities in such form as is prescribed by the denomination. (6) The denomination is empowered to remove from office pastors who are not functioning in such a manner as to promote the best interests of their church. (7) Pastors who desire to transfer to a church in another state must secure a letter of transfer from a denominational official. (8) One of the pastor’s duties is to see that the local church cooperates in all programs of the denomination.
The court concluded, on the basis of these facts, that “manifestly, this evidence meets every requirement for the establishment of an agency relationship . . . Further, the pastor was not only an agent of the denomination, but also was acting within the scope of his duties at the time of the accident. Accordingly, the denomination was legally responsible for his negligence.”
Miller v. International Church of the Foursquare Gospel, Inc., 37 Cal. Rptr. 309 (Cal. 1964).
In summary, national and regional denominational agencies may be liable for injuries occurring on the property of affiliates or resulting from the wrongful or negligent acts of clergy, lay employees, and volunteers, but only if they have sufficient authority over the affiliate and its personnel
Here are several of the factors identified by the courts in deciding if a national or regional denominational agency is sufficiently integrated with an affiliate to be responsible for the affiliate’s liabilities. The more of these a particular denomination meets, the less likely it can avoid liability for the acts and liabilities of the affiliate. And conversely, the fewer of these that a denomination meets, the more likely it can avoid liability for the actions of affiliates.
- A hierarchical denomination exercises control over local churches and subsidiary institutions, ranging from restrictions on the purchase or sale of property to the selection of local church pastors role with the local church
- A denomination’s charter specifies that it was incorporated “to supervise the management of the churches of the [denomination],” and to establish and grant charters to churches which would “be subject at all times to the supervision of [the denomination].”
- The denomination ordains ministers “for the furtherance of the work of the [denomination].”
- All property or equipment acquired by any local church is required to be held in the name of the denomination.
- No church is allowed to execute a general contract to build without the written consent of a denominational official.
- Each church is required to keep books of account and to prepare full and accurate monthly reports of activities in such form as is prescribed by the denomination.
- The denomination is empowered to remove from office pastors who are not functioning in such a manner as to promote the best interests of their church.
- Pastors who desire to transfer to a church in another state must secure a letter of transfer from a denominational official.
- One of the pastor’s duties is to see that the local church cooperates in all programs of the denomination.
Myerscough v. United Methodist Church, 2023 WL 3998256 (W.D. Mich. 2023).
