Suit Against ELCA’s Pension Board Dismissed

Case involved dispute over investment of funds in South African businesses.

Church Law and Tax 1996-07-01

Retirement Plans

Key point. The first amendment prohibits the civil courts from resolving core issues of ecclesiastical concern.

A Minnesota court dismissed a lawsuit brought by Lutheran pastors against a denominational pension board for allegedly breaching their fiduciary duty to participants by not investing in companies that did business in South Africa. The Evangelical Lutheran Church in America (ELCA) established a board of pensions in 1988 to manage and operate a pension fund for Lutheran pastors and lay employees “exclusively for the benefit of and to assist in carrying out the purposes of the ELCA.” The ELCA adopted the position that the system of apartheid in South Africa was so contrary to Lutheran theology that it had to be rejected as a matter of faith. The ELCA passed a resolution to “see that none of our ELCA pension funds will be invested in companies doing business in South Africa.” The board of pensions enforced this policy from 1988 to 1993. A dissenting group of Lutherans opposed the ELCA’s decision to use its assets as a political weapon and asked to withdraw their pension funds. When their request was denied they sued the board of pensions and the ELCA, claiming that both groups had violated their fiduciary duties to participants in the pension program by elevating social concerns over sound investment strategy. A state appeals court dismissed the lawsuit on the ground that a resolution of the lawsuit would require the court to interpret religious doctrine in violation of the first amendment’s nonestablishment of religion clause. The court pointed out that if the resolution of a lawsuit by a civil court would create “excessive entanglemen”t between church and state, then the court is prohibited by the nonestablishment of religion clause from becoming involved. On the other hand, the court can resolve lawsuits involving religious organizations if it can do so on the basis of “neutral principles of law” involving no interpretation of religious doctrine. The court noted that “if a claim involves core issues of ecclesiastical concern, the potential for government entanglement in religious matters prevents judicial review.” This was just such a case, the court concluded: “While the Board of Pensions is required to prudently invest its holdings, the ELCA created the Board to both provide for pastors’ retirement needs and assist the ELCA in accomplishing doctrinal goals. The ELCA enacted the [apartheid] policy in an effort to further its social and doctrinal goals …. Accordingly, any review of the Board of Pensions’ [investment policy] would entangle the court in reviewing church doctrine and policy.” The court rejected the pastors’ claim that their lawsuit could be resolved on the basis of neutral principles of law involving no interpretation of religious doctrine: “There are no neutral principles of law that would enable a [court] to distinguish between investments that Lutheran doctrine should find to be morally acceptable and those that it should find to be morally unacceptable.” The court also concluded that the “freedom of conscience” clause of the Minnesota Constitution prohibited the civil courts from resolving this dispute. Basich v. Board of Pensions, 540 N.W.2d 82 (Minn. App. 1995). [ Personal Liability of Church Officers, Directors, and Trustees, Judicial Resolution of Church Disputes]

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