• Key point 6-01.1. Unincorporated associations have no legal existence and as a result cannot sue or be sued, hold title to property, or enter into contracts. Some states have modified or eliminated some or all of these limitations. Unincorporated Associations
A federal court in the District of Columbia dismissed a discrimination lawsuit that had been brought against a Catholic church and school on the ground that they were “unincorporated entities” that could not be sued. An applicant (the “plaintiff”) for the position of music director at a school operated by a Catholic church claimed that she was not considered for the job because of her disability (multiple sclerosis), which confined her to a wheelchair. She sued the church and school for discrimination in violation of the Americans with Disabilities Act. The plaintiff conceded that the church and school were unincorporated divisions of the Archdiocese of Washington (a corporation), but she insisted that the church and school were sufficiently independent of the Archdiocese to be sued separately. The court disagreed. It began its opinion by noting that the Archdiocese is made up of all of the Catholic parishes and related facilities within its jurisdiction, which encompasses the District of Columbia and five surrounding Maryland counties. Although the Roman Catholic Church views each parish as a separate entity for religious purposes, the parishes are not separately incorporated under civil law. The parish that was sued in this case was within the jurisdiction of the Archdiocese. It operates independently of other parishes within the jurisdiction. The Archdiocese owns all of the parish’s property, which consists of a church, school, preschool, and convent.
The court referred to several cases holding that “unincorporated divisions of a corporation lack legal capacity to be sued.” It noted that the rationale for this position “arises out of an unincorporated division’s lack of independent assets: because any judgment against it must be satisfied out of the corporation’s assets, the corporation must be named, and adjudged liable, as a party …. Absent the ability to satisfy a judgment against the larger corporation, a plaintiff gains little by suing one of the corporation’s unincorporated divisions.” The court agreed with the plaintiff that the parish operates independently within the Archdiocese, but it did not find this independence relevant to the question of the capacity of the church and school to be sued.
Application. While the court in this case acknowledged that “unincorporated associations” may sue and be sued in most states, it ruled that “unincorporated divisions” of a corporation cannot. This is an important conclusion, since many churches and denominational agencies have affiliates that could be classified as unincorporated “divisions.” This case can be used to defend against lawsuits that are brought directly against such a “division.” Equal Employment Opportunity Commission v. St. Francis Xavier Parochial School, 77 F. Supp.2d 71 (D.D.C. 1999).
Copyright 2000 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m77 c0600
