Religious Institutions: June 2015

by Holland & Knight LLP

Timely Topics

Religious institutions commonly make payments to or receive payments directly or indirectly from governmental agencies for services rendered; e.g., day cares that benefit from public scholarships, hospitals that participate in Medicare or Medicaid, or soup kitchens that receive grants. Institutions that do business with government should be familiar with the federal and state False Claims Act. The quintessential false claim involves knowingly presenting or causing to be presented to a state officer or contractor a false or fraudulent claim for payment or approval. Another type is knowingly making, using, or causing to be made or used a false statement to decrease an obligation to pay money to the state. As a recent example, churches in Hawaii reportedly settled a False Claims Act lawsuit arguing that they misled public schools through the use of insincere documents to convince the schools to provide facilities at substandard rent. A "reverse" false claim involves knowingly failing to pay money or property owed to the government such as through retention of overpayments. "Knowingly" typically includes reckless disregard of obligations and deliberate ignorance of possible violations. A person who makes a false claim is liable for civil penalties, treble the amount of damages the agency sustains because of the act or omission of that person, and attorneys' fees and costs. In addition, the institution may be suspended from the public program. A private person may bring a civil action (called a qui tam action) for violation of the False Claims Act, but must give the state the opportunity to intervene and take over the action. Regardless, the individual receives a percentage of the recovery, making false claims a rapid growth area in litigation.

Religious Discrimination in Employment Requires Motive, Not Intent

In Equal Employment Opportunity Comm'n v. Abercrombie & Fitch Stores, Inc., No. 14-86 (U.S. June 1, 2015), the U.S. Supreme Court ruled that a non-exempt employer may not make an applicant's religious practice, confirmed or otherwise, a factor in employment decisions. Abercrombie had a policy that its employees could not wear a cap. Samantha Elauf, a practicing Muslim, applied for a job and was denied it because she wears a headscarf. Abercrombie argued that it had not violated Title VII because the applicant had not advised the employer of her need for an accommodation and, thus, the company lacked "actual knowledge" of it when it decided not to hire her. The court rejected this argument; it held that an applicant "need only show that his need for an accommodation was a motivating factor in the employer's decision." The so-called "disparate treatment provision" forbids employers to (1) "fail ... to hire" an applicant (2) "because of" (3) "such individual's ... religion." The court emphasized that "religion" in this context includes all aspects of religious observance and practice, as well as belief. Abercrombie also argued that its policy was neutral and not a form of intentional discrimination, but the court ruled that Title VII demands more than mere neutrality with regard to religious practices; it gives them favored treatment, affirmatively obligating employers not to fail or refuse to hire or discharge any individual because of the individual's religious observance or practice.

Missouri Free to Exclude Church from Generally Available Grant Program

In Trinity Lutheran Church of Columbia, Inc. v. Pauley, No. 14-1382, 2015 WL 3429427 (8th Cir. May 29, 2015), the court upheld the denial of a church's application for competitively awarded grants for purchase of recycled tires to resurface its playground based on the department's purported policy of not giving grants to religious organizations, and upheld the plaintiff's request to amend its complaint after the dismissal to allege that the department had awarded such grants to up to 15 other religious institutions, including churches. Although the plaintiff framed the case as an as-applied challenge, the court framed it as a facial attack on the state Blaine amendment, article I, section 7 of the Missouri Constitution. The latter states, in part, that "no money shall ever be taken from the public treasury, directly or indirectly, in aid of any church, sect or denomination of religion ... and that no preference shall be given to nor any discrimination made against any church, sect or creed of religion, or any form of religious faith or worship." The court found controlling the U.S. Supreme Court's summary affirmance in Luetkemeyer v. Kaufmann, 419 U.S. 888 (1974), where the court denied injunctive relief to the plaintiffs who sought the same public transportation benefits for the pupils of church-related schools as public schools. Furthermore, the court indicated that, setting aside what Missouri is constitutionally permitted to do, it was not aware of any federal precedent compelling Missouri to provide public grant money directly to a church. The court was not convinced by the church's argument that the Scrap Tire Program did not constitute "aid" within the meaning of article I, section 7. Judge Gruender dissented in part; he observed that the constitution does not leave states with unfettered discretion to exclude the religious from generally available public benefits.

Public School Contract to Educate Alternative Students at Religious School Did Not Violate Establishment Clause

In Smith v. Jefferson Cnty. Bd. of Sch. Comm'rs, No. 13-5957, 2015 WL 3620473 (6th Cir. June 11, 2015), the court reversed the District Court and ruled against teachers who lost their jobs when for budgetary reasons the county school board abolished their alternative school and contracted for its students to be educated at Kingswood, a private Christian school. The court found that the school board's purpose was secular; i.e., to reconcile its budget; and its effect was secular: "[there is no suggestion that the Board's association with Kingswood coerced students to partake in religious activity of any kind, either directly or through peer pressure." The court also ruled that "a reasonable observer would not interpret the School Board's relationship with Kingswood as a governmental endorsement of religion." Rather, the reasonable observer would understand (1) the budgetary crisis that caused the board to close its alternative school; (2) that the board selected the church school because it was a high-performing, state-certified alternative school; and (3) the move saved significant taxpayer money and ensured that the alternative students would get a good education. The court rejected the idea that the mere status of Kingswood as a religious organization gives rise to endorsement. Finally, the court ruled that the arrangement did not lead to excessive entanglement between church and state because it involved a quid pro quo, not aid, and Kingswood operated the school at a loss.

Employment and Housing Ordinance Constitutional as Applied to Small Employer

In Baker v. City of Iowa City, No. 13-1877, 2015 WL 2445108 (Iowa May 22, 2015), the court ruled that ordinances prohibiting employment and housing discrimination as applied to a small employer were not unconstitutional under the free association, commercial speech, procedural or substantive due process, or equal protection clauses of the federal Constitution. The plaintiffs were out-of-state real property owners who employed one or two people to manage their property. They turned down one applicant because she failed to provide requested references and indicated her 11-year-old son would perform the outside property maintenance required by the position. The applicant complained to the Iowa City Human Rights Commission, which agreed with her that the plaintiffs violated the employment and human rights ordinance. The court ruled that the plaintiffs had no free association claim because they had no close, intimate, personal or constant contact with their employee. As to all other federal rights, the court ruled that the city had a substantial interest in ensuring equal treatment of its citizens sufficient to survive rational basis constitutional scrutiny.

Notre Dame Not Entitled to Injunction Against Contraceptive Coverage by Insurer or Administrator

In Univ. of Notre Dame v. Burwell, No. 13-3853, 2015 WL 2374764 (7th Cir. May 19, 2015), the court ruled that the university failed to establish its entitlement to a preliminary injunction to prohibit the government from forbidding the university from barring its health insurer and health plan administrator from providing contraceptive coverage to the university's students and employees pursuant to the Affordable Care Act. The court expressed skepticism of Notre Dame's argument that it is complicit in providing contraception by virtue of completing EBSA Form 700 in order to obtain the statutory accommodation preventing the university from paying for contraception, or that the government has several practical alternatives to provide contraception such as directly or through tax credits.

Nevada Court Lacked Personal Jurisdiction Over Green Bay Diocese in Sexual Assault Case

In Catholic Diocese of Green Bay v. John Doe 119, No. 62840, 2015 WL 3413598 (Nev. May 28, 2015), the court ruled that the District Court lacked personal jurisdiction over the Catholic Diocese of Green Bay sufficient to establish liability against it in relation to a lawsuit for child molestation by a priest incardinated in Green Bay but supervised by the bishop of Reno-Las Vegas where the assault allegedly occurred. The District Court found purposeful availment of the jurisdiction due to four contacts: a letter of recommendation, telephone communication, periodic monitoring, and "some sort of employment or controlling relationship." The Green Bay Diocese's letter of recommendation was addressed to a Bishop in California. The priest unilaterally provided the letter to the Diocese of Reno-Las Vegas. The telephone call was from the Las Vegas Diocese to the Green Bay Diocese. "The alleged monitoring appears to have been little more than the occasional letter between [the priest] and the Vicar General of the Diocese of Green Bay ... ." As to any type of employment relationship, the court found no evidence that the Diocese of Green Bay assigned daily tasks to the priest and ruled that incardination had no bearing on supervisory authority.

Student States Claim Against School Based on Lack of Abuse Policies and Secretary's Knowledge

In Hecksher v. Fairwinds Baptist Church, Inc., No. 621, 2014, 2015 WL 2415121 (Del. May 21, 2015), the court reversed summary judgment for the school on that grounds that fact issues remained as to whether a religious school principal's secretary, who was married to the alleged perpetrator, was acting within the scope of her employment when she learned about, but failed to report a teacher's sexual abuse of a student, and therefore whether the secretary's knowledge should be imputed to the school. In addition, the court ruled there were fact issues whether the school's lack of an official policy or rules about sexual abuse prevention, detection or reporting of sexual abuse of students, together with a failure to inform faculty about statutory reporting duties, amounted to breach of its duty to exercise due care to protect the student. The court also ruled that there were fact issues about whether the school failed to take reasonable action in response to the complaints about inappropriate conduct by the teacher with female students.

Court May Set Record Date to Determine Church Membership

In Fairfield Pentecostal Church v. Johnson, No. 15-68, 2015 WL 3534122 (La. App. 3d Cir. June 3, 2015), the court ruled that a trial court had authority to set the record date to determine the membership entitled to vote at a special meeting on whether to dismiss the purported reverend of the church, in an action brought by a faction of the church that supported the reverend against another faction led by heirs of those who conveyed the land for the church.

Court Properly Defers to California Presbytery in Property Dispute

In Kim v. True Church Members of the Holy Hill Community Church, No. B255924, 2015 WL 2414138 (Cal.App. 2 Dist. May 21, 2015), the court ruled that the trial court had correctly applied the ecclesiastical rule requiring judicial deference to ecclesiastical decisions, but not in the case of a property dispute between two religious groups susceptible to the application of neutral principles of law. This dispute was between a faction, including an excommunicated former pastor and members, and another faction that attempted to secede from the Western California Presbytery (WCP). The appellate court found that the trial court properly deferred to the WCP's determination that the attempted secession was invalid.

Hasidic Jewish Community States Claim Against Village

In Bloomingburg Jewish Educ. Ctr v. Village of Bloomingburg, N.Y., No. 14-cv-7250 (KBF), 2015 WL 3604300 (S.D. N.Y. June 9, 2015), the court ruled that the plaintiffs stated claims under federal civil rights laws for equal protection and due process claims against the village and its officials for allegedly obstructing completion of a housing development project being marketed to Hasidic Jews, impeding the opening of the Bloomingburg Jewish Education Center (a private Hasidic religious school), preventing a property in Bloomingburg from being converted to a mikvah (a bath used by Hasidic Jews for ritual immersion and purification), and engaging in a program of harassment and discriminatory building code enforcement aimed at Hasidic Jews. The alleged obstructionism began after the town supervisor, who campaigned against Hasidic Jews moving into the area, was elected to office.

Amended Graduation Prayer Upheld

In Am. Humanist Ass'n v. S. Carolina Dep't of Educ., No. 6:13-2471-BHH, 2015 WL 2365350 (D.S.C. May 18, 2015), the court ruled on the constitutionality of a school district's graduation prayer practice as challenged and as amended thereafter, and stipulated to a finding that the original prayer practice was unconstitutional, but not the amended prayer practice. For the original, the school selected fifth graders to pray twice at the ceremony based in part on their "ability to speak in front of a group" and previewed and approved the content. For the amended practice, the school district agreed to select students based upon neutral criteria such as class rank or academic merit, and offer them the chance to deliver a message, including a religious one or prayer not previewed by the district. The court required the defendant to advertise the amended policy and was careful to rule that it would not accept "any kind of wink and nod maneuvering" that would allow the district to return to its unconstitutional practice.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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