Religious Institutions Update: October 2013

by Holland & Knight LLP

The legitimacy of political speech from the pulpit is much debated. Some contend that religious institutions should be silent, because of separation of church and state or the inaccessibility of divine inspiration to nonbelievers. But religious speech has been central to American politics from the beginning. As one example, consider the sermon of John Witherspoon, a Presbyterian minister and president of the College of New Jersey (Princeton). About one month before his election to the Continental Congress in June 1776, Witherspoon preached and published in Philadelphia The Dominion of Providence Over the Passions of Men. It concluded as follows:

Upon the whole, I beseech you to make a wise improvement of the present threatening aspect of public affairs, and to remember that your duty to God, to your country, to your families, and to yourselves, is the same. True religion is nothing else but an inward temper and outward conduct suited to your state and circumstances in providence at any time. And as peace with God and conformity to him, adds to the sweetness of created comforts while we possess them, so in times of difficulty and trial, it is in the man of piety and inward principle, that we may expect to find the uncorrupted patriot, the useful citizen, and the invincible soldier. God grant that in America true religion and civil liberty may be inseparable, and that the unjust attempts to destroy the one, may in the issue tend to the support and establishment of both.

Witherspoon served in Congress intermittently until 1782. He was the only clergy member to sign the Declaration of Independence and an architect of the Treaty of Paris, which ended the Revolutionary War in September 1783. He later served in the New Jersey legislature and was a member of that state's ratifying convention for the U.S. Constitution in 1787. Nine of the 55 participants in the federal convention in 1787 were Princeton graduates, including James Madison who studied under him. For Witherspoon, liberty was more than a secular matter.

For those unclear about the legal framework that applies today to religious institutions interested in publishing political comments, you should consult the newly released Government Regulation of Political Speech by Religious and Other 501(c)(3) Organizations Report at
and contact church-state counsel.

Key Cases

Former Trustees State Defamation Claim against Pastor and Church

In Banks v. St. Matthew Baptist Church, No. 27317, 2013 WL 5348387 (S.C. Sept. 25, 2013), the court held that allegedly defamatory statements that a pastor made during a congregational meeting were independent of religious doctrine or governance. Thus, the court concluded that the issue of whether the statements constitute defamation could be decided in a civil courtroom. At a congregational meeting, the pastor stated that (1) without his knowledge, the trustees took out a mortgage on the church's property in order to purchase apartment buildings nearby; (2) the trustees had failed to insure the apartment buildings; and (3) as a result, funds were missing because of their mismanagement. He added that the trustees had constantly deceived him and urged the congregation to remove them, which the congregation did. The trustees then sued the church and pastor for defamation, negligence and intentional infliction of emotional distress. The defendants moved to dismiss the case for lack of subject matter jurisdiction. The trial court granted the motion and the appeals court sustained except for the defamation count. The South Carolina Supreme Court affirmed on the grounds that the situs of the statements makes no difference and the defamation count fits squarely within the realm of claims susceptible to the neutral principles of law approach. The court distinguished these facts: "Had the pastor stated that the trustees were sinners, were not true followers of God, or had violated church law, the resulting defamation claim would not be susceptible to resolution through the neutral principles approach." Chief Justice Toal dissented on the grounds that the pastor's remarks centered on the relationship between the pastor, his board and the trustees, and their role in church affairs and spiritual life before a self-governing congregation.

Closely Held For-Profit Companies Denied Injunction against Contraceptive Coverage Mandate

In Autocam Corp. v. Sebelius, No. 12-2673, 2013 WL 5182544 (6th Cir. June 11, 2013) and MK Chambers Co. v. Dep't of Health and Human Servs., No. 13-11379, 2013 WL 5182435 (E.D. Mich. Sept. 13, 2013), the court denied the plaintiffs, for-profit closely held corporations, preliminary injunctions against enforcement of the contraceptive coverage mandate contained in the Patient Protection and Affordable Care Act (PPACA). Autocam Corporation and Autocam Medical LLC are for-profit, secular corporations engaged in high-volume manufacturing for the automotive and medical industries. The two companies have 1,500 employees in 14 facilities worldwide, including 661 employees in the United States. The Kennedy family members own a "controlling interest" in the two companies and John C. Kennedy serves as CEO and president. They claim that the same Catholic religious beliefs that motivate them to provide employees with health coverage on a self-insured basis also limit the scope of the coverage to exclude contraception. They "believe that they become morally responsible for the use of contraception by others when they 'directly pay for the purchase of the drugs and services ... in violation of their religious beliefs.'"

In Autocam Corp., the court ruled that the shareholder-standing rule barred controlling shareholders from bringing a Religious Freedom Restoration Act (RFRA) claim in their individual capacities. The court also found that a secular, for-profit corporate employer was not a "person" capable of "religious exercise" as intended by RFRA and, therefore, could not seek to enjoin implementation of PPACA's contraceptive coverage mandate. The court rejected the Kennedys' argument that if Autocam complies with the mandate, it will only be because the shareholders have directed Autocam to comply by violating their religious beliefs on the grounds this dilemma cannot be separated from the alleged harm to the company. The court also rejected a "pass through" theory of liability because it "abandon[s] corporate law doctrine at the point it matters most." Last, the court disagreed that the existence of corporate free speech rights, as recognized in Citizens United v. Federal Election Comm'n, 558 U.S. 310 (2010), implies the existence of free exercise rights.

In MK Chambers Co., Gerald Chambers and Robert Chambers each own half of MK Chambers Co., which has a workforce of more than 120 full-time employees. They adhere to the Catholic Church's teachings regarding the immorality of artificial means of contraception and sterilization and have caused their company to choose insurance that excludes coverage for contraception, abortion and lifestyle drugs. The court ruled that the separation between a corporation and its owners means the corporation is not the alter ego of its owners for purposes of religious belief and exercise; any burden upon the owners or officers of a company by virtue of the mandate imposed upon the company is remote and too attenuated to be considered substantial for purposes of the RFRA; the mandate is neutral, generally applicable and rationally related to a legitimate public purpose consistent with the Free Exercise Clause; the mandate grants no denominational preference and does not discriminate against any particular religious sect or denomination consistent with the Establishment Clause; the mandate does not compel speech consistent with the Free Speech Clause; and the mandate does not violate the Administrative Procedures Act (APA).

In contrast, in Armstrong v. Sebelius, No. 13-1218, 2013 WL 4757949 (10th Cir. Sept. 5, 2013) (per curiam), the court granted a motion to remand the case and vacate the district court's order that the plaintiff's for-profit corporation, Cherry Creek Mortgage Co., Inc., had not established a substantial likelihood of success on the merits of its RFRA claim against PPACA's contraceptive mandate. The court relied upon its recent decision, Hobby Lobby Stores, Inc. v. Sebelius, 2013 WL 3216103 (10th Cir. June 27, 2013).

Florida Church Property Belongs to Hierarchical Church, Not Congregation

In New Jerusalem Church of God, Inc. v. Sneads Community Church, Inc., No. 1D12-2603, 2013 WL 4859091 (Fla. 1st DCA Sept. 12, 2013), the court applied the "deference approach" to resolve a dispute regarding ownership of church property and ruled that the property in dispute belonged to the hierarchical church, New Jerusalem Church of God, Inc. (NJC), rather than the congregation that purchased it. Church members took title to the property as "trustees of the New Jerusalem Church of God of Sneads, Florida," contrary to the manner prescribed in NJC's The Book of Rules. The church actively participated in NJC from the 1960s to the mid-1990s, then disaffiliated. NJC claimed it was unaware that the church disaffiliated, whereas the church claimed NJC must have known. In 1997, the trustees of the church conveyed the property to Sneads Community Church, Inc. In 2002, NJC filed suit to quiet title. The jury returned a verdict for Sneads Community Church, Inc. after NJC's motion for directed verdict and motion for judgment notwithstanding the verdict were denied.

On appeal, the court ruled that the trial court should have granted the motions because it was obligated to defer to NJC's self-characterization as a hierarchical church and could not allow the fact finder to delve into is religious doctrine and polity. The court observed that, ordinarily, it would follow axiomatically that NJC controls the property. But in this case, the court ruled that a second inquiry was relevant into whether the church affiliated with NJC "such that it was a part of and subordinate to, the hierarchical structure." The court found that the relationship between a local church and hierarchical church is analogous to a contractual relationship and that, in this case, the church assented for 30 years to NJC's governance and structure of property ownership. Concerning the deed, the court ruled that the language was not availing or clearly descriptive and that the only incorporated entity at the time was NJC. Therefore, the court ruled that the property belongs to NJC and remanded the case with instructions that judgment be entered in favor of NJC.

Arizona Church's Property Taxation Challenge Dismissed

In Church of the Isaiah 58 Project of Arizona, Inc. v. La Paz Cnty., No. 1 CA-TX 12-0001, 2013 WL 4857951 (Ariz. App. Div. 1 Sept. 12, 2013), the court affirmed dismissal of the church's complaint requesting injunctive relief against: an "illegal tax" and foreclosure; declaratory relief that it was entitled to a religious exemption from property taxation; and other relief. The church was assessed for tax years 2006 to 2008. The court approved dismissal of all claims relating to tax year 2006 because the deadline for requesting an exemption for that year had expired before it purchased the property and the church did not exercise its right to petition for a refund. The court also approved dismissal of all claims for tax year 2008, because the church did not file an exemption request for that year. For tax year 2007, the church made a timely application for property tax exemption, but the court ruled that church ownership of property is not in itself notice to taxing authorities that the property is exempt from taxation. More is needed.

The court found that the tax assessor erred when it initially required an IRS letter of determination as a condition of tax exemption. However, the court ruled that an injunction was not appropriate because of a strong policy against it when challenging taxes and because the assessor nevertheless acted with "semblance of authority." The court denied the church a declaration that it was entitled to an exemption because the church did not first pay the assessed taxes and because the request was moot as of 2009, when the assessor accepted the Arizona Department of Revenue's letter as proof of the taxpayer's exempt status. Because the church did not pay the tax, the court also ruled that it could not bring a statutory claim to recover taxes illegally collected under A.R.S. §42-18352.

California Secretary of State Properly Exercised Discretion Not to File Corporation Sole's Articles of Incorporation

In Roman Catholic Bishop of San Jose v. Bowen, No. C070516, 2013 WL 4758221 (Cal.App. 3 Dist. Sept. 5, 2013), the court affirmed judgment in favor of the California secretary of state on the plaintiff's petition for writ of mandate to compel her to file its articles of incorporation for a new corporation sole. The secretary determined that the articles submitted by the plaintiff did not conform to a statute that provides, in the event of dissolution, any remaining assets "shall be transferred to the religious organization governed by the corporation sole, or to trustees in its behalf, or disposed of as may be decreed by the superior court." Instead, the articles directed that in the event of dissolution any remaining assets will be distributed to the Roman Catholic Bishop of San Jose, the entity that governs the proposed corporation sole.

The plaintiff stated that the assets could not be distributed to the Santee Catholic Mission if it were suppressed by the diocesan bishop because there would be no ecclesial entity that could function as a beneficiary to the trust. As a matter of canonical law, the plaintiff argued that the diocesan bishop is entitled to recover the property and resources provided to a parochial ministry because it is the diocesan bishop that forms and resources them. The plaintiff also stated that the California secretary of state had already filed more than 120 articles of incorporation containing dissolution provisions identical to the ones that she now disapproves. But on appeal, the court ruled that (1) the trial court had properly applied neutral principles of law in resolving the dispute by exclusively examining the text of the articles of incorporation; (2) the California secretary of state could do nothing but refuse to file the submitted articles as in conflict with section 10015; and (3) the California secretary of state's action filing similar articles of incorporation did not make her decision arbitrary, especially where there was no evidence that she had continued doing so after identifying the legal conflict.

New York Diocese Subject to Vermont Federal Court's Jurisdiction

In Shovah v. Mercure, No. 2:11-CV-201, 2013 WL 4736836 (D. Vt. Sept. 3, 2013), the court denied the Roman Catholic Diocese of Albany's motion to dismiss for want of personal jurisdiction claims against it for statutory violations, breach of fiduciary duty, negligent supervision, and outrageous conduct linked to a former priest's alleged sexual exploitation and abuse of children. The court found evidence between 2002 and 2012 of 16 services of worship conducted by 13 priests from the diocese in Vermont; six parishes within the diocese employed a total of 18 employees and served a total of 78 parishioners who reside in Vermont; business dealings between the diocese and a total of 21 Vermont vendors; advertisements from 11 Vermont vendors for publication in diocese church materials; and $56,305 in charitable donations collected by the diocese from Vermonters, representing about 0.080 percent of all contributions to the diocese. In comparison, the court ruled that the diocese's case against personal jurisdiction was cogent but not compelling. Therefore, the court ruled that the exercise of jurisdiction over the diocese is not unreasonable.

"In God We Trust" on Currency Constitutional

In Newdow v. United States, No. 13 CV 741(HB), 2013 WL 4804165 (S.D.N.Y. Sept. 9, 2013), the court granted the defendants' motion to dismiss the plaintiffs' claim that issuance of U.S. currency bearing the words "In God We Trust" violates the Establishment Clause, the Free Exercise Clause and the Religious Freedom Restoration Act (RFRA). The district court found that the U.S. Supreme Court has repeatedly assumed the motto's secular purpose and effect; in addition, all circuit courts that have considered this issue have found no constitutional violation in the motto's inclusion on currency. The plaintiffs argued that the Free Exercise Clause is violated because they are forced to "[b]ear a religious message they believe to be untrue and completely contrary to their sincerely held religious belief" but the court ruled that the burden was a "far cry from the coercion, penalty, or denial of benefits required under the 'substantial burden' standard."

Religious School's RLUIPA Claim Remanded after Zoning Amendment Denied

In Tree of Life Christian Schs. v. City of Upper Arlington, No. 12-4089, 12-4111, 2013 WL 4779603 (6th Cir. Sept. 6, 2013), the court reversed the district court that had granted summary judgment to the city on the grounds that the plaintiff's claims were not ripe. During the pendency of the case, the plaintiff sought a zoning amendment and the city council voted to deny it. Accordingly, the court remanded the case for further proceedings on whether the plaintiff, which sought to open a private Christian school that would consolidate its existing campuses, suffered religious-based discrimination under the Religious Land Use and Institutionalized Persons Act (RLUIPA) when it was denied a conditional use permit to open in the city's office and research district and unsuccessfully appealed the denial.

Religious Institutions in the News

Federal officials asked the U.S. Supreme Court to review its loss in the Hobby Lobby case, which was reported on in our July issue ( involving PPACA's contraception coverage mandate.

An Oklahoma federal district court struck down a state constitutional amendment that forbade its courts from considering Islamic law in judicial decisions.

Secretary of State John Kerry tapped Wesley Theological Seminary Ethicist Shaun Casey to lead the State Department's new Office of Faith-Based Community Initiatives.


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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