United States: Religious Institutions Update: May 2016

Lex Est Sanctio Sancta

Nathan Adams IV is a Partner in Holland & Knight's Tallahassee office

TIMELY TOPICS

Has your nonprofit received a donation for a restricted purpose that has become impractical, impossible to achieve, wasteful or even unlawful? A donor may restrict a contribution to a charity for a particular use, provided the restriction does not prevent the charity from freely using the transferred assets or the income therefrom in furtherance of its charitable purposes. Beware of unilaterally re-purposing such a donation, except in compliance with the law. Nearly all states have adopted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) or some variation of it. Under UPMIFA, a nonprofit may obtain either the release or modification of gift restrictions with the donor's consent. If a donor is not available (e.g., deceased) or refuses to consent to the release or modification of the purpose of a fund or a restriction on its use, and if the fund is "small and old" or less than a certain dollar threshold (e.g., $100,000) and established more than a certain number of years past (e.g., 20 years), the nonprofit may release or modify a donor-imposed restriction on its own in a manner as consistent as feasible with the purposes expressed in the gift instrument if (a) the nonprofit provides certain minimum notice to the state attorney general (e.g., 90 days' notice) and (b) the attorney general does not object. If the fund is not "small and old," the nonprofit must obtain judicial relief. The court ordinarily will not approve the change unless the nonprofit proves the purpose of a fund or a restriction on its use is, in fact, unlawful, impractical, impossible to achieve or wasteful, and unless the modification is consistent with the original purpose. Consult the controlling state statutory law. State attorneys general vary in how closely they monitor and review re-purposing donations. Of course, nonprofits often can avoid the problem of the impractical donor restriction by adopting a gift policy and incorporating language in gift agreements that anticipates and addresses the problem when the donation is made.

KEY CASES

Healthcare Network May Not Take Advantage of Church Plan Exemption to ERISA

In Stapleton v. Advocate Health Care Network, No. 15-1368, 2016 WL 1055784 (7th Cir. Mar. 17, 2016), the court ruled that a nonprofit corporation that owns 12 hospitals and more than 250 other inpatient and outpatient healthcare locations across Illinois affiliated with both the Metropolitan Chicago Synod of the Evangelical Lutheran Church in America and the Illinois Conference of the United Church of Christ could not operate its pension plan as a "church plan" exempt from the Employee Retirement Income Security Act (ERISA). The nonprofit, Advocate Health Care Network, resulted from a merger between two healthcare systems, Lutheran General HealthSystem and Evangelical Health Systems. The nonprofit is not owned or financially supported by either church, and it does not require that employees or patients belong to any particular religious denomination or uphold any particular religious beliefs, although it is a party to contractual relationships with both denominations in which each affirms "their ministry in health care and the covenantal relationship they share with one another." The court ruled that a bona fide church plan must at least be established by a church even if it is maintained by a church-affiliated organization. The plaintiff's plan was both established and maintained by it. The plaintiff argued that such a construction of statutory law violates the Establishment Clause by enabling the government to define what a church is and how it should structure its mission. The court disagreed that Congress may not make such distinctions and found, in any event, that the argument equally doomed its own position because the government must still determine whether the entity with which the organization is claiming affiliation is indeed a church. The court wrote, "It is true that one religious denomination cannot be preferred over another.... But '[t]he establishment clause does not require the government to equalize the burdens (or the benefits) that laws of general applicability impose on religious institutions."

Local Bill Unconstitutionally Targets Transitional Housing Program

In Martin v. Houston, No. 2:14-cv-905-WKW, 2016 WL 1368109 (M.D. Ala. Ap. 6, 2016), the court ruled that plaintiff Ricky Martin, pastor of the Triumph Church, states a claim against defendant Randall Houston, the district attorney for Chilton County, for enforcing a statute that the legislature enacted apparently to prevent Martin from continuing to house, on a transitional basis, Alabama Sex Offender Registration and Communication Notification Act offenders in five mobile homes established on property owned by Martin adjacent to his church. Incident to his religious exercise, Martin invites the men to live on the property in accordance with Christian principles and to attend services in preparation for transition to permanent homes. The plaintiff alleges that Houston, in concert with Alabama House Representative Kurt Wallace, passed a bill to prevent this by precluding sex offenders to reside in the same home or on the same property within 300 feet of each other unless married in Chilton County. Under threat of prosecution and fines up to $60,000, Martin evicted the men and then sued for violation of his constitutional rights. The court rejected a ripeness challenge for lack of actual imposition of the fine due to the alleged discriminatory motivation behind the law and certain applicability of the law. The court ruled that Martin stated a claim for violation of the Free Exercise Clause as impermissibly targeting his religious activity, a Bill of Attainder as singling out his past conduct for punishment and the Due Process Clause by depriving him of a constitutionally protected interest without adequate process. The court rejected the defendant's argument that Martin could simply move his settlement to another county as evidence that there was no imposition on his free exercise rights. The court denied exclusively Martin's Religious Land Use and Institutionalized Persons Act (RLUIPA) claim on the grounds that, inter alia, the complaint failed to allege a substantial burden on interstate commerce or program that receives federal funding.

RLUIPA Claim Vindicated against Denial of Permit for Homeless Ministry

In Harbor Missionary Church Corp. v. City of San Buenaventura, No. 14-56137, 2016 WL 946537 (9th Cir. Mar. 14, 2016), the court reversed the district court's judgment that the plaintiff was not entitled to a preliminary injunction against the city under RLUIPA for denying it a conditional use permit to continue to provide care and religious services for homeless men and women living in Ventura because the church faced no substantial burden in having to move its operation to another location and, even if it did, the denial of the permit was the least restrictive way to mitigate the city's safety concerns. The court ruled, "The City's denial of the conditional use permit prevents the Church from conducting its homeless ministry, an integral part of its religion, without suffering substantial delay, uncertainty, and expense." Furthermore, the court ruled that the district court erred "by questioning the validity of the Church's religious beliefs and by determining that its homeless ministry could be divided piecemeal when the Church insisted on the importance of keeping its homeless ministry as a whole at the same location." The court agreed that safety is a compelling interest of the city, but went on to find that it is likely that the city could have imposed conditions on a use permit that satisfied this interest rather than deny the permit altogether.

Religious Bible Colleges Fail to State Claim against Postsecondary Regulatory Regime

In Illinois Bible Colleges Ass'n v. Anderson, No. 15 cv 444, 2016 WL 1182040 (N.D. Ill. Mar. 28, 2016), the court dismissed the lawsuit filed by the Illinois Association of Bible Colleges, Providence Baptist College, Dayspring Bible College & Seminary, United Faith Christian Institute and Bible College, Civil Liberties for Urban Believers and a student who contended that the state postsecondary regulatory regime violates state and federal religious liberty guarantees. Specifically, the plaintiffs argued that mandating approval by the Board of Higher Education to grant "degrees" results in excessive entanglement with religion, and that the challenged statutes infringe on the plaintiffs' religious liberty. The court disagreed; it found that the laws neither advance nor inhibit religion, serve a substantial state interest and secular purpose in maintaining minimum educational standards in all schools and evaluate educational institutions on secular criteria against the institution's own stated objectives without excessive entanglement with religion consistent with the Establishment Clause. The court also considered the statutes and regulations neutral and generally applicable and, thus, consistent with the Free Exercise Clause. In addition, the court rejected the plaintiffs' free speech claim that by regulating the use of the terms "bachelor's," "master's" or "doctorate" degrees, the defendant unconstitutionally restricted their ability to accurately describe the nature of the colleges' curricula. The court also ruled that the regulations had no adverse impact on the plaintiffs' ability to associate freely.

Church Disciplinary Statements Not Actionable

In Pfeil v. St. Matthews Evangelical Lutheran Church of the Unaltered Augsburg Confession of Worthington, No. A14-0605, 2016 WL 1358029 (Minn. Ap. 6, 2016), the court ruled that pastors and Lutheran Church-Missouri Synod were not liable for defamation or negligence for statements made during the course of a formal church discipline progress to excommunicate them. The plaintiffs accused the defendants of making several allegedly defamatory statements such as that "[t]he Pfeils had engaged in behavior unbecoming of a Christian." After the remarks, members voted to affirm the pastors' decision to terminate the Pfeils' membership, and then a Missouri Synod panel upheld the excommunication. The Pfeils sued. The district court ruled that it could not decide the dispute under the "ecclesiastical abstention doctrine," and both appellate courts affirmed. The supreme court left for another time the question whether the doctrine is best viewed as an affirmative defense on the merits or a form of abstention. It rejected a claim-by-claim approach favored by the dissent (Lillehaug, J.) and some other courts whereby the court would evaluate each individual claim to determine whether it is "reasonably likely" that the plaintiffs could prove each element without intruding on the "sacred precincts." Instead, the court adopted a rule that adjudicating any defamation claim arising out of a statement made during a church disciplinary proceeding violates the First Amendment. The court observed, "A statement-by-statement analysis would be, at best, a difficult endeavor and, at worst, a court might be forced to interpret doctrine just to determine whether or not a statement had a religious meaning." However, the court suggested that a case could arise where the defendant abused the ecclesiastical abstention doctrine to avoid liability, in which case the court could take action.

Bigamy Statute Narrowly Escapes Due to Mootness Doctrine

In Brown v. Buhman, No. 14-4117, 2016 WL 1399358 (10th Cir. Ap. 11, 2016), the court ruled that a polygamist family's challenge to the constitutionality of Utah's bigamy statute was moot after the county attorney closed the criminal case against them and announced a policy limiting bigamy prosecutions to situations also involving "child or spouse abuse, domestic violence, welfare fraud or any other crime." The plaintiffs are the subject of the television show "Sister Wives." They belong to the Apostolic United Brethren Church, which views polygamy as a "core religious practice." The district court considered the county attorney's conduct merely strategic and designed to evade review. It went on to strike the cohabitation prong of the bigamy statute; adopt a narrowing construction of the marriage prong to save it; find that the defendant had waived qualified and prosecutorial immunity; grant summary judgment to the plaintiffs; and award them fees and costs. Assuming the plaintiffs had standing to file suit, the court of appeals reversed on the ground that the plaintiffs were entitled only to prospective relief and faced no credible threat of prosecution. The court found no reason to conclude that "the highest-ranking law enforcement official in Utah County had engaged in deliberate misrepresentation to the court." Furthermore, the court observed that the plaintiffs had moved to Nevada, where the defendant could not prosecute them.

Ministerial Exception Doctrine Bars Principal's Discrimination Claim

In Fratello v. Roman Catholic Archdiocese of N.Y., No. 12-CV-7359, 2016 WL 1249609 (S.D. N.Y. Mar. 29, 2016), the court granted the defendant's motion for summary judgment against a former Catholic school principal's gender discrimination and retaliation claims based on the affirmative defense of the ministerial exception doctrine. Applying Hosanna-Tabor Evangelical Lutheran Church and Sch. v. Equal Employment Opportunity Comm'n, 132 S.Ct. 694 (2012), the court began by examining whether the plaintiff was "held out" by the Archdiocese and the school as a minister. It turned to examination of the plaintiff's title and the requisite education and training associated with the title. Next, it evaluated whether the plaintiff "held herself out as a minister of the church by accepting the formal call to religious service." Then, the court examined whether the plaintiff's job responsibilities "reflected a role in conveying the church's message and carrying out its mission." The court wrote, "I find on balance that the ministerial exception applies. While Plaintiff's title [lay principal] and attendant training and [non-theological] education weigh against application of the exception, and while plaintiff's not claiming to be a minister weighs slightly against it as well, the other factors discussed above – the distinct ministerial role the church assigns her and, most significantly, plaintiff's job responsibilities – carry far more weight." She was required, at least in theory, to complete a Catechist Certification Program, knew she would be perceived as a religious leader, accepted "the vocation and challenge of leadership in Catholic education," conveyed the church's message and carried out its educational mission.

RFRA and RLUIPA Not Applicable to Fire Code Regulation

In Affordable Recovery Housing v. City of Blue Island, No. 12-cv-4241, 2016 WL 1161271 (N.D. Ill. Mar. 23, 2016), the court granted summary judgment to the defendant with respect to the plaintiff's various claims for discriminatory enforcement of the city's safety and zoning regulations against its faith-based drug and alcohol recovery facility. The case began when the Blue Island Fire Chief issued the plaintiff an eviction notice based on its failure to install fire sprinklers. The court mooted this issue when the plaintiff qualified as a state-licensed recovery home, thus preempting the city's safety regulations. But the plaintiff insisted it was still entitled to damages against the city for having to evict 73 men housed on the property. The court rejected the applicability of the RLUIPA and Illinois Religious Freedom Restoration Act (IRFRA) on the ground that the regulations at issue concern fire safety rather than land use. Even if RLUIPA applied, the court ruled that the city treated the plaintiff on equal terms with non-religious organizations by requiring sprinklers. In addition, the court ruled that the fire safety rules are neutral and generally applicable laws without any substantial burden on religious exercise or free association, as they require no more than installation of a sprinkler system.

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