United States: Religious Institutions Update: November 2017

Nathan "Nate" A. Adams IV is a Partner in Holland & Knight's Tallahassee office

Kaylee A Cox is Associate in Holland & Knight's Washington D.C. office

Timely Topics

Serious data breaches have become routine in the United States, yet a recent survey shows that the majority of religious institutions do not have a full-time IT professional, have no system to detect a potential breach and do not even have a policy to mitigate the chances of a breach. Think it will not happen to your organization? So did the hundreds of businesses already impacted. Attacks on religious institutions in the past couple of years have involved theft of funds; "ransomware" attacks in which hackers freeze an organization's database until a fee is paid; appropriation of employee, member and donor information for sale on the dark web; and "hacktivist" attacks by groups that commandeer an organization's website to modify its message. The problem is only growing as most sensitive operations of organizations become digital. Organizations that endure cyberattacks suffer long-term reputational damage and typically need to retain counsel as well as digital forensic, credit monitoring and other experts to comply with state and federal laws and to defend against litigation and regulatory investigations in the aftermath of an attack. Altogether, 48 states, the District of Columbia and certain U.S. territories have passed laws that impose obligations on organizations related to a breach and require them to notify the people who have been impacted. These laws are frequently amended to increase consumer protections. When organizations have residents of multiple states impacted, each one of these legal regimes is implicated. Federal agencies also may require reporting. The Ponemon Institute reported that the average total cost of a cyberbreach in 2017 was $7.35 million in the U.S., varying according to the number of records impacted and industry, with a minimum cost in 2015 of $307,000. Many religious institutions have no cyber insurance liability coverage, yet most general liability insurance policies do not cover cyber-related incidents. Cyber insurance policies vary radically in the extent of their coverage even at similar prices, meaning that review of these policies by independent agents or counsel is always a good idea. Holland & Knight's attorneys have internal threat detection and emergency management capabilities as well as extensive experience and relationships with regulators and digital vendors to assist in cyber liability prevention as well as breach response preparation.

Key Cases

Using Public Funds to Repair Church Building May Be Constitutional

In Taylor v. Town of Cabot, No. 2016-276, 2017 WL 4454708 (Vt. Oct. 6, 2017), the court affirmed in part, vacated in part and remanded a case brought by municipal taxpayers who challenged a town's use of federally derived funds for the purpose of repairing a historic church. The court vacated injunctive relief on the grounds that the taxpayers had not demonstrated a likelihood of success on the merits under the state constitution's compelled support clause or the federal First Amendment. The court ruled that the compelled support clause protects against the support of "worship," and added that a refusal to afford religious organizations access to secular benefits generally available to like institutions on account of their religious affiliation may trigger concerns under the Free Exercise Clause. The court determined that the plaintiffs would need to show that the grant funds would be used to repair religious artifacts or other items used in worship, whereas the record indicated that most were to be used for maintenance and repairs to a building that serves not only as a place of worship, but also as a place for nonsectarian community events and gatherings.

Degree Granting by Illinois Bible Colleges Subject to State Regulation

In Illinois Bible Colleges Ass'n v. Anderson, 870 F. 3d 631 (7th Cir. 2017), the court of appeals ruled that application of Illinois statutes regulating post-secondary educational institutions to Bible colleges does not violate the Establishment Clause, Free Exercise Clause, Free Speech Clause or Equal Protection Clause. The laws challenged include the Private College Act, which regulates the operation of private colleges, junior colleges and universities that offer "degrees" and requires such institutions to obtain a "certificate of approval" from the Illinois Board of Higher Education; the Academic Degree Act, which prohibits a "degree-granting institution" from "issuing" degrees without board approval; and the Private Business and Vocational Schools Act, which requires vocational schools that issue "certificates" or "certificates of completion" to obtain board approval. The court deemed the statutes neutral laws of general applicability, and ruled that they are rationally related to a valid governmental purpose of protecting students and employers from relying on degrees without true academic value and protecting legitimate institutions of higher education by safeguarding the value of their degrees. The court found no evidence of underlying religious animus and determined that certification of schools is based on secular criteria without special disability imposed on religion.

Divided Court Awards Most Disassociating Church Property to Denomination

In Protestant Episcopal Church in the Diocese of S. Carolina v. Episcopal Church, No. 27731, 2017 WL 3274123 (S.C. Nov. 17, 2017), a divided court ruled 3-2 that eight disassociating parish churches that were never subject to the so-called "Dennis Canon" could keep their property, but not the 28 other parish churches that acceded to it. The Dennis Canon states that "[a]ll real and personal property held by or for the benefit of any Parish ... is held in trust for this Church [i.e., the Episcopal Church]...." The circuit court applied "neutral principles of law" in favor of all 36 disassociating parish churches and ruled that their state-registered "episcopal" trademarks prevailed over the federally protected trademarks. The minority rejected altogether the application of neutral principles of law. Justices Costa Pleicones and Kaye Hearn concluded that the disposition of ecclesiastical real, personal and intellectual property was a question of hierarchical church governance, not subject to resolution by civil courts, and that the national religious organization's federally protected "episcopal" trademarks prevailed over the diocese's state-registered trademarks and required cancellation of the latter. Justice Hearn observed, "In essence, resolving this dispute would require us to decide which faction is the 'true' Episcopal Church." The remainder of the court would have applied neutral principles of law. Chief Justice Donald Beatty, who cast the deciding vote, found that the eight "parishes that did not expressly accede to the Dennis Canon cannot be divested of their property," but agreed that the 28 others who did expressly accede to it could be divested of their property. Justice John Kittredge would have affirmed the trial court in result as to all 36 local parishes based on a modified application of trust law that imposes a lesser burden on a national religious institution in the creation of an express trust, while recognizing that local churches retain authority to withdraw. Justice Jean Toal dissented and would have ruled the same way as the circuit court based on application of standard trust law. She found no evidence that defendants created either an express or constructive trust.

Plaintiffs Lacked Standing to Challenge Non-Discrimination Statute

In Barber v. Bryant, 860 F. 3d 345 (5th Cir. 2017), the court denied rehearing en banc in connection with the court's ruling that a lesbian, gay, bisexual, transgender and unmarried persons group lacks standing to attempt to enjoin under the Establishment Clause and Fourteenth Amendment Equal Protection Clause a Mississippi statute (HB 1523) prohibiting discrimination against citizens holding religious beliefs reflecting disapproval of them. In the underlying decision, the court ruled that, although the plaintiffs suffered a stigmatic injury from the law, they made no clear showing of a personal confrontation to support standing. Also, they were unable to show more than incidental tax revenues were spent to enforce the statute.

No Claim for Application of Public Accommodation Law to Videographers

In Telescope Media Gp. v. Lindsey, No. 16-4094, 2017 WL 4179899 (D. Minn. Sept. 20, 2017), the court granted the defendants' motion to dismiss the plaintiffs' challenges to the application of the Minnesota Human Rights Act (MHRA) to the operation of their videography business. The plaintiffs argued that the MHRA's requirement that they serve same-sex couples seeking wedding video services violates their constitutional rights. The court concluded that MHRA primarily regulates conduct, rather than language. In terms of its effect on the content of their videos, the court ruled the MHRA is content-neutral and, thus, must survive only intermediate scrutiny. The court added that the MHRA easily meets this test because 1) it furthers an important state interest of preventing invidious discrimination; 2) its purpose is unrelated to the suppression of free expression; and 3) any incidental restriction on First Amendment freedoms is no greater than essential to achieve its purpose. The court determined that the MHRA does not compel speech; is not a prior restraint granting defendants unbridled discretion; is a neutral law of general applicability and does not violate a fundamental right.

Wedding Provider's Claims Partially Dismissed and Partially Survive

In Country Mill Farms, LLC v. City of East Lansing, No. 1:17-cv-487, 2017 WL 5514818 (W.D. Mich. Nov. 16, 2017), the court granted in part and denied in part the defendant's motion to dismiss the plaintiffs' claims rooted in their refusal to host a same-sex wedding on their farm and, as a result, the East Lansing Farmer's Market's decision to decline their vendor application based on an amendment adopting the city's non-discrimination and public accommodations ordinance. The court dismissed the plaintiffs' 1) as-applied free speech claim on the grounds that the city's decision was based on their conduct, rather than speech; 2) overbreadth challenge to the public accommodations law; 3) Equal Protection Clause claim for lack of evidence that similarly situated vendors were treated differently; and 4) Home Rule City Act claim. The court allowed to proceed the plaintiffs' 1) facial free speech claim because the ordinance regulates speech based on content; 2) overbreadth challenge to the general business practice language in the vendor guidelines and harassment portion of the ordinance, both of which encompass communication; 3) First Amendment retaliation claim; 4) Free Exercise claim based on the city using a generally applicable and neutral policy to target their religiously motivated conduct; 5) Establishment Clause claim based on allegations that the predominant purpose of the changes to the vendor guidelines was motivated by disapproval of the plaintiffs' religious beliefs; 6) prospective unconstitutional conditions claim based on the plaintiffs' argument that they must give up their religiously motivated conduct in order to obtain a vendor license; 7) violation of their due process rights; and 8) Article 1, Section 4 of the Michigan Constitution protecting religious freedoms.

Denying Admission to Applicant for Religious Views Not Actionable

In Buxton v. Kurtinitis, 862 F. 3d 423 (4th Cir. 2017), the court ruled that an applicant who was denied admission into a community college's radiation therapy program allegedly due to his expression of religious beliefs in an admissions interview failed to state a claim under either the Free Speech Clause for First Amendment retaliation or the Establishment Clause. The interviewer wrote in review, "[B]uxton brought up religion a great deal during the interview. Yes, this is a field that involves death and dying; but religion cannot be brought up in the clinic by therapist [sic] or students." The court rejected the plaintiff's argument that public forum doctrine applied, and ruled instead that the Free Speech Clause does not protect speech expressed in an admissions interview during a competitive process inasmuch as the process inherently requires the government to make speech-based distinctions. The court also rejected any Establishment Clause basis for the lawsuit on the ground that the interviewer had a secular purpose: he "sought to identify the best qualified candidates, with strong interpersonal skills, for a competitive admissions program." Likewise, the court ruled that "nothing about ... using the topics discussed by interviewees as a means of determining their level of interpersonal skills can be construed as inhibiting religion."

Court Delays Ruling on Constitutionality of FEMA Exclusion for Houses of Worship

In Harvest Family Church v. Federal Emergency Mgmt. Agency, No. 4:17-cv-2662, 2017 WL 5235662 (S.D. Tex. Nov. 9, 2017), the district court delayed ruling on the plaintiffs' motion for preliminary injunction against a policy of the Federal Emergency Management Agency (FEMA) not to provide assistance to houses of worship that dedicate more than 50 percent of their space to religious activities. All three plaintiffs provided emergency relief services during and after Hurricane Harvey and themselves suffered significant storm damage. They contend that a public benefits program with an express policy of rejecting grant applications from any applicant owned or controlled by a religious entity violates the Free Exercise Clause by denying that entity an otherwise available public benefit on account of its religious status. FEMA declined to defend the merits of its policy and sought a stay of the case. The court denied the stay, but agreed to delay ruling on the motion for injunction until Dec. 1, 2017.

EO Temporarily Suspending Immigration Enjoined Under Establishment Clause

In International Refugee Assistance Project v. Trump, No. 17-0361, 17-2921, 17-2969, 2017 WL 4674314 (D. Md. Oct. 17, 2017), the district court granted in part and denied in part a motion for nationwide preliminary injunction on Establishment Clause and other grounds against Presidential Proclamation 9645, which will limit or suspend indefinitely the entry into the U.S. of nationals of Iran, Libya, Somalia, Syria, Yemen, Chad, North Korea and Venezuela. The individual plaintiffs include U.S. citizens or lawful permanent residents who have applied for visas for relatives who are citizens of one of the designated countries to enter the U.S. The court determined that the proclamation injured them as a result of their separation from family members. It considered their claim that the "anti-Muslim message" expressed in the proclamation, allegedly causing them emotional distress and making them feel attacked, targeted and disparaged, was sufficient for standing under the Establishment Clause. In assessing an Establishment Clause burden, governmental statements of purpose generally receive deference, but in this case, the court ruled it was appropriate to look at the motives for the proclamation, including the sequence of events leading up to it, such as then-candidate Donald Trump's public statements and his first and second related executive order (EO). The court concluded, "where the Proclamation itself is not sufficiently independent of EO-2 to signal a purposeful, persuasive change in the primary purpose of the travel ban, and there were no other public signs that 'as persuasively' as the original violation established a different primary purpose for the travel ban, it cannot find that a 'reasonable observer' would understand that the primary purpose of the Proclamation's travel ban is no longer the desire to impose a Muslim ban." The court limited the injunction to visa applications by individuals with immediate family members in the U.S., not including travelers from Venezuela or North Korea.

Ministerial Housing Allowance Unconstitutional

In Gaylor v. Mnuchin, No. 16-cv-215-bbc, 2017 WL 4466621 (W.D. Wis. Oct. 6, 2017), the court granted the plaintiff's motion for summary judgment and declared that 26 U.S.C. §107(2), which excludes from the gross income of a "minister of the gospel" a "rental allowance paid to him as part of his compensation," violates the Establishment Clause and Equal Protection Clause of the Fifth Amendment. The court found that the exemption, inter alia, 1) was not needed to eliminate discrimination, either among religions or between religious and secular employers; 2) could not be justified as a mere "accommodation of religion" because the Supreme Court has held that the payment of a generally applicable tax does not qualify as a substantial burden on free exercise; and 3) tended to foster excessive entanglement and created the prospect of inconsistent treatment over religious doctrine. Although ministers may have unique housing needs, so do other employees not covered by the exemption. The court requested additional briefing regarding what additional remedies are appropriate.

Parochial School Principal Deemed Ministerial Employee

In Fratello v. Archdiocese of N.Y., 863 F. 3d 190 (2d Cir. July 14, 2017), the court ruled that a former principal of a parochial school was a "minister" for purposes of the ministerial exception doctrine, which sunk her claims for gender discrimination and retaliation in violation of Title VII and the New York State Executive Law. The most important consideration for the court was the extent to which the plaintiff performed religious functions for the school and acted as its "spiritual leader." The principal 1) consistently managed, evaluated and worked closely with teachers to execute the school's religious education mission; 2) led daily prayers for students over the loudspeaker and other prayers at various ceremonies for faculty and students; 3) supervised and approved the selection of hymns, decorations and lay persons chosen to recite prayer at annual special masses; 4) encouraged and supervised teachers' integration of Catholic saints and religious values in their lessons and classrooms; 5) kept families connected to their students' religious and spiritual development through the newsletter; and 6) delivered commencement speeches and yearbook messages that were religious in nature. The court found two other factors slightly in favor of applying the ministerial exception doctrine, the substance reflected in her formal title and the use of the title, but the title "lay principal" weighed against it.

Non-Religious Nonprofit Has No Claim Against Contraception Coverage Mandate

In Real Alternatives, Inc. v. Sec. Dep't of Health and Human Servs., 867 F. 3d 338 (3d Cir. 2017), the court ruled that the contraception coverage mandate did not violate the Equal Protection Clause as applied to a nonprofit, non-religious, anti-abortion organization and the free exercise rights of its employees. The court ruled that the nonprofit is not similarly situated to a house of worship, based on adherence to a shared position on abortion. The plaintiff organization averred that its views on human life are based on science, reason and non-religious philosophical principles, rather than religion, but added that it opposes the use of all contraceptives as "morally wrong." The court worried that by trying to encompass the organization, the exemption would swallow the rule and overly broaden religious-based exemptions in similar contexts. Real Alternatives' president, vice president of operations and vice president of administration alleged that their sincerely held religious beliefs prohibit them from using, supporting or otherwise advocating the use of abortifacients, or participating in a health insurance plan that covers such items. The court rejected their claim under the Religious Freedom Restoration Act (RFRA). It found that "payment for the ability to have coverage does not give an employee an active 'role' in the underlying plan." Likewise, the court ruled that filling out a form does not involve the sort of "substantial" burden contrary to RFRA.

Mandatory Meeting with Health Worker to Reconsider Vaccination Constitutional

In Nikolao v. Lyon, No. 17-1367, 2017 WL 5147653 (6th Cir. Nov. 7, 2017), the court ruled that Michigan's rule requiring that parents seeking exemption from the vaccination requirement speak with a health worker did not violate the Establishment Clause, and neither did a state document responding to common religious objections to vaccination. The court found no evidence that the state coerced the plaintiff in her religious practice and held that the state had a secular purpose to encourage widespread vaccination to promote immunity.

Religious Institutions in the News

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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