Wednesday, August 9, 2023

Ninth Circuit Reinstates Huntsman's Fraud Claim Against Latter Day Saints


The implicit premise of this otherwise informative discussion is all wrong because churches don't have to be charitable for tax exemption.  

Can you imagine the shivers that megachurches are experiencing now that the Ninth Circuit has held that a congregant can sue a place of worship (a "church" for short) for not using his donations for "charitable purposes."  Seems the Mormon HQ invested tithes and offerings expertly over many years and have earned and accumulated a whole lot of wealth for their efforts, some of which has been invested in commercial properties.  And now they are being sued by a devoted congregant who claims to have given a half million dollars in tithes.  Tithes misspent by the church commercially rather than charitably, according to the complaint.  Oh, I'm not suggesting that the Mormons constitute a stereotypical megachurch or that Elders are living lavishly.  But there are plenty of churches whose leaders live very high on the hog -- private jets, campus like homes, luxury cars and such -- and, as a result, might have something to worry about if a congregant can involve the courts in how those churches spend their tithes and offerings. 

But only in the short run I think.  I predict the case will eventually be resolved in the Church's favor.  Because churches are not charities and their activities can be as uncharitable as old Beelzebub himself.  Just not illegal.  They aren't exempt because of their good works, though that is what they do mostly.  Churches get to define for themselves their tax exempt purpose, as long as its a "spiritual worship activity" for which no government definition constitutionally exists.   They can worship nothing and nobody, as an atheist megachurch; they can worship the almighty dollar if they want and nobody can claim they are not churches on that basis.   I have said it once, and I'll say it again.  Churches can do whatever they want with their tax exemption.  We cannot insist that churches act "charitably" as a condition of tax exemption.   They just need to be spiritual worshippers in whatever way they see fit that is not illegal.  Anyway, here is the reporters' summary from James Huntsman v. Corporation of the President of the Church of Jesus Christ of Latter-Day Saints, decided August 7, 2023.

The panel reversed the district court’s grant of summary judgment in favor of the Corporation of the President of the Church of Jesus Christ of Latter-Day Saints in a diversity action brought by James Huntsman, a former member of the Church, alleging fraud under California state law. Huntsman alleged that he contributed substantial amounts of cash and corporate shares to the Church as tithes. He further alleged that he relied on false and misleading statements by the Church that tithing money was not used to finance commercial projects, when in fact the Church used tithing money to finance a shopping mall development and to bail out a troubled for-profit life insurance company owned by the Church.

The panel denied the Church’s request to seal those portions of the opinion that include business and financial information relating to Church operations, noting that the opinion reveals very little of the Church’s financial information and some of the relevant information has already been publicly revealed. The panel rejected the Church’s argument that Huntsman’s fraud claims are barred by the First Amendment.

The panel held that the ecclesiastical abstention doctrine did not apply because the questions regarding the fraud claims were secular and did not implicate religious beliefs about tithing itself. Nor was the panel required to examine Huntsman’s religious beliefs about the appropriate use of church money. The panel held that there was a genuine dispute of material fact as to whether the Church fraudulently misrepresented the source of money used to finance the shopping mall development. Based on the evidence in the record, including statements by church officials and in church publications, a reasonable juror could conclude that the Church knowingly misrepresented that no tithing funds were being or would be used to finance the shopping mall development and that Huntsman reasonably relied on the Church’s misrepresentations.

The panel agreed with the district court that the evidence did not provide a sufficient basis for a fraud claim with respect to bail-out payments to the life insurance company. Concurring in part and dissenting in part, District Judge Korman dissented from Part IV.B.1 of the majority opinion because in his view no reasonable juror could conclude that the Church fraudulently misrepresented the source of the money used to finance the shopping mall development. Summary judgment in favor of the Church was therefore appropriate on all claims. 

darryll k. jones

| Permalink


Post a comment