May 8, 2009

Religious Institutions Update: May 2009

Holland & Knight Update
Nathan A. Adams IV

Timely Topics

Some of the worst news a Religious Institution can receive involves the death or sudden incapacity of a leader as a result of an accident, unexpected medical diagnosis, or crime. Equally, if not more damaging, are moral failures involving leadership. Membership may shrink. Donors may become disenchanted.

Does your organization have secession or transition protocols for events like this? Government and businesses do. Even families prepare for the worst with wills and other estate plans. Your ministries deserve at least as much attention. With a little forward legal planning, you can avert an institutional crisis, pass on your organization’s key values and prepare a new generation for leadership.

Key Cases

NLRB Jurisdiction Over Religious Schools Circumscribed

Federal courts have frequently held that the National Labor Relations Board (NLRB) lacks jurisdiction over religious schools to require them to participate in collective bargaining, because exercising that jurisdiction impinges upon religious orthodoxy. In Carroll College v. National Labor Relations Bd., No. 558 F. 3d 568 (D.C. 2009), the influential District of Columbia Court of Appeals reiterated, “It is not only the conclusions that may be reached by the Board which may impinge on rights guaranteed by the Religion Clauses, but also the very process of inquiry leading to findings and conclusions.” Accordingly, the Court held that the Board may not “ask[] how effective the institution is at inculcating its beliefs” and thereby question the sincerity of the school’s public representations. To be exempt from the Act, a school need only show that it (1) holds itself out to students, faculty, and the community as providing a religious educational environment; (2) is organized as a “nonprofit”; and (3) “is affiliated with, or owned, operated, or controlled, directly or indirectly, by a recognized religious organization, or with an entity, membership of which is determined, at least in part, with reference to religion.” For the last element, the representation in an institution’s articles of incorporation that it is related to a religious organization is sufficient without further proof of ownership, operation, or control to demonstrate affiliation with a religious organization.

School Tax Credit Program Struck

Just a few short weeks after the Arizona Court of Appeals held Arizona’s tax credit program constitutional under the Establishment Clause against a facial challenge in Green v. Garriott, 2009 WL 623346 (Ariz. App. Div. 1 March 12, 2009), the Ninth Circuit Court of Appeals held otherwise on an as-applied basis in Winn v. Ariz. Christian Sch. Tuition Org., Case No. 05-15754, 2009 WL 1055110 (9th Cir. April 21, 2009). To do so, the Court first had to find that the plaintiff had taxpayer standing under the Establishment Clause. For this purpose, the Ninth Circuit treated a tax credit as akin to a grant program rather than a tax deduction. Next, the Court focused on the plaintiffs’ allegations that the three largest school tuition organizations (STO) to which parents must apply restricted their scholarships to use at religious schools. Without deciding the question, the Court said that these allegations might be sufficient to prove that the stated statutory purpose of the tax credit program, to provide students equal access to a wide range of schooling options without respect to income level, was a sham. In addition, the Court found that the program had the impermissible effect of advancing religion, inasmuch as it was purportedly skewed in favor of religious schools. The Court rejected the argument that the program was a true program of independent parental choice. It held that parents’ choices are constrained by the choices made by taxpayers to fund one STO over another and in exchange to receive a tax credit. Consequently, the Ninth Circuit claimed that a reasonable informed observer would consider the program an endorsement of religion. For the prior Green decision, see the April 2009 Religious Institution Update.

Religious Institution’s Service Mark Protected

When Devon Park Restoration Branch of Jesus Christ’s Church ignored requests to cease and desist utilizing the name “Reorganized Church of Jesus Christ of Latter Day Saints,” the court enjoined the defendant from using it in Community of Christ Copyright Corp. v. Devon Park Restoration Branch of Jesus Christ’s Church, Case No. 4:08-CV-00906-GAF, 2009 WL 1106934 (W.D. Mo. April 23, 2009). The court presumed valid the plaintiff’s federally registered mark, found the mark had not been abandoned, and held that the defendant’s use of the mark created a likelihood of confusion, because it was the same mark, applied to the same type of use (e.g., religious services), and was geographically near the plaintiff’s headquarters.

Priest With Knowledge of Recording Not Liable for Fraudulent Concealment Because the Mississippi Supreme Court earlier found that the defendant priest had no fiduciary relationship with the plaintiff, the Court likewise held that the priest had no legal duty to disclose knowledge that the plaintiff was being recorded by her husband when he invited the two of them to his house to confront her over marital infidelity. Mabus v. St. James Episcopal Church, Case No. 2006-CA-02052-SCT, 2009 WL 1014907 (Miss. April 16, 2009). The tape was not introduced into evidence in their later divorce proceedings, but was influential to the husband’s expert in the award of child custody to him. Subsequently, the wife sued the priest, church and diocese for breach of fiduciary duty, fraudulent concealment, negligent misrepresentation, invasion of privacy, negligent infliction of emotional distress, negligent retention/supervision and clergy malpractice for the priest’s part in the undisclosed secretly recorded meeting. Concurring in result, select justices lamented the original decision finding that no fiduciary relationship exists, thus, leading to the majority result.

Religious Institutions in the News

President Obama has met with stiff congressional resistance to his proposal to cap the charitable-giving deduction in the tax code at not more than 28 percent of the amount of the contribution for taxpayers with annual income in excess of $250,000. Hearings on the subject are now promised.

For details on the President’s proposal, see

The Swine Flu scare is affecting churches as Americans go out less to avoid germs. See  

A new survey shows the percentage of Americans calling themselves “Christian” dropped from 86 percent in 1990 to 76 percent earlier this year while the percent saying they had no affiliation jumped from 8 percent to 15 percent. See 

Many religious nonprofits are weathering the economic downturn better than anticipated by promoting personal attachments between donors and the subjects of their donations. See 

Religious Institutions Update: Lex Est Sanctio Sancta is a monthly update on issues pertaining to religious institutions.

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