September 16, 2011

Religious Institutions Update: September 2011

Holland & Knight Update
Nathan A. Adams IV

Timely Topics

Franchises and other businesses generally do not appreciate it when others adopt confusingly similar names or utilize their goods or services without attribution. They are concerned that the public will be misled to believe that a non-franchised location is the same as a franchised location or that they will not receive compensation for their original works of authorship. Nonprofits are not immune from these concerns. In fact, with the advent of the Internet, even religious institutions are globally policing and enforcing their distinctive names, services and goods, and insisting that others not utilize them without permission.

The protection and licensing of intellectual property of all kinds is best approached both defensively and offensively. A good defense involves due diligence to be sure that you are not infringing a third party’s intellectual property and defending infringement actions when they arise. A good offense involves protecting your intellectual property through registration and your own enforcement efforts. The term “intellectual property” is broad to include patents on inventions, but more commonly for religious institutions includes these assets:

Trademarks – These are special names associated with your religious institution or its products and services. Trademarks are words, logos or slogans which are used to identify the source of goods or services.

Copyrights – These are “works of authorship” such as the written or spoken word, music, works of art or computer software. “Originality” is key to protection. Copyrights are owned by the author of the work unless the author is an “employee” who is hired to create the work.

Trade Secrets – These are special formulas for goods, customer and supplier lists or technology known only to a select few in the company or organization.

Domain Names – These are the key links to organization Internet sites which are often based on trademarks or company/organization names.

Advertising/Promotion – Sweepstakes, skill contests, raffles, games, rebates, coupons, gift cards, loyalty programs and copy clearance all involve intellectual property issues.

Intellectual property helps religious and commercial institutions alike distinguish themselves and commercialize works of authorship. Counsel can assist you with identifying the intellectual property in need of defensive or offensive support, potential infringements of your own or other’s assets, and help you prioritize which strategic steps to take first to advance your mission.

Key Cases

New Jersey Regulation of Continuing Care Retirement Center Enjoined Against Church

In Wiley Mission v. New Jersey, 2011 WL 3841437, Case No. 10-3024 (RBK/JS) (D.N.J. Aug. 25, 2011), the court enjoined enforcement of a New Jersey law requiring every continuing care retirement center (CCRC) to include a resident as a full voting member of the CCRC’s governing body. Wiley Mission, a church, operates a Christian retirement home that is not separately incorporated and, therefore, is subject to the church’s governing board to further the church’s goals of realizing the “Great Commission” and “revealing Christ.” As Wiley put it, its CCRC is “part of a ‘life-cycle’ ministry” of the church that “strives to serve all ages and all areas of life, the spiritual as well as the physical.” The New Jersey Department of Community Affairs threatened to withdraw its Certificate of Authority for lack of including a resident on the board, not due to any dissatisfaction with the quality of services rendered. To the contrary, residents and their families expressed exceptional satisfaction with the level of services rendered at the facility.

The Church sought declaratory and injunctive relief on the grounds that the New Jersey law violated its rights to Free Exercise, Equal Protection and Free Association under state and federal law. The court disagreed with respect to the first two claims, finding that the law was neutral and generally applicable, the Third Circuit has not endorsed a hybrid rights-styled claim and there was no evidence of selective enforcement of the law. But the court agreed that the law would violate the church’s “freedom of association” and “freedom not to associate” with a resident on its board. The court said the violation did not stem from an infringement upon the church’s association for religious purposes for lack of an underlying violation of the Free Exercise Clause, but due to infringement of its expressive purposes.

Applying a three-part constitutional test, the court found: (1) the church is an “expressive association,” inasmuch as it seeks to carry out the Great Commission and the CCRC “is inextricably linked to the Church’s stated goal of evangelization”; (2) the law “would directly interfere with the church’s ability to control how the substance of its public and private expressions are developed and effectuated”; and (3) the Department offered no evidence that the law is narrowly tailored to achieve its goal of protecting senior citizens or that it is the least restrictive regulatory alternative. The Department argued that adding a single resident to its board would not interfere with its expressive rights because one vote does not make a majority, but the court disagreed on the grounds that the single vote could be a deciding vote and the single vote would not be guided by the same spiritual principles. The court also considered that other accountability measures could ensure resident safety, besides putting a resident on the church board.

Religious Health Program Subject to Unruh Act and California Disabled Persons Act

In Stevens v. Optimum Health Institute - San Diego, 2011 WL 3741055, Case No. 09cv2565-WQH-RBB (S.D. Cal. Aug. 24, 2011), the court held that a religious institution, subordinate to Free Sacred Trinity Church (FSTC), operating a “holistic health program” in Lemon Grove, California, violated the California Unruh Civil Rights Act and the California Disabled Persons Act (DPA) by denying a blind woman access to a place of public accommodation unless accompanied by another adult. Optimum Health Institute (OHI) described itself as a “spiritual retreat” with a “monastic-like setting” with values based on “ancient spiritual disciplines” and “Essene based dietary and cleansing practices.” Attendees “are not required to adhere to any specific religious value or belief or ... be a member of OHI or FSTC.” They are also not required to participate in any of the religious activities on-site such as daily prayer circles and liturgies or ritual purification. The court considered both of these facts key when concluding that OHI is a “business establishment” within the meaning of the Unruh Act and a “public accommodation” pursuant to the DPA.

The plaintiff asked to come with her guide dog, but was turned down. The court held this a violation of the Unruh Act and DPA. OHI advised that animals were not welcome on the grounds, because the grounds are sacred and allowing animals would be “antithetical to the promotion of a safe, healing environment ... particularly for people who have animal phobias or allergies ... .” OHI defended that applying Unruh or the DPA to it would, therefore, violate its rights to free expressive association, free exercise of religion and due process. The court disagreed and found that even if OHI’s rights were infringed, the state had a compelling interest in eliminating discrimination against the disabled pursued in the least restrictive manner. The court also disagreed that the Americans with Disabilities Act, which contains an exemption for religious organizations, preempts the Unruh Act and DPA, and that either was void for vagueness.

Court Compels Arbitration of Church Property Dispute

In General Conference of the Evangelical Methodist Church v. Evangelical Methodist Church of Dalton, Ga., Inc., Case No. 4:11-CV-0186-HLM, 2011 WL 3841015 (N.D. Ga. Aug. 22, 2011), the court required a church and the denomination with which it was associated to arbitrate their differences. In 1955, the church affiliated with the denomination and thereby accepted the Discipline of the Evangelical Methodist Church (the Discipline), which specified two means for a local church to depart from and to remove property from the denomination. The Discipline also required Biblical conciliation, mediation and arbitration of non-doctrinal disputes to be conducted in accordance with the then-current rules of the Institute of Christian Conciliation, a division of Peacemaker Ministries. Nevertheless, the church unilaterally transferred the deed to church property to “Church on the Hill, Inc.,” and sent a letter memorializing its disassociation. The denomination asked the court to compel arbitration under the Federal Arbitration Act when the church did not respond favorably to its requests for conciliation. The court held that by executing the Affiliation Resolution, the defendant agreed to accept the Discipline and abide by its terms including the arbitration clause; therefore, the parties entered into a valid, enforceable agreement to arbitrate. Furthermore, the court determined there were no legal constraints external to the parties’ agreement foreclosing arbitration.

Church Applied Autonomy and Ministerial Exception Doctrine Applied With Mixed Results

Administrative Assistant’s Race Discrimination Claim Survives

In McCallum v. Billy Graham Evangelistic Ass’n, 2011 WL 3438756, Case No. 3:09CV381-RLV (W.D.N.C. Aug. 5, 2011), the court held that the church autonomy doctrine does not deprive the court of subject matter jurisdiction nor exempt the Billy Graham Evangelistic Association (BGEA) from defending against the plaintiff’s race discrimination claim under Title VII. The plaintiff worked as an administrative assistant in the Global Ministries Division of BGEA. She became concerned that BGEA was inviting only white people to events. One week after she shared her concern, she was notified that her department was being downsized and her job eliminated. Allegedly, the only job downsized in her department was hers. The plaintiff sued for racial discrimination and retaliation and BGEA moved to dismiss her claims. The court denied the motion to dismiss the plaintiff’s discrimination claim on the ground that BGEA failed to demonstrate that the church autonomy doctrine bars the plaintiff’s lawsuit or that her position falls within the ministerial exception inasmuch as her primary duties do not entail traditional ministerial functions. The court observed, “Nothing in the record suggests that McCallum had decision making authority or substantive input regarding the content of BGEA’s religious message.” The court acknowledged that BGEA’s “substantive defense to McCallum’s claim, is likely to pose the very type of entanglement issue that the church autonomy doctrine and ministerial exception seek to avoid.” About this, the court stated that it would keep “off-limits” certain “doctrinal topics” to include BGEA’s “decision-making process with respect to its missions ministry,” but would not be “entirely shielded ... from having to respond and provide any legitimate, non-discriminatory reason for the elimination of plaintiff’s position ... .” The court dismissed the plaintiff’s retaliation claim, because she alleged that the retaliation against her was due to her questioning of BGEA’s evangelism and ministry process, not due to her complaints concerning her own discriminatory treatment in the workplace. In other words, she failed to plead that the retaliation was for unlawful employment practices.

Principal’s Contract and Tort Claims Barred

In Dayner v. Archdiocese of Hartford, 301 Conn. 759, 23 A. 3d 1192 (Conn. Aug. 2, 2011), the court held, in keeping with authority from the U.S. Court of Appeals for the Second Circuit, that the ministerial exception barred a former principal’s action against the Archdiocese and a priest. The former principal claimed that, by not renewing her contract of employment, the Archdiocese: breached an implied contract, an implied covenant of good faith and fair dealing, and the doctrine of promissory estoppel; terminated her employment in violation of public policy; negligently inflicted emotional distress; and tortuously interfered with the principal’s business expectancies. In reaching its conclusion, the court considered whether adjudicating the claims and defenses would require the court to intrude into a religious institution’s exclusive right to decide matters pertaining to doctrine or its internal governance or organization. The court held that the contract and promissory estoppel claims would require the court “to police the Archdiocese’s compliance with its own internal procedures.” The court ruled that the remainder of the claims “arise directly from, and in furtherance of, the defendants’ decision to terminate the employment of the plaintiff – a ministerial employee – and requiring the court to determine whether any proffered religious reasons are a pretext for unlawful action would amount to judging the employment decisions of the church.” It was undisputed that the plaintiff’s duties rendered her a ministerial employee.

Members’ Claims for Violations of Nonprofit Act and Outrageous Conduct Survive

In Johnson v. Antioch United Holy Church, Inc., 2011 WL 3569830, Case No. COA11-24 (N.C. Appl. Aug. 16, 2011), former members sued officers of their church, alleging a number of violations of the North Carolina Nonprofit Corporation Act such as the officers exercising corporate powers without a board of directors in violation of the bylaws, failure to maintain audited financial statements as required by bylaws and failure to keep permanent records of meetings, members, or accounting records. The plaintiffs also alleged that the officers were wasting church property, causing the church to engage in transactions prohibited by the IRS, putting the church’s tax-exempt status in jeopardy and thereby putting plaintiffs at risk of having to pay taxes for donated funds. Last, one plaintiff alleged intentional infliction of emotional distress when an officer delivered a letter to the plaintiff as notice of the “removal of her name” as a member. The trial court dismissed the case and imposed Rule 11 sanctions on the plaintiffs on the grounds that it concerned an internal church governance dispute, but the appellate court reversed: “Whether Defendants’ actions were authorized by the bylaws of the church in no way implicates an impermissible analysis by the court based on religious doctrine or practice.” The court likewise determined that the allegations in the complaint of the defendant’s outrageous conduct in delivering the letter to the plaintiff met the pleading requirements of the common law tort of intentional infliction of emotional distress.

Director of Faith Formation’s Contract Claim Certified to Wisconsin Supreme Court

In DeBruin v. St. Patrick Congregation, 2011 WL 3591697, Case No. 2010AP2705 (Wis. App. Aug. 17, 2011), the court certified the question to the Wisconsin Supreme Court “whether the religious liberty protections found in the Wisconsin Constitution are so broad as to shield religious organizations from common law breach of contract lawsuits brought by ministerial employees.” The church fired the plaintiff, who was the director of faith formation, for allegedly failing to do a background check. She had signed a one-year contract providing that she could not be discharged without good and sufficient cause. The plaintiff sued the church for breach of contract. The court determined that the plaintiff was “unquestionably [] a ministerial employee,” but considered it significant that she might not be a “member of the clergy.” The decision discusses multiple cases pro and con for adjudicating a breach of contract claim such as the plaintiff’s. Without clearly ruling as such, the court appeared to find a consensus that the plaintiff’s claim should be adjudicated unless the Wisconsin Constitution has broader religious liberty protections than the First Amendment.

Pastor’s Defamation and Contract Claims Barred

In Indiana Area Foundation of the United Methodist Church, Inc. v. Snyder, Case No. 49A05-1011-CT-715, 2011 WL 3840993 (Ind. App. Aug. 31, 2011), the court held that alleged defamatory statements involving a pastor’s fitness for ministry that were either intra-church communications made to parishioners or church officials regarding the pastor’s status as a minister or made to medical professionals in furtherance of assessing the pastor’s competency to minister should be dismissed under the church autonomy doctrine. The court also granted summary judgment on the pastor’s breach of contract claim premised upon The Book of Discipline for the reason that the plaintiff failed to prove an enforceable contract or whether the defendants breached the purported contract or that the breach could be shown without excessive entanglement in church doctrine in violation of the First Amendment.

Religious Institutions in the News

An Illinois court ruled that Catholic Charities has no contract right to continue offering adoption and foster care services. See

The Commission on Accountability and Policy for Religious Organizations, which will analyze federal tax and related policy toward religious institutions, appointed its panel members. See;

Prison Fellowship terminated dozens due to loss of revenue. See

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