May 23, 2013

Religious Institutions Update: May 2013

Lex Est Sanctio Sancta
Holland & Knight Update
Nathan A. Adams IV

Timely Topics

Intellectual property is a legal construct referring to creations of the mind for which exclusive rights are recognized. Common types include copyrights, trademarks, patents, industrial design rights, trade dress and, sometimes, trade secrets. The property is typically intangible, e.g., literary, musical and artistic works that could include sermons, speeches, books, broadcasts, articles and songs; discoveries and inventions; and phrases, symbols and designs, such as easily recognizable corporate brands and names. Nonprofit religious organizations own intellectual property but are not always careful to protect or enforce those rights when third parties assert them. As a result, the public may become confused as to the origin of messages, products or services when another organization adopts the same name, word, phrase, logo, symbol, design, image or some combination of these for good or bad reasons. "Brand piracy" and "counterfeit goods or services" can be as damaging to religious organizations and misleading as any other types. Poorly defined intellectual property rights can lead to serious internal division, too; for example, when a dispute arises about whether an employee or the employer owns an original work.

As a default rule, a work prepared by an employee within the scope of his or her employment is a "work made for hire" that belongs to the employer. Determining what activities are within the scope of employment is not easy. The inquiry should begin with evaluating an employee's job description and actual responsibilities. Ahead of time, an employer and employee may contract around the work made for hire rule to provide that a work will be an employee's. After the fact, the employer may transfer or license rights to a work made for hire, but not without taking into account the exempt purposes of the organization and the value of the transfer in light of the employee's overall compensation. Tax and other considerations also arise if the organization itself promotes the private intellectual property of an officer or director. Disputes related to works also arise when there is a question whether the author is an employee or independent contractor. A multi-part legal test governs this analysis. If a work is created by an independent contractor, it will count as a work for hire if the work is specially ordered or commissioned, a written agreement provides that it is a work for hire and the work is a particular kind. Clearly, assigning intellectual property rights before disputes arise is always easier than resolving the disputes afterwards.

Key Cases

Missouri House of Worship Protection Act Upheld

In Survivors Network of those Abused by Priests, Inc. v. Joyce, No. 4:12CV1501 ERW, 2013 WL 1703371 (E.D. Mo. Apr. 19, 2013), the court ruled as constitutional the House of Worship Protection Act, which, inter alia, criminalizes intentionally and unreasonably disturbing, interrupting or disquieting any house of worship by using profane discourse, rude or indecent behavior, or making noise either within the house of worship or so near it as to disturb the order and solemnity of the worship services. Plaintiffs who regularly picket and distribute leaflets outside of churches claimed the act violated the Free Speech Clause of the state and federal Constitution and the Due Process Clause of the federal Constitution. The court ruled that the act is a content-neutral regulation subject to intermediate constitutional scrutiny, because it makes no distinction based on the content or message conveyed by protestors, rather than a content-based regulation subject to strict scrutiny, which does. A content-neutral time, place and manner regulation may be imposed in a public forum if it: (1) serves a significant governmental interest; (2) is narrowly tailored; and (3) allows for ample alternative channels for communication. The court held that the act satisfied all of these requirements. It said the act: (1) promotes a significant governmental interest in preserving and protecting the free exercise of religion; (2) applies to picketing exclusively within a house of worship or near it, for a short period during a worship service; and (3) leaves open ample alternative modes of communication such as leafleting when services are not being held, door-to-door proselytizing and mail. The court also rejected the plaintiff's claim that the act was void for vagueness due to imprecise terms such as "rude," "indecent" and "profane," on the grounds that people of ordinary intelligence would reasonably understand the prohibited conduct based on common usage and definitions of the terms, and the scienter requirement adequately addresses the plaintiff's concern that protestors could unknowingly violate the statute.

Colorado Board of Assessment Appeals Applies Wrong Religious and Charitable Use Tax Exemption Standard

In Larimer Cnty. Bd. of Com'rs v. Colorado Prop. Tax Admin., No. 07CA0422 & 11CA0725 (Colo.App. Apr. 11, 2013), the court ruled that the board of assessment appeals applied the wrong legal standard when it found that the Young Men's Christian Association of the Rockies (YMCA) Snow Mountain Ranch and Estes Park Center did not qualify for a religious purposes property tax exemption or charitable use property tax exemption with respect to facilities other than its chapels and religious activities center. The court remanded the case for further proceedings consistent with its opinion. The 2,187-acre Snow Mountain Ranch consists of 40 cabins, 12 vacation homes, 61 campsites, a chapel, conference facilities, dining halls, a library, a swimming pool, athletic and recreational facilities, a laundromat, and maintenance and administration buildings. The 860-acre Estes Park Center consists of 179 cabins, 25 vacation homes, 451 lodge rooms, a chapel, a museum, a library, conference facilities, auditoriums, dining halls, a swimming pool, a skating park and rink, a miniature golf course, a laundromat, and maintenance and administration buildings. Most activities are free or offered at nominal cost to guests. The court ruled that Colorado has adopted a broad view, exempting "necessarily incidental" property and activities of the religious organization entitled to a tax exemption. Toward this end, the YMCA's declaration of religious purposes is presumptive with regard to the religious purposes for which the property is used. Instead, with respect to the religious exemption, the board wrongly considered evidence of: (1) some guests' purposes, subjective experiences and choices during their stays; (2) access by public school children to the property; (3) the YMCA's receipt of bond funds; (4) the YMCA's lack of control over a "majority of the programs" within its facilities; and (5) the YMCA's marketing to the public without advertising religion. With respect to the charitable exemption, the board focused almost entirely on the use by families of the facilities equal to just 12–16 percent of the use. State law provides that if a charitable property is used for non-exempt purposes for fewer than 208 adjusted hours, or the non-qualifying purposes result in less than $25,000 of gross rental income in a year, the property maintains its full exempt status.

Ecclesiastical Abstention Doctrine Precludes Clergy Members' Contract and Tort Claims

In Susan v. Romanian Orthodox Episcopate of Am., No. 1-12-0697, 2013 WL 1636467 (Ill.App. 1st Dist. Apr. 16, 2013), the court ruled that the ecclesiastical abstention doctrine precluded it from taking jurisdiction over a breach of contract and tort claims because they were based on the allegation that the archbishop lacked the authority to transfer him, where the archbishop's authority over disciplinary and personnel matters arose from not only the constitution and bylaws, but also canon law, notwithstanding that no court was convened when the plaintiff demanded trial in a church court to combat the reason given for his transfer ("disloyalty"). The court distinguished Ervin v. Lilydale Progressive Missionary Baptist Church, 351 Ill.App.3d 41, 43 (2004), where it applied a neutral principles of law approach and decided a dispute, because the church's own secular procedures unambiguously placed the power to remove the church pastor with the congregation rather than the board; resolving the case did not require inquiry into church doctrine. In contrast, the court said that in this case, in order to find that the archbishop had no authority to unilaterally transfer the plaintiff without first referring the matter to the church courts it would have to first determine the extent of the bishop's authority for such an action under canon law. Furthermore, the bylaws placed jurisdiction over the plaintiff's grievance in the hands of the church judicial system. As for the plaintiff's tort claims, the court held the ecclesiastical abstention doctrine provides protection for statements that are made in the context of disciplinary proceedings as part of a church's right to regulate its clergy, whereas the plaintiff's claims were all based on internal communications within the church during the disciplinary proceedings. "Ultimately, the problem with all of plaintiff's arguments in this case is that the constitution and bylaws ... are not the final word on the authority of the ... bishop."

In Torralva v. Peloquin, No. 13-12-00342-CV, 2013 WL 1683621 (Tex. App. - Corpus Christi Apr. 18, 2013), the court affirmed the trial court's ruling that the ecclesiastical abstention doctrine and the ministerial exception bars an associate pastor's claims for defamation, conspiracy, tortuous interference with contract and prospective contract, negligence and intentional infliction of emotional distress. The plaintiff alleged that the head pastor asked for his resignation and relieved him of his administrative duties and office space after the plaintiff revealed to church officials that the church had financial problems, and that the church's head of deacons attempted but failed to secure the votes of a majority of deacons to oust him. The plaintiff also alleged that the defendants falsely accused him of producing and disseminating pornography. The court found that the plaintiff's claims took place entirely within the context of church officials' internal efforts to remove him from his position and, thus, that trial on the plaintiff's claims would require an analysis of church discipline, ecclesiastical government or the conformity of the members of the church to the standard of morals required. There was no evidence that the plaintiff's reputation was harmed outside the church community. Also, there was no evidence that any of the alleged torts pose a "substantial threat to public safety, peace or order" as necessary to avoid the abstention doctrine. Therefore, the court found that it lacked subject matter jurisdiction over all of the causes of action.

Church States First Amendment Claim against a Prosecutor in a Disturbing the Peace Case

In Faith Baptist Church v. Waterford Township, No. 10-1406, 2013 WL 1489387 (6th Cir. Apr. 11, 2013), the court reversed the dismissal of the plaintiff's suit against Walter Bedell, the prosecuting attorney for Waterford Township, Michigan, in his individual capacity for injunctive and declaratory relief, and of the plaintiff's First Amendment claims, based on lack of standing. Although Mr. Bedell threatened to prosecute, he did not actually charge church members for disturbing the peace when residents complained to the Waterford Police Department that the music at the church was too loud and actually shook the windows in their residences. The court ruled that the threat of criminal prosecution was "the exercise of governmental power" necessary to support an injury in fact based on chilling speech. The court affirmed the dismissal of the plaintiff's Fourth Amendment, Fourteenth Amendment and section 1983 conspiracy claims.

Property of Episcopal Church that Preceded Diocese Belongs to Diocese

In Falls Church v. Protestant Episcopal Church in the United States, Record No. 120919, 2013 WL 1687202 (Va. Apr. 18, 2013), the court affirmed the decision of the Virginia circuit court enjoining the congregation of Falls Church from further use of property conveyed to it decades before the congregation affiliated with the Protestant Episcopal Church in the Diocese of Virginia. When the congregation disaffiliated with the diocese to become part of a mission of the province of the Church of Nigeria, the court found that it had to give up the property because of an implied constructive trust over it in favor of the diocese. It also found that the existence of the trust turned on the enactment of the Dennis Canon in 1979, which created an express trust in "[a]ll real and personal property held by or for the benefit of any Parish, Mission or Congregation." The court rejected as not raised below the congregation's argument that it was incorrect for the trial court to rely upon the diocese's canons to determine property ownership. As distinguished from an implied trust, the court found that a statute precluding conveyances and transfer of real property to a church precluded an express trust in favor of the diocese. It ruled that the relationship between a local church and its hierarchical parent is akin to a contractual relationship, and that when the congregation joined the diocese it agreed to be bound by every diocesan "canon which shall be framed." For this reason, the court was not persuaded by the congregation's argument that there was no evidence of mutual assent with regard to the diocese's rights over the property. Furthermore, the court found that the congregation allowed the diocese to play an active role in its overall operations. The court also disagreed with the congregation that the award of the property to the diocese violated the First Amendment, because the dispute was resolved in a "wholly secular manner through the use of neutral principles of law." Nevertheless, it assigned error to the trial court's award of funds given the congregation after it disaffiliated, ruling that once it did so, the hierarchical church no longer had any interest in any property the congregation subsequently acquired.

Tort Claims against Homeless Shelter Dismissed

In Pilgrim v. Our Lady of Victories Church, No. 12-P-685, 2013 WL 1759415 (Mass.App. Apr. 25, 2013), the court affirmed dismissal of the plaintiff's complaint for negligence, public nuisance and outrageous conduct against the defendants, who operate a homeless shelter in the vicinity of her home. The plaintiff complained that her tenants were the victim of breaking and entering and battery by men visiting the shelter. The court ruled there was no special relationship between the defendant and plaintiff to support a negligence claim, no allegations of facts showing that the plaintiff suffered a particularized injury "different in kind" from the harm the rest of the community suffered to support a public nuisance, and no outrageous conduct that arose from defendant's invitation to her to "come and visit the [shelter] and once (the women) got to know the homeless men there they would not be afraid of them."

District Entitled to Lock Out Church, But Not Retain Personal Property

In Galilean Family Worship Ctr v. Cent. Fla. Dist Church, No. 5D12-235, 2013 WL 1775532 (Fla. 5th DCA Apr. 26, 2013), the court affirmed dismissal of the plaintiff's claims for "wrongful eviction," "wrongful foreclosure," unjust enrichment and conversion, but reversed the court's dismissal of plaintiff's claim for conversion. Galilean Family Worship Center occupied premises owned by the Central Florida District Church of the Nazarene Church. The defendant demanded that the plaintiff vacate its property due to, among other things, the "cultural divide" with defendant's leaders. When the plaintiff refused, the defendant locked the plaintiff out of the property. The plaintiff sued and the trial court dismissed the case on all counts. The appellate court affirmed except for dismissal of the conversion claim, inasmuch as the defendant offered no legal basis for any claim to the personal property that the plaintiff allegedly left on the property.

Factual Questions Preclude Award of Property to Congregation

In Mountain Lakes Dist. v. Oak Grove Methodist Church, No. 2111157, 2013 WL 1777731 (Ala. Civ. App. Apr. 26, 2013), the court reversed a summary judgment in favor of Oak Grove Methodist Church and remanded for further proceedings the question of whether real property belongs to the congregation or the United Methodist Church denomination. The court ruled that there was ambiguity regarding the intent of the grantors based on the description of the grantees in the deeds, precluding summary judgment and requiring resolution of various factual disputes. The disputed issues include the intention of the grantors in each deed, import of certain language in a deed, the organizational structure of the church, and the capacity, propriety or status of its representative to bring the case or to be awarded ownership of any property.

Court Refuses to Enjoin Contraceptive Coverage Mandate

In MK Chambers Co. v. Dep't of Health and Human Servs., No. 13-11379, 2013 WL 1340719 (E.D. Mich. Apr. 3, 2013), the court denied the plaintiffs' emergency ex parte motion for a temporary restraining order against the contraceptive coverage mandate contained within the Patient Protection and Affordable Care Act. The court held there was no reason the plaintiffs could not have given notice of the lawsuit to the defendant and, therefore, did not issue a temporary restraining order. In any event, the court ruled that the plaintiffs had not shown they would prevail under the Religious Freedom Restoration Act (RFRA), because the contraceptive coverage mandate applies to the corporate entity, not to its officers or owners, and any burden imposed on them was too remote or attenuated to be considered substantial. The court also was not persuaded that the corporation had a right to proceed under the Free Exercise Clause either on its own or through its owners because a corporation is not the alter ego of its owners. In addition, the court ruled that the mandate is a neutral, generally applicable law and that it regulates conduct, not speech. Last, the court ruled that equity does not favor the plaintiffs, since they waited two months after the mandate before filing their lawsuit.

Religious Institutions in the News

The U.S. Commission on International Religious Freedom identified 15 nations where abuse of religious liberty is "systemic, egregious and ongoing."

U.S. Muslims are more moderate than Muslims worldwide, according to a new report by the Pew Forum on Religion and Public Policy.

Pastors push back against city's "annual registration fee" as an unlawful tax.

Although most Americans have a Bible, the majority read it four times a year or less.;

Thirteen state attorneys general are urging the federal government to broaden religious exemptions for private businesses under the contraception mandate.

Related Insights