Estimated read time: 8-9 minutes
- Judge Robert J. Shelby questioned both sides in a lawsuit seeking tithing refunds from The Church of Jesus Christ of Latter-day Saints.
- The lawsuit alleges the church misused tithing funds and demands a class action and public accounting.
- The church argues the case threatens religious autonomy; Shelby will issue a written decision.
SALT LAKE CITY — A federal judge blitzed lawyers on both sides with questions Friday during a three-hour hearing in a lawsuit brought by 13 people asking for the return of tithing they donated to The Church of Jesus Christ of Latter-day Saints.
But U.S. District Court Judge Robert J. Shelby repeatedly challenged the attorneys for the plaintiffs about the arguments in the suit they filed, lobbing one pointed question at a lawyer before he made it from his chair to the podium in a downtown Salt Lake City courtroom.
Meanwhile, the lawyer for the Church of Jesus Christ and another representing evangelicals and Seventh-day Adventists called the lawsuit a "broadscale attack" that if successful would set dangerous precedents for the futures of churches and charities.
They also said the plaintiffs had failed to raise issues that would pierce a longstanding American legal precedent called the religious autonomy doctrine or church autonomy doctrine.
"In my own 40 years practicing law in this area and a decade teaching the law, I have never seen a more brazen and dangerous assault on a church's religious authority," said Gene Schaerr, who represented the National Association of Evangelicals and the General Conference of the Seventh-Day Adventists.
Schaerr said piercing the church autonomy doctrine the way the plaintiffs want would "wreak Constitutional chaos for all religious organizations."
The plaintiffs' cases were joined together in April. Shelby did not issue any rulings at the end of the hearing.
"I will take the matter under advisement and I will issue a written decision," he said.
What the lawsuit alleges and asks the court to do
The lawsuit alleges that the church defrauded its members by not informing them that leaders were placing some tithing funds into reserve accounts and investing that money. It also alleges the church hid those investments and defrauded members by saying it would not use tithing for the construction of the City Creek development in Salt Lake City while allegedly doing so.
The church has maintained that it used funds that came from "commercial entities owned by the church" and the "earnings of invested reserve funds" to build City Creek, a mixed-use commercial development across the street from church headquarters that was part of efforts to protect the area around Temple Square.
The lawsuit also asks the court to institute a class action that would make it possible for members or former members of the church to seek reimbursement of tithing they donated to the church. It also asks the court to require an annual public accounting about the church's use of tithing and investment funds and to appoint a special master to monitor the collection and use of tithing and investment funds.
Such rulings could create a court-authorized schism in the church, said the lead attorney for the Latter-day Saints, former U.S. Solicitor General Paul Clement.
He said any lawsuit that could successfully pierce the church autonomy doctrine would have to be more of a rifle shot, a very specific case about a particular incident that showed actual harm to a person, not "a blunderbuss attack" on how the church handled tithing for decades and including thousands of people with differing experiences.
How the lawsuit got to this point
The 13 people in the lawsuit initially filed a number of separate cases. In April, a panel of judges in Washington, D.C., bundled five lawsuits around the country — Illinois, Tennessee, Utah, Washington and California — into a single case. They assigned the case to Shelby.
The plaintiffs filed a unified complaint in July. The church filed three motions, and Friday's hearing was for arguments on those motions. The first was a motion to strike the creation of a class-action suit, and the other two were motions to dismiss the case.
Clement went first on Friday. He said the plaintiffs' claim faced three fatal problems:
- The church autonomy doctrine.
- What he alleged was a failure by the lawsuit to establish what statements the plaintiffs relied on and how they were damaged.
- The church's belief that the lawsuit missed a three-year window set by the statute of limitations.
Clement also argued for the church in September at a 9th Circuit Court of Appeals en banc hearing in a similar tithing case brought by James Huntsman. Clement is well-known as one of the nation's top appellate litigators.
The church autonomy doctrine
The U.S. Supreme Court has strengthened the church autonomy doctrine in several rulings over the past 25 years. The plaintiffs said Friday that it does not apply to their lawsuit, while Clement said it did.
"This case can't get over the First Amendment hump," Clement said.
The church autonomy doctrine says that the government and courts cannot infringe on the way church's govern themselves, especially with regard to religious questions. Clement said the ancient doctrine of tithing, which plaintiffs' attorneys agreed is practiced by most faiths, is a religious doctrine that places Latter-day Saints under scriptural command to give 10% of their income back to God through the church.
Shelby repeatedly asked Clement to consider hypotheticals in which a church, or a fraudster posing as a church, might be liable for fraudulently collecting and misusing tithing. Clement said his reading of court rulings on the religious autonomy doctrine was that there are only two exceptions to protecting church's from charges of fraud — embezzlement or self-dealing and raising funds for very specific purposes and then using them for different purposes.
Christopher Seeger, who represented the plaintiffs, argued that the church's statements that it would not use tithing funds for City Creek or anything but charitable purposes was a specific misrepresentation because a whistleblower alleged that the church used $1.4 billion in tithing funds for City Creek and $600 million to "bail out" Beneficial Life, allegations the church denies.
Seeger also alleged that the church intentionally concealed its investment fund, citing an SEC complaint and subsequent fine paid by the church without admitting wrongdoing.
Shelby sat in front of 13 attorneys, six for the plaintiffs, six for the church and Schaerr representing evangelicals and Seventh-day Adventists.
The judge questioned Seeger and Scott George, who also appeared for the plaintiffs, with questions about whether their complaint established an actual fraud under Utah law. He repeatedly said he could not see how they showed what church statements the plaintiffs relied on when they made donations and how those donations may have been misused and how they suffered a loss.
George said the complaint established a theme. Shelby questioned whether pleading general themes met the standard for establishing fraud in the U.S. 10th Circuit. At one point, Shelby said he wanted to clarify what appeared to be a disconnect to him between what he and plaintiffs' attorneys felt was the law he should follow. That discussion lasted about 45 minutes.
What's next
One of the issues Shelby will consider is whether the statute of limitations bars the lawsuit altogether. Clement argued that news reports about the alleged whistleblower's account started the clock on the three-year statute in December 2019. The plaintiffs didn't file suit until 2023.
The judge noted that there were 26 national and local media accounts of the alleged whistleblower's account between December 2019 and February 2020 and that Huntsman filed his suit in 2021 and the plaintiffs in another lawsuit filed theirs in 2020. Clement said the plaintiffs seeking a class action in Friday's hearing didn't file until after the SEC settlement.
"Why is that analysis wrong?" Shelby asked George.
George said the SEC settlement provided more clarity and should be when the clock started.
The potential class-action case is one of three pending lawsuits about the church's tithing.
Shelby previously judged one of those cases, which is now before the 10th Circuit Court of Appeals. The other, the Huntsman case, is before the 9th Circuit Court of Appeals. It's possible those courts could issue their rulings on September hearings before Shelby issues his.
In September, the 9th Circuit Court of Appeals in San Francisco heard arguments about whether to reinstate a lawsuit filed by Huntsman seeking a refund of $5 million he tithed to the church.
He alleges the church used tithing funds for part of the construction of the City Creek development in downtown Salt Lake City and that he wouldn't have donated the money if he knew tithing was being used for that alleged purpose.
A judge threw out the suit in 2021 but a three-judge appeals panel reinstated it in 2023 and the church appealed. The case also focuses on the church autonomy doctrine.
In a separate case, three former church members accused the church of propounding false beliefs and misrepresenting its history and practices to defraud members of donations.
Shelby also heard the case. He dismissed most of the case, but the defendants, including Laura Gaddy, appealed to the 10th Circuit Court. A panel of three 10th Circuit judges heard oral arguments in September. They have yet to issue a decision, but they indicated they saw barriers to the suit in church-autonomy precedent.
