The 10th Circuit Court of Appeals handed down a ruling Tuesday that is a major victory for religions in general and a specific win for The Church of Jesus Christ of Latter-day Saints.
A three-judge panel upheld a 2023 federal district court ruling that rejected a lawsuit purporting that the Church of Jesus Christ had propounded false beliefs and misrepresented its history and practices to defraud members of donations.
“This is a great day for religious liberty in America,” said Gene Schaerr, an attorney who filed a friend-of-the-court brief in the case on behalf of the National Association of Evangelicals, the Jewish Coalition for Religious Liberty and the General Conference of Seventh-day Adventists.
Former Latter-day Saint Laura Gaddy and others sued the church in 2018 claiming it fraudulently misrepresented its history and misused the tithing funds they donated. They made claims that the church’s practices violated the Racketeer Influenced and Corrupt Organizations Act.
District Court Judge Robert Shelby rejected those claims in 2023 and Gaddy appealed to the 10th Circuit in Denver.
The three-judge panel heard oral arguments on Sept. 23, 2024.
All three judges found for the church in the ruling released Tuesday. All three agreed the church autonomy doctrine shielded the church from the RICO claim and that Gaddy failed to sufficiently describe acts that would support a RICO claim.
“We hold that the church autonomy doctrine bars plaintiffs’ first RICO theory, because it improperly requires adjudication of ecclesiastical questions, namely, the truth or falsity of religious beliefs,” Judge Allison H. Eid wrote in the majority opinion.
“On plaintiffs’ second RICO theory, we need not decide whether the church autonomy doctrine applies, because plaintiffs’ complaint fails to adequately allege the requisite causal link between the church’s alleged misstatements about how it would use tithes and the plaintiffs’ alleged injury.”
The church autonomy doctrine is rooted in the First Amendment religion clauses that protects religions from government interference in their internal affairs, from issues related to doctrine, funds, membership and employment.
Judge Harris Hartz joined Eid in the majority opinion.
“Plaintiffs have not pled enough facts to support the reasonable inference that they relied on the church’s alleged misrepresentations and omissions in continuing to pay tithes,” Eid wrote in the majority opinion
While they didn’t apply the church autonomy doctrine to the tithing portion of Gaddy’s claims, Judge Gregory Phillips issued a concurring opinion to declare he didn’t think the church autonomy doctrine should be applied in tithing cases.
“We hold that this defect renders implausible the necessary causation component of plaintiffs’ civil RICO claim — that they were injured ‘by reason of’ a RICO violation by the Church — to the extent it is based on a fraudulent use of tithing funds theory. They thus have failed to state a claim upon which relief may be granted."
Gaddy and the other plaintiffs complained about church history teachings. For example, they said some church artwork misrepresented how the Book of Mormon was translated.
“The court ruled that matters of history fall within the realm of religious beliefs,” Schaerr said. “They’re not historical facts that can be adjudicated by secular standards.”
Gaddy and company also alleged the church used tithing funds to build the City Creek development and that church leaders misrepresented that use. The 9th Circuit Court of Appeals ruled against James Huntsman on a similar claim earlier this year.
The ruling was a great win for religious bodies generally, said Schaerr, managing partner at Schaerr Jaffe and former associate counsel to President George H.W. Bush.
“First, the court recognizes the importance of the church autonomy doctrine, which is grounded in the First Amendment, protecting religious bodies from challenges questioning their beliefs,” he said.
“Second, the court held the plaintiffs had not sufficiently articulated a case that the church’s statements caused them to make tithing payments they otherwise wouldn’t have made,” he said.
Gaddy and the other plaintiffs have two options if they decide to continue the case. They could ask for an en banc review of the ruling by the three judges, essentially asking for a review of the decision by the entire panel of judges on the 10th Circuit Court of Appeals.
They also could appeal to the U.S. Supreme Court.
Schaerr believes the Supreme Court would support the Church of Jesus Christ and the religious autonomy doctrine.
“I think the ruling is fully in line with Supreme Court precedent,” he said. “It’s consistent with 10th Circuit law and Supreme Court case law.”
Tuesday’s ruling was welcomed by The Church of Jesus Christ of Latter-day Saints.
“Today’s ruling by the 10th Circuit Court of Appeals confirms what courts have long said — that disputes over religious doctrine and history cannot be resolved in secular courts," church spokesman Sam Penrod said. “It also rejects the plaintiffs’ attempt to use federal law to attack the church’s use of tithing funds.
“All tithing donations to The Church of Jesus Christ of Latter-day Saints are considered sacred funds. Tithing funds and earnings on invested reserves are dedicated to building the church and fulfilling its divine mission around the world.”
Penrod also said the church was grateful for the other faiths and organizations that filed friend-of-the-court briefs supporting the church’s position.
Kay Burningham, the Salt Lake attorney who represented Gaddy, was critical of the 10th Circuit Court’s ruling.
“The gravamen of the Gaddy case alleges that the LDS Church misrepresented its history,” she said. “We are disappointed that the 10th Circuit Court of Appeals has interpreted the ‘church autonomy doctrine’ as an affirmative defense to fraud, that is misrepresentations of fact.
“Historically, the First Amendment, from which the church autonomy doctrine derives, only protects sincerely held religious beliefs.”
Blaine Evanson, a religious freedom attorney, was thrilled with the ruling but mildly disappointed the court stopped short of what many churches and attorneys have sought: a ruling that the church autonomy doctrine applies to tithing claims.
“Courts seem to struggle over where to draw the line,” said Evanson, a partner at Gibson, Dunn & Crutcher. “Instead, judges have preferred to rule using different rationales when they can, and have avoided squarely ruling whether church autonomy applies.”
He noted that the majority in the 9th Circuit Court en banc ruling for the Church of Jesus Christ in the James Huntsman tithing lawsuit did not apply the church autonomy doctrine either.
Evanson said the majority in the Gaddy case also ducked the doctrine in the tithing portion of its ruling today. He said the majorities in the cases so far haven’t chosen to apply it in a way that would wall off those types of claims.
“Judges across the spectrum are willing to stay out of claims about historicity and doctrine,” he said. “When it comes to tithing, they seem more willing to adjudicate the claims.”