Update on Huntsman Lawsuit: Ninth Circuit Reverses Trial Court

[smac97]

Here:

Quote

The panel reversed the district court’s grant of summary judgment in favor of the Corporation of the President of the Church of Jesus Christ of Latter-Day Saints in a diversity action brought by James Huntsman, a former member of the Church, alleging fraud under California state law. 
...
The panel rejected the Church’s argument that Huntsman’s fraud claims are barred by the First Amendment.  The panel held that the ecclesiastical abstention doctrine did not apply because the questions regarding the fraud claims were secular and did not implicate religious beliefs about tithing itself.  Nor was the panel required to examine Huntsman’s religious beliefs about the appropriate use of church money. 

The panel held that there was a genuine dispute of material fact as to whether the Church fraudulently misrepresented the source of money used to finance the shopping mall development.  Based on the evidence in the record, including statements by church officials and in church publications, a reasonable juror could conclude that the Church knowingly misrepresented that no tithing funds were being or would be used to finance the shopping mall development and that Huntsman reasonably relied on the Church’s misrepresentations.   

Haven't read it all.

Thanks,

-Smac

[Kenngo1969]

Par for the course.  There's a reason why the 9th Circuit is the Nation's most oft-reversed Circuit.  (They don't call it the "Notorious Ninth" for nothing!* )

*Hey, alliteration!  Cool!  

[webbles]

The decision refers to the Gaddy case (see page 11).  And I believe the Gaddy case referenced the Huntsman case.  How common is that?  For two district courts to reference active cases in the other court?  And does the fact that Gaddy was dismissed have any implication to the Huntsman case?

[smac97]

https://www.fox13now.com/news/local-news/appeals-court-reinstates-huntsmans-lawsuit-against-lds-church

Quote

SALT LAKE CITY — A federal appeals court has reinstated part of James Huntsman's high-profile lawsuit against The Church of Jesus Christ of Latter-day Saints.

In a ruling handed down Monday, the 9th U.S. Circuit Court of Appeals sided with Huntsman on part of his appeal in his fraud lawsuit. In that litigation, Huntsman accused the faith of misspending tithing dollars he and others had given them. The Church has vehemently denied wrongdoing.

"We reverse the judgment of the district court with respect to Huntsman’s fraud claim based on the Church’s representations as to the use of funds to finance the City Creek Mall project," Judge William Fletcher wrote. "We affirm the judgment of the district court with respect to Huntsman’s fraud claim as to the use of funds to bail out the Beneficial Life Insurance Company. We reverse and remand for further proceedings consistent with this opinion."

What it means is Huntsman, a brother of former Utah Governor and U.S. Ambassador Jon Huntsman Jr. and a member of the wealthy Utah family, will get another chance to take his case against the Church to court. Huntsman sued alleging the Church of using spending tithing dollars to finance the City Creek Center mall project in downtown Salt Lake City and prop up Beneficial Life Insurance instead of on charitable purposes, contrary to what the faith insisted.

A lower court judge in California dismissed the lawsuit. Huntsman appealed to the 9th Circuit Court. A divided panel of the 9th Circuit Court reinstated it. In the ruling, Judge Fletcher said "a reasonable juror could rely on the following evidence to conclude that the Church fraudulently misrepresented that neither tithing principal nor earnings on tithing principal would be or were being used to develop the City Creek Mall project: (1) the four unqualified statements by church officials and in church publications that tithing funds were not used to finance the City Creek Mall project; (2) the statement by President Hinckley, in which he denied that “tithing funds” would be used to develop the City Creek Mall project and in which he failed to tell his listeners that, as he was using the terms, “reserve funds” were “tithing funds”; (3) common usage in the Church under which the term “tithing funds” includes both tithing principal and earnings on tithing principal; and (4) [Ensign Peak President Roger] Clarke’s statement that money was transferred from Ensign Peak to Property Reserve in order to conceal the source of the funds used to develop the City Creek Mall project."

In a dissent, Judge Edward Korman took issue with representations about then-President Hinckley's comments on tithing.

"Hinckley’s earlier statements show that the Church would set aside tithing funds as reserves. This, in addition to the financial records, makes clear that Hinckley’s 2003 statement was truthful and not a misrepresentation. Combined with Huntsman’s sophistication and knowledge of the Church, there is also no question that Hinckley would have expected Huntsman to understand his statement, which entirely undermines any claim that Hinckley made a knowingly false representation," he wrote. "Again, this is not a question of what Huntsman understood, but of what Hinckley intended. Thus, no reasonable juror could conclude that the Church fraudulently misrepresented the source of the money used to finance the City Creek Mall project."

When contacted by FOX 13 News late Monday, The Church of Jesus Christ of Latter-day Saints insisted again no wrongdoing.

"The Court of Appeals decision returns part of this case to the trial court for further handling. As we have previously stated, there was no fraud," a Church spokesman said in a statement. "The Church did exactly what President Gordon B. Hinckley said when it invested earnings on reserve funds in the City Creek project. The Church looks forward to defending these facts in the next phase of the legal process."

Huntsman told The Salt Lake Tribune on Monday that he was "very grateful that the court has granted my appeal" and called it "an amazing victory, especially when you think a year and a half ago we were thrown out of court." (Huntsman is the brother of Paul Huntsman, the publisher of the Tribune. FOX 13 News and The Salt Lake Tribune also have a news-sharing partnership.)

Thanks,

-Smac

[Tacenda]

15 minutes ago, smac97 said:

https://www.fox13now.com/news/local-news/appeals-court-reinstates-huntsmans-lawsuit-against-lds-church

Thanks,

-Smac

Well, this might open up a can of worms.

[helix]

I just read through the two judges in favor. Boy is this a full attack on the First Amendment. The judges try to parse D&C 119 and D&C 120, then attempt to deduce from that what the definitions of church tithing and income must be.  Yeesh.

The crux of their argument relies on two parts. One is a 1991 talk in which Hinckley defined how all income in the church follows a pattern in D&C 119. The two judges in favor of the fraud argument insist all income must be tithing, if Hinckley says income, then all income is tithing. The dissenting judge correctly notes that the church can have other income outside of tithing, and that earnings from tithing can consistently not be called tithing funds.

The second part from the two judge majority is even more frustrating:

Quote

(3) common usage in the Church under which the term “tithing funds” includes both tithing principal and earnings on tithing principal

Their evidence for this is that David Nielsen said he recalled someone saying this in private meetings inside Ensign. Then the judges state "Given this common usage, a reasonable juror could conclude that President Hinckley intended his audience to understand" 

WHAT!?

The judges evidence for item (3) is a paraphrased recollection of private meetings that occurred before the individual worked at Ensign, and from that, two judges think that Hinckley's public General Conference audience use the same verbiage. Wow. This is the crux of their argument. It's awfully tenuous.

Overall, I'm just befuddled that two judges believe government can regulate and parse religious speech, creating definitions of tithing in behalf of the church over the stated objections of the church who insist tithing definitions mean something else.

The dissenting judge got it right. Fraud must have "misrepresentation" with "knowledge of falsity." Then pointed out that Hinckleys 1991 and 1995 words can be easily consistent with Hinckley's 2003 words, and thus no "knowledge of falsity". This case should not have got this far. Courts have no business trying to change the church's definition of tithing over the objections of the church.

Edited August 8, 2023 by helix
Edit, I misread, see below

[provoman]

2 hours ago, smac97 said:

Here:

Haven't read it all.

Thanks,

-Smac

How can there be a genuine issue of material fact if interest income paid for something?

[webbles]

22 minutes ago, helix said:

The crux of their argument relies on two parts. One is a 1991 talk in which Hinckley defined how all income in the church follows a pattern in D&C 119. The two justices in favor of the fraud argument insist all income must be tithing, if Hinckley says income, then all income is tithing. The dissenting judge correctly notes that the church can have other income outside of tithing, and that earnings from tithing can consistently not be called tithing funds.

I think you have this backwards.  The two judges say "But nothing in President Hinckley’s 1991 statement defines “income” of the Church as tithing contributions to the Church." (page 24).  They are arguing that when President Hinckley said that some income will be set aside in the reserve funds (which is what he later mentions in the 2003 statement), he was not talking about tithing but about other sources of income.

I do think it does come down to whether a "reasonable person" would understand tithing to include the interest or just the principal.  Back when this was first talked about, there were several posters who felt that both interest and principal should fall under the definition of tithing and others who argued the opposite.  That does feel like it will require a jury to decide.

[helix]

37 minutes ago, webbles said:

I think you have this backwards.  The two judges say "But nothing in President Hinckley’s 1991 statement defines “income” of the Church as tithing contributions to the Church." (page 24).  They are arguing that when President Hinckley said that some income will be set aside in the reserve funds (which is what he later mentions in the 2003 statement), he was not talking about tithing but about other sources of income.

I do think it does come down to whether a "reasonable person" would understand tithing to include the interest or just the principal.  Back when this was first talked about, there were several posters who felt that both interest and principal should fall under the definition of tithing and others who argued the opposite.  That does feel like it will require a jury to decide.

Yes, I misread. I was leaving work and read that part confused. 

I'm now fascinated these two judges are insisting that when Hinckley said "income", that it's usually secular, and since Hinckley didn't clarify this enough in 1991, then we should err against income being tithing. I'm just floored how judges get to define a religion's own terminology.

I was mostly stuck on their part 3, that they state that money generated from invested tithing is can be considered church-wide to be tithing funds, based on one person's vague recollection of private meetings.  

Quote

That does feel like it will require a jury to decide.

But it shouldn't get this far. Fraud requires a "misrepresentation" with "knowledge of falsity." The church didn't publicly state that earnings on tithing is also tithing income. Hinckley's statements are consistent with the church treating investments on unspent tithing funds to be reserve funds. You could say these statements aren't clear enough and it's reasonable to say someone misunderstood them. You can't twist them into stating Hinckley was deliberately deceptive. 

Holding a religion to the level of *fraud* because their religious language isn't precise enough is an awful First Amendment violation.

Edited August 8, 2023 by helix

[Calm]

9 minutes ago, webbles said:

I do think it does come down to whether a "reasonable person" would understand tithing to include the interest or just the principal.  Back when this was first talked about, there were several posters who felt that both interest and principal should fall under the definition of tithing and others who argued the opposite.  That does feel like it will require a jury to decide.

Is the Church more like a bank where interest on a loan is understood to be part of the loan (loans have a set time limit on them though and are given with the purpose of making money) or more like a personal gift where if a parent invests their kid’s birthday money over the years and ends up with a much bigger college fund than if they had stuck it in a piggy bank.  The grandparents and others give what they wrote out, not also the interest earned by the additional effort of the parent.

I can see why some might see tithing as in a special class because we talk about it as sacred and there is a connotation of eternity with that.  I think members would find it very wrong to sell a temple if it wasn’t needed anymore, but there is other church property where it makes sense to shift the category..  The Rexburg Tabernacle is now a nice civic auditorium that can be rented out.

[Thinking]

Expecting members to remember and "correctly" interpret the language in Hinckley's previous talks from years before reminds me of an experience my wife and I had with a rental car company.

Before we flew to our destination, I booked a rental car online. At the rental desk the associate asked for the card I used to reserve the rental car. She looked at it and said, "This is a debit card. You can't use a debit card to reserve a car. It has to be a credit card." I told her to run it as a credit card, that it would work because it's tied to an overdraft account (which is a line of credit). Note: When I use this card at a store the card pad asks if the card will be used as debit or credit. Sometimes I choose credit and sometimes I choose debit. Anyway, the associate disagreed with me and told me that because I used a debit card to reserve the car, she wasn't allowed to issue the car to me. I told her that the funds for the rental had already been taken out of my account. She said that didn't matter. I asked for my money back. She declined and said, "Didn't you read page 9 of the rental agreement?" Long story short: I eventually did get my money back, but I did not get a car from that company on that day.

Edited August 8, 2023 by Thinking

[helix]

30 minutes ago, Calm said:

Is the Church more like a bank where interest on a loan is understood to be part of the loan (loans have a set time limit on them though and are given with the purpose of making money) or more like a personal gift where if a parent invests their kid’s birthday money over the years and ends up with a much bigger college fund than if they had stuck it in a piggy bank.

More the latter.

Consider when then the widow gave two mites to the temple treasury.

Suppose the temple treasury decided to not spend 100% of all money, and invested the unspent money for that year. In that unspent invested money is the two mites. That investment yields a third mite.

Does the treasury have three widows mites? No. The widow didn't give three mites. The widow gave two mites. The treasury has an additional mite. These are all sacred funds.

That's how the church operates. 

Edited August 8, 2023 by helix

[Calm]

7 minutes ago, helix said:

More the latter.

Consider when then the widow gave two mites to the temple treasury.

Suppose the temple treasury decided to not spend 100% of all money, and invested the unspent money for that year. In that unspent invested money is the two mites. That investment yields a third mite.

Does the treasury have three widows mites? No. The widow didn't give three mites. No. The widow gave two mites. The treasury has an additional mite. These are all sacred funds.

That's how the church operates. 

I agree.  Tithing is what I give to the Church in my view.  What the church owns is not tithing, but just money in my view as they are not tithing it to anyone.

Edited August 8, 2023 by Calm

[bsjkki]

Only in the 9th. 

[sunstoned]

 

I think this is the main point the judges made.

Quote

Yet 9th Circuit Judges Kim McLane Wardlaw and William A. Fletcher agreed in the 41-page opinion that “a reasonable juror could conclude that the church knowingly misrepresented that no tithing funds were being or would be used to finance the shopping mall development and that Huntsman reasonably relied on the church’s misrepresentations.”

What would have been the problem is Hinkley would have just been open about the finances and just said the mall was build from interest accrued from tithing money?  The major PR disasters that the church as experienced in the last few months stem from the fact that church is secretive to the point of misleading in its financials.

[The Nehor]

Read it.

Agree with it based on the law cited. I still think the suit should fail but agree with the reasoning that summary judgment is inappropriate.

In answer to a few things said here:

There wasn’t an attempt to parse out sections in the Doctrine and Covenants and rule on them. They were using a statement the Church provided. They didn’t drag it in. The Church provided it as part of their argument.

While the Ensign Peak terminology was based on a tenuous story that would be the kind of thing you would normally flesh out in discovery which was never finished. It is also not the sole method of defining what is and is not tithing. It was just a part of the reasoning. The other parts of the argument are more substantial. It is important to note that this is not a ruling on whether any of this is any good. This is summary judgment. The bar for rejecting it is low.

I disagree with the dissent that Huntsman should have read and been familiar with everything the Church put out.

I do agree with the dissent that it is weird that California fraud law is applicable since the Church isn’t incorporated there and Huntsman recently moved there. I doubt it makes much difference but still odd. I doubt that Utah law is that different in terms of requirements but no idea.

I do find it odd that the Church argued against inclusion of financial information. All the stuff in there is public knowledge at this point. Maybe there is some way to use this on appeal? I don’t know.

One other random thought. The dissent started out with a very brief and complimentary description of the founding of the Church. Why is this in here? I mean, it is harmless but kind of weird.

 

Again, I don’t think the lawsuit should succeed but I agree that summary judgement is inappropriate. On the other hand a lot of money is being wasted so probably better to have it thrown out now but that is wishing for a different legal system.

[helix]

1 hour ago, The Nehor said:

There wasn’t an attempt to parse out sections in the Doctrine and Covenants and rule on them. They were using a statement the Church provided. They didn’t drag it in. The Church provided it as part of their argument.

The problem is that they botched the entire point of Section 119 and came an opposite conclusion of the church's view of tithing.

The two judges stated: "In his 1991 statement, President Hinckley referred to “income” three times, never defining the term."

But in his 1991 General Conference talk, Hinckley said this: "The financial program of the Church—both income and disbursement—is found in sections 119 and 120 of the Doctrine and Covenants." [Section 119 is literally the law of tithing and nothing more, Hinckley defines this as income]

Then the judges bizarrely said "Income is usually used as a secular term"

But Hinckley in 1991 said: "Section 119 simply states that all members “shall pay one-tenth of all their interest [that which is income] annually; and this shall be a standing law unto them forever … saith the Lord.” (D&C 119:4.)"  [They say it's secular, we say it's law straight from God"]

Then the judges tried implied that the church's commercial ventures are large enough to give the church a healthy reserve. "In the case of a religious organization, “income” can include income from real property, businesses, or other investments. The Church has significant commercial assets and income from those assets. "

But Hinckley in 1991 said: "We have a few income-producing business properties, but the return from these would keep the Church going only for a very brief time...I repeat, the combined income from all of these business interests is relatively small and would not keep the Church going for longer than a very brief period."  [Tithing is clearly the main source of income for the church]

The accuser needs to demonstrate evidence of "misrepresentation" with "knowledge of falsity" for fraud. Misreading or misunderstanding a religion's teachings and policies isn't fraud.

Edited August 8, 2023 by helix

[Benjamin McGuire]

Naturally, the Church would rather have avoided a trial, but I think that the odds of them winning when it does go to trial are pretty good.

[Kenngo1969]

Mr. Huntsman moved to California five months before he filed suit.  Was he forum shopping?  Inquiring minds want to know!  

[webbles]

7 hours ago, The Nehor said:

I disagree with the dissent that Huntsman should have read and been familiar with everything the Church put out.

I think Huntsman stated in an affidavit that he had read and was familiar with everything the Church put out.  Since he claims that in his affidavit, then I guess the court can assume that he is telling the truth there and can rule accordingly.

7 hours ago, The Nehor said:

One other random thought. The dissent started out with a very brief and complimentary description of the founding of the Church. Why is this in here? I mean, it is harmless but kind of weird.

He also talked about the Manhattan temple.  I looked him up to see if he was a member because of how he wrote the dissent but it doesn't seem so.

[Tacenda]

I'm coming out of left field, but I do think the church is wrong to say income in place of interest in the D&C section. 

[webbles]

1 hour ago, Tacenda said:

I'm coming out of left field, but I do think the church is wrong to say income in place of interest in the D&C section. 

Are you talking about the definition of tithing for members - D&C 119:4?  Because that isn't actually argued in this case.  The majority in the court is arguing over whether the church's income includes tithing or if it only includes non-tithing related money (such as the church's profit generating businesses).  And the argument is happening because President Hinckley said that the reserves came from the church's income.  So, if the church's income doesn't include tithing, then the reserves also don't come from tithing and his later statement is potentially fraudulent.  But the dissent in the court argued that President Hinckley is including tithing in the church's income.

[The Nehor]

1 hour ago, webbles said:

Are you talking about the definition of tithing for members - D&C 119:4?  Because that isn't actually argued in this case.  The majority in the court is arguing over whether the church's income includes tithing or if it only includes non-tithing related money (such as the church's profit generating businesses).  And the argument is happening because President Hinckley said that the reserves came from the church's income.  So, if the church's income doesn't include tithing, then the reserves also don't come from tithing and his later statement is potentially fraudulent.  But the dissent in the court argued that President Hinckley is including tithing in the church's income.

It is more that the church said that the money would not come from tithing income. I think the church will win the case.

[The Nehor]

5 hours ago, Kenngo1969 said:

Mr. Huntsman moved to California five months before he filed suit.  Was he forum shopping?  Inquiring minds want to know!  

Possible but I would think the Church could have challenged on venue since the alleged fraud did not impact either party while he was in California.

[Craig Speechly]

Seems 2 of the 3 judges agreed that tithing and money earned on invested tithing are both tithing. 
 

If that point of view, is upheld in the lower court, Huntsman wins.