Update on Huntsman Lawsuit: Ninth Circuit Reverses Trial Court

[Analytics]

35 minutes ago, Calm said:

I didn’t see where Shelby addressed the difference between tithing and donations, where with the second there is a possible right to know where those funds go, but none with the former.  Unless you mean this part:

I have not anticipated that the doctrine that tithing is not a gift or donation, but a returning to God of what is his coupled with the inference made by many that the devout member would of course pay tithing whatever the use of the tithing is and therefore the member need not know what tithing is spent on nor is it a problem if spent on others things would be argued in the court. My guess is the law sees no difference since they can’t determine or shouldn’t if God really commanded such or not.  Plus that would be an argument on whether the Church is required to be transparent or not and not if the Church was accurate with the details it chose to disclose even if there was no obligation to do so.

It is your right to view tithing that way, and the court’s aren’t going to make a ruling that is based on individuals’ beliefs about tithing. However, if the law says there is in fact a fiduciary relationship between donors and churches, I don’t think you can get out of obeying that law by saying that you personally don’t consider tithing a “donation”, but rather returning to God what is already His.

I know a lot of members see tithing the way you do, and I’m sure there are lots of general conference talks and such that will back you up. However, it would seem that there are at least some people who are concerned with how it is used, as evidenced by Hinckley feeling the need to reassure them that “tithing” wouldn’t be used for the mall.

[juliann]

26 minutes ago, Analytics said:

It is your right to view tithing that way, and the court’s aren’t going to make a ruling that is based on individuals’ beliefs about tithing. However, if the law says there is in fact a fiduciary relationship between donors and churches, I don’t think you can get out of obeying that law by saying that you personally don’t consider tithing a “donation”, but rather returning to God what is already His.

I know a lot of members see tithing the way you do, and I’m sure there are lots of general conference talks and such that will back you up. However, it would seem that there are at least some people who are concerned with how it is used, as evidenced by Hinckley feeling the need to reassure them that “tithing” wouldn’t be used for the mall.

Wouldn't the court first have to decide if interest is tithing? That doesn't seem secular. Then how do they decide after all this time, if it is together, what is interest and what is principle? 

I thought the seerstone stuff, as presented, was ludicrous. But I think the church is at fault for not thoroughly disclosing how tithing is used to prevent this kind of stuff. 

[Tacenda]

When doing surveys or whatever they do to find out, Utah is one of the most charitable states in the USA. I always attributed that to them paying tithes combined with charitable donations. I wonder if it's only on charitable donations vs. both?

[Analytics]

51 minutes ago, juliann said:

Wouldn't the court first have to decide if interest is tithing? That doesn't seem secular. Then how do they decide after all this time, if it is together, what is interest and what is principle? 

I thought the seerstone stuff, as presented, was ludicrous. But I think the church is at fault for not thoroughly disclosing how tithing is used to prevent this kind of stuff. 

I would think the better question is whether using tithing to generate interest, and then using that interest to purchase x, is still using tithing to purchase x, even in an indirect way.

From my perspective, the issue has nothing to do with the technical religious definition of tithing. Rather, it is how would a reasonable Latter-day Saint interpret the various disclosures and assurances that were made. In figuring this out, I think it is worth remembering some discussions we had about this before the whistleblower report came out.

In 2012, a MDDB poster started a thread as follows:

When people accuse the Church of using sacred tithing money to fund things like the building of the City Creek mall, the obvious answer is of course that tithing money is not used; rather money from the for-profit arm of the church is used that was obtained through business investments over the years.

But then of course critics ask the next question; "Where do you think the church got the money to buy the businesses in the first place?"

And they conclude that It must have started with tithing money donated by early church members. So in an indirect way the City Creek mall was made possible by sacred tithing money donated by members 150 years ago; money that is supposed to be dedicated to building God's church and helping the poor; not for building shopping malls. How does one respond to this? (Emphasis added)

You can review those old threads for yourself, but to me at least, back then most believers interpreted Hinckley’s remarks to be about how tithing is used, and most of them thought that using interest generated from tithing was indirectly using tithing.

I don’t know if Judge Shelby has considered these arguments about how using interest on tithing revenue isn’t indirectly using tithing revenue and that even if it were, it all has to do with the definition of “tithing” which is purely religious and is therefore all protected by church autonomy.

What I do know is that he said that the portion of the Gaddy case that was about tithing was about the secular issues of how the Church used the money it received. Because of that, the facts could be analyzed without evaluating any religious claims and thus the church autonomy doctrine didn’t apply.

For your convenience, here is a link to a post that contains the judge's detailed analysis of this issue:

 

[Calm]

1 hour ago, Tacenda said:

When doing surveys or whatever they do to find out, Utah is one of the most charitable states in the USA. I always attributed that to them paying tithes combined with charitable donations. I wonder if it's only on charitable donations vs. both?

The study I remember said that even if one removed donations to the Church Utah at that time was still higher than at least the average.  I think charity giving is a habit because once you start paying attention to others’ needs and believe it is fair that others have a right so to speak to your excess money, you’ll start seeing needs everywhere and if your heart is already softened, you are more likely to give again.

That and the emphasis in our church that everything we have been given is from God’s and we have more of a stewardship than possession of our wealth, perhaps it is easier to give it to others.

[Analytics]

1 hour ago, Tacenda said:

When doing surveys or whatever they do to find out, Utah is one of the most charitable states in the USA. I always attributed that to them paying tithes combined with charitable donations. I wonder if it's only on charitable donations vs. both?

Excellent point. If they argue they aren’t subject to the Utah Charitable Solicitations Act because tithing payments aren’t charitable donations, I hope they insist this distinction is applied when states are ranked by how charitable they are.

[Calm]

Here is one interesting dissection of charity giving. 
 

I think it helps also to be living closer to those in need. The wealthy generally aren’t surrounded by those who are on the edge of poverty, who need a helping hand rather than a bailout. They don’t have neighbors one runs a casserole over to help when a parent is sick, they probably don’t trade babysitting. They aren’t going to see a neighbor’s lawn which needs cutting or sidewalk that needs shoveling. So if they give it is most likely in big gestures that aren’t impulse giving. 
 

I would love to see if wealthy Saints buck the trend (minus their tithing).

Edited September 23, 2024 by Calm

[Calm]

https://penntoday.upenn.edu/news/penn-research-shows-mormons-are-generous-and-active-helping-others
 

This breaks down the type of charity LDS gives, including tithing and church work as charity.

”While LDS members volunteered fewer hours to causes independent of the church, even if this were the only volunteer activity of Latter-day Saints, it would equal the national average of volunteering of all Americans, according to the study which cites previous research conducted by the Corporation for National and Community Service.”

”The study unveils that 88 percent of LDS respondents reported donating 10 percent of their income to the church.  Adding to those who reported fully tithing, another 6 percent said that they partially tithe. 

But, the study found, members of the LDS Church also donate to other causes.  Through the church, on average, a Latter-day Saint donates $650 a year to social causes [through the Church] and another $1,171 a year outside the church”

Edited September 23, 2024 by Calm

[Calm]

14 minutes ago, Analytics said:

Excellent point. If they argue they aren’t subject to the Utah Charitable Solicitations Act because tithing payments aren’t charitable donations, I hope they insist this distinction is applied when states are ranked by how charitable they are.

I don’t think the Church would mind at all if this happened.   Members do pretty well minus tithing and church callings.

Edited September 23, 2024 by Calm

[Calm]

51 minutes ago, Analytics said:

would think the better question is whether using tithing to generate interest, and then using that interest to purchase x, is still using tithing to purchase x, even in an indirect way.

It would be interesting to get a legal reading on this because on that basis I can see problems with loans and donations to charities that are designated for a specific purpose where the money is placed in a bank until needed in a personal or a general savings or checking account and the principal amount is spent on the required purchases or projects, but the interest is not but just blended with the rest of the account. 

When a senior I got a scholarship check for college, tuition and textbooks were specified iirc.  I put it in my checking account at the time for several months as it was not needed.  When I finally pulled it out, I did not calculate the interest earned. While this would have been at most a few dollars (it was a couple of thousand and was not needed for 4-6 months), the idea of having to calculate interest off of that to be sure and use it for college to abide by legal requirements seems way too annoying.

Edited September 23, 2024 by Calm

[Stormin' Mormon]

25 minutes ago, Calm said:

It would be interesting to get a legal reading on this because on that basis I can see problems with loans and donations to charities that are designated for a specific purpose where the money is placed in a bank until needed in a personal or a general savings or checking account and the principal amount is spent on the required purchases or projects, but the interest is not but just blended with the rest of the account. 

When a senior I got a scholarship check for college, tuition and textbooks were specified iirc.  I put it in my checking account at the time for several months as it was not needed.  When I finally pulled it out, I did not calculate the interest earned. While this would have been at most a few dollars (it was a couple of thousand and was not needed for 4-6 months), the idea of having to calculate interest off of that to be sure and use it for college to abide by legal requirements seems way too annoying.

These situations are VERY common in the professional world I operate in.  The state gives our municipality a few hundred thousand a year that, according to the state constitution, MUST be spent on transportation needs.  Those funds are kept in an account until they are ready to be spent.  The interest they generate gets thrown together with all the other interest being generated from our other municipal accounts, and the whole ball of interest is thrown into the General Fund as one lump sum called "interest" and it is used to help pay for all sorts of things, including a whole host of non-transportation related items.   

And the Attorney General doesn't care that every municipality in the state is "using" transportation-only dollars to generate interest that is spent on non-transportation priorities.  Cuz that's a whole big nothing burger.  It's not what "using" means in the context of finance and budgets and what not.    

Edited September 23, 2024 by Stormin' Mormon

[Analytics]

1 hour ago, Stormin' Mormon said:

These situations are VERY common in the professional world I operate in.  The state gives our municipality a few hundred thousand a year that, according to the state constitution, MUST be spent on transportation needs.  Those funds are kept in an account until they are ready to be spent.  The interest they generate gets thrown together with all the other interest being generated from our other municipal accounts, and the whole ball of interest is thrown into the General Fund as one lump sum called "interest" and it is used to help pay for all sorts of things, including a whole host of non-transportation related items.   

And the Attorney General doesn't care that every municipality in the state is "using" transportation-only dollars to generate interest that is spent on non-transportation priorities.  Cuz that's a whole big nothing burger.  It's not what "using" means in the context of finance and budgets and what not.    

Just thinking about how to make your analogy a bit more applicable and to scale, imagine the following scenario.

• Over the last 60 years, your municipality has received $200,000 each year for transportation needs.
• Your city put the money into a fund called “transportation needs”, and invested it aggressively in real estate and commercial stocks, but otherwise hasn’t touched it.
• Over the subsequent 60 years, this grows to about $500,000,000 with principal and interest.
• All of this was hidden from the public.
• A whistleblower eventually informs the Attorney General that the state never uses any of the transportation money, but instead saves it in an obscenely large reserve fund, and that the only time it was ever tapped was when $100,000,000 was used to pay for overruns on the snazzy new high school.
• The city replies, “while we have the obligation to use the funds for transportation, the constitution doesn’t say when we have to use them. We still don’t have any plans of using them for any specific thing at any specific time in the future, but we think we might eventually need the money for transportation for something someday. We’re saving the money for that. And we were being totally honest when we said we weren’t using transportation money for the high school; we used interest on unspent transportation money for the high school."

 

 

[Analytics]

2 hours ago, Calm said:

It would be interesting to get a legal reading on this because on that basis I can see problems with loans and donations to charities that are designated for a specific purpose where the money is placed in a bank until needed in a personal or a general savings or checking account and the principal amount is spent on the required purchases or projects, but the interest is not but just blended with the rest of the account. 

When a senior I got a scholarship check for college, tuition and textbooks were specified iirc.  I put it in my checking account at the time for several months as it was not needed.  When I finally pulled it out, I did not calculate the interest earned. While this would have been at most a few dollars (it was a couple of thousand and was not needed for 4-6 months), the idea of having to calculate interest off of that to be sure and use it for college to abide by legal requirements seems way too annoying.

One of the things we’ve talked about over the years is “fund-based accounting.” The Church could create one fund that only had pure, unadulterated “tithing” dollars in it, which it could use to buy sacred things like Microsoft, Nvidia, Apple, and Chevron stock. The interest, dividends and capital gains could then be allocated to a different fund for investing in less sacred things like City Creek.

The secular fact of the matter is that the Church doesn’t do that. All of the Ensign Peaks money is jumbled together into one homogenous blob.

Edited September 23, 2024 by Analytics

[Analytics]

[duplicate]

Edited September 23, 2024 by Analytics

[Calm]

1 minute ago, Analytics said:

One of the things we’ve talked about over the years is “fund-based accounting.” The Church could create one fund that only had pure, unadulterated “tithing” dollars in it, which it used to buy stocks in Microsoft, Nvidia, Apple, and Chevron. The interest, dividends and capital gains could then be allocated to a different fund.

The secular fact of the matter is that the Church doesn’t do that. All of the Ensign Peaks money is jumbled together into one homogenous blob.

I agree, but that doesn’t somehow turn the interest into tithing or anything funded by that fund automatically funded by tithing. The fact that it could pull the interest out and use the funds separately even if it doesn’t, demonstrates that. 

[webbles]

3 hours ago, Analytics said:

Excellent point. If they argue they aren’t subject to the Utah Charitable Solicitations Act because tithing payments aren’t charitable donations, I hope they insist this distinction is applied when states are ranked by how charitable they are.

I don't see why they need to argue they aren't subject to the act.  The only fiduciary duty that I've found that they have to perform is to ensure that the money donated is used for the intended purpose.  And putting it in a massive reserve is using it for its intended purpose.

[Analytics]

3 minutes ago, Calm said:

I agree, but that doesn’t somehow turn the interest into tithing or anything funded by that fund automatically funded by tithing. The fact that it could pull the interest out and use the funds separately even if it doesn’t, demonstrates that. 

Let me see if I understand your point. Say the Church receives $100 and uses that money to purchase Nvidia stock. Does that Nvidia stock then become “tithing” since it was purchased with “tithing”? If the Nvidia stock is then sold, is the amount it is sold for still “tithing”?

In any case, my view on this is the same as Judge Shelby’s. While “tithing” is a religious principle, you don’t use religious principles to purchase stocks in Nvidia, you use money for that. Whether the church uses its money in the way it says it did is a secular dispute that can be evaluated without encroaching on sacred beliefs.

[Analytics]

1 minute ago, webbles said:

I don't see why they need to argue they aren't subject to the act.  The only fiduciary duty that I've found that they have to perform is to ensure that the money donated is used for the intended purpose.  And putting it in a massive reserve is using it for its intended purpose.

The plaintiffs have argued that there is a fiduciary duty to the donors that includes a duty to be transparent so that the donors can make an informed decision about whether or not to donate. The Church has argued that no such fiduciary relationship or duty exists. 

I’m interested in reading the plaintiffs' responses to the defense’s motions on this. While I personally like the idea of a legal fiduciary duty to be transparent to the public, and while I firmly believe that this is an ethical issue as well, it isn’t clear to me that the plaintiffs are right on this one. But I’m sure they’ll have some carefully written arguments defending their interpretation of the law, so we’ll see.

[webbles]

14 minutes ago, Analytics said:

The plaintiffs have argued that there is a fiduciary duty to the donors that includes a duty to be transparent so that the donors can make an informed decision about whether or not to donate. The Church has argued that no such fiduciary relationship or duty exists. 

I’m interested in reading the plaintiffs' responses to the defense’s motions on this. While I personally like the idea of a legal fiduciary duty to be transparent to the public, and while I firmly believe that this is an ethical issue as well, it isn’t clear to me that the plaintiffs are right on this one. But I’m sure they’ll have some carefully written arguments defending their interpretation of the law, so we’ll see.

California has an actual fiduciary duty to the donors spelled out in the law.  It doesn't state what the fiduciary duty is, just that the charity has one to the donors.  As I mentioned earlier, looking at California's guidelines on what is needed to do to fulfill that duty, none of them include being as transparent as you or the plaintiffs are arguing for.  The only need is for the charity to ensure that the donated money is used correctly.  Utah's law is very similar to the California law so I would suspect that the duty in Utah is similar to the duty in California.  I can't find any court cases about the Utah law but there are ones for the California law.

Looking at the complaint specifically, they do spell out what they think is the fiduciary duty:

Quote

153. Under the circumstances described in detail above, LDS and Ensign breached their fiduciary duties to Plaintiffs and the members of the Class by, among other things, misusing the donations, failing to use the donations as represented, failing to fully disclose to the Class all material facts and information in connection with their disposition of donated monies, and by continuing to misrepresent their use of donated funds and criminal activity after their scheme was partially disclosed to the public.

154. As a direct and proximate result of Defendants’ breach of their fiduciary duties, Plaintiff and members of the Class donated money to LDS under the reasonable, but mistaken, belief that the funds would be used in the ways that LDS represented that they would when it solicited donations.

155. However, some portion of those donated funds was actually diverted to Ensign, with no intention of ever being used for the solicited purpose at all, let alone “immediately.”

The plaintiffs also talk about 3 main types of donations: tithing, fast offering, and LDS Philanthropies (1-7).

If we talk about tithing by itself, then I don't see how they have alleged that the church has "[misused] the donations".  Everywhere that I can find and everything that I can remember says that tithing was for the building up of the Church.  The Council on the Disposition of Tithes will prayerfully decide where the funds go.  Putting tithing donations in a reserve (no matter how big) is inline with that.  If the Council on the Disposition of Tithes decides to make a really, really, really large rainy day fund and they prayed about and received inspiration to do that, then it is fine.  Same with "failing to use the donations as represented".  I also don't see how the size of the rainy day fund is material fact.  So tithing donations are being not breaking the fiduciary duty.

I also think the plaintiffs know this and that is why they have included the other forms of donations.  The LDS Philanthropies does say that it would go to "those in need".  They also said 100% of the donations would be used.  If any portion of those donations make it into the reserve fund and stay there, then the Church is at fault for the fiduciary duty.  Fast Offerings are similar.  We are taught that they will be used for those in need at the local level.  If it isn't needed at the local level, I believe we are taught that they are used in the same manner somewhere else (though it is possible that there have been teachings that it will be treated as tithing and help build the Church).

I think the reason why the plaintiffs bring in tithing is because it has a lot more money at stake and would make a much larger class.  But I think that is their weakest case.  The other two donation types have a better chance of going further.

 

I'd also like to know why the plaintiffs quote "immediately" in 155.  It makes it seem like they are quoting a law or something but they don't have any links.  Where is it required that the Church use the funds immediately?

[smac97]

On 9/23/2024 at 5:06 PM, Analytics said:

The plaintiffs have argued that there is a fiduciary duty to the donors that includes a duty to be transparent so that the donors can make an informed decision about whether or not to donate.

"The plaintiffs have argued" being the operative wording.  Plaintiffs have cited, I think, zero authority for their argument.  And Judge Shelby has already noted that no case law regarding the existence of such a duty has been cited in Gaddy III, 665 F. Supp. 3d at 1292 (“Plaintiffs cite no case law... establishing or even suggesting that a legally cognizable fiduciary duty arises or could arise from ecclesiastical relationships.”).

On 9/23/2024 at 5:06 PM, Analytics said:

The Church has argued that no such fiduciary relationship or duty exists. 

There is no question that there is no common law fiduciary duty (that is, no duty "arises or could arise from ecclesiastical relationships").  Judge Shelby addressed this in Gaddy.

There is also no question that the Charitable Solicitations Act ("CSA") cannot create such a duty because Judge Shelby, citing the Court of Appeals, held in Gaddy that this statute "does not create a private cause of action."  665 F. Supp. 3d 1263, 1294 (citing Siebach v. Brigham Young University, 2015 UT App 253, 361 P.3d 130, 139-40) (stating that the CSA does not preclude a fraud claim, but it does not create a fiduciary duty claim).

Siebach may well prove to be the controlling decision on the fiduciary duty issue.  From that case (emphases added) :

Quote

The Utah Legislature has also treated the inducement of charitable donations differently from a charity's obligation to manage donated funds in compliance with a donor's expressed intentions. UPMIFA governs a charitable institution's post-donation management of funds. See Utah Code Ann. §§ 51-8-101 to -604 (LexisNexis 2010 & Supp. 2014). However, the Charitable Solicitations Act addresses the solicitation of funds by charitable institutions. See id. §§ 13-22-1 to -23 (2013 & Supp. 2014).

This may be a fairly important distinction.  "UPMIFA" is the "Uniform Prudent Management of Institutional Funds Act."  I think the MDL plaintiffs' claims straddle both UPMIFA and the CSA.  They seem to be challenging the Church's post-donation management of funds by arguing that the Church committed fraud in inducing members to tithe.  

Nobody disputes that the MDL plaintiffs are at liberty to submit fraud claims to the Court.  It just so happens that they do not seem to have facts sufficient to support fraud claims.  So they have also attempted to present "fiduciary duty"-style claims.  But they aren't doing very well there, either:

First, the plaintiffs' "fiduciary duty" arguments fail insofar as they claim such a duty exists at common law.  That just ain't so.  From Siebach:

Quote

"At common law, a donor who has made a completed charitable contribution, whether as an absolute gift or in trust, had no standing to bring an action to enforce the terms of his or her gift or trust unless he or she had expressly reserved the right to do so." Carl J. Herzog Found., Inc. v. University of Bridgeport, 243 Conn. 1, 699 A.2d 995, 997 (Conn. 1997) (footnote omitted); see also Hardt v. Vitae Found., Inc., 302 S.W.3d 133, 137 (Mo. Ct. App. 2009); Courtenay C. & Lucy Patten Davis Found. v. Colorado State Univ. Research Found., 2014 WY 32, ¶ 34, 320 P.3d 1115 (Wyo. 2014).

Under the general common-law rule, only the attorney general, and not the donor, has standing to enforce the terms of a completed charitable gift. Courtenay C. & Lucy Patten Davis Found., 2014 WY 32, ¶ 34 ("At common law, only the attorney general may enforce the terms of a charitable gift."); see also Carl J. Herzog Found., Inc., 699 A.2d at 997-98; Evelyn Brody, From the Dead Hand to the Living Dead: The Conundrum of Charitable-Donor Standing, 41 Ga. L. Rev. 1183, 1209 (2007) ("[C]ourts have extended the settlor's traditional lack of standing to donors who make restricted gifts (not in trust) to corporate charities, again leaving enforcement to the attorney general in all but the unusual case."); Mary Grace Blasko et al., Standing to Sue in the Charitable Sector, 28 U.S.F. L. Rev. 37, 40-42 (1993) (tracing the historical development of the common-law rule); cf. In re United Effort Plan Trust, 2013 UT 5, ¶ 26, 296 P.3d 742 ("Under the common law rule, suits to enforce the terms of charitable trusts generally may not be maintained by trust beneficiaries."). Donors have traditionally been "prevented from enforcing their gifts in court, because non-trustee donors retain[] no interest in the gift, except the sentimental one that every person who [has] contributed to the charity would be presumed to have." Hardt, 302 S.W.3d at 137 (citation and internal quotation marks omitted).

Second, the plaintiffs' cause of action is styled as "Common Law Breach of Fiduciary Duty," but they then immediately invoke the CSA.  This is legally nonsensical, because "common law" duties are entirely distinct from statutorily-created duties.  It's one or the other, not both.

Third, the plaintiff's cause of action claims the fiduciary duty was breached both in the solicitation of tithes and in the use of tithes.  Apparently the CSA has no relevance to claims of post-donation use (such claims are instead governed by UPMIFA, which the plaintiffs have not cited).  The CSA also does not apply to plaintiffs' solicitation theory because that statute does not create a private cause of action.  That is, a private party can use the CSA to sue for fraud, but not for breach of fiduciary duty.  From Gaddy:

Quote

Plaintiffs bring a cause of action for "violation of the Utah Charitable Solicitations Act" (UCSA),  [*1294]  alleging the Church solicited tithing by saying it was required from members for full temple access to keep families together in the afterlife, while omitting that tithing was used for commercial projects.274 In its Motion to Dismiss, the Church argues the UCSA does not create a private cause of action, but rather leaves enforcement to the Utah Attorney General's Office and the Division of Consumer Protection.275 In opposition, Plaintiffs apparently concede the Church is right, providing only two sentences in response to the Church's UCSA argument:

Concededly, U.C.A. § 13-22-4 is vague. Assuming arguendo that [the Church] is correct, the statute at least demonstrates an intent by the State of Utah that churches are not exempt from a fair disclosure in the context of their solicitations, with damages which exceed those limited by the statute.276

The court construes Plaintiffs' Opposition to have conceded this claim. But even if Plaintiffs did not concede the claim, the court agrees with the Church that the UCSA does not create a private cause of action.277 In Siebach v. Brigham Young University, the Utah Court of Appeals, addressing a preemption argument, held the UCSA does not prevent a donor to a charitable organization from bringing a cause of action for fraud arising from the donation.278 However, nothing in the case, which analyzes the UCSA in some detail, suggests the UCSA creates a separate, private cause of action. Rather, the legal issue addressed was whether the UCSA could prevent a plaintiff from maintaining his own separate cause of action for fraud.279

Because the UCSA does not appear create a private cause of action, and because effectively Plaintiffs concede this point in their Opposition, the court dismisses Plaintiffs' claim for violation of the UCSA.

And from Siebach:

Quote

The Charitable Solicitations Act is aimed at preventing charitable fraud and prohibits the "making of any untrue statement of material fact" in connection with a charitable solicitation. See id. § 13-22-13(3) (2013); see also American Target Advert., Inc. v. Giani, 199 F.3d 1241, 1247 (10th Cir. 2000) ("The [Charitable Solicitations] Act's general declarations and specific prohibitions clearly target fraud."). The Charitable Solicitations Act allows for the prosecution of charity fraud actions by the state of Utah, but also states—in the section of the Act making a violation a misdemeanor—that "[n]othing in this section precludes any person damaged as a result of a charitable solicitation from maintaining a civil action for damages or injunctive relief." Utah Code Ann. § 13-22-4(2) (LexisNexis 2013). Thus, the Charitable Solicitations Act anticipates  [**140]  donors personally seeking damages when their donations are procured by fraud.

We conclude that claims alleging the improper inducement of a charitable donation are distinguishable from claims seeking to enforce donative intent and that improper-inducement claims do not fall within the common-law donor-standing rule. The common-law rule is based on the precept that a donor relinquishes his or her personal interest in an unrestricted charitable gift once the gift is complete, and thereafter it becomes the duty of the attorney general to vindicate the public interest in ensuring that charitable organizations use donated funds appropriately. See Carl J. Herzog Found., Inc. v. University of Bridgeport, 243 Conn. 1, 699 A.2d 995, 997-98 (Conn. 1997). But, when a donor alleges that fraud or negligent misrepresentation induced a charitable gift, it cannot be said that the donor freely relinquished his or her property to the charity such that only a general public interest in the matter remains. In this case, the Siebachs' Amended Complaint alleges that their donations to the RSA were induced by fraud or negligent misrepresentation. Those claims fall outside the reach of the common-law donor-standing rule, and the district court erred by dismissing them.

The plaintiffs are trying to cross their wires by conflating their fiduciary duty claim with the CSA.  I don't think that will work.  I don't see any way forward for it.

On 9/23/2024 at 5:06 PM, Analytics said:

I’m interested in reading the plaintiffs' responses to the defense’s motions on this. While I personally like the idea of a legal fiduciary duty to be transparent to the public, and while I firmly believe that this is an ethical issue as well, it isn’t clear to me that the plaintiffs are right on this one.

I think you are better of assessing the law as it exists, not as you think it ought to be.  The former is more likely to yield an accurate prediction, whereas the latter is mostly wishful thinking.

Thanks,

-Smac

Edited December 24, 2024 by smac97

[carbon dioxide]

Ever since I was a teenager I always understood that tithing was giving funds to the church to do whatever it needed to build up the kingdom.   There was never an expectation that the church one only do certain things with the money.   I think it is very wise for the church to build up a reserve fund as much as possible.  Eventually the economy is going to go through a major crash.   The amount of debt is not sustainable.  We are probably going to spend 9 trillion in interest payments alone over the next 10 years on the debt.  If the market goes down 50%, better to have a 100 billion before the crash and have 50 billion on the other side than have 10 billion before the crash and have 5 billion on the other side.   Just seems logical to me.

[Tacenda]

20 minutes ago, carbon dioxide said:

Ever since I was a teenager I always understood that tithing was giving funds to the church to do whatever it needed to build up the kingdom.   There was never an expectation that the church one only do certain things with the money.   I think it is very wise for the church to build up a reserve fund as much as possible.  Eventually the economy is going to go through a major crash.   The amount of debt is not sustainable.  We are probably going to spend 9 trillion in interest payments alone over the next 10 years on the debt.  If the market goes down 50%, better to have a 100 billion before the crash and have 50 billion on the other side than have 10 billion before the crash and have 5 billion on the other side.   Just seems logical to me.

I've been vocal that the church needs to spend more on charities, but second thoughts lead me to think the church may need to help the world if all heck breaks loose. 

[webbles]

1 hour ago, smac97 said:

"The plaintiffs have argued" being the operative wording.  Plaintiffs have cited, I think, zero authority for their argument.  And Judge Shelby has already noted this.  See Gaddy III, 665 F. Supp. 3d at 1292 (“Plaintiffs cite no case law... establishing or even suggesting that a legally cognizable fiduciary duty arises or could arise from ecclesiastical relationships.”).

There is no question that there is no common law fiduciary duty (that is, no duty "arises or could arise from ecclesiastical relationships").  Judge Shelby addressed this in Gaddy.

There is also no question that the Charitable Solicitations Act ("CSA") cannot create such a duty because Judge Shelby, citing the Court of Appeals, held in Gaddy that this statute "does not create a private cause of action."  665 F. Supp. 3d 1263, 1294 (citing Siebach v. Brigham Young University, 2015 UT App 253, 361 P.3d 130, 139-40) (stating that the CSA does not preclude a fraud claim, but it does not create a fiduciary duty claim).

Siebach may well prove to be the controlling decision on the fiduciary duty issue.  From that case (emphases added) :

This may be a fairly important distinction.  "UPMIFA" is the "Uniform Prudent Management of Institutional Funds Act."  I think the MDL plaintiffs' claims straddle both UPMIFA and the CSA.  They seem to be challenging the Church's post-donation management of funds by arguing that the Church committed fraud in inducing members to tithe.  

Nobody disputes that the MDL plaintiffs are at liberty to submit fraud claims to the Court.  It just so happens that they do not seem to have facts sufficient to support fraud claims.  So they have also attempted to present "fiduciary duty"-style claims.  But they aren't doing very well there, either:

First, the plaintiffs' "fiduciary duty" arguments fail insofar as they claim such a duty exists at common law.  That just ain't so.  From Siebach:

Second, the plaintiffs' cause of action is styled as "Common Law Breach of Fiduciary Duty," but they then immediately invoke the CSA.  This is legally nonsensical, because "common law" duties are entirely distinct from statutorily-created duties.  It's one or the other, not both.

Third, the plaintiff's cause of action claims the fiduciary duty was breached both in the solicitation of tithes and in the use of tithes.  Apparently the CSA has no relevance to claims of post-donation use (such claims are instead governed by UPMIFA, which the plaintiffs have not cited).  The CSA also does not apply to plaintiffs' solicitation theory because that statute does not create a private cause of action.  That is, a private party can use the CSA to sue for fraud, but not for breach of fiduciary duty.  From Gaddy:

And from Siebach:

The plaintiffs are trying to cross their wires by conflating their fiduciary duty claim with the CSA.  I don't think that will work.  I don't see any way forward for it.

I think you are better of assessing the law as it exists, not as you think it ought to be.  The former is more likely to yield an accurate prediction, whereas the latter is mostly wishful thinking.

Thanks,

-Smac

In Siebach, it also says:

Quote

35 We conclude that claims alleging the improper inducement of a charitable donation are distinguishable from claims seeking to enforce donative intent and that improper-inducement claims do not fall within the common-law donor-standing rule. The common-law rule is based on the precept that a donor relinquishes his or her personal interest in an unrestricted charitable gift once the gift is complete, and thereafter it becomes the duty of the attorney general to vindicate the public interest in ensuring that charitable organizations use donated funds appropriately. See Carl J. Herzog Found., Inc. v. University of Bridgeport, 699 A.2d 995, 997–98 (Conn.1997). But, when a donor alleges that fraud or negligent misrepresentation induced a charitable gift, it cannot be said that the donor freely relinquished his or her property to the charity such that only a general public interest in the matter remains. In this case, the Siebachs' Amended Complaint alleges that their donations to the RSA were induced by fraud or negligent misrepresentation. Those claims fall outside the reach of the common-law donor-standing rule, and the district court erred by dismissing them.

Doesn't that match what the plaintiffs are arguing?  Or is a "improper inducement claim" different than what they are alleging?

[Calm]

2 hours ago, carbon dioxide said:

f the market goes down 50%, better to have a 100 billion before the crash and have 50 billion on the other side than have 10 billion before the crash and have 5 billion on the other side.   Just seems logical to me.

Better to buy materials that will not lose their value in the crash (like toilet paper  ) imo.  There is time to do that assuming the Lord inspires such. 

[Analytics]

22 hours ago, webbles said:

California has an actual fiduciary duty to the donors spelled out in the law.  It doesn't state what the fiduciary duty is, just that the charity has one to the donors.  As I mentioned earlier, looking at California's guidelines on what is needed to do to fulfill that duty, none of them include being as transparent as you or the plaintiffs are arguing for.  The only need is for the charity to ensure that the donated money is used correctly. 

To the extent there is an obligation to the donors for money to be used “correctly,” then isn’t there a need for transparency so that the donors know what “correctly” even means?

22 hours ago, webbles said:

Utah's law is very similar to the California law so I would suspect that the duty in Utah is similar to the duty in California.  I can't find any court cases about the Utah law but there are ones for the California law.

I appreciate your take on this.

22 hours ago, webbles said:

If we talk about tithing by itself, then I don't see how they have alleged that the church has "[misused] the donations".  Everywhere that I can find and everything that I can remember says that tithing was for the building up of the Church.

I went to the Church’s official website and did a search on “tithing”. The first article that came up that talked about how tithing is used is a Liahona article called, “What We Believe: Tithing Helps Build of the Kingdom of God.” It has a graphic with cartoon images illustrating what they mean by “building the kingdom of God:"

• It shows the Salt Lake Temple with the COB in the background and says, “Tithing funds are transmitted from wards and branches to Church headquarters, where a council that includes the First Presidency decides how these funds will be used."
• It shows a young family walking into a Church and says, “Tithing pays for the cost of building and maintaining temples and meetinghouses."
• It shows somebody holding a couple of books and says, “Tithing pays for the translation and publication of scriptures and lesson materials."
• It shows some kinds in a classroom and says, “Tithing helps pay for educating young members in Church schools, seminaries, and institutes of religion."

There isn’t a cartoon depiction of a stock broker that says, “The biggest* a big use of tithing is to purchase stocks, bonds, and commercial real estate in an unnecessarily gargantuan, exorbitant reserve fund that is never used for anything."

22 hours ago, webbles said:

The Council on the Disposition of Tithes will prayerfully decide where the funds go.  Putting tithing donations in a reserve (no matter how big) is inline with that.  If the Council on the Disposition of Tithes decides to make a really, really, really large rainy day fund and they prayed about and received inspiration to do that, then it is fine.

A couple of points about this.

First, in the context of a fiduciary duty to the donors, whether or not putting their donations into an excessive reserve fund constitutes “misuse” must have something to do with the donors reasonable expectations about how their donations will be used, doesn’t it? The Church might think what they are doing is proper, but that doesn’t change the fact that they hide from donors what they are actually doing because they are afraid if the donors knew the truth, they’d stop donating.

Second, if I were a donor and felt inclined to sue the Church, the angle I would explore would be suing the individual members of the Quorum of the Twelve for failing their fiduciary duty to the Church. Why? They have a very clear fiduciary duty to the church regarding all of these things, including the duty to exercise care and diligence when deciding the right balance between saving and spending. Despite being members of the Council on the Disposition of Tithes, I would argue that they do not do this with proper diligence because the Church doesn’t allow them to know how much money is in the reserve funds. How can they possibly make an informed decision about budgets if they don’t know how much money the Church has saved?

I would speculate that the reason the Church won’t allow the apostles to know how much money they have saved up is because they’d want to spend more of it if they knew.

22 hours ago, webbles said:

Same with "failing to use the donations as represented".  I also don't see how the size of the rainy day fund is material fact.  So tithing donations are being not breaking the fiduciary duty.

I also think the plaintiffs know this and that is why they have included the other forms of donations.  The LDS Philanthropies does say that it would go to "those in need".  They also said 100% of the donations would be used.  If any portion of those donations make it into the reserve fund and stay there, then the Church is at fault for the fiduciary duty.  Fast Offerings are similar.  We are taught that they will be used for those in need at the local level.  If it isn't needed at the local level, I believe we are taught that they are used in the same manner somewhere else (though it is possible that there have been teachings that it will be treated as tithing and help build the Church).

I think the reason why the plaintiffs bring in tithing is because it has a lot more money at stake and would make a much larger class.  But I think that is their weakest case.  The other two donation types have a better chance of going further.

I agree.

22 hours ago, webbles said:

I'd also like to know why the plaintiffs quote "immediately" in 155.  It makes it seem like they are quoting a law or something but they don't have any links.  Where is it required that the Church use the funds immediately?

In paragraph 133, they say that plaintiffs reasonably relied on LDS’s public statements, including a statement that the “vast majority” of donated funds were “used immediately.” I’d guess that is what they are quoting.

_________________________________

* Note: When I originally posted this, I implied that “the biggest use of tithing is to purchase stocks, bonds, and commercial real estate in an unnecessarily gargantuan, exorbitant reserve fund that is never used for anything.” When I wrote this, I was thinking of the Church drawing from all sources of income in a proportional manner. While I believe that is the correct way of looking at it, I acknowledge that most people, especially in the church, succumb to the mental accounting fallacy and think income from investments and income from tithing are intrinsically different and should be treated as such. Consequently, my original words were sloppy and were a gratuitous hyperbole that should have been expected to be misunderstood. If my words caused you any pain or confusion, I offer my deepest apologies.    

 

Edited September 24, 2024 by Analytics