Mormon church can use tithes for investments, 9th Circuit rules

In the Parable of the Talents, profitable investors are rewarded, but he who buries his treasure in the ground is cast out. On Friday, an en banc panel of the 9th U.S. Circuit Court of Appeals concurred with that New Testament asset management creed as it blessed the way the Mormon Church handles tithes.

The court voted 11-0 to reverse a three-judge panel and reject arguments from the plaintiff, a prominent former church member, that the Church of Jesus Christ of Latter-day Saints committed fraud by misspending millions of dollars of his tithes on a shopping mall in downtown Salt Lake City. Huntsman v. Corporation of the President of the Church of Jesus Christ of Latter-day Saints, 21-56056 (9th Cir., filed Sept. 28, 2021).

On the contrary, the church did not use tithes it collects directly on commercial projects but instead uses the income generated by investing the tithes to fund its commercial projects -- and it has long openly said it was doing so, the court held in ruling for the defense.

The court was careful to avoid entanglement in religious issues. Circuit Judge Michelle T. Friedland, a President Barack Obama appointee, wrote the opinion. Only secular fraud claims, not religious conflict, were involved in the case, she held.

Four judges concurred separately to underscore the First Amendment prohibition on courts resolving ecclesiastical disputes.

Circuit Judge Patrick J. Bumatay, a President Donald Trump appointee, also concurred separately to argue that although the church autonomy doctrine is necessarily a part of the analysis, it bars the court from reaching the merits of the case.

The church's lawyer, Rick L. Richmond of Larson LLP, said, "There is nothing wrong with a church putting aside some of the contributions it receives and investing those reserves for future uses. Based on the Parable of the Talents, one could argue Jesus himself would approve of that common practice among virtually all Christian faiths."

Richmond, himself a practicing Mormon, added, "As counsel for the Church, and as a life-long member of the Church whose ancestors participated in its founding, I am profoundly grateful to the 9th Circuit en banc panel for this extraordinary ruling today."

Richmond has been with the case from the start. Paul D. Clement of Clement & Murphy PLLC came on for the oral argument before the en banc panel. He could not be reached for comment.

The pro-church ruling, though specific to the Mormon Church, was good news for several religious groups that filed friend of the court briefs urging the outcome the circuit announced Friday.

The en banc court reversed a three-judge panel that ruled in favor of the plaintiff. That 2023 decision had alarmed many.

The three-judge panel had reversed U.S. District Judge Stephen v. Wilson of Los Angeles. Wilson had granted summary judgment to the church, but two of the panel's three judges held there were factual disputes over the fraud claims that required further litigation.

That set off a rush of similar claims, according to a host of religious denominations. They wrote in one amicus curiae pleading. "Thus, the panel decision has spawned copycat litigation throughout the nation -- posing an additional risk to all organizations of faith."

At least five similar federal cases have since been filed by active and former Latter-day Saints church members, claiming they were also misled on tithing.

Friday's ruling affirmed Wilson's grant of summary judgment to the church.

The case has been pending for years. The plaintiff, James Huntsman -- a brother of former Utah Gov. Jon Huntsman -- resigned his membership and sued the church in 2020 seeking to recover $5 million of his own tithing plus interest and penalties.

Huntsman claimed that the church falsified the source of the $1.4 billion it spent on a project to redevelop the City Creek Center mall beginning in 2003. He cited statements by church leaders promising that tithing funds would not be used on commercial endeavors.

Huntsman argued that interest on the tithes was the same as the tithes themselves, but the court saw a difference. "Although the Church stated that no tithing funds would be used to fund City Creek, it also clarified that earnings on invested reserve funds would be used," wrote Friedland. "The Church had long explained that the sources of the reserve funds include tithing funds. Huntsman has not presented evidence that the Church did anything other than what it said it would do."

Friedland added, "No reasonable juror could conclude that the Church misrepresented the source of funds for the City Creek project."

One authority who has followed the case called it concerning that Circuit Judge Lawrence VanDyke, a Trump appointee, disassociated himself from a key footnote that pointed out religious leaders in secular courts are not immunized from fraudulently enriching themselves at a church's expense.

Richard B. Katskee, the director of the appellate litigation clinic at Duke University School of Law, said that reading between the lines, VanDyke "seems to think that the Constitution absolutely protects religious leaders who fraudulently enrich themselves at the expense of their congregation --a view that the church itself rejected. That view is dangerous to religious freedom and to the health of religious denominations and institutions."

David B. Jonelis of Lavely & Singer PC represents Huntsman. Jonelis did not respond to a message seeking comment. There was no immediate word on whether Huntsman would appeal to the U.S. Supreme Court. Reached by text Friday by The Salt Lake City Tribune, Huntsman replied, "Still assessing."