Litigation continues in federal actions alleging fraud with LDS tithings
In a matter centered on religious freedom and fraud allegations, a lawsuit involving the Church of Jesus Christ of Latter-day Saints and member tithing is going back to the San Francisco-based 9th U.S. Circuit Court of Appeals for a rehearing en banc. (Photo from Shutterstock)
Updated: In a matter centered on religious freedom and fraud allegations, a lawsuit involving the Church of Jesus Christ of Latter-day Saints and member tithing is going back to the San Francisco-based 9th U.S. Circuit Court of Appeals for a rehearing en banc.
The action, Huntsman v. Corporation of the President of The Church of Jesus Christ of Latter-day Saints, was filed in 2021 by James Huntsman, a California man. The complaint states that between 1993 and 2017, Huntsman donated 10% of his annual income to the church, which amounted to millions, and was misled to think the money would not be used to finance commercial projects. An IRS whistleblower complaint later stated that tithing funds were used to build a Salt Lake City shopping mall and bail out a troubled for-profit life insurance company owned by the church, according to the lawsuit.
The U.S. District Court for the Central District of California granted the church’s motion for summary judgment in 2021, and Huntsman appealed to the 9th Circuit. In 2023, a panel partially reversed the district court order, rejecting the church’s argument that Huntsman’s claims were barred on First Amendment grounds.
Additionally, the panel found that the ecclesiastical abstention doctrine, which holds that courts should stay out of lawsuits involving church dogma, did not apply because the fraud claim questions were secular. A jury could conclude the church knowingly misrepresented that no tithing funds were used for the shopping mall, but there was not sufficient basis for Huntsman’s claim involving the life insurance company, the opinion states.
It was a 2-1 opinion. Judge William Fletcher wrote for the majority, and U.S. District Judge Edward Korman, sitting by designation from the Eastern District of New York, authored a partial dissent, disagreeing with the majority’s decision to uphold the fraud claims involving the shopping mall.
The en banc hearing was granted in March; oral arguments are scheduled to take place in September.
“A grant of rehearing en banc in any appeal is rare. It means a majority of the judges think the initial decision in the case, made by a panel of three judges, is worth another look by more judges,” explained Rick Richmond, a partner at Larson who is representing the LDS church in Huntsman.
Huntsman’s attorney, David Jonelis of Lavely & Singer, told the ABA Journal his firm does not comment on pending litigation.
Eric Baxter, senior counsel and vice president of Becket Law, a nonprofit group also known as the Becket Fund for Religious Liberty, wrote an amicus brief supporting the LDS church.
He referenced a statement by the church’s then-president Gordon B. Hinckley at the organization’s 2003 general conference, assuring members their tithing funds would not be used to acquire the shopping mall property. General Conference is a biannual gathering for all church members centered on sermons and messages from church leaders, according to its website.
“The church’s statement that Huntsman challenged was made by its top religious leader, on an inherently religious subject (tithing), at one of its most important religious gatherings, for members worldwide. Courts have no business regulating what churches teach from the pulpit to the faithful,” Baxter wrote in an email to the ABA Journal.
Additionally, the amicus brief argued that the “revitalization” was funded with reserve fund earnings, not tithing principal.
Richard B. Katskee wrote an amicus brief supporting Huntsman, on behalf of the Interfaith Alliance, the Lambda Legal Defense and Education Fund Inc., the National Women’s Law Center and the Sikh Coalition. He views the potential case outcome in another light.
“This case has generated a lot of public interest because of the aggressive assertion by the church and its amici that religious liberty is at risk whenever houses of worship or religious denominations are required to follow general laws,” says Katskee, director of Duke University School of Law’s Appellate Litigation Clinic.
“I hope that the en banc court will see through the hype and understand that real religious freedom for everyone is best served by a fair system that protects us all from fraud and other crimes and harms, regardless of our faith or the faith of the perpetrator,” he adds.
Regulators have gotten involved with the church’s investments. In February 2023, the Securities and Exchange Commission settled charges with Ensign Peak Advisors Inc., a nonprofit created by the Corporation of the President of the Church of Jesus Christ of Latter-Day Saints to hold and invest donations.
According to a news release from the SEC, Ensign failed to file forms that disclosed the church’s equity investments, and instead filed forms “for shell companies that obscured the church’s portfolio and misstated Ensign Peak’s control over the church’s investment decisions.” Ensign Peak paid a $4 million penalty to settle the charges, and the church paid $1 million, the release states.
In a statement, the LDS church said Ensign Peak relied on legal counsel to comply with reporting obligations and maintain the privacy of the portfolio.
“We affirm our commitment to comply with the law, regret mistakes made, and now consider this matter closed,” the statement said.
Huntsman’s attorney is also involved in a similar case, Judson et al v. Corporation of the President of The Church of Jesus Christ of Latter-day Saints.
Here, Gene and Michelle Judson are the named plaintiffs in a class action alleging the organization used at least $1.4 billion in tithing funds for a for-profit shopping mall. The 2024 complaint also alleges the church “diverted tithing funds for profit-generating, noncharitable purposes.”
The case was initially filed in the U.S. District Court for the Central District of California and later transferred to the U.S. District Court of the District of Utah.
Todd Eagan, Jonelis’ co-counsel, also told the ABA Journal he does not comment on pending litigation.
Additionally, the U.S. Judicial Panel on Multidistrict Litigation in an April 11 order transferred four other actions involving tithing and the organization to the District of Utah.
Updated May 28 at 10:55 a.m. to correctly report that Richard B. Katskee wrote an amicus brief on behalf of the Interfaith Alliance, the Lambda Legal Defense and Education Fund Inc., the National Women’s Law Center and the Sikh Coalition.
