A federal appeals court has granted a win to the Church of Jesus Christ of Latter Day Saints in a dispute with a former prominent Mormon, declaring James Huntsman can't continue suing the LDS Church over its use of church money to finance the $600 million purchase of a mall in Salt Lake City.
On Jan. 31, a full contingent of 11 judges of the San Francisco-based U.S. Ninth Circuit Court of Appeals delivered the ruling in favor of the LDS Church.
While the judgment itself was unanimous, a majority of six judges on the panel said it was enough to determine the LDS Church had not misled LDS adherents about the source of the money to finance the mall purchase.
Everyone knew, or should have known, the funds included tithes paid by LDS adherents, the judges said.
Five other judges, however, said the LDS should have prevailed easily on First Amendment grounds, as they believed the U.S. Constitution prohibits the courts from even addressing the thorny ecclesiastical question of whether the government can tell a church how to spend money given by church members and adherents. They warned the majority's ruling trespassed on turf forbidden to the courts by the First Amendment.
The case landed before the 11-judge panel after the LDS Church appealed the ruling of a three-judge Ninth Circuit panel, which had determined Huntsman should be allowed to sue the church.
The case centered on claims by Huntsman that the LDS Church leadership had misled members over the use of $1.4 billion in church funds to finance the purchase of the City Creek Center Mall in Salt Lake City.
According to court documents, the LDS Church's use of the funds to develop the mall was first disclosed in a 2019 whistleblower complaint filed by David Nielsen, a senior portfolio manager for Ensign Peak Advisors.
According to court documents, that revelation came despite nearly two decades of assurances from church leaders that the mall project was only being financed from the church's existing commercial holdings, and did not involve tithe funds.
Nielsen claimed this should result in the government stripping the church of its tax exempt status, since it was using tithe funds for commercial profit.
In February 2023, the federal Securities and Exchange Commission announced the LDS church and Ensign Peak were paying a combined $5 million penalty to settle charges accusing them of allegedly creating 13 shell corporations to "intentionally conceal" the LDS investments, including the mall.
In response to those revelations, wealthy former Mormon James Huntsman became the first to file suit against the church, seeking the refund of millions of dollars in tithes he paid to the church before he renounced his membership in 2020.
Huntsman is the son of Jon Huntsman Sr., founder of the Huntsman Corporation, and brother of former Utah governor Jon Huntsman Jr.
The elder Huntsman had also served as a leader within the LDS church.
Huntsman's lawsuit was initially dismissed by a California federal judge.
However, that dismissal was overturned by a panel of the U.S. Ninth Circuit Court of Appeals in August 2023, when judges determined the lawsuit's claims did not actually involve the church's use of its funds.
Rather, they agreed with Huntsman that the claims centered on the alleged fraud and conspiracy allegedly committed by church leadership in allegedly misrepresenting to church members how the funds were being spent, allegedly inducing them to continue giving their tithes.
Other lawsuits have followed on behalf of other LDS members, demanding the church repay tithes from millions of members who gave to the church over the past two decades. Those cases have been transferred to Utah federal court and remain pending.
Meanwhile, the LDS Church asked the full Ninth Circuit court to review the decision of the three-judge panel, in a so-called en banc proceeding, which includes a panel of 11 of the court's judges.
And in that ruling, the larger panel said their colleagues on the three-member panel got the decision wrong.
The overall opinion was drafted by Ninth Circuit Judge Michelle T. Friedland, an appointee of former President Barack Obama.
She was joined in that opinion by Ninth Circuit Chief Judge Mary Murguia, also an Obama appointee; and judges John B. Owens, Jennifer Sung, Gabriel P. Sanchez and Ana de Alba.
Owens was appointed by Obama; Sung, Sanchez and de Alba were all appointed by former President Joe Biden.
In their opinion, the six judges said they did not need to use the constitutional principle known as church autonomy to determine if Huntsman's lawsuit could survive.
They said it was enough to find that "no reasonable juror" could find the church misled its members about at least some of the sources of the money the church used to complete the mall project.
The judges noted the evidence shows the church's investment earnings alone more than accounted for the money that the church could have used to complete the mall project.
"... Any commingling of principal tithing funds and earnings on invested tithing funds cannot support Huntsman’s fraud claim," the judges said.
They further noted they believed the dispute over how the church may have used tithe money doesn't delve enough "into matters of Church doctrine or policy" to trigger any First Amendment concerns that the courts have trespassed on areas of constitutionally-protected church self-governance.
In concurring opinions, however, their five colleagues differed sharply on where the line should be drawn on unconstitutional court meddling in church affairs.
Judge Daniel Bress, who was appointed during the first term of President Donald Trump, authored a concurring opinion. He was joined by Judges Milan D. Smith, an appointee of former President George W. Bush; Jacqueline H. Nguyen, appointed by Obama; and Lawrence VanDyke, a Trump appointee.
Bress said the majority opinion improperly would "indulge in the illusion that this is merely a secular lawsuit about civil fraud."
Instead, Bress said the lawsuit marks an attempt by Huntsman - a "disaffected" former member of the LDS Church - to use the courts to extract millions of dollars from the LDS under a "not-so thinly concealed effort to challenge the Church's belief system under the guise of litigation."
"The majority is correct that there was no fraudulent misrepresentation even on the terms of plaintiff’s own allegations. But it would have done well for the en banc court to recognize the obvious: There is no way in which the plaintiff here could prevail without running headlong into basic First Amendment prohibitions on courts resolving ecclesiastical disputes," Bress wrote.
Ninth Circuit Judge Patrick Bumatay, a Trump appointee, wrote a special concurrence of his own, asserting all of his colleagues were mistaken by considering the case in the first place.
He particularly faulted the majority, saying their decision comes too close to allowing courts to step into internal church matters and establish legal definitions for "tithes" that are separate from other forms of church revenue and deciding who should be allowed to speak for and lead a church and if those leaders' decisions actually sufficiently align with the church's statements and doctrine to avoid accusations of fraud.
Bumatay said the principle of church autonomy should be treated as a "threshold issue," used by courts to determine if they are even constitutionally allowed to hear certain kinds of disputes.
"In deciding religious matters, the Constitution strictly limits our authority. Simply put, the church autonomy doctrine bars federal courts from resolving matters of faith, doctrine, and church governance," Bumatay wrote.
"So we can’t just sidestep the doctrine and jump straight to the merits. Nor can the doctrine be assumed away, considered an afterthought, or serve as a convenient alternative ruling. Rather, it’s a threshold structural bar that must be reckoned with. Otherwise, we violate the restraints the Constitution places on our power."
Huntsman was represented in the case by attorneys David B. Jonelis, of the firm of Lavely & Singer P.C., of Los Angeles; Jake A. Camara, of Berk Brettler LLP, of West Hollywood; Bradley Girard, of Democracy Forward Foundation, of Washington, D.C.; and Jenny Samuels of Americans United for Separation of Church and State, of Washington, D.C.
The LDS Church was represented by attorneys Rick Richmond, Troy S. Tessem and Andrew E. Calderon, of Larson LLP, of Los Angeles; and Paul D. Clement, Andrew C. Lawrence and Chadwick J. Harper, of Clement & Murphy PLLC, of Alexandria, Virginia.