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United States District Court, S.D. New York

March 15, 2004.

JANET BRODERICK KRAFT, Plaintiff, -against- The Rector, Churchwardens and Vestry of GRACE CHURCH in New York; RICHARD F. GREIN; ANNE RICHARDS; and DAVID RIDER, Defendants

The opinion of the court was delivered by: KIMBA WOOD, District Judge


Plaintiff, a former senior associate priest at defendant Grace Church in New York ("Grace Church"), was terminated by Grace Church. Plaintiff does not contest the Church's right to terminate her, and does not seek reinstatement to her former position. Rather, plaintiff claims damages for breach of her employment contract and for the allegedly tortious conduct surrounding her termination. Specifically, plaintiff sues for: breach of, and tortious interference with, her employment contract; wrongful discharge; wrongful denial of employment benefits; and defamation. Each of the defendants moves to dismiss the Complaint, either in whole or in part.

Plaintiff's claims all arise out of her employment agreement. This agreement permitted Grace Church to terminate plaintiff with or without cause, but it entitled her to certain benefits if her termination was without cause. Plaintiff claims that she was ultimately terminated without cause, and yet did not receive the benefits to which she was entitled. Defendants claim that Page 2 plaintiff was terminated for cause; namely, that certain expenditures made by plaintiff from her discretionary fund, and on the church credit card, were improper and in violation of canon law. Plaintiff's actions in tort similarly derive from her challenge to the Church's position that she was terminated for cause.

  As discussed below, the Free Exercise Clause of the United States Constitution (the "Free Exercise Clause") bars courts from adjudicating a dispute, such as this, regarding the reasons for a church's decision to terminate one of its ministers.*fn1 Additionally, resolving the precise dispute posed by plaintiff in this litigation — namely, whether the challenged expenditures furthered her ministry and/or whether they complied with canon law — would likely entangle the Court in a religious dispute, in violation of the Establishment Clause of the United States Constitution (the "Establishment Clause").*fn2

  I. Background*fn3

  Plaintiff is an ordained priest of the Episcopal Church in good standing. See Complaint, ¶ 10. In 1997, plaintiff resigned as Rector of All Saints' Church in Briarcliff Manor, New York, to Page 3 accept the position of Senior Associate Priest, with the title of "Vicar," at defendant Grace Church in New York. Id. at ¶¶ 11-12. At that time, plaintiff entered into a written employment agreement (the "Agreement") with Grace Church. The Agreement provides that the "Vicar [i.e., plaintiff] shall serve at the pleasure of the Rector. If Vicar is terminated for any reason . . . other than for cause, she will be given not less than one year's prior written notice thereof." Agreement, § F(1).*fn4 The Agreement also provides for: (1) specified compensation and benefits, id. Exh. A, § B; (2) "periods of leave at full compensation," id. at § A(2); and (3) plaintiff's ability to make disbursements from a clergy discretionary fund and a vicar's discretionary fund, id. at § D. The vicar's discretionary fund was established for the purpose of plaintiff to "deposit and, at her sole discretion, disburse all donations received to support her ministry." Id.

  In May 1999, the Reverend John Andrew ("Andrew") became the "Priest-in-Charge" at Grace Church. See Complaint, ¶ 22. In late September 2000, Andrew notified plaintiff that she would be terminated without cause, effective October 1, 2001. Id. at 1 25. Upon receiving that notice, plaintiff began her search for employment at other parishes. Id. at ¶ 26. On January 18, 2001, plaintiff began a seven-month sabbatical leave. Id. at 1 29. In March 2001, Reverend David Rider ("Rider") was appointed the Priest-in-Charge of Grace Church, to be effective June 1, 2001. Page 4 Id. at ¶ 34.

  In April 2001, Defendant Bishop Grein ("Grein") directed Andrew to sign a letter (the "Termination Letter") immediately terminating plaintiff's employment for cause, based on alleged improprieties in plaintiff's use of the discretionary funds and of the parish's credit card. Id. at 55 36-38. On May I, 2001, Andrew read the Termination Letter at a meeting attended by: plaintiff; counsel for plaintiff; counsel for Grace Church; the Treasurer and Assistant Treasurer of Grace Church; the two Wardens; and Andrew. Id. at 55 42-46. In response, plaintiff asked for details about her alleged improprieties. She received a computer printout listing the allegedly improper transactions. Id. at ¶ 49. Included in the printout were several payments to the high school that her son attended, as well as payments to people who had, at some point, allegedly served as plaintiff's babysitter. See Defendants' Exh. 1. Kraft also used the discretionary funds to send her son and two friends on a ski trip with FOCUS, a religious group. Id. Kraft admits to having made the challenged expenditures, but defends them as having been properly made, at her discretion, to support her ministry. See Oct. 17, 2002, Tr. 69:14-21.

  Representatives of Grace Church asked plaintiff to approve a draft announcement of her termination and to sign a draft agreement of termination. Complaint, 55 51-54. The draft announcement stated that there was cause for plaintiff's discharge; the draft agreement claimed to supercede all prior agreements. Id. at 15 51-52 & 54. Page 5 Plaintiff refused to sign either. Id. at ¶¶ 52 & 56.

  In a May 3, 2001, telephone conversation, and in a May 16, 2001, letter, Grein threatened and attempted to intimidate plaintiff to compel her to sign the draft termination agreement. Id. at II 59 & 61. In the letter, Grein advised plaintiff that, if she continued to refuse to sign the draft termination agreement, she could be charged in a formal canonical complaint with "conduct unbecoming of a member of clergy." Id. at Exh. D. Sometime thereafter, Grace Church terminated plaintiff's salary and all of her benefits. Id. at 163.

  Throughout April, May and June 2001, Grein and Rider made false statements about plaintiff's alleged misuse of her discretionary funds and about plaintiff's other, unspecified, alleged "wrongdoing." Id. at ¶ 64. Grein and Rider made those statements to (among others) members of the congregation of Grace Church and plaintiff's prospective employers. Id. In an effort to discredit the allegations of impropriety, plaintiff documented each challenged financial transaction and requested an opportunity to present her documentation to the vestry of Grace Church. Id. at 1 65. When Rider denied her that opportunity, she distributed, on her own accord and for consideration at the next-scheduled meeting, written explanatory materials to all members of the vestry. Id. at ¶ 66. Rider directed the vestry to return the materials unread. Id. at ¶ 68.

  On June 6, 2001, at a meeting between Grein and plaintiff, Grein acknowledged that plaintiff had not used improperly any of Page 6 Grace Church's money. Id. at ¶ 75. Nonetheless, Grein continued to threaten plaintiff with ecclesiastical charges and attempted to intimidate her into not filing a lawsuit. Id. at ¶¶ 75-76. On June 26, at a special vestry meeting, Rider announced that he intended to appoint Richards to the position previously held by plaintiff. Id. at ¶ 79. Rider subsequently appointed Richards to the position. Id. at ¶ 81.

  Plaintiff now charges Grace Church with breach of the Agreement, wrongful discharge and wrongfully denying her employment benefits. Plaintiff charges Grein, Richards and Rider with tortious interference with the Agreement. She charges all defendants with improperly damaging her professional reputation.*fn5 Defendants move to dismiss, in part and in whole.

  II. Discussion

  Defendants move to dismiss this action, under Fed.R.Civ.P. 12(b)(1), for lack of subject matter jurisdiction or, alternatively, under Fed.R.Civ.Pro. 12(b)(6), for failure to state a claim upon which relief can be granted. On a motion to dismiss under Rule 12(b)(1) and (6), the Court must accept all factual allegations in the Complaint as true and must draw all reasonable inferences in favor of plaintiff. See Jaghory v. New Page 7 York State Pep't of Educ., 131 F.3d 326, 329 (2d Cir. 1997). When deciding a Rule 12(b)(6) motion, the Court may not consider any material outside of the pleadings. See Fonte v. Bd. Managers of Cont'l Towers Condominium, 848 F.2d 24, 25 (2d Cir. 1988). However, when deciding a Rule 12(b)(1) motion, the Court may refer to evidence outside of the pleadings to resolve any disputed jurisdictional facts. See Zappia Middle East Constr. Co., Ltd, v. Emirate of Abu Dhabi, 215 F.3d 247, 253 (2d Cir. 2000) (citation omitted).

  A. Rule 12(b)(1) Motion

  On a Rule 12(b)(1) motion for lack of subject matter jurisdiction, the plaintiff bears the burden of proving jurisdiction. See Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir. 1994). The nature of the plaintiff's burden depends on the procedural posture of the litigation. See Ball v. Metallurgie Hoboken-Overpelt, 902 F.2d 194, 197 (2d Cir. 1990). Where, as here, a court holds an evidentiary hearing to determine whether it can exercise jurisdiction, the plaintiff must demonstrate jurisdiction by a preponderance of the evidence.*fn6 See Met. Life Ins. Co. v. Robertson-Ceco, 84 F.3d 560 (2d Cir. 1996); Robinson, 21 F.3d at 507 n.3.

  Defendants challenge the Court's jurisdiction under both the Free Exercise Clause and the Establishment Clause of the First Amendment. Plaintiff must demonstrate by a preponderance of the Page 8 evidence that neither of these clauses protects defendants from a Court exercising jurisdiction. The key difference between a Free Exercise Clause analysis and an Establishment Clause analysis, is that the former focuses on the nature of the parties involved in the dispute, whereas the latter focuses on the issues that would have to be addressed in order to resolve the suit. See Hartwig v. Albertus Magnus College, 93 F. Supp.2d 200, 211 n. 13 & 212 n. 15 (D. Conn. 2000).

  1. The Free Exercise Clause

  If a suit involves an employment decision by a church with respect to one of its ministers, courts lack jurisdiction because the Free Exercise Clause bars court involvement in the employment relationship between a minister and a church. This absolute bar has developed under a line of Supreme Court cases interpreting the Free Exercise Clause as prohibiting courts from encroaching on a church's ability to manage its internal affairs,*fn7 particularly with respect to decisions regarding the selection and retention of clergy. See, e.g., Gonzalez v. Roman Catholic Archbishop of Manila, 280 U.S. 1, 16, 50 S.Ct. 5, 74 L.Ed. 131 (1929) ("it is the function of the church authorities to determine what the essential qualifications of a chaplain are and whether the candidate possesses them"); Serbian Eastern Orthodox Diocese v. Milivojevich, Page 9 426 U.S. 696, 717, 96 S.Ct. 2372, 49 L.Ed.2d 151 (1976) ("questions of church discipline and the composition of the church hierarchy are at the core of ecclesiastical concern").

  Numerous Courts of Appeal have considered whether the Free Exercise Clause precludes ministers from suing church employers for purported violations of federal anti-discrimination statutes. Those courts have held, unanimously, that the Free Exercise Clause bars the application of these statutes to churches' employment decisions concerning ministers.*fn8 Courts have referred to this bar as being a "ministerial exception" to, or a "ministerial exemption" from, federal anti-discrimination statutes. *fn9 Page 10

  Although the instant suit asserts common law claims, rather than federal statutory claims, the same constitutional principle applies to both, and bars court review of church decisions regarding the employment of ministers.*fn10

  The Second Circuit has never been called upon to decide whether the Free Exercise Clause prohibits courts from adjudicating employment disputes between members of the clergy and religious institutions. It made indirect reference to the "ministerial exception," without adopting it, in a case in which it held that Page 11 the ADEA applied to a parochial school teacher because his duties were unlike a minister's duties. See DeMarco. v. Holy Cross High School, 4 F.3d 166, 171-72 (2d Cir. 1993).*fn11 See also Whitney v. Greater New York Corp. of Seventh-Day Adventists, 401 F. Supp. 1363, 1368 (S.D.N.Y. 1973: (denying motion to dismiss typist-receptionist's race-based Title VII claim, because her duties were nor similar to those of a minister, and thus the Free Exercise Clause did not bar adjudication of her claim).

  In this case, plaintiff acknowledges that she was a minister at a church (her employment agreement states that her duties as Vicar included, inter alia, liturgical participation, preaching, pastoral care, supervision of children's ministries, and Women's Bible Study). See Agreement, Position Description. Plaintiff asks this Court to determine whether she was terminated for cause, which necessarily would require the Court to scrutinize the reasons for the church's decision to terminate one of its ministers. For the reasons explained above, the Free Exercise Clause bars the Court from resolving this dispute.*fn12 Page 12

  It is important to note that the Court does not hold that the Free Exercise Clause bars a court from adjudicating every dispute that might arise in the context of an employment contract between a minister and her church. The Court's holding is limited to a church's decisions concerning employment of ministers.*fn13

  Plaintiff argues that this case would not require court involvement in a church's decision regarding who is fit to be a minister, because the Court is not being asked to order the church to do anything other than pay damages for breaching the Agreement, and for its tortious conduct surrounding that breach.

  The Court rejects plaintiff's argument. Under a Free Exercise Clause analysis, plaintiff's distinction between a claim for damages and a claim for reinstatement is irrelevant. Regardless of the relief requested, a court may not exercise jurisdiction over a case disputing the reasons why a church decided to terminate a minister. The fact that courts do not accept plaintiff's proposed distinction is reflected in decisions declining to exercise any jurisdiction over cases brought by ministers pursuant to federal anti-discrimination laws. If these courts had found it appropriate Page 13 to exercise jurisdiction over disputes to the extent that the disputes are over damages, they would have done so.

  The Court is aware that two courts have suggested that the distinction between damages and reinstatement might make a difference. See Bollard, 196 F.3d at 950 (suggesting that the scope of the ministerial exception may depend upon the remedy sought); Minker, 894 F.2d at 1360 (reversing dismissal of plaintiff's claim for breach of oral contract, stating "as the remedy would be limited to the award of money damages, we see no potential for distortion of church appointment decisions").

  The prohibition on a court resolving employment disputes between a church and its minister is founded on the principle that courts may not second-guess a church's determination of who is fit to perform religious duties. It is irrelevant whether the end result of such a court determination would be damages or reinstatement.

  The Court recognizes that this decision allows a church to contract to terminate a minister only "for cause," with the minister's only recourse for breach being an appeal to the church itself. See National Network of Episcopal Clergy Associates, amicus curiae letter-brief, dated February 5, 2002. This result is required, however, by the Free Exercise Clause.

  2. Establishment Clause

  Because the Court holds that plaintiff's suit is barred by the Free Exercise Clause, the Court need not decide whether it is also barred by the Establishment Clause. However, the Court notes that Page 14 on the facts presented in this case, it is likely that plaintiff's suit would also be barred by the Establishment Clause.

  The Establishment Clause bars courts from exercising jurisdiction in cases where resolution of the dispute would result in the "entanglement" of government with religion. See Gargano v. Diocese of Rockville Centre, 80 F.3d 87, 90 (2d Cir. 1996). Entanglement occurs when a court is called upon to resolve disputed issues of "religious doctrine and practice." Martinelli v. Bridgeport Roman Catholic Diocesan Corp., 196 F.3d 409, 431 (2d Cir. 1999) (quoting Presbyterian Church v. Hull Church, 393 U.S. 440, 449, 89 S.Ct. 601, 21 L.Ed.2d 658 (1969)).

  The Termination Letter states that certain improprieties were discovered "concerning [plaintiff's] discretionary account funds, and [her] use of the church credit card," and that in accordance with canon law she was terminated. Complaint, Exh. C. Plaintiff contends that canon law is not implicated by her termination, because her use of the Vicar's discretionary fund is governed solely by the terms of her employment contract, which permits her "at her sole discretion" to make disbursements "to further her ministry." Agreement § D. Plaintiff argues that even if her employment contract is to be read in accordance with canon law, canon law is silent with respect to expenditures from church credit cards and vicar's discretionary funds.

  The Establishment Clause would bar consideration of this suit for two reasons. First, in order to decide whether canon law applies in this suit, the Court would have to resolve the parties' Page 15 dispute about the meaning and reach of canon law. The Court entanglement with religion that this decision would require is underscored by the parties' submissions of Affidavits from experts disputing the scope and meaning of canon law. A court is barred by the Free Exercise Clause from resolving such disputes. See Martinelli, 196 F.3d at 431 ("First Amendment values are plainly jeopardized when . . . litigation is made to turn on the resolution by civil courts of controversies over religious doctrine and practice") (quoting Presbyterian Church, 393 U.S. at 449).

  Second, regardless of whether the challenged expenditures are governed by canon law or by the terms of plaintiff's employment agreement, the exercise of jurisdiction would require the Court to make determinations that are inherently religious. That is, if canon law applies to plaintiff's expenditures, resolution of this suit would require the Court to determine whether the challenged expenditures were used for "pious and charitable purposes," see Title III, Canon 14, Section 2(f) of the Canons of the General Convention, Notice of Motion, Exh. B. On the other hand, if plaintiff's expenditures are to be judged on the terms of her employment agreement, the Court would have to determine whether the funds were used in furtherance of plaintiff's ministry, see Agreement § D. In either case, the Court would be required to pass on whether the church's invocation of church doctrine and religious principles constituted sufficient cause for plaintiff's termination.

  III. Conclusion Page 16

  The Court concludes that the Free Exercise Clause bars this Court from adjudicating plaintiff's employment dispute with Grace Church, because resolution of the dispute would encroach upon the constitutionally protected relationship between a church and its ministers. Because plaintiff's claims of tortious interference with employment contract and defamation are essentially tied to whether the employment contract was breached, and whether plaintiff's use of her discretionary fund and the parish credit card were improper, the Court dismisses those claims as well.

  The Court finds that it has no jurisdiction over this matter, and dismisses plaintiff's Complaint in its entirety. The Clerk of the Court is directed to close this case. Any pending motions are moot.


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