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
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
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
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."
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.
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.
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 ¶
On June 6, 2001, at a meeting between Grein and plaintiff, Grein
acknowledged that plaintiff had not used improperly any of
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