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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 ...

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