Another would-be class-action lawsuit against The Church of Jesus Christ of Latter-day Saints alleging fraud over the practice of tithing has been rejected by the courts.
A panel of the 10th U.S. Circuit Court of Appeals ruled Tuesday that wide-ranging fraud and racketeering allegations brought by former Latter-day Saints Laura Gaddy and two co-plaintiffs in 2019 were barred under the church autonomy doctrine, which precludes courts from probing into matters of faith.
Tuesday’s decision marks the third high-profile lawsuit involving tithing to the Utah-based faith to be dismissed by U.S. courts this year.
The Denver-based appeals court wrote Tuesday that examining Gaddy’s assertions that church leaders solicited donations through misrepresenting the faith’s history — including how the Book of Mormon was translated and the visions of church founder Joseph Smith — “improperly requires adjudication of ecclesiastical questions, namely, the truth or falsity of religious belief.”
After having most of their case dismissed by a federal court in Utah, Gaddy and fellow plaintiffs had pressed their remaining arguments on appeal under the Racketeer Influenced and Corrupt Organizations Act, or RICO, accusing the church of mail and wire fraud in communicating what the plaintiffs contend are false teachings that misled them into paying tithing.
Another issue Gaddy raised on appeal — as to how sincerely church leaders themselves believed some of their own teachings — was also turned aside in Tuesday’s 36-page ruling. Judges said the plaintiffs had failed to adequately link their own personal assertions of legal injury with alleged misstatements by church leaders about how money from tithing would be used.
Ultimately, the three-judge panel ruled, Gaddy and the co-plaintiffs want to hold the church liable for teaching core beliefs that don’t line up with what they believe to be the historical truths of the faith.
But the alleged misconduct by church leaders, the court wrote, “is religiously rooted, relating to core issues of faith.”
Invoking language in a prior ruling dismissing the case, the judges wrote that a court “can no more determine whether Joseph Smith ... translated with God’s help gold plates ... than it can opine whether Jesus Christ walked on water or Muhammad communed with the archangel Gabriel.”
“We must decline the plaintiffs’ invitation to ‘enter [the] forbidden domain’ of assessing the ‘truth or falsity’ of religious beliefs and doctrine.”
‘Expansion’ of church autonomy
The church said Tuesday’s ruling “confirms what courts have long said — that disputes over religious doctrine and history cannot be resolved in secular courts."
“It also rejects the plaintiffs’ attempt to use federal law to attack the church’s use of tithing funds,” church spokesperson Sam Penrod said in a statement. “All tithing donations to The Church of Jesus Christ of Latter-day Saints are considered sacred funds. Tithing funds and earnings on invested reserves are dedicated to building the church and fulfilling its divine mission around the world.”
Penrod also voiced gratitude to several other faiths and advocacy groups that weighed in with friend-of-the-court briefs backing the church’s stance.
Salt Lake City-based attorney Kay Burningham, representing Gaddy and co-plaintiffs Lyle Small and Leanne Harris, said she would petition the U.S. Supreme Court for what’s called a writ of certiorari, though she acknowledged the remote chance that the justices would grant it and take up the case.
“The essence of the Gaddy case alleged that the LDS Church misrepresented its history,” Burningham said. “We are disappointed that the 10th Circuit Court of Appeals has interpreted the ‘church autonomy doctrine’ as an affirmative defense to fraud, that is, misrepresentations of fact.
“Historically,” she said, “the First Amendment — from which the church autonomy doctrine derives — only protects sincerely held religious beliefs."
At oral arguments before the 10th Circuit in September 2024, Burningham focused on alleged deceptions by church leaders in the form of conflicting accounts over the Book of Mormon being translated by founding prophet Smith from gold plates — or through visions from a brown “seer stone” in a hat.
Those and similar “material omissions,” Burningham argued, were integral to proving fraud under federal racketeering laws — without implicating issues of faith.
“Facts,” Burningham said at the time, “are different than beliefs.”
But in Tuesday’s ruling, judges at the 10th Circuit disagreed, saying that the dispute about the essential accuracy of the church’s representations “is ecclesiastical, not ‘purely secular.’”
“When it comes to religious claims about historical events,” they wrote, “‘facts’ and ‘beliefs’ are inextricably intertwined.”
Third tithing case tossed out
Tuesday’s ruling is likely to mark a key turning point in legal pursuits since 2019 by former and active Latter-day Saints to address legal questions about church finances and transparency.
Gaddy, et. al. v. Corporation of The Church of Jesus Christ of Latter-day Saints by The Salt Lake Tribune
It was almost six years ago now that explosive leaks from an IRS whistleblower first brought to light the church’s $100 billion-plus investment portfolio, held by its investment arm, Ensign Peak Advisors, revelations that have motivated, at least in part, these legal actions.
In January, judges with 9th U.S. Circuit Court of Appeals, based in San Francisco, rejected a similar and highly publicized case brought by Utahn James Huntsman over millions of dollars of his own tithing.
In that unanimous ruling, that court found “no reasonable juror” could have concluded — as Huntsman alleged — that the church misrepresented the source of funds it used to spend $1.4 billion on the development of City Creek Center, a church-owned mall and residential complex in downtown Salt Lake City.
“The church had long explained that the sources of the reserve funds included tithing funds,” according to the 9th Circuit, “and Huntsman had not presented evidence that the church did anything other than what it said it would do.”
All but one of those judges, however, stopped short of invoking the church autonomy doctrine as a legal wall to proceeding, with only the appellate court’s Judge Patrick J. Bumatay writing a dissent saying that church autonomy barred even an initial look at Huntsman’s fraud assertions.
Another brewing class-action lawsuit that had bubbled up in U.S. District Court, combining separate cases from nine plaintiffs in six states, was thrown out in April by a federal judge in Utah, who ruled the case was incompletely argued and filed too late.
In that case, Judge Robert Shelby wrote that judicial canon required him to focus on “nonconstitutional failures” in the would-be class-action suit — before approaching any hard-fought questions involving the law and how the church governs its financial affairs.
That case was dismissed with prejudice — as with Huntsman’s case — meaning that neither can be refiled.
At the time, Penrod, the church spokesperson, praised Shelby’s decision, saying “the legal claims brought against the church were rightfully dismissed by the court.”
“Tithing donations made by members of The Church of Jesus Christ of Latter-day Saints are an expression of faith and allow the church to fulfill its divine mission,” he said in a statement. “These donations are carefully used and wisely managed, under the direction of senior church leaders.”
But an attorney for the plaintiffs at the time called Shelby’s decision a blow to transparency owed to millions of Latter-day Saints who have tithed to the church through the decades.