In setback for LDS Church, appeals court reinstates James Huntsman’s tithing lawsuit

Utahn James Huntsman has been given another chance to press his fraud case against The Church of Jesus Christ of Latter-day Saints over its spending on the City Creek Center shopping mall in downtown Salt Lake City.

In a major setback for the Utah-based faith, a three-judge panel of the 9th U.S. Circuit Court of Appeals ruled 2-1 on Monday that a lower court judge erred by summarily tossing out Huntsman’s lawsuit, which alleges he was misled by church leaders and seeks to recover millions in tithing donated to the church.

The California-based appellate court’s split opinion found that a genuine dispute over facts and the meaning of official statements by top church leaders remained when U.S. District Court Judge Stephen Wilson incorrectly granted summary judgment in September 2021 and dismissed Huntsman’s case.

The opinion also rejected church arguments that Huntsman’s fraud lawsuit was barred by the First Amendment and its constitutional protections of religion. Those did not apply here, the panel decided, “because the questions regarding the fraud claims were secular and did not implicate religious beliefs about tithing itself.”

[Read the 9th U.S. Circuit Court of Appeals’ 2-1 opinion.]

Based on evidence offered in Wilson’s Los Angeles courtroom, two of the three appellate judges found “a reasonable juror” could conclude that Latter-day Saint leaders misrepresented how tithing was being used with regard to the City Creek development.

In faith’s April 2003 General Conference, then-President Gordon B. Hinckley insisted that tithing funds “have not and will not be used” for the shopping center, stating that the money came from “commercial entities owned by the church” and the “earnings of invested reserve funds.”

Two of the three judges ruled Monday that Hinckley’s statements were not entirely clear and still could have misled Huntsman — a key element in proving fraud.

All three appellate judges, however, agreed that was not the case with similar accusations Huntsman made about church spending on a church-owned insurance company, Salt Lake City-based Beneficial Life, which they did not uphold.

“There is no statement in the record by any church official,” they wrote, “denying that tithing funds — either tithing principal or earnings on tithing principal — would be or were used to finance the bail out of Beneficial Life.”

What the ruling does

The split ruling effectively sends the case back to U.S. District Court for further discovery of evidence and a potential trial.

In a brief interview shortly after the opinion was published, James Huntsman said he was “very grateful that the court has granted my appeal” and called it “an amazing victory, especially when you think a year and a half ago we were thrown out of court.”

“We have always believed,” he added, “we should argue these facts in front of a jury.”

The church noted in a short statement that only part of the case was being sent back to the trial court “for further handling.”

”As we have previously stated, there was no fraud,” church spokesperson Sam Penrod said. “The church did exactly what President Gordon B. Hinckley said when it invested earnings on reserve funds in the City Creek project. The church looks forward to defending these facts in the next phase of the legal process.”

Penrod did not address whether the church would appeal Monday’s ruling to the full 9th Circuit.

The church’s legal argument throughout the case has been that no actual tithing was used in either $1.4 billion of spending on City Creek or $600,000 spent to rescue Beneficial Life — but that instead, the church used earnings from invested tithing funds kept in reserve.

Yet 9th Circuit Judges Kim McLane Wardlaw and William A. Fletcher agreed in the 41-page opinion that “a reasonable juror could conclude that the church knowingly misrepresented that no tithing funds were being or would be used to finance the shopping mall development and that Huntsman reasonably relied on the church’s misrepresentations.”

The opinion points to five statements from church leaders included in the court record, including Hinckley’s statement from the General Conference pulpit.

When is tithing not tithing?

Evidence suggests, the judges found, that the term “tithing” was in common usage among church officials to refer both to tithing funds and to earnings from tithing — despite church assertions that Hinckley distinguished between the two in statements later submitted to the court as evidence.

“A reasonable juror could conclude that President Hinckley intended his audience to understand, when he said that no ‘tithing funds’ would be used to fund the City Creek Mall project, that neither tithing funds principal nor earnings on tithing principal would be used,” Fletcher wrote in the court’s majority opinion.

A third appellate judge, Edward R. Korman, dissented from the finding, saying statements by Hinckley clearly distinguished between tithing and earnings from investments of the church’s reserve funds that were used on City Creek.

“A reasonable juror,” Korman wrote in his dissent, “could therefore not find that Hinckley made ‘a knowingly false representation of fact.’”

The majority decision points to a declaration from David Nielsen, a former manager at Ensign Peak Advisors, the church’s investment arm, to the effect that its senior leaders all referred to money invested by the firm “as ‘tithing’ money, regardless of whether they were referring to principal or earnings.”

The court also turned aside a request from church lawyers to seal portions of the opinion dealing with aspects of its business and finances, saying there were “no compelling reasons” to do so.

The estimated $1.4 billion the church spent on City Creek, the court said, had already been revealed elsewhere publicly. Nor, the judges said, was release of the information precluded by the First Amendment, as the church has argued.

”If this were a fraud case brought against a secular institution,” the opinion said, “there is nothing about the expenditure that would warrant protection.”

In a short statement after the ruling, a Los Angeles-based lawyer for Huntsman, David Jonelis, said “we’re pleased with the 9th Circuit’s decision and we look forward to moving forward with the case in the district court.”

Huntsman, son of the late Utah industrialist-philanthropist Jon Huntsman Sr., had initially sought to recover at least $5 million in his own tithing, interest and penalties in a suit filed in March 2021 — after failed attempts to settle out of court.

James Huntsman resigned his church membership in 2020.

Editor’s note • James Huntsman is a brother of Paul Huntsman, chair of the nonprofit Salt Lake Tribune’s board of directors.