More surprises may be in store in James Huntsman’s fraud lawsuit against the LDS Church

This is one resurrection surely unwelcome by leaders of The Church of Jesus Christ of Latter-day Saints.

However surprising Monday’s ruling by the 9th U.S. Circuit Court of Appeals to breathe new life into a once-rejected lawsuit alleging fraud by top church elders over their spending of wealth built from members’ tithing, more surprises are probably coming.

It could mean a protracted legal battle or a trial, one likely to touch on topics the faith considers deeply sensitive, including tithing and its finances. High-level church leaders could be called to testify. The case could even probe the bounds of long-standing constitutional doctrines protecting religion from legal intrusion and scrutiny.

Monday’s decision by a three-judge panel of the California-based appellate court revives a federal case tossed out of court six months after it was first filed in March 2021 by prominent Utahn and former Latter-day Saint James Huntsman.

Huntsman, brother of ex-Utah Gov. Jon Huntsman Jr. and son of the late Utah billionaire philanthropist Jon Huntsman Sr., had sued the Salt Lake City-based faith to recover millions of his own donations, alleging he was misled by statements from church leaders and gave a tenth of his income under false pretenses that the sacred funds were used only for church operations and charity.

That is, until the high-profile legal action got thrown out of U.S. District Court in September 2021 in a fast-track move known as summary judgment.

The gist of this latest opinion restarting the case is this: According to two of the three appellate judges and based on the evidence presented so far, a “reasonable juror” could conclude that Latter-day Saint leaders — and in particular, then-President Gordon B. Hinckley — misrepresented how $1.4 billion in church dollars was used to build the City Creek Center shopping mall in downtown Salt Lake City.

Interviews and a deeper look at Monday’s 41-page ruling — including a testy dissenting opinion from one of the judges, New York-based Edward Korman — reveal other key details on where the clash is headed:

What are the next steps?

Streamlined to its more basic elements, Huntsman’s case now goes from dead to marching back in reshaped form to Judge Stephen V. Wilson’s Los Angeles courtroom, where it left off — barring an appeal by church lawyers to the full 9th Circuit.

A Latter-day Saint legal analyst with an outsider’s eye on church affairs believes that’s a likely move, given what could come after that — discovery of more evidence by both sides in advance of a trial.

“The church would be able to ask Huntsman for information,” said Sam Brunson, a tax law professor at Loyola University Chicago, “but Huntsman would also ask the church about financial stuff that the church is recalcitrant to share.

“But if the en banc review [by the full court] is successful,” Brunson added, “then there is no discovery. So I’d be really surprised for that practical reason if they didn’t seek review. They’re already paying the attorneys.”

A church spokesperson declined to say if Monday’s ruling would be appealed, but in a short statement he noted 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.”

There also remains a chance the case could be settled out of court at some point as it proceeds. The court record so far shows ample evidence that Huntsman and lawyers for the church sought to work out their disputes before the initial lawsuit was launched.

Other ways legal action will be different this time

Korman, in his dissent, agreed with the lower court that no reasonable juror — and especially Huntsman, with his “sophistication and substantial familiarity with the church” — could conclude that Hinckley “intended to make a knowingly false representation” when speaking to a General Conference audience about tithing and the mall in 2003.

“I wish to give the entire church the assurance that tithing funds have not and will not be used to acquire this [mall] property. Nor will they be used in developing it for commercial purposes,” the church prophet-president declared. “Funds for this have come and will come from those commercial entities owned by the church. These resources, together with the earnings of invested reserve funds, will accommodate this program.”

Hinckley’s statements through the years, combined with financial records already submitted in the case, Korman wrote, make “clear that Hinckley’s 2003 statement was truthful and not a misrepresentation.”

While Korman and his panel colleagues, Judges Kim McLane Wardlaw and William A. Fletcher, disagreed on reinstating the main heart of Huntsman’s case regarding City Creek, they agreed on many other points.

They upheld Wilson’s decision to wipe away another major strand in Huntsman’s lawsuit: church spending from its tithing-related reserves on another commercial venture, Beneficial Life, a church-owned insurance company.

The opinion notes that there’s no evidence of misleading statements by church leaders on how a $600,000 bailout of that company from church coffers would be paid for, defanging Huntsman’s fraud assertions on that point.

The panel also turned aside requests from the church to seal financial details in the opinion, despite the faith’s warnings they were “confidential and competitively sensitive,” potentially damaging if released, and that Huntsman wanted to make them public “for improper purposes.”

The appellate court concluded that little financial information was actually being revealed that wasn’t already public about the church’s spending on City Creek, the luxury shopping and residential center next to historic Temple Square.

The ‘perplexing’ idea of why this all started in California

Korman, in his dissent, questioned why Huntsman’s lawsuit was filed in the Golden State, given that the Utah native moved there in October 2020 and filed his case “less than five months later.” The church, the judge continued, is a corporation organized and operating under Utah law.

“Why California law applies in this case,” Korman wrote, “is perplexing.”

Huntsman made tithing donations in at least three states before he stopped giving in 2015 and resigned his membership in 2020, according to court records.

One of those states was California, where property records show Huntsman, founder and owner of a film distribution firm in Los Angeles, has kept homes in Beverly Hills and the Southern California resort community of Coronado.

So Huntsman was within his legal rights to choose California among several viable court venues for filing the lawsuit. And in legal strategizing before initiating his case, advisers reportedly told him that juries in California were viewed as more liberal, as are judges on the 9th Circuit Court of Appeals.

If that was the logic, it appears to have worked.

Huntsman has declined to comment about specific legal aspects of his suit but has confirmed that in recent months he moved back to Utah.

Dispute will probably focus more now on what Hinckley said

Instead of addressing five separate statements from church leaders included in Huntsman’s suit denying the use of tithing in subsidizing the mall, the focus from here on is likely to center on Hinckley’s statements alone, ones made from the pulpit in 2003 in combination with prior remarks offered on church finances in priesthood meetings, in 1991 and 1995.

While statements from other church leaders mentioned in Huntsman’s lawsuit also said no tithing would be used, those were “unqualified,” the judges wrote. “Only President Hinckley’s 2003 statement was arguably hedged.”

The court opinion highlights remarks by the late church president that such funds “have not and will not be used” for the shopping center but also stating that the money instead came from “commercial entities owned by the church” and the “earnings of invested reserve funds.”

It’s those latter statements that two of the three judges ruled were rooted in “opaque language” that still could have misled Huntsman or others in the audience about where the cash emanated.

“President Hinckley,” the opinion states, “nowhere explained that, as he was using the terms, ‘reserve funds’ were ‘tithing funds.’”

Sliver of new information on church finances reveals billions

Though only a few new financial numbers were released against church wishes, they are all big-dollar items, to be sure.

The church’s investment arm, Ensign Peak Advisors, transferred $1.2 billion to another account in 2004 set aside for City Creek, according to the opinion, followed by additional smaller amounts in 2007 and 2009.

As of 2007, money set aside for the mall grew to $1.68 billion. The judges concluded the church, whose wealth has drawn increasing scrutiny, ultimately spent $1.438 billion to develop City Creek.

City Creek debuted in 2012, a massive construction project that helped Utah weather the dire economic storms of the Great Recession.

Are more fights coming over the First Amendment?

Perhaps as important as reviving the case and rejecting the church’s requests for financial confidentiality, the ruling reaffirmed Wilson’s decision that as a religious institution, the global faith of 17 million members is not protected under the First Amendment from a civil fraud suit.

The “church autonomy doctrine” — which bars courts from getting involved in deciding matters of faith — does not apply in this case.

“We are not required to rely on or interpret the church’s religious teachings to determine if it misrepresented how it was using tithing funds,” the judges wrote. “Nor are we required to examine Huntsman’s religious beliefs about the appropriate use of church money.”

Their ruling pointed to another similar case filed in Utah, known as Gaddy, in which former Latter-day Saints brought a civil racketeering claim contending the church’s statements about tithing were false and seeking their money back.

In that suit, filed in 2019, federal Judge Robert Shelby eventually ruled fraud accusations in the case weren’t barred by the First Amendment because they don’t “implicate religious beliefs about tithing itself.”

Similarly, the appellate justices wrote in the Huntsman opinion, questions in that case also “are secular” and can be answered by a court or jury based solely on nonreligious evidence and analysis, without probing into questions of faith or belief.

The ruling is official federal case law. What does that mean?

The latest opinion, including Korman’s dissent, was marked by the judges for official publication, meaning it enters official case law in the federal system and can be cited in other legal matters.

That doesn’t mean the ruling is legally binding on other courts, including Utah’s 10th Circuit, according to Kay Burningham, a Salt Lake City attorney representing plaintiffs in the Gaddy lawsuit.

But it does mean, Burningham added, “the opinion is arguably persuasive as far as it goes.”

As far as Huntsman is concerned, its official publication is a sign of victory. “A year and a half ago, we were thrown out of court,” he said in a brief interview after the opinion was issued, “and now it’s case law.”

Editor’s note • This story is available to Salt Lake Tribune subscribers only. Thank you for supporting local journalism. Also, James Huntsman is a brother of Paul Huntsman, chair of the nonprofit Tribune’s board of directors.