facebook-pixel

LDS Church prevails as federal appeals court tosses out James Huntsman’s tithing lawsuit

The 9th U.S. Circuit Court of Appeals finds “no reasonable juror” would believe allegations that the faith misrepresented how it spent money on City Creek Center.

An appeals court has thrown out Utahn James Huntsman’s fraud lawsuit against The Church of Jesus Christ of Latter-day Saints over millions of dollars in tithing.

In a unanimous ruling, the 9th U.S. Circuit Court of Appeals found “no reasonable juror” could have concluded that the Utah-based faith misrepresented the source of funds it used to spend $1.4 billion on the building and development of City Creek Center, a church-owned mall and residential towers in downtown Salt Lake City.

“The church had long explained that the sources of the reserve funds included tithing funds,” according to an opinion summary issued Friday by the 9th Circuit, “and Huntsman had not presented evidence that the church did anything other than what it said it would do.”

Huntsman, while living in California, sued the church in 2021, alleging he was fraudulently misled into donating to the faith by statements from church leaders, including then-President Gordon B. Hinckley, that no tithing would be used on commercial projects.

“Although the church stated that no tithing funds would be used to fund City Creek,” the court’s majority opinion said, “it also clarified that earnings on invested reserve funds would be used.”

The California-based appellate judges agreed 11-0 that Huntsman hadn’t proved fraud under that state’s statute and that his lawsuit should be dismissed, but they split on what bearing the U.S. Constitution’s protections for religion had on the case and where courts might be forbidden from probing.

Friday’s ruling dismissing Huntsman’s case, in effect, reaffirms a lower court’s decision in September 2021 that tossed the case on summary judgment, without letting it go to trial.

It was not immediately clear Friday whether Huntsman, a brother of former Utah Gov. Jon Huntsman, would appeal the ruling to the U.S. Supreme Court, which appeared to be his only remaining legal avenue after two dismissals of his case in four years.

The 63-page set of opinions is all but sure to resonate in other tithing lawsuits pending against the worldwide faith, as well.

Reached Friday via text, James Huntsman withheld initial comment while his legal team dug into the latest decision.

“Still assessing,” he wrote.

(Chris Samuels | The Salt Lake Tribune) James Huntsman, shown in 2023, was "still assessing" Friday's court defeat.

In an emailed statement, church spokesperson Doug Andersen noted the decision was unanimous and that it reaffirmed that tithing donations “are considered sacred” and “are dedicated to advancing the church’s global religious mission.”

“We welcome this decision,” Andersen said, “inasmuch as the church has consistently affirmed that funds used for the City Creek project came from the earnings of invested reserve funds and not from donations.”

Huntsman tithing lawsuit opinion by The Salt Lake Tribune on Scribd

Huntsman, who resigned his church membership in 2020, saw his initial complaint filed in Los Angeles against the global faith get thrown out in September 2021 by U.S. District Court Judge Stephen Wilson.

A split decision by a three-judge panel of the 9th Circuit later reinstated his suit. That ruling, in turn, was vacated by the full 9th Circuit after it granted a review by the full court that produced Friday’s decision.

The 9th Circuit judges’ withering lines of questioning for lawyers representing Huntsman and the church during oral arguments last fall in San Francisco hinted at deep concerns over religious aspects of the case.

Beneficial Life bailout

In Friday’s opinions, judges took a similar view to their stance on City Creek when it came to Huntsman’s fraud assertions about the $600,000 Latter-day Saint leaders spent to bail out a church-owned insurance firm, Beneficial Life.

Huntsman, the court wrote in its main opinion, did not point to “any specific statements made by the church about the source of funds for Beneficial Life” — apart from references to “Sunday school manuals,” speeches on tithing at the faith’s biannual General Conferences and a statement from a church business executive, Keith B. McMullin, that “not one penny of tithing goes to the church’s for-profit endeavors.”

The 9th Circuit said the court record contained “no representations by the church about Beneficial Life in particular” and so “it does not support a claim of fraudulent misrepresentation” on that score.

For six of the 9th Circuit judges, their finding of a lack of merits on Huntsman’s fraud arguments was enough to reject the lawsuit. The five others added their names to two separate opinions addressing the First Amendment question.

Four of the judges, led by Judge Daniel Bress, an appointee of President Donald Trump, found that even though the entire “en banc” 9th Circuit agreed Huntsman’s claims fell short, if his case had proceeded, “a suit like this could never succeed under the First Amendment’s church autonomy doctrine.”

“There is no way, Bress wrote on behalf of concurring colleagues, “in which the plaintiff here could prevail without running headlong into basic First Amendment prohibitions on courts resolving ecclesiastical disputes.”

The appellate court’s Judge Patrick J. Bumatay, another Trump appointee, agreed as well with the overall judgment. However, Bumatay wrote separately that church autonomy barred courts — including his 9th Circuit colleagues — altogether from interfering in matters of religious thought, halting them short of even an initial parsing of Huntsman’s fraud assertions.

“My colleagues believe that we have a choice on how to resolve this case,” Bumatay wrote his separate opinion. “The Constitution gives us no such choice.”

“Simply put,” the judge continued, “the church autonomy doctrine bars federal courts from resolving matters of faith, doctrine, and church governance. So we can’t just sidestep the doctrine and jump straight to the merits.”

Putting faith ‘on trial’?

For Huntsman’s lawsuit to prevail, Bumatay wrote, a court or jury would need to agree with his view of tithing. “That,” the judge wrote, “would intrude on the church’s authority to define that divine concept for itself.”

“How could this lawsuit proceed further,” he wrote, “without putting The Church of Jesus Christ of Latter-day Saints on trial for its own beliefs?”

Latter-day Saint Sam Brunson, a tax law professor at Loyola University Chicago, said he was unsurprised by the judges’ ruling.

“It was clear from oral arguments that the church was going to win,” Brunson wrote in an email. “The big question was: Would they rule that there had been no misrepresentation or that the First Amendment prohibited the suit altogether.”

Ultimately, 10 of the 11 found no fraud, the scholar noted, and the 11th said the Constitution precluded even delving into that question.

The church’s legal campaign against Huntsman’s case had relied heavily on arguments the First Amendment’s protections of religion and the church autonomy doctrine barred the courts from probing into the faith’s financial decisions or parsing any religious views held either by Huntsman or church leaders.

Tithing vs. earnings from tithing

Church lawyers had also argued that financial evidence offered before the lower court’s Judge Wilson made clear that investment earnings from tithing reserves — not tithing itself — had been used on City Creek Center and Beneficial Life.

In an April 2003 General Conference address, 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.”

(The Salt Lake Tribune) President President Gordon B. Hinckley speaks at General Conference in April 2003.

The 9th Circuit ruling found that church leaders’ references to the use of “earnings on invested reserve funds” as opposed to actual tithing were “not so ambiguous that the church could have expected or intended its relevant audience — here, Huntsman — to misunderstand what it meant.”

Huntsman comes from a prominent Latter-day Saint family, the court said, and has extensive business experience “so was presumably familiar with investment concepts.”

Andersen, the church spokesperson, said the decision “vindicates” what Hinckley said and is a “confirmation of constitutional rights afforded to religions in the United States.”

Effects on other tithing cases

Friday’s ruling will assuredly resonate in another fraud lawsuit against the church over tithing, currently underway in U.S. District Court in Utah.

Nine plaintiffs from six states are suing the church in a case springing from an IRS whistleblower’s 2019 allegations that the church’s investment arm, Ensign Peak Advisors, amassed a $100 billion-plus portfolio built from tithing while not spending a penny of it on the faith’s religious or charitable efforts.

Huntsman shaped his case around those allegations as well, including a sworn affidavit from whistleblower David Nielsen, a former portfolio manager for Salt Lake City-based Ensign Peak, in which he testified that top handlers of the faith’s reserve funds referred to “every penny” — whether it came from principal or earnings — as tithing.

Also like Huntsman’s case, the would-be class-action lawsuit turns similarly on questions of whether the alleged fraud can be viewed as purely secular or whether it instead might illegally entangle religion from the get-go.

The proposed class-action lawsuit also cites a 2023 settlement with the U.S. Securities and Exchange Commission that levied $4 million in penalties against Ensign Peak and $1 million against the church for failing to properly disclose past stock holdings and going to “great lengths,” regulators said, to deliberately “obscure” the size and scale of its investment portfolio.

After hearing oral arguments earlier this month, presiding Judge Robert J. Shelby is preparing to rule on a motion from the church to dismiss the case.

Yet another tithing fraud case, filed before Shelby in early 2019 by plaintiff Laura Gaddy and others, remains on appeal before the 10th U.S. Circuit Court of Appeals in Denver.


RELATED STORIES