Federal Judge Returns South Carolina Case to State Court

In a thoroughly researched and well-reasoned opinion released today, Senior District Judge C. Weston Houck of the United States District Court for the District of South Carolina, Charleston Division, ordered that the trademark infringement and declaratory relief action -- originally brought in State court by Bishop Mark Lawrence's Diocese and its parishes, but "removed" to federal court by the Episcopal Church in South Carolina -- be returned to State court for further adjudication. Judge Houck's order finds that there is no basis upon which any federal court could assert original jurisdiction over the claims asserted in the Lawrence complaint.

The order is a veritable model of how to proceed in analyzing and dissecting opposing arguments, and then applying the law to the facts so discerned. Judge Houck begins by describing the parties to the dispute: the plaintiff Episcopal Diocese of South Carolina, a non-profit religious corporation organized under South Carolina law in 1973; the plaintiff Trustees, also a non-profit corporation organized under South Carolina law in 1902 for the purpose of holding title to real property of the Diocese; and the thirty-five plaintiff parishes, each of which is a separate religious corporation under South Carolina law.

The defendants -- the ones who removed the suit to federal court -- are the Episcopal Church in South Carolina, an unincorporated association formed in 2013 out of the remnant parishes and congregations who wished to remain affiliated with the Episcopal Church (USA); and ECUSA (TEC) itself, an unincorporated association of member dioceses which is headquartered in New York. (Note that Judge Houck observes in his footnote number #2 that ECUSA is "hierarchical", as found in the case of Dixon v. Edwards, 290 F.3d 699, 716 (4th Cir. 2002).

Judge Houck is bound by that decision, delivered by the federal Circuit Court of Appeals to which his own court is subject. But the remark is irrelevant, because (1) Dixon v. Edwards involved a dispute between a bishop and a member of the clergy, not a dispute between a diocese and the national Church; (2) the case is being remanded to South Carolina State court, where the judges will follow the "neutral principles of law" approach adopted by the South Carolina Supreme Court in All Saints Waccamaw Parish v. Protestant Episcopal Church, 685 S.E.2d 163, 171 (S.C. 2009), under which the nature of the polity of ECUSA is irrelevant; and (3) Judge Houck himself recognizes in his own opinion that South Carolina courts are free so to proceed under the law as declared in Jones v. Wolf, 443 U.S. 595, 602 (1979). The Dixon case is not binding upon the South Carolina State courts, as it is upon Judge Houck; the State courts are bound by the decision of their own Supreme Court -- i.e., by All Saints Waccamaw. 

Having described the parties, Judge Houck then sets out the principal points in dispute between them, by citing to their own pleadings. The plaintiffs sought relief under State trademark law against the use by the defendants of the name "Episcopal Diocese of South Carolina", as well as declaratory relief that the Diocese and each of its parishes owned their respective properties free and clear of any claims by ECUSA.

The defendants counterclaimed that the plaintiff Diocese had no right to withdraw from ECUSA; that the national Church had made an "ecclesiastical determination" that its withdrawal was null and void, which determination was binding upon all civil courts; and that as a consequence of their taking part in the withdrawal, each of the persons holding office in the plaintiff diocese and parishes had forfeited their positions, which the remnant group, and only it, had the right to fill.

The defendants asserted that their claims depended on the "free exercise" clause of the First Amendment, which bars the civil courts from interfering with matters of ecclesiastical discipline, structure and polity, and so should be heard in federal court. More specifically, they argued that the plaintiffs' own complaint inevitably raised these First Amendment issues, so that it could have been brought originally in federal court.

In the next section of his order, Judge Houck sets out the law that is applicable to these various claims and assertions ("Standard of Review"). Citing another 4th Circuit case which is binding upon him, Judge Houck writes: "Thus, '[i]f a plaintiff can establish, without the resolution of an issue of federal law, all of the essential elements of his state law claim, then the claim does not necessarily depend on a question of federal law." To determine this question, the U.S. Supreme Court requires a federal court to which a state-law case has been removed to analyze whether or not the federal claim involved is "substantial", or is merely an incident to the dispute:

Under the substantial federal question doctrine, "federal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress." ... If the defendant fails to demonstrate all four of these elements, removal is improper under this doctrine.

Now Judge Houck turns to a detailed analysis of the defendants' arguments to see how they fare under each of the four prongs of this test. He preliminarily disposes of the defendants' claims concerning the Lanham (federal trademark) Act, and observes that the plaintiffs had the absolute right to base their complaint upon State trademark law only. Thus the fact that there may be federal-law claims assertable in addition to the state-law ones pled in the complaint is irrelevant to the analysis.

And in a few thoroughly researched and well-written pages, Judge Houck now demonstrates how insubstantial are the defendants' federal-law arguments. He takes each of the four prongs one by one, and shows how the defendants' arguments fail to satisfy any of them. ((That is why Judge Houck's order would almost certainly be upheld if defendants were able to appeal from it (see below). Failing four out of four grounds of the test does not even make this a close case.)

In the end, Judge Houck says, defendants' arguments do turn upon the First Amendment, but only insofar as the First Amendment acts as a limitation upon the State courts. The First Amendment, in and of itself, does not enable any federal lawsuits based on the plaintiffs' or the defendants' allegations; no violations of its precepts have been alleged. Instead, the defendants were trying to use the First Amendment as a defense to advance their own cause, but that is not what creates federal-question jurisdiction in the federal courts:

ECSC relies on the First Amendment as a basis of its defense. In essence, ECSC claims the First Amendment prohibits a civil court from considering the underlying issue because it is purely ecclesiastical in nature. Similarly, in Burcaw v. Allegheny Wesleyan Methodist Connection, the defendants removed an action seeking a declaratory judgment regarding the control and disposition of church property. ... The defendants claimed the complaint raised purely ecclesiastical issues and, pursuant to the First Amendment, the court could not interfere in the dispute. ... Judge Gaughan of the Northern District of Ohio found the defendants' First Amendment argument "tantamount to a defense to the action." Id. The court held that it lacked jurisdiction because the "plaintiffs' complaint [did] not rest on any federal or constitutional claim ...." Id. Thus, the action was remanded.  

In the present action, the defendant's First Amendment argument is similarly "tantamount to a defense." The First Amendment was not pled in the complaint nor was it addressed in the answers or counterclaims. The First Amendment was initially raised in ECSC's notice of removal as an anticipatory dispute between the parties. ... Thus, the Court lacks jurisdiction over this matter.

This is the way that all court decisions should proceed: describe the facts and the respective claims, state the applicable law, and then follow that law and apply it to the facts of the case. Based on just my cursory review of Judge Houck's order, I would venture to say that it is impeccable, and not likely at all to be overturned by any higher court. (Besides, a federal statute provides that decisions to remand are not subject to appellate review. The Supreme Court has recognized a limited exception to that statute, but it would not apply to Judge Houck's decision.)

So where does that leave the defendants? Back in State court, where there is already an injunction entered against them. Look for them now to bring a motion to try to lift that injunction, by raising all the First Amendment defenses they tried out before Judge Houck.

But once again, any judge may turn to what Judge Houck has already noted about the status of those arguments in the South Carolina state courts:

The United States Supreme Court has expressly approved two methods for these types of disputes, and has granted the states the power to choose the method it will apply. All Saints Parish, 685 S.E.2d at 171. The First Amendment provides guidance for methods of constitutionally consistent legal application, not a basis for a direct claim or a direct cause of action arising under federal law. ...  

ECSC argues that whether the First Amendment permits the plaintiffs "to employ the power ofthe judiciary to abnegate the determinations of Church authorities on matters of Church governance and doctrine" is "a matter of immeasurable importance [n]ot merely to millions of Episcopalians across the country but to the free exercise of religion in general."  

... The United States Supreme Court in Jones, 443 U.S. 595, and Milivojevich, 426 U.S. 696, has defined approaches that state courts may apply in determining religious disputes without violating the First Amendment. The argument that it is substantial to the federal system is undone by the United States Supreme Court yielding the right to choose an approved approach to church dispute resolution to the states. Courts have interpreted the First Amendment to serve as a safeguard or a limitation on a civil court's authority, to ensure the "free exercise of religion" is not violated by undue consideration of ecclesiastical matters. Therefore, the issue raised by ECSC is inapplicable as the "serious federal interests" have already been addressed by state and federal systems.

Or, in other words: not even a "hierarchical" Church may require a State to refrain from using the "neutral principles of law" approach, and to defer to it on every point just because of its "hierarchical" nature. The First Amendment may limit how far civil courts may go into questions involving ecclesiastical discipline and polity, but where they are able to proceed by using the same principles of civil law that apply to every other party in a property dispute, the United States Supreme Court has given State courts its blessing in so proceeding to decide church property cases, as well.

Look for Judge Houck shortly to enter another order holding Bishop vonRosenberg's individual Lanham Act case against Bishop Lawrence in abeyance, pending the outcome of the lawsuit in the State courts.  It will take a few weeks for the federal court to return the files to the Circuit Court of Dorchester County. But as soon as that court has them, it can proceed to resolve the matter under the "neutral principles" approach laid down in the All Saints Waccamaw case.

Remnant Quincy Group to Be Absorbed by Diocese of Chicago

At dual conventions held today in Chicago and Peoria, the Episcopal Diocese of Chicago and the remnant Episcopalians in Quincy (who called themselves a "diocese" for purposes of the ongoing litigation over whether the actual Diocese of Quincy could leave the Episcopal Church [USA]) have voted to combine into a single Diocese of Chicago. The actual merger will not take place until General Convention meets, probably two years from now, to approve it pursuant to Article V of the Constitution.

(Curmudgeon's Note: See what a wonderful "hierarchy" ECUSA claims to be! It is supposedly "governed and ruled" by a body which meets together once every three years for just 8 days, and then dissolves -- never to assemble again. Eight days out of 365 x 3 = 1,095 days (1,096 if one year is a leap year), or less than 1% of the time (to be exact, 0.73%). It's rather like Scotland saying it was "governed" by the village of Brigadoon.)

[UPDATE 06/08/2013: Since my writing the above, The Living Church has put up an article which references a "background document" given to the deputies at the convention of the Diocese of Chicago.   And according to that document, the merger will not have to wait for General Convention's next session in 2015. Instead, it asserts that a majority of the diocesan bishops and standing committees can give their assent to the union, and that is all the approval that will be necessary.

Needless to say, I was surprised by this claim that Canon I.10.6 (which allows for such an approval) would apply to this situation. That Canon speaks of a reunion of dioceses that were previously a single entity, but which had split apart, and now wanted to come together again. Article V of the Constitution (linked above) covers the case of the joining of two existing dioceses to make a single one -- and a provision of the Constitution trumps a provision in the Canons.

Upon further reflection, however, I realized that applying the Canon rather than the Constitution is just par for ECUSA's course. For the ongoing Quincy litigation, ECUSA must maintain the fiction that its current Potemkin diocese is the same entity whose disgruntled and unenlightened deputies voted overwhelmingly but illegally to amend their governing documents so as no longer to be a part of ECUSA. In 815's view -- as advanced at the recent trial -- those votes were invalid, and hence cannot be recognized as separating the diocese from the Church. (Never mind that ECUSA admitted at the trial that there is no language in its Constitution or Canons which renders the votes invalid; it's just that ECUSA has "determined" ex post facto that they were -- don't you see?)

Therefore (in 815's view), the "Diocese of Quincy" never left; it just had to be "reorganized" from the ground up, with a new bishop and a new standing committee. And so when that "continuing" entity votes to recombine with the Diocese of Chicago, it really is a "reunion" of two dioceses that were formerly one.

Except that when they were both "one" diocese -- to accept their premise for the sake of the argument -- that single diocese also consisted of what is now the Diocese of Springfield. In other words, there was never a time when just the now Diocese of Chicago and the "Diocese of Quincy" were one and the same diocese -- even under their convenient manipulation of the facts for litigation purposes.

But awareness of that defect in their little scheme to rejoin will never hinder or delay the process for a single second. Nevertheless, this is such an important objection to make to yet another of 815's decisions to let the needs of current litigation trump everything else that defines the Church -- whether it be its Constitution, or Canons, or the Book of Common Prayer, or Holy Eucharist -- that it is worthy of a separate post. So stay tuned.]

* * *

The fate of the Potemkin "Diocese of Quincy" foreshadows what will probably happen to all of the other Potemkin villages currently being propped up by the coffers of ECUSA, except for Pittsburgh and possibly Fort Worth (depending on how the Texas Supreme Court rules -- any day now, by the way). The remnant Episcopalians in San Joaquin, Quincy and South Carolina are currently each governed by a part-time, provisional bishop, previously retired ("resigned"), who spends only a fraction of his time visiting the parishes and handling administrative matters.

The oldest such group is in the geographical area of the former Diocese of San Joaquin, spread over fourteen California counties in the southern Central Valley. The Presiding Bishop called its initial convention in April 2008 so that it could immediately file a lawsuit against Bishop Schofield (but not naming his Anglican Diocese -- remember, ECUSA cannot recognize the right of a diocese to withdraw, without forfeiting its claims to the withdrawing diocese's property and bank accounts).

After five years, the group's lawsuit against Bishop Schofield has yet to go to trial, while it has accepted loans and subsidies from ECUSA amounting to about $1.5 million thus far. Meanwhile, its ASA dropped since 2001 by nearly 80%, and has remained flat at just 943 for 2010 and 2011. Worse still, its number of baptized members is declining steadily also, so that there are fewer and fewer replacements to fill the pews.

With an annual budget in which legal expenses must dwarf all other items, San Joaquin has no resources from which to repay its loans from the national Church, and if it does not prevail in its lawsuit, 815 will have to write off what it is owed. Its average pledge was just under $200 per month in 2011, and it had only 628 pledging units.

The situation in Quincy after that Diocese withdrew in 2008 is even more tenuous, because Quincy was never a large diocese from the outset. Its ASA dropped from 1,275 in 2001 to just 340 in 2011; from 2010 to 2011 alone, there was a 6.3% decline. It has not received anywhere near as much in subsidies as has San Joaquin, but it has never been self-sustaining since 2008. Its current average pledge is even lower than San Joaquin's, and it has just 251 pledging units.

The press release from the Diocese of Chicago says nothing about assuming Quincy's liabilities, but in any event it would not do so until after General Convention approves the merger in the summer of 2015. One wonders also what will happen to the remnant group's role in the pending lawsuit, assuming it is still in the Illinois courts at that time. (Post-trial briefing was just completed this week, and a decision could be expected by August, but there will almost certainly be an appeal by whichever side loses. Any such appeal could easily drag on past 2015.)

If the lawsuit is still pending in the summer of 2015, the successor Diocese of Chicago will have to be substituted in place of the remnant group for the suit to continue. And that might introduce some entirely new and novel legal questions into the lawsuit. For instance, what is the legal right under Illinois law of an unincorporated association's members to assign their claims to property and assets when that unincorporated association dissolves and merges into a much larger association? The status of those members as belonging to a unique group organized for purposes of maintaining a lawsuit will have vanished, and the Diocese of Chicago will have no such claims prior to the merger. To whom will those claims be assigned, and can they even be assigned?

This is what happens when an organization that calls itself a church refuses to adhere to the Christian path, and instead seeks to gain temporary advantages through litigation while failing abysmally to carry out its mission. Indeed, an outsider might even conclude, from the fact that by 2015 ECUSA may have spent as much as its entire current yearly budget just on litigation, that ECUSA's mission is litigation -- nothing more, nothing less.

Now that briefing has concluded, I will be able to report more details about the Quincy trial in forthcoming posts.

Decision Time in South Carolina

Today is the day that Senior Federal District Judge Houck hears oral arguments from counsel on the motion by Bishop Mark Lawrence, his Episcopal Diocese of South Carolina and more than three dozen parishes to remand ("send back") the lawsuit they began last January to South Carolina's Circuit Court in Dorchester County. I reviewed the history of this increasingly complex litigation in this post, and will not repeat it here.

Essentially, what is at issue on the motion to remand is whether or not the Court can fairly read the Lawrence State court complaint to state a "claim or controversy" under the laws of the United States, so that the case could have been brought initially in the federal Court. One would think that a complaint based only upon State trademark law would be left to the State courts to decide, but ECUSA and its Potemkin diocese saw things differently. ECUSA has not done well in the South Carolina State courts, and so they wanted desperately to have the federal courts take jurisdiction of the dispute over who owns the rights to the name "Episcopal Diocese of South Carolina."

If the judge decides to keep the case in his court, then it will be consolidated with the federal lawsuit begun by Bishop vonRosenberg against Mark Lawrence personally, under the federal trademark law (called the "Lanham Act"). But if he does not -- if Judge Houck sends Bishop Lawrence's case back to State court, then look for him to stay the Lanham Act lawsuit until the State court resolves the trademark issues first (since that lawsuit was filed first).

I will report on the Judge's decision once he makes it. In the meantime, if any reader attends the hearing today, feel free to record your impressions of it in the comments. Also, those in South Carolina and elsewhere may find useful the prayer circulated today by the Very Rev. John Barr.

[UPDATE 06/05/2013: I am told that the hearing was brief, and was over in about forty minutes. Judge Houck was noncommittal, asked few questions, and mostly listened to the arguments. At the conclusion, he remarked that he had already been at work on the matter, and expected to get a decision on file "within a week."]