9th Circuit: Fraud Claim Against LDS Church By Prominent Donor May Move Ahead

In Huntsman v. Corporation of the President of the Church of Jesus Christ of Latter-Day Saints, (9th Cir., Aug. 7, 2023), the U.S. 9th Circuit Court of Appeals, in a 2-1 decision, reversed a California federal district court's dismissal of a fraud claim brought against the LDS Church by James Huntsman, a prominent former member who had contributed over $2.6 million in tithes to the Church. The court described Huntsman's claim:

Huntsman alleged that the Church represented that tithing money was not used to finance commercial projects, but that, in fact, the Church used tithing money to finance a shopping mall development and to bail out a troubled for-profit life insurance company owned by the Church.

The court rejected the Church's claim that the suit was barred by the ecclesiastical abstention doctrine, saying in part:

In the case before us, 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. Nor are we required to examine Huntsman’s religious beliefs about the appropriate use of church money. 

Instead, as presented to us, the questions are secular. The questions are whether the Church’s statements about how it would use tithing funds were true, and whether Huntsman reasonably relied on those statements when he made tithing contributions. A court or jury can answer these questions based on secular evidence and analysis.....

The majority then concluded that the district court had erred in granting summary judgment to the Church, saying in part:

The question before the district court, and before us, is whether a reasonable juror could conclude that the five statements by church officials and in church publications amounted to fraudulent misrepresentation by the Church.... Huntsman contends that a reasonable juror could conclude from the five statements that the Church fraudulently misrepresented that neither tithing principal nor earnings on tithing principal were being or would be used to finance the City Creek Mall project. We agree.

Judge Korman dissented in part, agreeing with the district court that no reasonable juror could find that the Church had misrepresented the source of funding for the mall project.