Private Foundation That Funds Milwaukee Archdiocese Is Respondent In Securities Fraud Case Supreme Court Agrees To Review

Yesterday, the U.S. Supreme Court granted certiorari in Halliburton Co. v. Erica P. John Fund, (Docket No. 13-317, cert. granted 11/15/2013). (Order List.) This is the second time the case is before the Supreme Court. (The Court's 2011 opinion was Erica P. John Fund, Inc. v. Halliburton.) Reports on yesterday's decision by the Court to grant review, such as this report by Reuters, all focus on the main issue involved-- whether the Court will back off of the so-called "fraud-on-the-market theory" that makes it easier for securities fraud class actions to be brought in federal court.  What few, if any, media are reporting is that the plaintiff-appellee, the Erica P. John Fund, was previously known as the Archdiocese of Milwaukee Supporting Fund.  In recent years it has donated some $600,000 per year to the Catholic Archdiocese-- which is now in bankruptcy reorganization. Here are excerpts from a somewhat unflattering March 2011 report about the Fund by the Milwaukee Journal-Sentinel:

The nonprofit Erica P. John Fund, which has given millions of dollars to the archdiocese and other organizations over the years, is among a number of revenue sources expected to be scrutinized by creditors in the archdiocese's bankruptcy.

Victims and their attorneys question the timing of the name change in 2009, suggesting it may have been intended to obscure the fund's true purpose - to financially support the archdiocese - and may have been part of a broader effort by the archdiocese to shield its resources from being used for sex abuse claims....

Archdiocese spokesman Jerry Topczewski said the John Fund, as a private foundation, cannot be tapped to pay sex church abuse settlements and that its grants obtained by the archdiocese are restricted to specific uses....

Proceeds from the fund - more specifically, from the sale of a property it donated - were used to pay $450,000 in hush money in 1998 to a man who claimed to have been sexually assaulted by then-Archbishop Rembert Weakland when he was a seminary student years earlier. Weakland, who abruptly retired after the payment became public in 2002, has maintained that the relationship was consensual.

[An Archdiocese spokesman] said the building was donated before Erica John dictated that no family funds could be used to pay sex-abuse settlements. And federal authorities investigated the allocation but found no wrongdoing by the archdiocese because the money had not been diverted from a specific purpose.

Wrongful Death Suit Filed Against Philadelphia Catholic Archdiocese and Two Priests

The Legal Intelligencer reports that a wrongful death lawsuit was filed last Wednesday in a Pennsylvania state trial court against the Catholic Archdiocese of Philadelphia, Monsignor William Lynn and Rev. Robert L. Brennan.  At issue is the death of Sean Patrick McIlmail who last month was found dead in his car from a drug overdose. The suit alleges that McIlmail, who was addicted to drugs, suffered psychologically and emotionally as a result of sexual abuse by Brennan, and that McIlmail developed "various psychological coping mechanisms" in order to deal with the trauma. The suit claims that the Archdiocese and Msgr. Lynn "protected Brennan in his position so as to facilitate his sexual abuse of children...." Criminal charges against Brennan were dropped after McIlmail's death. A jury had previously deadlocked on criminal charges against Brennan.  Lynn was convicted last year of child endangerment for covering up sexual abuse by other priests. (See prior posting.)

7th Circuit In 2-1 Decision Grants Preliminary Injunction To For-Profit Corporations and Their Owners In Contraceptive Mandate Challenge

In Korte v. Sebelius, (7th Cir., Nov. 8, 2013), the U.S. 7th Circuit Court of Appeals, in a 2-1 decision in a consolidated appeal of suits by two unrelated small businesses and their Catholic owners, held that a preliminary injunction should be granted barring enforcement of the Affordable Care Act contraceptive coverage mandate on religious freedom grounds.  The companies involved are Korte & Luitjohan Contractors, Inc., an Illinois construction company, and Grote Industries, Inc., an Indiana manufacturer of vehicle safety systems.

The majority, in a 64-page opinion, held that for-profit corporations are "persons" whose religious exercise is protected by the Religious Freedom Restoration Act, saying:

It’s common ground that nonprofit religious corporations exercise religion in the sense that their activities are religiously motivated. So unless there is something disabling about mixing profit-seeking and religious practice, it follows that a faith-based, for-profit corporation can claim free-exercise protection to the extent that an aspect of its conduct is religiously motivated.

The majority then concluded that the mandate imposes a substantial burden on the religious exercise of both the corporations and their individual owners and managers that is not justified by a compelling governmental interest and is not achieved by the least restrictive means.

Judge Rovner wrote a very interesting 89-page dissent. Early in her opinion, she sets out several hypotheticals that follow from the majority's decision, involving employers who object on religious grounds to paying for coverage for other kinds of medical treatment for their employees.  Later in her opinion, she discusses at length what she describes as "significant logical difficulties posed by attributing religious rights to secular corporations."  She says in part:

First, to the extent that a corporation’s religious principles and identity derive from its owners, what if the owners have diverse beliefs, diverse degrees of devotion, and diverse notions as to whether and how the corporation ought to reflect their religious beliefs?...

Second, suppose that the company’s ownership changes. What happens then to the beliefs we have attributed to the corporation based on its ownership?....

Third, are the religious beliefs of corporate owners solely determinative of the corporation’s religious principles? Suppose ... that a corporation’s owners have entirely entrusted the management of the corporation to its longtime CEO.... Are her beliefs attributable to the corporation?  Or suppose ... the focus of the corporation is on serving members of a particular religion-- selling kosher or halal food products, for example....  Can the corporation be said to hold the religious beliefs of its target market, even if its owners and managers do not?....

[I]f a corporation has free exercise rights because the Dictionary Act suggests it is among the "persons" to which RFRA grants the right to make such a claim... then why does a corporation of large, diverse, or even public ownership not have free exercise rights also? And how would the beliefs of a public corporation be determined—by a vote at the annual shareholders’ meeting, for example?

The 7th Circuit had previously granted an injunction pending appeal in the case. (See prior posting.)

Disciplinary Office Seeks Suspension of Lawyer For Anti-Catholic Statements In Court Filings

As reported by the St. Paul Pioneer Press and by MinnLawyer Blog, the Minnesota Office of Lawyers Professional Responsibility on Wednesday filed with the Minnesota Supreme Court a petition seeking suspension from practice of attorney Rebekah Nett.  The petition alleges a pattern of bad faith litigation and reckless and harassing statements.  Among the statements at issue are a number of anti-Catholic slurs directed at the federal bankruptcy court judge and several federal bankruptcy trustees. This excerpt from the 26-page petition to the state Supreme Court gives a flavor of the statements involved:

Respondent's statements ... that Judge Dreher is a Catholic judge, that Judge Dreher is a black robed bigot, that the Chapter 7 trustee had engaged in lies, deceit, treachery, and connivery... , that the fact that [3 U.S. trustees and the judge] ... are of the same race and religion demonstrates their conspiracy and deceitful practices to hurt the debtor, that ... court systems... are composed of a bunch of ignoramus, bigoted Catholic beasts that carry the sword of the church ... lacked a basis in law or fact and were made with knowledge of their falsity or with reckless disregard at to their truth or falsity.

(See prior related posting.)