Mormon Church Defeats Suit Alleging Fraud Over Use of Donations

Sept. 14, 2021, 10:40 PM

The Church of Jesus Christ of Latter-Day Saints will avoid allegations that it misled members about how their donations were being used after a federal court in California dismissed a suit filed by a church member.

California resident James Huntsman said he paid 10% of his annual income to the church from 1993 to 2017, believing the money would be used for noncommercial purposes. Huntsman sued the church for fraud in the U.S. District Court for the Central District of California, alleging tithings had been used to build a shopping center in Salt Lake City, despite church leaders’ assurances to the contrary.

Judge Stephen V. Wilson rejected the church’s argument that the First Amendment barred Huntsman’s claim. The case presents a purely secular dispute, and it isn’t necessary to analyze church policy or doctrines to resolve it, Wilson said.

But church leadership didn’t say tithing funds wouldn’t be used for the project, Judge Stephen V. Wilson said. Instead, they specified that earnings from invested reserve tithing funds would be used. That distinction is important, Wilson wrote in an order docketed Tuesday, and a reasonable juror could only conclude the church used the earnings of invested tithings to fund the mall.

Wilson also dismissed a challenge to the church’s alleged transfer of $600 million to bail out Beneficial Life Insurance Company.

Huntsman doesn’t identify a specific misrepresentation in regards to the transfer, and to the extent he relies on the church’s teachings to support the claim, that claim would be barred by the First Amendment. Resolving his claim on those grounds would require a jury to decide whether church doctrines prohibit the alleged transfer, Wilson said.

Lavely & Singer PC represents Huntsman. Larson LLP represents the church.

The case is Huntsman v. Corp. of President of Church of Jesus Christ of Latter-Day Saints, C.D. Cal., No. 2:21-cv-02504, 9/14/21.

To contact the reporter on this story: Maeve Allsup in San Francisco at mallsup@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Meghashyam Mali at mmali@bloombergindustry.com

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