On March 23, 2021, an ex-member of The Church of Jesus Christ of Latter-day Saints (“LDS Church”) filed a federal lawsuit accusing his former church of fraud and demanding the return of millions of dollars in tithing.
The ex-member is James Huntsman, grandson of LDS Church apostle David Haight, son of LDS Church leader Jon Huntsman, and brother of former Utah governor Jon Huntsman, Jr. He alleged that senior church leaders had misled members over spending tithing funds on commercial projects—specifically, the upscale City Creek shopping center in downtown Salt Lake City.
The Background
Since its members first arrived in Utah Territory in 1847, the LDS Church has invested contributions from church members in commercial activities as a way for its members to become self-sufficient and to serve as a “rainy day fund.” More than 170 years later, Mr. Huntsman’s lawsuit brought attention to the long-established tradition.
Tithes, the lawsuit claimed, were said to be used by the LDS Church “solely for non-commercial purposes such as missionary work, member indoctrination, temple work, and education/charitable activities.” Mr. Huntsman alleged that the LDS Church purchased and renovated the commercial shopping center using his tithes—10% of his yearly income donated to the church, which were given as a voluntary and unrestricted contribution. He sought a refund $5 million.
The LDS Church hired partner Rick Richmond to lead the defense, arguing that all of the funds for the City Creek project came from the earnings on the church’s invested reserve funds and from commercial entities affiliated with the church, just as then-President Gordon B. Hinckley said they would.
A Potentially Devastating Precedent
From the outset, Mr. Huntsman’s lawsuit could have established potentially devasting precedent for hundreds of thousands of other churches and charitable institutions.
“Courts are reluctant to entertain claims like the one by Mr. Huntsman because the First Amendment protects the rights of churches to determine how their own doctrines and religious practices affect the spending and investing of unrestricted contributions . . . All of Mr. Huntsman’s contributions to the church were voluntary and were given with no strings attached. The law says he cannot get them back.”
— Rick Richmond
Allowing a claim for refund of voluntary, unrestricted contributions to the LDS Church could have paved the way for similar claims against other churches, museums, theaters, orchestras, universities, and charitable institutions across the country. If charitable contributions were subject to possible return, even many years after they were made, most of our country’s charitable institutions could not survive and their missions would go unfulfilled.
In Mr. Huntsman’s suit, the risk of an adverse precedent was heightened because this particular charitable institution was a church. The First Amendment protects churches in the U.S. from unwarranted governmental intrusion and, as it applies in this and similar cases, courts should not allow plaintiffs to intrude on church freedoms. Allowing a fraud claim to challenge the way the LDS Church raised and spent its money could have thrown other churches onto a slippery slope of inappropriate intrusion into their religious freedoms through litigation.
Three Strategic Choices for the Defense
The case’s potentially devastating threat of creating an adverse precedent raised strategic choices about how our team could shape the case for resolution.
One, we could argue that voluntary, unrestricted contributions to charitable institutions cannot be recovered whenever a donor becomes dissatisfied with the institution or its mission—the broadest possible defense. However, if the court had not accepted it or had written an opinion significantly narrowing the defense’s scope or application, the court’s decision could have been used against this church and other charitable institutions, potentially creating an existential crisis.
Two, we could use the First Amendment as a shield against judicial inquiry into church finances. But again, if the court had not accepted that defense or had written an opinion significantly narrowing the First Amendment’s scope or application, the court’s decision could have been used against this church and others in future cases.
Three, we could create a concrete factual record, based on deposition admissions and documentary evidence, proving the church did not commit fraud in how it raised and spent money, as alleged by the plaintiff. There were two benefits of seeking resolution on that kind of factual record: 1) the LDS Church’s statements and actions would be vindicated; and 2) resolving the case on a strong factual record would lessen the risk that the trial court, or any appellate courts, would address the larger issues in a way that could create future adverse consequences.
The Larson defense team, which included Rick and associate Troy Tessem, chose the third option. The principal drawback was that the LDS Church would be required to provide very specific information about how it raised and spent money, which it should not have to disclose under the First Amendment. However, that risk was mitigated with a motion to seal the church’s confidential financial information, which the trial court granted. This allowed the court and the plaintiff to see the information while protecting it from public disclosure.
A Motion for Summary Judgment
On Aug. 9, we filed a motion for summary judgment seeking the dismissal of Mr. Huntsman’s lawsuit. The motion included confidential financial data under seal that detailed how the money used for City Creek came from commercial entities owned by the LDS Church and earnings on invested reserve funds, rather than actual tithing donated by church members.
The opposing side attempted to support Mr. Huntsman’s claims with testimony from a former senior portfolio manager of the LDS Church’s investment arm. We swiftly fired back and offered additional financial records on behalf of the LDS Church on Aug. 23 to refute the testimony. Following our submission, U.S. District Judge Stephen V. Wilson canceled the highly anticipated hearing originally scheduled for the end of August and decided to rule on whether to dismiss the case based on the papers submitted.
The Winning Strategy
Our third strategic option proved to be the winning one. On Sept. 14, Judge Wilson ruled that “the church’s president expressly stated that earnings on invested tithed funds would be used to buy and develop a commercial shopping center in downtown Salt Lake City” and that “any reasonable juror would find that the church used the earnings of the invested reserve funds exactly the way it said it would”—granting our summary judgment motion.
Judge Wilson also ruled that Mr. Huntsman’s fraud claim is prohibited by the First Amendment, which “bars the jury or the court from diving into ‘internal ecclesiastical disputes.’”
“I’m very pleased and proud of the result we got . . . and grateful that the court took the time to dig deeply into the record that was presented, and come out with this result.”
— Rick Richmond
“We are further grateful that the court agreed that the statements made by President Gordon B. Hinckley and other church leaders are accurate as to the source of funding for the City Creek project.”
— Eric Hawkins, LDS Church Spokesperson
