A Primer on the LSU-3 Lawsuit

Is this a case in which an arm of the Church (that is La Sierra University, through Board Chair Ricardo Graham) merely upheld the Church’s religious standards against consuming alcohol and using profanity, offenses potentially punishable by dismissal within the Church? Or is this a case of wrongful termination based on the illegal transcription and distribution of a non-consensual recording of a private conversation? Does the Free Exercise Clause of the First Amendment protect religious nonprofit organizations from civil statutes governing employment? Or are Seventh-day Adventist universities subject to the employment laws of the land like their secular counterparts? These are some of the many questions that this case may answer. 

Presiding
The Honorable Commissioner Paulette Durand-Barkley was to hear preliminary motions on October 20, 2011. However, the hearing was postponed until December 5, 2011. Court documents name 2003 Gray Davis appointee, the Honorable Craig G. Riemer, as the judge assigned to this case. [Riverside Superior Court judge, the Honorable Ronald L. Taylor held demurrer hearings and motions to strike, beginning on December 5.]

Counsel for the Plaintiffs
Firm – McCuneWright, LLP

Richard D. McCune, partner at McCuneWright, obtained his J.D. from the University of Southern California School of Law in 1987 and a B.S. from Loma Linda University, Riverside campus in 1982. He is the son of the late R. Dale McCune, the former Provost of Loma Linda University, La Sierra campus. Richard McCune’s successful results include the recent $203 million class action verdict on behalf of the 1.14 million California Wells Fargo Bank customers for unfair bank overdraft fees. He has experience in all types of product liability cases, as well as complex litigation involving consumer class actions, insurance bad-faith and dangerous highway design. He has successfully represented clients in defective or dangerous product cases against GM, Ford, Chrysler, Honda, Toyota, Nissan, Mitsubishi, Caterpillar, and other manufacturers.

David C. Wright is a partner of McCuneWright. He served as a prosecutor for the United States Attorney’s Office prior to 2001. Wright has successfully prosecuted numerous defective product cases against some of the nation’s largest corporations. Prior to working at the U.S Attorney’s Office, Mr. Wright clerked for the Honorable Stephen S. Trott, United States Court of Appeals for the Ninth Circuit. He obtained a B.S. degree from Atlantic Union College in 1991 and a J.D. from Pepperdine University in 2004.

Counsel for the Defendants
Firm – Lewis Brisbois Bisgaard & Smith LLP (a national firm of over 785 lawyers with offices throughout the US), hired by Gencon Insurance Company through Adventist Risk Management to represent La Sierra University, the Pacific Union Conference Corporation and the North American Division Corporation.

Gencon (deriving from “General Conference”) Insurance Company of Vermont
Gencon is a risk management entity for the Seventh-day Adventist Church, which claims assets of more than $100 million and annual gross written premiums exceeding $40,000,000. Gencon insures against liabilities and risks for denominational organizations worldwide.

Michael W. Connally is a partner and one of 54 attorneys at the Orange County office of Lewis Brisbois Bisgaard & Smith LLP. Connally’s practice focuses on trial and appellate litigation, specializing in, among other things, defense of insurance companies, churches and other non-profit religious organizations He obtained a J.D. from Loyola University Law School in 1981.

Counsel for Ricardo Graham
Firm – Hiroshima, Jacobs, Roth and Lewis

Jon Daggett is an approved defense counsel for Adventist Risk Management, Inc. He received a bachelor’s degree in 2000 from The University of California, Riverside and J.D. from UCLA in 2003. Daggett’s guest lecturing appearances have included Pacific Union College, Amazing Facts, and the West Indies Union Conference of Seventh-day Adventists. He served as president for the Pacific Union Conference Seventh-day Adventist Attorneys Association from 2006 to 2007. In 2005, he lectured on the Fiduciary Duties of a Board Member of a Church Entity or a Corporation.

Plaintiffs’ Arguments:
The plaintiffs allege, in part, that Kaatz, Beach and Bradley were lifelong employees of La Sierra University who were wrongfully discharged from their employment when they were coerced and forced to resign under threat of public firing by defendant Ricardo Graham. Graham’s action was improper because he made use of secretly-recorded conversations in forcing the resignations, and he lacked authority to seek their resignations or threaten them with termination. They allege that Graham violated numerous due process rights provided by La Sierra University. Jackson, Blackmer and others were complicit due to their listening to, transcribing, distributing and/or discussing the recording, and by their conferring about the dismissal of the plaintiffs.

Defendants’ Arguments:
The defendants argue, in part, that the plaintiffs’ behavior violated Seventh-day Adventist Church policy and La Sierra University policy governing the comportment of faculty and administrative staff. Further, they argue that the court has no jurisdiction in this matter and that the First Amendment to the U.S. Constitution protects nonprofit religious institutions like La Sierra University from interference by the government in matters of governance and employment. Civil statutes such as the Unruh Civil Rights Act do not apply to religious nonprofit institutions like La Sierra University, they argue. Counsel for Ricardo Graham argues that Graham cannot be held personally liable for his actions as volunteer executive officer for a nonprofit organization according to state statutes.

Abridged Timeline:

June 10, 2011, La Sierra University employees Kaatz, Beach and Bradley are called to separate meetings in which the La Sierra University Board of Trustees chairman Ricardo Graham asks for their resignations.

July 28, 2011, McCuneWright files suit on behalf of Kaatz, Beach and Bradley, alleging improper termination through coerced resignation using a non-consensual recording of a private conversation, and asking for damages and injunctive relief, and demanding a jury trial.

September 13, 2011, Connally files Demurrer on behalf of La Sierra University, Pacific Union Conference of Seventh-day Adventists and North American Division Corporation of Seventh-day Adventists, arguing that the complaint against defendants does not state facts sufficient to constitute a cause of action and that the court lacks jurisdiction because the Workers Compensation Act provides exclusive remedy for emotional distress. The demurrer calls the Plaintiffs’ complaint a “full-scale assault on the First Amendment’s protections for freedom of religion and expressive association rights.”

September 22, 2011, Schirmer files Demurrer on behalf of Ricardo Graham stating in part that pursuant to California CORP. CODE § 9247 Graham cannot be held personally liable for his actions as volunteer executive officer for a nonprofit organization.

September 22, 2011, Schirmer files Motion to Strike on behalf of Ricardo Graham stating that the complaint makes no allegation that Graham operated outside of his duties as Board chairman, and as such, cannot be held liable. Further, according to the handbooks documents to which the plaintiffs refer, the Board Chair is not precluded from accepting resignations, Schirmer states.

October 6, 2011 – McCune files Opposition and Objection to defendants request for Judicial Notice in support of defendants’ demurrer and motion to strike, stating that the request amounts to a thinly disguised motion for summary judgment–a judicial shortcut that lacks any proper evidentiary foundation.

October 6, 2011 – McCune files Opposition to LSU demurrer, stating that plaintiffs sufficiently allege facts sufficient to constitute a cause of action.

October 6, 2011 – McCune files Opposition to PUC and NAD demurrer, stating that plaintiffs sufficiently allege facts sufficient to constitute a cause of action.

October 6, 2011 – McCune files Opposition to LSU’s motion to strike portions of Plaintiffs’ complaint, calling untrue the Defendants’ “talking point” that the Plaintiffs’ complaint asks the Court to become involved in how the Seventh-day Adventist Church organizations are to be governed, interact and accomplish their religious mission in violation of the First Amendment.

October 20, 2011 – Hearing set for La Sierra University’s motion to dismiss charges, to be heard by Commissioner Paulette Durand-Barkley, postponed until Dec. 5, 2011.

November 3, 2011 – Hearing set for Ricardo Graham’s motion to dismiss charges.

December 5, 2011 – Hearing scheduled for defendants’ motion to dismiss.

Similar and/or Precedent-setting Cases:
Derrick Proctor vs. General Conference of Seventh-day Adventists.
Plaintiff Derrick Proctor brought a suit against the local, Union and General Conference alleging a violation of the Sherman Antitrust Act. The defense cited the First Amendment of the U.S. Constitution as a basis for exemption from conspiracy, monopoly, price discrimination, and tortious interference. Federal District Judge William T. Hart found in favor of the General Conference. But he did not consider the argument that the church was exempt from governmental scrutiny under the First Amendment of the Constitution.

That case established, in part, that the Adventist Church is a single unified entity governed by the General Conference. The judge stated in his decision that, “next to the Roman Catholic Church, the Adventist Church is the most centralized of any denomination in this county.”

The church has been arguing at least since the 1970’s that its governance is beyond the purview of civil authorities. However, the Supreme Court rendered a unanimous decision in Ohio Civil Rights Commission v. Dayton Christian Schools (June 1986), which set precedent that religious organizations cannot use their religious freedom to prevent investigations into wrongful termination or that such investigations violate the First Amendment. The General Conference filed an amicus brief in that case. Justice Rehnquist, who penned the majority decision, wrote, “Even religious schools cannot claim to be wholly free from some state regulation.”

This year the U.S. Supreme Court heard arguments in Equal Opportunity Employment Commisssion, et al vs. Hosanna-Tabor Evangelical Lutheran Church and School.  In this case, the Equal Employment Opportunity Commission filed suit against Hosanna Tabor Evangelical Lutheran School on behalf of Cheryl Perich, who lost her job and alleged discrimination on the basis of the Americans with Disabilities Act.

Judgment has not yet been handed down on whether the so-called “ministerial exception” trumps the ADA or vice-versa. Ruling expected within 6-9 months. Loma Linda University, Adventist Health, Pacific Union Conference of Seventh-day Adventists Church State Council filed Amici Curiae brief in this case.