Unanimous 9th Circuit panel dismisses Huntsman tithing lawsuit

SALT LAKE CITY — A panel of 11 judges in the 9th Circuit issued a unanimous ruling Friday dismissing James Huntsman's lawsuit seeking the return of $5 million he donated to The Church of Jesus Christ of Latter-day Saints.

It is the second time the lawsuit has been dismissed in four years.

Huntsman, a former church member, alleged the church committed fraud by using tithing funds to finance commercial endeavors despite stating it had not and would not do so. A U.S. district court granted summary judgment to the church in September 2021.

The 9th Circuit panel, known as an en banc panel, stated in its 63-page set of rulings Friday that it agreed with the district court ruling.

The church's victory in the 9th Circuit, which covers the nine westernmost U.S. states, could have a powerful influence over two other tithing-related cases now in the 10th Circuit, which includes Utah, said Jeremy Rosen, managing partner for the San Francisco office of Horvitz & Levy, which filed an amicus brief on behalf of charitable organizations that supported the church.

"Ninth Circuit opinions are not binding in the 10th Circuit, but I would think that they would have, especially from an en banc panel, a persuasive effect," Rosen said. He added, "I think if the 10th Circuit were to do anything other than rule in favor of the church, especially in light now of this 9th Circuit opinion, there would be a bullet train to the Supreme Court and then a reversal."

Huntsman's lead attorney, David Jonelis, did not immediately respond Friday to a message seeking comment about the case or whether Huntsman would appeal.

What the court ruling said

The 11 judges all agreed to toss out the case, but they formed two main groups with different reasons for dismissing the lawsuit.

The six-judge majority ruling threw out the case on the merits of Huntsman's arguments, finding them lacking.

"No reasonable juror could conclude that the church misrepresented the source of funds for the City Creek project," six judges said in Friday's majority ruling. "Although the church stated that no tithing funds would be used to fund City Creek, it also clarified that earnings on invested reserve funds would be used. The church had long explained that the sources of the reserve funds include tithing funds. Huntsman has not presented evidence that the church did anything other than what it said it would do."

Four other judges concurred with that reasoning but also found that the case should have been sidelined by the church autonomy doctrine, which holds that the First Amendment bars the government, and therefore courts, from interfering in church matters.

"This lawsuit is extraordinary and patently inappropriate, a not-so thinly concealed effort to challenge the church's belief system under the guise of litigation," the four judges wrote. "The majority is correct that there was no fraudulent misrepresentation even on the terms of plaintiff's own allegations. But it would have done well for the en banc court to recognize the obvious: There is no way in which the plaintiff here could prevail without running headlong into basic First Amendment prohibitions on courts resolving ecclesiastical disputes.

That group also wrote, colorfully, that "The plaintiff in this case is free to criticize his former church and advocate for church reforms. But he cannot ask the judiciary to intrude on the church's own authority over core matters of faith and doctrine. That is the lesson of this lawsuit. We as courts are not here to emcee religious disputes, much less decide them. The First Amendment restricts our role as it protects religious organizations from lawsuits such as this."

The final judge agreed so strongly on the church autonomy doctrine that he wrote a lengthy solo opinion saying that should have been the only consideration in the case.

"Resolving (Huntsman's) claims requires swimming in a current of religious affairs," Judge Patrick Bumatay wrote. "What is a 'tithe?' Who can speak for the church on the meaning of 'tithes?' What are church members' obligations to offer 'tithes?' These are questions that only ecclesiastical authorities — not federal courts — can decide."

How the case got here

Huntsman filed his lawsuit in March 2021. He said that between 2003 and 2015, he tithed over $1 million in cash, over 20,000 shares of Huntsman Corporation stock and over 1,800 shares of Sigma Designs stock to the church, according to Friday's ruling.

When he resigned his membership in the church, Huntsman filed the lawsuit claiming the church had committed fraud because after saying it does not use tithing funds for commercial use a purported whistleblower alleged that it did.

David Nielsen, a former employees of Ensign Peak Advisors, alleged in an IRS complaint that the church spent tithing funds for two commercial uses — $1.4 billion to build the City Creek shopping center in downtown Salt Lake and $600 million to bail out Beneficial Life, an insurance company the church owns through a holding company

Church leaders have maintained that tithing funds are used for religious purposes. The church repeated its position that it used reserve funds for City Creek and Beneficial Life.

The church told the court that it had made no misrepresentations and swiftly made a motion for summary judgment, asking the original U.S. District Court judge in California to dismiss the case before it ever got to trial. The original judge agreed, granting summary judgment in September 2021.

Huntsman appealed, and a 9th Circuit panel reinstated the lawsuit by a 2-1 vote in August 2023.

The church asked for and was granted an en banc appeal of that reinstatement. The en banc panel of 11 judges of the 9th Circuit heard oral arguments in September 2024, when the judges unleashed a barrage of questions at Huntsman's attorneys.

The panel then said it would issue a written ruling in coming months.

That ruling came Friday, and included a repudiations of Nielsen's logic and the usefulness of his information.

Why the court said Huntsman's and Nielsen's allegations fail

To explain the funding of the City Creek project, the Church submitted two declarations.

In Friday's ruling, the court said it relied on a declaration submitted by the church from a director in its Finance and Records Department. In the declaration, Paul Rytting stated that all the funds allocated to the City Creek project came from earnings on the church's reserve funds invested by Ensign Peak, "meaning that no principal reserve funds (i.e., funds taken directly from church members' tithing contributions) were used," the judges wrote.

Rytting testified that Ensign Peak allocated $1.2 billion into an internal account earmarked for City Creek on Jan. 1, 2004. Those funds were invested and reached nearly $1.7 billion before appropriations were made for City Creek.

The panel of judges found that the church's statements created a clear distinction between principal tithing funds that come directly from church members and earnings on the funds the church sets aside from its annual income, which includes tithing.

The judges also found that the $1.4 billion the church appropriated to City Creek was consistent with the church's statements that it would be funded by earnings on invested reserve funds.

"Because each relevant Ensign Peak account held enough earnings on invested funds to cover the funds appropriated for City Creek, any commingling of principal tithing funds and earnings on invested tithing funds cannot support Huntsman's fraud claim," Friday's majority opinion stated.

The judges rejected Nielsen's reasoning that the church was using tithing funds because Ensign Peak employees allegedly referred to all the money in its accounts as "tithing."

"Even accepting the facts asserted in Nielsen's declaration as true, they do not show that principal tithing funds were used for the City Creek project," the judges ruled.

The panel rejected the allegations about Beneficial Life outright, saying that neither Huntsman nor Nielsen provided any representations by the church about the funds used to bolster Beneficial Financial Group during the 2008 financial crisis.

Note: Beneficial is a life insurance company owned by the church's for-profit arm, Deseret Management Corp., which also owns the Deseret News and KSL.com.

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