Contract interpretation: Do not expect courts to consider the contracting parties’ intent!

In a recent opinion, a Florida appellate court found the contract term “sale”, as related to the sale of property, included a foreclosure sale.  The contract provided payment would be due if any of three triggering events occurred, the first being “the sale of the property” located at a specific street address.  One party argued the contract contained an ambiguity requiring the court to look outside the words of the contract to determine whether the parties intended “sale” to include an involuntary sale, such as a foreclosure sale.  The appellate court rejected this argument, holding the clear definition of sale includes an involuntary sale of the property.

This case highlights the importance for religious organizations to pay close attention to contract terms when signing agreements.  It is a rare exception for a court to look past the language of a contract to consider the parties’ intent.  As recognized by the appellate court in holding “sale” to mean “any sale”, to consider parties’ intent for a contract term there would need to be either an “extrinsic fact or extraneous circumstances that changed the parties’ understanding of the contract,” or “the contract language would need to be susceptible to two different interpretations.”

If your religious organization has questions about what a contract term or provision means, do not assume you understand what you are signing. Get a lawyer’s advice before signing.  The ability to argue later that a court should look past the words in the contract and interpret the parties’ intent will usually fail.

I will sue you now, and you will learn about the lawsuit later…4 months later!

In Florida, a plaintiff can file suit and then wait 120 days to serve a defendant with the complaint.  Additionally, trial courts are required to extend the time to serve a defendant past the 120 days if the plaintiff makes a reasonable showing why more time is needed.

What this means for religious organizations who find themselves in an adversary position with a claimant making demands for compensation is that, although the organization has not been served with a lawsuit, the organization may have already been sued. Because a claimant can take its time in serving a religious organization with a filed lawsuit, that claimant can trick an organization into continuing to communicate possibly damaging information under the organization’s mistaken belief that cooperation will avoid a lawsuit; all the while, the claimant is simply informally building their case against an organization that has already been sued.

The takeaway for religious organizations is the value in getting legal counsel involved as early as possible in disputes.  Counsel can help religious organizations avoid being trapped into unknowingly helping adverse parties build their case, including uncovering whether a religious organization has been sued before the organization is served with the lawsuit.

Fool me once, shame on you! Fool me twice, shame on me!

If a religious organization is tricked into entering into a contract, Florida courts recognize that organization’s ability to sue the offending party under a claim titled fraudulent inducement. However, the organization’s reliance on the misrepresentations that fooled the organization must have been reasonable.  In a recent Florida appellate opinion, the court adopted a “fool me once, shame on you, fool me twice, shame on me” approach to find a claimant’s reliance on defendant’s misrepresentations unreasonable, resulting in the claim being dismissed.

The Court found:

If the plaintiffs were defrauded by an allegedly fraudulent inducement…to enter into the Merger Agreement in 2014, and the performance that was promised was not forthcoming, they certainly could not justifiably rely on further inducements to enter into the 2016 Share Issuance Agreement and its sweeping release. The principle is that “after the assertion of claims involving dishonesty, the claimant in negotiations culminating in a settlement and release cannot rely on oral representations made by the party already asserted to have been dishonest.”

This principle of law seems obvious.  However, religious organizations’ desire to forgive the wrongful actions of others leaves open the possibility that an organization may wish to give a contracting party a second chance.  Such an approach is dangerous. Should the organization be misled a second time resulting in damages to the organization, the religious organization may be prohibited from pursuing a lawsuit for fraudulent inducement into the second contract.

Crafting a release against future claims: Its trickier than you think!

With summer in full swing, fellowship outings, mission work, community service projects, and numerous other events await religious organizations over the next few months.   Knowing the importance of protecting against a lawsuit should a member unexpectedly injure themselves during such events, religious organizations often include in the registration documents some release language.  Ultimately, the level of protection afforded by such releases depends on how much attention was taken in crafting both the release, and the entire document in which the release is located.

Termed “exculpatory clauses,” these releases are strictly construed against the party seeking to be relieved of liability. Courts are required to read such clauses together with all other related provisions of the documents to determine whether the intention to be released was made clear, such that an ordinary person would know what he/she is contracting away. Acknowledging the heightened scrutiny applied to such clauses, one Florida court wrote “we do not look with favor on exculpatory clauses, we must require the draftsmen of all contracts which contain them to use clear and unequivocal language totally without a hint of deceptive come-on, or inconsistent clauses.”

In a recent opinion, Florida’s Third District Court of appeal reversed a trial court’s enforcement of a gym’s exculpatory clause.  The gym was sued by a member who was knocked unconscious by another customer. The gym contract contained language aimed at releasing the gym from claims brought by gym members. The appellate court found the language in the release that claimant would “assume full responsibility for any risk of bodily injury, death or negligence of any of the clubs or otherwise while [I am] on the premises occupied by any of the clubs,” though broad and clearly worded, conflicted with other language in the release.  Therefore, the gym was not protected against claims by the injured member.

The takeaway from the high scrutiny courts continue to apply to the enforcement of exculpatory clause is that great attention and care should be taken when crafting any such release language.  Religious organizations are well advised to have legal counsel assist with the drafting of such release provisions.

 

The Constitutional Bar to Actions for “Clergy Malpractice”

When a religious organization is sued by one of its members for physical or emotional injuries, the organization’s religious leader is typically included as a party defendant.  Though under certain circumstances a religious leader can be sued, religious leaders cannot be sued for failure to follow the religious principles of their faith.  Often termed claims for “clergy malpractice,” the First Amendment to the U.S. Constitution protects religious leaders, and their employers, from  such actions.

Claims for clergy malpractice are constitutionally barred because such actions require courts to determine whether the religious leaders properly interpreted and applied the tenets of their faith. It has been held that “[a]llowing a secular court or jury to determine whether a church and its clergy have sufficiently disciplined, sanctioned, or counseled a church member would insert the State into church matters in a fashion wholly forbidden by the Free Exercise Clause of the First Amendment.”

Therefore, when suit is brought against a religious leader, a careful review must be made to determine if the action includes a prohibited claim for clergy malpractice.  The attorneys in Gray Robinson’s Religious Organizations Practice Group can perform this important analysis.

Loose Lips Sink Ships: Protecting the attorney client privilege through litigation committees

The attorney-client privilege allows a client to candidly communicate with legal counsel without concern that the discussion will become public.  However, the privilege is only as secure as it is treated by the client.  Religious organizations involved in litigation are vulnerable to damaging disclosures of privileged communications because of the community relationship between leadership and the organizations’ membership.

Religious organizations’ leadership is primarily composed of members with deep ties to the membership. Typically, this leadership is constituted through a formal board. Because of this intimate relationship with the membership, when legal issues concerning a lawsuit come before the board, especially litigation concerning another member, it becomes extremely difficult for board members to keep from inadvertently sharing privileged information with their religious community. This difficulty is amplified for religious organizations with large boards.

The solution to this problem is the creation of a litigation committee. A litigation committee is composed of a handful of board members who become the point of contact for the lawyers.  All privileged communications pass between legal counsel and the committee members.  The committee is empowered by the full board with the authority to give legal counsel instructions.  If a report is to be made to the full board concerning litigation matters, a sanitized report can be crafted with the assistance of legal counsel. As long as the litigation committee is comprised of trusted members of the board, privileged information should be safe.

Due to the importance of protecting all attorney-client communications, a religious organization should communicate with counsel early in the course of litigation about creation of a litigation committee.

Actionable Slander Within Religious Organizations

The First Amendment right to freely hire and fire religious leaders does not completely insulate religious organizations from being sued for defamation by pastors, rabbis, and other members of leadership.

A Florida case involving a pastor who had preached for 45 years evidences the difference one court drew between the constitutionally protected decision of who is fit to lead a religious organization, and the unprotected neutral issue of whether a religious leader has been defamed.

In the lawsuit, two congregants stated the pastor had stolen money from the church to purchase a vehicle.  The pastor sued the congregants for slander.  When the case came up on appeal, the court found that based on the face of the complaint, the slander action did not concern excessive entanglement in an internal church matter, and did not concern the interpretation of religious doctrine.  The slander claim was found to concern “a neutral principal of tort law,” and therefore the pastor was permitted to continue with his action for slander against the congregants.

What is significant about that court’s logic is that although the church could have terminated the pastor and been protected under the First Amendment from a lawsuit for wrongful termination, the pastor could still proceed with a lawsuit against the persons who made the statement.  Therefore, religious organizations who have concerns with the actions of their religious leaders should consult with legal counsel on how best to address those concerns so as to maximize constitutional protections, while avoiding possible civil liabilities, such as an action for slander.

Should we accept contractual prevailing party fee provisions?

The business world is driven by contracts.  Religious organizations are not insulated from this reality.  If a synagogue needs a new roof, if a church has a hole in the parking lot that needs repair, if a loan is necessary to construct a new Buddhist temple, each of these events will require a written contract.

Parties can agree that if they end up in a lawsuit over the contract, the party who loses the case will pay the winning parties’ reasonable attorney’s fees. But should a religious organization agree to a prevailing party fee provision?

What should be considered when faced with this question is which party has more to lose from a prevailing party fee provision. For example, if a well-funded religious organization contracts with a small contractor who has limited resources, the religious organization agreeing to a prevailing party provision may not make sense.  The only party in that example who has the means to pay the other party’s attorney’s fees is the religious organization. Conversely, if a modest religious organization is contracting with a major financial institution, then the religious organization agreeing to the fee provision makes more senses.  In litigation, a prevailing party fee provision can become the rock that brings down Goliath.  Prevailing party fee provisions level the playing field for the smaller party: if the smaller party wins, it can recoup the financial burden of going through the courts.

It is also important to understand that in Florida, a religious organization does not eliminate the risk of paying an opposing party’s fees by entering into a contract that only allows the religious organization to recover fees.  Florida statute permits the award of prevailing party fees to a party who wins a case under a contract that expressly provides only the opposing party may recover fees.

Therefore, careful thought should be given to the economic realities of the contracting parties when considering a prevailing party fee provision.  The attorneys at GrayRobinson can counsel religious organizations on the best strategies for these, and other, contract terms.

Florida’s Unincorporated Not-For-Profit Religious Associations

Many churches, synagogues, and other places of worship in Florida are unincorporated.  What does it mean to be an unincorporated religious association in Florida?

The simple answer is unincorporated not-for-profit religious associations have no legal standing in Florida.  These associations cannot sue or be sued.  This means these associations also cannot enter into enforceable contracts.  The Florida Supreme Court found “such a society or association has no legal existence, and it can neither contract nor sue or be sued in its own name.”

Florida courts have repeatedly held that until the legislature passes laws (as other states have done) recognizing an unincorporated association’s ability to sue and be sued, these associations will continue to lack any legal rights.  Florida’s First District Court of Appeal stated: “[U]nincorporated associations whose functions are fraternal or social…are a legal enigma in Florida. Although we can talk about them, define them, pledge allegiance to them and contribute money to them…, we cannot sue them. We can only attack their members.” As evidenced by the comments of the Appellate Court, existing as an unincorporated association exposes the religious association’s members to being sued.  Some courts have even stated the only way to sue an unincorporated not-for-profit association is to sue all of its members.

Religious groups in Florida should therefore consult legal counsel to determine the best strategy for their existence: incorporate and assume the ability to contract, sue and be sued; or, exist as an unincorporated association and enjoy protection against suit, while exposing the association’s members to possible liabilities.  The attorneys in GrayRobinson’s Religious Organizations practice group can counsel religious organizations through this decision.

 

To Remove a Neighbor’s Tree Roots or Not… That is the Question!

In the November 15, 2018 blog post, we addressed the importance of religious organizations keeping properties free of known tripping hazards.  Of the many common tripping dangers, tree roots are a consistent problem.  Roots can raise sidewalks, create hazardous cracks in roadways, and can simply grow so big that the roots become their own hazard.  Therefore,  a property owner wisely removes dangerous roots when they arise.  But what happens when the tree that is the source of the roots grows on a neighbor’s property?  Can the removal of roots from the neighboring tree create a responsibility to pay for injury to the neighbor’s tree?

Under Florida law, an owner of a healthy tree is not liable to an adjoining property owner for damage caused by encroaching tree branched or roots.  Similarly, the adjoining property owner is permitted to trim back, at its own expense, any encroaching tree roots or branches which have grown onto the adjoining property.

In the recent appellate opinion of Balzar v Ryan, the court refused to hold an adjoining property owner responsible for damaging a neighbor’s tree when the adjoining property owner removed tree roots encroaching upon the property owner’s land.  This finding is good news for property owners attempting to keep the land free of tripping hazards. Landowners may responsibly remove encroaching roots from neighboring trees without concern that damage to the tree will result in a claim against the adjacent landowner.

The take away: property owners should always err on the side of removing tree roots as part of the continued effort to keep the premises safe.