Brazauskas v. Fort Wayne-South Bend Diocese, Inc.

Attorneys for Appellant Attorneys for Appellee
Stephen M. Terrell William T. Hopkins, Jr.
Landman & Beatty Michael A. Scheer
Indianapolis, Indiana Barnes & Thornburg
Fort Wayne, Indiana
Edward N. Kalamaros & Associates
South Bend, Indiana
__________________________________________________________________________

In the
Indiana Supreme Court
_________________________________

No. 71S03-0205-CV-268

Beverly M. Brazauskas,
Appellant (Plaintiff below),

v.

Fort Wayne-South Bend Diocese, Inc.,
Sacred Heart Parish, and Jose Martelli,

Appellees (Defendants below).

_________________________________

Appeal from the St. Joseph Superior Court, No. 71D07-9302-CP-10017
The Honorable Michael D. Cook, Judge
_________________________________

On Petition To Transfer from the Indiana Court of Appeals, No. 71A03-0102-
CV-55
_________________________________

September 25, 2003

Shepard, Chief Justice.

Appellant Beverly Brazauskas sued Father Jose Martelli and the Fort
Wayne-South Bend Catholic Diocese for blacklisting and tortious
interference with a business relationship. She claims that after Father
Martelli terminated her employment at Sacred Heart Church, he and Bishop
John D’Arcy of the Diocese prevented her from obtaining a position at the
University of Notre Dame by truthfully informing University President
Father Edward Malloy that Brazauskas was suing them over this termination
decision.

We conclude that even if this scenario occurred as she describes, her
suit fails under the First Amendment’s Free Exercise Clause.

Facts and Procedural History

Sacred Heart Parish, a part of the Diocese, is located on the campus
of the University of Notre Dame near South Bend. In August 1992, Parish
pastor Father Martelli dismissed Brazauskas from her position as Director
of Religious Education and Liturgy at Sacred Heart Church.

Brazauskas sued the Diocese (which includes the Parish) and Father
Martelli on a variety of grounds, including breach of contract, breach of
the covenant of good faith and fair dealing, wrongful discharge, fraud,
defamation, promissory estoppel, and infliction of emotional distress.
All these claims were eventually dismissed in various proceedings.

While her employment lawsuit was pending, Brazauskas applied for a
position as Acting Director of Notre Dame’s Program for Church Leaders
(PCL), a sabbatical program. In June 1993, a search committee recommended
her for the job.

Father Malloy rejected the recommendation, believing that Notre Dame
“should not hire someone who has an active lawsuit against the local bishop
until that matter [is] resolved.” (Id. at 422.) He explained, “I consider
a [C]atholic university to desirably have a positive and respectful
relationship to the [C]atholic church community, including the local
bishop,” and hiring someone who had a pending lawsuit “would be a gesture
of ill will until such a matter was resolved by the courts.” (Id. at 423.)
[1]

This view is consistent with Ex Corde Ecclesiae, a 1990 directive of
Pope John Paul II based on Roman Catholic canon law that addresses the
relationship between Catholic universities and local diocesan bishops. Ex
Corde Ecclesiae encourages “close personal and pastoral relationships
between university and Church authorities characterized by mutual trust,
close and consistent cooperation and continuing dialogue.” (Appellant’s
App. at 1013.)

After she failed to receive the PCL position, Brazauskas added claims
for blacklisting and tortious interference with a business relationship to
her lawsuit against Father Martelli and the Diocese. See Ind. Code Ann. §§
22-5-3-1, 2 (West 1991). [2] Brazauskas did not challenge Father Malloy’s
or Notre Dame’s legal right to deny her the PCL position for the reason
Father Malloy gave.

In February 2001, the trial court dismissed both of these claims for
lack of subject matter jurisdiction. The Court of Appeals affirmed.
Brazauskas v. Fort Wayne-South Bend Diocese, Inc., 755 N.E.2d 201 (Ind. Ct.
App. 2001). We granted transfer, and now affirm, concluding that the trial
court had jurisdiction over the matter but that the Diocese defendants were
entitled to judgment on the merits.

I. The Procedural Posture

As a preliminary matter, we address the appropriate procedure for
seeking dismissal of a suit by asserting a Free Exercise Clause defense.

In 1997, the trial court denied the Diocese defendants’ motion for
summary judgment on the tortious interference and blacklisting claims. On
appeal of this ruling, the Court of Appeals noted sua sponte that the
Diocese defendants should have challenged subject matter jurisdiction via
motions to dismiss for lack of subject matter jurisdiction under Indiana
Trial Rule 12(B)(1) rather than via summary judgment motions. See
Brazauskas v. Fort Wayne-South Bend Diocese, Inc., 714 N.E.2d 253, 259
(Ind. Ct. App. 1999). Following that guidance, the Diocese defendants
accordingly argue that the trial court lacked subject matter jurisdiction
over the tortious interference and blacklisting claims under Rule 12(B)(1).

Other courts have resolved this procedural question differently. In
Bryce v. Episcopal Church, 289 F.3d 648 (10th Cir. 2002), the Tenth Circuit
dealt with an analogous claim brought by two church members claiming sexual
harassment in the form of remarks made during parish meetings about
homosexuals and the two members’ homosexual activities. Id. at 651-53.
The church responded that the remarks were part of ecclesiastical
discussions on church policy, so the claims were barred. Id. at 651.

Applying rules of federal procedure, the Tenth Circuit treated the
church’s challenge as a Rule 12(B)(6) motion to dismiss for failure to
state a sufficient claim. Id. at 654. It found no abuse of discretion by
the trial court in considering evidence beyond the pleadings, thereby
converting the motion to dismiss into a summary judgment motion, and
affirmed judgment for the church. Id. at 654, 660. See also McKelvey v.
Pierce, 800 A.2d 840, 844 (N.J. 2002) (applying state rules of procedure
and treating contract and tort suit by former seminarian claiming damages
stemming from unwanted homosexual advances as motion for judgment on the
pleadings that effectively became a summary judgment motion).

We agree with the approach taken by these two courts, and hold that
the trial court erred in concluding that it lacked jurisdiction over this
matter. A court with general authority to hear matters like employment
disputes is not ousted of subject matter or personal jurisdiction because
the defendant pleads a religious defense. Rather, pleading an affirmative
defense like the Free Exercise Clause may under certain facts entitle a
party to summary judgment.

We will proceed with our review using the standard applicable to
summary judgment, as the trial court did not exclude matters submitted
outside the pleadings. See Ind. Trial R. 12(B), 56. We will therefore
consider whether there is any genuine issue of material fact and whether
the Diocese defendants as the moving parties are entitled to judgment as a
matter of law. T.R. 56. In doing so, we construe all facts and reasonable
inferences in the light most favorable to Brazauskas as the nonmoving
party. See State Farm Fire & Cas. Co. v. T.B., 762 N.E.2d 1227 (Ind.
2002).

II. The Changed Landscape of Blacklisting Law

Had these events occurred two years later, our disposition would be
quite simple. In 1993, Indiana’s blacklisting statute read about the same
as it had upon initial enactment in 1889, namely:
A person who, after having discharged any employee from his service,
prevents the discharged employee from obtaining employment with any
other person commits a Class C infraction, and is liable in penal
damages to the discharged employee, to be recovered by a civil action;
but this section does not prohibit a person from informing, in
writing, any other person to whom the discharged employee has applied
for employment, a truthful statement of the reasons for discharge.

If any railway company or any other company or partnership or
corporation in this state shall authorize, allow or permit any of its
or their agents to black-list any discharged employees, or attempt by
words or writing, or any other means whatever, to prevent such
discharged employee, or any employee who may have voluntarily left
said company’s service, from obtaining employment with any other
person, or company, said company shall be liable to such employee in
such sum as will fully compensate him, to which may be added exemplary
damages.

Ind. Code Ann. §§ 22-5-3-1, 2 (West 1991).

In 1995, however, the General Assembly added an important exception:
An employer that discloses information about a current or former
employee is immune from civil liability for the disclosure and the
consequences proximately caused by the disclosure, unless it is proven
by a preponderance of the evidence that the information disclosed was
known to be false at the time the disclosure was made.

Ind. Code Ann. § 22-5-3-1(b) (West 2002).

Brazauskas does not claim that any of the alleged disclosures that led
to her denial of the PCL position were false. She would therefore have no
claim for blacklisting under the revised statute.

She would likewise not have a claim for tortious interference, because
in Indiana this tort requires some independent illegal action. See, e.g.,
Watson Rural Water Co., Inc. v. Ind. Cities Water Corp., 540 N.E.2d 131
(Ind. Ct. App. 1989). Brazauskas’ only other allegation of illegal conduct
is the blacklisting claim (Appellant’s Br. at 18) so both would fail with
no need to reach the Diocese defendants’ constitutional argument.

III. The Factual Premise

Notwithstanding subsequent legislative action, we must apply the
statute as it existed in 1993. Brazauskas’ complaint alleges that the
Bishop and Father Martelli prevented her from obtaining employment at Notre
Dame.[3] She bases her claim primarily on a letter Father Martelli wrote
more than six months before she applied for the PCL job and on influence
allegedly exerted by the Bishop that prompted Father Malloy to deny
Brazauskas the position.

Father Martelli’s writing was a response to two letters he received
from one of Brazauskas’ supporters, Notre Dame Theology Department
Assistant Chairman Kern Trembath. In the first letter, Dr. Trembath
accused Father Martelli of scandalizing the Church by firing Church
employees, saying, “the fact that you are allowed to remain a priest is
simply and strictly a measure of the worldwide shortage of priests.”
(Appellant’s App. at 1082.) He described Father Martelli as “a bad priest,
and . . . not a cultural American.” (Id.) Dr. Trembath and his wife
followed up with a second letter a week later, threatening legal action on
their own behalf and demanding “[c]omplete resolution of Beverly
Brazauskas’ issue against you to the satisfaction of her and her attorney.”
(Id. at 1083.)

In early November, Father Martelli sent copies of these letters to
Father Malloy, along with his own letter saying that the Trembath letters
“include charges and accusations so alarming in nature that I would be
remiss not to bring them to your attention.” (Id. at 1081.) Martelli’s
letter mentioned Brazauskas only to explain that her termination had
precipitated this verbal assault, and did not criticize her or her actions.
(Id.) Father Martelli stated that he was writing “for your information
and not with the intent of causing more trouble for anyone.” (Id.) He
copied the correspondence to Bishop D’Arcy, among others.

Brazauskas does not explain how such a letter could support a
reasonable inference that by making others aware of Trembath’s accusations
Father Martelli prevented her from getting the PCL position.

Her allegations against the Bishop are on similarly shaky factual
ground. Both Bishop D’Arcy and Father Malloy deny that they ever discussed
the PCL position, much less Brazauskas’ candidacy. (Appellant’s App. at
139-40, 422-24.) Brazauskas says she can prove otherwise, through
circumstantial evidence such as records of telephone calls between the
Bishop and Father Malloy’s office. (See Appellant’s Br. at 9-10.) The
evidence she offers is at most marginally sufficient to raise a genuine
issue of material fact, but for reasons explained below her claim would
fail in any event.

IV. Ex Corde Ecclesiae

The Diocese defendants successfully argued to the trial court and
Court of Appeals that they lacked jurisdiction because secular review of
Brazauskas’ claims would constitute excessive entanglement and violate the
Free Exercise clause of the First Amendment of the U.S. Constitution, which
is applicable to the states through the Fourteenth Amendment. Brazauskas,
755 N.E.2d at 207-08. [4] They likewise urge us to hold that Ex Corde
Ecclesiae forecloses court inquiry because under the First Amendment courts
may neither interpret such documents nor penalize the practice of religion
in fulfillment of the provisions of such a document. (Appellees’ Br. at
40.)

This argument is somewhat circular. We cannot simply accept that Ex
Corde Ecclesiae governed the alleged action without some review of the
document. See Draskovich v. Pasalich, 151 Ind. App. 397, 401, 280 N.E.2d
69, 72 (1972) (“Notwithstanding the limitations imposed on the civil courts
. . . the civil courts can (and indeed must in some cases) look at
ecclesiastical documents and related evidence concerning religious rites,
doctrines, polity and practices for the limited purpose of determining the
nature of the church organization.”)

We also cannot accept without question an assertion that the courts
may not review the legality of an action because that action was pursuant
to a directive from higher church authority. See Employment Div. v.
Smith, 494 U.S. 872 (1990). In Smith, the plaintiffs ingested peyote
during a sacramental ceremony of their Native American Church. Id. at
874. They were consequently fired from their jobs at a drug rehabilitation
organization and denied unemployment benefits. Id.

The Supreme Court upheld the denial of benefits, holding that the Free
Exercise Clause does not exempt religiously motivated action from neutral
laws of general applicability. Id. at 881-82, 890. Therefore, under
Smith, church directives such as Ex Corde Ecclesiae are not the end of the
story, because they do not automatically insulate the faithful from such
neutral laws of general applicability as Indiana’s blacklisting statute.

This is not to say that Ex Corde Ecclesiae is wholly irrelevant to
this case. It establishes that higher church authority (namely, the Pope)
has directed Catholic universities such as Notre Dame and local Catholic
diocese officials to cooperate closely, communicate, and develop an
environment of mutual trust. Bishop D’Arcy and other diocesan personnel
would therefore be acting in accordance with ecclesiastical directive in
keeping Father Malloy apprised of diocesan developments, including pending
lawsuits, and in coordinating with him on administrative and policy
matters.

V. The Church Autonomy Doctrine After Smith

There is an important and relevant limitation in the Smith decision.
Justice Scalia specifically noted that the case presented “a free exercise
claim unconnected with any communicative activity.” Id. at 882. Here, in
contrast, the challenged activity was communicative.[5]

Smith is distinguishable in another important respect, because it did
not implicate the church autonomy doctrine. This doctrine deals with a
church’s First Amendment right to autonomy in “making decisions regarding
[its] own internal affairs,” including matters of faith, doctrine, and
internal governance. Bryce, 289 F.3d at 655.

The Bryce court cited Kedroff v. St. Nicholas Cathedral, 344 U.S. 94
(1952), in which the Supreme Court applied the First Amendment and struck
down a statute that reassigned control over a cathedral among church
officials. In Kedroff, the Court said that religious freedom encompasses
“an independence from secular control or manipulation, in short, power [of
churches] to decide for themselves, free from state interference, matters
of church government as well as those of faith and doctrine.” Id. at 116-
17.

The Tenth Circuit concluded, and we agree, that “[t]he Supreme Court’s
decision in Employment Division v. Smith . . . does not undermine the
principles of the church autonomy doctrine.” Bryce, 289 F.3d at 656. See
also EEOC v. Catholic Univ. of Am., 83 F.3d 455, 462 (D.C. Cir. 1996) (Free
Exercise clause forbids governmental action that encroaches on a church’s
ability to manage its internal affairs).

This doctrine does, of course, have limits. As the New Jersey Supreme
Court recently said, “The First Amendment does not immunize every legal
claim against a religious institution and its members. The analysis in
each case is fact-sensitive and claim specific, requiring an assessment of
every issue raised in terms of doctrinal and administrative intrusion and
entanglement.” McKelvey, 800 A.2d at 844 (finding genuine issues of
material fact as to whether former seminarian’s claim that unwanted
homosexual advances damaged his career prospects could be litigated without
offending First Amendment principles).

Brazauskas would have us apply the blacklisting statute and tort law
to penalize communication and coordination among church officials (all
answerable to higher church authority that has directed them to work
cooperatively) on a matter of internal church policy and administration
that did not culminate in any illegal act. Such a holding would violate
the church autonomy doctrine and run counter to the Court’s declaration in
Cantwell v. Connecticut, 310 U.S. 296, 307 (1939): “The fundamental law
declares the interest of the United States that the free exercise of
religion be not prohibited and that freedom to communicate information and
opinion be not abridged.”[6]

We therefore conclude that under these facts the Free Exercise Clause
entitles the defendants to summary judgment on Brazauskas’ blacklisting
claim. Her tortious interference claim fails for similar reasons, as well
as the fact that she has not proven any illegal conduct by the Diocese
defendants.

Conclusion

We reverse dismissal of the case for lack of subject matter
jurisdiction, and remand for entry of summary judgment in favor of the
Diocese defendants.

Dickson, Boehm, and Rucker, JJ., concur.
Sullivan, J., concurs in part and dissents in part with separate opinion.
Sullivan, Justice, concurring in part and dissenting in part.

I agree with the majority that the trial court had jurisdiction and
that Plaintiff's allegations of blacklisting and interference are "at most
marginally sufficient to raise a genuine issue of material fact." Maj. Op.
at 7. But I disagree that the Diocese is entitled to summary judgment as a
matter of law.

Employment Div. v. Smith, 494 U.S. 872, 881 (1990), announced that the
First Amendment rarely “bars application of a neutral, generally applicable
law to religiously motivated action.” The Indiana blacklisting statute and
common law tort of interference with prospective advantage at issue here
are neutral laws of general applicability. The majority holds that,
notwithstanding Smith, the Diocese is entitled to summary judgment as a
matter of law for two reasons. First, the majority finds that the
challenged activity here was “communicative” and that Smith contains an
exception to its general rule for Free Exercise claims connected with
“communicative activity.” Second, the majority finds that the challenged
activity here is protected by the "church autonomy doctrine" that survived
Smith.

As to the communicative activity defense, the phrase from Smith cited
by the majority is part of a larger discussion in which the Supreme Court
stated its precedents could not be read to allow individuals to engage in
otherwise prohibited conduct merely because the conduct is accompanied by
religious conviction. See Smith, 494 U.S. at 882 (“‘Our cases do not at
their farthest reach support the proposition that a stance of conscientious
opposition relieves an objector from any colliding duty fixed by a
democratic government.’”) (quoting Gillette v. United States, 401 U.S. 437,
461 (1971)). As such, it does not establish an exception from Smith’s
general rule for all communicative activity. At most, the term
"communicative activity" encompasses merely that communicative activity
that is protected by constitutional provisions other than the Free Exercise
Clause. Smith, 494 U.S. at 881-82 (discussing prior cases). In my view,
the “communicative activity” that forms the basis of Brazauskas’s claims
does not meet this standard.1

As to the church autonomy doctrine defense, the Supreme Court has not
yet had occasion to make clear whether this doctrine survived Smith.2 I
find it hard to reconcile Smith with the doctrine’s continued vitality, at
least as applied to the facts of this case.

Smith held to be constitutional a law banning the sacramental use of
peyote because the law was both neutral and generally applicable. 494 U.S.
at 878-82, 890. A central concern behind Smith’s neutrality principle is
the notion that a private right to ignore neutral and generally applicable
laws is, and should remain, a constitutional anomaly. See Smith, 494 U.S.
at 879, 885. The arguments used to support the neutral and generally
applicable standard cut against the continued vitality of the church
autonomy defense. Mere religious belief has never been a cognizable shield
“from compliance with an otherwise valid law prohibiting conduct the State
is free to regulate.” Smith, 494 U.S. at 879. Indeed, in the few cases
where the U.S. Supreme Court applied the church autonomy defense, the law
in question was neither neutral nor generally applicable. See Kedroff v.
St. Nicholas Cathedral of the Russian Orthodox Church in N. Am., 344 U.S.
94 (1952) (invalidating 1925 New York statute that effectively put the
Russian Orthodox churches of New York under the administration of the
Russian Church in America).

Even if the church autonomy defense survived Smith, I do not believe
it bars Brazauskas’s claim.

The church autonomy doctrine prohibits the government from “lend[ing]
its power to one or the other side in controversies over religious
authority or dogma.” Smith, 494 U.S. 877. Since its inception, the
doctrine has resonated most strongly in cases involving members of the
clergy because these are the cases that run the greatest risk of forcing
the government to take sides in a factional religious dispute. But courts
have not used the Free Exercise Clause to bar claims by non-ministerial
employees of a religious institution. See Shawna Meyer Eikenberry, Note,
Thou Shalt Not Sue the Church: Denying Court Access to Ministerial
Employees, 74 Ind. L.J. 269, 276 (1998).

Moreover, the church autonomy defense does not prohibit a state court
from resolving church disputes if the court can and does resort to neutral
principles of law and applies them in a secular fashion. See Jones v.
Wolf, 443 U.S. 595, 602-04 (1979) (analyzing church property dispute by
using neutral principles of law). This is because in so doing, a state
court avoids making determinations of the underlying religious dispute.

In the present case, Brazauskas claims that certain individuals
unlawfully denied her the opportunity to work at a university. Neither
party suggested, as the church autonomy defense has traditionally required,
that her prospective position would have involved ministerial-type duties.
To the extent that Brazauskas’s claim can be characterized as a religious
dispute at all, the church autonomy defense does not bar a claim where
neutral principles of law are available to resolve the case. The Indiana
blacklisting statute and the tort of interference with prospective
advantage are religiously neutral and generally applicable. Far from
advantaging any particular religious faction or group, the laws provide for
the general welfare by protecting an open and free market of labor in all
spheres. The Legislature could have accommodated custom by providing an
exception to the law but it did not. Neither the Indiana blacklisting
statute nor the tort of interference with prospective advantage benefits
any one religious faction over any other. And just as there was no
contention in Smith that the Oregon drug law was “an attempt to regulate
religious beliefs,” neither is there any similar contention here. See
Smith, 494 U.S. at 882.

-----------------------
[1] Father Malloy also ordered dissolution of the PCL, and testified that
he thought the program had already been eliminated. (Appellant’s App. at
407.) Brazauskas has gone to lengths to try to prove that Father Malloy
terminated the program “to implement the Bishop’s desires that Beverly
Brazauskas not be hired at Notre Dame.” (Appellant’s Br. at 13.) For
reasons explained below this makes no difference to the resolution of this
case.
[2] The Diocese defendants correctly point out that the more appropriately
styled claim would be tortious interference with prospective advantage.
(Appellee’s Br. at 22); see Kiyose v. Trustees of Ind. Univ., 333 N.E.2d
886 (Ind. Ct. App. 1975).
[3] She also complains that the defendants prevented her from obtaining
employment at any other Parish or Catholic institution in the Diocese, but
this complaint is waived for lack of argument that she sought or was denied
any such positions. See Ind. Appellate. Rule 46(A)(8)(b).
[4] They make no claim under the Indiana Constitution, so we do not address
its applicability to the case.
[5] In her complaint Brazauskas alleges, despite Bishop D’Arcy’s deposition
testimony that he had “no clout” in employment-related matters at Notre
Dame, that the Diocese exercised “abuse of power . . . undue influence
and/or duress” in preventing her employment as PCL director. (Appellee’s
App. at 20, 142; Appellant’s Br. at 8.) Brazauskas supports this
contention only by asserting that Ex Corde Ecclesiae, which calls only for
cooperative effort, gives the Bishop authoritative influence over Notre
Dame. (Appellant’s Br. at 8, n.2.) This is not enough to support a
reasonable inference that the Bishop controlled the decision regarding
Notre Dame’s PCL director, but even assuming that he did exercise decisive
influence over this undisputedly legal action, our conclusion would be the
same.
[6] This is not to say that the Free Exercise Clause would prevent
prosecution for an agreement with another person to commit a felony, even
if that other person is another church member or official and the agreement
implicates ecclesiastical issues, if the state also proves an overt act in
furtherance of that agreement in accordance with Indiana’s conspiracy
statute. See Ind. Code Ann. § 35-41-5-2 (West 2001). For example, a
defendant charged with conspiracy to commit murder via terroristic attacks
could not insulate himself from liability merely by claiming that the
agreement element of the crime occurred within a protected discussion of
church doctrine or policy.
1 None of the majority, Brazauskas, or the Diocese appear to suggest that
the disputed communicative activity would be constitutionally protected
absent the claim of religious conviction.

2 I acknowledge the majority's citations to two federal Courts of Appeal
that have so held. Bryce v. Episcopal Church, 289 F.3d 648 (10th Cir.
2002); EEOC v. Catholic Univ. of Am., 83 F.3d 455 (D.C. Cir. 1996).