FROM JEFFERSON CIRCUIT COURT HONORABLE JUDITH E.
MCDONALD-BURKMAN, JUDGE ACTION NO. 15-CI-002624
FOR APPELLANT: Stephen B. Pence Louisville, Kentucky.
FOR APPELLEE: John O. Sheller Steven T. Clark Louisville,
Kentucky AMICUS BRIEF: Bryan H. Beauman Lexington, Kentucky
Eric S. Baxter Washington, DC.
BEFORE: ACREE, COMBS AND D. LAMBERT, JUDGES.
appeal arises from a summary judgment in favor Presbyterian
Church (U.S.A.) relating to an action claiming slander and
libel brought by a former employee, Roger Dermody. Appellate
review requires consideration and application of the
ecclesiastical-abstention doctrine and ministerial exception.
After review, we affirm.
AND PROCEDURAL BACKGROUND
Church (U.S.A.) (PC(USA)) is the corporate entity for the
largest Presbyterian denomination in the United States. The
highest ecclesiastical governing body of PC(USA) is the
General Assembly which oversees five agencies, including the
Presbyterian Mission Agency (PMA). The PMA is the mission and
ministry agency of PC(USA). Its operations are governed by a
Board and such operations must comply with the directives of
the General Assembly and PC(USA)'s
Dermody was ordained by the Presbyterian Church as a minister
in 1997. In June 2010, PMA recruited Dermody from Bel Air
Presbyterian Church in Los Angeles, California, to be the
Deputy Executive Director for Missions in Louisville,
Kentucky. In his position at the PMA, he had oversight of the
agency's five ministry areas of missional work and their
PMA's mission projects was called "1001 New
Worshipping Communities, " and the Director of the
initiative reported to Dermody. In late 2013, in what the
record indicates was well-intentioned efforts to facilitate
the project, several PMA staff members created and
incorporated a non-profit corporation, Presbyterian Centers
for New Church Innovation, Inc. (PCNCI). It is unfortunate
that these efforts were not in compliance with the
Church's Incorporation Policy and Criteria and lacked the
General Assembly's approval.
January 2014, in two email threads, each of which included
Dermody as a participant, there was discussion of the
existence of the non-profit entity, its incorporation and its
pursuit of tax-exempt status. For Dermody's part, he
asked why PC(USA) employee Craig Williams, one of PCNCI's
incorporators, was not making his expected and regular
contacts with Presbytery leadership (the Mid-Council
Engagement initiative). The answer came from another PC(USA)
employee and PCNCI incorporator, Eric Hoey, who explained
that Williams was "running his own shop as a non-profit
entity." Dermody responded, "That's what I
thought but I wanted to make sure." (R. 775). Nothing in
this or any part of the record indicates that Dermody
inquired of Hoey or Williams as to whether, in the process of
forming the non-profit entity, they had complied with PMA
regulatory policy or obtained approval of the General
Assembly. Dermody would later say, in response to
PC(USA)'s written Employment Warning, "It never
dawned on me that our staff would do something as stupid as
go outside our organization and separately incorporate."
incorporating PCNCI, its principals submitted grant requests
to fund the project. In March 2014, $100, 000.00 of PC(USA)
funds were transferred to the new non-profit.
thereafter, the PMA Office of Legal Services learned of
PCNCI's existence through internal control procedures.
Steps were taken to end PCNCI's operations, to return the
transferred funds, and to prevent an additional transfer of
funds that was in progress. These events prompted
PC(USA)'s internal audit and investigation of the matter.
Audit Committee issued a Report to the PMA Board of Directors
in August 2014. The Report was posted on the PC(USA) website
in October 2014. The report concluded:
The actions which led to this investigation indicate a
serious lack of regard for and adherence to the established
policies and procedures of the PC(USA) and PMA. The Board and
PMA have a solemn fiduciary responsibility to their donors,
who expect their gifts to be used wisely and in accordance
with restrictions and with budgets and priorities which have
been adopted appropriately. These policies are in place to
safeguard these assets. . . .
An independent corporation was formed by PC(USA) employees,
without PMA authorization, using a virtually identical
program name and website, transferring grant funding, and
planning transfer of PC(USA) employees and further grant
funding to the unauthorized separate corporation. The claimed
purpose was to ensure the future existence of the program
without reliance on PMA budget constraints, without exposure
to PMA budget cuts and without potential impact from any
changes in PMA leadership.
(R. 216). The Report identified four employees who were found
to have violated the Ethics Policy based upon failure to
follow established and known policies in the establishment of
the unauthorized corporation. Dermody, in his role atop the
PMA structure, was one of the four identified. The findings
as to Dermody were that he: failed to properly supervise his
subordinates who created PCNCI without proper authority;
failed to inform legal counsel when he learned in January
2015 of PCNCI's existence; contributed to a culture of
disregard of PC(USA) policies by his subordinates; and
empowered Hoey, a PMA employee with "known performance
issues, " to control a significant PMA initiative
without proper oversight. These findings were deemed
sufficient to conclude that Dermody had committed ethics
violations because its Ethics Policy provides:
All funds received and administered by the PMA . . . are
entrusted to the organization by God through the faithful
financial support of PCUSA members and friends. The highest
degree of stewardship and fiduciary responsibility is
expected of all employees . . . .
received a written Employment Warning as required by the PMA