Hutterville Hutterian Brethren, Inc. v. Sveen

• Decision Date: 13 January 2015
• Docket Number: No. 13–3160.,13–3160.
• Citation: 776 F.3d 547
• Parties: HUTTERVILLE HUTTERIAN BRETHREN, INC., a South Dakota nonprofit corporation; George Waldner, Sr.; Tom Waldner; Kenneth Waldner, individually and as officers and directors of Hutterville Hutterian Brethren, Inc., Plaintiffs–Appellants v. Jeffrey T. SVEEN; Rodrick L. Tobin; Harvey C. Jewett; Siegel, Barnett & Schutz, L.L.P., a South Dakota limited liability partnership, Defendants–Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

776 F.3d 547

HUTTERVILLE HUTTERIAN BRETHREN, INC., a South Dakota nonprofit corporation; George Waldner, Sr.; Tom Waldner; Kenneth Waldner, individually and as officers and directors of Hutterville Hutterian Brethren, Inc., Plaintiffs–Appellants

v.Jeffrey T. SVEEN; Rodrick L. Tobin; Harvey C. Jewett; Siegel, Barnett & Schutz, L.L.P., a South Dakota limited liability partnership, Defendants–Appellees.

No. 13–3160.

United States Court of Appeals, Eighth Circuit.

Submitted: Sept. 23, 2014.

Filed: Jan. 13, 2015.

Rehearing and Rehearing En Banc Denied Feb. 17, 2015.^*

David Bradley Olsen, argued, Minneapolis, MN (Court J. Anderson, Minneapolis, MN, Steven Daniel Sandven, Sioux Falls, SD, on the brief), for Appellant.

Robert B. Anderson, argued, Pierre, SD (Thomas G. Fritz, Rapid City, SD, on the brief), for Appellee.

Before RILEY, Chief Judge, LOKEN and KELLY, Circuit Judges.

Opinion

RILEY, Chief Judge.

This case publishes a new chapter in the legal struggle for control of Hutterville Hutterian Brethren, Inc. (Hutterville), a South Dakota religious nonprofit corporation whose members have split into factions, mirroring a larger division in the Hutterite religion. Though both factions claim the right to control Hutterville, the South Dakota Supreme Court has ruled this issue is not constitutionally determinable by secular courts under either the federal constitution or the state constitution because the questions of corporate governance cannot be answered without delving into disputes of ecclesiastical¹ polity and hierarchy which “are shielded from judicial scrutiny under the First Amendment.”Hutterville Hutterian Brethren, Inc. v. Waldner (Hutterville I ), 791 N.W.2d 169, 179–80 (S.D.2010) (no jurisdiction to answer governance issues); see also Wipf v. Hutterville Hutterian Brethren, Inc. (Hutterville II ), 808 N.W.2d 678, 686 (S.D.2012) (no jurisdiction to mandate corporate dissolution). With the South Dakota Supreme Court effectively leaving a legal stalemate, the leaders of one faction brought the present suit against several attorneys and a law firm who allegedly conspired with leaders of the other faction to “manufacture” the apparent religious schism and improperly place the conspiring faction leaders in command of Hutterville.

The district court² dismissed the case, reasoning it could not determine the presence of standing under Article III of the United States Constitution without reaching the same religious impasse that halted the South Dakota state courts. Equipped with appellate jurisdiction, see 28 U.S.C. § 1291, we affirm.

I. BACKGROUND

A. History

As the South Dakota Supreme Court explained, the Hutterite religion descends—like the Amish and Mennonite religions—from the Anabaptist movement in sixteenth-century Germany and takes its name from its founder, Jacob Hutter, who was burned at the stake in Innsbruck in 1536. See Hutterville II, 808 N.W.2d at 680 ; Decker ex rel. Decker v. Tschetter Hutterian Brethren, Inc., 594 N.W.2d 357, 359 (S.D.1999). In the 1870s and 80s, the Hutterites fled religious persecution in Europe, relocating in Canada and the northern United States, where their colonies remain today. See Decker, 594 N.W.2d at 359. One of the more distinguishing characteristics of the Hutterite faith is what the South Dakota Supreme Court referred to as a “community of goods”—Hutterites must disavow individual property ownership in favor of a communal lifestyle within each colony. See Hutterville II, 808 N.W.2d at 680.

As the Waldners explain, the Hutterian Brethren Church (Hutterian Church) is organized into three conferences—the Dariusleut, Lehrerleut, and Schmiedeleut Conferences—with each Hutterite colony belonging to one of these conferences. Hutterville Colony (the congregation associated with Hutterville, the corporation) is a South Dakota colony historically belonging to the Schmiedeleut Conference. See id. Consistent with the community-of-goods principle, members of Hutterville Colony live a communal lifestyle with all of the colony's real and personal property belonging to Hutterville. See id. Hutterville itself is a South Dakota nonprofit corporation, managed by an elected board and elected officers, who operate Hutterville as a communal farm for the colony. Formed with the stated purpose of promoting the Hutterite faith and Hutterian Church, Hutterville conducts the colony's business and owns all property in lieu of individual property ownership.

In 1983, when Hutterville and Hutterville Colony first formed, Reverend Jacob Kleinsasser was the Senior Elder (i.e., the spiritual and ecclesiastical leader) of the Schmiedeleut Conference. See Decker, 594 N.W.2d at 360. According to the complaint, this position made Rev. Kleinsasser “the final arbiter or decision-maker regarding issues affecting the members of the Church.”

Around 1992, a large group of Hutterite ministers repudiated Rev. Kleinsasser's leadership in response to accusations of impropriety, and these ministers opted instead to follow Reverend Joseph Wipf. See id. The remaining ministers supported Rev. Kleinsasser. See id. Colonies following Rev. Wipf (forming the Schmiedeleut “Group 2”) solidified their division in 1993 by ratifying a new constitution which purported to institute new conference leadership.See Hutterville II, 808 N.W.2d at 680. Rev. Kleinsasser's colonies (forming the Schmiedeleut “Group 1”) refused to adopt the 1993 constitution, preserving their position in favor of Rev. Kleinsasser. See id. As the South Dakota Supreme Court explained, “[e]ach Group maintained that it was the true Schmiedeleut.” Id. (emphasis added) (quotations omitted).

Meanwhile, according to the complaint, Reverend George Waldner, Sr.—Hutterville Colony's minister and ecclesiastical leader, as well as Hutterville's president and one of its directors—remained loyal to Rev. Kleinsasser and insisted that Hutterville Colony belong to Group 1 of the Schmiedeleut Conference. Not everyone in the Hutterville Colony agreed, and the members of Hutterville split into Group 1 (Waldner faction) and Group 2 (Wipf faction) supporters. See id.

Fifteen years later, the tensions of this internal split boiled over. The complaint alleges that through a series of “sham” corporate meetings in late 2008 and early 2009, a number of Wipf faction members were improperly elected to replace Waldner faction officers and directors. Among these was Johnny Wipf, who claimed to have been elected president to replace Rev. Waldner. Rev. Waldner and his faction challenged the validity of these elections and claimed Waldner faction members still maintained control. At loggerheads over who controlled the corporation, each faction began having its own member and board meetings and conducted business in the name of the company, all the while condemning the other faction's purported officers and directors as fraudulent imitators.

B. Hutterville's State Court Litigation

In August of 2009, Johnny Wipf and other Wipf faction members brought suit in South Dakota state court against Rev. Waldner, Tom Waldner, and Kenneth Waldner (Waldners), “seeking a declaration that [the Wipf faction members] were the properly elected directors of Hutterville.” Hutterville I, 791 N.W.2d at 172. Using Hutterville's bylaws and articles of incorporation, the state trial court determined the Wipf faction members were its duly elected directors and officers. See id. After the unfavorable decision, Rev. Waldner, who remained minister of the Hutterville church, and Rev. Kleinsasser signed a “Resolution of Action Taken by Hutterian Church Group I,” which states:

The undersigned, being duly authorized by Hutterian Church Group I to act on its behalf, hereby declare that Johnny Wipf, Alvin Hofer and Jake Hofer Sr., residents of Hutterville Hutterian Colony, are hereby excommunicated/removed as Members of the Hutterian Church, effective as of August 19, 2009. As a result of such excommunication, the said Johnny Wipf, Alvin Hofer and Jake Hofer Sr. shall no longer be considered Members of Hutterian Church Group I, nor shall they be entitled to attend services or participate in Church activities.

See id. at 172. According to the Waldner faction, excommunication from the local church made these Wipf faction members ineligible for corporate membership in Hutterville and unable to hold a director or officer position. See id. at 173.

Challenging the validity of the excommunication, the Wipf faction asked the state trial court to declare that the excommunication did not affect its conclusion that the Wipf faction members were the duly elected directors and officers of Hutterville. See id. at 172–73. Before a hearing could be held on the issue, the Waldners “moved to dismiss [the Wipf faction's] complaint for lack of subject matter jurisdiction.”Id. at 173. The state trial court agreed jurisdiction was lacking and dismissed the Wipf faction's lawsuit because the matter required the court to decide disputed religious questions. See id. at 174. Accepting the Waldners' argument, the South Dakota Supreme Court affirmed, reasoning the federal constitution and the South Dakota constitution prohibit state courts from resolving disputes of religious doctrine and ecclesiastical polity, despite the presence of a secular claim. See id. at 179–80. The court rejected the argument that control of the Hutterville corporation could be determined by a neutral reading of its articles of incorporation and bylaws because fundamental questions—such as status as a corporate member, director, or officer—were “inseparable” from disputed religious questions of church membership and leadership. Id. at 179.

In a second state action, the Wipf faction alleged deadlock and misapplication of corporate assets were causing irreparable harm to Hutterville's business and requested the dissolution of Hutterville and appointment of a receiver to wind up its business. See Hutterville II, 808 N.W.2d at 681. The trial court agreed and appointed a receiver, Harvey C. Jewett....