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The Texas Supreme Court heard arguments to decide if SMU’s Board of Trustees can alter the university’s articles of incorporation with approval from the United Methodist Church.
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The church sued the university in 2019 after SMU’s board of trustees voted to split from the church without approval from the South Central Jurisdictional Conference of the United Methodist Church.
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The conference’s claim that the university breached its contract was dismissed by a trial court, but an appeals court sided with the conference.
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The Texas Supreme Court heard arguments to decide if SMU’s Board of Trustees can alter the university’s articles of incorporation with approval from the United Methodist Church.
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The church sued the university in 2019 after SMU’s board of trustees voted to split from the church without approval from the South Central Jurisdictional Conference of the United Methodist Church.
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The conference’s claim that the university breached its contract was dismissed by a trial court, but an appeals court sided with the conference.
Austin, TexasRegarding which laws, if any, could determine who governs Southern Methodist University, the Texas Supreme Court appeared divided.
On Wednesday morning, the South Central Jurisdictional Conference and the university presented their cases to the justices.
We know:
Is SMU’s ownership a business or a religious matter?
The justices asked both sides the question Wednesday morning.
The university’s lawyers said that their case of distancing themselves from the United Methodist Church was not covered by the ecclesiastical abstention concept.
Civil courts cannot settle conflicts involving church doctrine because of the ecclesiastical abstention concept.
It seems that both sides agreed that the theory did not apply to the current legal dispute.
Nonetheless, a few justices appeared to believe that a ruling in the case would have repercussions for Texas corporate law.
Since SMU’s Board of Trustees decided to change the school’s articles of incorporation in 2019, the university and the church have been embroiled in a legal dispute.
Following the church’s vote to maintain its prohibition on approving same-sex unions and ordaining clergy who identify as LGBTQ, the action was taken.
SMU made it clear in those modifications that the board of trustees was the only entity in charge of running the institution.
The goal of the revised articles was to make it clear that the school and the church were two different organizations.
What they’re saying:
Allyson Ho, an attorney for SMU, urged the justices to make a decision about the university based on impartial standards.
She consistently reaffirmed the school’s status as a nonprofit, nonmember organization that functions independently of the church and has the authority to adopt new articles of incorporation and submit them to the state.
The 1996 articles’ claim that the church owned, managed, and controlled the school was eliminated in the 2019 articles.
Justice Brett Busby cited the preceding papers and appeared to disagree with Ho’s view.
“Except that the articles of incorporation say that it’s owned,” Busby stated. According to the 1996 publications, it is owned.
When it came to the claim that the 2019 articles were invalid, Busby was the most outspoken justice.
In order to give the church an uncontested right to sue the school, the justice recommended to Sawnie McEntire, an attorney with the South Central Jurisdictional Conference, that the church appoint a board member and then include that board member in the complaint.
According to Ho, the 2019 articles just strengthened the bond between the church and the institution, and the church never contributed money, participated in degree programs, or hired teachers.
McEntire claimed that the church’s use of the institution to further its purpose and its 100 years of dominance were disrupted by SMU’s decision to leave.
According to McEntire, the school denied the church a chance to elect new board members before 2019.
Since the university’s concerns regarding the church’s ideology were addressed, Justice Debra Lehrmann stated that she believed the matter was settled.
“The fact that the dispute has been resolved about same-sex marriages and things of that nature, that’s not going to let us back in the door,” McEntire stated. “They shut the door on us.”
The backstory
According to the university’s original articles of organization, the South Central Jurisdictional Conference would own, administer, and govern the institution. The conference also had the authority to authorize any changes.
Without the conference’s consent, the university’s board of trustees changed the articles in 2019 to eliminate those clauses, and they submitted a sworn certificate to the secretary of state’s office.
The South Central Jurisdictional Conference filed a lawsuit over the separation from the United Methodist Church, arguing that the revisions were unconstitutional because the conference had not approved them.
They maintained that the conference owned the land on which the school was constructed.
Citing a Texas law that would allow them to recover losses because the university filed the new amendments with the Secretary of State, the conference changed its argument to assert that the university had violated both its fiduciary duties and its contract with the conference by causing financial harm.
A trial judge rejected all of the conference’s assertions.
The Fifth Circuit Court of Appeals heard an appeal of the judgment and overturned the breach of contract ruling.
According to the appeals court, the decision might be contested in court under the Business Operation’s Code, and both factual and opinion claims could be actionable as substantially false filings that resulted in losses that could be compensated for with damages.
The institution appealed to the Texas Supreme Court, arguing that the court circumvented the state’s regulations regarding the eligibility of “ultra vires” claims.
A allegation that a government or company has acted beyond its lawful bounds is known as an ultra vires claim.
Such claims against an entity in Texas can only be made by the entity, its shareholders, or the attorney general.
SMU asserted that since they have no interest in the university, the conference is exempt from such regulations.
According to the university’s attorneys, the court was the first to rule that the articles of incorporation of a non-member nonprofit organization constituted a legally binding agreement for the purposes of a breach of contract claim.
SMU’s lawyers claimed in a Supreme Court brief that the appeals court “disregarded a longstanding precedent that a legal opinion can’t be materially false or give rise to damages where there’s no cognizable harm.”
Based on the figures:
According to their website, the SCJC serves eight states: Arkansas, Kansas, Louisiana, Missouri, Nebraska, New Mexico, Oklahoma, and Texas.
In addition to SMU, the conference runs Saint Paul School of Theology in Leawood, Kansas, and Oklahoma City, as well as the Lydia Patterson Institute in El Paso.
According to its website, SMU is a Dallas-based university with about 12,000 students.
The source of the information in this article is the websites of SMU, the SCJC, and Texas Supreme Court filings.
