Cross-Complaint lawsuit is filed in California against The Episcopal Church

From Anglican Curmudgeon:

The litigation in San Joaquin has entered a new phase with the filing of a cross-complaint against the Episcopal Church (USA) by the parties it initially sued last April. The cross-complaint, brought by Bishop Schofield and two diocesan investment entities which he heads (the Episcopal Foundation and the Diocesan Investment Trust), seeks an award against ECUSA for the amount of attorneys' fees those defendants are being called upon to expend in defending the suit instigated by Bishop Jerry A. Lamb and a group calling itself the "Episcopal Diocese of San Joaquin", and joined in by ECUSA.

The cross-complaint states two claims for relief. The first asserts that ECUSA in effect put Bishop Lamb and his followers up to bringing the lawsuit that was filed in Fresno County Superior Court on April 24, 2008, by making false representations to them that they could be plaintiffs because they were now a genuine diocese of the Episcopal Church who had met in a legitimate "special convention" the previous month and elected a bishop. The Presiding Bishop of the Episcopal Church, the Most Rev. Katharine Jefferts Schori, convened the special convention herself, and proposed the Rt. Rev. Jerry A. Lamb, the resigned (retired) bishop of the Diocese of Northern California, to be its "provisional bishop". After it concurred, the convention proceeded to adopt resolutions authorizing him to claim ownership of the corporation sole that holds title to diocesan real property, and to file the present lawsuit against Bishop Schofield and the investment entities, which manage the funds belonging to the diocese.

Bishop Schofield alone asserts the second claim for relief in the cross-complaint. It is a contingent claim, dependent on the outcome of the principal lawsuit against him. In essence, it asserts that Bishop Schofield simply followed the wishes of his employer, the Diocese of San Joaquin, in taking the steps for which he has been sued by the plaintiffs, and that he believed those steps were lawful. He has an agreement of indemnity with his employer, the cross-complaint alleges, whereby the Diocese is required to reimburse him for any legal expenses incurred as a result of his good-faith obedience to its decisions. Therefore, if the plaintiffs succeed in their lawsuit against him, and regain all the property and other assets of the diocese, he alleges that they will have to reimburse him for all his legal expenses under the provisions of California Labor Code section 2802 and the general indemnity statute, Civil Code section 2778 (4).

The cross-complaint also names as a defendant the Domestic and Foreign Missionary Society of ECUSA, which it alleges is the alter ego of ECUSA, and is the entity that actually holds its funds and property. In order to be able to collect any judgment awarded against ECUSA, the cross-complaint alleges, judgment would have to be awarded against the Domestic and Foreign Missionary Society as well.

The filing of the cross-complaint raises the stakes considerably in what is already a very high-stakes game being played by ECUSA, as I explained in this earlier post. Essentially, ECUSA was risking everything on its bet that the Fresno court would accept the legitimacy of the "Remain Episcopal" group in San Joaquin as a lawfully constituted diocese of the Episcopal Church, with full standing to claim title to the assets of the actual diocese, which had voted to disaffiliate. By lending its authority and recognition to that group, by installing Bishop Lamb as their titular head, and by bankrolling both of them from the outset, ECUSA may fairly be said to have been the driving force behind the current litigation.

Later Anglican Curmudgeon writes:

The lawsuit filed by ECUSA, Bishop Lamb and the unincorporated association which styles itself as "the Diocese of San Joaquin" in its complaint places directly into play the legitimacy of the moves used by Bishop Jefferts Schori to "prove" her assertion that "dioceses cannot leave the Church; only people can." The cross-complaint hones in on that assertion by charging her Church with the legal consequences of carrying it into effect.

Bishop Schofield had announced, prior to the December 2007 vote by the Diocesan Convention to disaffiliate, that any parish wishing to remain with ECUSA would be allowed to do so without rancor or legal consequences, so long as it did not owe any debt to the Diocese. Had ECUSA's Presiding Bishop not insisted on recruiting and financing the group that remained to serve as a plaintiff to sue Bishop Schofield, it is doubtful in the extreme that the group alone, which constituted around a third of the parishes in the Diocese before the vote, would have marshaled the resources (and the will) to maintain a lawsuit.

In quite a few previous posts, I have gone into the manifold legal difficulties which I believe ECUSA will face in trying to make Bishop Jefferts Schori's claim stand up in court. The problem essentially is that there are two aspects to what Episcopalians understand as a "diocese": it is an entity that has a canonical status in the Church itself, and which is wholly apart from its legal status as an entity under a state's secular law. It is not possible to have one without the other, and still be a diocese of the Episcopal Church (USA).

A church itself has to have a legal existence, in order to be able to hold title to property and to have bank accounts, for one thing. In just the same way, a diocese has to have a legal existence as well. The flaw in ECUSA's theory in San Joaquin (as well as in Pittsburgh, Fort Worth and Quincy) is that an entity recognized as such in the law cannot be two entities at the same time, just as one person cannot be two people at the same time. Sam Jones, for example, may legally change his identity to Sam Smith, but the law will then cease to recognize Sam Smith as Sam Jones.

And that is just what happened when the dissenters from the vote in San Joaquin left and formed their own unincorporated association under California law, with its headquarters in Stockton. They were not the association who had held the vote, because that association continued to exist and to have its headquarters where they had always been---in Fresno. They were a new association in the eyes of the secular law. They cannot, in the eyes of California law, be the same association as the one that left.

Read it all here. We do hope that Bishop Lamb and the laity in Remain Episcopal who were drawn into the litigation by The Episcopal Church understand what they've been brought into and have received independent advice.