Key point 10-16.8. Churches have various defenses available to them if they are sued as a result of a personal injury. One such defense is an arbitration policy. By adopting an arbitration policy, a church can compel members to arbitrate specified disputes with their church rather than pursue their claim in the civil courts.

A New York court refused to enforce an arbitration clause in a church’s bylaws to a contract dispute between a church and one of its members who performed repair work. A church’s bylaws contained an arbitration clause specifying that “any claim not resolved in accordance with Matthew 18, by or between any member of the church [or] any person having once been a member [of the church] shall be decided by mediation, and if mediation is unsuccessful, by binding arbitration.”

A church member sued the church in civil court claiming that it breached a contract for the renovation of certain premises. The church asked the court to dismiss the lawsuit and compel the member to resolve his dispute through arbitration. The court refused to do so. It acknowledged that “members of an organization entering into a contract with the organization may be bound by duly enacted organizational bylaws compelling arbitration.” However, “a party will not be compelled to arbitrate absent a clear, explicit, and unequivocal agreement to do so.” The court concluded that the arbitration procedure in the church’s bylaws failed this test, since it “provides no instruction as to how, or before whom, the referenced mediation is to be conducted, fails to establish whether the type of dispute to be arbitrated is limited to either temporal or spiritual disputes or extends to both, and purports to apply to former members who have since left the church. Therefore, the provision is so unclear and equivocal as to be unenforceable …. The church failed to establish that the parties entered into an explicit and unequivocal agreement to arbitrate this particular type of dispute. Based upon the overbroad scope of the arbitration agreement, the church failed to establish that the arbitration clause applies not only to religious matters, but temporal matters as well.”

What This Means For Churches:
Many churches have incorporated arbitration clauses in their bylaws, or in employment handbooks. This case illustrates the importance of having an attorney draft, or review, such provisions to ensure their enforceability. The defect in this case was the arbitration policy’s failure to clarify that it applied to both spiritual and temporal matters. Dean v. Harvestime Church, 79 A.D.3d 793 (N.Y.A.D. 2010).

This Recent Development first appeared in Church Law & Tax Report, November/December 2011.