Hawaiian churches win partial victory in fight over school rentals

A judge in Hawaii gutted a new lawsuit on Tuesday filed by two atheists against churches that rent space from public schools. The lawsuit is a renewed effort to prove the churches acted illegally after the same judge threw out their first attempt at a conviction late last year.

In March 2013, Holly Huber and Michael Kahle, founder of Hawaii Citizens for the Separation of Church and State, filed a lawsuit against five churches who met in public schools, claiming they collectively owed the state’s Department of Education $5.6 million in unpaid or underpaid rental fees and utility charges for the prior six years. Under the state’s False Claims Act (FCA), the duo claimed they had inside information that would expose fraudulent billing.

Kahle and Huber conducted a “rigorous, yearlong, church-by-church, boots-on-the-ground investigation, involving on-site surveillance and/or on-line research,” the suit said. It claimed they discovered “significant discrepancies” in the amount of time the churches claimed to use the facilities and the amount of time the two observed them using the space. They also used a public records request to obtain and review the agreements between 189 churches and 137 public schools.

But Alliance Defending Freedom (ADF), which represents two of the churches—One Love Ministries and Calvary Chapel Central Oahu—asked the court to dismiss their clients from the case, declaring it had no merit because Kahle and Huber’s information came from public records and not from the plaintiffs personal knowledge. Because the False Claims Act forbids people from filing a complaint based in whole or in part on public records, ADF argued Kahle and Huber were “jurisdictionally barred” from bringing the lawsuit. A False Claims Act violation also requires proof of “false claims” by the churches, and the plaintiffs did not cite a single example of a false claim made by either church, ADF attorneys argued.

First Circuit Court of Hawaii Judge Virginia Crandall agreed with ADF and dismissed the two churches from the lawsuit in December. But she gave Kahle and Huber the option to amend the complaint and refile against the two churches within 45 days.

In the meantime, the churches remaining in the original suit decided to settle out-of-court rather than continue the battle. All three churches—New Hope Oahu, New Hope Hawaii Kai, and New Hope Kapolei—belong to the same parent denomination, the International Church of the Foursquare Gospel. According to the settlement agreement signed in January, the churches admitted no wrongdoing but agreed to pay the state $775,000, with Kahle and Huber pocketing up to $200,000 of it.

“Hawaii’s False Claims Act was never intended to bully churches into settlements when they did nothing wrong,” said Erik Stanley, ADF senior legal counsel. “No one benefits from this suit except the two atheists bringing it, who stand to gain financially if they are successful.”

Kahle and Huber filed an amended complaint against ADF’s clients in March, alleging the churches and schools had an “illegal quid-pro-quo agreement”—or in American vernacular, a “you scratch my back, and I’ll scratch yours” pact. For example, one church paid no rental fees for facility use, but donated a variety of in-kind services to the school, such as student mentoring, replacing the auditorium’s electrical wiring, and grounds maintenance.

ADF filed a motion to dismiss the new case because it was, in substance, the same suit brought the year before. On Tuesday, Crandall issued an oral ruling, throwing out most of the case because it was again based on public records. For example, although it was true one church paid no weekly rental fee, that fact was part of the written agreement between the school’s principal and the church, which makes it a part of the public record, not a secret or illegal activity.

But the judge did allow some portions of the suit to move forward. Stanley told me via email that questions about the churches’ use of the schools’ electricity and the use of facilities outside of contracted times are still under inquiry.

“But we are confident that when the facts come out on those issues, the churches will prevail,” he said.