# Appendix — Steele v. Industrial Development Board

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386015_0718%3A2

## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 2003
- **Citation:** 537 U.S. 1188

## Text

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APPENDIX A

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

Nos. 00-6646/6647/6648/6649

HAROLD E. STEELE; DON PETERSON; Rev. DAVID MAYNARD;
HARMON WRAY; Rev. TOM BAKER, JR.,
Plaintiffs-Appellees,
set, A
INDUSTRIAL DEVELOPMENT BOARD OF
METROPOLITAN GOVERNMENT NASHVILLE (00-6648);
METROPOLITAN GOVERNMENT OF NASHVILLE (00-6646);
DAVID LIPSCOMB UNIVERSITY (00-6647);
NATIONSBANK (00-6649);
NATIONSBANK/TENNESSEE (00-6649),
Defendants-Appellants.

Appeal from the United States District Court
for the Middle District of Tennessee at Nashville.
No. 91-00421
Aleta A. Trauger, District Judge.

Argued: February 1, 2002
Decided and Filed: August 14, 2002

Before: NORRIS and CLAY, Circuit Judges; SARGUS,
District Judge.”
SARGUS, D. J., delivered the opinion of the court, in

which NORRIS, J., joined. CLAY, J., delivered a separate
dissenting opinion.

* The Honorable Edmund A. Sargus, Jr., United States District Judge
for the Southern District of Ohio, sitting by designation.

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OPINION

SARGUS, District Judge. Defendants have appealed the
district court’s order granting summary judgment to Plaintiffs
and issuing a permanent injunction prohibiting the Industrial
Development Board (“Board”) and the Metropolitan
Government (“Metro”) from issuing additional tax-exempt
bonds to David Lipscomb University (“Lipscomb University’)
or bonds to any other pervasively sectarian institution. (J.A.
1027-28). Metro and Lipscomb University also appeal the
court’s denial of their separate motions for summary judgment.
For the reasons that follow, we REVERSE the district court’s
grant of summary judgment for plaintiffs and REVERSE the
district court’s denial of summary judgment as to Metro and
Lipscomb University.

I. BACKGROUND

The background of this case is well set forth by the district
court which described Lipscomb University and _ its
redevelopment project as follows:

_ David Lipscomb University, founded in 1891,
describes itself as a “liberal arts university.” It is
located in Nashville, Tennessee, and has an
enrollment of approximately 2,500 students. It is
affiliated with the Churches of Christ, and its primary
mission has been to integrate Christian faith and
practice with the pursuit of academic excellence.
During the early 1990s, Lipscomb undertook a major
redevelopment project on its campus. To finance the
project, Lipscomb sought a $15 million, low-interest
loan from the Industrial Development Board. The
Industrial Development Board approved the loan and
financed it by issuing tax-exempt industrial
development bonds worth $15 million.

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Steele v. Indus. Dev. Bd. of the Metro. Gov’t of Nashville and
Davidson County, 117 F. Supp.2d 693, 694 (M.D. Tenn. 2000).

The district court then described the bonds the Board
issued to Lipscomb University as those “typical of industrial
revenue bonds that are commonly issued for educational or
industrial purposes.” The Board issued the bonds pursuant to its
authority under state law for the financing of projects for “[a]ny
nonprofit educational institution in any manner related to or in
furtherance of the educational purposes of such institution,
including but not limited to classroom, laboratory, housing,
administrative, physical education, and medical research and
treatment facilities.” Tenn. Code Ann.§7-53-101(11)(A)(vii)
(1990 Supp.).

This case was filed in the district court on May 30, 1991,
challenging the validity of the Board’s action in issuing the
tax-exempt revenue bonds for the benefit of Lipscomb
University. The plaintiffs are state and local taxpayers residing
in the Nashville area. They contend that the issuance of
tax-exempt revenue bonds for Lipscomb University provides an
impermissible benefit to a pervasively sectarian institution,
thereby violating the Establishment Clause of the First
Amendment to the United States Constitution. Such aid, they
argue, has the impermissible effect of advancing religion
because a substantial portion of Lipscomb University’s
functions are subsumed in its religious mission. The plaintiff’ s
objected to the issuance of the bonds on this basis at public
hearings and meetings of the Board on April 16, 1990, May 30,
1990, and January 22, 1991. The decision was made to issue
the bonds, which is the basis of this case.

As to the ability of the plaintiffs to bring this suit, the
district court explained that the plaintiffs were found to have
standing to bring this suit as municipal taxpayers who have an
| interest in preventing their local government from subsidizing

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religious institutions. The plaintiffs argued that tax dollars were
being expended on behalf of a pervasively religious institution
because the tax base of the state and local governments was
reduced by the tax-exempt bonds. They asserted that, if
tax-exempt bonds had not been issued, Lipscomb University
would have financed all or part of the project through taxable
bonds, which would have provided significant revenue for the
city coffers.

The tax exempt bonds do not constitute an indebtedness of
either the Board or the Metropolitan Government. Neither the
Board nor the Metropolitan Government can be held liable to
pay any portion of the principal or interest on the bonds or any
costs incident to their issuance. TENN. CODE ANN. §
7-53-306 (1985). No state or local government tax revenues
have been or will be spent as a result of the issuance of the
bonds.

The district judge originally assigned to this case found
that, even if no tax money is spent, taxpayer status is proper
grounds for an Establishment Clause challenge to policies that
affect the city’s general revenue fund. Summary judgment was
denied on those grounds and, on interlocutory appeal, the Sixth
Circuit Court of Appeals upheld the district court’s decision as
to standing. Steele v. Indus. Dev. Bd. of the Metro. Gov't of
Nashville and Davidson County, 39 F.3d 1182 (6th Cir.1994)
(unpublished table decision), cert. denied, 515 U.S. 1121, 115
S.Ct. 2275, 132 L.Ed.2d 279 (1995).

With regard to the mechanics of the bonds at issue, the
district court’s decision again provides a thorough summary:

Under 26 U.S.C. §103 [Internal Revenue Code], gross
income does not include interest on any state or local
bonds that are both private activity bonds and
qualified under 26 U.S.C. § 141. See 26 U.S.C. _
§103(a)(b)(1) (1994). A private activity bond is

Sa

defined, in relevant part, under 26 U.S.C. § 141 as any
bond that is part of an issue which meets the “private
loan financing test.” 26 U.S.C. § 141(a)(2) (1994).
The “private loan financing test” is met where “the
amount of the proceeds of the issue which are to be
used (directly or indirectly) to make or finance loans
... to persons other than governmental units exceeds
the lesser of (A) 5 percent of such proceeds, or (B)
5,000,000.” 26 U.S.C. § 141(c)(1) (1994).

In order for the interest on the bonds to be exempt
from federal taxation, the private activity bonds must
also be qualified under 26 U.S.C. § 141(e) (1994).
There are three criteria that a bond issuance must meet
under this section. First, the bond must fall within
one of the enumerated categories: “(A) an exempt
facility bond, (B) a qualified mortgage bond, (C) a
qualified veterans’ mortgage bond, (D) a qualified
small issue bond, (E) a qualified student loan bond,
(F) a qualified redevelopment bond, or (G) a qualified
501(c)(3) bond.” 26 U.S.C. § 141(e)(1) (1994).
Second, the bond issue must meet the volume cap
requirements of section 146. 26 U.S.C. § 141(e)(2)
(1994); see also 26 U.S.C. § 146 (1994). Finally, the
bond issue must meet the requirements of each
applicable subsection of section 147. 26 U.S.C. §
141(€)(3) (1994). Under the public approval
requirement of section 147(f), in order to be a
qualified bond a private activity bond must be
approved by both the governmental unit issuing the
bond and the governmental unit that has jurisdiction
over the area in which the facility receiving financing
through the bond proceeds is located. See 26 U.S.C.
§ 147(f)(2)(A) (1994).

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A bond that meets each of these criteria will be
designated as a qualified private activity bond under
26 U.S.C. § 103. Where the bonds issued are qualified
private activity bonds, the interest from the bonds will
be exempt from federal taxation. 26 U.S.C. § 103
(1994).

Steele, 117 F. Supp.2d at 698 (emphasis added).

In the instant case, the bonds were issued for the benefit of
Lipscomb University, a private educational institution. The
bonds were issued for the purpose of renovating facilities on
Lipscomb University’s campus. This meets the “private loan
financing test” of section 141(c) because the entire amount of
bond proceeds loaned to Lipscomb University exceeded the
statutory minimum loan amount. Therefore, the bonds may
be characterized as private activity bonds under 26 U.S.C.
§ 141(a) (1994). Further, the Loan Agreement between the
- Board and Lipscomb University specifically prohibits it from
using any bond-financed facilities for religious purposes.’ The
bonds in question meet the technical requirements of 26 U.S.C.
§ 103.

For the bonds to be qualified as tax exempt, they must also
meet the criteria under section 141(e). The bonds meet the first
criteria for being a qualified private activity bond under section
141(e)(1) because the bonds are qualified 501(c)(3) bonds,

' The Loan Agreement between Lipscomb University and the Board
does contain a restrictive use provision. Section 5.3 on “Special Covenants”
States:

(s) The Borrower will not use the Project or any part thereof for
sectarian instruction or as a place of religious worship or in
connection with any part of the program of a school or
department of divinity for any religious denomination or the
training of ministers, priests, rabbis or other similar persons in
the field of religion.

Steele, 117 F. Supp.2d at 727 citing Docket No. 13, attach. Ex. 12 at 18.

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which is one of the enumerated categories of bond types under
this section. See 26 U.S.C. § 141(e)(1) (1994). A qualified
501(c)(3) bond is defined in section 145(a) as a private activity
bond where “all property which is to be provided by the net
proceeds of the issue is to be owned by a 501(c)(3)
organization.” 26 U.S.C. § 145(a)(1) (1994). All of the
proceeds of the $15,000,000 bond issue were loaned to
Lipscomb University for use in building new facilities and in
renovating existing facilities. Lipscomb University is a
registered 501(c)(3) organization, thereby satisfying this
requirement.

The district court summarized the final requirement as to
pubic hearing and local approval as follows:

[A] private activity bond will not be a qualified bond
unless it meets the subsection’s public approval
requirement. 26 U.S.C. § 147(f) (1994). This require-
ment is satisfied where the bond issue has been both
(1) approved either by or on behalf of the govern-
mental unit that issued the bonds, and (2) approved by
each governmental unit that has jurisdiction over the
area where any facilities which are to be financed by
the bond proceeds are located. 26 U.S.C. § 147(f)(A)
(1994). In each case, the approval must be given by
either “the applicable elected representative of such
governmental unit after a public hearing following
reasonable notice” or by a voter referendum of the
governmental unit. 26 U.S.C. § 147(f)(B) (1994). The
elected representative may be an elected legislative
body of the governmental unit, “the chief elected
executive officer, the chief elected State legal officer
of the executive branch, or any other elected official
of such unit designated for the purposes of this
paragraph by such chief elected executive officer or

_

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| by State law.” 26 U.S.C. § 147(f)(2)(EM(i) (1994).
| Steele, 117 F. Supp.2d at 698.’

In this case, the bond issue was approved by the Industrial
Development Board as the governmental unit that issued the
bonds and by Mayor Bill Boner as the chief elected executive
officer of Metropolitan Government of Nashville and Davidson
County, the governmental unit in which the facilities of
Lipscomb University are located.

2 The “scope” of the governmental approval is addressed in federal
regulations, which state:
An issue is treated as approved if the governmental units ... have
approved either - (i) The issue ... not more than one year before
the date of issue, or (ii) A plan of financing for each facility
financed by the issue pursuant to which the issue in question is
timely issued (as required in paragraph (f)(3) of this section). In
either case, the scope of the approval is determined by the
information, as specified in paragraph (f)(2), contained in the
notice of hearing ... and the approval. (2) Information required.
A facility is within the scope of an approval if the notice of
hearing . . . and the approval contain - (i) A general, functional
description of the type and use of the facility to be financed . . .
(ii) The maximum aggregate face amount of obligations to be
issued with respect to the facility, (iii) The initial owner,
operator, or manager of the facility, (iv) The prospective
location of the facility by its street address or, if none, by a
general description designed to inform readers of its specific
location. ... An approval or notice of public hearing will not be
considered to be adequate if any of the items in subdivisions (i)
through (iv) of this subparagraph (2), with respect to the facility
to be financed, are unknown on the date of the approval or the
date of the public notice.
26 C.F.R.§ 5f.103-2(f) (1999).

\

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II. STANDARD OF REVIEW

This Court reviews the district court’s grant of summary
judgment de novo. See Gribcheck v. Runyon, 245 F.3d 547, 549
(6th Cir. 2001). The standards applicable to such review are
well established:

Summary judgment is appropriate where no genuine
issue of material fact exists so that the movant is
entitled to judgment as a matter of law. Fed.R.Civ.P.
56(c). The court determines whether “there are any
genuine factual issues that properly can be resolved
only by a finder of fact because they may reasonably
be resolved in favor of either party.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct.
2505, 91 L.Ed.2d 202 (1986). Of course, “inferences
to be drawn from the underlying facts must be viewed
in the light most favorable to the party opposing the
motions.” Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 89
L.Ed.2d 538 (1986). The movant meets its initial
burden “by ‘showing’ - that is, pointing out to the
district court - that there is an absence of evidence to
support the nonmoving party’s case.” Celotex Corp.
v. Catrett, 477 U.S. 317, 324-25, 106 S.Ct. 2548, 91
L.Ed.2d 265 (1986). At that point, the non-movant
“must set forth specific facts showing that there is a
genuine issue for trial.” Fed.R.Civ.P. 56(e): Anderson,
477 US. at 250, 106 S.Ct. 2505.

Clayton v. Meijer, Inc., 281 F.3d 605, 609 (6th Cir. 2002)
(citation omitted).

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Ill. ANALYSIS

The issue presented in this appeal is whether the issuance
of tax exempt revenue bonds violates the Establishment Clause,
if the bonds are for the benefit of an institution found by the
district court to be pervasively sectarian.’ The issue has not

> In the following cases, the Supreme Court found government aid
programs constitutional: Mitchell v. Helms, 530 U.S. 793 (2000) (plurality)
(providing educational materials and equipment to religious schools upheld);
Agostini v. Felton, 521 U.S. 203 (1997) (allowing remedial public school
teachers and counselors to assist at religious school); Rosenberger v. Rector
and Visitors of Univ. of Virginia, 515 U.S. 819 ( 1995) (providing printing
facilities for all qualified student publications including religious publication
constitutional); Zobrest v. Catalina Foothills Sch. Dist., 509 U.S. 1 (1993)
(providing a sign language interpreter for deaf child in religious secondary
school not unconstitutional); Bowen v. Kendrick, 487 U.S. 589 (1988)
(funding for abstinence-based family planning programs offered by religious
social welfare agency found constitutional); Witters v. Washington Dept. of
Services for the Blind, 474 U.S. 481 (1986) (offering vocational education
scholarship to visually disabled seminarian not unconstitutional); Committee
for Pub. Educ. and Religious Liberty v. Regan, 444 U.S. 646 (1980)
(reimbursing religious school for performing state-mandated standardized
tests and record keeping); Wolman v. Walter, 433 U.S. 229 (1977)
(providing textbook loans, vocational training, diagnostic services,
religious school); Roemer v. Bd. of Pub. Works, 426 U.S. 736 (1976)
(subsidizing per-student to a religious college constitutional); Tilton v.
Richardson, 403 U.S. 672 (1971) (finding construction grants to religiously
affiliated college constitutional); Bd. of Educ. v. Allen, 392 U.S. 236 (1968)
(loaning of textbooks for religious school upheld); Everson v. Bd. of Educ.,
330 U.S. 1 (1947) (reimbursing parents for bus transportation costs to
religious school constitutional); Cochran v. Louisiana State Bd. of Educ.,
281 U.S. 370 (1930) (loaning textbooks to religious school constitutional);
Bradfield v. Roberts, 175 U.S. 291 (1899) (allowing federal funds to build
a Catholic hospital constitutional).

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been addressed by other Circuits or by the Supreme Court.‘

The First Amendment, applicable to the states through the
Fourteenth Amendment, provides that “Congress shall make no
law respecting an establishment of religion, or prohibiting the
free exercise thereof.” U.S. Const. amend. L The Supreme
Court has consistently held that the Establishment Clause,
prohibiting government establishment of religion, and the Free
Exercise Clause, prohibiting government restrictions of the free
exercise of religion, must function in harmony. Johnson v.
Economic Development Corp., 241 F.3d 501, 509 (6th Cir.

* Several state courts have addressed the precise issue; all have found
that the issuance of industrial revenue bonds is not tantamount to the giving
of direct aid to religious schools. Opinion of the Justices, 354 Mass. 779,
236 N.E.2d 523, 526, 27 (1968) (concluding that tax-exempt bond financing
is not a form of direct assistance to private or religious charitable
institutions, as there was no grant or appropriation of public money, no loan
of public credit, and the participants bore all costs of the program); Vermont
Educ. Bldgs. Financing Agency v. Mann, 247 A.2d 68, 72 (Vt. 1968) app.
' dism’d, 396 U.S. 801 (1969) (same); Nohrr v. Brevard County Educ.
Facilities Auth., 247 So.2d 304, 307-09 (Fla. 1971) (same); Cercle v. II.
Educ. Facilities Auth., 288 N.E.2d 399, 401 (Ill. 1972) (same); Calif. Educ.
Facilities Auth. v. Priest, 526 P.2d 513, 515,520 (Cal. 1974) (same); Minn.
Higher Educ. Facilities Auth. v. Hawk, 232 N.W.2d 106, 111(Minn. 1975);
Washington Higher Educ. Facilities Auth. v. Gardner, 699 P.2d 1240, 1243,
1245-46 (Wash. 1985) (holding that the tax exempt status did not create a
debt or a borrower-lender relationship between the state and the religiously
affiliated universities or the bondholders, the bond proceeds never entered
the public treasury, repayment did not pass through the public treasury, and
no state debt was created); Cortez v. Independence County, 698 S.W.2d
291, 292 (Ark. 1985) (concluding that the tax-exempt revenue bonds were
not a pledge of public money); Virginia College Bldg. Auth. v. Lynn, 538
S.E.2d 682, 698 (Va. 2000) (finding that the aid received from tax-exempt
revenue bonds does not involve usage of governmental funds in the
traditional sense in which the terms have been used). See also Durham v.
McLeod, 192 S.E.2d 202, 203-04 (S.C. 1972), app. dism’d for want of a
sub’! fed’l question, 413 U.S. 902 (1973) (finding that tax-free revenue
bonds satisfied solely by student loan payment were neither a state debt nor
public money or credit).

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2001) citing Everson v. Bd. of Educ., 330 U.S. 1, 16 (1947);
Walz v. Tax Comm’n, 397 U.S. 664, 669-70 (1970).

A. Pervasively Sectarian Test

The district court concluded that Lipscomb University is a
pervasively sectarian institution. The district court set forth the
law governing this analysis as follows:

The pervasively sectarian test is based on the line of
cases beginning with Tilton [v. Richardson, 403 U.S.
672 (1971)], and extending through Bowen v.
Kendrick, 487 U.S. 589 (1988). In Hunt v. McNair,
the Court found that “aid normally may be thought to
have a primary effect of advancing religion when it
flows to an institution in which religion is so
pervasive that a substantial portion of its functions are
subsumed in the religious mission or when it funds a
specifically religious activity in an otherwise
substantially secular setting.” 413 U.S. 734, 743
(1973). Thus, the rule under the pervasively sectarian
test, as stated in Roemer v. Board of Publ. Works of
| Maryland, 426 U.S. 736, 96 S. Ct. 2337, 49 L. Ed. 2d
| 179 (1976), is that “no state aid at all go to
| institutions that are so ‘pervasively sectarian’ that
secular activities cannot be separated from sectarian
ones... .” 426 US. at 755.

Steele, 117 F. Supp.2d at 707 (parallel citations omitted).
The district court made the following finding:

| The evidence presented in the depositions and
| literature of Lipscomb shows that, while Lipscomb
| may effectively teach a wide variety of secular
courses, the central mission of the school is to
inculcate and promote Churches of Christ doctrine as
the true word of God. Students are taught entirely by

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Churches of Christ members; are informed of the
importance of the Bible in all areas of their lives; are
expected to attend Bible courses and chapel on a
daily basis and surrounded by an environment
thoroughly saturated by Churches of Christ doctrine.
The school does not follow the Statement of
Principles on Academic Freedom of the AAUP, and
the section of the faculty handbook dealing with
research states that the primary aim of every instructor
Should be to give superior academic instruction,
emphasizing daily instruction in the Bible.
Lipscomb’s Board of Directors, which controls all
major decisions of the school, contains only members
of the Church of Christ. Christian education is one of
the three principal duties of the president of the
school. In this environment, the chance that religion
“would seep into the teaching of secular subjects,” as
discussed in Roemer, 426 U.S. at 751, 96 S. Ct. at
2347, seems inevitable.

Id, at 715 (internal citations omitted). Accordingly, the district
court found that Lipscomb University is a pervasively sectarian
institution.

The vitality of the pervasively sectarian test is questionable
in light of subsequent, more recent decisions from the Supreme
Court. In Mitchell v. Helms, 530 U.S. 793 (2000), six of nine
Justices rejected an Establishment Clause challenge to loans of
educational materials directly to parochial schools. Justice
Souter pointed out in his dissenting opinion that “[N]Jo one,
indeed, disputes . . . that the Roman Catholic schools which
made up the majority of the private schools participating, were
pervasively sectarian . . . .” In his plurality opinion, Justice
Thomas responded by stating that:

eee ee | RRR RRR R RR

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[T]he dissent is correct that there was a period of time
when this factor mattered, particularly if the
pervasively sectarian school was a primary or
| secondary school. But that period is one that the Court
should regret, and it is thankfully long past.”

Id. at 826. Justice Thomas went on to note that the pervasively
sectarian analysis, “born of bigotry, should be buried now.” Jd.
at 829.

Yet, Mitchell is a plurality opinion. Thus, the district court,
and this Court, are still bound by pre-Mitchell law with regard
to the pervasively sectarian doctrine. As the district court
correctly noted:

It is well settled that in a plurality opinion, “the
holding of the Court may be viewed as that position
taken by those Members who concurred in the
judgments on the narrowest grounds.” Coe v. Bell,

161 F.3d 320, 354 (6th Cir. 1998) (quoting Marks v.

United States, 430 U.S. 188, 193 (1977)); see also,

Lakewood v. Plain Dealer Publishing Co., 486 U.S.

750, 764, fn. 9 (1988); Reese v. City of Columbus, 71

F.3d 619, 625 (6th Cir. 1995). In Mitchell, there is no
single part of any opinion that commands the support
of a majority of the Court. As a result, the only
binding precedent of Mitchell is the holding. See Igor.
Kirman, Note, Standing Apart to be A Part: The |
Precendential Value of Supreme Court Concurring |
Opinions, 95 Colum. L. Rev. 2083, 2084-85 (1995);
Ken Kimura, A _ Legitimacy Model for the
Interpretation of Plurality Decisions, 77 Cornell L.
Rev. 593, 1596-98 (1992).

Steele, 117 F. Supp.2d at 706 (parallel citations omitted).

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Further, the Supreme Court has specifically stated that the
lower courts are to treat its prior cases as controlling until the
Supreme Court itself specifically overrules them. Agostini v.
Felton, 521 U.S. 203, 237 (1997). In reaffirming its prior
mandate the Court noted in Agostini that “if a precedent of this
Court has direct application in a case, yet appears to rest on
reasons rejected in some other line of decisions, the Court of
Appeals should follow the case which directly controls, leaving
to this Court the prerogative of overruling its own decisions.”
Id. citing Rodriguez de Quijas v. Shearson/American Express,
Inc., 490 U.S. 477, 484 (1989). It is for the Supreme Court, not
this Court, to jettison the pervasively sectarian test, which it has
not done.

Regardless of whether the pervasively sectarian test is still
the law, we conclude that, given the nature of the aid in

question, the issue of the bonds does not offend the
Establishment Clause.

B. Nature of the Institution Receiving the Aid

The precise type of aid at issue in this appeal is virtually
identical to the bonding mechanisms involved in Hunt y.
McNair, 413 U.S. 734 (1973). The Supreme Court described
the program as follows:

The “state aid” involved in this case is of a very
special sort. We have here no expenditure of public
funds, either by grant or loan, no reimbursement bya
State for expenditures made by a parochial school or
college, and no extending or committing of a State’s
credit. Rather, the only state aid consists, not of
financial assistance directly or indirectly which would
implicate public funds or credit, but the creation of an
instrumentality (the Authority) through which
educational institutions may borrow funds on the basis
of their own credit and the security of their own

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property upon more favorable interest terms than
otherwise would be available. The Supreme Court of
New Jersey characterized the assistance rendered an
educational institution under an act generally similar
to the South Carolina Act as merely being a
“governmental service.” The South Carolina Supreme
Court, in the opinion below, described the role of the
State as that of a “mere conduit.”

Hunt, 413 U.S. at 745 n7.

This passage would seem to indicate that a public body
could serve as a conduit to allow a pervasively sectarian
institution to receive the benefits of tax free bonds so long as
public funds were not expended. Rather than reach such
conclusion, however, the Supreme Court instead found that the
schools at issue were not, in fact, pervasively sectarian and
found it unnecessary to address the precise issue before this
Court. Since Hunt, the Supreme Court has not addressed the
issue.

More recently, in Johnson v. Economic Development
Corp., 241 F.3d 501 (6th Cir. 2001), this Court considered a
case involving facts similar to Hunt, supra. In Johnson, a
private Catholic school applied for and was granted an
industrial revenue bond from the Michigan Economic
Development Corporation, an agency of the State of Michigan.
This Court held that the school, although a Roman Catholic
institution, was not a pervasively sectarian institution. /d. at
515.

Because of this conclusion, the Court did not resolve the
question of whether the granting of an industrial revenue bond
to a pervasively sectarian institution is an unconstitutional form
of aid. The Johnson Court did note, however, that:

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[I]t is far from settled that the type of aid at issue in
this case is direct aid within the meaning of the
Establishment Clause jurisdiction.

Id. at 510.

Moreover, the Court also made the following
observation:

Plaintiff claims that the tax-exemption under the EDC
Act is the equivalent of a tax subsidy for purposes of
the Establishment Clause. . . . The Supreme Court
has expressly rejected the argument. “There is a
constitutionally significant difference between
Subsidies and tax exemptions.” Camps
Newfound/Owatonna, Inc. v. Town of Harrison, 520
U.S. 564, 590, & n.25 (citing Walz, 397 U.S. [664,]
690 [(1970)]). The difference between subsidies and
tax exemptions is that in giving tax exemptions “the
government does not transfer part of its revenue . . .
but simply abstains from demanding the [entity]
support the state.” Walz, 397 U.S. at 675. Therefore,
the benefit provided by the tax-exempt status of the
bonds does not amount to a cash subsidy.

Id. at 511-12 (parallel citations omitted).

Judge Nelson, in a concurring opinion, was even more
direct and concluded that conduit financing in the form of an
industrial revenue bond does not offend the Establishment
Clause, even if the benefitting institution is pervasively
sectarian. Id. at 518-19. He concluded that the type of aid in
question was no different than the indirect aid provided by
property tax exemptions available to religious institutions and
expressly approved by the Supreme Court in Walz, infra. Id. at
519.

18a _ -

In the case at bar, the Board provides pass-through or
conduit financing services to a wide variety of nonreligious and
religious nonprofit organizations. The Board has arranged tax
exempt financing, for example, for a number of colleges and
universities with and without a religious affiliation, as well as
for low-income housing projects, the Country Music Hall of
Fame, the Easter Seal Society, retirement centers, the Jewish
Community Center, the Young Mens Christian Association,
and Nashville Public Radio. (Cochran Aff. at 3-4; Pressnell
Aff. at 2 & Ex. B). Further, similar conduit financing has been
provided to a number of privately owned development
projects.’ Significantly, no claim is made that the Board ever
favored or disfavored one religion over another.

C. Nature of the Aid

Lipscomb University contends that the bonds represent
indirect aid of the type the Supreme Cout upheld in Walz v. Tax
Commission, 397 U.S. 664 (1970). The Walz Court held that a
Statute which provided a tax exemption for real estate owned by
religious organizations did not represent an unconstitutional
governmental attempt to establish, sponsor, or support religion.
In language pertinent to this appeal, the Supreme Court noted:

The grant of a tax exemption is not sponsorship since
the government does not transfer part of its revenues
to churches but simply abstains from demanding that
the church support the state.

Id. at 675. The Supreme Court concluded that “[t]here is no
genuine nexus between tax exemption and establishment of
religion.” Id.

5 The Court notes that Congress has acted to limit the number of bonds
issued by state and local government. The Tax Equity and Fiscal
Responsibility Act of 1982, Pub. L. No. 97-248, § 214, 96 Stat. 324, 466-68
(codified at I.R.C. § 103(b)(6)).

19a

financial benefit conferred by a religiously neutral tax does not
give rise to an Establishment Clause violation. In Mueller v.
Allen, 463 U.S. 388 (1983), the Court upheld a tax deduction
for amounts paid as school tuition, text books, and
transportation.° The Court acknowledged that “religious
institutions benefit very substantially from the allowance” of
this kind of tax deduction. Jd. at 396 n.5. The Court found that
both parents and parochial schools received a benefit, and the
assistance “ultimately has an economic effect comparable to
that of aid given directly to the schools attended by the
children.” Id. at 399. Irrespective of this benefit, the Court
acknowledged its decisions “consistently have recognized that
traditionally ‘[legislatures] have especially broad latitude in
- Creating classifications and distinctions in tax Statutes,’ Regan
v. Taxation With Representation of Wash., 461 U.S. 540, 547
(1983), in part because the ‘familiarity with local conditions’
enjoyed by legislators especially enables them to ‘achieve an
equitable distribution of the tax burden.’” Madden v. Kentucky,
309 U.S. 83, 88 (1940). Id. at 396. Thus, a religious school’s
receipt of indirect benefits through a tax deduction “does not

Subsequently, the Court made clear that an indirect

* The Court found significant that these deductions were among many
deductions allowed under Minnesota law. For example, the Court found
that:

Deductions for charitable contributions, allowed by Minnesota

law, Minn. Stat. § 290.21, subd. 3 (1982), include contributions

to religious institutions, and exemptions from property tax for

property used for charitable purposes under Minnesota law

include property used for wholly religious purposes, § 272.02.

In each case, it may be that religious institutions benefit very

substantially from the allowance of such deductions. The

Court’s holding in Walz v. Tax Comm'n, 397 U.S. 664 (1970),

indicates, however, that this does not require the conclusion that

such provisions of a State’s tax law violate the Establishment

Clause.

Mueller, 463 U.S. at 396 and n.5.

20a

|
require the conclusion that such provisions of a state’s tax law |
violate the Establishment Clause.” Id. at 396. As long as the tax |
benefit is neutrally available,’ the Establishment Clause is not :
violated. |

The only evidence of record is that similar bonds have
been issued to both religious and non-religious institutions in
a neutral manner. The financing in question has been made
available to colleges and universities in Metro, as well as
throughout Tennessee and the United States, and has been
provided to anumber of colleges and universities with different
kinds of religious affiliations, and those without any religious
affiliation.

In Mueller, the Supreme Court distinguished its holding in
Nyquist v. Committee for Public Education and Religious
Liberty, 413 U.S. 756 (1973). In Nyquist, the state legislation
at issue included a wide range of government financial
assistance in aid of private, predominately parochial education.
State money was directed for maintenance and repair of private
schools. In addition, the legislation provided for both direct
tuition grants and tax credits payable to parents whose children
attended private schools. In Mueller, the Court noted that the
outright grants in Nyquist were fundamentally different from
tax deductions given to all parents of public and private school
students for education related expenses. 463 U.S. at 396 n.6.

7 The Mueller court found that “[MJost importantly, the deduction is
available for educational expenses incurred by all parents, including those
whose children attend public schools and those whose children attend
nonsectarian private schools or sectarian private schools.” The Court
analogized to Widmar v. Vincent, 454 U.S. 263, 274 (1981), where it
“concluded that the State’s provision of a forum neutrally ‘available to a
broad class of nonreligious as well as religious speakers’ does not ‘confer
any imprimatur of state approval,’” The Court concluded that “here: ‘[the]
provision of benefits to so broad a spectrum of groups is an important index
of secular effect.’” Meuller, 463 U.S. at n.7.

We address the neutrality issue infra.

2la

Further, unlike the deductions approved in Mueller, the
deductions at issue in Nyquist were not based on actual
expenses incurred. Instead, the deductible amounts were
estimated and designed to equal the dollar amount of the direct
aid in the form of tuition grants available only to low income
families. Jd. The Court concluded that these grants did not take
the form of ordinary tax benefits and constituted direct aid to
religious schools.

In Hernandez v. Commissioner of Internal Revenue, 490
U.S. 680, 688 (1989), the Court held provisions of the Internal
Revenue Code permitting federal taxpayers to deduct gifts or
contributions made to a variety of charitable organizations,
including purely religious groups did not violate the
Establishment Clause. In Hernandez, members of the Church
of Scientology contended that the First Amendment prevented
the IRS from deeming obligatory payments for attendance of
“auditing sessions” as something other than a charitable
contribution. Jd. at 680. The IRS contended that a mandatory
payment to the church for auditing and training was not a gift,
but rather a quid pro quo payment for services received and
therefore not deductable. The Church of Scientology contended
that the disallowance of such payments as charitable deductions
violated the Establishment Clause, inter alia, by creating
excessive entanglement between church and state. The
Supreme Court found no excessive entanglement and, in
language pertinent to the issue before this Court, stated that
“routine regulatory interaction which involves no inquiries into
religious doctrine . . . no delegation of state power to a religious
body . . . and no ‘detailed monitoring and close administrative
contact’ between secular and religious bodies . . . does not of
itself violate the nonentanglement command.” Jd. at 696-97
(internal citations omitted).

Most recently, in Zelman v. Simmons-Harris, 536 U.S. at
—— (2002), the Supreme Court again distinguished its holding

22a

in Nyquist. The Zelman Court found that the school voucher
program in Ohio did not violate the Establishment Clause. The
Court found that the program was controlled by its holdings in
Mueller, Witters, and Zobrest. As to Nyquist the Court held:

To the extent the scope of Nyquist has remained an
open question in light of these later decisions, we now
hold that Nyquist does not govern neutral educational
assistance programs that, like the program here, offer
aid directly to a broad class of individual recipients
defined without regard to religion.

Zobrest, 536 U.S. at __.

In a concurring opinion in Zelman, Justice O’Connor
explained that a government program is not constitutionally
infirm solely because a sustantial benefit is conferred on a
religious organization. 536 U.S. at _._. (O’Connor, J.
concurrence). She explained:

Although $8.2 million is no small sum, it pales in
comparison to the amount of funds that federal, state,
and local governments already provide religious
institutions. Religious organizations may qualify for
exemptions from the federal corporate income tax, see
26 U.S.C. § 501(c)(3); the corporate income tax in
many States, see, e.g., Cal. Rev. & Tax.Code Ann. §
23701d (West 1992); and property taxes in all 50
States, see K. Turner, Property Tax Exemptions for
Nonprofits, 12-Oct. Probate and Property 25 (1998);
and clergy qualify for a federal tax break on income
used for housing expenses, 26 U.S.C. § 1402(a)(8). In
addition, the Federal Government provides
individuals, corporations, trusts, and estates a tax
deduction for charitable contributions to qualified
religious groups. See §§ 170, 642(c). Finally, the
Federal Government and certain state governments

23a

Provide tax credits for educational expenses, many of
which are spent on education at religious schools. See,
e.8.,8 25A (Hope tax credit); Minn.Stat. § 290.0674
(Supp.2001).

Most of these tax policies are well established, see,
e.g., Mueller v. Allen, 463 U.S. 388 (1983) (upholding
Minnesota tax deduction for educational expenses);
Walz v. Tax Comm’n of City of New York, 397 U.S.
664 (1970) (upholding an exemption for religious
organizations from New York Property tax), yet
confer a significant relative benefit on religious
institutions. The state property tax exemptions for
religious institutions alone amount to very large sums
annually.

Id. (parallel citations omitted).

Similar to the benefits at issue in Walz, Mueller,
Hernandez, and now, Zelman, the bonds at issue in this case are
analogous to an indirect financial benefit conferred by a
religiously neutral tax or deduction.

D. Method by Which the Aid is Issued

The method by which the tax exempt bonds are to be
issued to Lipscomb University is significant. Any institution
Seeking a tax exempt bond must arrange the financing by
locating exclusively private lenders of the funds. The purchaser
of a bond has recourse for repayment against Lipscomb
University only; the holder of a bond has no recourse against
the Board or Metro in the event of non-payment. No
government funds are involved in the entire transaction. The
interest paid to the bond holders by Lipscomb University is not
subject to federal, state or local income taxes. Since the bonds
are tax exempt, Lipscomb University reaps the benefit of a
lower interest rate than that paid to a lender paying income

24a

taxes on the interest received. Only by the potential loss of tax
revenue does the conduit financing involve any impact-on
public funds.

Initially, we note that a governmental body must issue the
bonds. While at first blush such fact would indicate
governmental endorsement of religion, the reason for the
issuance of the bonds by a governmental agency stems from the
simple fact that the Internal Revenue Code excludes from
income taxation only interest paid on industrial revenue bonds
issued and approved by a state or local governmental unit. 28
U.S.C. § 147()(2)(A). Such qualifying bonds need not finance
a governmental function (such as water or sewer lines), but may
be issued to promote a variety of purposes, including economic
development and higher education. Further, Tennessee law
requires such bonds serve the “furtherance of the educational
purposes of such institution, including but not limited to
classroom, laboratory, housing, administrative, physical
education, and medical research and treatment facilities.” Tenn.
Code Ann. §§ 7-53-101(11)(A){vii).

The federal government has continuously provided an
exemption for interest on bonds issued “by or on behalf of”
states and localities since the inception of a federal income tax
in 1913. Tariff Act of 1913, Pub. L. No. 63-16, ch. 16, 38 Stat.
114. Although states and localities first took advantage of this
exception by issuing general obligation bonds, they later issued
revenue bonds to help finance private business activities for the
ostensible purpose of promoting economic growth. Stuart C.
Johnson, Multi-Family Housing Bonds: Can the Tax Code
Provide an Efficient and Effective Low-Income Housing
Program, 5 Va. Tax. Rev. 497, 498-99 (1986) (citations
omitted). Congress provided for an exemption from income
taxation for industrial revenue bonds issued in connection with
a project intended to benefit a local economy. The Internal
Revenue Service explicitly legitimized this practice in 1954.

25a

Rev. Rul. 54-106, 1954-1 C.B. 28, 28-29.8 Such bonds have
been typically issued by a governmental authority, even though
such authority does not actually borrow the funds nor is such
authority liable for repayment. “A revenue bond is repaid solely
from the revenues generated by the facilities constructed with
bond proceeds. In the issuance of this type of bond, the political
subdivision acts solely as a conduit for issuing the bonds. It has
no obligation to use its tax revenues to finance any shortfall.”
Zimmerman, Limiting the Growth of Tax-Exempt Industrial
Development Bonds: An Economic Evaluations (1984) (Cong.
Research Serv. Rep. No. 84-37E).

In addition, by requiring local governmental authorities to
issue tax-exempt industrial revenue bonds, Congress delegated
to such governmental units an element of control over local
economic development. The revenue bonds serve as a means of
financing local preferences. See Clayton P. Gillette, Fiscal
Federalism and the Use of Municipal Bond Proceeds, 58
N.Y.U.L. Rev. 1030 (1983) (discussing Section 103 of the
Internal Revenue Code, which provides a federal tax exemption
for interest earned on state and municipal bonds).? For

* The Service classified as tax exempt those bonds issued by a
municipality to finance construction of privately used industrial plants,
“notwithstanding the purpose for which they were issued or the fact that the
Promise to pay is limited to the revenue to be derived from leasing the
Property to be acquired. . . . It is not necessary . . . that the obligation be a
general one, pledging the general credit of the municipality or the use of its
taxing power.”

* According to the Senate Committee on Finance, S. Rep. No. 494,
97th Cong., 2d Sess. 168 (1982), the public notice and approval
requirements were enacted to help eliminate inappropriate uses of
#x-exempt financing and to help restore the benefit of tax-exempt financing
for traditional governmental Purposes. While acknowledging that state and

26a

example, a local government might conclude that the issuance
of an industrial revenue bond to a new business could give a
competitive disadvantage to an existing business which had not
received such conduit financing and result in economic
displacement, rather than development.

It is clear from the record that industrial revenue bonds are
issued to a wide variety of businesses, schools, universities,
charities and other organizations. It is without question that a
religious organization may receive “general government
benefits” consistent with the Establishment Clause. Zobrest v.
Catalina Foothills Sch. Dist., 509 U.S. 1, 8 (1993). As the
Supreme Court noted in Widmer v. Vincent, 454 U.S. 263, 274,
275 (1981), “If the Establishment Clause barred the extension
of general benefits to religious groups ‘a church could not be
protected by the police and fire departments or have its public
sidewalk kept in repair’.” citing Roemer v. Bd. of Pub. Works.,
426 U.S. 736, 747 (1976). We conclude that the issuance of tax
exempt bonds on a neutral basis is the conference of a generally
available governmental benefit.

E. Primary Purpose and Effect of the Program

In her concurrence in Zelman, Justice O’ Connor reaffirmed
that the modified Lemon Test is still a central tool in analysis of
Establishment Clause cases noting:

As originally formulated, a statute passed this test
only if it had “a secular legislative purpose,” if its
“principal or primary effect” was one that “neither

public has an opportunity to comment on the use of tax-exempt financing for
particular facilities and (b) after that input, the elected representatives of the
governmental unit determine that there will be substantial public benefit
from issuing the bonds. H.R. Conf. Rep. No. 760, 97th Cong., 2d Sess. 518
(1982), 1982-2 C.B. 623-24. Based on this legislative history, Metro has
clearly fulfilled its obligation under 147 (f) to approve a bond issue that
meets the public criteria.

27a

advance[d] nor inhibit[ed] religion,” and if it did “not
foster an excessive government entanglement with
religion.” Lemon v. Kurtzman, 403 U.S. 602, 612-613
(1971) (internal quotation marks omitted). In Agostini
v. Felton, 521 U.S. 203, 218, 232-233 (1997), we
folded the entanglement inquiry into the primary
effect inquiry. This made sense because both inquiries
rely on the same evidence, see ibid. , and the degree of
entanglement has implications for whether a Statute
advances or inhibits religion, see Lynch v. Donnelly,
465 U.S. 668, 688 ( 1984) (O’CONNOR, J.,
concurring). The test today is basically the same as
that set forth in School Dist. of Abington Township v.
Schempp, 374 U.S. 203, 222 (1963) (citing Everson v.
Board of Ed. of Ewing, 330 U.S. 1 (1947); McGowan
v. Maryland, 366 U.S. 420, 442 (1961)), over 40 years

ago.

Zelman, 536 U.S. __ (2002) (O’Connor, J. concurring
opinion) (parallel citations omitted).

As to the primary purpose, industrial revenue bonds
advance a clear governmental, secular interest in promoting
economic and educational development. Such conduit
financing also promotes economic development though the
underwriting of job-producing construction projects at colleges
and universities. In turn, a more educated populace is better
positioned to generate new development and economic
opportunity. In a case involving industrial revenue bonds for a
private religious high school, this Court held in Johnson v.
Economic Development Corp., 241 F.3d at 512:

A state’s decision to assist businesses in their
Operation in order to create and maintain jobs -
regardless of the type of businesses - ‘evidences a
purpose that is both secular and understandable’,

28a

Mueller, 463 U.S. at 395. . . Michigan could conclude
that there is a strong public interest in promoting,
assisting, and retaining commercial enterprises, both
sectarian and non-sectarian.

As to the program’s primary effect, tax free revenue bonds
have neither the effect of advancing or inhibiting religion, or as
Justice O’Connor has “put it, of “endors[ing] or disapprov(ing]

. religion.’”” Zelman, 536 U.S. at __. (O’Connor, J.
concurrence) citing Lynch v. Donnelly, 465 U.S. at 691-92
(concurring opinion). Metro’s program, “as in Mueller, ‘[{ ] is
made available generally without regard to the
sectarian-nonsectarian, or public-nonpublic nature of the
institution benefitted.’” Zelman, 536 U.S. at____ citing Mueller,
474 US. at 487.

The effect of Metro’s program is economic and educational
development. Many states and local governments have used
industrial revenue bonds to entice new, or expanded
manufacturing, commercial, and educational projects. These
projects, privately owned, are not financed with direct
government funding, but are given preferential tax treatment
through conduit financing. Lipscomb University seeks the same
type of financing for the expansion of its facilities as could be
sought by Walmart, Sears, or educational institutions. The Loan
Agreement between the Board and Lipscomb University
specifically prohibits it from using any bond-financed facilities
for religious purposes. The projects Lipscomb University seeks
to finance would provide no less economic development than
a new store or a new manufacturing facility.

Further, as in the school funding program the Supreme
Court upheld in Zelman, Metro’s industrial revenue bond
program does not present the perception of endorsement to the
reasonable observer. “‘[T]he reasonable observer in the
endorsement inquiry must be deemed aware’ of the ‘history and

bg

29a

context’ underlying a challenged program.” Zelman, 536 U.S.
at ____ citing Good News Club v. Milford Central School, 533
U.S. 98, 119 (2001). As the Zelman Court Stated:

Any objective observer familiar with the full history
and context of the Ohio program would reasonablely
view it as one aspect of a broader undertaking to assist
poor children in failed schools, not as an endorsement
of religious schooling in general.

Zelman, 536 U.S. at__.

Similarly, in the instant case, the objective observer of
Metro’s industrial revenue bond program, knowing the history
and context of this program, would reasonably view it as one
aspect of a broader undertaking to finance economic
development, not as an endorsement of religious schooling in
general. Metro no more endorsed Lipscomb University than it
did Wal-Mart in issuing industrial revenue bonds.

IV. CONCLUSION

Because the proposed issuance of industrial revenue bonds
to Lipscomb University is part of a neutral program to benefit
education, including that provided by sectarian institutions, and
confers at best only an indirect benefit to the school, we hold
that the issuance of the bonds does not violate the First
Amendment.

In sum, the nature of the institution is not the relevant
inquiry in the special type of aid at issue in this appeal. The
nature of the aid conferred by the tax free revenue bonds is not
direct aid. Instead, it is analogous to an indirect financial
benefit conferred by a religiously neutral tax or charitable
deduction and is indistinguishable from that expressly approved
in Walz, supra. The funding vehicle is available on a neutral
basis. No government funds will be expended. Nor does any
holder of a bond have recourse against the Board or Metro in

30a

the event of non-payment. The benefit to be obtained by
Lipscomb University is the same provided to private companies
which create identical economic opportunities. The conduit
financing advances a clear governmental, secular interest in
promoting economic opportunity. Finally, the revenue bond
program does not present the perception of government
endorsement of religion.

Based on the foregoing, we REVERSE the district court
grant of summary judgment for plaintiffs and REVERSE both
the district court’s denial of summary judgment for Metro and
its denial of summary judgment to Lipscomb University.

ES Se eee a

3la

DISSENT

CLAY, Circuit Judge, dissenting. Because David
Lipscomb University (“Lipscomb”) _ is indisputably a
“pervasively sectarian” educational institution and because the
low-interest loan to Lipscomb through the issuance of the
tax-exempt bonds by the Industrial Development Board (“the
Board”) amounted to a direct economic benefit in violation of
the Establishment Clause of the First Amendment of the U.S.
Constitution, I would find that the district court did not err in
granting Plaintiffs’ cross-motion for Summary judgment,
denying the separate motions for summary judgment filed by
the Board and the Metropolitan Government (“Metro”) and
entering a permanent injunction prohibiting the Board and
Metro from issuing additional tax-exempt bonds to Lipscomb
or tax-exempt bonds to any pervasively sectarian institution.

As will be conclusively demonstrated below, Lipscomb fits
the profile of a pervasively sectarian educational institution by
imposing religious restrictions on Student admissions and
faculty and staff appointments; enforcing obedience to its
religious dogma, which is the “supreme purpose” of the
University; requiring daily Bible study and attendance at Chapel
as an integral part of its religious mission; and placing religious
limitations on how and what the faculty teach. The low-interest
loan of $15 million originated by the Board at Lipscomb’s
request constituted a direct economic benefit because it enabled
Lipscomb to advance its sectarian mission by funding
improvements to the University. Given its pervasively sectarian
character, the direct economic benefit to Lipscomb results in
excessive governmental entanglement with the religious
mission of the University in violation of the Establishment
Clause.

32a

BACKGROUND

Before addressing the substantive issues, it is helpful to
describe in detail the nature of Lipscomb, a private,
not-for-profit religious corporation affiliated with the Churches
of Christ, which was founded by David Lipscomb and James
Harding in 1891 and originally incorporated under the name of
“The Nashville Bible School.”' Characterizing itself as a “small
co-educational liberal arts university” with an enrollment of
approximately 2,500 students, Lipscomb states that “its primary
mission has been to integrate Christian faith and practice with
academic excellence.” Among the objectives of Lipscomb are
“[t]o provide the very best in a Christian liberal arts education
under the direction of Christian teachers in a distinctly
Christian environment .. . [t]o train future leaders in the church
... [and] .. . [t]o hold up Christ as the example to follow in
every field of activity.” (J.A. at 38, 1249.)

According to Lipscomb’s corporate charter and the bylaws
of the Board of Directors,

The corporation was organized for the purpose of
teaching the word of God and the various branches of
the useful knowledge, commonly taught in institutions
of learning for the following general purposes: the
support of any literary or scientific undertaking, as a
college or university with power to confer degrees, an
academy, a debating society lyceum, the establishment
of a library, the support of a historical society, the
promotion of painting, music and the fine arts, the

' This portrayal of Lipscomb is largely based upon its own publications
that date from the time that the Board approved Lipscomb’s request for a
loan financed by the issuance of $15 million in tax-exempt bonds. It should
be noted that for the purposes of deciding the issue on appeal, there is
nothing in the record to suggest that the current publications of Lipscomb
are materially different in any relevant respect.

33a

support of Board of Trade or Chamber of Commerce
or other objects of like nature, the support of public
worship, the building of churches and chapels and the
maintenance of missionary undertakings.

(J.A. at 805, 829-30). To this end, the bylaws of Lipscomb state
that “[t]he President, with the assistance of vice presidents and
principals, shall maintain a Christian college that shall
perpetuate the high Christian ideals inaugurated by Harding and
Lipscomb, the founders of David Lipscomb College, in which
the Bible is made the book of most importance.” (J.A. at
830-31.)

As noted in the President’s letter in the 1989-1990 edition
of the Student Handbook: “[W]e have a sincere interest in the
Spiritual values of each student and faculty staff member.
Lipscomb has been built on Christian ideas. Daily Bible study
and chapel provide direction but only you can make the
commitment to grow closer to God.” (J.A. at 293.) Lipscomb’s
Faculty Handbook also provides:

The mission of David Lipscomb University is to serve
its students so that they may master knowledge and
Skills appropriate to them and become Christlike in
attitude and behavior.

It must be kept firmly in the consciousness of all
connected with the institution - administration,
faculty, students, and patrons - that Lipscomb is a
Christian school. In the original appeal for support,
written by David Lipscomb, it was made clear that the
Bible was to be the foundation upon which all else
would center:

The supreme purpose of the school shall be
to teach the Bible as the revealed will of God
to man and as the only and sufficient rule of

34a

faith and practice, and to train those who
will attend in a pure Bible Christianity,
excluding from the faith all opinions and
philosophies of men, and from the work and
worship of the church of God all human
inventions and devices. Such other branches
of learning may be added as will aid in the
understanding and teaching of the Scriptures
and as will promote usefulness and good
citizenship among men.

(J.A. at 1627.) (emphasis in original.) The Faculty Handbook
continues by stating,

This purpose was further set forth in the deed
conveying the property on Spruce Street for the use
of the school as follows:

... that the property shall be used for maintaining
a school in which, in addition to other branches of
learning, the Bible as the recorded will of God and the
only standard of faith and practice in religion,
excluding all human systems and opinions and all
innovations, inventions, and devices of men from the
service and worship of God, shall be taught as a
regular daily study to all who shall attend said school
and for no other purpose inconsistent with this object.
The condition being herein inserted at the request of
the founders of the proposed Bible School, the same
is hereby declared fundamental and shall adhere to the
premises conveyed as an imperative restriction upon
their use so long as the same shall be owned by said
Bible School, or its Trustees, and to any and all
property which may be purchased with the proceeds
of said premises in case of sale or reinvestment, as
hereinafter provided.

35a

David Lipscomb University is not, therefore, merely
an institution which requires every student to take a
lesson in the Bible each day; this study is the
wellspring from which the university issued.

(J.A. at 1627-28.)

These ideas about the central importance of the Bible are
echoed throughout Lipscomb’s catalogues. For example, in the
university catalogue for 1988-1989, Lipscomb states:

The Bible has always been considered the most
important area of Study for all students at DLC [David
Lipscomb College]. The founders and those who have
followed them have held it to be important that every
Student study the Bible in aclass every day. Whatever
one’s major interest or life work, a thorough
knowledge of the biblical life principles is needed.

In daily classes the Bible is taught as the inspired
word of God. With the Bible itself as the text,
students are encouraged to apply the Bible principles
of right living to all aspects of personal and
professional life.

In view of the daily Bible classes, it can be said
that every Lipscomb graduate unofficially “majors in
Bible.” Those who formally major in Bible may give
Special emphasis in one of the following areas:
Biblical Languages, Missions, Preaching, Religious
Education, or Youth Ministry.

(J.A. at 41-42.) These points are reinforced in the 1990-1991
university catalogue:
The Daily Bible Requirement

The supreme purpose of David Lipscomb -
University is “to teach the Bible as the revealed will

36a

of God to man and as the only and sufficient rule of
faith and practice, and to train those who will attend
in a pure Bible Christianity.” To help fulfill this
purpose, each regular student must be enrolled in a
Bible class each school day and also attend daily
chapel services.

Every college or university has a right and even
an obligation to be unique and distinctive based upon
its individual purpose. Few, if any, other colleges
today require students to take regular daily classes in
Bible study. Students who choose to attend David
Lipscomb University should be interested and
supportive of the daily Bible requirement. The
university has no authority to suspend this
requirement for any student.

(J.A. at 1253.) Lipscomb’s 1990-91 catalogue further provides:

Although the daily Bible requirement is important
enough to be listed as a separate part of each student’s
academic program, it is also considered an integral
part of the general education program at David
Lipscomb College. No body of knowledge or study of
any kind is as important as the study of the Bible
itself.

(J.A. at 41, 1254.)

Accordingly, taking and passing a daily Bible class is a
“fundamental requirement for attendance” at Lipscomb. (J.A.
at 39-40.) As set forth in Lipscomb’s student bulletin for
1991-92:

The Bible has always been considered the most
important area of study for all students at David
Lipscomb University. The founders, and those who
have followed them, have held it to be important that

37a

every student study the Bible. Whatever their major
interest or life work, a thorough knowledge of Biblical
principles is needed.

In daily classes, Bible is taught as the inspired
word of God. Students are encouraged to apply the
Bible principles of right living to all aspects of
personal and professional life.

(J.A. at 836-37, 1260.) These ideas were continually expressed
in the editions of the Student Handbook from 1988 through
1992:

Because the Bible is the heart of Lipscomb’s
curriculum, every regular student Studies the Bible
every school day. Offerings in the Department of
Bible are arranged so that a student can, in four years,
have exposure to the entire Bible.

Any student who fails Bible is automatically
placed on probation for the Succeeding semester.
Probation must be removed by passing each Bible
course carried during the semester of probation.
Failure to meet this requirement means that the
student will be dropped at the end of the semester.

(J.A. at 303, 1189, 1212, 1235.) As explained by Dr. Joe Mac
Lynn, the head of Lipscomb’s Bible Department, each student
is required to have two credit hours of Bible each semester in
order to graduate from Lipscomb. (J.A. at 1504-5.) From 1988
until September 1992, approximately 100 undergraduate
students were on “Bible probation.” (J.A. at 834.) As noted in
the Student Handbooks, students who do not pass every Bible
course carried while on probation are Subject to dismissal from
the school.

38a

In addition to daily Bible study, Lipscomb also requires
every full-time student to attend chapel each school day. (J.A.
at 833.) As stated in Lipscomb’s Faculty Handbook:

Chapel

The heart of each day’s activities at David
Lipscomb University is the chapel service. It is here
that the entire Lipscomb family gains strength and
inspiration for the tasks of the day. Since attendance
at chapel is compulsory for all students, it is expected
that each faculty member will attend chapel
regularly. No arrangements should be made which
require regular chapel absences of one or more times
each week without prior written approval of the dean.

(J.A. at 1401.) (emphasis in original.) As set forth in the
editions of the Student Handbook from 1988 through 1992, a
student with eleven absences from chapel during a semester is
placed on “chapel probation.” (J.A. at 303, 1189-90, 1212-13,
1235-36.) From 1990 through 1992, an average of 40 to 60
students were on “chapel probation” each semester. (J.A. at
833, 1463.) The Student Handbooks also provide that “[i]f
flagrant disregard for chapel attendance persists, a student is
subject to immediate suspension.” (J.A. at 304.) In his
deposition, Dr. Dennis Loyd, the Dean of Students at
Lipscomb, testified that every full-time student “knows he goes
to chapel,” and that failure to do so results in dismissal. (J.A. at
1455-59.)

As stated in the bylaws of the Board of Directors, each
director at Lipscomb must be a member of the Churches of
Christ in good standing in the congregation. (J.A. at 110.) The
Board of Directors elects the president to be its chief executive
officer in charge of “its business and Christian education
affairs.” (J.A. at 115.) The bylaws also provide that “great care
should be exercised in the selection and development of [ ]

39a

teaching personnel.” (J.A. at 116.) Moreover, all personnel,
with the exception of employees of its services, building and
grounds departments, shall be members in good standing of the
Churches of Christ. (J.A. at 832.) Lipscomb also reserves the
right under Title VII of the Civil Rights Act of 1964 (as
amended) to discriminate, “where it is necessitated by the
specific religious tenets held by the institution.” (J.A. at 834,
1250.)

In addition, Lipscomb President Harold Hazelip
acknowledged in his deposition testimony that all of its faculty
must be members in good standing of the Churches of Christ,
end that leaving the church is grounds for termination of
employment. (J.A. at 1167, 1169.) In a letter to Nashville
Mayor Boner Opposing the bond issue, Norman Parks, the
former dean of Lipscomb, remarked:

No person can be employed at Lipscomb who is not a
member of the mainline Church of Christ. He cannot
be a premillennialist or believe that instrumental
music is acceptable for worship of God. He must
believe that a divorced person Cannot remarry and
continue in church. He must believe that a woman
cannot teach a class in religion to men.

(J.A. at 1142.) In this regard, Dr. Lynn, the head of Lipscomb’s
Bible Department, testified in his deposition that a divorced
teacher may be allowed to remain as a teacher at the university,
but “[a] person who divorces and remarries during the [ ]
employment relationship to [sic] the University would be
subject to discipline or to dismissal.” (J.A. at 1539.) According
to Dr. Susan Dennison Sinclair, she was informed by the
department chairman when she was hired as an adjunct
professor in the English Department for one semester in 1990
that “he would not be allowed to recommend me based on
various personal questions, one of them being the fact that my

40a

husband and I at that time were separated.” (J.A. at 1572.) Dr.
Sinclair also testified that the chairman of the English
Department informed her when she was hired that “there might
be some problems, with the requirements of the university” by
her failure to answer the question on the employment
application concerning drinking. (J.A. at 566-67.)

Lipscomb also imposes religious restrictions on how and
what the faculty teach. Specifically, Lipscomb admits that it
does not subscribe to the American Association of University
Professors’ (“AAUP”) Statement of Principles on Academic
Freedom.’ In contrast, Lipscomb’s Faculty Handbook states:

? The AAUP’s principles provide:

a. Teachers are entitled to full freedom in research and in the
publication of the results, subject to the adequate
performance of their other academic duties; but research for
pecuniary return should be based upon an understanding with
the authorities of the institution.

b. Teachers are entitled to freedom in the classroom in
discussing their subject, but they should be careful not to
introduce into their teaching controversial matter which has
no relation to their subject. Limitations of academic freedom
because of religious or other aims of the institution should be
clearly stated in writing at the time of the appointment.

c. College and university teachers are citizens, members of a
learned profession, and officers of an educational institution.
When they speak or write as citizens, they should be free
from institutional censorship or discipline, but their special
position in the community imposes special obligations. As
scholars and educational officers, they should remember that
the public may judge their profession and their institution by
their utterances. Hence they should at all times be accurate,
should exercise appropriate restraint, should show respect for
the opinions of others, and should make every effort to
indicate that they are not speaking for the institution.

(J.A. at 689.)

4la

In the final analysis, the worth of any educational
institution is determined by its faculty. It is of special
importance in the Christian university that every
teacher be first dedicated to Christ and His truth,
demonstrating those qualities of heart and life which
will inspire young people to love the Lord and strive
to please Him. This devotion must be accompanied by
sound scholarship, awareness of student needs, and a
determined desire to serve.

(J.A. at 1305.) Under the subheading of “Academic Freedom,”
the Faculty Handbook adds:

Each member of the Lipscomb faculty is
committed both by personal conviction and by
contract to the purposes and ideals of the institution as
set forth by the founders and Board of Directors.
Within this framework each teacher is free to pursue
and teach truth in his/her respective field of learning.
Since truth is consistent everywhere, this basic
commitment makes possible academic freedom
without the necessity of a formal Statement.

(J.A. at 1305.) According to Dr. Sinclair, who has had a long
association with Lipscomb in addition to teaching there, the
administration at Lipscomb directed members of the faculty to
teach certain religious doctrines or views in courses given in
the Biology and Physics Departments, where faculty members
are “instructed to teach creationism.” (J.A. at 1616-17.) In her
affidavit, Dr. Sinclair also stated:

5. Those who are not familiar with the church
of Christ have difficulty understanding the restrictive
nature of its beliefs. The Bible is taken very literally
and very restrictively. For example, women are not
allowed tohold any leadership positions of any kind.
Women are not allowed to speak in any worship

42a

service. Women are not allowed to lead singing, to
make announcements or to teach in any group where
men are present. Women are not allowed to go to
business meetings of the church. Women have no vote
in any meetings; women have no say in how the
money collected is spent. Women are taught to “be in
submission” at home and in the church.

6. In order to see how this doctrine affects
teaching and academic freedom at Lipscomb, I recall
a speech Hollis Todd, professor of the sociology
department at Lipscomb and an elder at my church
gave on November 22, 1992. (I took notes on it
because it was a few days after my discovery
deposition in the case of Steele v. Industrial
Development Board, et al. and I was thinking about
these issues.) He told how he required the students in
his David Lipscomb University sociology class called
“The Family” to answer a question on Ephesians 5.
The question was whether they accepted the doctrine
that a man must be “head” of the wife. He was
shocked and upset that one of his students had once
actually said she didn’t agree with the scripture. He
cited this incident as proof of “the rising tide of
immorality.” He did not state whether he graded the
student poorly.

(J.A. at 622.)

During the years from 1990 to1992, at the time of the
issuance of the bonds, more than 77% of the undergraduate
students at Lipscomb were members of the Churches of Christ.
(J.A. at 837, 1181.) According to the affidavit of W. Craig
Bledsoe, the Provost at Lipscomb since 1997, 78.97% of the
student body indicated that they were members of the Churches
of Christ in 1991, while 71.42% of the student body so

43a

indicated in 1997. (J.A. at 502.) Student applications for
admission to Lipscomb during these years “required a character
reference from a’minister, youth minister or leader at church,”
without specifying the denomination of the church or the
religion. (J.A. at 837.) As expressed in a brochure from
Lipscomb, “[o}]ne common thread that binds students together
is their commitment to Christ. At Lipscomb a student’s love for
the Lord is strengthened by this special association with other
Students, the majority of whom share the same spiritual
values.” (J.A. at 1635.) In his affidavit, Bledsoe also stated that
“there are numerous other religions represented in the student
body including, for example, Buddhism, Lutheran, Muslim,
Russian Orthodox, Hindu, Catholic, Mormon, Baptist, and
Nazarene.” (J.A. at 502). In his supplemental affidavit, Bledsoe
averred that “Lipscomb does not discriminate against students
on the basis of religion.” (J.A. at 775.) Nevertheless, Dr.
Sinclair testified in her deposition that students were pressured
to become members of the Churches of Christ, particularly
during chapel service. (J.A. at 1606-07.) Moreover, while
Lipscomb provided its students with a list of local churches in
the community, it only named those affiliated with the
Churches of Christ. (J.A. at 835-36.) Lipscomb also
acknowledges that it prohibits students from dancing,
consuming alcohol, using tobacco, among other things, because
it regards such conduct as being “un-Christian conduct.” (J.A.
at 308-309, 835, 1191-92, 1472-74.)

In response to recommendations made by the Southern
Association of Colleges and Schools, Lipscomb undertook a
major development project in the early 1990s to expand and
renovate its campus to accommodate an increase in
undergraduate enrollment to 3,000. To fund the project,
Lipscomb applied for a $15 million, low-interest loan from the

44a

Board.’ Lipscomb requested funding to construct and equip a
new library; renovate and convert the old library into
administrative offices; construct an intramural building (or
student activity center), an intramural field, four new tennis
courts, and a baseball stadium; construct an addition to the
Swang Business Center; make parking, landscaping and
walkway improvements; and acquire computer and fiber optic
equipment.

At a public meeting on April 10, 1990, the Board approved
Lipscomb’s request for the loan, which was financed by the
issuance of $15 million in tax-exempt industrial development
bonds, pursuant to the Board’s authority under Tenn. Code
Ann. § 7-53-101(11)(A)(vii). After another public hearing on
May 30, 1990, the Board formally approved the issuance of the
bonds. On May 31, 1990, Nashville Mayor Bill Boner approved
the issuance of the bonds, as required for tax-exempt status

> The Board is a public corporation created under the authority of
Tenn. Code Ann. § 7-53-101 - § 7-53-311. Metro approved the creation of
the Board by resolution as provided in Tenn. Code Ann. § 7-53-201. By
law, all amendments to the corporate charter of the Board must also be
approved by Metro. Tenn. Code Ann.§ 7-53-204 (1985). Under the statute,
the Board has the authority to enter into loan agreements with third parties;
it can sue and be sued; it can sell any of its properties; it can issue bonds and
borrow money from banks and other financial institutions by issuing notes.
Tenn. Code Ann. § 7-53-204. In addition, the Board has the authority to
issue tax-exempt revenue bonds for various public work projects, including

[aJny nonprofit educational institution in any manner related to
or in furtherance of the educational purposes of the institution,
including, but not limited to classroom, laboratory, housing,
administrative, physical education and medical research and
treatment facilities.
Tenn. Code Ann. § 7-53-101(11)(A)(vii(1990 Supp.). After the approval
and sale of the tax-exempt bonds under the statute, the municipal
governments that approve them are not liable for repayment of the debt.
Tenn. Code Ann.§ 7-53-306 (1985).

45a

under 26 U.S.C. § 147(f), thus certifying that the bonds served
a public purpose.

The tax-exempt bonds were then sold to private investors
(bondholders), and the proceeds from the bonds were loaned to
Lipscomb, pursuant to the loan documents. According to the
loan agreement, Lipscomb was not to use the project funds for
sectarian instruction or religious worship. Lipscomb is also
obligated to pay all sums due on the bonds. In January of 1991,
the bonds were replaced by revenue refunding bonds titled
“Educational Facilities Revenue Refunding Bonds, Series
1991.”

Defendant Sovran Bank, as trustee for the bondholders,
was assigned the loan documents. Sovran Bank provided the
Principal security for the bonds through a $15,969,453
irrevocable letter of credit for the account of Lipscomb to
Sovran Bank, N.A. as trustee for the bondholders. Additional
security was provided by a promissory note and loan agreement
entered into by Lipscomb and the Board.

Plaintiffs are state and local taxpayers residing in Davidson
County, Tennessee, who objected to the issuance of the bonds
at public hearings and meetings of the Board held on April 10,
April 16, and May 30, 1990.4 At the meetings, Plaintiffs or their
representatives complained that the issuance of the tax-exempt
bonds for Lipscomb provided governmental Support to a
pervasively sectarian institution in violation of the
Establishment Clause of the First Amendment of the U.S.
Constitution. On May 30, 1991, Plaintiffs, as municipal
taxpayers, commenced the instant action, challenging the
validity of the Board’s action in issuing tax-exempt revenue
bonds for the benefit of Lipscomb.

* The lead Plaintiff, Harold E. Steele, is no longer a party as a result
of his death on April 1, 1998.

46a

Eventually, on October 9, 1998, Metro and Lipscomb
separately moved for summary judgment, alleging that the
issuance of the tax-exempt revenue bonds did not violate the
Establishment Clause. In support of their respective motions for
summary judgment pursuant to Rule 56 of the Federal Rules of
Civil Procedure, both Metro and Lipscomb submitted separate
statements of the undisputed material facts on October 9, 1998
and October 16, 1998, respectively. Plaintiffs responded to
Defendants’ statements of the undisputed material facts and
filed documents in opposition to Defendants’ motions for
summary judgment. Plaintiffs also filed a statement of
additional undisputed material facts in opposition to
Defendants’ motions on November 9, 1998. Both Defendants
then responded to Plaintiffs’ statement of additional undisputed
material facts on November 20, 1998 and December 2, 1998,
respectively.

At oral argument on May 10, 2000, the district court
requested that Plaintiffs submit a cross-motion for summary
judgment. Pursuant to the district court’s order, Plaintiffs filed
a motion for summary judgment on May 30, 2000, alleging that
the issuance of the tax-exempt revenue bonds to Lipscomb
violated the Establishment Clause because Lipscomb is so
pervasively sectarian that a substantial portion of its functions
is subsumed in its religious mission, and that the $15 million
dollars in tax-exempt revenue bonds had the impermissible
effect of promoting religion as a matter of law. In support of
their motion for summary judgment, Plaintiffs submitted a
statement of the undisputed facts. Thereafter, on July 3, 2000,
Lipscomb submitted its verified response to Plaintiffs’
statement of undisputed material facts in support of their
motion for summary judgment.

On October 24, 2000, the district court entered a
memorandum and order granting Plaintiffs’ cross-motion for
summary judgment and denying Lipscomb and Metro’s

aero ee ce = << aeavaramcaes .

47a

respective motions for summary judgment. The district court
also issued a permanent injunction enjoining the Board and
Metro from issuing any additional tax-exempt revenue bonds
for the benefit of Lipscomb or any other pervasively sectarian
institution. The district court further awarded Plaintiffs’
nominal damages in the amount of $1.00 each and authorized
attorneys’ fees for Plaintiffs. Defendants then filed timely
notices of appeal. Subsequently, Defendants filed a motion to
stay further proceedings on the matter of attorneys’ fee pending
this appeal. On October 31, 2000, the district court granted the
motion to stay proceedings on the attomeys’ fee issue.

Metro also asked for a Stay of the permanent injunction
issued by the district court enjoining the Board and the Metro
from issuing any additional tax-exempt revenue bonds for the
benefit of Lipscomb or any other pervasively sectarian
institution. On July 13, 2001, the district court denied Metro’s
motion for a stay pending appeal. Thereafter, in a motion filed
on August 13, 2001, Metro appealed the district court’s denial
of its motion for a stay pending appeal. In an order entered on
September 25, 2001, this Court denied the motion for a stay

pending appeal.
DISCUSSION

At the outset, it should be noted that Plaintiffs challenge
only the constitutionality of the Tennessee statute as applied,
which authorized the Board to issue tax-exempt bonds to
Lipscomb or any other pervasively sectarian institution. Thus,
the issue squarely presented on appeal is whether the
low-interest loan by the Board to Lipscomb funded througi the
issuance of the tax-exempt bonds violates the Establishment
Clause because Lipscomb is a pervasively sectarian educational
institution and the loan amounts to direct state aid.

The point of departure for analyzing whether the
low-interest loan to Lipscomb through the issuance of the

rr

48a

tax-exempt bonds by the Board violated the Establishment
Clause is the test set forth in Lemon v. Kurtzman, 403 U.S. 602,
612-13 (1971), as refined by the Court in Agostini v. Felton,
521 U.S. 203, 232-33 (1997), which merged the excessive
government entanglement prong with the “primary effect”
analysis. As the majority opinion notes, the Lemon test, as
reformulated by Agostini, continues to have vitality. See
Zelman v. Simmons-Harris, 122 S. Ct. 2460, 2476 (2002)
(O’Connor, J. concurring opinion). In the present case, the
question before us concerns whether the governmental action
satisfies the “primary effect” test. Under this test, the Court in
Agostini stated that the governmental aid is permissible if “it
does not result in governmental indoctrination; define its
recipients by reference to religion; or create an excessive
entanglement.” Jd. at 234. In the matter before us, the specific
issue is whether the governmental aid results in excessive
entanglement. In assessing whether there is excessive
entanglement, the Court in Agostini stated that “we have looked
to ‘the character and purposes of the institutions that are
benefited, the nature of the aid that the State provides, and the
resulting relationship between the government and religious
authority.’” Id. at 232 (quoting Lemon, 403 U.S. at 615).

On appeal, Lipscomb first argues that the district court’s
grant of summary judgment in favor of Plaintiffs was erroneous
because it rested upon a finding that Lipscomb is a pervasively
sectarian educational institution. According to Lipscomb,
“whether an institution is ‘pervasively sectarian’ is no longer a
factor to be considered by the courts in these kinds of cases.”
Lipscomb’s Br. at 7. However, as the majority opinion
recognizes, the pervasively sectarian test has not been
abandoned. In Johnson v. Econ. Dev. Corp. of County of
Oakland, 241 F.3d 501, 510 n. 2 (6th Cir. 2001), this Court
pointed out:

49a

The principle expressed in Hunt y. McNair, 413 U.S.
734 (1973), that government aid in the form of tax
exempt revenue bonds of the type involved in this
case violates the Establishment Clause--when
Provided to pervasively sectarian institutions--has
not been disavowed, at least to my knowledge, by
any subsequent majority opinion of the Supreme
Court. Accord Agostini v. Felton, 521 U.S. 203, 233
(1997) (recognizing that under the Establishment
Clause, the court must consider “ ‘the character and
purposes of the institutions that are benefitted’ . =e
(e.g., whether the religious institutions were
‘predominantly religious’”)) (citing Hunt, 413 U.S. at
734-44).

241 F.3d at 510 n. 2 (parallel citations omitted.) Although the
majority notes that the Court questioned “[t]he vitality of the
pervasively sectarian test” in Mitchell v. Helms, 530 U.S. 793
(2000), we noted in Johnson that “it is Justice O’Connor’s
opinion [in Mitchell], which does not abolish the distinction
between ‘pervasively sectarian’ and ‘sectarian’ institutions and
which expressly declines to adopt Justice Thomas’ expansive
view, that is controlling upon this Court.” Jd.

Alternatively, Lipscomb claims that even if the pervasive
sectarian test remains relevant, the district court’s decision
must be vacated and remanded for an evidentiary hearing
because the court improperly “viewed ambiguous facts in a
light least favorable to the non-moving party” in granting
summary judgment in favor of Plaintiffs. Lipscomb’s Br. at 7,
n. 4. There is no merit to this claim because the district court
based its decision on the undisputed facts in the record, which
established as a matter of law that Lipscomb is a pervasively
sectarian educational institution and that the loan transaction
amounted to a direct economic benefit for Establishment
Clause purposes.

50a

The profile of a pervasively sectarian educational
institution

In evaluating whether Lipscomb is a pervasively sectarian
institution, our attention should be directed in the first instance
to Hunt v. McNair, 413 U.S. 734 (1973), since it is the only
case dealing with the precise issue at hand that yielded a
majority opinion. In Hunt, the Supreme Court also addressed
the issue of state aid to a religious school in a challenge to the
validity of the South Carolina Educational Facilities Authority
Act (“the Act”), under which revenue bonds were issued to the
Baptist College at Charleston, South Carolina, a
Baptist-affiliated college. Through the issuance of the revenue
bonds, the Act provided assistance to higher educational
institutions in constructing and financing projects, such as
buildings, facilities, and site preparation, specifically excepting
“any facility used or to be used for sectarian instruction or as a
place of religious worship nor any facility which is used or to
be used primarily in connection with any part of the program of
a school or department of divinity for any religious
denomination.” Jd. at 736.

Applying the factors set forth in Lemon, the Court in Hunt
held that the Act did not violate the Establishment Clause,
finding in pertinent part that the statute did not have the
primary effect of advancing or inhibiting religion insofar as the
college did not have a significant sectarian orientation and the
projects were limited to those with a secular purpose. In Hunt,
the Supreme Court noted:

Aid normally may be thought to have a primary effect
of advancing religion when it flows to an institution in
which religion is so pervasive that a substantial
portion of its functions are [sic] subsumed in the
religious mission or when it funds a specifically

Sla

religious activity in an otherwise substantially secular
setting.

Id. at 743. The Court in Hunt concluded that the aid did not go
to a pervasively sectarian institution, nor to fund specifically
religious activities, and thus would not “place the Authority in
the position of providing aid to the religious as opposed to the
secular activities.” Id. at 744. Although Hunt did not outline a
test for identifying a pervasively sectarian institution, the Court
found that the Baptist college in question was not pervasively
sectarian inasmuch as “there are no religious qualifications for
faculty membership or student admission, and that only 60% of
the College student body is Baptist, a percentage roughly
equivalent to the percentage of Baptists in that area of South
Carolina.” 413 U.S. at 743-44,

Notwithstanding the absence in Hunt of an explicit test for
identifying a pervasively sectarian educational institution, the
plurality opinion in Roemer v. Bd. of Public Works of Md., 426
U.S. 736 (1976) set forth a profile of a pervasively sectarian
educational institution for evaluating Establishment Clause
claims. In Roemer, the Court considered an Establishment
Clause challenge to the constitutionality of a Maryland statute
providing public aid in the form of grants (“Sellinger grants”)
to colleges affiliated with the Roman Catholic Church. In
Roemer, the plurality noted that “the focus of the debate”
concerned whether the grant program had the primary effect of
advancing religion and Creating excessive church-state
entanglement. As to the primary-effect question, the plurality
in Roemer noted that “Hunt requires (1) that no state aid at all
go to institutions that are so ‘pervasively sectarian’ that secular
activities cannot be separated from sectarian ones, and (2) that
if secular activities can be Separated out, they alone may be
funded.” Jd. at 755. In determining whether an institution was
“pervasively sectarian,” the plurality opinion in Roemer noted
that it was necessary to “paint a general picture of the

52a

institution, composed of many elements.” Jd. at 758.
Summarizing the elements of a sectarian profile set forth in the
Court’s majority opinion in Comm. for Public Educ. and
Religious Liberty v. Nyquist, 413 U.S. 756, 767-68 (1973), the
plurality in Roemer stated:

The elements of the “profile” were that the schools
placed religious restrictions on admission and also
faculty appointments; that they enforced obedience to
religious dogma; that they required attendance at
religious services and the study of particular religious
doctrine; and that they were an ‘integral part’ of the
religious mission of the sponsoring church; that they
had religious indoctrination as a ‘substantial purpose’ ;
and that they imposed religious restrictions on how
and what the faculty could teach.

Roemer, 426 U.S. at 753 n. 18 (citing Nyquist, 413 U.S. at
767-68).

In light of the views expressed in the majority opinions in
Hunt and Nyquist, the proper starting point for evaluating the
Establishment Clause challenge in this case is to adopt the
profile for a pervasively sectarian educational institution stated
by the plurality in Roemer, as this most closely adheres to
Supreme Court precedent expressed in majority opinions on
this topic. See Agostini, 521 U.S. at 237 (noting that “the Court
of Appeals should follow the case which directly controls,
leaving to this Court the prerogative of overruling its own
decisions”).

It should be noted that this approach accords with that
taken by the Fourth Circuit in Columbia Union Coll. v. Clarke,
159 F.3d 151 (4th Cir. 1998) (“Columbia Union I’), which
adopted a four-factor test that is essentially a restatement of the
Supreme Court’s profile of a pervasively sectarian educational
institution. In Columbia Union I, the Fourth Circuit identified

53a

four “general areas of inquiry” in determining whether a school
is pervasively sectarian: “(1) does the college mandate religious
worship; (2) to what extent do religious influences dominate
the academic curriculum, (3) how much do religious
preferences shape the college’s faculty hiring and student
admission processes, and (4) to what degree does the college
enjoy ‘institutional autonomy’ apart from the church with
which it is affiliated.” Jd. at 163. Although the Fourth Circuit
asserted that a college is not pervasively sectarian unless it
possesses a “great many” of the characteristics identified in the
four-factor test, 159 F.3d at 163, there is nothing clearly stated
in prior Supreme Court precedent to the effect that a
pervasively sectarian instruction must possess “a great many”
of the relevant characteristics; rather, the focus of the inquiry is
whether religion so permeates the secular education functions
provided by a religious-affiliated educational institution that its
religious and secular educational functions are in fact
inseparable. Further, I take issue with the Statement by the
Fourth Circuit in Columbia Union I that “because the Supreme
Court has never held any institution of higher education to be
‘pervasively sectarian,’ we lack even a clear “general picture’
of a ‘pervasively sectarian’ college or university.” 159 F.3d at
163. In my view, the general profile of a pervasively sectarian
institution is not as difficult to discern from Supreme Court
jurisprudence as the Fourth Circuit purports it to be. Although
the Fourth Circuit correctly recognized that “{nJeither the
Supreme Court, nor any circuit court to our knowledge, has
ever found a college to be pervasively sectarian,” id. at 169, it
is clear that the Supreme Court certainly left open this
possibility. See Hunt, 413 U.S. at 743 (citing Tilton v.
Richardson, 403 U.S. 672, 682 (1971)); see also Va. Coil.
Bldg. Auth. v. Lynn, 260 Va. 608, 538 S.E.2d 682 (Va. 2000)
(applying the elements of the Roemer test to find that Regent
University, created under the auspices of the Christian

54a

Broadcasting Network, Inc., is a pervasively sectarian
institution).

Lipscomb fits the profile of a pervasively sectarian
educational institution

Viewing the undisputed facts, the district court properly
concluded that Lipscomb is, as a matter of law, a pervasively
sectarian educational institution. First, the record indicates that
Lipscomb places religious restrictions on admission, and that
more than 70% of the student body belongs to the Churches of
Christ. Lipscomb also places religious restrictions on faculty
and staff appointments, requiring that all personnel, with
limited exceptions, be members in good standing of the
Churches of Christ. Specifically, all members of Lipscomb’s
faculty and staff are expected to attend daily chapel and adhere
to church doctrines. Further, faculty members are contractually

bound to promote the beliefs of the Churches of Christ, both in
and out of the classroom, and if any member leaves the church,
it is an immediate ground for termination of employment. As
noted by the district court, Lipscomb also reserves the right
under Title VII of the Civil Rights Act of 1964 (as amended) to
discriminate, “where it is necessitated by the specific religious
tenets held by the institution.”

Second, Lipscomb enforces obedience to its religious
dogma, directing that the Bible be taught “every school day to
every student enrolled . . . by teachers who are sound in the
faith and faithful in their lives to its sacred truths.” According
to Lipscomb, its “supreme purpose” is “to teach the Bible as the
revealed will of God to man and as the only and sufficient rule
of faith and practice, and to train those who will attend in a
pure Bible Christianity.”

Third, Lipscomb requires its students to participate in daily
Bible study and attendance at chapel. According to Lipscomb,
“(t]he university has no authority to suspend [the daily Bible}

55a

requirement for any student.” As the district court found, all
Students must take at least one Bible class every day of each
semester and are required to take at least one course from each
of the following four categories: The Gospels, The Church, Old
Testament, and Defense of the Faith. According to Lipscomb,
the Bible is the inspired word of God, and Students are
encouraged to apply Biblical principles in conducting the
affairs of their personal and professional lives. Students are also
required to pass Bible courses, and the failure to do so results
in being placed on “Bible probation,” which could lead to
expulsion. From 1988 to 1992, approximately 100 students
were placed on Bible probation. In addition, students are
required to attend chapel every school day, and the failure to do
So may lead to being placed on “chapel probation.”

Fourth, attendance at chapel and the study of the Bible at
Lipscomb are an “integral part” of the religious mission of the
Churches of Christ. This is made clear repeatedly throughout
Lipscomb’s Faculty and Student Handbooks, as well as its
university catalogues.

Fifth, religious indoctrination is a “substantial purpose” at
Lipscomb. As set forth in Lipscomb’s corporate charter and
bylaws of the Board of Directors, “[t]he Corporation was
organized for the purpose of teaching the word of God and the
various branches of the useful knowledge, commonly taught in
institutions of learning for the following general purpose: ...
the support of public worship, the building of churches and
chapels and the maintenance of missionary undertakings.”
Moreover, as the district court noted, “[t]he land on which the
construction projects funded by the bend proceeds were
undertaken is subject to restrictive covenants tha require that
the property be used exclusively to further the religious mission
of the institution so long as the property is owned by
Lipscomb.” Steele v. Indus. Dey, Bd. of the Metro. Gov. of

56a

Nashville and Davidson County, 117 F.Supp.2d 693, 710 (M.D.
Tenn. 2000).

Sixth, Lipscomb imposes religious restrictions on how and
what the faculty teach. As Lipscomb acknowledges, it does not
subscribe to the AAUP’s Statement of Principles on Academic
Freedom. Specifically, there was unrebutted testimony that
Lipscomb instructs the faculty in the Biology and Physics
Departments to “teach creationism.” By Lipscomb’s own
admission, the religious tenets of the Churches of Christ are
designed to permeate every facet of the University, including
classroom instruction in subjects that are considered
non-religious or nonsectarian.

Here, the record shows that Lipscomb satisfies all the
elements of a sectarian educational institution profile,
conclusively demonstrating that religion pervades it to such an
extent that “its functions are subsumed in the religious

mission.” Hunt, 413 U.S. at 743. Accordingly, there is no
genuine issue of material fact about whether Lipscomb is a
pervasively sectarian educational institution.

Lipscomb is clearly distinguishable from educational
institutions found not to be pervasively sectarian

As an educational institution, Lipscomb is clearly
distinguishable from those higher educational institutions that
the Supreme Court has found not to be pervasively sectarian.
For example, in Tilton v. Richardson, 403 U.S. 672 (1971), the
Supreme Court found that a direct federal grant awarded
pursuant to the Higher Education Facilities Act of 1963 to four
colleges and universities affiliated with the Roman Catholic
Church for the construction of academic facilities devoted to
secular purposes did not violate the Establishment Clause,
except for the section of the Act that limited federal interest in
the facilities to a period of twenty years because it allowed the
unconstitutional contribution of valuable property to a religious

57a

institution, and could be “used to promote religious interests.”
403 U.S. at 683. The colleges in Tilton were described in the
following terms:

All four schools are governed by Catholic religious
organizations, and the faculties and student bodies at
each are predominantly Catholic. Nevertheless, the
evidence shows that non-Catholics were admitted as
students and given faculty appointments. Not one of
these four institutions requires its students to attend
religious services. Although all four schools require
their students to take theology courses, the parties
Stipulated that these courses are taught according to
the academic requirements of the Subject matter and
the teacher’s concept of professional standards. The
parties also stipulated that the courses covered a range
of human religious experiences and are not limited to
courses about the Roman Catholic religion. The
Schools introduced evidence that they made no
attempt to indoctrinate students or to proselytize.
Indeed, some of the required theology courses at
Albertus Magnus and Sacred Heart are taught by
rabbis. Finally, as we have noted, these four schools
subscribe to a well-established set of principles of
academic freedom, and nothing in this record shows
that these principles are not in fact followed. In short,
the evidence shows institutions with admittedly
religious functions but whose predominant higher
education mission is to provide their students with a
secular education.

Id. at 686-687. Unlike Tilton, where the theology courses at the
colleges affiliated with the Roman Catholic Church were
“taught according to the academic requirements and the
teacher’s concept of professional Standards,” without
attempting “to indoctrinate students or to proselytize,” the

58a

religion classes at Lipscomb are Bible classes, not theology
classes. At Lipscomb, Bible classes are taught as “the revealed
will of God to man and as the only and sufficient rule of faith
and practice, and to train those who will attend in a pure Bible
Christianity, excluding from the faith all opinions and
philosophies of men, and from the work and worship of the
church of God all human inventions and devices,” except those
that “will aid in the understanding and teaching of the
Scriptures.”

Lipscomb also clearly differs from the Baptist college in
Hunt. As already noted, the Baptist College at Charleston was
not found to be a pervasively sectarian educational institution
based upon the fact that it did not impose religious
qualifications on its faculty and staff and given that the
percentage of the student body roughly reflected the same
percentage of Baptists in the area. Unlike the college in Hunt,
which did not hire faculty on the basis of religion, apart from
those teaching in the theology departments, Lipscomb requires
that its faculty be members in good standing of the Churches of
Christ. Further, the fact that the student body at Lipscomb is
largely affiliated with the Churches of Christ reflects
Lipscomb’s placement of religious restrictions on student
admissions.

Lipscomb is also clearly distinguishable from the Roman
Catholic colleges in Roemer, which were “characterized by a
high degree of institutional autonomy” from “their formal
affiliation with the Roman Catholic Church.” Roemer, 426 U.S.
at 755. By contrast, Lipscomb’s “supreme purpose” is “to teach
the Bible as the revealed will of God to man and as the only
and sufficient rule of faith and practice, and to train those who
will attend in a pure Bible Christianity.” Further, unlike the
colleges in Roemer, Lipscomb does not subscribe to the
AAUP’s Statement of Principles on Academic Freedom.
Moreover, unlike the colleges in Roemer, where attendance at

59a

religious exercises was not required and where spiritual
development was encouraged as a “secondary objective,”
Lipscomb requires attendance at religious service, placing those
who fail to attend on “chapel probation,” and clearly promotes
Spiritual development as the primary objective of the
institution. While the colleges in Roemer gave mandatory
religion and theology courses taught “primarily by Roman
Catholic clerics,” those courses only supplemented “a
curriculum covering ‘the spectrum of a liberal arts program.’”
Roemer, 426 U.S. at 756. In contrast, the Bible classes at
Lipscomb are central to the mission of the school, and the
failure to pass a Bible course results in a student being placed
on “Bible probation,” which subjects the student to dismissal
from the school if he or she does not pass every Bible course
taken while on Bible probation. Lipscomb thus clearly stands
Separate and apart from the higher educational institutions that
the Supreme Court has found not to be pervasively sectarian.

It should also be noted that Lipscomb is markedly different
from the religious academy in Johnson that this Court found
not to be pervasively sectarian. In Johnson, this Court described
the religious academy in the following terms:

As to the nature of the institution, as with any
religiously affiliated school, the Academy pledges its
allegiance to its faith. Nevertheless, the facts establish
that the Academy is not a pervasively sectarian
institution. The Academy’s Restated Articles of
Incorporation provide that the school’s purpose is to
“conduct an independent Catholic school from
pre-school through and including the 12th grade,
wherein the arts and sciences, and other forms of
primary and secondary learning are taught, and
diplomas and honors therein conferred: while
maintaining a philosophy consonant with that of the
network of the Sacred Heart schools of which it is a

60a

member.” (J.A. at 66.) The Academy’s curriculum
and requirements provides that

[e]very student at [the Academy] receives
intensive training in the basic academic
skills of English, Mathematics, History,
Foreign Language and Science. Art, Music,
Drama, Forensics, Theology and Computer
Science are essential parts of this program.
[The Academy] offers each student a full
Physical Education Program designed to
develop a sense of sportsmanship, a respect
for physical fitness and an awareness of the
enjoyment derived from athletic endeavors.

(J.A. at 154.) A review of the course descriptions and the
subjects covered for each of the courses offered at the
Academy, with the exception of the Religion Department,

demonstrates that the Academy does not interject religion into
every aspect of its curriculum. Moreover, there are no religious
requirements for membership on the Academy’s Board of
Trustees. Non-Catholics have served, and currently serve, on
the Board.

In addition, the Academy does not discriminate on the
basis of race, color, creed, or national origin in its admissions
process, nor does it give preference in admission to Roman
Catholics. Furthermore, the Academy does not discriminate on
the basis of race, color, or national origin in any of its
educational policies, scholarship and loan programs, athletic or
extracurricular activities, or other-school administered
programs. As of the date of the issuance of the bonds at issue,
135 of the 366 (non-preschool) students at the Academy, or
37%, were not Catholic. And as of the date of the stipulation,
34% of the students were not Catholic. The facts indicate that
faiths represented in the Academy student body include

6la

non-Catholic Christian, Jewish, Islamic, Shinto and others.
Finally, the Academy does not discriminate on the basis of race,
color, creed or national Origin in the hiring of its employees.
The Academy has a teaching faculty of 60, of whom five are
members of religious orders. There is no religious-affiliation
requirement or preference for the Academy’s teachers, and the
School does not inquire as to the religious affiliation of
Prospective faculty members.

Johnson, 241 F.3d at 516-17. Most striking, Lipscomb, unlike
the academy in Johnson, interjects religion into virtually all
aspects of its institutional life. Further, unlike the school in
Johnson, Lipscomb reserves the right under Title VII of the
Civil Rights Act of 1964 to discriminate in the hiring of faculty
and staff on the basis of religion.

Lipscomb is also distinguishable from Columbia Union
College, the educational institution affiliated with the Seventh
Day Adventist Church that the Fourth Circuit did not regard as
@ pervasively sectarian educational institution. See Columbia
Union Coll. v. Oliver, 254 F.3d 496 (4th Cir. 2001) (“Columbia
Union IT’). In Columbia Union II, the Fourth Circuit Stated:

The district court respected fully the majority’s
order of remand in Colwmbia Union I. Working
through the four factors in this case, the court found
that although Columbia Union had a mandatory
worship policy, it applied only to a minority of

was insufficient to show that the traditional liberal arts
classes were “taught with the primary objective of
religious indoctrination.” The court pointed to
“affirmative evidence indicating that secular
education is the primary goal of” Columbia Union.
The court examined the college’s mission statement

62a

and the descriptions of secular curricula in the
college’s catalog, among other things, in making this
finding. The court looked at the college’s syllabi for
secular courses and determined that the religious
references were too isolated and scattered to justify a
finding that religion permeates the secular courses.
And although the court found that the Seventh-day
Adventist Church exerted a dominance over college
affairs and that the college gave an express preference
in hiring and admissions to members of the Church,
these factors by themselves were not enough to make
the college a pervasively sectarian one.

Id. at 508-09. In contrast to Columbia Union College,
Lipscomb has a mandatory worship policy and imparts
instruction with the primary objective of religious
indoctrination. Lipscomb also places religious restrictions on
admission and expressly hires faculty and staff based upon
membership in the Churches of Christ.

Indeed, Lipscomb is even more pervasively sectarian than
Regent University (“Regent”), the only other institution that has
been found by a court to be a pervasively sectarian institution
for Establishment Clause purposes. As noted by the Virginia
Supreme Court in Lynn,

Regent’s Articles of Incorporation, provide that:

[Regent] shall exist for the purpose of bringing
glory to God and His Son Jesus Christ by providing an
institution or institutions of learning in which those
who are mature in the knowledge of God and His
ways can assist and guide, in a spirit of free inquiry
and scholarly excellence, those who would learn of
Him, His ways, and His creation, while together they
study ways to glorify God and better their world.

63a

538 S.E.2d at 685. Lynn also noted that Regent has adopted a
Statement of Faith that provides,

Regent University is a Christ-centered institution. The
Board of Trustees, along with the faculty and staff of
the university, are committed to an evangelical
interpretation and application of the Christian faith.
The campus community is closely identified with the
present-day renewal movement, which emphasizes the
gifts, fruit and ministries of the Holy Spirit. It is
expected that all trustees, officers, administrators and
faculty will subscribe to this Statement in writing[.]

Id. Regent’s Mission Statement provides:

Preamble--Regent University is a graduate institution
that exists to bring glory to God the Father and His
Son Jesus Christ through the work of the Holy Spirit.

Mission--Our mission is to provide an exemplary
graduate education from biblical perspectives to
aspiring servant leaders in pivotal professions and to
be a leading center of Christian thought and action.

Vision--Our vision, through our graduates and other
scholarly activities, is to provide Christian leadership
in transforming society by affirming and teaching
principles of truth, justice and love as described in the
Holy Scriptures, embodied in the person of Jesus
Christ, and enabled through the power of the Holy
Spirit.

Id. In spite of its religious mission, Regent does not have any
“specific religious requirement for student admissions, and “the
lack of such a ‘{Christian] commitment’ does not negatively
impact an applicant’ s standing for admission.” Jd. at 686,
However, the Virginia Supreme Court noted that “[aJll
applicants are required to submit a ‘Clergy Recommendation,’

both as a matter of policy and practice. Among the questions
asked is whether the applicant has ‘made a meaningful personal
commitment to Jesus Christ.’” Jd. The Virginia Supreme Court
in Lynn further remarked:

Although encouraged to do so, students are not
required to attend Regent’s weekly corporate chapel
services or participate in any particular religious
activities. However, they must have “[pJersonal goals
consistent with the mission and goals of Regent
University,” and must submit a “[pJersonal goals
statement” addressing how their “personal and
spiritual objectives” relate to Regent’s
“Christ-centered educational philosophy.” The
instructions explain that “for the Christian, [a goal] is
a statement of faith in God’s will for his or her life.”

Faculty, unlike students, are required to sign a
document indicating their adherence to the “Statement
of Faith.” They are “strongly encouraged but they’re
not required” to attend chapel. The faculty is required
to integrate “faith and learning.” Dr. Selig testified,
and the SACS (Southern Association of Colleges and
Schools) and the ABA (American Bar Association)
agree, that the Statement of Faith has not interfered
with academic freedom. Regent’s detailed academic
freedom policy encourages faculty to “pursue truth
. . . by research, discussion, and other forms of
inquiry.” Nonetheless, Regent prohibits faculty from
using “their position or classroom as a platform to
demand adherence by students to a personal
theological viewpoint, political preference or social
agenda.” The SACS in a review of Regent's
accreditation application in 1998 found that “[flaculty
and students are free to examine all pertinent data,
question assumptions, be guided by the evidence of

scholarly research, and teach and study the substance
of a given discipline.” With respect to its curriculum,
each faculty member at Regent is required to include
in the syllabus for each class a “description of how the
Christian faith and the Bible wil] be incorporated into
the course.”

Id. at 617-18.

Like Regent, the “supreme purpose” of Lipscomb is to
Promote Christian ideals. Both Lipscomb and Regent also
require applicants to submit a recommendation from a member
of the clergy, without specifying the denomination. However,
unlike Regent, nearly three-quarters of the Students at
Lipscomb are identified with a particular creed, the Churches
of Christ. Further, in contrast to Regent, which encourages, but
does not require, its students to attend chapel services or to
Participate in certain religious activities, daily Bible class and
chapel attendance are mandatory at Lipscomb. In addition,
while both schools require its faculty to adhere to religious
principles and to incorporate the Bible into class instruction,
Regent provides much greater latitude in terms of academic
freedom than Lipscomb. Thus, even among pervasively
sectarian religious institutions, Lipscomb Clearly stands out as
unrelentingly sectarian in its policies and practices.

institution, it thus must be determined whether the issuance of
the tax-exempt revenue bonds is a direct or indirect benefit for

noted that because Hunt found that the Baptist College at
Charleston was not a sectarian educational institution, it did not
need to decide the issue whether the issuance of the revenue

bonds constituted direct state aid in that case. In a footnote,
though, the Court in Hunt remarked:

The ‘state aid’ involved in this case is of a very
special sort. We have here no expenditure of public
funds, either by grant or loan, no reimbursement by a
State for expenditures made by a parochial school or
college, and no extending or committing of a State’s
credit. Rather, the only state aid consists, not of
financial assistance directly or indirectly which would
implicate public funds or credit, but the creation of an
instrumentality (the Authority) through which
educational institutions may borrow funds on the basis
of their own credit and the security of their own
property upon more favorable interest terms than
otherwise would be available. The Supreme Court of
New Jersey characterized the assistance rendered an
educational institution under an act generally similar
to the South Carolina Act as merely being a
“governmental service.’ Clayton v. Kervick, 56 N.J.
523, 530-531, 267 A.2d 503, 506-507 (1970). The
South Carolina Supreme Court, in the opinion below,
described the role of the State as that of a “mere
conduit.” 258 S.Ct., at 107, 187 S.E.2d, at 650.
Because we conclude that the primary effect of the
assistance afforded here is neither to advance nor to
inhibit religion under Lemon and Tilton, we need not
decide whether, as appellees argue, Brief for
Appellees 14, the importance of the tax exemption in
the South Carolina scheme brings the present case
under Walz v. Tax Comm'n, 397 U.S. 664, 90 S.Ct.
1409, 25 L.Ed.2d 697 (1970), where this Court upheld
a local property tax exemption which included
religious institutions.

67a

tax-exempt revenue bond issue amounts to a direct benefit
because it held that the religious academy was nota pervasively

functions is subsumed in the religious mission so as to suggest
that the state aid to Lipscomb has the primary effect of
advancing religion.

In deciding this question, it is advisable to make some
preliminary observations. First, although the majority opinion
correctly notes that this precise issue has not been addressed by
other circuits or by the Supreme Court, it inaccurately states
that all the state courts that have addressed the issue “have
found that the issuance of industrial revenue bonds is not
tantamount to the giving of direct aid to religious schools.”
Opn. at n. 2. However, with the exception of the Virginia
Supreme Court’s decision in Lynn, 538 S.E.2d at 682, none of
the cases cited by the majority has addressed the precise
question at hand, namely, whether tax-exempt bond financing
to a pervasively sectarian educational institution constituted a
form of direct state aid, having the primary effect of advancing
religion, in violation of the Establishment Clause. Indeed, as
noted by the California Supreme Court in Calif. Educ.
Facilities Auth. v, Priest, 526 P.2d 513, 518, n. 8 (Cal. 1974),
one of the cases cited by the majority:

Of course, if the Authority were to exercise its powers
in aid of an institution which is pervasively sectarian
within the meaning of the Hunt test, a different
conclusion might be compelled.

Tas iene

68a

“Individual projects can be properly evaluated if and
when challenges arise with respect to particular
recipients and some evidence is then presented to
show that the institution does in fact possess these
(disqualifying) characteristics.” (Tilton v. Richardson
(1971) supra, 403 U.S. 672, 682.)) We emphasize,
however, that the fact an institution of higher
education is affiliated with or governed by a religious
organization is insufficient, without more, to establish
that aid to that institution impermissibly advances
religion. (See Hunt v. McNair (1973) supra, 413 U.S.
734, 743; Tilton v. Richardson (1971) supra, 403 U.S.
672, 686-687.)

Priest, 526 P.2d at 518, n. 8 (parallel citations

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386015_0718%3A2. Public record. Not legal advice.