Petition for Writ of Certiorari — Word of Faith World Outreach Center Church, Inc. v. Morales

Bupreme Court, U.S.

()

92-1959 ~ w£r1cees

JUN 9 1993

—t eerie othe CLERK

In The

Supreme Court of the United States

October Term, 1992

*

WORD OF FAITH WORLD OUTREACH CENTER

CHURCH, INC., ET AL.,

Petitioners,

DAN MORALES, Attorney General of Texas,

Respondent.

¢

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Fifth Circuit

$

PETITION FOR WRIT OF CERTIORARI

*

J.C. Joyce

(Counsel of Record)

Joyce & PoLLarD

515 South Main Mall, Suite 300

Tulsa, Oklahoma 74103

(918) 585-2751

Diane M. HENSON

Boyce C. CaBANIss

GRAVES, DOUGHERTY, HEARON &

Moopy

A Professional Corporation

515 Congress Avenue, Suite 2300

Austin, Texas 78701

(512) 480-5600

Attorneys for Petitioners

June 8, 1993

COLLECT (402) 342-283

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964 }

OR CALL d

QUESTIONS PRESENTED

1. Whether the standard used by the Fifth Circuit in

determining that Pullman abstention should be applied in

this case is inconsistent with the standard used by other

circuit courts and in conflict with the requirement

announced by this Court that a case must turn on an

ambiguous issue of state law for the Pullman doctrine to

apply.

2. Whether the Fifth Circuit erred in reversing the

district court’s refusal to abstain in favor of a preexisting

state court proceeding filed by the Attorney General in

light of the district court’s unchallenged finding that the

Attorney General had filed the state court proceeding in

bad faith and in retaliation for the Petitioners’ exercise of

fundamental First Amendment rights.

3. Whether the Fifth Circuit abused its discretion by

ordering the district court to abstain under the Pullman

doctrine rather than certifying any unsettled issues of

state law directly to the Texas Supreme Court as provided

for under Texas law.

ii

LIST OF ALL PARTIES

Reverend Robert Tilton

Martha Phillips Tilton

Word of Faith World Outreach Center Church, Inc.

J.C. Joyce, Esq.

Joyce & Pollard

Diane M. Henson, Esq.

Boyce C. Cabaniss, Esq.

Graves, Dougherty, Hearon & Moody, P.C.

Dan Morales, Attorney General for the State of Texas

Renea Hicks, Special Assistant Attorney General

Will Pryor, First Assistant Attorney General

Mary F. Keller, Deputy Attorney General

Joe Crews, Chief, Consumer Protection Division

Virginia Pendergrass Bucy, Assistant Attorney General

Ann Kitchen, Assistant Attorney General

ili

TABLE OF CONTENTS

Page

ye 8 ys i

RE MT URI MMB 6 sca scccesccvnscccccscsccess ii

pe 6. | Vv

cca ha nee eb ses see tanevesce 1

Ne ce ti cebseescceessauwss 2

STATUTORY PROVISIONS INVOLVED............. 2

ee yy or 3

REASONS FOR GRANTING THE WRIT ........... 7

I. The Pullman Abstention Standard Applied by

the Fifth Circuit Conflicts With the Standard

Announced by this Court and is Inconsistent

With the Standards Applied by Other Circuit

eg ES a errr 7

Il. This Case Presents the Court With an Oppor-

tunity to Fashion a Precise Standard for the

Degree of Uncertainty Necessary in State Law

to Justify the Application of Pullman Absten-

CEM ECCARE CSAS WM Saeed sna racecesuseseses 11

Ill. The Fifth Circuit’s Holding That the Bad Faith

Exception to Younger Abstention is Irrelevant

to Pullman Abstention Profoundly Mis-

construes the Nature of the Bad Faith Excep-

tion and the Relationship Between the Younger

en 14

IV. The Fifth Circuit Abused Its Discretion by

Ordering Abstention Rather Than Certifying

Any Ambiguous Issues of Texas Law Directly

to the Texas Supreme Court Pursuant to Texas

Rule of Appellate Procedure 114............. 17

iv

TABLE OF CONTENTS - Continued

COAAIIOIN 5 oisnci.cstuice eee 21

APPENDIX............. ix ree ages Eee App. i

Vv

TABLE OF AUTHORITIES

Page

Cases

American Trial Law. Ass’n, N.J. Branch v. New

Jersey S. Ct., 409 U.S. 467, 93 S.Ct. 627 te a

Bellotti v. Baird, 428 U.S. 132, 96 S.Ct. 2857 (1976) .... 18

City of Houston v. Hill, 482 U.S. 451, 107 S.Ct.

PISS oct a boa wh dd i ote 8, 18, 20

England v. Louisiana Bd. of Medical Examiners,

375 U.S. 411, 84 S.Ct. 461 SO Pines eacnccks 20, 21

Harman v. Forssenius, 380 U.S. 528, 85 S.Ct. 1177

MAR SPR RTOS aire ae alee ia Sn dan 8

Harris County Comm’rs Court v. Moore, 420 U.S.

A BS Be ) aia 19

Hawaii Hous. Authority v. Midkiff, 467 U.S. 229,

I I ID i is oy 66h W bie be hv Kodnccs ou nec. 8

Lehman Bros. v. Schein, 416 U.S. 386, 94 S.Ct. 1741

IDE enh ek cke ee aS 18

Pearl Inv. Co. v. City of San Francisco, 774 F.2d

a I 13

Pennzoil v. Texaco, 481 U.S. 1, 107 S.Ct. 1519

Sn CEE Pf Chena y PRR OL Dat aE at ae 16, 17

Pietzsch v. Mattox, 719 F.2d 129 (5th Cir. | 9

Procunier v. Martinez, 416 U.S. 396, 94 S.Ct. 1800

PEER Gb iae toy eek clr oe ce 8, 20

Railroad Comm’n v. Pullman Co., 312 U.S. 496, 61

ge Bisco cer.) OEE POPES OT Cae tik 3

Stephens v. Bowie County, 724 F.2d 434 (5th Cir.

I heb Se skort ease Seni bubcek veces xeuees, 9

vi

TABLE OF AUTHORITIES - Continued

Page

United Fence & Guard Rail Corp. v. Cuomo, 878

oe Fe ge Ser eerere err erry reer ree 9, 13

Virginia v. American Booksellers Ass’n., 484 U.S.

Ps RO ee, Be CEs ba cc case cgicdapssencccicss 18

Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746 (1971)...3, 16

Zwickler v. Koota, 389 U.S. 241, 88 S.Ct. 391 (1967) .... 20

STATUTES

2B USCA: & 1Z50)) Ceeme. TGRB). on asc scccssevccsncs 2

atk a ee, Be TTR ETT P eee eT ATC ree 5

Article 1302, Chapter 5, Texas Miscellaneous Cor-

gw | . eee eee e verry ee eT eee 4, 5, 6

pe | Se PPE TREE TTT Le ee eee 17

Texas Deceptive Trade Practices - Consumer Pro-

tection Act, Tex. Bus. & Com. Code § 17.41 et seq

CRATE PASS DEER ESE ERA DARE ORE a 4, 5, 6, 10

TREATISES

Erwin Chemerinsky, Federal Jurisdiction (1989) ....... 12

Charles A. Wright, Law of Federal Courts (1983)...... 18

17A Charles A. Wright, Arthur R. Miller &

Edward H. Cooper, Federal Practice and Pro-

EE Sy MD vo kenedse sk cadskaneseue 12, 13, 19

Law Review ARTICLES

David P. Currie, The Federal Courts and the Ameri-

can Law Institute (Pari II), 36 U. Chi. L. Rev. 268

Sy eee ee teres earn ae eke tee 3

Vii

TABLE OF AUTHORITIES - Continued

Page

Julie A. Davies, Pullman and Burford Abstention:

Clarifying the Roles of State and Federal Courts in

Constitutional Cases, 20 U.C. Davis L. Rev. 1

i ee ane ae eabier eins ecules 3, 12, 13

Martha A. Field, Abstention in Constitutional Cases:

The Scope of Pullman Abstention Doctrine, 122 U.

PW My MOO OOD COs iccnesecenccerscusvccas, 13

Martha A. Field, The Abstention Doctrine Today, 125

U. Pa. L. Rev. 590, 602-03 (1977).................. 12

Martin H. Redish, Abstention, Separation of Powers,

and the Limits of the Judicial Function, 94 Yale L.J.

RR eee ieee chee ccs nds hock beck cna wanes 3

Peter H. Barber, Pullman Abstention: A Discussion

of Issues and Strategies, 1983 Clearinghouse Rev.

POM FS EARS Cilaie AGS Was ais GEC BENS Ako ck cae. 12, 13

Rex E. Lee & Richard G. Wilkins, An Analysis of

Supplemental Jurisdiction and Abstention with Rec-

ommendations for Legislative Action, 1990 B.Y.U.

i Mg a Ole hae kek Gin ts dane aside cesas 11

Richard B. Lillich & Raymond T. Mundy, Federal

Court Certification of Doubtful State Law Ques-

tions, 18 UCLA L. Rev. 888 (1971) ................. 3

Theodore B. Eichelberger, Certification Statutes:

Engineering a Solution to the Pullman Abstention

Delay, 59 Notre Dame L. Rev. 1339 ae 3

Thomas G. Buchanan, Pullman Abstention: Recon-

sidering the Boundaries, 59 Temp. L.Q. 1243

SSRI 66 GSS ety ica aa 3, 11, 12

viii

TABLE OF AUTHORITIES - Continued

Page

CONSTITUTION

United States Constitution, Amendment |....... passim

United States Constitution, Amendment XI........... 2

*

In The

Supreme Court of the United States

October Term, 1992

r’

v

WORD OF FAITH WORLD OUTREACH CENTER

CHURCH, INC., ET AL.,

Petitioners,

V.

DAN MORALES, Attorney General of Texas,

Respondent.

¢

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Fifth Circuit

&

PETITION FOR WRIT OF CERTIORARI

°

Petitioners, Word of Faith World Outreach Center

Church, Inc. (the “Church”), Robert Tilton and Martha

Phillips Tilton (the “Tiltons”) pray that a Writ of Cer-

tiorari be issued to review the decision in this case of the

United States Court of Appeals for the Fifth Circuit.

¢

OPINIONS BELOW

The opinion of the United States Court of Appeals for

the Fifth Circuit, reported at 986 F.2d 962 (Sth Cir. 1993),

is attached hereto as Appendix A, App. 1-18. The opinion

1

of the United States District Court for the Western Dis-

trict of Texas, reported at 787 F. Supp. 689 (W.D.Tex.

1992), is attached hereto as Appendix D, App. 23-63.

¢

JURISDICTION

The opinion of the Fifth Circuit in this case was

issued on March 29, 1993. (See Appendix A, App. 1-18)

An order denying Appellees’ Motion for Rehearing

before the Fifth Circuit was issued on April 26, 1993. (See

Appendix C, App. 21-22) The jurisdiction of this Court is

invoked pursuant to 28 U.S.C.A. § 1254(1) (Supp. 1993).

¢

STATUTORY PROVISIONS INVOLVED

Although the proceedings below involved the First

and Eleventh Amendments to the United States Constitu-

tion and various provisions of Texas law, this Petition

presents issues pertaining only to the proper application

of Pullman abstention which is a non-statutory, court-

made procedural doctrine. The Texas certification rule,

Texas Rule of Appellate Procedure 114, is implicated in

this Petition. Because Rule 114 is somewhat lengthy, its

text is set out in Appendix E, App. 64-66.

¢

STATEMENT OF THE CASE

This case involves the Pullman) abstention doctrine,

the limits on its use, the need for a uniform standard for

determining when its use is appropriate, its relationship

to other species of abstention — namely the Younger? doc-

trine — and its continued viability when direct state

supreme court certification of uncertain state law issues is

available. In short this case presents the Court with the

opportunity to thoroughly examine one of the most con-

troversial of all court-made procedural doctrines.3

' Pullman abstention is so named after Railroad Comm’n v.

Pullman Co., 312 U.S. 496, 61 S.Ct. 643 (1941), the case in which

the doctrine was initially articulated.

2 Younger abstention takes its name from Younger v. Harris,

401 U.S. 37, 91 S.Ct. 746 (1971), the case in which that doctrine

was first expostulated.

° Each of the articles and treatises cited in this Petition is, to

some extent, critical of the Pullman abstention doctrine. Some

commentators advocate its abolition altogether. See Martin H.

Redish, Abstention, Separation of Powers, and the Limits of the

Judicial Function, 94 Yale L.J. 71 (1984); David P. Currie, The

Federal Courts and the American Law Institute (Part II), 36 U. Chi.

L. Rev. 268, 317 (1969). Others propose additional limitations on

its application. See Thomas G. Buchanan, Pullman Abstention:

Reconsidering the Boundaries, 59 Temp. L.Q. 1243 (1986); Julie A.

Davies, Pullman and Burford Abstention: Clarifying the Roles of

State and Federal Courts in Constitutional Cases, 20 U.C. Davis L.

Rev. 1 (1986). Still others propose that its use be discontinued

when direct state court certification is available. See Theodore B.

Eichelberger, Certification Statutes: Engineering a Solution to the

Pullman Abstention Delay, 59 Notre Dame L. Rev. 1339 (1984);

Richard B. Lillich & Raymond T. Mundy, Federal Court Certifica-

tion of Doubtful State Law Questions, 18 UCLA L. Rev. 888 (1971).

The backdrop for this proposed examination is pro-

vided by an extraordinary set of facts. This case was

precipitated when the Attorney General of Texas

attempted to suppress the religious teachings of what he

acknowledges to be a bona fide church (App. 24, n.1)

because he found them detrimental to the people of

Texas. After waging war against Petitioners in the media,

the Attorney General, claiming authority under the Texas

Deceptive Trade Practices - Consumer Protection Act,

Tex. Bus. & Com. Code § 17.41 et seg (the “DTPA”),

demanded that the Church turn over documents which

the district court found to be clearly protected by the

United States Constitution. (App. 46) In reaction to this

demand, the Church notified the Attorney General that it

would seek protection through a federal court suit. (App.

26) To compel the Church to turn over these documents

and, as the district court later found, to prevent the

acquisition of federal jurisdiction (App. 31), the Attorney

General filed a quo warranto proceeding in state court in

which he sought the revocation of the Church’s charter,

the appointment of a receiver over its assets, and a per-

manent injunction against all operations of the Church.

(App. 27) The Attorney General sought this draconian

relief pursuant to Article 1302, Chapter 5, Texas Miscella-

neous Corporation Laws Act (the “MCLA”). (Id.) The quo

warranto action is still pending in the Probate Court of

Travis County, Texas.

4 A more detailed account of the somewhat complex

sequence of events that led to the filing of Petitioner’s federal

complaint is provided in Appendix F, App. 67-72.

Two days after the Attorney General filed his quo

warranto proceeding which threatened the very existence

of the Church, Petitioners filed this action in federal

district court pursuant to 42 U.S.C.A. § 1983 (1981), con-

tending that the Attorney General’s actions violated the

First Amendment to the United States Constitvtion and

seeking an injunction to prevent the Attorney General

from attempting to enforce his document demand and

from prosecuting his quo warranto proceeding.

Following a two day trial, the district court held that:

(i) Texas law was “clear” that the DTPA, the claimed

source of authority for the document demand, was not

applicable to an entity, like the Church, that sold nothing

and was in no way involved in trade or commerce (App.

38), (ii) the application of the DTPA to the Church vio-

lated the Establishment Clause of the First Amendment

(App. 51-53), (iii) the Attorney General’s demand that the

Church turn over all of its sensitive documents, including

tapes of all of its sermons and a list of its members,

violated the Free Exercise Clause and the Freedom of

Association Clause of the First Amendment (App. 46),

and (iv) the application of the MCLA, the claimed source

of authority for the filing of the quo warranto suit, to the

Church violated the Church’s rights under the First

Amendment because the “remedies provided under the

MCLA and sought by the Attorney General would wholly

deprive the Plaintiffs of their right to worship” (App.

54-55). Based on these findings, the district court perma-

nently enjoined the quo warranto proceeding and the

Attorney General's attempts to obtain constitutionally

protected documents from the Church. (App. 62-63)

The district also court rejected the Attorney General’s

request that it abstain under either the Younger or Pullman

abstention doctrines because it found that the Attorney

General’s actions against the Church, including the filing

of the quo warranto proceeding, were taken in bad faith.

(App. 32) The district court also expressly found that the

Attorney General had filed his quo warranto action for the

purpose of retaliating against the Petitioners’ exercise of

their First Amendment rights. (App. 33-34)

On appeal the Fifth Circuit ruled that the district

court should have abstained pursuant to the Pullman

doctrine. The court reached this result based solely on its

conclusion that the case turned on state law issues that

are “fairly susceptible to an interpretation that might

avoid or substantially modify the federal constitutional

question.” (App. 11-12) The court did not determine that

the state statutes involved, the DTPA and the MCLA,

were ambiguous or uncertain. Indeed, with respect to the

DTPA, the Fifth Circuit concluded that it was “highly

likely” that the district court’s finding that the DTPA did

not apply to the Church was correct. (App. 14) With

respect to the MCLA, the Fifth Circuit noted that none of

the exceptions to its application included churches or

religious corporations (App. 14, n.8), but concluded that

“nonetheless, a state court might impose a limiting con-

struction on the statute.” (Id.) The Fifth Circuit’s own

conclusions, therefore, indicate that no real uncertainty

exists regarding the application of the two state statutes

to the Church - the DTPA does not apply and the MCLA

does. :

Although the district court found that the Attorney

General filed the quo warranto proceeding in bad faith and

- alll

7

to retaliate for Petitioners’ exercise of their First Amend-

ment rights, the Fifth Circuit nevertheless held that the

bad faith exception to the Younger abstention doctrine is

irrelevant for the purposes of Pullman abstention. (App.

17, n.10) Indeed, the Fifth Circuit supported its decision

to abstain under the Pullman doctrine based on the exis-

tence of the pending quo warranto proceeding. (App. 18,

n.12)

In their Motion for Rehearing the Petitioners

requested that the court not only reconsider its holding

on Pullman abstention but also, alternatively, that it cer-

tify any ambiguous issues of state law directly to the

Texas Supreme Court pursuant to the Texas certification

rule. The Fifth Circuit denied Petitioners’ Motion for

Rehearing without comment.

a

REASONS FOR GRANTING THE WRIT

I. The Pullman Abstention Standard Applied by the

Fifth Circuit Conflicts With the Standard

Announced by this Court and is Inconsistent With

the Standards Applied by Other Circuit Courts.

The standard developed by the Fifth Circuit and

applied in this case to determine the applicability of

Pullman abstention omits the most critical element of the

Pullman doctrine. This Court has repeatedly held that the

application of the Pullman abstention doctrine is appro-

priate only if two elements are satisfied: (1) the state

Statute at issue must be uncertain, unsettled, or ambig-

uous and (2) it must be fairly subject to an interpretation

which will render unnecessary or substantially modify

the federal constitutional question. City of Houston v. Hill,

482 U.S. 451, 468, 107 S.Ct. 2502, 2513 (1987); Hawaii Hous.

Authority v. Midkiff, 467 U.S. 229, 236, 104 S.Ct. 2321, 2327

(1984); Harman v. Forssenius, 380 U.S. 528, 535, 85 S.Ct.

1177, 1182 (1965). The first element of the standard — that

the issue of state law involved be uncertain, unsettled, or

ambiguous — is an absolute prerequisite for the applica-

tion of the Pullman doctrine. City of Houston v. Hill, 482

U.S. at 469, 107 S.Ct. at 2514 (“when a statute is not

ambiguous, there is no need to abstain even if state courts

have never interpreted the statute”) and Procunier v. Mar-

tinez, 416 U.S. 396, 402-03, 94 S.Ct. 1800, 1806 (1974)

(unsettled state law is “the essential prerequisite for

abstention”).

The standard developed by the Fifth Circuit directly

conflicts with this Court’s holdings by requiring the pres-

ence of only one of these elements as a prerequisite for the

application of the Pullman doctrine:

In order to app!y the [Pullman] abstention doc-

trine, the district court must be convinced that

at least one of three factors is present:

(1) Whether the disposition of a question of

state law involved in the case can eliminate

or narrow the scope of the federal constitu-

tional issue;

(2) Whether the state law question presents

difficult, obscure or unclear issues of state

law; or

(3) Whether a federal decision could later con-

flict with subsequent state court resolutions

concerning the same regulatory program or

scheme, thus engendering more confusion.

(Emphasis added) Stephens v. Bowie County, 724 F.2d 434,

435 (Sth Cir. 1984).5 See also Pietzsch v. Mattox, 719 F.2d

129, 131 (Sth Cir. 1983). Because only one of these three

factors need be present, under the Fifth Circuit’s standard

a federal court can abstain under the Pullman doctrine if

the resolution of the state law issue involved will narrow

or eliminate the federal constitutional issue — even if the

State law is not uncertain or ambiguous. That was the

precise result in the instant case. The Fifth Circuit abs-

tained solely on its conclusion that the Texas statutes at

issue were fairly subject to an interpretation which would

moot the federal constitutional claims brought by Peti-

tioners. (App. 12) (“The question thus presented is

whether the statutes at issue here apply full force to the

church or are susceptible of a limiting construction that

would alleviate the unconstitutional burdens the district

court found they imposed on the church.”) The Fifth

Circuit did not examine the statutes at issue to determine

if their application to the facts of this case was uncertain

under Texas law. On the contrary, the court endorsed the

° This standard should be compared to the standard

adopted by the Second Circuit:

The three basic conditions that must be present to

trigger Pullman abstention reflect the policies that

underlie the doctrine: First, the state statute must be

unclear or the issue of state law uncertain; second,

resolution of the federal issue must depend upon the

interpretation given to the ambiguous state provision;

and third, the state law must be susceptible of an

interpretation that would avoid or modify the federal

constitutional issue.

(Emphasis added) United Fence & Guard Rail Corp. v. Cuomo, 878

F.2d 588, 594 (2d Cir. 1989).

10

district court’s finding that Texas law was “clear” that the

DTPA could not be applied to the Church:

It is highly likely, as the district court noted, that

the DTPA does not even apply to the church.

Significantly, it is the DTPA that provides the

Texas Attorney General with the investigative

authority upon which the objectionable January

13, 1992, demand letter was predicated. A state

court ruling to the effect that the DTPA does not

apply to the church plainly would moot any

federal constitutional claim, at least insofar as it

was premised upon the application of the DTPA.

(App. 14) The Fifth Circuit would thus force the parties to

relitigate this issue in state court even though the district

court has already resolved it and the Fifth Circuit found it

“highly likely” that the district court’s resolution was

correct. This pointless result wastes judicial resources and

does not serve the policies underlying the Pullman doc-

trine.

Commentators have noted that the Pullman absten-

tion standard applied by the Fifth Circuit is inconsistent

with the purpose of the Pullman doctrine -and with

Supreme Court precedent:

The approach taken by the Fifth Circuit clearly

demonstrates a failure to perceive the purposes

of the Supreme Court in establishing the Pull-

man abstention doctrine . . . [The Fifth Circuit’s]

approach has the potential to extend the scope

of Pullman abstention far beyond its limited

function and purpose. By requiring only one of

the Supreme Court’s triggering elements must

be met before abstention is ordered, the Fifth

Circuit acts counter to precedent established by

the Supreme Court.

11

Footnotes omitted. Buchanan, supra, at 1255-56.© See also

Rex E. Lee & Richard G. Wilkins, An Analysis of Supple-

mental Jurisdiction and Abstention with Recommendations for

Legislative Action, 1990 B.Y.U. L. Rev. 321, 340-41 (conclud-

ing that the Fifth Circuit’s Pullman standard allows appli-

cation of the doctrine to a far wider range of cases than

does the standard used in the Second Circuit). The Court

should grant writ in this case to correct the erroneous and

widely criticized Pullman abstention standard applied by

the Fifth Circuit.

II. This Case Presents the Court With an Opportunity

to Fashion a Precise Standard for the Degree of

Uncertainty Necessary in State Law to Justify the

Application of Pullman Abstention.

The Court should grant writ in this case in order to

formulate a consistent standard for determining the

extent to which state law must be unclear in order to

trigger the application of Pullman abstention. Although

the Court has consistently required the presence of an

unclear or ambiguous issue of state law as a prerequisite

for abstention under the Pullman doctrine, virtually every

commentator who has addressed Pullman abstention has

bemoaned the fact that the Court has failed to articulate a

consistent standard for the degree of ambiguity necessary

to render abstention appropriate. See, e.g., 17A Charles A.

© After noting “substantial disparity among the circuits” in

the application of the Pullman doctrine, the author concluded

that the Pullman standard applied by the Second Circuit is con-

sistent in furthering the purposes of the Supreme Court. Id. at

1252. The Second Circuit standard is set out above at note 5.

12

Wright, Arthur R. Miller & Edward H. Cooper, Federal

Practice and Procedure § 4242 at 42 (2d ed. 1988) (“The

Court has not defined with precision what degree of

unclarity in state law is needed to justify Pullman-type

abstention”); Erwin Chemerinsky, Federal Jurisdiction

§ 12.2.1 at 599 (1989) (the “Supreme Court has offered

relatively little guidance about how unclear the state law

must be [to trigger Pullman abstention”]); Buchanan,

supra, at 1251 (“the lack of a concise, workable definition

of the proper circumstances in which to apply Pullman

abstention provides the lower federal courts with little in

the way of guidance”); Davies, supra, at 7 (“Commenta-

tors have noted the existence of different shades of

‘unclarity’ and the uncertainty of how unclear state law

must be to justify abstention”); Peter H. Barber, Pullman

Abstention: A Discussion of Issues and Strategies, 1983

Clearinghouse Rev. 1093 at 1097 n.49 (reviewing the vary-

ing standards announced by the Court for the necessary

degree of ambiguity in state law to trigger Pullman

abstention).

Some commentators have suggested that the lack of a

precise standard for the degree of unclarity in state law

necessary to trigger the Pullman doctrine has led to abuse

of the doctrine by lower courts. See Wright, Miller &

Cooper, supra, § 4242 at 43-44 (“Indeed the standard on

when state law is sufficiently unclear to justify abstention

is so amorphous that it has been suggested that decisions

on whether to abstain may be shaped by the court’s view

of the substantive issues that the case presents,” citing

Martha A. Field, The Abstention Doctrine Today, 125 U. Pa.

L. Rev. 590, 602-03 (1977), and Buchanan, supra, at 1251).

13

This case presents the Court with the opportunity to

announce a precise standard for the degree of unclarity

necessary to trigger the Pullman doctrine. Commentators

have urged the adoption of a standard under which a

federal court would abstain under Pullman only if the

dispositive issue of state law involved is so unclear that

the court would run a “substantial” risk of error in decid-

ing it. Davies, supra, at 48 (“courts should confine Pull-

man abstention to those instances in which the underlying

and potentially dispositive question of state law is so

unclear that federal courts would runa substantial risk of

error in deciding it”); Barber, supra, at 1097 (“the best

view is that Pullman is appropriate only when the state

law raises substantial doubt as to its correct interpreta-

tion”).

In perhaps the most influential work dealing with

Pullman abstention,” Professor Martha Field Proposes a

standard under which a federal court would abstain from

deciding an issue of state law only when the state law is

so unclear that the “chance of error is reasonably great.”

Martha A. Field, Abstention in Constitutional Cases: The

Scope of Pullman Abstention Doctrine, 122 U. Pa. L. Rev.

1071, 1090 (1974). The Field standard has already been

adopted by the Second and the Ninth Circuits. United

Fence & Guard Rail Corp. v. Cuomo, 878 F.2d 588, 595 (2d

Cir. 1989); Pearl Inv. Co. v. City of San Francisco, 774 F.2d

1460, 1465 (9th Cir. 1985). |

7 Professors Wright, Miller and Cooper acknowledge Pro-

fessor Field’s 1974 article in the Pennsylvania Law Review to be

the “outstanding work in the area of Pullman abstention.”

Wright, Miller & Cooper, supra, § 4244 at 81 n.44.

14

In this case the Fifth Circuit concluded that it was

“highly likely” that the district court’s interpretation of

the primary state statute at issue in this case is correct.

Based on this finding, the chances of the district court’s

interpretation of state iaw being in error cannot be “rea-

sonably great.” Under the Second and Ninth Circuit stan-

dards therefore, the Fifth Circuit’s decision to abstain

under Pullman was in error. The Court should grant the

writ in this case in order to provide a consistent standard

for determining whether state law is sufficiently unclear

to trigger abstention under the Pullman doctrine.

III. The Fifth Circuit’s Holding That the Bad Faith

Exception to Younger Abstention is Irrelevant to

Pullman Abstention Profoundly Misconstrues the

Nature of the Bad Faith Exception and the Rela-

tionship Between the Younger and Pullman Doc-

trines. ;

The Fifth Circuit refused to accept the district court’s

conclusion that the Attorney General's bad faith filing of

the state court quo warranto action rendered abstention in

favor of that proceeding inappropriate under both the

Younger and the Pullman doctrines. The reasoning applied

by the Fifth Circuit in reaching this result treats Younger

and Pullman abstention as two separate, unrelated doc-

trines and effectively reads the critical bad faith exception

out of the Younger doctrine. The Fifth Circuit’s reasoning

is completely at odds with this Court’s global approach to

abstention.

The district court expressly found that seven differ-

ent actions taken by the Attorney General against Peti-

tioners, including the filing of the state court guo warranto

15

proceeding, constituted bad faith. (App. 29-30) Speci-

fically, the district court found that the Attorney General

had filed the state court proceeding in which he sought to

strip the Church of its charter, appoint a receiver over its

assets and enjoin its minister from conducting the busi-

ness of the Church, for the purpose of retaliating against

Petitioners for exercising their rights under the First

Amendment. (App. 33-34) The district court concluded

that these facts precluded the application of either Youn-

ger or Pullman abstention. (App. 32)

With little discussion, the Fifth Circuit peremptorily

dismissed this basis for the district court’s rejection of

Pullman abstention:

[W]e are persuaded that prosecutorial bad faith

and harassment, although constituting a recog-

nized exception to Younger abstention, possesses

little or no relevance for Pullman-type situations.

(App. 17, n.10) In so holding, the Fifth Circuit completely

misconstrues the nature of the bad faith/harassment

exception to Younger abstention and the relationship

between the various abstention doctrines. The bad faith

exception to the Younger doctrine is premised on the

conclusion that a bad faith state court proceeding filed by

a state official for the purpose of retaliation or harass-

ment is, in itself, a constitutional violation. Justice Stew-

art succinctly stated the rationale behind the bad faith

exception to the Younger doctrine:

[I]f there has been bad faith and harassment —

official lawlessness — in a statute’s enforcement-

. .. the reasons of policy for deferring to state

16

adjudication are outweighed by the injury flow-

ing from the very bringing of the state proceed-

ings, by the perversion of the very process that

is supposed to provide vindication, and by the

need for speedy and effective action to protect

federal rights.

Citations omitted. Younger v. Harris, 401 U.S. 37, 56, 91

S.Ct. 746 (1971) (J. Stewart, concurring). The existence of

a state proceeding filed in bad faith by a state official

must therefore constitute a valid basis for refusing to

abstain not only under the Younger doctrine but also

under the Pullman doctrine. Neither Younger nor Pullman

abstention can justify forcing a party to endure an uncon-

stitutional, bad faith state court proceeding.

The Fifth Circuit’s holding also flies in the face of this

Court’s articulation of the interrelated nature of the two

doctrines:

[CJonsiderations similar to those that mandate

Pullman abstention are relevant to a court’s deci-

sion whether to abstain under Younger. The var-

ious types of abstention are not rigid

pigeonholes into which federal courts must try

to fit cases.

Citations omitted. Pennzoil v. Texaco, 481 U.S. 1, 11 n.9,

107 S.Ct. 1519, 1526 n.9 (1987). In this case the Fifth

Circuit has ruled that a consideration fundamental to the

Younger doctrine is completely irrelevant to the Pullman

doctrine. Indeed, the Fifth Circuit actually relies on the

existence of the quo warranto proceeding as a consider-

ation supporting its application of Pullman abstention.

(App. 18, n.12 (existence of a pending state court pro-

ceeding in which issues of state law may be resolved

a ae at

we

nea

17

Supports application of Pullman doctrine)) By expressly

approving the continuation of the state court Proceeding,

the Fifth Circuit has effectively stripped the Younger doc-

trine of its bad faith exception, endorsed the Attorney

General’s bad faith efforts to thwart federal jurisdiction

and retaliate against Petitioners’ exercise of their First

Amendment rights, and, Perhaps most ironically, has well

illustrated the intrinsic error, rejected by this Court in

Pennzoil, of treating Younger and Pullman abstention as

unrelated doctrines. This Court should grant writ to reaf-

firm its holding in Pennzoil and correct the Fifth Circuit’s

“pigeonhole” approach to abstention.

IV. The Fifth Circuit Abused Its Discretion by Order-

ing Abstention Rather Than Certifying Any

Ambiguous Issues of Texas Law Directly to the

Texas Supreme Court Pursuant to Texas Rule of

Appellate Procedure 114.

Rather than force Petitioners to endure a state court

proceeding brought in bad faith for the Purpose of

relitigating facts already found by the district court, the

Court of Appeals should have simply certified any

unclear questions of state law directly to the Texas

Supreme Court. Texas Rule of Appellate Procedure 114

allows the Court of Appeals to certify to the Texas

Supreme Court any unsettled questions of Texas law.

(App. 64-66)

This Court has enthusiastically endorsed the use of

certification as an alternative to Pullman abstention when

18

direct certification is available. Virginia v. American Book-

sellers Ass’n., 484 U.S. 383, 396, 108 S.Ct. 636, 644 (1988)

(“Certification, in contrast to the more cumbersome and

(in this context) problematic abstention doctrine, is a

method by which we may expeditiously obtain [an

authoritative construction of state law]”); City of Houston

v. Hill, 482 U.S. at 470, 107 S.Ct. at 2514 (“the certification

procedure is useful in reducing the substantial burdens of

cost and delay that abstention places on litigants”);

Bellotti v. Baird, 428 U.S. 132, 150-51, 96 S.Ct. 2857, 2868

(1976) (“the availability of an adequate certification pro-

cedure ‘does, of course, in the long run save time, energy,

and resources and helps build a cooperative judicial fed-

eralism,’ ” quoting Lehman Bros. v. Schein, 416 U.S. 386,

391, 94 S.Ct. 1741, 1744 (1974)).

Certification, as opposed to Pullman abstention, is

particularly appropriate in this case because it is the only

method by which federal jurisdiction may be retained

8 Commentators are virtually unanimous in strongly pre-

ferring certification to the much more burdensome Pullman

abstention doctrine. See, e.g., Charles A. Wright, Law of Federal

Courts § 52 at 315 (1983):

Although there is still disagreement on the desir-

ability of certification in cases of unclear state law,

there is no such disagreement about the value of certi-

fication in situations of the Pullman type. The state

law questions that are intertwined with federal con-

stitutional issues in Pullman-type cases can be

resolved more expeditiously by certification than by

the traditional method of requiring a party to com-

mence a declaratory judgment action in the state trial

court and take the decision there to the highest court

of the state.

19

pending the resolution of any ambiguous state law issues.

When issues of Texas law are involved, a federal court

applying the Pullman doctrine cannot follow the pro-

cedure mandated by this Court and retain jurisdiction

pending the outcome of proceedings in state court. Ameri-

can Trial Law. Ass‘n, N.J. Branch v. New Jersey S. Ct., 409

U.S. 467, 469, 93 S.Ct. 627, 629 (1973). Instead, the federal

court must dismiss the proceeding, leaving the federal

plaintiffs to refile in federal court when and if proceed-

ings in state court are concluded. Harris County Comm'rs

Court v. Moore, 420 U.S. 77, 88 n.14, 95 S.Ct. 870, 875 n.14

(1975). As pointed out in Wright and Miller, direct certi-

fication to the Texas Supreme Court, which became avail-

able in 1987, now allows federal courts to discontinue this

“highly artificial practice.” Wright, Miller & Cooper,

supra, § 4243 at 66-67.

The ramifications of the district court’s inability to

retain jurisdiction in this case are of critical significance.

First, the district court will not be able to grant any form

of interim relief to protect Petitioners’ federal constitu-

tional rights pending state court resolution of the state

law issues involved. Under the circumstances of this case

~ a State attorney general misusing the power of his office

in an attempt to suppress the First Amendment rights of

an acknowledged, bona fide church — the inability of the

district court to grant interim relief is crucial. Second,

because the federal suit must be dismissed, Petitioners

lose the benefit of the district court’s determination of

20

fact issues.? This Court has expressly rejected that result.

England v. Louisiana Bd. of Medical Examiners, 375 U.S. 411,

417, 84 S.Ct. 461, 466 (1964) (“in cases where, but for the

application of the abstention doctrine, the primary fact

determination would have been by the District Court, a

litigant may not be unwillingly deprived of that deter-

mination”).

Finally, the fact that Petitioners’ federal suit must be

dismissed will significantly add to the expense and delay

associated with the application of the Pullman doctrine in

this case. If the Texas courts resolve state law so that the

constitutional issues already decided by the district court

are not mooted, Petitioners will be forced to start over

again in the district court by refiling and relitigating their

federal constitutional claims. This result would greatly

exacerbate the delay and expense attendant upon the

application of Pullman abstention.!°

9 This case is tailor-made for certification because all fact

findings necessary to the resolution of any state law issues have

already been made by the district court. These findings of fact

have gone unchallenged by the Attorney General. Certification

therefore would not be complicated by the necessity of any

additional fact finding.

10 The delay that would be caused by the application of the

Pullman doctrine in this case is particularly serious due to the

fundamental nature of First Amendment rights involved. This

Court has repeatedly expressed an unwillingness to apply Pull-

man abstention with its attendant delays when fundamental

rights, particularly First Amendment rights, are at issue. City of

Houston v. Hill, 482 U.S. at 467-68, 107 S.Ct. at 2513; Procunier v.

Martinez, 416 U.S. at 404, 94 S.Ct. at 1807; Zwickler v. Koota, 389

U.S. 241, 252, 88 S.Ct. 391, 397 (1967).

or ee ee ee

a

21

The use of certification would also avoid the pro-

cedural balancing act required of Petitioners to preserve

their federal constitutional claims for federal court. See

England v. Louisiana Bd. of Medical Examiners, 375 U.S. at

420, 84 S.Ct. at 467 (setting out requirement that Pullman

plaintiff submit federal constitutional claims to state

court so that court may construe state law in “light of

those claims,” but must at the Same time reserve those

Claims to avoid later res judicata preclusion in federal

court).

Even though certification is a singularly appropriate

alternative to abstention under the facts of this case, the

Fifth Circuit refused Petitioners’ request that any uncer-

tain issues of Texas law be certified to the Texas Supreme

Court. That refusal, under the circumstances present

here, was an abuse of discretion. This Court should-

enforce its long-standing preference for certification over

abstention by requiring the Court of Appeals to certify

any questions of Texas law directly to the Texas Supreme

Court.11

CONCLUSION

The jurisprudence Surrounding the Pullman absten-

tion is currently in a state of disarray. This disarray is

illustrated by the Fifth Circuit's holding in this case. The

"1 It should be noted that under the Texas certification stat-

ute only this Court or the Fifth Circuit can certify questions in

this case. The district court cannot do so. (App. 64)

22

Fifth Circuit reached its conclusion that Pullman absten-

tion was appropriate in this case only by using an erro-

neous, widely-criticized standard that conflicts with the

standard applied by other circuit courts, and by conclud-

ing that the bad faith use of state law by a state official

for the purpose of deterring Petitioners from exercising

their constitutional rights, while critical to the Younger

doctrine, is irrelevant to the Pullman doctrine. Finally, by

flatly refusing to certify any ambiguous issues of state

law directly to the Texas Supreme Court, the Fifth Circuit

ignored the extraordinary costs of abstaining in this case

and further ignored this Court’s repeated exhortations to

use certification, when available, as an alternative to

abstention. This case presents the Court with a golden

opportunity to clarify and impose consistency on the use

of Pullman abstention.

For the foregoing reasons, Petitioners respectfully

pray that a Writ of Certiorari issue to review the decision

of the Court of Appeals for the Fifth Circuit.

Respectfully Submitted,

J.C. Joyvce

(Couns::! >f Record)

Joyce £. PoLLarRD

515 South Main Mall, Suite 300

Tulsa, Oklahoma 74103

(918) 585-2751

Diane M. HENSON

Boyce C. CABANISS

Graves, DouGHERTy, HEARON &

Moopy

A Professional Corporation

515 Congress Avenue, Suite 2300

Austin, Texas 78701

(512) 480-5600

Attorneys for Petitioners

App. i

Appendix Table of Contents

Appendix A

Opinion of United States Court of Appeals for

the Fifth Circuit, Dated March 29, 1993...... App.

Appendix B

Judgment of United States Court of Appeals for

the Fifth Circuit, Dated March 29, 1993...... App.

Appendix C

Opinion on Petition for Rehearing to United

States Court of Appeals for the Fifth Circuit,

I OE osc sce ce cnsccccece App.

Appendix D

Opinion of the United States District Court for

the Western District of Texas, Dated March 18,

Saeko dw hn ood ose kn ccaevcccecee, App.

Appendix E

Texas Rule of Appellate Procedure 114: Certi-

fication of Questions of Law by United States

es ves sa veccccncsessss vine App.

Appendix F

Detailed Factual Background of This Case... .App.

19

21

23

67

App. 1

APPENDIX A

WORD OF FAITH WORLD OUTREACH

CENTER CHURCH, INC.,

Plaintiffs-Appellees,

Vv.

Dan MORALES, Attorney General of Texas,

Defendant-Appellant.

No. 92-8178.

United States Court of Appeals,

Fifth Circuit.

March 29, 1993.

Texas Attorney General filed quo warranto petition

in state court to compel church to produce records and to

obtain forfeiture of charter, dissolution of corporation,

and appointment of receiver. Church and its leaders

sought injunction in federal court seeking determination

of rights and privileges. The United States District Court

for the Western District of Texas, Sam Sparks, J., 787

F.Supp. 689, entered injunction against Attorney General,

and he appealed. The Court of Appeals, Jerry E. Smith,

Circuit Judge, held that: (1) Eleventh Amendment immu-

nity did not bar action by church and its leaders, and (2)

Pullman abstention was required.

Reversed and remanded.

Appeal from the United States District Court for the

Western District of Texas.

Before REAVLEY, SMITH, and EMILIO M. GARZA,

Circuit Judges.

JERRY E. SMITH, Circuit Judge:

iii i

App. 2

The Texas Attorney General appeals the district

court’s injunction permanently prohibiting him from

attempting to obtain certain records and documents from

the Word of Faith Family Church (“Word of Faith”) and

enjoining him from further prosecuting the state court

action in which he sought them. In a diligent and well-

intentioned effort to resolve the competing consider-

ations, the district court found that the Attorney Gen-

eral’s threatened investigation violated the church’s First

Amendment associational and religious freedoms.

Because we discern certain unsettled state law issues, the

resolution of which may render moot the federal constitu-

tional claims, we conclude that the district court should

have abstained from the exercise of jurisdiction under the

doctrine enunciated in Railroad Comm'n v. Pullman Co.,

312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941).

I.

Word of Faith is a church founded in 1976 as a Texas

nonprofit corporation. Its professed beliefs apparently do

not include a vow of poverty: With 12-13,000 members

and some 500,000 people on its mailing list, Word of Faith

grossed $65 million in revenues in 1991 on an operating

budget of $50 million.!

On November 21, 1991, the American Broadcasting

Company aired a Prime Time Live television program

unflattering to both the church and its pastor, the Rever-

end Robert Tilton (collectively, with Mrs. Tilton, the

1 The parties have stipulated that Word of Faith is a bona

fide church holding sincere religious beliefs.

App. 3

“church”). The program put forth against the church

essentially four accusations: that the church was run as a

sole proprietorship and that the Reverend and Mrs. Tilton

therefore had direct access to church funds; that the

church falsely represented that it provided financial sup-

port to a Haitian orphanage; that the church had sent out

vials of holy water purporting to be from the Red Sea that

in fact were from Taiwan; and that prayer requests solic-

ited by Reverend Tilton never reached him but in fact

were thrown into the garbage by the bank that processes

the church’s mail and deposits its contributions.

After the program aired, the church’s attorney wrote

to both federal and state governmental agencies, includ-

ing the Texas Attorney General, and offered to meet with

them and to permit review and inspection of the church’s

records for the purpose of satisfying the governmental

agencies that the allegations made on Prime Time Live

were false. The Attorney General declined this invitation;

the United States Postal Service and the Federal Bureau

of Investigation accepted.

On January 13, 1992, the Consumer Protection Divi-

sion of the Office of the Attorney General faxed to the

church a demand for documents pursuant to the Texas

Deceptive Trade Practices-Consumer Protection Act

(“DTPA”), Texas Bus. & Com. Cope ANN. § 17.41 et seq.

Upon receipt of the demand letter, the church again

requested a meeting with the Attorney General and his

personnel, which the Attorney General again refused.

Thereafter, pursuant to an oral request, the Attorney Gen-

eral’s office remitted the January 13, 1992, document

demand to the print and television media.

App. 4

The publication of the Attorney General’s document

demand letter resulted in further unfavorable publicity to

the church, apparently prompting it to harden its position

and to decline any further cooperation with the Attorney

General. Even so, the church yet again requested a meet-

ing with the Attorney General at which counsel for the

church represented, both orally and in writing, that if the

Attorney General could convince his “clients” that their

records should be examined, the records would be made

available. The Attorney General again declined the meet-

ing. The church’s counsel then advised the Attorney Gen-

eral of his intention to file a lawsuit in federal court on

February 6, 1992.

On February 5, 1992, five days before the deadline

specified in the January 13th demand letter, the Attorney

General filed a petition in quo warranto in the Probate

Court of Travis County, Texas, pursuant to his authority

under the Miscellaneous Corporation Laws Act

(“MCLA”), Tex.Rev.Civ.Stat.ANN. art. 1302-5.05. The

Attorney General sought not only to compel production

of the records he had requested but also, as his pleadings

indicated, “forfeiture of [the church’s] charter and disso-

lution of the corporation and appointment of a Receiver

to take possession of the affairs of the corporation and

appointment of a Receiver to take possession of the

affairs of the [church], to rehabilitate, reorganize, con-

serve or liquidate the affairs of the corporation,” as well

as a “Permanent Injunction against the [church], its offi-

cers, directors, stockholders, agents, employees, and rep-

resentatives whomsoever from conducting any business

of the [church], and from disposing of or concealing in

App. 5

any manner or any way the property or other assets of

any kind or nature whatsoever of the {[Church].”2

On February 7, the day after the probate court issued

its show cause order and scheduled the matter for hear-

ing on March 9, 1992, the church filed its lawsuit in the

Western District of Texas.3 The district court that same

day issued a Temporary Restraining Order to halt the

state court proceedings; on March 18, 1992, it issued its

Memorandum Opinion and Order enjoining the Attorney

General from attempting to obtain the church’s docu-

ments and records or from further prosecuting the state

court quo warranto proceeding. The Attorney General

appeals.

II.

We review the district court’s order for abuse of

discretion and reverse if the order was based upon an

erroneous legal standard or clearly erroneous factual

findings. Gaudiya Vaishnava Soc’y v. City & County of San

Francisco, 952 F.2d 1059, 1062 (9th Cir.1990), cert. denied,

— US. __, 112 S.Ct. 1951, 118 L.Ed.2d 555 (1992). The

? The documents requested by the Attorney General in his

original, January 13, 1992, document demand letter are summa-

rized in the district court’s published opinion. See Word of Faith

World Outreach Ctr. Church, Inc. v. Morales, 787 F.Supp. 689, 699

(W.D.Tex.1992).

3 On March 4, 1992, the Attorney General filed with the

Travis County Probate Court his First Amended Petition and a

modified document demand letter, both of which differed from

the originals in certain material particulars. An important factor

in our analysis, these alterations in the nature of the Attorney

General’s actions are discussed more fully below.

App. 6

Attorney General argues that Eleventh Amendment

immunity bars the action, the district court incorrectly

applied First Amendment caselaw, and Pullman absten-

tion compels the district court to abjure jurisdiction in

favor of the state court proceeding.

It is beyond civil [sic] that the Eleventh Amendment

generally bars suits in federal court by a citizen of a state

against his state or a state agency or department. Penn-

hurst State School & Hosp. v. Halderman, 465 U.S. 89, 100,

104 S.Ct. 900, 907, 79 L.Ed.2d 67 (1984); Hirtz v. Texas, 974

F.2d 663, 665 (5th Cir.1992). The amendment does not,

however, bar suits for injunctive relief against state offi-

cials. Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed.

714 (1908).

In Young, the Court upheld the issuance of an injunc-

tion against the Minnesota Attorney General, foreclosing

his attempt to enforce a state statute alleged to violate the

Fourteenth Amendment. Employing an analogy to ultra

vires corporate acts, the Court held that the unconstitu-

tional statute was effectively void and therefore could not

confer immunity upon a state official. Since the state

could not constitutionally authorize the Attorney Gen-

eral’s action, the Attorney General was “stripped of his

official or representative character and [was] subjected in

his person to the consequences of his individual con-

duct.” Id. at 160, 28 S.Ct. at 454. Although the logic of

Young has not been extended to suits seeking relief in the

form of money damages or “equitable restitution,” see

Edelman v. Jordan, 415 U.S. 651, 664-68, 94 S.Ct. 1347,

1356-58, 39 L.Ed.2d 662 (1974), prospective injunctive

relief may still be had by way of the Young fiction.

App. 7

The Attorney General contends that the instant case

fits within Pennhurst’s holding that, consistent with the

Eleventh Amendment, a federal court may not enjoin a

state official to act in accordance with state law.4 The

Attorney General argues that, in determining that the

Texas DTPA and MCLA afford the Attorney General no

authority to conduct the sort of all-encompassing investi-

gation of the church that was sought here and that the

Attorney General thus was acting ultra vires his official

capacity and therefore was subject to suit under Young,

the district court construed state law, namely the DTPA

and MCLA. Therefore, Pennhurst applies, and the district

court had no authority to enjoin the state court proceed-

ing.

The Attorney General’s argument misconstrues Penn-

hurst. While the district court necessarily determined

whether the church came within the provisions of the

DTPA and MCLA (and therefore whether the Attorney

4 In Pennhurst, 465 U.S. at 106, 104 S.Ct. at 911, The Court

stated that when a plaintiff alleges a state official’s violation of

state law,

the entire basis for the doctrine of Young and Edelman

disappears. A federal court's grant of relief against

state officials on the basis of state law, whether pro-

spective or retroactive, does not vindicate the

supreme authority of federal law. On the contrary, it

is difficult to think of a greater intrusion on state

sovereignty than when a federal court instructs state

officials on how to conform their conduct to state law.

Such a result directly conflicts with the principles of

federalism that underlie the Eleventh Amendment.

We conclude that Young and Edelman are inapplicable

in a suit against state officials on the basis of state law.

App. 8

General had authority to investigate the church pursuant

to the powers accorded him therein), this was primarily a

determination antecedent to the court’s finding that the

Attorney General was acting in his individual capacity

for purposes of Eleventh Amendment immunity. “Under

existing law, federal courts must necessarily construe

local law and administrative regulations to ascertain if

there is a[n] interest protected by the federal constitu-

tion.” Patchette v. Nix, 952 F.2d 158, 162 (8th Cir.1991). The

Attorney General cannot push the Young-like square peg

of the facts of this case into the round-holed immunity

recognized in Pennhurst.

The court’s alternative holding - that even if the

DTPA and MCLA did permit the Attorney General to

conduct such an intrusive investigation of the church, the

statutes would violate the First Amendment as thus

applied — underlines the fact that the ultimate basis for

the suit was an alleged violation of federal law. This fact

distinguishes the instant case from Pennhurst, where the

Court expressly noted that “[n]o one questions that the

petitioners in operating Pennhurst were acting in their

official capacity.” Pennhurst, 465 U.S. at 109 n. 17, 104

S.Ct. at 912 n. 17.5 Here, the district court found the

Attorney General was not acting in his official capacity.

5 This fact, the Court added, took the facts in Pennhurst out

of that exception to Eleventh Amendment immunity provided

where a state official’s actions are unauthorized by state law.

“Since it cannot be doubted that the statutes at issue here gave

petitioners broad discretion in operating Pennhurst, the con-

duct alleged in this case would not be ultra vires. .. . ” Penn-

hurst, 465 U.S. at 110-11, 104 S.Ct. at 913-14 (citations omitted).

Thus, Pennhurst stands for the proposition that the Eleventh

Amendment bars suit not, as the district court found here,

oe ae

App. 9

Moreover, nothing in Pennhurst supports the proposi-

tion that merely by construing Pennsylvania law to deter-

mine whether the defendants were acting in an official or

individual capacity, the district court acted contrary to

the Eleventh Amendment. Anytime a court declares a

state statute unconstitutional, it first must determine just

what the statute means. Such was the case in Ex parte

Young; nothing the Attorney General has advanced per-

suades us that this case is distinguishable from the set-

ting of that landmark decision. As the Supreme Court has

stated, it is plain “that the Eleventh Amendment does not

bar an action against a state official that is based on a

theory that the officer acted beyond the scope of his

Statutory authority or, if within that authority, that such

authority is unconstitutional.” Florida Dep't of State v.

Treasure Salvors, Inc., 458 U.S. 670, 689, 102 S.Ct. 3304,

3317, 73 L.Ed.2d 1057 (1982). Accordingly, our jurisdiction

over this case is not barred by the Eleventh Amendment.

II.

Even though we rightfully may exercise jurisdiction

in this case, we nonetheless may decline to do so in

accordance with the discretionary doctrines of federal

court abstention set forth in Younger v. Harris, 401 U.S. 37,

91 S.Ct. 746, 27 L.Ed.2d 669 (1971), and Pullman. Younger

abstention is generally deemed appropriate where

where the state official’s actions are alleged to be unauthorized

by state law but where state law imposes an affirmative duty

upon the official, and it is that duty that provides the basis for

the injunctive relief sought.

App. 10

assumption of jurisdiction by a federal court would inter-

fere with pending state proceedings, whether of a crimi-

nal, civil, or even administrative character. See, e.g.,

Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 12-14, 107 S.Ct.

1519, 1526-27, 95 L.Ed.2d 1 (1987) (federal courts may not

enjoin state ¢ivil proceedings between private parties);

Middlesex County Ethics Comm. v. Garden State Bar Ass‘n,

457 U.S. 423, 102 S.Ct. 2515, 73 L.Ed.2d 116 (1982)

(extending Younger to state administrative proceedings

involving important state interests).

Here, the district court repeatedly found that the

Attorney General’s sole purpose in filing the state court

quo warranto proceeding was “to retaliate for or to deter

the church and the Tiltons from exercising their constitu-

tional rights in declining to furnish the documents and

records demanded, and this ‘retaliation’ was a major

motivating factor and played a prominent role in the

Attorney General’s decision to file the quo warranto pro-

ceedings.” 787 F.Supp. at 694-95. This determination, the

court concluded, brought the instant case within that

narrow exception to Younger abstention in which a state

court action is brought in bad faith or for a retaliatory

motive. See, e.g., Wilson v. Thompson, 593 F.2d 1375, 1387

(5th Cir.1979); Shaw v. Garrison, 467 F.2d 113, 122 (5th

Cir.), cert. denied, 409 U.S. 1024, 93 S.Ct. 467, 34 L.Ed.2d

317 (1972).

The Attorney General does not appeal the district

court’s refusal to abstain on Younger grounds, and

ES ee ee ey ee ne

App. 11

accordingly we are foreclosed from reviewing it.6 Pullman

abstention, however, is addressed to the inappropriate-

ness of federal court resolution of difficult or unsettled

questions of state law and the undesirability of reaching

constitutional questions that might be mooted by the

application of state law. See Pullman, 312 U.S. at 500, 61

S.Ct. at 645. The fact that Younger considerations might

not be implicated on appeal, therefore, does not preclude

the application of Pullman’s differently-focused doctrine.

See Hodory, 431 U.S. at 480 n. 11, 97 S.Ct. at 1904 n. 11.

We acknowledge that Pullman abstention is not nec-

essarily proper whenever a state law question must be

decided in order to reach the federal question. “Unless

the state law in question is fairly susceptible of an inter-

pretation that might avoid or substantially modify the

federal constitutional question, federal courts should

exercise their properly invoked jurisdiction.” O’Hair v.

White, 675 F.2d 680, 693 (Former 5th Cir.1982) (en banc);

see also County of Allegheny v. Frank Mashuda Co., 360 U.S.

185, 189, 79 S.Ct. 1060, 1063, 3 L.Ed.2d 1163 (1959) (Pull-

man abstention appropriate “in cases presenting a federal

© See Ohio Bureau of Employment Servs. v. Hodory, 431 U.S.

471, 480 & n. 10, 97 S.Ct. 1898, 1904 & n. 10, 52 L.Ed.2d 513 (1977)

(“If the State voluntarily chooses to submit to a federal forum,

principles of comity do not demand that the federal court force

the case back into the State’s own system.”) Morales v. Trans

World Airlines, U.S. ___, __n. 1, 112 S.Ct. 2031, 2036 n. 1, 119

L.Ed.2d 157 (1992) (“Petitioner [Attorney General of Texas] has

not argued for abstention, and the federal-state comity consid-

erations underlying Younger are accordingly not implicated.”).

For the above reason, we do not address the issue of whether the

district court correctly applied the very narrow “bad faith or

harassment” exception to Younger.

App. 12

constitutional issue which might be mooted or presented

in a different posture by a state court determination of

pertinent state law”).

IV.

The question thus presented is whether the statutes

at issue here apply full-force to the church or are suscept-

ible of a limiting construction that would alleviate the

unconstitutional burdens the district court found they

imposed upon the church. The district court found that

application of the DTPA and MCLA to the church -

inasmuch as these authorized the Attorney General's

intrusive document demand - violated the church’s First

Amendment rights of free association, see NAACP v. Ala-

bama ex rel. Patterson, 357 U.S. 449, 460-61, 78 S.Ct. 1163,

1170-71, 2 L.Ed.2d 1488 (1958), and inextricably inter-

twined church and state in violation of the entanglement

prong of the Establishment Clause test first enunciated in

Lemon v. Kurtzman, 403 U.S. 602, 612-13, 91 S.Ct. 2105,

2111, 29 L.Ed.2d 745 (1971).

The district court’s conclusion as to the DTPA’s

unconstitutionality as applied to the church was prem-

ised primarily upon the-unconstitutionality of the Attor-

ney General’s demand for the church’s membership and /

or contributor lists - an obvious infringement of the First

Amendment associational right announced in NAACP v.

Alabama. See Word of Faith, 787 F.Supp. at 699-701.7 In the

7 The district court also faulted the Attorney General’s doc-

ument demand for its unreasonable and oppressive scope,

“insofar as it requires the Plaintiffs to produce an enormous

App. 13

district court’s view, the DTPA also ran afoul of the

Establishment Clause by virtue of the availability, under

the statute, of injunctive relief and continuing jurisdiction

to monitor the church’s compliance with any injunction

that might be entered against it. Id. at 701-02.

Essentially the same associational and excessive

entanglement concerns underlay the district court’s con-

viction that the MCLA also violated the church’s First

Amendment rights. The MCLA’s investigative provisions

authorize the Attorney General to inspect and investigate

virtually any aspect of a corporation’s activities, and it

provides penalties for non-compliance with the Attorney

General’s request, including forfeiture of the corporate

charter, injunctive relief to deny the right to transact

business within the state, and fines and imprisonment of

uncooperative corporate officers. See id. at 703-04.

We venture no opinion as to the correctness of the

district court’s decision on the constitutional merits, for

we need not do so in order to apply the Pullman doctrine

to the particulars of this case. The district court, despite

its apparent conviction that the consumer-fraud DTPA

statutes does not apply to the church, see id. at 696-98 & n.

7, nonetheless proceeded to address the federal constitu-

tional issue as if the DTPA did apply. Likewise, the court

found the state court receivership originally sought by

amount of documents, which do not appear to have relevance to

the alleged purpose of the investigation.” Word of Faith, 787

F.Supp. at 699 n. 10. We do not understand the court to have

made a constitutional ruling on this ground. Absent such a

foundation, this issue was not properly before the court and is

best resolved by the state trial court in the first instance.

App. 14

the Attorney General pursuant to the MCLA to be an

unconstitutional penalty as applied to the church, despite

the court’s recognition that the receivership provision

was unavailable in the quo warranto proceeding. Id. at 703

n. 15.

In short, the unsettled questions regarding the appli-

cation of state law in this case, depending upon how a

state court would resolve them, could have mooted the

federal constitutional issue. It is highly likely, as the

district court noted, that the DTPA does not even apply to

the church. Significantly, it is the DTPA that provides the

Texas Attorney General with the investigative authority

upon which the objectionable January 13, 1992, demand

letter was predicated. A state court ruling to the effect

that the DTPA does not apply to the church plainly would

moot any federal constitutional claim, at least insofar as it

was premised upon the application of the DTPA.

The district court did not discuss whether the MCLA

properly applies to the church; we assume, arguendo, that

it does.* Nonetheless, a state court might impose a limit-

ing construction on the statute or find that the church’s

8 Article 1302-1.03 B of the MCLA provides,

Except to the extent that any provisions of this Act

are expressly made inapplicable by any provision of the

Texas Business Corporation Act, the Texas Non-Profit

Corporation Act, or any special Statute of this State per-

taining to a particular type of corporation, this Act shall

govern (1) all domestic corporations, including without

limitation those corporations heretofore or hereafter

organized under any Statute of the State. . . .

None of the excepted statutes expressly limits the MCLA’s

application to churches or religious corporations.

| ssinbiniiaunaiiaaasiieilaaeieeaeiaeia | 3

App. 15

March 30, 1992, voluntary dissolution of its corporate

form mooted the Attorney General’s investigation pur-

suant to the statute.9

Lastly, the district court found that the church did

not qualify as a “charitable trust” within the meaning of

Tex.Prop.Cope ANN. § 123.001 (Vernon’s Supp.1992). We

voice no opinion as to the correctness of this conclusion

or its concomitant, that the Travis County Probate Court

thereby was deprived of the jurisdiction provided by

Texas Prosate Cope ANN. § 5A(d) (West Supp.1993). See

Word of Faith, 787 F.Supp. at 704-05 & n. 18. We do note,

however, that this jurisdictional question presents yet

another contested question of state law with the potential

to moot the federal constitutional question. Pullman

abstention was appropriate here, where “ ‘unsettled ques-

tions of state law must be resolved before a substantial

federal constitutional question can be decided’ because

‘the state courts may interpret [the] challenged state stat-

ute[s] so as to eliminate, or at least to alter materially, the

constitutional question presented.’ ” Pennzoil, 481 U.S. at

29, 107 S.Ct. at 1535 (Blackmun, J., concurring) (citations

omitted).

One last aspect of this case likewise materially alters

or even eliminates the federal constitutional question,

namely, the Attorney General’s representations - ten-

tatively before the district court, but with more force

® In this regard, we note that the Attorney General’s ability

under the MCLA to dissolve the church’s corporate charter and

forfeit its right to do business in the state poses little threat

when the church, by dissolving voluntarily, has beaten him to

the punch.

Ciel

App. 16

before this panel at oral argument - that he no longer

seeks to discover the church’s membership or list of

contributors, to have a receiver appointed to conduct the

church’s affairs, or to pursue imprisonment of church

officers pursuant to the MCLA. The modified demand

letter and amended state court petition, both dated March

4, 1992, reflect these changes in the Attorney General's

position. Taken together, they address a substantial part,

if not all, of the district court’s constitutional qualms,

and, in our opinion, dispel the “exceptional circum-

stances” justifying the district court’s assumption of juris-

diction. See Word of Faith, 787 F.Supp. at 694.

The district court’s apparent conclusion that an

exception to Pullman abstention was presented by the

“great and immediate” threat of irreparable injury to the

church by the Attorney General’s unconstitutional

actions, see id., was predicated upon the original state

court petition and demand letter.!° The amended petition

10 In its opinion, the district court discussed both Pullman

and Younger abstention before concluding that an exception

applies to both. According to the court, “[t]hese circumstances

satisfy, in this Court’s judgment, the requirements on exceptions

to abstention of irreparable injury being ‘great and immediate’

and the conduct of the Attorney General as ‘bad faith, harass-

ment or any other unusual circumstance that would require

equitable relief.’ ” 787 F.Supp. at 694.

We have discussed, see supra note 6, the bad faith and

harassment exception to Younger abstention. The threat of

“irreparable injury” generally excepts a case from the applica-

tion of Pullman abstention “in the most extraordinary circum-

stances when fundamental rights such as voting rights are

involved.” O’Hair v. White, 675 F.2d at 694. See also Procunier v.

Martinez, 416 U.S. 396, 404, 94 S.Ct. 1800, 1807, 40 L.Ed.2d 224

(1974) (facial challenge to statute under First Amendment justi-

item iia ace iii el

App. 17

and modified demand letter suggest there now exists no

continuing constitutional violation sufficient to justify the

exception to abstention, especially in light of the many

unresolved state law issues in the case.

Therefore, abstention in this case is proper “to avoid

unwarranted determination of federal constitutional

questions. When federal courts interpret state statutes in

a way that raises federal constitutional questions, ‘a con-

stitutional determination is predicated ona reading of the

statute that is not binding on state courts and may be

discredited at any time - thus essentially rendering the

federal-court decision advisory and the litigation under-

lying it meaningless.’ ” Pennzoil, 481 U.S. at 11, 107 S.Ct.

at 1526 (quoting Moore v. Sims, 442 U.S. 415, 428, 99.S.Ct.

2371, 2379, 60 L.Ed.2d 994 (1979)). The muddled presenta-

tion of the issues in this case — the question of whether

proper jurisdiction resides in the state trial court, whether

the investigative powers provided the Attorney General

by the DTPA and MCLA may be invoked against the

church, and which state court petition and demand letter

we should look to — should make apparent the danger of

fies assumption of jurisdiction), Zwickler v. Koota, 389 U.S. 241,

248, 88 S.Ct. 391, 395, 19 L.Ed.2d 444 (1967) (same). We have

reversed the district court’s refusal to abstain under Pullman at

least in part because we believe the Attorney General’s mod-

ified request presents no continuing constitutional violation jus-

tifying the “extraordinary” exception to Pullman represented by

these cases. We do not understand the district court to have

rejected Pullman — as it did Younger - on the basis of the Attorney

General’s bad faith; indeed, we are persuaded that prosecutorial

bad faith and harassment, although constituting a recognized

exception to Younger abstention, possess little or no relevance

for Pullman-type situations.

App. 18

a federal court’s interfering at too early a stage, only to

promulgate an advisory opinion.'! Pullman seems tailor-

made for application to this case, where we must take

care to “avoid the waste of a tentative decision as well as

the friction of a premature constitutional adjudication.”

Pullman, 312 U.S. at 500, 61 S.Ct. at 645.12

For the above reasons, we REVERSE and REMAND

to the district court for an appropriate disposition in

accordance with this opinion.

11 See e.g. Pennzoil, 481 U.S. at 11 n. 9, 107 S.Ct. at 1526 n. 9

(“In some cases, the probability that any federal adjudication

would be effectively advisory is so great that this concern alone

is sufficient to justify abstention, even if there are no pending

state proceedings in which the question could be raised.”) (Cit-

ing Pullman.)

12 Lastly, we are persuaded that Word of Faith has, in the

Texas court system, an adequate state forum in which to obtain a

resolution of the state law issues while preserving its federal

constitutional claims. See Nissan Motor Corp. v. Harding, 739 F.2d

1005, 1010-11 (5th Cir.1984) (discussing importance of availabil-

ity of adequate state forum in abstention analysis). Indeed, the

potential for a ready resolution of the church’s claims in state

court confirms us in our conclusion that Pullman abstention is

warranted here. See 17A CHar.es A. WRIGHT, ET AL. FEDERAL PRAc-

TICE AND PRocebure § 4242, at 60 (2d ed. 1988) (“A factor that will

tip the scales in favor of abstention is if there is already pending

a state court action that is likely to resolve the state questions

without the delay of having to commence proceedings in state

court.”).

|

App. 19

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 92-8178

(Filed March 29, 1993)

D.C. Docket No. A 92 CA 89

WORD OF FAITH WORLD OUTREACH

CENTER CHURCH, INC., A CHURCH NON-

PROFIT TEXAS CORPORATION, ET AL.,

Plaintiffs-Appellees,

versus

DAN MORALES, in his official capacity as

Attorney General of the State of Texas, and

Individually, ET AL.,

Defendants,

DAN MORALES, in his official capacity as

Attorney General of the State of Texas, and

Individually,

Defendant-Appellant.

Appeal from the United States District Court for the

Western District of Texas

Before REAVLEY, SMITH and EMILIO M. GARZA, Cir-

cuit Judges.

JUDGMENT

This cause came on to be heard on the record on

appeal and was argued by counsel.

App. 20

ON CONSIDERATION WHEREOF, It is now here

ordered and adjudged by this Court that the judgment of

the District Court in this cause is reversed, and the cause

is remanded to the District Court for further proceedings

in accordance with the opinion of this Court.

IT IS FURTHER ORDERED that each party bear its

own costs on appeal.

March 29, 1993

ISSUED AS MANDATE:

App. 21

APPENDIX C

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 92-8178

WORD OF FAITH WORLD OUTREACH

CENTER CHURCH, INC., A CHURCH NON-

PROFIT TEXAS CORPORATION, ET AL.,

Plaintiffs-Appellees,

versus

DAN MORALES, in his official capacity as

Attorney General of the State of Texas, and

Individually, Et Al.,

Defendants,

DAN MORALES. in his official capacity as

Attorney General of the State of Texas, and

Individually,

Defendant-Appellant.

Appeal from the United States District Court

for the Western District of Texas

ON PETITION FOR REHEARING

(April 26, 1993)

Before REAVLEY, SMITH and EMILIO M. GARZA, Cir-

cuit Judges.

PER CURIAM:

App. 22

IT IS ORDERED that the petition for rehearing filed

in above entitled and numbered cause be and the same is

hereby DENIED.

ENTERED FOR THE COURT:

/s/ J. Smith

United States Circuit Judge

CLERK’S NOTE:

SEE FRAP AND LOCAL

RULES 41 FOR STAY OF

THE MANDATE.

eT

ts eT ee

——eEeEE————

App. 23

APPENDIX D

WORD OF FAITH WORLD OUTREACH CEN-

TER CHURCH, INC., a Church non-profit

Texas corporation, Robert G. Tilton and Martha

Phillips Tilton, Plaintiffs,

Vv.

Dan MORALES, in his official capacity as

Attorney General of the State of Texas, Defendant.

Civ. No. A 92 CA 089.

United States District Court,

W.D. Texas,

Austin Division.

March 18, 1992.

Diane M. Henson, Graves, Dougherty, Hearon &

Moody, Austin, Tex., J.C. Joyce, Joyce & Pollard, Tulsa,

OKl., for plaintiffs.

Rose Ann Reeser, David Guillory, Texas Atty. Gen-

eral’s Office, Austin, Tex., for defendant.

MEMORANDUM OPINION AND ORDER

SPARKS, District Judge.

This case involves serious issues of the rights of

freedom of religion and of association under the First

Amendment of the Constitution of the United States,

Article 1 § 6 of the Texas Constitution, and the govern-

mental rights of the State of Texas in enforcing its laws

regarding non-profit corporations chartered under state

law.

On November 21, 1991, ABC’s Prime Time Live pub-

lished a television network special involving, in part, the

App. 24

Word of Faith World Outreach Center Church, Incorpo-

rated, and Robert G. Tilton, two of the three plaintiffs in

this lawsuit. The import cf this publication was not flat-

tering to either the church or Mr. Tilton, but the accuracy

or inaccuracy of the reporting is not relevant to the issues

in this lawsuit.! Subsequent to November 21, 1991, the

attorney representing Word of Faith World Outreach Cen-

ter Church, Inc. and Robert G. Tilton, wrote federal and

state governmental agencies, including the Attorney Gen-

eral of the State of Texas, and offered to meet with these

governmental agencies and to permit review and inspec-

tion of the church’s records for the purpose of satisfying

the governmental agencies that the allegations made in

Prime Time Live were false. The United States Postal Ser-

vice and the Federal Bureau of Investigation accepted this

offer, conferred with the attorney and were furnished

with any records of the church requested, including

financial records documenting the revenues and expendi-

tures of the church. The Attorney General declined this

invitation both initially and subsequently.

On January 13, 1992, the Consumer Protection Divi-

sion of the Office of the Attorney General of Texas sent to

the Plaintiffs, by facsimile transmission, a demand for

documents pursuant to the Texas Deceptive Trade Prac-

tices-Consumer Protection Act (Sec. 17.41, et seq., of the

1 Likewise, the religious beliefs, practices and testimonies

of Mr. and Mrs. Tilton for the Church and themselves are imma-

terial to the issues in this case as the Attorney General stipu-

lated Word of Faith World Outreach Center Church, Inc. is a

bona fide church holding sincere religious beliefs.

App. 25

Texas Bus. & Com. Code of the State of Texas). The

demand states in the first paragraph:

The Consumer Protection Division of the Office

of the Attorney General has reason to believe

that Word of Faith Family Church and World

Outreach Center . . . has engaged in trade prac-

tices and charitable solicitations which may vio-

late provisions of state law including the Texas

Consumer Protection and Deceptive Trade Prac-

tices Act... .

Both the nature and extent of the documents demanded

were not reasonable and included documents clearly the

Attorney General was not entitled to obtain from any

religious organization and/or church.2

Upon receipt of the January 13, 1992, demand, the

Plaintiffs, through their counsel, again requested a meet-

ing with the Attorney General and his personnel, and, for

reasons still unclear and unconvincing to the Court, the

Attorney General and his personnel continued in their

refusal to meet with the attorney representing the Word

of Faith World Outreach Center Church, Inc. and Mr. and

Mrs. Tilton. The church and Mr. and Mrs. Tilton clearly

had First Amendment rights to assert to the demand for

documents made on January 13, 1992, and did so on their

own behalf and their members.

Thereafter, the Attorney General, following an oral

request to do so, remitted, by facsimile transmission, the

January 13, 1992, document demand to the press and

2 On January 13, 1992, the Attorney General and his staff

well knew they were dealing ostensibly with a church and its

minister and had to anticipate First Amendment probiems.

‘

App. 26

television media. The Attorney General justifies this

action by its own interpretation of Art. 6252-17a, V.A.T.S.,

and contends there was no choice but to deliver to the

media this document notwithstanding the express terms

of the statute under which the demand was made, which

specified information obtained from such a request was

confidential and could not be released except by court

order. The publication of the January 13, 1992, Attorney

General demand to the media resulted in wide spread,

unfavorable publicity to the church and Mr. Tilton. This

action by the Attorney General had the overall effect of

“hardening” the attitude of the church, the Tiltons, and

their counsel against any cooperation with the Office of

the Attorney General and the release of any documents

whatsoever.

Notwithstanding, counsel for the church and the

Tiltons again requested a meeting with the Attorney Gen-

eral and represented, orally and in writing, that, if the

representatives of the Attorney General could convince

his “clients” that records should be examined, the records

would be made available. Again, the Attorney General

declined any meeting. Counsel for the church and the

Tiltons then advised the Attorney General he would file a

lawsuit in the United States District Court before the

deadline of February 10, 1992, to determine their respec-

tive rights and privileges. On February 5, 1992 (five days

3 Section 17.61(f) of the Texas Deceptive Trade Prac-

tices-Consumer Protection Act expressly excepts this informa-

tion from public disclosure, as does Art. 1302-5.04 of the Texas

Miscellaneous Corporation Laws Act, and Articles

6252-17a(3)(a)(1) and (2) of the Open Records Act authorizes

nondisclosure by the Attorney General.

App. 27

before the deadline date set by the Attorney General for

the inspection and copying of the documents demanded

on January 13, 1992), the Attorney General, pursuant to

Art. 1302-5.05, filed a petition in quo warranto in the

Probate Court of Travis County, Texas.4 The petition in

quo warranto, verified by the department head of the

Consumer Protection Division of the Attorney General,

expressly alleged:

This suit is brought in the nature of quo warranto

against the

Defendant corporation . . . for the purpose of

obtaining a permanent injunction ordering Defen-

dant to produce records as requested by the Attorney

General, for forfeiture of Defendant's charter and

dissolution of the corporation, an appointment

of a receiver to take possession of the affairs of

the Defendant, to rehabilitate, to reorganize, con-

serve, or liquidate the affairs of the corporation, as

the case may be... . A further purpose of this suit

is to obtain, after notice and hearing, a tempo-

rary injunction and a permanent injunction

against the Defendant, its officers, directors, stock-

holders, agents, employees, and representatives

whomsoever from conducting any business of the

Defendant. ... (emphasis added).

Further, said petition alleges:

* On February 5, 1992, the Attorney General deliberately

did not seek to enforce the remedy under the Texas Deceptive

Trade Practices-Consumer Protection Act by filing a lawsuit ina

district court in Dallas, Texas, requesting an order that the Plain-

tiffs comply with the documents demanded on January 13, 1992.

|

App. 28

Article 1302, Chapter 5, Texas Miscellaneous

Corporation Laws Act, provides that the Attor-

ney General or his representatives are entitled to

examine any books or records of a Texas corpo-

ration as he may deem necessary. ... (emphasis

added).

The testimony from the Assistant Attorney Generals

in charge of this investigation, the records demand of

January 13, 1992, and the filing of the quo warranto peti-

tion establish unequivocably that the Attorney General

interprets the two statutes (Texas Deceptive Trade Prac-

tices-Consumer Protection Act and Texas Miscellaneous

Corporation Laws Act) as giving the Attorney General

complete discretion to request any documents from any

corporate entity (including a non-profit corporation

which operates as a church with its principal or sole

purpose of religious activities). Now, after the filing of

this lawsuit, the Attorney General admits its demand for

documents of January 13, 1992, and its petition in quo

warranto were inappropriate and should be amended in

light of apparent recent knowledge he is dealing with a

church.5

5 It must be stated that the departmental head of the Con-

sumer Protection Department, who personally verified the peti-

tion in quo warranto, testified he believed that the pleadings in

the quo warranto petition were simply what a “good lawyer”

would plead under the circumstances. In addition, the March 4,

1992, amended document demand states that “[w]hile we [the

Consumer Protection Division] do not adopt your legal position

in this matter, in an effort to respond to your concerns, we

submit to you this modified request for documents. .. . ”

(emphasis in original).

App. 29

The testimony of the department head of the Con-

sumer Protection Division of the Office of the Attorney

General is that the purpose of the filing of the quo war-

ranto petition was to enforce its demand for the records of

the church and Mr. Tilton. However, he admitted the

timing and location of the filing was to attempt to insure

the litigation would be in the Probate Court in Travis

County rather than federal court where the Plaintiffs

represented they would file this lawsuit.6

The Plaintiffs contend that frequent public comment

by the Office of the Attorney General regarding the

alleged investigation of the church and Mr. Tilton, as well

as the conduct described above, constitutes such “bad

faith” as to justify refusal to tender any documents of the

Plaintiffs and to permanently enjoin the Attorney General

from further investigation and public comment. The

department head of the Consumer Protection Division of

the Office of the Attorney General defends the public

statements made by the Attorney General by testifying

the staff made “no comment” statements to the media on

80 percent of its inquiries, apparently believing the other

occasions of public comment, during an investigation,

were appropriate and responsible conduct.

The Court expressly finds from the evidence that the

actual statements made by Assistant Attorney Generals

and the Attorney General did not technically accuse

° The Court specifically finds the lawsuit filed by Attorney

_ General on February 5, 1992, was a reaction to being advised the

Plaintiffs would file in federal court and an attempt by the

Attorney General to invoke an abstention doctrine defense

based on pending state litigation.

App. 30

either the church and/or Mr. and Mrs. Tilton of anything,

but, on each occasion of public comment, the publicity

generated was negative to the church and the Tiltons. The

Court finds from the evidence that the conduct of the

_ Attorney General and his personnel in stating the Con-

sumer Protection Division of the Office of the Attorney

General had “reason to believe” the church and the

Tiltons violated the Texas Deceptive Trade Practices-Con-

sumer Protection Act when they had no substantial evi-

dence for the accusations, the Attorney General's refusing

to meet with or confer with the attorney representing the

church, selecting the documents demanded from both the

church and the Tiltons on January 13, 1992, publishing to

the media the accusations and demand of January 13,

1992, continuing to make public comment regarding the

Plaintiffs, refusing all proffered cooperation from the

Plaintiffs, and filing the verified petition in quo warranto

on February 5, 1992, was neither professional nor respon-

sible, bordering on the unethical, and constitutes “bad

faith.” This conduct is not what is expected of attorneys

charged with the responsibility of being the legal repre-

sentatives of the State of Texas.

However, the Court does not find this “bad faith”

conduct prevents the Attorney General of Texas from

appropriately using his authority to investigate the corpo-

rate plaintiff to determine if it is truly a non-profit corpo-

ration under Texas law.

ABSTENTION

The Attorney General requests dismissal of this case

under the abstention doctrine, contending that its quo

ee

App. 31

warranto proceedings in the Probate Court of Travis

County, Texas, filed on February 5, 1992, preempts this

Court’s action. The Attorney General relies on Younger v.

Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971),

Railroad Commission of Texas v. Pullman Co., 312 U.S. 496,

61 S.Ct. 643, 85 L.Ed. 971 (1941), and related cases.

As previously stated, the Court specifically finds

from the evidence the Attorney General filed the petition

in quo warranto on February 5, 1992, reacting to the repre-

sentation by Plaintiffs’ counsel a lawsuit would be filed

in the United States District Court to determine the rights

and privileges of the parties. The Attorney General,

through his supervisor of the Consumer Protection Divi-

sion, admits a purpose of the filing of the quo warranto

proceedings was to attempt to establish venue and juris-

diction in the Probate Court of Travis County prior to the

filing of any federal lawsuit. Thus, the quo warranto pro-

ceedings were filed with a purpose by the Attorney Gen-

eral to defend the federal lawsuit to be filed by February

10, 1992, on the grounds of abstention. For that reason

alone, this Court does not believe that abstention would

be appropriate in this case. Steffel v. Thompson, 415 U.S.

452, 94 S.Ct. 1209, 39 L.Ed.2d 505 (1974), Wooley v. May-

nard, 430 U.S. 705, 97 S.Ct. 1428, 51 L.Ed.2d 752 (1977).

The Court finds specifically that it has jurisdiction

over the parties and subject matter; that exceptional cir-

cumstances certainly exist; and that injunctive relief is

necessary for the adequate protection of constitutional

rights. Ealy v. Littlejohn, 569 F.2d 219 (5th Cir.1978).

However, there are other reasons for not bowing to

the abstention request of the Attorney General. Despite

iii initiate nnn

App. 32

the number of treatises and volumes of cases reviewed,

this Court cannot determine any consistent pattern of the

Courts in applying the abstention doctrine except that the

exceptions are few and must be cautiously granted. It is

beyond dispute freedoms of religious worship and of

association are foundation pillars of our country. This is

true no matter how “flim flam” the religious doctrines

and procedures (including solicitation of funds from

members and expenditures) of any particular church may

appear to others. For generations Americans have died

and been persecuted defending these specific constitu-

tional rights.

In this particular case, the Attorney General of the

State of Texas has utilized its own interpretation of a

statute (Texas Deceptive Trade Practices-Consumer Pro-

tection Act) to publicly accuse a church of fraud and

demand documents clearly constitutionally protected.

- The accusation and demand for documents and records

are enforced by pleadings in quo warranto requesting dis-

solution of the corporate church, appointment of a

receiver to manage its affairs, and an injunction against

its ministers from conducting the business of the church

which is admitted (by stipulation) to be a bona fide

religious organization. These circumstances satisfy, in this

Court’s judgment, the requirements on exceptions to

abstention of irreparable injury being “great and immedi-

ate” and the conduct of the Attorney General as “bad

faith, harassment or any other unusual circumstance that

would require equitable relief.”

The Court particularly finds persuasive Judge

Debevoise’s opinion in New Jersey — Philadelphia Presbytery

v. New Jersey State Bd. of Educ., 482 F.Supp. 968 (D.N.J.

App. 33

1980), aff'd, 654 F.2d 868 (3d Cir.1981). There, like here,

there were state actions to enforce substantively valid

Statutes that effectively stopped religious activities,

including instruction, education and worship and to

enjoin related individuals from the same. See id. at 973.

Had the Attorney General merely fiied a lawsuit in a

Dallas state district court for the determination whether

an order, pursuant to the Texas Deceptive Trade Prac-

tices-Consumer Protection Act (the statute under which

the Attorney General alleges his authority to investigate

and demand records in this case), should issue requiring

the production of the records and documents, this Court,

like Judge Debevoise, may have yielded to the state court

on abstention grounds. But that is not the case, and the

Attorney General's filing the quo warranto petition speci-

fying the relief requested by the State under these circum-

stances compels this Court to act.

Furthermore, in Smith v. Hightower, 693 F.2d 359,

366-67 (5th Cir.1982), our Fifth Circuit, in affirming its

previous holding in Wilson v. Thompson, 593 F.2d 1375 (5th

Cir.1979), held there is a three-part test in determining an

exception to Younger. The case at bar comes within this

established rule.

First, the Court finds from the evidence that the

Plaintiffs have established that their declining to deliver

the records and documents demanded by the Attorney

General was an exercise of legitimate and valid First

Amendment rights, i.e. constitutionally protected.

Second, the Court finds from the evidence that the

Attorney General’s filing the guo warranto proceedings

was motivated by a purpose to retaliate for or to deter the

a

App. 34

church and the Tiltons from exercising their constitu-

tional rights in declining to furnish the documents and

records demanded, and this “retaliation” was a major

motivating factor and played a prominent role in the

Attorney General's decision to file the quo warranto pro-

ceedings.

Third, the Court finds from the evidence that the

Attorney General would not have filed a quo warranto

proceeding under these circumstances “but for” the

church and the Tiltons’ exercising their constitutional

rights. The evidence does not even suggest the Attorney

General had independent grounds for any such action.

Therefore, this Court declines to dismiss this case

pursuant to the abstention doctrine.

Turning now to the merits, the Plaintiffs specifically

seek to enjoin the Attorney General

from conducting any civil investigation or inves-

tigation of any kind of the Plaintiffs’ religion

pursuant to the DTPA and the MCLA, and fur-

ther to enjoin the Attorney General from forfeit-

ing, or attempting to do so in any Court action,

this Plaintiff Church’s charter and its right to

conduct its religious service in the State of Texas

pursuant to the MCLA and further to prohibit

the Attorney General from levying any fine

against the Church pursuant to the MCLA and

further to prohibit and enjoin the Attorney Gen-

eral from imprisoning Robert G. Tilton, the prin-

cipal minister of this religion and/or his wife

Martha Phillips Tilton, or any other member or

employee of this Plaintiff Church pursuant to

the MCLA, and further to prohibit the Attorney

App. 35

General from interfering, meddling or entang-

ling with or in the religious and or financial

affairs of Word of Faith World Outreach Center

Church, Inc. or abridging the Plaintiffs’ constitu-

tional right of freedom of religion in any man-

ae

Plaintiffs’ First Amended Original Complaint and Application

for Injunctive Relief, para. 19 (emphasis in original).

The Attorney General has requested the Plaintiffs to

produce a lengthy list of documents, records, and other

materials he believes relevant to his investigation of the

Plaintiffs under the Deceptive Trade Practices-Consumer

Protection Act (DTPA) and under the common law of

charitable trusts.

Thus, this Court must determine (1) whether the

DTPA applies to the Plaintiffs on its face; (2) whether the

DTPA, as interpreted by the Attorney General, can be

constitutionally applied to the church or its representa-

tives; (3) whether the Texas Miscellaneous Corporation

Laws Act (“MCLA”) applies to the Plaintiffs on its face;

(4) whether the MCLA, as interpreted by the Attorney

General, may be constitutionally applied to the Plaintiffs;

(5) whether the church is a charitable trust subject to

Texas common law concerning charitable trusts; (6)

whether the Attorney General may constitutionally inves-

tigate and inspect records of the church under Article 4,

Section 22 of the Texas Constitution, which authorizes the

Attorney General to inquire into the charter rights of

private corporations and take action to prevent a corpora-

tion from exceeding its powers authorized by law; and (7)

whether the Attorney General has the power and author-

ity to investigate the church and inspect records under

App. 36

any other law, for instance the Texas Non-Profit Corpora-

tion Act, and, if so, to what extent may that power be

exercised under state law and the United States Constitu-

tion.

TEXAS DECEPTIVE TRADE

PRACTICES-CONSUMER

PROTECTION ACT

In his January 13, 1992, demand the Attorney General

published he “had reason to believe that Word of Faith

Family Church & World Outreach Center . . . has engaged

in trade practices and charitable solicitations which may

violate provisions of state law including the Texas Con-

sumer Protection and Deceptive Trade Practices Act

(“DTPA”).”7 Accordingly, the Attorney General required

7 Specifically, the Attorney General stated he had reason to

believe that the Church’s activities violated section 17.46(a) of

the DTPA and the following provisions of section 17.46(b) of the

DTPA:

(b)(2) Causing confusion or misunderstanding as to

the source, sponsorship, approval, or certification of

goods or services;

(b)(5) Representing that goods or services have spon-

sorship, approval, characteristics, ingredients, uses,

benefits, or quantities which they do not have or that

a person has a sponsorship, approval, status, affilia-

tion, or connection which he does not;

(b)(12) Representing that an agreement confers or

involves rights, remedies, or obligations which it does

not have or involve, or which are prohibited by law;

(b)(19) Representing that a guarantee or warranty

confers or involves rights or remedies which it does

not have or involve; and

(b)(23) Failing to disclose information concerning

goods or services which was known at the time of the

oh bees Ct dit ee

App. 37

the production of documentary material for inspection

and copying pursuant to the DTPA and the MCLA.

In his brief and in hearings before this Court, the

Attorney General continues to maintain the Plaintiffs are

subject to the DTPA because it is alleged they solicit and

accept donations from members and others, distribute

various pamphlets, books, and objects, and make certain

representations that are not technically accurate. Plain-

tiffs, in opposition, argue that the DTPA does not apply

as they are not engaged in “trade or commerce” and the

contributors to the church (“members”) are not “con-

sumers” because no money is required to receive any-

thing from the church or to have Mr. Tilton pray over

returned objects or perform other acts and because con-

tributors’ donations are not requested for any specific

purpose.

This Court agrees the Texas Deceptive Trade Prac-

tices-Consumer Protection Act has no applicability in this

case. Although no Texas court has considered the appli-

cability of the DTPA to church activities and donations,

transaction if such failure to disclose such informa-

tion was intended to induce the consumer into a trans-

action into which the consumer would not have

entered had the information been disclosed.

January 13, 1992, letter from the Attorney General to the Tiltons

(emphasis added). Note that the Attorney General would be

unable to prove violations against the Church under any of the

Provisions using the words “goods”, “services”, and “con-

sumer”, regardless of the DTPA’s applicability otherwise. As

defined in Section 17.45, each of those words requires that a

person seek to purchase or lease a good or service. See Tex.Bus.

& Com.Code Ann. § 17.45(1), (2), (4).

App. 38

the language of the DTPA as well as Texas case law make

clear the Plaintiffs are not subject to the DTPA.

The Attorney General's Office asserts its authority to

investigate and inspect documents under the auspices of

Sections 17.60 and 17.61 of the DTPA, which give the

Attorney General power to investigate and inspect rele-

vant documentary material when the Attorney General

has “reason to believe that a person is engaging in, has

engaged in, or is about to engage in any act or practice

declared to be unlawful by this subchapter [the

DTPA]. ...” See Tex. Bus. & Com.Code Ann. §§ 17.60,

17.61 (Vernon’s 1992 Supp.). Section 17.46(a) makes

unlawful “[flalse, misleading, or deceptive acts or prac-

tices in the conduct of any trade or commerce” and gives a

list of some acts which fall within the definition of pro-

scribed conduct. Id. § 17.46(a) (emphasis added).

“Trade” and “commerce” are defined in Section

17.45(6) as “the advertising, offering for sale, lease, or

distribution of any good or service, of any property,

tangible or intangible, real, personal, or mixed, and any

other article, commodity, or thing of value, wherever

situated, ....” In its brief the Attorney General focuses

on “the advertising . . . or distribution of any good or

service” and claims that under this definition and the

case of Mother & Unborn Baby Care of N. Texas, Inc. v. State,

749 S.W.2d 533 (Tex.App. — Ft. Worth 1988, writ denied),

cert. denied 490 U.S. 1090, 109 S.Ct. 2431, 104 L.Ed.2d 988

(1989), all that is needed to fall within “trade” or “com-

merce”, and to be subject to the DTPA, is advertising or

distribution of a good or service whether or not it is

advertised as though it were for sale, and whether or not

App. 39

the recipient of the good or service believed it to be for

sale or sought to purchase it.

Not only is this a misinterpretation of Mother &

Unborn Baby Care of North Texas, Inc. v. State, in which the

Court found that misleading advertising led women to

believe doctors would perform abortions for a fee, see id.

at 537, but the reading of the DTPA as a whole makes it

clear that the Texas legislature was concerned with “busi-

ness”, not gratuitous, transactions. Furthermore, there

must be some “consumer”, either the plaintiff or, if the

Attorney General is bringing the action, “consumers”

within the statutory definition whose rights will be pro-

tected. See generally, Tex.Bus. & Com.Code §§ 17.41, et

seq.; see also Pennington v. Singleton, 606 S.W.2d 682

(Tex.1980); Mother, 749 S.W.2d 5%3.

As stated by the Texas Supreme Court, “[ljegislative

intent should be determined from the language of the

entire Act and not isolated portions.” Pennington, 606

S.W.2d at 686. “[L]egislative intent rather than the strict

letter of the Act will control.” Id. The Legislature’s intent

was clearly stated in Section 17.44. “This subchapter shall

be liberally construed and applied to promote its under-

lying purposes, which are to protect consumers against

false, misleading, and deceptive business practices, uncon-

scionable actions, and breaches of warranty and to pro-

vide efficient and economical procedures to secure such

protection.” Tex.Bus. & Com.Code Ann. § 17.44 (emphasis

added). It is not just to be liberally construed, rather it is

to be liberally construed to promote its express purposes.

See id.; see also Pennington, 606 S.W.2d at 686, 688, 690.

App. 40

Section 17.44 makes it clear that the “false, mislead-

ing, or deceptive acts or practices in the conduct of any

trade or commerce” described in Section 17.46 must be

“business” acts or practices. Solicitation of funds from

church members, and new members,’ is not a business

practice. See Murdock v. Pennsylvania, 319 U.S. 105, 111, 63

S.Ct. 870, 874, 87 L.Ed. 1292 (1943). The Attorney General

cannot seize upon a technical ambiguity in one section of

the Act to try to insure that Texas residents donate their

money only in ways he deems wise. The DTPA was

meant to protect those residents from deceptive “busi-

ness” acts and practices only.

Nor can the church’s or Mr. Tilton’s actions be

described as “unconscionable”, protection against which

is also a purpose under Section 17.44. Donating money to

a religious cause one believes in can hardly be to one’s

detriment as a result of being taken advantage of to a

“grossly unfair degree”. See Tex.Bus & Com.Code Ann.

§ 17.45(5). That is clearly a value judgment the Attorney

General is incapable of making in this case.

Finally, there are no grounds for a breach of warranty

action, the only remaining purpose of the DTPA enumer-

ated in Section 17.44. Because the DTPA does not define

or create any warranties, the Attorney General must

establish the existence of a warranty based on statutory

or common law. See La Sara Grain Co. v. First Nat'l Bank of

Mercedes, 673 S.W.2d 558, 565 (Tex.1984). Express or

implied warranties arise out of contracts or sales. Again,

8 Plaintiffs testified that a contributor is automatically con-

sidered to be a “member” of the church, and the Attorney

General did not dispute this construction.

App. 41

the facts of this case show that no sales or contracts

existed. Donations were distinct and separate from

prayer requests and receipt of other materials or acts

from Mr. Tilton or the church and cannot form the bases

of sales or the consideration for contracts.

In addition to there being no “trade” or “commerce”

to satisfy Section 17.46 and no action protected against

under Section 17.44, there are no “consumers”. The fact

that Section 17.47, which gives the Consumer Protection

Division the power to bring an action for injunctive relief,

does not explicitly require the Attorney General to act on

behalf of some consumer is irrelevant. The purpose of the

DTPA is to protect “consumers” and no other class of

persons. See Tex.Bus. & Com.Code Ann. § 17.44. That

purpose is paramount to technical readings of individual

sections. See id.; see also Pennington, 606 S.W.2d at 686.

Furthermore, the very name of the Act, the Deceptive

_Trade Practices-Consumer Protection Act, and the name

of the agency in charge of enforcing the Act, the Con-

sumer Protection Division, also indicate that the Attorney

General can only act under the DTPA to protect con-

sumers.

A “consumer” under the DTPA is a person “who

seeks or acquires by purchase or lease, any goods or

services. ...” Tex.Bus. & Com.Code Ann § 17.45(2). In

order to be a consumer, one must purchase or seek to

purchase goods or services. Rutherford v. Whataburger,

Inc., 601 S.W.2d 441, 444 (Tex.App. - Dallas 1980, writ ref.

n.r.e.) (plaintiff who had won a contest prize but not

received it was not a “consumer” because he did not seek

or purchase to seek the prize and because no purchase

App. 42

was required to enter the contest); Mother, 749 S.W.2d at

538 (women seeking abortions were “consumers” because

they sought to purchase a service).

Contributors to the church do not seek to purchase

goods or services. Plaintiffs do not advertise goods or

services for sale. Contributors to the church are not

required to give donations in order to receive pamphlets,

books, or other goods. Nor is a donation required before

Mr. Tilton will pray over a prayer request or perform

other acts. There is nothing to make contributors to the

church believe their contributions are in return for

requested materials or acts by the church or Mr. Tilton. In

fact, not only do members sometimes make “vows” or

contributions without requesting any materials or acts to

be performed by Mr. Tilton, but the church makes it a

practice to inform persons who seek to “purchase” items

that the church no longer sells anything and offers to

refund their money. Contributors to the church are not

“consumers”, and the Attorney General may not bring a

DTPA action to protect their interests.

Even if the DTPA were applicable to the Plaintiffs on

its face, it still could not be constitutionally applied to the

Plaintiffs as interpreted by the Attorney General. The fact

that the DTPA has a valid purpose and was not enacted to

discriminate against a religion or restrict the free exercise

of a religion, does not mean any effects on the Plaintiffs

are merely incidental and permissible under the First

Amendment. See, e.g., Wisconsin v. Yoder, 406 U.S. 205, 220,

92 S.Ct. 1526, 1535-36, 32 L.Ed.2d 15 (1972); Bates v. City of

Little Rock, 361 U.S. 516, 523, 80 S.Ct. 412, 416, 4 L.Ed.2d

480 (1960); N.A.A.C.P. v. Alabama, 357 U.S. 449, 462, 78

S.Ct. 1163, 1171-72, 2 L.Ed.2d 1488 (1957); Murdock, 319

App. 43

U.S. at 115, 63 S.Ct. at 876. The investigation sought by

the Attorney General under the provisions of the DTPA in

this case unduly burden the Plaintiffs’ First Amendment

rights to exercise their religion free from excessive gov-

ernmental interference or entanglement.

Sections 17.60 and 17.61 of the DTPA give the Attor-

ney General unfettered discretion to inquire into the

inner workings of the church and inspect and copy its

documents and records. Section 17.60 allows the Con-

sumer Protection Division of the Office of the Attorney

General to require the church to file a statement or report

as to “all the facts and circumstances concerning the

alleged violation and such other data and information as

the consumer protection division deems necessary” whenever

it “has reason to believe that a person is engaging in, has

engaged in, or is about to engage in any act or practice

declared unlawful by this subchapter, or when it reason-

ably believes it to be in the public interest... .” Tex.Bus. &

Com.Code Ann. § 17.60 (emphasis added). Section 17.61

gives the Consumer Protection Division authority to

demand a person to produce documentary material and

permit inspection and copying “[w]henever the consumer

protection division believes that any person may be in

possession . . . of any documentary material relevant to

the subject matter of an investigation of a possible viola-

tion of this subchapter. ... ” Id. § 17.61(a) (emphasis

added). |

The Attorney General clearly interprets these sec-

tions as broadly as they appear, applying them to the

Plaintiffs without consideration for any First Amendment

Rights as a religious organization. In the January 13, 1991,

:

App. 44

document demand sent to the Tiltons, the Attorney Gen-

eral demanded, amongst other things:

(1) Media plans and insertion data for television

presentations and written solicitations made by the

Church;

(2) All documents, shipping records, memoranda

and other materials relating to the handling of prayer

requests and any other solicitation material which is

claimed to be the subject of any prayer or other entreaty

to God by Robert Tilton or any other person employed by

the Church from January 1, 1989, to and including the

present;

(3) All cancelled checks and other documentary

material relating to contributions sent to each orphanage,

mission, ministry, and charitable organization by Robert

Tilton or the Church during the period from January 1,

1989 to and including the present;

(4) Testimonials or complaints from any individuals

who have sent money or anything else of value to Robert

Tilton, Marte Tilton, the Church, or any other Church

entity from January 1, 1989, to and including the present;

(5) List of all Church employees and consultants

that have received in excess of $100,000 from the Church

or any Church entity from January 1, 1987, to and includ-

ing the present, including the name, address, and tele-

phone number of each person and amounts received;

(6) List of all persons who have been paid or remu-

nerated in any way in excess of $100,000 from the Church

App. 45

or any Church entity from January 1, 1987, to and includ-

ing the present, including the name, address, and tele-

phone number of each person;

(7) List of all persons who have sent contributions

to the Church and any other Church entity from January

1, 1989, to and including the present, including name,

address, telephone number, amount and date of contribu-

tion;

(8) List of all vendors and/or contract labor that

have received payments in excess of $50,000 from the

Church and any other Church entity from January 1,

1987, to and including the present, including name,

address, telephone number, and amounts and dates

received;

(9) Copies of the minutes of meetings of the board

of directors for the Church held since January 1, 1987, to

and including the present;

(10) List of all members of Robert Tilton’s family

who are involved in any way with the production of

Robert Tilton’s television broadcasts;

(11) A copy of all policy or procedure manuals

relating to the method and manner in which the Church,

other Church entities, and Robert Tilton solicit contribu-

tions;

(12) A copy of every advertisement, brochure, or

other document used in the promotion or marketing of

the Church and all other Church entities.°

® To avoid undue repetition, the Court has combined some

of the Attorney General's specific requests in this list.

App. 46

The scope and substance of these requests are clearly

unconstitutional.!° The State has no constitutional author-

ity to know a person’s membership in or support of any

church. The State has no constitutional authority to know

what a person believes, how he or she practices religion,

or how he or she supports religious activities. Nor does

the State have constitutional authority to probe into the

internal operations of a church without limitation or com-

pelling purpose. The First Amendment right to freedom

of religious belief and freedom of association protects this

kind of information.

Implicit in these First Amendment freedoms is pri-

vacy of belief and association. See Buckley v. Valeo, 424

U.S. 1, 65-67, 96 S.Ct. 612, 657, 46 L.Ed.2d 659 (1976);

Gibson v. Florida Legislative Investigation Comm., 372 U.S.

539, 544, 83 S.Ct. 889, 892-93, 9 L.Ed.2d 929 (1962); Bates v.

City of Little Rock, 361 U.S. at 523, 80 S.Ct. at 416;

N.A.A.C.P. v. Alabama, 357 U.S. at 462, 78 S.Ct. at 1171-72.

Disclosure of who belongs to a group or who contributes

to a group, and how much, has been vigorously safe-

guarded by the United States Supreme Court. See id. The

Court has recognized that disclosure to the public, or to

the State, of a groups’ members or contributors can harm

the group by subjecting them to harassment or causing

10 The scope of the request is also unreasonable and clearly

oppressive insofar as it requires the Plaintiffs to produce an

enormous amount of documents, which do not appear to have

relevance to the alleged purpose of the investigation. For exam-

ple, the Church grosses approximately $65,000,000 a year. The

number of checks received and mailed out and the documents

produced, even over a three-year period, would be unimagin-

able, much less easily produced.

App. 47

new members to not join for fear of disclosure or harass-

ment or other reprisal. E.g., Gibson, 372 U.S. 539, 83 S.Ct.

889 (Florida legislative committee could not require Gib-

son to produce N.A.A.C.P.’s organization list for the com-

mittee).

The Attorney General argues that the church’s First

Amendment rights of free exercise of their religion and

association are not harmed because the DTPA requires

that the Attorney General not publicly disclose informa-

tion gathered under Section 17.61 See Tex.Bus. &

Com.Code Ann. § 17.61(f). This argument is seriously

flawed. Nothing prevents the Attorney General from dis-

closing information gathered under Section 17.60, and

given past interpretations of statutes by the Attorney

General,"! it is not unforeseeable that the Attorney Gen-

eral might seize upon this distinction.

In addition, the mere threat of disclosure has been

recognized as seriously harming a group by causing new

members to not join and old members to withdraw in fear

of hostility or reprisal. Bates, 361 U.S. at 524, 80 S.Ct. at

417; Familias Unidas v. Briscoe, 619 F.2d 391, 398, 400 (5th

Cir. 1980). Thus, if the Attorney General is permitted to

make such a request and discloses the request, as done in

this case, that in itself is a significant intrusion on the

" Recall that the Attorney General interprets the Open

Records Act exemption of information “demed confidential by

law” to mean that it is nonetheless permissible to release to the

media document requests for information made confidential by

the DTPA and the MCLA, describing in detail what the Attorney

General is seeking. See Tex.Rev.Civ.Stat.Ann. Art.

6252-17a(3)a)(1) (Vernon’s 1992 Supp.); Tex.Bus. & Com.Code

Ann. § 17.61(f); Tex.Rev.Civ.Stat.Ann. Art. 1302-5.04.

App. 48

Plaintiffs’ First Amendment rights. Such harm was shown

in this case by the Plaintiffs, who testified that the

number of new members joining the church has

decreased and the number of old members withdrawing

has increased. Death threats and other forms of harass-

ment have also increased. This harms not only the Plain-

tiffs’ rights of association but also the exercise of their

religion, which to a large degree involves attracting new

members to their faith and encouraging people to make

“vows” to God.

Furthermore, Section 17.61(f) states that information

gathered under that section may be used “in the enforce-

ment of this subchapter, including presentation before

any court.” Given the publicity surrounding the hearings

in this case so far, the Attorney General would be hard

pressed to argue that information gathered will not be

made public in the future.

Absent a compelling State interest, the Attorney Gen-

eral’s “signficant encroachment” upon “important and

traditional aspects of individual freedom” cannot be tol-

erated. See Bates 361 U.S. at 524, 80 S.Ct. at 417; N.A.A.C.P.

v. Alabama, 357 U.S. at 463, 78 S.Ct. at 1172; Familias, 619

F.2d at 399. The Attorney General’s proffered reason for

investigation is to determine if the Plaintiffs are persuad-

ing people to contribute to the Church through misrepre-

sentations or fraud. Membership lists and contributors

lists will not further that interest. Full and complete

documentation of the Church’s internal affairs may fur-

ther that purpose, but such discretion is overbroad and if

not more narrowly drawn cannot survive constitutional

App. 49

attack.!? Cf. Int’l Soc’y for Krishna Consciousness v. City of

Houston, 689 F.2d 541, 556 (5th Cir.1982) (Houston ordi-

nance, simply requiring registration for groups to solicit,

did not require membership lists or lists of contributors

or inquire about the organization’s internal operations,

apart from its public solicitation, and thus was constitu-

tional).

Allowing the Plaintiffs to petition to modify or set

aside the demand does not rectify the infringement on

Plaintiffs’ First Amendment rights. See Tex. Bus. & C.

§ 17.61(g); see also Murdock, 319 U.S. 105, 63 S.Ct. 870.

Plaintiffs should not be forced to resort to the courts to be

allowed to exercise their First Amendment rights. Section

17.61(g) of the DTPA requires just that in order for a

person to challenge the Attorney General’s document

demand. Having to resort to the courts before exercising

a First Amendment right is even more of an infringement

than requiring fees to be paid first. See id. Section 17.61(g)

is not, contrary to the Attorney General’s opinion, “ade-

quate due process”.

Furthermore, proceeding with the investigation

under the DTPA, as interpreted by the Attorney General,

2 The Attorney General, during the hearings, tacitly

admits both the January 13, 1992, document demand and

requested relief in the quo warranto proceedings are unconstitu-

tionally invasive and requested that amendments to both docu-

ments be allowed. The testimony of the Assistant Attorney

Generals, in the hearings and in the proposed amended docu-

ment request, however, remains consistent - they appropriately

acted under their statutory authority in the DTPA. This “King’s

X" approach merely emphasizes the unconstitutional applica-

tion of the statute to a church, its ministers, and its members.

App. 50

would result in an excessive entanglement with the

Church in violation of the Establishment Clause of the

First Amendment.

During the hearing on injunctive relief before this

Court, Assistant Attorney Generals testified that they

were not trying to prevent the Plaintiffs from practicing

their religion as they see fit or discourage membership in

the church, but rather only wanted to investigate as to

whether or not “secular statements” made in pamphlets

and on television by Mr. Tilton were false or deceptive.

For instance, if Mr. Tilton promised to pray over a prayer

cloth, did he actually do so? However, the Assistant

Attorney Generals fail to take the next logical step. If they

apply the DTPA, and if they determine the church or Mr.

Tilton have violated the DTPA, the relief granted under

the DTPA is injunctive. See Tex.Bus. & Com.Code Ann.

§ 17.47(a).

In order to withstand attack under the Establishment

Clause, three requirements must be met:

First, the statute must have a secular legislative

purpose; second, its principal or primary effect

must be one that neither advances nor inhibits

religion; finally, the statute must not foster “an

excessive government entanglement with reli-

gion.”

Lemon v. Kurtzman, 403 U.S. 602, 612-13, 91 S.Ct. 2105,

2111, 29 L.Ed.2d 745 (1971) (citations omitted); see also

United States v. Holmes, 614 F.2d 985, 989 (5th Cir.1980).

While the Attorney General can easily show that the

DTPA meets the first two requirements, the nature of the

injunctive relief authorized by the DTPA in section 17.47

App. 51

is such that the “end result” is “an excessive government

entanglement with religion.” See Walz v. Tax Com'n of New

York, 397 U.S. 664, 674, 90 S.Ct. 1409, 1414, 25 L.Ed.2d 697

(1970); Surinach v. Pesquera de Busquets, 604 F.2d 73, 76 (1st

Cir.1979). In Surinach, the First Circuit Court of Appeals

found an investigation of operating costs of Catholic

schools under a statute quite similar to the DTPA uncon-

Stitutional. See Surinach, 604 F.2d at 75. The statute was

enacted to “defend and implement the rights of the con-

sumer, to restrain inflationary trends; as well as the estab-

lishment and inspection of a price control over the goods

and services for use and consumption.” Id. at 74. The

Secretary of the Department had “untrammelled” investi-

gatory powers under which he could “require the infor-

mation which might be necessary, pertinent and essential

to achieve such purposes.” Id.

Because the gathering of information was “not

viewed as an end in itself”, but merely as the first step in

ultimately imposing ceilings on what the schools could

spend, the Court found that if the end result was uncon-

stitutional so was the investigation. Id. at 75. Examining

the end result, the Court determined that cost limits the

Department might impose could seriously interfere with

religious objectives and duties the school felt it owed its

students. Id. at 77. In addition, imposition of cost controls

would necessitate continuing surveillance by the Depart-

ment which would also result in an impermissible degree

of entanglement. Id. at 78 (citing Walz, 397 U.S. at 675, 90

S.Ct. at 1414).

Investigation of the Plaintiffs under the DTPA is

equally impermissible under the. First Amendment.

Investigation of the Plaintiffs by the Attorney General

App. 52

under the DTPA is for the sole purpose of ascertaining

whether or not the Plaintiffs have violated the DTPA. If

the Attorney General determines that a violation exists,

he may seek injunctive relief. See Tex.Bus. & Com.Code

Ann. § 17.47(a). If injunctive relief is granted, the court

retains jurisdiction, and the Attorney General may bring

actions if the Plaintiffs do not comply, meaning of course

that the Attorney General must monitor the Plaintiffs’

activities to ensure compliance. See id. § 17.47(e). Plain-

tiffs’ pamphlets, advertisements, television broadcasts,

sermons, etc., would be subject to inspection and

approval by the Attorney General. Certainly this contin-

ual monitoring of the Plaintiffs’ activities by the Attorney

General would constitute an excessive entanglement. See

Walz, 397 U.S. at 675, 90 S.Ct. at 1414.

This would also require the Attorney General to

make determinations as to which representations are

purely religious and which are secular. The Assistant

Attorney Generals assure this Court they can distinguish

purely religious assertions from secular assertions subject

to the DTPA. Despite the Assistant Attorney Generals’

confidence, this Court does not believe they or any other

state officials are authorized to make those kind of deter-

minations. See e.g., Cantwell v. Connecticut, 310 U.S. 296,

305-06, 60 S.Ct. 900, 904, 84 L.Ed. 1213 (1940) (state could

not give a state official the power to determine if a

solicitation was for a religious cause or not in order for

the solicitor to receive a license to solicit); Lemon, 403 U.S.

at 618-19, 91 S.Ct. at 2114 (“With the best of intentions

such a teacher would find it hard to make a total separa-

tion between secular teaching and religious doctrine”). It

is simply not the business of courts or the State to

FOIE ee en eee Saad Wr eo

App. 53

“approve, classify, regulate, or in any manner control

sermons delivered at religious meetings” or other forms

of religious expressions. See Fowler v. Rhode Island, 345

U.S. 67, 70, 73 S.Ct. 526, 527, 97 L.Ed. 828 (1953).

The fact that the investigation may not reveal viola-

tions or that the Attorney General may not seek injunc-

tive relief does not make the investigation constitutional.

As stated in Surinach, “bifurcation of the gathering of the

information and the purpose for which it is sought . . . [is]

both artificial and constitutionally unsound.” Id. at 75. If

there is no constitutional end use of the information

gathered, there is no reason for this Court to wait until a

constitutional violation has actually occurred. See id. at

75-76; cf. Ambassador College v. Geotzke, 675 F.2d 662, 664

(5th Cir.), cert. denied 459 U.S. 862, 103 S.Ct. 138, 74

L.Ed.2d 118 (1982). (Because an individual sought discov-

ery, there was no danger of the “government seeking to

monitor or regulate” a religious group, and therefore

Surinach did not apply).

In sum, the express wording of the Texas Deceptive

Trade Practices-Consumer Protection Act makes the Act

inapplicable to the factual circumstances of this case and,

even if applicable, the DTPA, as interpreted by the Attor-

ney General and as used in this case, cannot be constitu-

tionally applied to the Plaintiffs.

TEXAS MISCELLANEOUS CORPORATION

LAWS ACT

As previously mentioned, the Attorney General did

not file a petition for enforcement in a Dallas district

court under Section 17.62(b) of the DTPA, but rather

App. 54

asserts his authority to investigate under the Texas Mis-

cellaneous Corporation Laws Act (“MCLA”).'4 The

MCLA, as interpreted by the Attorney General, also can-

not be constitutionally applied to the Plaintiffs in this

case.

The Church is incorporated as a non-profit corpora-

tion under the Texas Non-Profit Corporation Act. As

such, Article 1302-1.03 of the MCLA causes the church to

be governed by the MCLA “[e]xcept to the extent that

any provisions of [the MCLA] are expressly made

inapplicable by . . . the Texas Non-Profit Corporation

Act. ... “15 See Tex.Rev.Civ.Stat. Art. 1302-1.03(B) (Ver-

non’s 1992 Supp.).

Nonetheless, as interpreted by the Attorney General,

the provisions of the MCLA may not be constitutionally

applied to the Plaintiffs. Not only is the discretion of the

Attorney General to investigate under the MCLA as

broad and unbridled as it is under the DTPA, but the

remedies provided under the MCLA and sought by the

14 The Office of the Attorney General was quite creative in

their combining of statutes in the quo warranto proceeding. They

seek to investigate possible violations of the DTPA. They assert

their investigative power under the MCLA. And, they filed in

Probate Court in Travis County pursuant to the Texas Probate

Code.

15 Note that one of the remedies sought by the Attorney

General in the original quo warranto proceeding, receivership

under the MCLA, is expressly made inapplicable by Article

1396-7 .07, which states that “[n]o receiver shall be appointed for

any corporation in which this Act applies or for any of its assets

or for its business except as provided for and on the conditions

set forth in this act.” See Tex.Rev.Civ.Stat.Ann. Art. 1396-7.07(A)

(emphasis added).

App. 55

Attorney General would wholly deprive the Plaintiffs of

their right to worship. See generally Tex.Rev.Civ.Stat.Ann.

Art. 1302-5.01 et seq.

Under Article 1302-5.01

[e]very corporation . . . doing business in Texas,

shall permit the Attorney General . . . to make

examination of all the books, accounts, records,

minutes, letters, memoranda, documents,

checks, vouchers, telegrams, constitution and

by-laws, and other records of said corporation

as he may deem necessary.

Id. at Art. 1302-5.01(A) (emphasis added). Under Article

1302-5.03

[t]he Attorney General . . . has the power and

authority to make investigation into the organi-

zation, conduct and management of any corpora-

tion . . . authorized to do business within this

State, and has authority to inspect and examine

any of its said books, records, and other docu-

ments, and take such copies thereof as in his

judgment may show or tend to show said corpora-

tion has been or is engaged in acts or conduct in

violation of its charter rights and privileges, or

in violation of any law of this State.

Id. at Art. 1302-5.03(A) (Vernon’s 1992 Supp.) (emphasis

added).

This is not just unbridled discretion, this is complete

discretion. As these articles read, and as the Attorney

General interprets them,'© the Attorney General may

16 Recall once again that even in the amended Document

Request, the Consumer Protection Division maintains that it

App. 56

inquire about, and inspect or investigate, literally any

aspect of the Church. For the same First Amendment

freedom of religion and association concerns described

above with respect to the DTPA, this Court finds applica-

tion of these articles to the Plaintiffs unconstitutional.!7

The penalty section, under which the Attorney Gen-

eral sought various remedies in the Information in quo

warranto filed on February 5, 1992, is even more

egregious. Article 1302-5.05 states that

-

A. Any... domestic corporation which shall

fail or refuse to permit the Attorney General

. to examine or take copies of any of its said

books, records, and other documents . . . shall

thereby forfeit its right to do business in this State;

and its permit or charter shall be canceled or

forfeited.

B._ If any .. . officer of any domestic . . . corpo-

ration doing business under permit or charter

from this State shall refuse to permit the Attor-

ney General . . . to make such examination . . . or

to take copies of any or all of the books,

accounts, records, minutes, letters, memoranda,

does not adopt the Plaintiffs’ legal position in the matter, but

rather modified the request merely “in an effort to respond” to

the Plaintiffs’ (and presumably this Court’s) concerns.

17 And, for the same reasons described above with respect

to the DTPA’s nondisclosure provision, this Court finds Article

1302-5.04, which prohibits public disclosure of information

gathered under the MCLA except “in a suit by the State . . . or

for information of any officer of this State charged with the

enforcement of its laws”, equally unprotective of the Plaintiffs’

First Amendment rights.

App. 57

documents, checks, vouchers, telegrams, consti-

tution and by-laws and other records of said

corporation, he shall be fined not less than one

hundred nor more than one thousand dollars,

and be imprisoned in jail not less than thirty nor

more than one hundred days. Each day of such

failure or refusal shall be a separate offense.

Tex.Rev.Civ.Stat.Ann. Art. 1302-5.05 (Vernon’s 1992

Supp.).

Proceeding under Article 1302-5.05 and Article

1302-5.10, the Attorney General sought “forfeiture of [the

church’s] charter and dissolution of the corporation and

appointment of a Receiver to take Possession of the

affairs of the [church], to rehabilitate, reorganize, con-

serve or liquidate the affairs of the corporation” and

sought a “Permanent Injunction against the [church], its

officers, directors, stockholders, agents, employees, and

representatives whomsoever from conducting any busi-

ness of the [church]... . ” See id. Art. 1302-5.05, Art.

1302-5.10 (Vernon’s 1992 Supp.). Application of these

remedies to the Plaintiffs is clearly unconstitutional. It is

absurd for the Attorney General to think that it can

deprive the Plaintiffs of their rights to freely worship as a

group altogether as punishment for thé Plaintiffs’ initial

assertion of their First Amendment rights to not produce

constitutionally protected documents. See generally Mur-

dock, 319 U.S. 105, 63 S.Ct. 870, Cantwell, 310 U.S. 296, 60

S.Ct. 900. ,

Furthermore, although the Attorney General did not

explicitly request fine or imprisonment under Article

1302-5.05, that article says refusal to produce requested

documents “shall” result in forfeiture of the corporations

App. 58

right to do business and its charter and “shall” result in a

fine and imprisonment of the officer refusing to comply

with the Attorney General’s demand. See Tex.Rev.Civ.

Stat.Ann. Art. 1302-5.05. Thus, it is not inconreivable that

the Probate Court might also impose fines or imprison

Mr. or Mrs. Tilton. If se, a fine for exercising one’s First

Amendment rights would clearly be unconstitutional

under Murdock v. Pennsylvania, which did not even permit

a fee to exercise First Amendment rights to spread one’s

religious beliefs. See Murdock, 319 U.S. at 115, 63 S.Ct. at

876. Imprisonment would also clearly be unconstitu-

tional, both as a punishment for exercising one’s constitu-

tional rights and because it would wholly prevent Mr. or

Mrs. Tilton from exercising an important part of their

religious beliefs, which is to spread their religious faith to

others. See id.

Finally, the MCLA does not even have a provision, as

does the DTPA, allowing the Plaintiffs to bring an action

to challenge the document demand. Having determined

that forcing the Plaintiffs to seek a court order to permit

them to exercise their constitutional rights is violative of

those rights, giving them no means of redress is even

more damaging.

The investigation and penalty provisions of the

MCLA, as interpreted by the Attorney General, may not

be constitutionally applied to the Church or to the

Tiltons.

CHARITABLE TRUSTS LAW

The Attorney General also maintains that the Church

is a charitable trust and that, as such, it is the Attorney

App. 59

General’s common law duty to protect the public’s inter-

est with respect to that charitable trust.18 Without having

to reach the Attorney General’s duties over charitable

trusts under the common law, this Court finds that the

church is not a charitable trust.

A “charitable trust” as defined in the Texas Property

Code includes a “charitable entity.” Tex.Prop.Code Ann.

§ 123.001(2) (Vernon’s 1992 Supp.). A “charitable entity”,

in turn, is defined as a “corporation, . . . or other entity

organized for scientific, educational, philanthropic, or

environmental purposes, social welfare, the arts and

humanities, or another civic or public purpose described by

Section 501(c)(3) of the Internal Revenue Code of

1986. ...” Id. at § 123.001(1). The Attorney General

argues that because Section 501(c)(3) of the Internal Reve-

nue Code includes a corporation operated for religious

purposes the Church is a charitable entity.

This Court disagrees. A church is not organized for a

“civic or public purpose”. If the Legislature had intended

to incorporate any entity described in the Internal Reve-

nue Code, whatever its purpose, it could have easily done

so. The church is not a charitable trust, and because

jurisdiction in the Travis Courity Probate Court is based

on the church being a charitable trust, that jurisdiction is

improper. See Tex.Probate Code-Ann. § 5A (Vernon’s 1992

Supp.). .

1° Only if the church is a charitable trust is filing in the

Travis County Probate Court proper. See Tex.Probate Code Ann.

§ 5A(c), (d), (e) (Vernon’s 1992 Supp.).

App. 60

TEXAS NON-PROFIT CORPORATION

ACT

This Court’s finding that the DTPA and MCLA can-

not be constitutionally applied to the Plaintiffs and that

the quo warranto proceeding may not be properly main-

tained in the Travis County Probate Court does not mean

that the Attorney General has no authority to investigate

the Plaintiffs.

The Court agrees with the Attorney General that

persons may not, “under the cloak of religion” use the

First Amendment “with impunity” to “commit frauds

upon the public”. See Cantwell, 310 U.S. at 306, 60 S.Ct. at

904. Nonetheless, the Attorney General cannot, in turn,

use allegations of fraud as a sword to violate the Plain-

tiffs’ First Amendment rights either. Lines must be drawn

and interests balanced. The DTPA and the MCLA, as

interpreted by the Attorney General, are too broad and

give too little protection and may not be constitutionally

applied to the Plaintiffs. The Texas Non-Profit Corpora-

tion Act (“NPCA”), however, may be constitutionally

applied.

Article 1396-2.01 of the NPCA states that a corpora-

tion organized under the NPCA “shall” fully state its

purposes in its articles of incorporation. Tex.Rev.Civ.

Stat.Ann. Art. 1396-2.01 (Vernon’s Supp.1992). It also lists

some permissible purposes, including charitable and reli-

gious. See id. The church is properly organized as a non-

profit corporation, and its articles of incorporation

(Restated) properly list its purposes. The Attorney Gen-

eral has the right to test that - to determine if the church

App. 61

is indeed operating only within the scope of its stated

purposes.

The Attorney General’s authority stems from both

the Texas Constitution and the Non-Profit Corporation

Act. Article 4, section 22 of the Texas Constitution states

that the Attorney General

shall especially inquire into the charter rights of

all private corporations, and from time to time,

in the name of the State, take such action in the

courts as may be proper and necessary to pre-

vent any private corporation from exercising

any power . . . not authorized by law. (emphasis

added).

Article 1396-7.01 gives the Attorney General the authority

to seek dissolution of a non-profit corporation “when it is

established .. . [t]he corporation has continued to trans-

act business beyond the scope of the purpose or purposes

of the corporation as expressed in its articles of incor-

poration.” Tex.Rev.Civ.Stat.Ann. Art. 1396-7.01(A)(3).

The Texas Constitution and the Non-Profit Corpora-

tion Act make it clear that the Attorney General does

have the limited power under a “properly narrowed sum-

mons” to investigate in order to determine if the church is

operating within the limited purposes for which it was

incorporated and if it may retain its non-profit status. See

United States v. Grayson County State Bank, 656 F.2d 1070,

1074 (Sth Cir.1981); United States v. Holmes, 614 F.2d 985,

989 (Sth Cir.1980) (“Requiring plaintiff to comply with a

properly narrowed summons in order to show its entitle-

ment to tax exempt status results in only an incidental

burden upon his free exercise of religion”).

x

xX ee

App. 62

Furthermore, to the extent financial records actually

kept by the church are necessary to make that determina-

tion, they may be inspected. That Article 1396-2.23A spec-

ifically exempts a religious institution from having to

maintain, and make available to the public, financial

records “with respect to all financial transactions of the

corporation” does not mean records actually kept are

necessarily exempt from inspection as well. Article

1396-2.23 requires all non-profit corporations to keep

“correct and complete books and records of account” for

inspection by any member. Tex.Rev.Civ.Stat.Ann. Art

1396-2.23 (emphasis added). Thus, the church is not

exempt from all record-keeping, but rather only in depth

financial record-keeping. It would be ludicrous to find

that the Attorney General has no authority to look at any

financial records given his duties and powers under the

Texas Constitution and the NPCA to insure that non-

profit corporations are non-profit.

CONCLUSION

The Court holds that the Texas Deceptive Trade Prac-

tices-Consumer Protection Act and the Texas Miscella-

neous Corporation Laws Act, as interpreted by the

Attorney General, may not be constitutionally applied to

the Word of Faith World Outreach Center, Incorporated,

to Robert G. Tilton, or to Martha Tilton. The quo warranto

proceeding in the Travis County Probate Court, Cause

No. 59,268, is permanently enjoined. The Attorney Gen-

eral of Texas, is permanently enjoined from pursuing

further its January 13, 1992, demand for documents and

investigation pursuant to the DTPA and the MCLA, but

this order is without prejudice to the Attorney General to

ee

App. 63

appropriately pursue an investigation of the Plaintiffs

under the Texas Non-Profit Corporation Act.

App. 64

APPENDIX E

Texas Rule of Appellate Procedure 114

Certification of Questions

of Law by United States Courts

(a) Certification of Questions of Law. The Supreme

Court of Texas may answer questions of law certified to it

by the Supreme Court of the United States or a Court of

Appeals of the United States when requested by the

certifying court, if there are involved in any proceedings

before the certifying court questions of law of this state

which may be determinative of the cause then pending

and as to which it appears to the certifying court that

there is no controlling precedent in the decisions of the

Supreme Court of Texas. The Supreme Court may, in its

discretion, decline to answer the questions certified to it.

(b) Contents of the Certification Order. A certifica-

tion order shall set forth:

(1) The questions of law to be answered.

(2) A stipulated statement of all facts rele-

vant to the questions certified and showing fully

the nature of the controversy in which the ques-

tions arose.

(3) The names of each party to the pending

cause.

(4) The names and addresses of counsel

for each party.

(c) Preparation of Certification Order. The certi-

fication order shall be prepared bj the certifying court

and forwarded to the Supreme Court of Texas by the

clerk of the certifying court under its official seal. The

Supreme Court may require the original or copies of all

App. 65

or any portion of the record before the certifying court to

be filed under the certification order, if in the opinion of

the Supreme Court, the record or portion thereof may be

necessary in answering the questions.

(d) Fees and Costs. Fees and costs shall be the same

as in direct appeals docketed before the Supreme Court

and shall be equally divided between the parties unless

otherwise ordered by the certifying court in its order of

certification.

(e) Briefs and Oral Argument. Upon the agreement

of the Supreme Court to answer the questions certified to

it, notice shall be given to all parties. The appealing party

in the certifying court shall file his brief with the clerk of

the Supreme Court within thirty days from the date of

receipt of the notice and the opposing parties shall file an

answering brief within fifteen days of service of copies of

the opening brief. Briefs shall be in the manner and form

of Rules 131 and 136, Texas Rules of Appellate Procedure,

so far as reasonably applicable. Oral argument may be

granted upon application or ordered by this court. If

granted or ordered, argument shall be as provided in 172,

Texas Rules of Appellate Procedure.

(f) Notice to the Attorney General. When the con-

stitutionality of a Texas statute is the subject of a certified

question to which the State of Texas or an officer, agency

or employee of the state is not a party, the clerk of the

Supreme Court shall notify the Attorney General and

shall permit the State of Texas to intervene for presenta-

tion of briefs and oral argument on the question of consti-

tutionality.

a ai a i |

App. 66

(g) The Answer to the Certified Question. After all

motions for rehearing have been overruled, the written

opinion of the Supreme Court stating the law governing

the questions certified shall be sent by the clerk under the

seal of the Supreme Court to the certifying court and to

the parties.

(h) All time limits shall be in accordance with the

Texas Rules of Appellate Procedure, so far as reasonably

applicable.

App. 67

APPENDIX F

Detailed Factual Background of This Case

Word of Faith World Outreach Center Church is an

independent Christian Church whose religious beliefs are

similar to those held by the members of the Pentecostal

movement. Tr. 6:167-72. At the core of the Church’s teach-

ings is a belief in spiritual healing - the healing of physi-

cal ailments through faith and the spiritual power of God

~ and the belief that tithing as required by the Bible is a

basic part of Christian life. Tr. 6:179-80.

Approximately 3000-4000 members attend weekly

services at the Church’s main sanctuary in Farmers

Branch, Texas and thousands more view these services on

television. Tr. 6:39, 182. In addition to conducting reli-

gious services, the Church is involved in numerous other

activities including the operation of a prison ministry,

youth programs, and a large, well-respected private

school, Liberty Academy. Tr. 6:36, 43. The Church also

funds missions and charities in Mexico, Guatemala, Haiti,

and South Africa, and operates an extended outreach

program which in recent years has sponsored large cru-

sades in the Philippines, India and South Africa where

literally hundreds of thousands of people have been

exposed to Christianity. Tr. 6:109-10, 182-83. Reverend

Tilton is the Church’s founder and head pastor.

The events which led to the filing of this Petition for

Writ of Certiorari began on November 21, 1991 when the

ABC television tabloid Prime Time Live televised a seg-

ment on the Church and Reverend Tilton in which several

App. 68

accusations of wrongdoing were made. P. Ex. 8. Simul-

taneously with the airing of Prime Time Live a represen-

tative of the Attorney General’s Office held a news

conference in which he announced an investigation of the

Church and suggested that the Church and Reverend

Tilton were guilty of fraud. P. Ex. 8. Within a few days

after the airing of Prime Time Live, the Church’s attorney,

J.C. Joyce, notified various state and federal agencies that

the Church’s records would be made available for their

inspection. Tr. 6:78, 142-43. Mr. Joyce personally tele-

phoned the Attorney General’s office and invited repre-

sentatives to coine examine any of the Church’s records

they wanted. Tr. 7:480-81. The Federal Bureau of Investi-

gation (“FBI”) and the Postal Inspection Service accepted

the Church’s offer and began an examination of the

Church’s records. Tr. 6:78-79, 143. All Church records

requested by these agencies were made available to them.

Tr. 6:143, 161-62. Neither the FBI nor the Postal Inspection

Service made any public comment or announcement

regarding their investigations of the Church. Tr. 6:79.

In contrast to the actions of the FBI and the Postal

Inspection Service, the Attorney General refused the

Church’s offer to review its records and instead released

a statement to the media calling the Church’s offer to

open its records a “show-boating trick, just to give the

appearance of propriety.” P. Ex. 22, Tr. 6:157.

In addition to this gratuitous attack on the Church,

representatives of the Attorney General’s office made

numerous other statements to the press intimating that

the Church had committed fraud. P. Ex. 22.

App. 69

On January 13, 1992, over six weeks after refusing the

Church’s offer to examine its records, the Attorney Gen-

eral sent a letter to the Tiltons informing them that the

Attorney General's Office had “reason to believe” that the

Church had violated provisions of the Texas Deceptive

Trade Practices-Consumer Protection Act, Tex. Bus. &

Com. Code § 17.41 et seq. (the “DTPA”). P. Ex. 23; Tr.

6:85-86. The letter demanded the turnover of 55 catego-

ries of documents and information pertaining to some of

the most sensitive aspects of the Church’s organization

and finances. Included in the documents demanded were

a list of church members and scripts of sermons. P. Ex. 23.

The Attorney General gave the Tiltons until February 10,

1992, to produce the requested documents at the Attorney

General's offices in Dallas. The letter did not explain how

or why the Attorney General suspected the Church or

Reverend Tilton of violating the DTPA.

In a letter dated January 17, 1992, J.C. Joyce

responded to the Attorney General’s document demand

by requesting a meeting with the Attorney General for

the purpose of discussing the voluminous information

and documents requested in the January 13 demand letter

and the reasons for the demand. RE:21-23, P. Ex. 33.

Pending that meeting, Mr. Joyce requested an extension

of time for the production of the requested documents

based on the expectation that at the proposed meeting

“we will be able to either eliminate the necessity to

respond at all, or, if a response is called for, that it be

limited.” Id. Mr. Joyce went on to explain that many of

the items requested, such as tapes of all the Church’s past

sermons, would require a great deal of time to copy, but

App. 70

that the Church would provide the original tapes to the

Attorney General for viewing.

By the date of the Attorney General’s demand letter,

media coverage of the Attorney General’s investigation of

the Church and Reverend Tilton had waned considerably.

On January 22, 1992, with no prior warning to the Church

or Reverend Tilton, the Attorney General's office faxed the

January 13 demand letter to numerous newspapers and

television stations in Texas and Oklahoma and to the

Associated Press Wire News Service. Tr. 6:89-90. As might

have been expected, the release of the demand letter

produced a flurry of negative newspaper articles and

television news reports in which the Attorney General's

accusations contained in the letter were repeated. Tr. 6:90.

After the Attorney General refused to meet with Rev-

erend Tilton or his counsel, Mr. Joyce sent another letter

to the Attorney General dated January 29, 1992, in which

he protested the Attorney General’s release of the Janu-

ary 13 demand letter to the media and again requested a

meeting in which the dispute over the document demand

could be resolved. P. Ex. 34. Mr. Joyce also informed the

Attorney General that if he continued to refuse to meet

with him and grant an extension of the February 10, 1992

deadline for the production of the requested documents,

the Church would file suit in federal court on February 6,

1992 in order to protect its rights under the United States

Constitution. Id. In a letter dated January 30, 1992, the

Attorney General's office responded to Mr. Joyce by again

refusing to meet with Reverend Tilton and Mr. Joyce. P.

Ex. 24.

App. 71

At 5:07 p.m. on February 5, 1992, one day before Mr.

Joyce had said he would file suit in federal court and five

days before the February 10, 1992 deadline for the Tiltons

to comply with his document request, the Attorney Gen-

eral filed an Information in Quo Warranto, Original Peti-

tion and Application for Injunction, Forfeiture of Charter

and Appointment of a Receiver (the “Quo Warranto”) in

Travis County Probate Court. Appellant’s RE: 56-62, Tr.

2:222-72. In order to obtain immediate media attention,

the Attorney General’s office faxed the Quo Warranto to

various newspapers and television stations before the

Church, Reverend Tilton and their attorney were notified

of its filing. Tr. 6:195. The Attorney General did not file

the Quo Warranto under the DTPA, but rather under

Article 1302, Chapter 5, Texas Miscellaneous Corporation

Laws Act (the “MCLA”), which the Attorney General on

p. 4 of the Quo Warranto asserted gave the Attorney

General or his representatives the authority “to examine

any books or records of a Texas corporation as he may

deem necessary... . ”

Even though the Attorney General’s suit was filed

five days before the deadline for the production of the

documents requested in the January 13 demand letter, the

Quo Warranto recited that the Church had failed to com-

ply with the document demand and on that basis sought:

1) a permanent injunction ordering the Church to pro-

duce the records demanded by the Attorney General; 2)

the forfeiture of the Church’s charter and dissolution of

the corporation; 3) the appointment of a receiver to take

possession of the affairs of the corporation; and 4) a

permanent injunction against the Church or anyone affili-

ated with the Church from conducting any “business” of

App. 72

the Church. Appellant’s RE:57, Tr. 2:223. In filing the Quo

Warranto, the Attorney General sought, in effect, to seize

the Church’s property and discontinue all of the Church’s

operations, including its religious operations in the state

of Texas.

On February 7, 1992, the Church and the Tiltons filed

their Complaint and request for injunctive relief with the

district court pursuant to 42 U.S.C. § 1983. Tr. 1:1-100. On

that same day the Church and the Tiltons obtained a

temporary restraining order from the district court pre-

venting the Attorney General from proceeding with the

Quo Warranto action or from taking any steps to enforce

the January 13 document demand. Tr. 1:127-129. The hear-

ing on the preliminary injunction was set for March 4,

1992. Id.

On March 18, 1992, following a two day trial on

March 4 and 5, 1992, the district court issued a 27 page

Memorandum Opinion and Order and accompanying

Judgment in which it permanently enjoined the Attorney

General from attempting to enforce the January 13 docu-

ment demand letter and from proceeding with the Quo

Warranto action. (App. 63)