Concordia University Texas Wins Federal Jurisdiction Case Against LCMS

The United States District Court for the Western District of Texas has dismissed the LCMS's request to have its dispute with CTX heard in a Federal Court.

A Texas District Court has confirmed a November 2024 ruling that granted Concordia University Texas (CTX) its motion to dismiss the 2023 case and its motion to remand the 2024 case to state court, both brought by the Lutheran Church—Missouri Synod (LCMS).

The two parties have been disputing governance and property rights, and significant jurisdictional implications have emerged regarding whether the case should be heard in federal or state court. CTX amended its Articles of Incorporation and Bylaws in November 2022, granting itself corporate self-governance independent of the LCMS. It sought to be the sole owner of all the university's assets, including real estate. ​

Judge Dustin M. Howell ruled for CTX based on the following:

1. Lack of Subject-Matter Jurisdiction: The court found that it lacked subject-matter jurisdiction over the case. CTX argued that the LCMS is a non-diverse (Texas) defendant capable of being sued, making it improper for the federal court to exercise jurisdiction. ​

2. Real Party in Interest: The court concluded that the Synod, not LCMS, holds the substantive rights being disputed in the lawsuit. ​ Therefore, the Synod is the real party in interest and must be joined in the case. ​

3. Diversity Jurisdiction: The Synod was determined to be an unincorporated association with members in Texas, making it a Texas citizen. ​ This defeated the complete diversity required for federal jurisdiction. ​

4. Improper Joinder Doctrine: The court found that CTX had plausibly stated a claim for declaratory judgment against the Synod regarding its alleged reversionary interest in CTX’s new campus property. ​ This meant that the Synod was not improperly joined to defeat federal jurisdiction. ​

The ruling is a significant setback for the LCMS, which has been wrangling with CTX over the university’s unilateral declaration of independence from the Synod.

The court's distinction between the Synod and the LCMS is somewhat surprising. It will surely create new legal insecurity since it sets a national precedent for bifurcating the corporation from the Synod, with significant implications for governance and asset ownership.

In arguing for the distinction between the Synod and LCMS, the court found a Federal Court would not have jurisdiction based on:

1. Separate Entities: The court recognized that the Synod and LCMS are different entities. ​ The Synod is a religious denomination governed by its constitution and bylaws, while the LCMS is a Missouri nonprofit corporation that acts as the "civil law reflection" of the Synod, referred to as "Corporate Synod" in the Synod’s bylaws. ​

2. Unincorporated Association: The court concluded that the Synod is an unincorporated association under Texas law, which means it can be sued in its name. ​ This classification was based on Synod's structure and purpose as an organization that exists for a common, nonprofit purpose. ​

3. Property and Rights: The court found that the Synod holds the substantive rights at issue in the lawsuit, including any property interests. ​ The Synod’s bylaws and the LCMS Policy Manual indicate that property held by LCMS is considered property of the Synod. ​

4. Capacity to Sue or Be Sued: The court noted that Texas law permits unincorporated associations, including religious non-profits, to sue or be sued. ​ As an unincorporated association, the Synod can be sued independently of LCMS. ​

The LCMS had argued for federal jurisdiction on the basis that the Synod should not be considered a separate unincorporated association under Texas law, contending:

1. Non-Existence of Separate Entity: the formation of the LCMS as a nonprofit corporation precluded the existence of the Synod as a separate unincorporated association. ​ They claimed that once a church decides to incorporate, no remaining unincorporated association is amenable to suit. ​

2. Internal Affairs Doctrine: the LCMS argued that recognizing the Synod as an unincorporated association violated Texas' internal affairs doctrine.

3. First Amendment and Church Autonomy Doctrine: The LCMS claimed that recognizing the Synod as a civil entity subject to secular authority violated the First Amendment and the Church Autonomy Doctrine, which protects religious organizations from government interference in their internal governance and doctrinal matters.