Posted on by barakrichman · 1 Comment

Organizational Values, Neutral Principles, and Economic Power

Dan Crane, again with great eloquence, concludes his insightful and personal post by asking, “So where does it leave us if bargaining over money is an unavoidable aspect of much religious hiring but that rivalry over finances is contrary to the principles and self-understanding of many religious organizations?”  This is indeed a foundational problem in nations (like ours) that do not rely on state support for religious activity, but I respectfully submit that this is not a new problem.  Indeed, as I wrote in my earlier posts, the suggestion that religious and nonprofit organizations pursue non-pecuniary objectives — as they clearly do — has often been invoked to shield them from antitrust and regulatory scrutiny, which has led to both economic harm and legal confusion.

It has also led to a mistaken expansion of First Amendment defenses.  Some commentators have spread the mistaken fear that applying neutral principles of law to religious organizations requires, as Dan suggests, an inquiry into “the values of each organization.” Michael Helfand, a rising star in the field, has called this fear “Establishment Clause creep” and has contributed to a growing immunity for religious organizations from general laws.  The Supreme Court’s endorsement of the Ministerial Exception this past year codified this immunity from employment and other discrimination laws, which is a decision I support (disclosure: I authored an amicus brief for Hosanna Tabor that articulated a position that did not contradict with either the petitioner or the respondent in the case).  But if Dan means to extend this immunity to protection from the antitrust laws, would he also extend it to other economic torts?  Or contract actions?

Without doubt, religious organizations and committed religious individuals do an enormous amount of social good.  Dan’s parents are paradigmatic cases in point.  But there needs to be a realistic appreciation that the road to good intentions often strays from the beneficent path, and the law is designed to protect the parties injured from actions motivated by these otherwise well-intended actions.  If a pastor who signed an employment contract that included a severance package is dismissed (perhaps the pastor’s and the congregation’s ideologies parted ways), the church is obligated to pay severance.  If they refuse and the pastor sues, there is no need for a court to inquire into the values underlying the religious motivations or values of either the congregation or the pastor.  Applying neutral principles, the court should enforce the contract.  If a church becomes so popular that its members, to gain entrance to the church, pass over a neighbor’s yard and cause damage, the church would be subject to a tort and should pay compensation. Again, no need to inquire into the church’s mission.  These situations extend, especially, to intra-denominational disputes between large and small parties.  What if the neighbor to the large church is a small church?  The smaller congregation relies on neutral law for protection, otherwise an expansive First Amendment could allow an “entanglement” defense to preclude a court’s intervention into the trespass dispute.

The same logic applies to the antitrust laws.  Neutral principles can and should take a court a long way to resolving a dispute over what essentially is an economic tort.  It is true that the Rabbinical Assembly’s control over the labor market infringes upon a congregation’s Free Exercise rights, but a court need not inquire into either those rights nor the  Free Exercise interests of the Rabbinical Assembly as it implements its cartel.  Neutral principles works very well here, and a court that proceeds along this path would succeed in not interfering with religious organizational values much better than a court that refuses to intervene.  Refusing to intervene would allow the economically powerful to infringe on the mission of the weak.

Although my primary area of expertise is antitrust, I know enough about the First Amendment and the Religion Clauses to appreciate how central they are to American life and American law.  But if the First Amendment prevents courts from enforcing secular law according to neutral principles, then it can defeat its own mission (see Saving the First Amendment from Itself).  The law should not and cannot be dogmatic in its refusal to adjudicate disputes between religious organizations because that would remove protections from organizations that need and rely on the law. And it would — again, contrary to the best of intentions — enshrine the powerful and undermine the religious values of those without power.

Posted on by Dan Crane · 1 Comment

More Thoughts on Harmony and Competition

Thanks, Barak, for very thoughtful and illuminating comments. Our differences are becoming crystallized, and I wonder how much of it has to do with the differences between our respective religious traditions.

It’s interesting that Barak and Harry, who are infinitely more qualified than I am to opine on the issue, understand the hiring of rabbis as a clearly commercial transaction. I can only counter with an idiosyncratic example from my own experience. Until their recent retirement, my parents served their entire adult lives as evangelical Protestant missionaries in Europe. Their income came entirely from money raised from U.S. churches. I think that both they and their supporting churches would have most surprised to hear these transactions described as commercial. The money was incidental to the mission, in the same way that an athlete drinks gatorade incidentally to running a marathon. It may be true that without the gatorade she will collapse, but no one would understand the drinking of the gatorade as the point of the marathon.

This is the major distinction from Barak’s examples from the professions. Doctors, lawyers, teachers, and many other professionals may choose their vocation because of altruistic motivations–the desire to heal, promote justice, or mold young minds. But it is still a vocation–a way to earn a living–that they are choosing. Earning their keep is not incidental to their moral vision. If it were, professional salaries would be far lower than they are.

My point that ordained ministers are differently situated from “the professions” is perhaps as much aspirational as empirical. There are no doubt clergy of all religions who bargain hard to maximize their income based on market factors. But the overall effect is quite different than in the professions. Consider the 2012 Large Church Salary Report conducted by the Leadership Network. The study found that the average salary for a megachurch pastor (one with at least 2,000 attendees) was around $150,000, with an average increase of $8,000 for every 1,000 additional attendees. True, this suggests some market forces at work in setting compensation–pastors who attract more congregants get paid more. But, on the other hand, the effect is very small. The incremental income brought into the church by an additional 1,000 congregants is probably several million dollars. Megachurch pastors are comparable in talent, managerial responsibility, and labor intensity to the top professionals, yet their direct compensation is relatively modest (and yes, indirect compensation would need to be explored as well). In most congregations, it would be considered appalling for a pastor to try to justify his salary based on his value to the church (“I’ve saved thirteen souls this year so I should get a bonus”) as opposed to his needs.

Even conceding that bargaining over money plays a role in the hiring of clergy, there remains the question of fit between the existential purposes of the antitrust laws and the existential purposes of religious groups. When it comes to business firms, we believe that the profit motive is exactly what drives firms to deliver the goods and services we value. As Adam Smith observed, “[i]t is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” Competition principles channel this self-interest to maximize our collective well being. But I would not want to attend a church that followed such a principle–one where others gave of their time, money, and friendship only because of self-interest. Although I am of course self-interested (blame original sin), when I participate in my church I aspire to something different–to Jesus’ admonition that it is more blessed to give than to receive, that the widow’s mite was far more valuable than the rich man’s donation.

So where does it leave us if bargaining over money is an unavoidable aspect of much religious hiring but that rivalry over finances is contrary to the principles and self-understanding of many religious organizations? Should courts sift through the evidence on each religious organization, trying to craft antitrust rules that respect the values of each organization while obtaining the benefits of competition where they are warranted? In my view, that would raise serious questions of entanglement between church and state that justify a categorical decision not to apply antitrust law to ministerial hiring–just as the Supreme Court recently declined to apply antidiscrimination law to religious hiring. Barak and I have agreed to debate that issue next.

Posted on by barakrichman

On Productive Disagreements and Theological Harmony

It’s an honor to engage with Dan Crane on this, and I deeply appreciate his kind remarks.  But our very cordial disagreement perfectly illustrates a problem with his reasoning:  unity and harmony is perfectly compatible with disagreement and competition.

Let me first counter one point, a minor one to Dan’s cogent reasoning but a critical one for antitrust-in-action (and the realist question of whether a court would view this cartel to be within antitrust’s domain).  Dan says “Producing and selling food is a commercial transaction; hiring rabbis or pastors is not.”  To quote Harry First, an antitrust giant, a co-author on my amicus brief on this topic, and a former synagogue president, “If you’ve ever negotiated with a rabbi, you’ll know it’s commerce.”  There is an essentially commercial element to the rabbinic market–synagogues work hard to raise funds to pay rabbinic salaries; rabbis sign heavily-negotiated employment contracts with synagogues, often with the aid of advocates; and both synagogues and rabbis are highly aware of market wages.  Yes, rabbis do lots of very good things, but they receive compensation for them — as they should! — and are squarely engaged in commercial transactions with their employing synagogues.

To make a larger point:  lots of professionals are dedicated to the public interest, and some even define “professionals” as those whose careers are designed to advance the public interests — see “A Community Within A Community: The Professions”, a seminal 1957 work in sociology.  Consider a physician’s dedication to health & healing, a lawyer’s commitment to advocacy & justice, and an engineer’s devotion to science & safety.  To be sure, these commitments to public service do a world of good and motivate conduct (charity, research, government service, other) that both markets and governments have difficulty providing. But these aspects of professionalism also make professional cartels particularly pernicious.  Precisely because their conduct is premised on noble spirits, they feel entitled to maintain their market dominance; because their attachment to their fellow professionals is so core to their identity, exit or defection becomes unlikely, making their cartel much more stable than other cartels; because they are motivated by paternalist concerns, they easily justify usurping choice, freedom, and efficiencies from consumers. Although professionals do not need to apologize for seeking compensation for their services, their professional zeal often leads to commercial excesses and abuses, and these excesses and abuses are routinely justified in the language serving the public interest.

But my primary point is my first, that both antitrust the First Amendment — and both pluralism and democracy — are premised on a civil exchange of ideas and the freedom to choose among them.  Just like the virulent debates between osteopaths and allopaths, between Bayesian and non-Bayesian statisticians, and (to use a provincial example) between the Mitnagdim and the Hasidim, there are disagreements among Jewish organizations.  Antitrust readily permits agreements to emerge from a competition of ideas — we call them setting standards — and it applauds osteopaths and allopaths when they achieve harmony and unite around a common course of treatment.  But it appropriately would condemn any agreement that is antithetical to a productive clash of ideas.  The rabbis are welcome to disagree among themselves or disagree with congregational choices, but they are not permitted to impose their will though their collective economic dominance.

Dan hit on a very foundational idea.  There is a deeply-felt inclination among religious communities, and perhaps among all ethnic communities, to avoid visible disputes and to seek theological and political unity.  These inclinations have motivated many of my own co-religionists to urge me not to seek legal action and, more generally, to stop talking about this issue publicly.  To be sure, there is an obvious response to that argument, and I submit that voicing disagreement with legal, economic, and moral reasoning is much more squarely within the American tradition.  Fortunately for me, it is this tradition that supports the Sherman Act and the American legal system.  More generally, there is a long and proud history of theological disagreements in America where the resolution is to permit each community to pursue its own beliefs.  This distinguishes the horrors of religious disagreements expressed through force from the benefits of religious disagreements expressed through reason.

Posted on by Dan Crane · 1 Comment

Price-fixing Rabbis: Is Antitrust Made for this Problem?

Barak has single-handedly provoked a national dialogue over an interesting and important issue about the relationship between antitrust law and religious organizations.  This is scholarly entrepreneurship at its best, so kudos to Barak.  Alas, I’ll have to part company with his position.  Not having the benefit of his expertise on the specifics of  rabbinical hiring, I’ll make more general comments about antitrust and the regulation of religious enterprises.

Modern antitrust law is justified on the assumption that rivalry between firms for the design, manufacture, and distribution of goods and services promotes efficiency by stimulating innovation and lowering prices.  This assumption is true enough as to commercial undertakings that it serves as a useful market ordering principle.  I’m far less confident that the rivalry assumption holds as a general matter as to religious organizations.

On the one hand, competition clearly can be a spur to the performance of religious organizations.  The best empirical evidence for this is the widely different paths of the state-established churches of Europe and the disestablished churches in the United States.  In Europe, the Lutheran, Anglican, Orthodox, and Catholic churches have held near-monopoly positions for hundreds of years.  Funded by the state and granted all manner of valuable privileges and subsidies, they are economically protected—and in north Europe at least almost completely irrelevant.  Secure in its position and unmotivated by competition, the established church had little reason to sharpen its message, adapt to new social realities, or reach new audiences.  By contrast, religion has flourished in America precisely because of its disestablishment.   America has been the most fertile land for development of new religious sects, doctrines, and expressions, in large part because no group could succeed unless it presented an appealing message and worked hard to attract and retain members.  Europeans who often look with a mixture of contempt, amusement, horror, and incredulity at the deep religiosity of the United States would do well to consult economic principles to understand the differences.

On the other hand, it’s far from clear that rivalry between religions is as fundamental to the well-being of society as is rivalry between commercial firms.  I was recently at a conference where someone asked whether the antitrust laws should apply to the Balamand agreement between the Roman Catholic and Eastern Orthodox Church, which ended official Roman Catholic proselytization of the Eastern Orthodox.  The audience laughed.  Given that much of history’s nastiest episodes have come about because of religious rivalry, gestures toward religious conciliation and ecumenicalism are a relief—even if they happen to take the form of market division.

And that’s as to what the antitrust crowd would call “interbrand competition,” rivalry between different religious sects.  If the value of overt rivalry between religious sects is questionable, so much more so for rivalry within religious sects—what the antitrust crowd would call “intrabrand competition.”  Speaking from within just my own tradition—the Christian one—a good bit of the Apostle Paul’s letters to the churches scattered across the Roman world was about the need for unity, the need to avoid internecine strife, the need to stop competing and to be “unified in Christ.”  Since the church was said to be “one body,” the Apostle would likely have found it surprising that social welfare would be maximized if the churches at Ephesus and Corinth competed with each other to attract Timothy as their next pastor.  To put the point rather awkwardly in the language of modern antitrust, in Christian theology the church is a single firm, and a single firm is juridically incapable of conspiring with itself (as the Supreme Court held in Copperweld).  I can’t speak universally, but my sense is that most religions have a similar commitment to internal unity and harmony.

The fundamental problem with applying antitrust law to the non-commercial activities of churches, synagogues, or other religious organizations is that it forces them to adhere to a set of normative commitments that may not be their own.  An ecclesiastical organization may think it’s far more important to ensure order, theological continuity, adherence to tradition, or harmony in allocating its clergy than to secure the optimal short-run deployment of its human capital resources (i.e., its clergy) given the preferences of local congregations.  I don’t know whether or not it is.  But if I were a judge making the decision in an antitrust case, I would be pretty sure that the question wasn’t my call.  Congregational style organizations exist precisely because their members want control over these kinds of decisions; synodic or hierarchical organizations exist precisely because they value order, theological continuity, adherence to tradition, and harmony over local autonomy.

Thus far, my arguments have been purely normative.  Whether modern U.S. antitrust law applies in the rabbinical case Barak has raised is a different question.  I seriously doubt that the framers of the Sherman Act would have contemplated the statute’s application to churches and synagogues.  To be clear, I’m not suggesting that religious organizations are immune from the antitrust laws when they sell goods or services.  If kosher slaughterhouses collude to raise prices for meat, they surely don’t get antitrust immunity just because the collusion is sanctioned by a rabbinical council.  The Supreme Court has held that the antitrust laws apply when “proximate relation to lucre” appears.  Producing and selling food is a commercial transaction; hiring rabbis or pastors is not.  We hope that the core motivation of the transaction has no approximation to lucre whatsoever—that each party to the transaction is maximizing things other than money.  To force the parties to follow the normative goals of the antitrust laws when it comes to ordering their religious activities fails to  respect to the very reasons that churches and synagogues exist.

Posted on by barakrichman · 1 Comment

Rabbis Following in Cartel Footsteps of Lawyers, Doctors, Engineers, Many Others

First, I thank the CLR for offering its space for an extended discussion of what I think is a critically important issue to many synagogues in America: the freedom to select and hire the rabbi they want.  I confess, however, that this is not a terribly complicated or difficult legal issue. America’s rabbis implement rules that are squarely illegal and are well outside any reasonable First Amendment protection.

Let me briefly describe the organization of America’s Jewish denominations.  Synagogues are independent congregations, governed like any independent nonprofit and like Baptist, Quaker, or other congregational churches.  synagogues hire rabbis just as they hire secretaries, and they pay a voluntary dues to national associations in affiliating with particular movements.  When a synagogue wants to hire a rabbi, however, it confronts a tightly organized labor market.  Individual rabbis are prohibited from seeking employment independently, and instead are required to apply only for jobs through their professional associations.  If they act independently, they are expelled from their associations. Meanwhile, congregations seeking to hire a rabbi must enlist exclusively through the hiring processes sponsored by the rabbinical associations and can only interview the individuals the association sends their way.  I have written about this system in greater detail here and here.

By organizing their individual members, the rabbinic associations are able to leverage their collective power against individual congregations.  This strategy among professionals is nothing new.  The American Medical Association has a very checkered past of instituting similar practices, and until federal antitrust officials intervened had expelled any individual member who accepted employment or payment from early HMOs. Several Bar Associations considered it “unethical” to charge low prices for certain rudimentary services.  Associations of professional engineers prohibited negotiations on price, associations of dentists prohibited its members from working constructive,y with insurers and mother professionals, and the list goes on.  Three similarities persist throughout this history: first, that the professionals expelled members who misbehaved, thereby enabling the association to leverage the entire market of its professional members; second, the association used thus leverage to exploit patients, purchasers of legal services, and other consumers; and third, courts and antitrust enforcers concluded that these practices violated the Sherman Act.

The rabbis are no different.  Their collective dominance allows them to pursue full-employment policies, extract higher wages than other clergy, and stifle innovation and entry from would-be entrants.  America’s synagogues suffer as a result.  Synagogues are contracting, unable to gather the financial resources necessary to sustain themselves; and American Judaism remains ossified in organizational structures that may have made sense in the 1950s but currently are unable to address contemporary needs.  These are the classic harms from a cartel.

So, the practices are familiar and the consequences are predictable.  This is precisely the conduct the Sherman Act is designed to prohibit.  That also means the solution is easy too.

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Schragger & Schwartzman on Religious Institutionalism

Richard Schragger and Micah Schwartzman (both of University of Virginia School of Law) have posted Against Religious Institutionalism. The abstract follows.

The idea that religious institutions should play a central role in understanding the First Amendment has become increasingly prominent in recent years. Litigation over the application of civil rights laws to ministers and the requirement that religious employers provide contraception coverage to their employees have elicited calls for a doctrine of church sovereignty based on an institutional conception of the Religion Clauses. In this Article, we present grounds for skepticism about this new religious institutionalism, especially the concept of “freedom of the church,” which we distinguish from the seemingly related but importantly distinct idea of church autonomy. We further explain why individual rights of conscience are sufficient to protect the free exercise and anti-establishment values of the First Amendment. Our argument, contrary to some recent scholarship, is that religious institutions do not give rise to a special set of rights, autonomy, or sovereignty, and that what might be called institutional or church autonomy is ultimately derived from individual rights of conscience. Indeed, for purposes of understanding religious liberty, we contend that any notion of institutional autonomy — to the extent it exists — can come from nowhere else.

Posted on by Mark Movsesian

CLR Forum Debate: Is Conservative Judaism a Cartel?

Back in August, I posted a critique of Duke Professor Barak Richman‘s argument, discussed in an article in the New York Times, that Conservative Judaism’s process for naming rabbis violates the antitrust laws. Barak responded in the comment box, and it occurred to me that it would be a nice idea to host an online debate on the subject. Professor Daniel Crane (Michigan) has kindly agreed to participate. So, for the next couple of days, Barak and Dan will face off here at CLR Forum. We’re very grateful to both of them and look forward to a lively and enlightening exchange. And the com boxes will be open!

Posted on by Mark Movsesian · 3 Comments

Is Conservative Judaism a Cartel?

CLR Forum reader John McGinnis points out an interesting article in the New York Times this weekend, about Duke Law Professor Barak Richman’s quest to have the courts declare Conservative Judaism’s rules for naming rabbis a violation of the Sherman Act. It’s not entirely clear from the Times article, but, as I understand it, synagogues that affiliate with Conservative Judaism must select rabbis from lists approved by the Rabbinical Assembly, a membership association of Conservative rabbis.  Richman believes this mechanism makes the Rabbinical Assembly an illegal “cartel” that “harms both the economic welfare and the religious interests of individual congregations.” He argues that the ministerial exception properly applies only to hierarchical religions and employers, not “congregational denominations,” like Conservative Judaism, in which individual congregations, not the central body, employ clergy. You can read his argument in an amicus brief he filed, along with several other antitrust scholars, in the Hosanna-Tabor case.

I don’t know whether this mechanism would violate the Sherman Act in a commercial setting. I’m confident the logic of the ministerial exception applies here, though. From what I can gather, Conservative Judaism is a hybrid polity, not hierarchical but not strictly congregational, either. Authority seems to be shared between the central body, the United Synagogue of Conservative Judaism, and local congregations. It hardly seems inappropriate to require local congregations that affiliate with the central body to choose clergy the central body approves; otherwise, the central body could lose control over the movement’s meaning and message. Although Professor Richman is correct that the rules impinge on individual congregations’ power to choose whomever they wish as clergy, that’s just a consequence of affiliating with the central body. If congregations want total freedom of choice, they can organize outside the Conservative movement and select whomever they wish.

Posted on by Mark Movsesian

DC Court of Appeals: Ministerial Exception Does Not Bar Minister’s Breach of Contract Suit Against Church

Here’s a reminder that, even after Hosanna-Tabor, the ministerial exception does not bar all lawsuits clergy bring against church employers. The DC Court of Appeals has allowed a minister’s breach of contract claim against her former congregation to go forward, notwithstanding the congregation’s claim of immunity. The Rev. Deloris Prioleau, an ordained AME pastor, had a series of one-year employment contracts with the Cornerstone AME Church in DC. When Cornerstone failed to pay Prioleau $39,000 it owed her on her final contract, she brought a breach of contract action. Last week, the DC Court of Appeals ruled that the action could proceed under the “neutral principles of law” approach. Prioleau’s suit, the court said, appeared to be “a straightforward contract case, uncomplicated by ecclesiastical considerations.” Moreover, the ministerial exception did not apply. Prioleau had not challenged Cornerstone’s “authority to hire, to fire, or to assign her duties” and did not seek “reinstatement.” (Oddly, the court did not discuss Hosanna-Tabor itself). The court ended its opinion with a warning, however:  “if it becomes apparent … that this dispute does in fact turn on matters of doctrinal interpretation or of church governance, the trial court may grant summary judgment to avoid ‘excessive entanglement with religion.'” The case is Second Episcopal District African Methodist Episcopal Church v. Prioleau, 2012 WL 3243190 (D.C. Court of Appeals, Aug. 9, 2012).

Posted on by Mark Movsesian

1st Circuit Applies Neutral Principles Approach in Church Copyright Dispute

Here’s an unusual church property dispute. The Holy Transfiguration Monastery in Brookline, Massachusetts brought a copyright infringement action against a former monk who had posted on his website English-language translations of ancient Christian texts the monastery had prepared. The former monk, now an archbishop in a different Christian communion, raised a number of copyright defenses, including fair use and non-originality. Last week, the First Circuit rejected all the archbishop’s defenses and ruled in favor of the monastery. The copyright issues are quite dense and apparently of real importance to copyright lawyers. For CLR Forum readers, though, the case is significant for its implications for church autonomy doctrine. The archbishop argued that the monastery’s statutes gave title to the texts to the monastery’s then-parent body, the Russian Orthodox Church Outside Russia, or ROCOR. (The monastery has since ended its affiliation with ROCOR). Using the neutral principles approach, the First Circuit rejected this argument. Applying “the Monastic Statutes’ plain terms,” and “without treading upon religious doctrine, church governance, and ecclesiastical laws,” title to the texts rested in the monastery, not ROCOR. The case is Society of the Holy Transfiguration Monastery, Inc. v. Gregory, 2012 WL 3125120 (1st Cir., Aug. 2, 2012).