Posted by Eugene Volokh:
Contract Law and the First Amendment:
http://volokh.com/archives/archive_2008_12_07-2008_12_13.shtml#1228950237


   Generally speaking, contracts between private entities are enforceable
   even when they [1]restrict one party's speech; the right to free
   speech, like most other rights, can be waived by contract. Likewise
   when a contract obligates a person to do something that the person
   later decides is against his religious beliefs. But there is one area
   where the First Amendment may preclude enforcement of contracts: when
   enforcing the contract requires religious decisionmaking, something
   that secular courts are not allowed to do. [2]Friedlander v. Port
   Jewish Center, decided Monday, offers a good example (some paragraph
   breaks rearranged):

     [Rabbi Ariel Friedlander] entered into a contract with the
     Defendant in May of 2005 to serve as the Temple's rabbi for a
     period of three years. The contract provided that the Plaintiff
     would perform "all the customary and usual duties of rabbis of
     Reform Congregations of the Union of Reform Judaism." In
     particular, the contract specified that the Plaintiff was expected
     to carry out various spiritual and administrative duties that
     included holiday and worship services; life cycle events;
     educational functions; pastoral functions; temple and other
     community functions; membership functions; and administrative
     functions.

     The contract also provided that "the Rabbi shall have freedom of
     the pulpit," and indicated that the Temple could terminate the
     Plaintiff's contract only "for gross misconduct or willful neglect
     of duty." ... On or about July 5, 2006, Sandy Ehrlich, the Temple
     President, sent the Plaintiff an email cataloguing a list of
     grievances ... includ[ing], among other issues, the congregants'
     dissatisfaction with: (i) the Plaintiff's infrequent readings of
     the Torah; (ii) the quantity and variety of liturgical music
     selected for religious services; (iii) changes made to the Bar
     Mitzvah and Bat Mitzvah services; (iv) the Plaintiff's funeral
     service policies; (v) the Plaintiff's inability to work with
     religious instructors and the Cantor; (vi) the Plaintiff's neglect
     of her pastoral functions; (vii) the Temple's attrition rates under
     her leadership; and (viii) the number of hours the Plaintiff
     dedicated to administrative functions.... [O]n or about August 2,
     2006, the Temple officially terminated her contract.

     The Plaintiff argues that the Defendant's proffered reasons for her
     firing did not constitute just cause under the contract because she
     did not commit "gross misconduct" or "willful negligence". The
     Plaintiff also asserts a common law claim that the Defendant's
     breached the covenant of good faith and fair dealing by
     "fabricat[ing] and exaggerat[ing] situations they thought would
     constitute gross misconduct and willful neglect." ...

     [T]he ministerial exception plainly does not create for religious
     institutions a charmed existence free from liability for "their
     torts and upon their valid contracts." ... The Plaintiff argues
     instead that this is a purely secular contract case that would not
     require the Court to entangle itself in religious doctrine.

     The Court disagrees. "The Establishment Clause forbids 'excessive
     government entanglement with religion.'" The Second Circuit teaches
     that certain claims, regardless of their "emblemata," may
     "inexorably entangle [the courts] in doctrinal disputes." In this
     sense, the fact that the Plaintiff asserts causes of action
     sounding in violations of state contract law does not alter the
     Court's analysis.

     Here, adjudicating the Plaintiff's claim would ... necessarily
     require the Court to review the Plaintiff's performance of her
     rabbinical duties. This is precisely the type of inquiry that the
     First Amendment prohibits. The Plaintiff's duties included, among
     other things, selecting readings from the Torah, and establishing
     policies for funeral services as well as Bar Mitzvah and Bat
     Mitzvah services. These are purely religious matters in which the
     Court may not interfere....

   Note, incidentally, that courts will generally enforce the decisions
   of arbitral tribunals chosen by parties, even if those arbitrations
   interpreted religious law. Had the contract, for instance, provided
   for arbitration by a named religious tribunal, then that tribunal
   could have decided whether the rabbi's actions constituted "gross
   misconduct or willful neglect of duty," and any monetary judgment by
   the tribunal would have been enforceable by a secular court. (I
   suspect that an order that the congregation rehire the rabbi would
   have been enforceable, too, though that might conceivably be a tougher
   question.) But a secular court cannot itself decide whether a rabbi's
   decisions about how often to read the Torah, what sort of liturgical
   music to play, and so on constitute "gross misconduct or willful
   neglect."

References

   1. 
http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=501&invol=663
   2. http://volokh.com/files/friedlander.pdf

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