The Presbyterian Mission Agency Board, through its Louisville-based lawyer, John Sheller of Stoll Keenon Ogden PLLC, issued a response on June 25 to a defamation lawsuit filed against the Presbyterian Church (U.S.A.), A Corporation, by the Rev. Roger Dermody.

Dermody, former deputy executive director for mission, filed a defamation suit against the PC(USA) May 29, 2015, in Louisville’s Jefferson Circuit Court.

He is one of four PC(USA) employees placed on paid administrative leave Nov. 14, 2014, while an independent investigation was conducted regarding the establishment of an unauthorized nonprofit corporation, the Presbyterian Centers for New Church Innovations, Inc. (PCNCI). An announcement was made June 1, 2015, that the four were no longer employed by the Presbyterian Mission Agency.

The Rev. Eric Hoey filed a similar suit on June 16, 2015. A response to Hoey’s suit is due on or before July 8. Hoey is the former director of Evangelism and Church Growth at the PC(USA).

The PC(USA)’s response claims Dermody is barred from bringing civil charges against the church by the “ecclesiastical abstention doctrine or ministerial exception.” These clauses assert Dermody, as a teaching elder of the PC(USA), agreed to the disciplinary process—including reporting of disciplinary actions—as a condition of his ordination.

The response further claims the reporting of disciplinary action against Dermody, made to the presbytery and the wider denomination, were “required by the Church’s policies and practices informed by its faith and polity.”

The church denies Dermody’s claims of defamation, asserting, “Any statements made by or attributed to the [PC(USA)] were true or substantially true.” The defense states moreover that the church is not legally responsible for rumors or gossip that spread after these truthful statements were made, or for reports published by third parties such as the Presbyterian Outlook.

The PC(USA) response cites Dermody’s own admission of improper supervision of employees and his role in creating the PCNCI, saying, “Rev. Dermody’s claims are barred by admission in that Rev. Dermody acknowledged in a written response addressing the disciplinary action taken against him that (a) he failed to properly supervise certain ministers within his purview, and (b) he had a role in the creation and incorporation of PCNCI.”

In addition to responding to Dermody’s suit, Sheller filed four motions on behalf of the PC(USA) with Division 9 of the Jefferson Circuit Court in Louisville on June 25, 2015. 

The first, a motion to consolidate, asks the court to combine the two cases against the PC(USA) into one suit “because they involve common questions of law and fact and consolidation will avoid unnecessary expense and dely.”

The second is a motion requesting to serve a third-party complaint against the Rev. Eric Hoey, the Rev. Philip Lotspeich, and the Rev. Craig Williams. If the motion is granted, the complaint will assert claims against and seek indemnity and contribution from Hoey, Lotspeich and Williams in connection with the allegedly defamatory statements that are at issue in Dermody’s lawsuit.

The third motion requests summary judgment dismissing Dermody’s claims against the PC(USA). The motion states that the court is “precluded from adjudicating Rev. Dermody’s claims because that would require an examination of the Church’s faith and ecclesiastical governance.”

The fourth motion, a stay of litigation, asks the court to halt discovery and litigation until it rules on the PC(USA)’s motion for summary judgment.

Details of Dermody’s suit

Dermody’s defamation suit alleges the PC(USA), “by itself or through its directors, officers and/or employees, acting within the scope of their employment, repeatedly and falsely published that Dermody had engaged in ‘unethical’ conduct while an employee of the PCUSA.”

The suit claims Dermody had no knowledge of, and played no part in, the creation of the PCNCI nonprofit corporation and did not know of or authorize the disbursement of grant funds to the corporation.

The suit further claims the actions of the PC(USA) “have caused Dermody substantial embarrassment and shame, and have substantially compromised Dermody’s future employment and financial prospects. Dermody seeks compensatory damages for those injuries. In addition, because PCUSA’s false and defamatory statements have exposed Dermody to public hatred, ridicule, contempt or disgrace, or induce and evil opinion of him in the minds of right-thinking people, its statements constitute defamation per se, entitling Dermody to compensatory and punitive damages without further proof.”

Dermody’s suit seeks a jury trial; a judgment against the PC(USA) for defamation per se; compensatory damages for public embarrassment and humiliation, adverse effects on future employment and career, and adverse effect on future earnings and financial stability; punitive damages “sufficient to punish PCUSA and to deter it and others from engaging in similar conduct;” recovery of litigation costs; and other relief.

Timeline of the investigation

An October 8, 2014, report from Linda Valentine, executive director of the Presbyterian Mission Agency, to the Presbyterian Mission Agency Board noted that PC(USA) legal services became aware of the incorporation of PCNCI and a $100,000 grant to the corporation in March 2014. The results of an internal audit ensured the grant funds were fully returned to the PC(USA) in April, further grants were halted and the corporation disbanded. The complete audit report was delivered to concerned parties on August 13, 2014.

The report also stated the “corporation was formed without following the Presbyterian Mission Agency policy on incorporation, without knowledge or approval of the Leadership Cabinet or the Board and without consultation with the Agency’s Legal Services. The employee who formed the corporation also applied to the Internal Revenue Service for 501(c)(3) status. This was done with knowledge of the supervisor and the supervisor’s supervisor.”

Following this report, Valentine issued a statement November 12, 2014, titled, “A word of regret and hope from Linda Valentine,” in which she provided information on her recommended course of action regarding those involved in establishing the PCNCI and affirmed her commitment to the 1001 New Worshiping Communities initiative.

While not disclosing details of personnel actions, Valentine indicated her response to the findings included “some changes in job responsibilities, internal reorganization to provide closer supervision, additional financial oversight, ongoing review of policies and procedures, and the addition of an experienced financial manager to assure that financial controls are in place and that budget systems provide information for better management of funds and activities.”

Two days later, the Executive Committee of the Presbyterian Mission Agency Board initiated an external investigation and placed the four employees named in the audit report on paid administrative leave.

The final report of the independent investigation into the incorporation and funding of a California 501(c)(3) nonprofit corporation by PC(USA) Evangelism and Church Growth staff was delivered to the Presbyterian Mission Agency Board at its April 15–17, 2015, meeting.

The Presbyterian Mission Agency Board, citing sensitive personnel issues, did not release the full report at that time. The next communication regarding the matter was delivered June 1, 2015, when the board issued a statement that the four employees were “no longer with the Presbyterian Mission Agency.”

The Finance and Accounting office of the PC(USA) reported June 1 that paid administrative leave for the four employees, including salary and benefits, from November 14, 2014, until their separations was approximately $242,000. The total cost of legal fees for the investigation, across several legal firms, was estimated at $850,000, not including continued representation by John Sheller.

A June 25, 2015 statement issued by the Presbyterian Mission Agency Board said they had no further information on the suits but reassured church members regarding financial obligations surrounding the investigation and defense, saying, “No per capita dollars are being spent for attorney fees or anything related to this case, including the independent investigation. Subject to deductible, the defense of these two suits is being paid by our insurance.”