The 6th Circuit Court rules Lipscomb bonds constitutional

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CINCINNATI (Aug. 14, 2002) - The 6th U.S. Circuit Court of Appeals today reversed a district court decision and affirmed that Industrial Development Bonds awarded to Lipscomb University in the early 1990s are constitutional. In a 2-1 decision, the 6th Circuit court held that the bonds were issued through a religiously neutral program of Metro Nashville and provided only indirect aid to Lipscomb, according to the majority opinion written by U.S. District Judge Edmund Sargus Jr. "The objective observer of Metro's industrial revenue bond program, knowing the history and context of this program, would reasonably view it as one aspect of a broader undertaking to finance economic development, not as an endorsement of religious schooling in general. Metro no more endorsed Lipscomb University than it did Wal-Mart in issuing industrial revenue bonds," the opinion says. "Because the proposed issuance of industrial revenue bonds to Lipscomb University is part of a neutral program to benefit education, including that provided by sectarian institutions, and confers at best only an indirect benefit to the school, we hold that the issuance of the bonds does not violate the First Amendment," the court concluded. In its ruling, the 6th Circuit reversed the district court's grant of summary judgment to the plaintiffs, and reversed the denial of summary judgment that had been sought by Metro and Lipscomb. "The 6th Circuit has declared that these bonds are constitutional and therefore lawful. This is a complete victory," said Bradley A. MacLean of Stites and Harbison PLLC. MacLean is Lipscomb's lead counsel in the case. In October 2000, U.S. District Judge Aleta Traugher ruled that Lipscomb was ineligible for the industrial revenue bonds, holding that the institution was "pervasively sectarian" and that such aid would violate the separation of church and state, or the "Establishment Clause" of the First Amendment. Trauger's ruling enjoined Metro from awarding such bonds to Lipscomb and other pervasively sectarian institutions. Today's ruling overturns that decision. "The 6th Circuit's decision was based on the very same rationale that we argued to the 6th Circuit," MacLean said. That argument focused on two questions: Is Metro's Industrial Development Bond program religiously neutral, and is the resulting benefit direct or indirect governmental aid. "The court found that the Industrial Development Bond program in our case is a religiously neutral program, which means that participation in the program is based upon religiously neutral criteria. The court also found that the nature of the governmental benefit in our case is an indirect benefit, which means that it is the type of benefit that religious or sectarian institutions can realize without violating the Establishment Clause," MacLean said. The benefit in this case was a tax exemption for those who purchased the bonds, which permitted Lipscomb to borrow funds at a lower interest rate. "A tax exemption is an indirect benefit. The benefit to Lipscomb is even more attenuated because the benefit is a lower interest rate. The court looked at that and affirmed that this was an indirect benefit. The mere fact that a religious or sectarian institution might realize that benefit does not violate the Establishment Clause," MacLean said. In early 1991, Lipscomb University applied for, and was granted, $15 million in Industrial Development Bonds to finance construction of Beaman Library, the Student Activities Center, campus landscaping and beautification, and renovation of Crisman Memorial Library for use as an administration building. On May 31, 1991, five Davidson County residents, led by Harold Steele, and a group called Americans for Religious Liberty, filed a lawsuit asserting that the bonds constituted a direct endorsement of religion in violation of the Establishment Clause. If they choose to pursue the case further, the plaintiffs have two options. One is to request an "en banc" hearing by the entire 6th Circuit Court of Appeals. The second is to request a review by the U.S. Supreme Court. Full text of court opiinion