Kentucky Conference wins lawsuit with foundation

The Kentucky Annual (regional) Conference has won control of proceeds from the 1995 sale of Good Samaritan Hospital in Lexington, Ky., following a legal battle with Good Samaritan Foundation. A UMNS photo courtesy of Good Samaritan Hospital.

A UMNS Report By Linda Green*

A seven-year legal battle between the United Methodist Kentucky Annual (regional) Conference and an affiliated foundation has ended in favor of the conference.

The outcome also upholds the United Methodist "trust clause" pertaining to local church property.

The conference and the board of trustees of the Good Samaritan Foundation were battling for control of $20 million in assets resulting from the 1995 sale of Good Samaritan Hospital in Lexington, Ky.

Good Samaritan was one of dozens of hospitals built by the Methodist church in the late 19th and early 20th centuries to provide care for the poor and indigent.

When the hospital sold to a for-profit company, the foundation -- described as "a philanthropic organization dedicated to serving the healthcare needs of Kentucky's poor and disadvantaged" -- placed those assets in an endowment fund providing $1 million a year in health-related grants.

In 2000, the foundation's board of trustees stopped reporting to the conference and said it was no longer affiliated with The United Methodist Church. The conference countered with a $20 million lawsuit, claiming ownership of the hospital at the time of its sale.

Last December, Fayette Circuit Judge Gary Payne ruled that the church rightfully owned the hospital and the money from its sale and ordered that the church appoint a new foundation board. The board appealed, and the appeals court sent the case back to Payne, who reaffirmed his earlier decision.

Last spring, the conference entered into discussions with the foundation board. Under a plan announced in June, the conference and the former trustees of the foundation have named 15 members to a transitional board with the conference naming all members to the board by 2012.

The foundation will continue its mission to provide healthcare, health education and research ministries for the people of Kentucky.

"We look forward to working with the former board," said Michael Watts, treasurer of the Kentucky conference. "We are looking forward to being able to continue with the mission of working to improve the health and healthcare situation of Kentuckians."

Sally Manning, vice chairperson of the Good Samaritan Foundation, said the board is happy the disagreement is settled. "We are a unified board, united in carrying out the mission of the Good Samaritan Foundation and the work of the Lord," she said.

Trust clause
Watts said the legal battle involved control by the foundation's board of trustees, which handled the former hospital's assets and refused to give the conference an accounting of the proceeds.
"While conference did not object to the foundation's use of the money from the sale of the hospital for healthcare needs," Watts said, "the suit was filed because of the trust clause" that established the foundation's relationship with the conference.

The United Methodist Church's trust clause, which dates back to the days of Methodism founder John Wesley, declares that the local church holds its property in trust for the denomination. The clause, which has been upheld in U.S. courts throughout the 200-plus history of the denomination in the United States, has faced challenges in recent years.

According to Watts, the foundation's position "was that the trust clause was not in the documentation for the articles of incorporation, so they said they were not Methodists and the hospital was not Methodist."

In Kentucky, a trust clause does not have to be in writing, "so we maintained that we had established that trust relationship in 1925," Watts said.

"We felt we were in the right all the time as far as maintaining the trust clause is concerned."

Watts said the legal wrangling over the foundation and its assets, while difficult at times, has helped all entities understand that "the trust clause still is a vital part of our polity as United Methodists, and we certainly want to uphold the polity of the church."

Holsinger connection
The legal battle took some interesting twists and turns over the years.

The appeal of the Payne's ruling was led by James Holsinger, president of the United Methodist Church's Judicial Council, the denomination's highest court. Holsinger also served as chairman of the Good Samaritan Foundation's board.

Holsinger, who was nominated by President George W. Bush last spring as U.S. surgeon general, was quoted by Media Transparency as saying the church is "only interested in the foundation's money, not its cause."

Holsinger, who awaits confirmation as the country's top doctor, has declined interviews on all matters, including the legal battle with the Kentucky conference. His confirmation has stalled because the Senate Health, Education, Labor and Pensions Committee is awaiting answers to follow up questions it posed to him. Last August, the committee questioned him about his views on homosexuality, an issue that has drawn opposition to his nomination from health groups and gay rights groups, among others.

*Green is a United Methodist News Service news writer based in Nashville, Tenn.