There is a storm brewing between our Synod President, the Synod Board of Directors (BOD), and the Concordia University Texas (CTX) Board of Regents (BOR). While the issues each side has raised are critical (like who has “standing” to act in the interest of a Concordia University and how we communicate and work with one another in the bonds of love), the real “winner” in this controversy may HotChalk, which is bringing the $302M lawsuit against Concordia, Portland, the LCMS, and LCEF. It all comes down to “ascending liability.”
From the evidence detailed below, it seems that when a Concordia is in financial trouble and apt to close, Synod considers them to be an independent legal entity, and its BOR has ultimate responsibility for the decision to close and its consequences (see Bylaw 3.10.6.5). From Synod’s viewpoint, declaring a Concordia’s independent status apparently frees them from ascending liability and responsibility for the closure.
However, if the university is successful and financially viable, the Board of Regents no longer governs a “separate or independent legal entity” but an agency “owned” by Synod (see Bylaw 3.10.6.4.i).
You can’t have it both ways.
The Basic Story
In seeking to fulfill its fiduciary responsibilities toward CTX and Synod (Bylaw 3.10.6.4 and 3.10.6.5), the Concordia Texas BOR asked the Synod Board of Directors (BOD) for a future-oriented conversation about governance and alignment with the LCMS. Their request was initially met with silence. You can read a more detailed explanation about it here.
President Harrison and a team made an official visit to the CTX campus on April 20-22 and promised to produce a response report within two weeks. Two bylaws govern these university visitations. First, visitations can be an extension of the President’s ecclesiastical authority to supervise the doctrine taught and practiced (Bylaw 3.3.1.1.1.c). Second, visitations can come from the President’s administrative authority to review adherence to our governing documents (3.3.1.2.a). However, the stated scope of this visitation was different.
According to the report of the CTX website page about the official visit, the agreed purposes of this visit were clear and different from bylaw restrictions. The visitation team was coming:
- To understand the Board of Regents’ action in seeking a new model of governance
- To strengthen Concordia University Texas’ alignment with the Synod’s doctrine and practice
- To gain a greater understanding of how Concordia is serving the interest of the Synod and its congregations
As of November 2022, the promised report from the Synod President has not been received by CTX leadership.
President & CEO Dr. Donald Christian explained CTX’s concerns in a June 6 memo. It says in part:
… the Board has recognized that the need for a system of governance that is local, responsive, and adaptive is more essential than ever for our university. While our core Lutheran values will never change, the strategies to achieve our mission may need to change as we go forward. To accomplish this, our Board of Regents is exploring becoming the sole-governing body of the institution, looking at a different relationship with the Lutheran Church – Missouri Synod (LCMS) than is prescribed in the church’s bylaws…” [Emphasis added]
You can read the complete memo here.
The Concordia Texas Decision
On November 8, the BOR decided to protect the university by voting to change its governance structure without changing its commitment to the LCMS. President Don Christian announced the decision in a memorandum, which says in part:
“For over a year, the Concordia University Board of Regents has diligently worked and prayed about a decision to guard and guide the future of the University…[The] Board voted to adopt a structure whereby Concordia University Texas will be governed solely by its Board of Regents, rather than the historic governance directed by the bylaws of Synod….[It] is important that you understand that we are not leaving the LCMS. We are committing to our alignment with the LCMS. This vote simply reframes the nature of that relationship so that governance will be directed solely by the Board of Regents rather than shared with Synod.” [Emphasis and elipsis added]
You can read the complete memorandum here.
Synod’s Quick Response
In response, President Harrison and the Synod BOD Chair issued a statement on November 11, which says in part:
“The Synod President and the Chairman of the Synod Board of Directors condemn this unilateral attempt of CTX to separate from and dictate new terms of relationship to the Synod, CTX having rejected the specific means laid out by the congregations to maintain the faithfulness and mission accountability of Synod’s schools and disdained laying its concerns before the church, for the church to act together.” [Emphasis added]
You can read the complete statement from our Synod President and Synod’s BOD here.
“Independent Legal Entities”
The CTX BOR believes they are acting in their fiduciary responsibility toward the university. Because Synod describes each of our Concordia Universities as an “independent legal entity,” the CTX BOR has acted as such. However, the statement of the Synod President and the BOD Chair, in doing their best to act as a fiduciary, brings into question the CTX BOR’s ability to act as an “independent legal entity.”
It seems in the past decade, the term “independent or separate legal entity” in the LCMS only applies to colleges and universities which are closing.
Portland Treated Differently Than Texas
When Concordia University, Portland (CUP) announced in February 2020 that the school would close at the end of the current academic semester, the official statement in The Reporter characterized each Concordia as an “independent legal entity” and identified the CUP BOR as the group that both chose to close AND had the power to do so.
“The Board of Regents of Concordia University, Portland, Ore., has announced the closure of the school effective at the end of the current academic semester on April 30, 2020…
The CUP Board of Regents made this painful and prayerful decision based on the university’s circumstances. While each school in the Concordia University System is an independent legal entity, their collective impact on the work of the Synod is felt by the entire LCMS community, and we thank God for the diligent efforts of those who labored to find ways for CUP to continue.” [Emphasis Added]
You can read the entire press release here.
Selma Deemed “Separate”
Three years prior, when Concordia College Alabama in Selma was encouraged by the Synod BOD to close in 2017, the LCMS BOD resolved three things: to have “no objection to” the closure of Selma, that the decision falls entirely on the Selma BOR, and that the process defined by Synod Bylaw 3.6.6.4 had not been revoked. You can read about it in detail in the Our Congregations — Our Synod article reporting the closure “The Fix Was In – Selma Never Had a Chance.” In Selma’s case, according to the Synod BOD, closure or separation decisions stood squarely on the shoulders of the BOR. The Selma BOR was independent and in charge.
Bronxville “Separate” Too
When Concordia College, New York, announced on January 28, 2021, that it was closing and selling its assets to Iona College in New Rochelle, NY, the official LCMS announcement took a different tone than the joint statement regarding Concordia Texas:
“CCNY, though a separate legal entity governed by the CCNY Board of Regents, is part of the Concordia University System (CUS) and, as such, has been an important part of the mission and ministry of The Lutheran Church—Missouri Synod (LCMS). The impact of the CCNY closure will be felt by the entire LCMS community.” [Emphasis Added]
“Independent” Only When They Close
It’s hard not to conclude the obvious.
In the last decade, Concordias in trouble have Boards of Regents with great independent control (see Bylaw 3.10.6.5). The Board of Regents can decide to close or separate on their own, and the LCMS sadly accepts their decision despite bylaw restrictions to the contrary (Bylaw 3.6.6.4.i).
However, viable Concordias have Boards of Regents which cannot independently govern as a “separate or independent legal entity.” Instead, they are restricted as an agency “owned” by Synod (see Bylaw 3.10.6.4.i).
$302M of Ascending Liability
Why does local responsibility for university governance and direction seem to change when Concordias struggle financially? And what does it have to do with ascending liability?
Ascending liability is precisely what HotChalk suggests in its $302M lawsuit against Concordia Portland, the LCMS, and the Lutheran Church Extension Fund (who now owns the Portland property). You can read detailed reports about the lawsuit in the HotChalk Suit Update December 2021 and the Oregon Public Broadcasting article of February 21, 2022. However, the concept is simple.
HotChalk, a company that partnered with Concordia Univerisity Portland (CUP) to deliver online education, is suing for breach of contract, fraud, and other allegations on the part of CUP. HotChalk suggests the evidence shows that the LCMS and the LCEF actually controlled the university, that they had a hand in causing its closure, that Synod kept the university from hiring a president, and that CUP is not a separate or independent legal entity from the LCMS because of Synod’s control. Since the sale of the CUP property will not cover the liability of the lawsuit, they argue the liability “flows uphill” or “ascends” to the actual owners (LCMS and LCEF) who proved their ownership by the exercise of their control. In other words, they are going after the “deep pockets.”
The LCMS argues it had no role in the closure, nor does it have legal or financial responsibility for the university. Currently, the LCMS refuses to disclose approximately 2,000 emails and documents to HotChalk. So far, documents reportedly shared and the depositions reportedly taken seem to lean toward ascending liability due to Synod’s control.
Can You Have It Both Ways?
The courts will have to settle the issues which the HotChalk lawsuit exposed. But there is at least one other multi-million dollar lawsuit pending that may test the ascending liability issue. Twenty-seven former Concordia College New York employees have sued the school for $5 million. They allege the violation of contracts and back salary and benefits owed to them. Decisions in the coming weeks made by our Synod leadership may strengthen HotChalk’s and Bronxville employees’ standing in their respective lawsuits against the LCMS or weaken them.
Suppose the LCMS successfully defends the independent governance of Concordia University Portland (as Synod stated with the Selma, Portland, and Bronxville closures). In that case, Synod has little standing to deny the action of the CTX BOR to change its governance relationship with the LCMS and nullify its actions.
However, suppose the LCMS continues on the path it seems to have chosen by its November 11th response to the Concordia Texas BOR. In that case, it may prove Synod DOES have control over its universities and may increase Synod’s liability for the damages HotChalk and Bronxville employees seek.
While the LCMS may want to have it both ways, that may not be possible.
Match Best Intentions With Action
Our Congregations – Our Synod believes everyone involved is trying to do the right thing regarding their respective responsibilities. However, stonewalling, condemning, and public power-posturing will only strengthen the case for ascending liability. As much as the LCMS may protest in court and try to withhold documentation, the courts – and juries – may not agree. You can’t have it both ways.
To learn more about this issue, be sure to read the articles
- We Are A Synod Together and We All Have Standing, and
- Concordia Regents Vote for Improved Governance
Our Congregations – and Our Concordias – are Our Synod. We all need to care for our remaining universities. We must work for true, local governance supported by our national Synod, not controlled by it.