## Facts

- The Salvation Army operated Social Services for Children (SSC) in New York, providing adoption and child-placement services, group homes, and related services for children under contracts with New York City, New York State, and Nassau and Suffolk Counties.
- The government entities funded SSC through service contracts and oversaw aspects of the program’s performance.
- Anne Lown and other current and former SSC employees sued the Salvation Army and the public officials/entities connected to the contracts, alleging that the Salvation Army used some government funds to support religious activity.
- Plaintiffs alleged the Salvation Army adopted the “One Army Concept,” aiming to make its social-services work expressly reflect Salvation Army religious beliefs.
- As part of that effort, plaintiffs alleged job descriptions were revised to include religious mission language, including preaching and providing aid “in the name of Jesus Christ.”
- Plaintiffs alleged Salvation Army officials expressed concern about the number of non-Christian employees and gay employees.
- Plaintiffs alleged the Salvation Army revised its employment manual to remove nondiscrimination language and to state that employment actions could be taken against employees not in compliance with Salvation Army principles.
- Plaintiffs alleged employees were required to disclose church affiliation and were pressured to conform to religious standards.
- Plaintiffs alleged these demands conflicted with professional duties in serving program participants, including counseling sexually active teens and serving gay teens without discrimination.
- Plaintiffs sued the government defendants under the First and Fourteenth Amendments (via 42 U.S.C. § 1983), including Establishment Clause theories tied to public funding and oversight of SSC.
- Plaintiffs sued the Salvation Army for employment discrimination under Title VII; the Salvation Army invoked Title VII’s religious-organization exemption, 42 U.S.C. § 2000e-1(a) (§ 702).
- Plaintiffs argued that applying the § 702 exemption to a heavily publicly funded contractor violated the Establishment Clause.
- Defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6).

## Issues

1. Whether plaintiffs plausibly alleged that the Salvation Army’s challenged employment practices were fairly attributable to the government defendants, supporting § 1983 claims (including Equal Protection and non-taxpayer Establishment Clause theories) against those government defendants.
2. Whether plaintiffs had standing—particularly taxpayer standing—to pursue an Establishment Clause challenge to the government defendants’ funding relationship with the Salvation Army program.
3. Whether the Salvation Army acted “under color of state law” (state action) such that constitutional claims under § 1983 could proceed against it.
4. Whether Title VII’s § 702 exemption barred plaintiffs’ Title VII religious-discrimination claims against the Salvation Army, and whether the exemption was unconstitutional as applied.
5. Whether plaintiffs stated viable retaliation claims against the Salvation Army under New York State and New York City human-rights laws.

## Decision

- The court granted the government defendants’ motions to dismiss the constitutional claims based on alleged discrimination because plaintiffs did not plausibly allege that the challenged employment conduct was attributable to the government defendants.
- The court denied the government defendants’ motions to dismiss to the limited extent plaintiffs asserted an Establishment Clause claim grounded in taxpayer standing challenging the public funding arrangement.
- The court dismissed constitutional claims against the Salvation Army because it was not a state actor, even though it provided publicly funded services under government contracts.
- The court dismissed plaintiffs’ Title VII religious-discrimination claims against the Salvation Army under Title VII § 702 and rejected the argument that the exemption violated the Establishment Clause as applied.
- The court dismissed all other claims against the Salvation Army except plaintiffs’ retaliation claims under New York State and New York City law, which survived the motion to dismiss.

## Legal Principles

- A private entity does not become a state actor merely by contracting with the government, receiving public funds, or being subject to regulation; state action generally requires government coercion, significant encouragement, joint participation, or a function that is traditionally and exclusively governmental.
- To hold government defendants liable under § 1983 for a contractor’s employment decisions, a complaint must plausibly connect the government to the specific challenged conduct; generalized funding and oversight are not enough.
- Taxpayer standing may permit an Establishment Clause challenge to alleged unconstitutional expenditure of public funds, even when other constitutional theories fail for lack of state action.
- Title VII § 702 exempts qualifying religious organizations from Title VII liability for religion-based employment decisions; applying that exemption to a religious organization does not, without more, violate the Establishment Clause.
- Retaliation claims under New York State and New York City human-rights laws can proceed where plaintiffs plausibly allege protected activity, adverse action, and a causal link.

## Conclusion

In Lown v. Salvation Army, the Southern District of New York largely dismissed employees’ federal claims at the pleading stage, holding that the Salvation Army’s employment practices were not attributable to the government and that the Salvation Army was not a state actor, and further holding that Title VII’s religious-organization exemption barred the federal religious-discrimination claims and was constitutional as applied; the court allowed only a taxpayer-standing-based Establishment Clause challenge to the government funding relationship to proceed against the government defendants and allowed state and city retaliation claims to proceed against the Salvation Army.


Lown v. Salvation Army, 393 F. Supp. 2d 223 (2005)