California megachurch founder Robert H. Schuller has asked the U.S. Supreme Court to allow his $5 million compensation claim in the bankruptcy of Crystal Cathedral Ministries, saying lower courts have wrongfully interpreted his retirement agreement as an employment contract.

Schuller, who founded the church in the 1950s and later became well known as the host of the popular Christian televangelist show "Hour of Power,” said the majority of a split Ninth Circuit panel erroneously found that he was only entitled to a general unsecured claim of about $600,000 in compensation, under a “transition agreement” written when he stepped down as senior pastor, according to a petition for a writ of certiorari filed Jan. 20.

As the dissenting Ninth Circuit Judge Stephen Roy Reinhardt found, the principle purpose of that agreement was to provide for Schuller’s retirement from his position as senior pastor into a relationship with the church that was “more akin to an emeritus status than an employment relationship,” Schuller said in the petition.

In its 2014 decision finding that Schuller was only entitled to around $600,000, the appeals court held that he was an employee, and therefore the parties' transition agreement amounted to an employment contract.

Crystal Cathedral portrayed the transition agreement as another example of alleged self-dealing by insiders that helped cause the once-prosperous church's slide into bankruptcy. Schuller and three family members, it says, pocketed more than $12.7 million between 1993 and 2010.

Schuller had argued the church was liable for about $5 million in damages for rejecting the contract, which allegedly stipulated that the church would provide for Schuller and his wife until their deaths in its Chapter 11 plan, which was confirmed by a judge in December 2011.

In slashing his claim, the Ninth Circuit misapplied Section 502(b)(7) of the Bankruptcy Code, Schuller contends, which provides that the claim of an employee for damages resulting from the termination of an employment contract is limited to one year’s compensation.

“This limitation makes no sense in the case of a retired employee’s claim for vested retirement benefits, however, because a retired employee has already earned the benefits through years of prior service and does not have the ability to obtain an equivalent retirement arrangement to provide for himself and his family in his final, nonworking years,” the petition states.

Schuller contends the issue is ripe for Supreme Court review, since the Ninth Circuit’s ruling created a split with the Eleventh Circuit, in a case called In re Prospect Hill Inc., in which the court found that 502(b)(7) doesn’t apply to vested retirement benefits.

The Ninth Circuit’s broad definition of employment threatens to classify as employees all individuals who provide any service of any kind, specifically in this case, retirees who maintain a beneficial relationship with their prior employer, according to Schuller.

An attorney for the church could not be immediately reached for comment on Friday.

The physical Crystal Cathedral that Schuller built in Garden Grove, California, is now owned by the Roman Catholic Diocese of Orange, California, which acquired it in 2011.

Schuller is represented by Becky S. James and Jessica W. Rosen of James & Stewart LLP.

The case is Robert H. Schuller et al. v. Karen Sue Naylor et al., case number 14-945, in the Supreme Court of the United States.

Megachurch Founder Asks Top Court To Resurrect $5M Claim

by Stewart Bishop

Law360,  New York  (February 06, 2015, 5:36 PM ET)

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