In an extremely well-written and soundly analyzed opinion, Judge Lawrence P. Zatkoff of the US District Court for the Eastern District Court of Michigan, has denied the U.S. government's motion to dismiss the lawsuit filed by Kevin Murray. (The full opinion may be downloaded here.) Mr. Murray, who is represented by legal counsel David Yerushalmi and the Thomas More Law Center (Richard Thompson and Robert Muise), filed a federal complaint against the Treasury Secretary, representing the U.S. Treasury, and the Federal Reserve Board alleging that AIG's promotion of Shariah in its Shariah-compliant insurance products violates the Establishment Clause because the federal government owns and controls 80% of AIG and AIG's actions have become the government's. Background on the lawsuit is available here.
The government filed its motion to dismiss making two arguments. One, Mr. Murray, as a former combat Marine, practicing Catholic, and tax payer, did not have standing to even bring this lawsuit. Two, even if he did have standing, the government acted in buying AIG without any intent to promote or become involved in religious questions.
The Court spent much of its opinion reciting the law on the narrow exception to the no-tax-payer-standing rule. That exception is triggered in a claim of a violation of the Establishment Clause and when there is a specific legislative grant for spending that implicates the First Amendment. The Court carefully reviewed all of the relevant case law and found the argument made by Messrs. Yerushalmi and Muise in their brief persuasive.
On the second issue, the Court put together all of the facts as presented by the Plaintiff's brief and concluded:
For more coverage of the decision: National Review Online; Thomas More Law Center
In this case, the fact that AIG is largely a secular entity is not dispositive: “The question in an as-applied challenge is not whether the entity is of a religious character, but how it spends its grant.” Kendrick, 487 U.S. at 624–25 (Kennedy J., concurring). The circumstances of this case are historic, and the pressure upon the government to navigate this financial crisis is unfathomable. Times of crisis, however, do not justify departure from the Constitution. In this case, the United States government has a majority interest in AIG. AIG utilizes consolidated financing whereby all funds flow through a single port to support all of its activities, including Sharia-compliant financing. Pursuant to the EESA, the government has injected AIG with tens of billions of dollars, without restricting or tracking how this considerable sum of money is spent. At least two of AIG’s subsidiary companies practice Sharia-compliant financing, one of which was unveiled after the influx of government cash. After using the $40 billion from the government to pay down the $85 billion credit facility, the credit facility retained $60 billion in available credit, suggesting that AIG did not use all $40 billion consistent with its press release. Finally, after the government acquired a majority interest in AIG and contributed substantial funds to AIG for operational purposes, the government co-sponsored a forum entitled “Islamic Finance 101.” These facts, taken together, raise a question of whether the government’s involvement with AIG has created the effect of promoting religion and sufficiently raise Plaintiff’s claim beyond the speculative level, warranting dismissal inappropriate at this stage in the proceedings.