Taxpayer May Pursue Notre Dame For Restitution

It may not be another bowl loss, but Notre Dame lost its bid to stop a taxpayer from pursuing the university for funds it received for training teachers for Catholic schools in violation of the establishment clause of the U.S. Constitution.

The Seventh Circuit found that a taxpayer can continue its lawsuit to have Notre Dame refund to the federal government nearly $500,000 it received from the Department of Education for a program called Alliance for Catholic Education (ACE), funds that the university distributed to several other religious colleges. The First Amendment prohibits Congress from creating religious establishments.

At the trial court, the taxpayer had requested an injunction preventing the expenditure. The trial court dismissed the case as moot, finding that the funds already had been spent and that “the likelihood of a future such earmark was too remote to warrant injunctive relief.”

However, the Seventh Circuit found that the court could order Notre Dame to return the funds, even though the taxpayer had not requested it at the trial court level. The appellate court said “there is no per se rule that the recipient of illegal funds who has spent them cannot be forced to repay them.”

In remanding the case to the trial court, the Seventh Circuit said the issue will be whether the “religious” component of the ACE program was funded by federal or private funds. “As long as the religious component is financed entirely by the private donations, there is no violation of the establishment clause, which has been interpreted as not forbidding grants of public money to religious institutions as long as the grants are limited to the institutions’ secular activities.”

The dissent agreed with the trial court that the case was moot. It wrote that restitution was neither sought by the taxpayer nor is it consistent with taxpayer standing to bring a lawsuit in the first place.

Laskowski v. Spellings and University of Notre Dame, Seventh Cir. No. 05-2749, April 13, 2006.