Catholic Charity Loses 2–1 Over Same-Sex Spousal Benefits as Court Rejects a Theory From Two Indianapolis Catholic School Cases

The Lewis F. Powell Jr. U.S. Courthouse in Richmond, Virginia, where the Fourth Circuit Court of Appeals sits. Photo by Smash the Iron Cage, CC BY-SA 4.0, via Wikimedia Commons.

It started with a question at a 2016 job fair. A data analyst told a Catholic Relief Services recruiter he was gay and married, and asked whether his husband would be covered by the agency's dependent health plan. The recruiter, in a federal court's telling, said "unequivocally" that he would. Five months later CRS told him the enrollment had been a mistake, because covering his husband was contrary to its religious values.

Ten years on, that benefits decision just cost the U.S. Catholic bishops' overseas relief agency a religious-liberty fight. On Friday the U.S. Court of Appeals for the Fourth Circuit ruled 2–1 that CRS discriminated because of sex when it cut off the employee's spousal coverage, rejecting every statutory and constitutional shield the agency raised. Senior Judge Henry Floyd wrote the majority opinion, joined by Judge James Wynn. Both are Obama appointees, Bloomberg Law noted. Judge A. Marvin Quattlebaum Jr. dissented, and the ruling plus separate opinions runs 173 pages.

The money is small. The parties had agreed to $60,000 in compensatory damages if CRS lost on liability, according to the opinion. The principle is not. CRS, which the court describes as governed by the U.S. Conference of Catholic Bishops and employing more than 8,000 people, argued that a decision rooted in sincerely held Catholic belief falls under Title VII's exemption for religious employers, the Religious Freedom Restoration Act, the church autonomy doctrine and the Free Exercise Clause. The majority said no to all of it.

"The extremely broad and nearly unbounded immunity CRS seeks is not required by any statute or constitutional provision," Floyd wrote. "That none of these defenses applies in this case is not a reason for this Court to invent new protections for religious employers over what Congress and the Constitution require."

The heart of the ruling is one sentence of the 1964 Civil Rights Act. Section 702 says Title VII "shall not apply" to a religious organization "with respect to the employment of individuals of a particular religion." The majority read that to cover only religious discrimination, meaning a Catholic agency may still favor Catholics in hiring, but not claims based on sex, race or national origin, even when religion also drives the decision. Reading it more broadly, Floyd wrote, "would allow the exemption to swallow the rule." Because Doe is a man married to a man, the court applied Bostock v. Clayton County and treated the benefits cutoff as sex discrimination. The employee sued under the pseudonym John Doe.

Quattlebaum saw the text differently. As the majority summarizes his dissent, he read the exemption to reach "all of [Title VII], not merely one protected category," and called the majority's narrow-construction canon a "policy argument." The majority answered with unusual heat, accusing the dissent of claiming "disingenuously" that the circuit's own precedent posed no obstacle.

Why Indianapolis shows up in a Maryland case

To make its case, CRS leaned on Hoosier litigation. The opinion walks through two Seventh Circuit decisions out of Indianapolis, Starkey v. Roman Catholic Archdiocese of Indianapolis (2022) and Fitzgerald v. Roncalli High School (2023). Both involved sexual-orientation claims against Catholic schools, and both were resolved under the ministerial exception, which shields decisions about employees who carry out a religious mission.

In Starkey, Judge Frank Easterbrook wrote separately that he would have gone further and decided the case on Section 702 itself: "when [an employment] decision is founded on religious beliefs, then all of Title VII drops out." A concurrence in Fitzgerald adopted the same view. That is the reading CRS wanted Richmond to accept. "We do not find persuasive Judge Easterbrook's interpretation," the Fourth Circuit majority replied.

Indiana's churches, schools and charities sit in the Seventh Circuit, where the Easterbrook reading has so far appeared only in concurrences, not as a binding holding. Friday's decision means another federal appeals court has now looked squarely at that reading and turned it down. The majority also flagged a 2026 Ninth Circuit opinion that had leaned toward the broader view, Union Gospel Mission of Yakima v. Brown, noting it was vacated on June 18.

The ministerial exception never came to CRS's rescue here, because nobody argued it applied. The employee worked on the agency's IT and data systems, including its Gateway project database and a monitoring-and-evaluation role, the court said, and CRS does not require employees to practice the Catholic faith except in "representational" positions. A brief filed by Americans United for Separation of Church and State and allied groups put it bluntly: "As CRS and the United States both concede, Doe was not a ministerial employee."

That reference to "the United States" matters. The federal government was in the case. The Justice Department and the state of Maryland both intervened in the appeal, and DOJ lawyer Lowell V. Sturgill Jr. argued for the intervenors when the case was heard in March, according to the opinion. The U.S. Conference of Catholic Bishops, the Seventh-day Adventist General Conference, the Maryland Catholic Conference and a coalition of Christian schools represented by Alliance Defending Freedom filed briefs backing CRS.

According to a CRS brief in the case, the agency gave the employee a $5,000 salary increase and ended the spousal coverage effective Oct. 1, 2017. The opinion says he turned down an alternative compensation arrangement and stayed at CRS until he resigned in 2024. A federal judge in Baltimore, Julie R. Rubin, ruled for him after a bench trial, and the Fourth Circuit affirmed on the Title VII and Maryland claims while dismissing the Equal Pay Act piece as moot.

CRS's next options are the usual ones: ask the full Fourth Circuit to rehear the case, or petition the Supreme Court. With the Fourth Circuit now on record against a reading that judges in Indiana's own circuit have endorsed in concurrences, the question of how much room Title VII leaves a religious employer to run its own benefits plan is the kind the justices are asked to settle. The case is Doe v. Catholic Relief Services, No. 25-1569, and the full docket is public.

Written by Hoosiers, for Hoosiers.