UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

KEVIN J. MURRAY,

Plaintiff,

Civil No. 08-15147

v. Hon. Lawrence P. Zatkoff

TIMOTHY F. GEITHNER and

BOARD OF GOVERNORS OF THE 

FEDERAL RESERVE SYSTEM,

Defendants.

________________________________________________/

OPINION AND ORDER

AT A SESSION of said Court, held in the United States Courthouse,

in the City of Port Huron, State of Michigan, on May 26, 2009

PRESENT: THE HONORABLE LAWRENCE P. ZATKOFF

UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

This matter comes before the Court on Defendants’ motion to dismiss [dkt 6]. The parties

have fully briefed the motion. The Court finds that the facts and legal arguments are adequately

presented in the parties’ papers such that the decision process would not be significantly aided by

oral argument. Therefore, pursuant to E.D. Mich. L.R. 7.1(e)(2), it is hereby ORDERED that the

motion be resolved on the briefs submitted. For the reasons set forth below, Defendants’ motion is

DENIED.

II. BACKGROUND

According to the parties, a large-scale economic crisis erupted in the United States in 2008,

threatening the liquidity and stability of financial institutions domestically and abroad. The rapid
2

decline of the financial institutions subsequently infected the entire global economy, resulting in a

state of affairs that the parties compare to the Great Depression. A full discussion of the crisis is

irrelevant to this opinion; however, the underlying facts of this case would not have occurred but

for the crisis, which catalyzed governmental response in unprecedented ways. 

In September 2008, the Board of Governors for the Federal Reserve System acquired a

majority ownership interest in American International Group, Inc. (“AIG”) on behalf of the federal

government. The Board of Governors accomplished this by authorizing the Federal Reserve Bank

of New York (“FRBNY”) to create a credit facility that enabled AIG to draw up to $85 billion for

general corporate purposes, including as a liquidity source. The $85 billion credit line was

collateralized by AIG’s assets. In return for the credit facility, AIG signed a credit agreement

whereby it agreed to pay interest and fees to the FRBNY and to issue Series C preferred stock to a

trust—the AIG Credit Facility Trust (“Trust”)—that held the stock for the benefit of the United

States Treasury. The credit agreement provided that holders of Series C preferred stock were

entitled to 79.9% (subsequently reduced to 77.9%) of the dividend payments and 79.9%

(subsequently reduced to 77.9%) of the aggregate voting power of the common stock. 

On October 3, 2008, Congress passed the Emergency Economic Stabilization Act of 2008

(“EESA”), 12 U.S.C. § 5201, in order to “restore liquidity and stability to the financial system of

the United States.” The EESA granted the Treasury Secretary broad authority “to purchase, and to

make fund commitments to purchase, troubled assets from any financial institution” without

specifying any particular institution. On November 25, 2008, the Secretary exercised the authority

granted to him under the EESA to purchase “$40 billion of newly issued AIG perpetual [Series D]

preferred shares and warrants to purchase a number of shares of common stock of AIG equal to 2%
1

The Court takes judicial notice that “PBUH” is an acronym meaning “Peace be upon

him” and that practicing Muslims often include the acronym after naming a prophet of Islam. 

3

of the issued and outstanding shares as of the purchase date.” AIG issued a press release in which

it indicated that “[a]ll of the proceeds will be used to pay down a portion of the Federal Reserve

Bank of New York credit facility.” After the payment to reduce the $85 billion debt, the credit

facility retained $60 billion in available credit.

AIG is the market leader in Sharia-compliant financing, which features financial products

that comply with the dictates of Islamic law. According to AIG, “Sharia” is “Islamic law based on

Quran [sic] and the teachings of the Prophet (PBUH).”1

 In Sharia-complaint financing, a Sharia

authority issues a legal ruling called a fatwa, which approves or rejects particular investments or

transactions. AIG’s Sharia authority exists in the form of a “Sharia Supervisory Committee,” the

purpose of which “is to review [AIG’s] operations, supervise its development of Islamic products,

and determine Sharia compliance of these products and [AIG’s] investments.” A significant element

of Sharia compliance involves “purification” of finances, accomplished in two manners: 1) an

obligatory charitable contribution to those who “struggle for Allah”; and 2) disgorgement of

“tainted” funds (those associated with entities forbidden under Islamic law) by donating them to

acceptable Islamic charities. 

One of the most prominent examples of Sharia-compliant financing is Takaful Insurance,

which avoids investments in “prohibited elements in Islam according to Sharia.” AIG opened a

subsidiary in Bahrain called AIG-Takaful-Enaya in 2006. In December 2008, another AIG

subsidiary announced the creation of a Takaful Homeowners Policy, the first in “a series of

Shari’ah-compliant (Takaful) product offerings in the U.S.” These subsidiaries represent elements
4

of AIG’s “global expansion strategy” to benefit from the growing Takaful Insurance field. In

November 2008, the Department of Treasury hosted a forum entitled “Islamic Finance 101” in

conjunction with the Islamic Finance Project of the Harvard Law School.

On March 4, 2009, AIG filed a Form 8-K with the Securities Exchange Commission (“SEC”)

in which AIG reported the transfer of the preferred shares of its stock to the Trust. The filing

provided that “[a]s a result of the Transaction, a change in control of AIG has occurred. Pursuant

to the Purchase Agreement, AIG and AIG’s Board of Directors are obligated to work in good faith

with the Trust to ensure corporate governance arrangements satisfactory to the Trust.” In AIG’s

annual report to the SEC, it explained that “the Trust, which is overseen by three independent

trustees, will hold a controlling interest in AIG, AIG’s interests and those of AIG’s minority

shareholders may not be the same as those of the Trust of the United States Treasury.” 

Plaintiff is a federal taxpayer, United States Marine, and a practicing member of the Catholic

faith. He brings this suit as a taxpayer, alleging that the “appropriated funds are being used to

finance Sharia-based Islamic religious activities in violation of the Establishment Clause.” As such,

Plaintiff believes that the unregulated appropriation of funds to AIG was constitutionally

impermissible. Defendants contend that Plaintiff lacks standing to bring this suit. In the alternative,

Defendants maintain that Plaintiff has not stated a cognizable Establishment Clause claim and

therefore, his case should be dismissed. 

III. LEGAL STANDARD

Defendants bring their motion under both Fed. R. Civ. P. 12(b)(1) and 12(b)(6). When a

motion is filed under Fed. R. Civ. P. 12(b)(1), the “plaintiff has the burden of proving jurisdiction

in order to survive the motion.” Rogers v. Stratton Indus., Inc., 798 F.2d 913, 915 (6th Cir. 1986).
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The plaintiff’s burden in this regard “is not onerous.” Musson Theatrical v. Fed. Express Corp., 89

F.3d 1244, 1248 (6th Cir. 1996). The plaintiff may defeat the motion “by showing any arguable

basis in law for the claim made.” Id. The Court may dismiss an action for lack of subject-matter

jurisdiction “because of the inadequacy of the federal claim . . . only when the claim is ‘so

insubstantial, implausible, foreclosed by prior decisions of [the Supreme Court], or otherwise

completely devoid of merit as not to involve a federal controversy.’” Steel Co. v. Citizens for a

Better Env’t, 523 U.S. 83, 89 (1998) (quoting Oneida Indian Nation of N.Y. v. County of Oneida,

414 U.S. 661, 666 (1974)).

A motion brought pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which

relief may be granted tests the legal sufficiency of Plaintiff’s claims. The Court must accept as true

all factual allegations in the pleadings, and any ambiguities must be resolved in Plaintiff’s favor.

See Jackson v. Richards Med. Co., 961 F.2d 575, 577–78 (6th Cir. 1992). While this standard is

decidedly liberal, it requires more than the bare assertion of legal conclusions. See Advocacy Org.

for Patients & Providers v. Auto Club Ins. Ass’n, 176 F.3d 315, 319 (6th Cir. 1999). Thus, a

plaintiff must make “a showing, rather than a blanket assertion of entitlement to relief” and

“[f]actual allegations must be enough to raise a right to relief above the speculative level.” Bell

Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1965 (2007). 

In deciding a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), this Court may only

consider “the facts alleged in the pleadings, documents attached as exhibits or incorporated by

reference in the pleadings, and matters of which the [Court] may take judicial notice.” 2 James Wm.

Moore et al., Moore’s Federal Practice ¶ 12.34[2] (3d ed. 2000). If, in deciding the motion, the

Court considers matters outside the pleadings, the motion will be treated as one for summary
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judgment pursuant to Fed. R. Civ. P. 56. See Fed. R. Civ. P. 12(b).

IV. ANALYSIS

A. STANDING

Article III of the Constitution of the United States “limits the judicial power . . . to the

resolution of ‘Cases’ and ‘Controversies,’ and ‘Article III standing . . . enforces the Constitution’s

case-or-controversy requirement.’” Hein v. Freedom From Religion Found., 551 U.S. 587, 127 S.

Ct. 2553, 2562 (2007) (quoting DaimerChrysler Corp. v. Cuno, 547 U.S. 332, 342 (2006)). To

satisfy Article III standing, a plaintiff “must allege personal injury fairly traceable to the defendant’s

allegedly unlawful conduct and likely to be redressed by the requested relief.” Allen v. Wright, 468

U.S. 737, 751 (1984). A plaintiff’s injury must be “distinct and palpable, and not abstract or

conjectural or hypothetical.” Id. (quotations omitted). The standing inquiry is “especially rigorous

when reaching the merits of the dispute would force [a court] to decide whether an action taken by

one of the other two branches of the Federal Government was unconstitutional.” Raines v. Byrd, 521

U.S. 811, 819–20 (1997). Therefore, federal courts “must ‘refrai[n] from passing upon the

constitutionality of an act . . . unless obliged to do so in the proper performance of [their] judicial

function, when the question is raised by a party whose interests entitle him to raise it.” Hein, 127

S. Ct. at 2562 (quoting Valley Forge Christian Coll. v. Ams. United for Separation of Church &

State, Inc., 454 U.S. 464, 474 (1982).

Generally speaking, “the interest of a federal taxpayer in seeing that Treasury funds are spent

in accordance with the Constitution does not give rise to the kind of redressable ‘personal injury’

required for Article III standing.” Id. In the vast majority of cases, a taxpayer’s interest “is too

generalized and attenuated to support Article III standing.” Id. at 2563. The Supreme Court has
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previously explained that taxpayer standing is complicated by the relatively minuscule interest a

taxpayer has in government spending:

Interest in the moneys of the Treasury . . . is shared with millions of

others; is comparatively minute and indeterminable; and the effect

upon future taxation, of any payment out of the funds, so remote,

fluctuating and uncertain, that no basis is afforded for an appeal to

the preventive powers of a court of equity.

Massachusetts v. Mellon, 262 U.S. 447, 487 (1923). 

There exists, however, one “narrow exception to the general constitutional prohibition

against taxpayer standing.” Hein, 127 S. Ct. at 2564. In Flast v. Cohen, 392 U.S. 83 (1968), the

Supreme Court delineated a two-part test for determining whether a taxpayer has standing: 

First, the taxpayer must establish a logical link between the status and

the type of legislative enactment attacked. Thus, a taxpayer will be

a proper party to allege the unconstitutionality only of exercises of

congressional power under the taxing and spending clause of Art. I,

§ 8, of the Constitution. It will not be sufficient to allege an

incidental expenditure of tax funds in the administration of an

essentially regulatory statute. . . . Secondly, the taxpayer must

establish a nexus between that status and the precise nature of the

constitutional infringement alleged. Under this requirement, the

taxpayer must show that the challenged enactment exceeds specific

constitutional limitations imposed upon the exercise of the

congressional taxing and spending power and not simply that the

enactment is generally beyond the powers delegated to Congress by

Art. I, § 8.

Id. at 102–03. The Flast Court determined that the taxpayer-plaintiff had satisfied both prongs

where her challenge was aimed at congressional action taken pursuant to the Constitution’s Taxing

and Spending Clause and she alleged a violation of the First Amendment’s Establishment Clause,

which mandates that “Congress shall make no law respecting an establishment of religion.” U.S.

Const. Amend. I. The Supreme Court observed that the Establishment Clause “operates as a specific

constitutional limitation upon the exercise by Congress of the taxing and spending power conferred
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by Art. I, § 8.” Flast, 392 U.S. at 104. Therefore, the plaintiff in Flast had standing to challenge

the Elementary and Secondary Education Act of 1965 because federal funds appropriated under the

Act “were being used to finance instruction in reading, arithmetic, and other subjects in religious

schools, and to purchase textbooks and other instructional materials for use in such schools.” Id.

at 85–86. 

In Bowen v. Kendrick, 487 U.S. 589 (1988), the Supreme Court applied the Flast test and

found that the plaintiffs had standing to challenge a statute both facially and as applied where the

statute left disbursement decisions to the discretion of the Secretary of Health and Human Services.

There, the statute at issue was the Adolescent Family Life Act (“AFLA”), which was “essentially

a scheme for providing grants to public or nonprofit private organizations or agencies for services

and research in the area of premarital adolescent sexual relations and pregnancy.” Id. at 593

(quotations omitted). The Kendrick Court held that the statute “is at heart a program of

disbursement of funds pursuant to Congress’ taxing and spending powers, and appellees’ claims call

into question how the funds authorized by Congress are being disbursed pursuant to the AFLA’s

statutory mandate.” Id. at 619–20. The Supreme Court found this to be a “sufficient nexus between

the taxpayer’s standing as a taxpayer and the congressional exercise of taxing and spending power,

notwithstanding the role the Secretary plays in administering the statute.” Id. at 620. 

Nearly forty years after deciding Flast and twenty years after deciding Kendrick, the

Supreme Court rendered its decision in Hein, 127 S. Ct. 2553. The petitioners in that case claimed

that “conferences held as part of the President’s Faith-Based and Community Initiatives program

violated the Establishment Clause of the First Amendment because, among other things, President

Bush . . . gave speeches that used ‘religious imagery’ and praised the efficacy of faith-based
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programs in delivering social services.” Id. at 2559. The federal funds used to pay for the

challenged conferences came not from congressional approval, however, but out of the general

Executive Branch appropriations. The Supreme Court determined that the petitioners fell outside

the narrow exception of Flast “[b]ecause the expenditures that respondents challenge were not

expressly authorized or mandated by any specific congressional enactment.” Id. at 2568. 

The Hein Court distinguished Kendrick based on the fact that the latter case “involved a

‘program of disbursement of funds pursuant to Congress’ taxing and spending powers’ that

‘Congress had created,’ ‘authorized,’ and ‘mandate[d].’” Id. at 2567 (quoting Kendrick, 487 U.S.

at 619–20). Because the grants at issue in Kendrick were authorized by Congress, a sufficient nexus

was created “notwithstanding the fact that ‘the funding authorized by Congress ha[d] flowed through

and been administered’ by an Executive Branch official.” Id. (quoting Kendrick, 487 U.S. at 619).

The Hein Court contrasted the facts before it, stating that the “best [respondents] can do is to point

to unspecified, lump-sum ‘Congressional budget appropriations’ for the general use of the Executive

Branch—the allocation of which ‘is a[n] administrative decision traditionally regarded as committed

to agency discretion.’” Id. (quoting Lincoln v. Virgil, 508 U.S. 182, 192 (1993)). 

In holding that the petitioners lacked standing to bring their suit, the Hein Court explained:

“We do not extend Flast, but we also do not overrule it. We leave Flast as we found it.” Id. at

2571–72. The Supreme Court did not articulate explicitly the condition in which it found Flast but

suggested that it is a novelty, effectively collecting dust on a shelf somewhere in the annals of the

Supreme Court: “we have repeatedly emphasized that the Flast exception has a ‘narrow application

in our precedent,’ that only ‘slightly lowered’ the bar on taxpayer standing, and that must be applied

with ‘rigor.’” Id. at 2568 (citations and quotations omitted). The Hein Court further noted, “It is
2

 Criticism of Flast and taxpayer standing does not end with the Hein opinion. This area

of the law has been characterized as “arbitrary,” “illogical,” and lacking in “comprehensiveness

and rationality.” Freedom From Religion Found., Inc. v. Chao, 447 F.3d 988, 989–90 (7th Cir.

2006) (Easterbrook, J., concurring in denial of rehearing en banc).

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significant that, in the four decades since its creation, the Flast exception has largely been confined

to its facts.” Id. at 2569–70. The Hein Court also criticized the Flast decision for giving “too little

weight” to “serious separation-of-powers concerns.” Id. at 2569.2

 

The Court turns to Plaintiff’s case armed with a much-maligned taxpayer-standing exception,

which, despite its fragile state, remains the law of the land. In this case, Defendants argue that

Plaintiff does not fit within the Flast exception because the EESA “does not expressly mandate (or

even contemplate) or specifically appropriate funds for an investment in AIG or any other

companies involved in the business of Sharia-compliant financing.” In so arguing, Defendants

observe that the statute at issue in Flast specifically appropriated funds for “private schools,” a

category that necessarily entails religious schools. Similarly, Defendants argue that in Kendrick,

the statute expressly contemplated disbursement to religious groups. Defendants further maintain

that the Secretary’s decision to appropriate funds to AIG amounted to “executive discretion, not

congressional action” and, as such, do not fall under the purview of Flast. To that end, Defendants

note that “Plaintiff has not even alleged that the ‘expenditures at issue here were . . . made pursuant

to [an] Act of Congress’ rather than ‘general appropriations to the Executive Branch to fund its dayto-day activities.’” 

In its discussion of Flast and Kendrick, the Hein Court suggests that, for a taxpayer to have

standing, the congressional authorization or mandate at issue must imply or contemplate, on some

level, appropriation of funds to religious groups. The statute in Flast referenced only “private
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schools” and did not expressly reference religious schools. The Flast Court did not discuss the

correlation between private schools and religious schools in its opinion. Regardless, the Hein Court

intimated that the obvious relationship between private and religious schools provided a basis for

the Flast decision, stating that “[a]t the time the Act was passed and Flast was decided, the great

majority of nonpublic elementary and secondary schools in the United States were associated with

a church. . . . Congress surely understood that much of the aid mandated by the statute would find

its way to religious schools.” Id. at 2565 n.3. The Hein Court made a similar attribution to the

Kendrick decision as it related to the AFLA, which specifically contemplated the involvement of

religious groups. Despite that reality, the Supreme Court held that the AFLA was constitutional on

its face: “In this lawsuit, nothing on the face of the AFLA indicates that a significant proportion of

the federal funds will be disbursed to ‘pervasively sectarian’ institutions.” Kendrick, 487 U.S. at

610. Again, the Hein Court attributed much significance to Congress’s alleged contemplations:

“AFLA not only expressly authorized and appropriated specific funds for grant-making, it also

expressly contemplated that some of those moneys might go to projects involving religious groups.”

Hein, 127 S. Ct. at 2567. 

The Hein Court left Flast as it found it. As delineated, Flast unequivocally set forth its twoprong test: “the taxpayer must establish a logical link between the status and the type of legislative

enactment attacked . . . [and] the taxpayer must establish a nexus between that status and the precise

nature of the constitutional infringement alleged.” Flast, 392 U.S. at 102–03. The Flast Court

applied its test without regard to whether the statute in question or Congress itself contemplated

appropriations to religious groups. Therefore, the fact that the EESA contains no references

whatsoever to religious groups is irrelevant to the standing inquiry. Rather, the question of whether
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the EESA “authorized” or “mandated” expenditures relates to the nexus between Plaintiff’s taxpayer

status and the type of act he questions. Hein’s retroactive assessment of Flast and Kendrick, in

particular its emphasis on congressional contemplation of religious involvement, does not alter the

test this Court must use. 

The EESA does not specify which institutions should receive aid but broadly empowers the

Secretary:

The purposes of this Act are to immediately provide authority and

facilities that the Secretary of the Treasury can use to restore liquidity

and stability to the financial system of the United States; and to

ensure that such authority and such facilities are used in a manner

that protects home values, college funds, retirement accounts, and life

savings; preserves homeownership and promotes jobs and economic

growth; maximizes overall returns to the taxpayers of the United

States; and provides public accountability for the exercise of such

authority.

12 U.S.C. § 5201. The EESA authorizes the Secretary “to purchase, and to make and fund

commitments to purchase, troubled assets from any financial institution, on such terms and

conditions as are determined by the Secretary, and in accordance with this Act and the policies and

procedures developed and published by the Secretary.” Id. § 5211. In this regard, the EESA

expressly grants Defendants the authority to expend substantial funds consistent with the statute’s

purposes. Plaintiff maintains that Congress enacted the EESA pursuant to the Taxing and Spending

Clause of the Constitution; Defendants do not dispute this. Accordingly, the Court finds that

Plaintiff satisfies the first prong of Flast.

Defendants’ argument that the Secretary’s decision to appropriate funds to AIG amounted

to “executive discretion, not congressional action” and, as such, does not fall under the purview of

Flast is unpersuasive in light of Kendrick. The statute at issue in Kendrick, like the statute at issue
13

in this matter, did not specify the manner in which funds were to be distributed and to which entities.

Instead, the statute empowered the Secretary of Health and Human Services to award grants

pursuant to certain criteria. The Court found standing because the statute authorized the expenditure

of the funds:

The AFLA is at heart a program of disbursement of funds pursuant

to Congress’ taxing and spending powers, and appellees’ claims call

into question how the funds authorized by Congress are being

disbursed pursuant to the AFLA’s statutory mandate. In this

litigation there is thus a sufficient nexus between the taxpayer’s

standing as a taxpayer and the congressional exercise of taxing and

spending power, notwithstanding the role the Secretary plays in

administering the statute.

 

Kendrick, 487 U.S. at 619–20. The grants authorized under the AFLA are sufficiently similar to the

expenditures authorized by the EESA. Both statutes expressly empowered an Executive Branch

official to spend funds in accordance with the statutes. Therefore, the Court finds that the EESA

expressly authorized the expenditure of funds by the Secretary of the Treasury.

With respect to the second prong of the Flast test, Plaintiff contends that the “appropriated

funds [to AIG] are being used to finance Sharia-based Islamic religious activities in violation of the

Establishment Clause.” The Establishment Clause “operates as a specific constitutional limitation

upon the exercise by Congress of the taxing and spending power conferred by Art. I, § 8.” Flast,

392 U.S. at 104. Therefore, Plaintiff has established the second prong of the Flast test.

Accordingly, he has standing to bring this suit.

B. ESTABLISHMENT CLAUSE 

The Establishment Clause of the First Amendment provides that “Congress shall make no

law respecting an establishment of religion.” U.S. Const. Amend. I. The clause has been construed

as preventing the government “from enacting laws that have the purpose or effect of advancing or
14

inhibiting religion.” Zelman v. Simmons-Harris, 536 U.S. 639, 648–49 (2002) (internal quotation

marks and citations omitted). The Court examines Establishment Clause challenges under the test

delineated in Lemon v. Kurtzman, 403 U.S. 602, 612–13 (1971): “First, the statute must have a

secular legislative purpose; second, its principal or primary effect must be one that neither advances

nor inhibits religion; finally, the statute must not foster ‘an excessive government entanglement with

religion.’” (citations and quotation omitted). Recent Supreme Court decisions have modified the

test slightly by “fold[ing] entanglement analysis into the effect analysis because ‘entanglement is

. . . an aspect of the inquiry into a statute’s effect.’” Smith v. Jefferson County Sch. Bd. of Comm’rs,

549 F.3d 641, 656 (6th Cir. 2008) (quoting Agostini v. Felton, 521 U.S. 203, 223 (1997)).

Establishment Clause queries are conducted under the objective reasonable observer standard. See,

e.g., Ams. United for Separation of Church & State v. City of Grand Rapids, 980 F.2d 1538,

1543–44 (6th Cir. 1992) (en banc). 

It is beyond question that the EESA does not violate the Establishment Clause on its face.

Congress enacted the EESA in response to what the parties portray as a monumental economic crisis

for the sole purpose of restoring stability to financial institutions. The statute makes no mention of

religion or religious institutions. Instead it focuses entirely on institutions that are primarily, and

in most cases entirely, secular. Nothing from the plain text of the statute hints at an improper

relationship between the government and religion.

It is the application of the EESA as it relates to AIG, however, that Plaintiff challenges. The

Supreme Court has previously permitted as-applied challenges to facially constitutional statutes.

The Kendrick Court, for example, held that the statute at issue was constitutional on its face but

nevertheless remanded the case for examination of “whether particular AFLA grants have had the
15

primary effect of advancing religion.” Kendrick, 487 U.S. at 622. In other words, although the

Court concluded that the AFLA did not violate the Establishment Clause on its face, it did not

eliminate the possibility that the AFLA was unconstitutional as applied. In Hunt v. McNair, 413

U.S. 734, 743 (1973), the Supreme Court observed that “[a]id normally may be thought to have a

primary effect of advancing religion when it . . . funds a specifically religious activity in an

otherwise secular setting.” 

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
16

religion and sufficiently raise Plaintiff’s claim beyond the speculative level, warranting dismissal

inappropriate at this stage in the proceedings.

V. CONCLUSION

IT IS HEREBY ORDERED that Defendants’ motion to dismiss is DENIED. 

IT IS SO ORDERED.

S/Lawrence P. Zatkoff 

LAWRENCE P. ZATKOFF

UNITED STATES DISTRICT JUDGE

Dated: May 26, 2009

CERTIFICATE OF SERVICE

The undersigned certifies that a copy of this Order was served upon the attorneys of record

by electronic or U.S. mail on May 26, 2009.

S/Marie E. Verlinde 

Case Manager

(810) 984-3290