Court ends Michigan challenge to AIG bailout

A federal district court has ruled against a Michigan man in a lawsuit he filed challenging the federal government’s bailout of insurance giant AIG on establishment grounds because one of the company’s subsidiaries sells “Sharia-compliant” insurance.

The suit was filed two years ago, shortly after the federal government spent billions of dollars to keep AIG afloat during rough economic times, by the Ann Arbor-based Thomas More Law Center, a Catholic legal organization created by Domino’s founder Tom Monaghan, on behalf of a Michigan resident.

An AIG subsidiary markets “Takaful” insurance to Muslims around the world. Takaful policies contain restrictions on how the money paid to the company can be invested, forbidding investment in products and companies that Muslims would view as immoral or contrary to the commands of the Quran. Insurance companies and investment funds offer similar products for Christians as well.

This suit argued that because AIG markets products to Muslims, government investment in the company amounts to an endorsement of Islam and thus violates the Establishment Clause of the First Amendment. The judge rejected that argument:

Plaintiff argues that a reasonable observer would conclude that the government purchased AIG stock under the EESA with the purpose of advancing religion because “Defendants intended for AIG to use federal funding to support all of its activities, including SCF, which Defendants favorably endorse.” However, this lone statement constitutes the extent of Plaintiff’s argument with respect to the government’s purpose in purchasing AIG preferred stock under the EESA. Defendants, on the other hand, have presented evidence that the government enacted the EESA for the secular purpose of restoring liquidity and stability to the financial system of the United States, and that the Secretary purchased AIG preferred stock pursuant to his authority under the EESA because he believed that AIG’s failure would be catastrophic for the United States and the world economy…

Even assuming government officials were aware of AIG’s SCF activities, the Court finds it highly unlikely that a reasonable observer would determine that the government’s ostensible and predominant purpose in providing financial assistance to AIG was to support such a small aspect of AIG’s business.

You can read the full ruling here. This outcome is not terribly surprising. As we reported when the suit was filed, most of the nation’s top experts in church/state law bluntly called lawsuit frivolous after reading the complaint, which was mostly filled with anti-Muslim invective rather than serious legal argument.