On October 6, 2015, the United States Court of Appeals, Sixth Circuit, overturned the terms of a settlement agreement between taxpayer group and the state of Kentucky in a case challenging the manner in which the state provides foster care to children in state custody.  The taxpayer group had argued that Sunrise Children’s Services - "a religiously oriented group who had contracted with the state to provide foster care services - forces its religious beliefs on children in its care and thus payments made by Kentucky to Sunrise violate the Establishment Clause of the U.S. Constitution.

The taxpayer group sued Kentucky in 2000 and named Sunrise as a necessary defendant under Federal Rule of Civil Procedure 19. Sunrise and Kentucky then moved to dismiss the suit for lack of standing and that motion was granted. The case was later reinstated in 2009, however, when the U.S. Court of Appeals held the taxpayer group did indeed have standing to sue. See: Pedreira v. Ky. Baptist Homes for Children (Pedreira I), 579 F.3d 722,-731-33 (6th Cir. 2009).

On remand, the group filed an amended complaint again naming Sunrise as a necessary defendant. Kentucky and the plaintiffs, but not Sunrise, then agreed to a settlement which, in part, required Kentucky to alter the terms of its agreement with Sunrise and impose new obligations on them.

According the agreement, Sunrise must inform the child and the child’s parent of the foster home’s religious affiliation, allow children to go to a church of “of their choice,” and provide religious  alternatives.

Sunrise objected to the settlement, but the district court overruled their objections, and Sunrise appealed.

In their appeal, Sunrise raised the issue whether the agreement between Kentucky and the taxpayer group was a "consent decree." The settlement itself expressly stated it was not a "consent decree." But the court of appeals held.-that the agreement mat the two key elements found in a consent decree, as opposed to an order of dismissal: the retention of jurisdiction by the court, and whether the agreement puts the "power and prestige of the court behind the compromise struck by the Parties."

"Both of these key attributes are present here," the court of appeals wrote. Noting the district court expressly retained jurisdiction to enforce compliance with the settlement's terms, and that the settlement itself was incorporated into the court's own dismissal order, the appellate court found that the order was in fact a consent decree.

Because it was a consent decree, the district court was required to, among other things, determine if the agreement was "fair, adequate, and reasonable, as well as consistent with the public interest." Moreover, and key co Sunrise's appeal, the court must allow anyone affected by the decree to present evidence and have its objections heard.

"Thus, the decree denies Sunrise a chance to clear its name -- and instead -- over Sunrise's objection, imposes the very reputational harm that Sunrise sought to avoid by means of 15 years of litigation," the court concluded.

The district court's order was vacated and the case remanded for further proceedings. See: Pedreira v. Sunrise Children's Services (Pedreira II), No. 14-5879, 302 F.3d 855 (6th Cir. 2015).

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