Lansing — After a year and a half of litigation, Michigan Attorney General Dana Nessel reached a settlement in a case challenging state taxpayer funding for faith-based adoption agencies that refuse to place foster children with same-sex couples.

The settlement will require the Michigan Department of Health and Human Services to maintain non-discriminatory provisions in foster care and adoption agency contracts and end state contracts with agencies if they discriminate against same-sex couples in state-contracted cases.

The American Civil Liberties Union of Michigan filed the lawsuit in 2017 on behalf of Kristy and Dana Dumont of Dimondale and Erin and Rebecca Busk Sutton of Detroit after they sought to adopt a child out of Michigan’s foster care system, but were rejected by agencies with religious objections to same-sex couples.

The couples' lawsuit was filed against the Michigan Department of Health and Human Services and the Michigan Children's Services Agency. The complaint centered around faith-based agencies Bethany Christian Services and St. Vincent Catholic Charities, which was named as an intervenor-defendant in the case.

The settlement is a win for Michigan's 12,000 children in foster care, said Leslie Cooper, deputy director of the ACLU LGBT & HIV Project, in a Friday statement.

"When agencies choose to accept taxpayer dollars to provide public child welfare services, they must put the needs of the children first," Cooper said.

A lawyer representing St. Vincent Catholic Charities maintained the settlement violates a Michigan law enacted in 2015 that banned the state from taking adverse action against an agency that declined to provide services based on religious beliefs.

"The Michigan AG and the ACLU are trying to stop the state from working with faith-based adoption agencies," said Becket senior counsel Lori Windham. "The result of that will be tragic. Thousands of children will be kept from finding the loving homes they deserve."

The Michigan Catholic Conference said in a Friday tweet that the settlement "does nothing to protect the thousands of children in foster care looking for loving homes. As such, it is highly unlikely this is the last chapter of the story."

Of the 13,489 children under state supervision as of mid-February, Bethany was responsible for 1,159 cases and St. Vincent for 80, MDHHS spokesman Bob Wheaton said.

Nessel, the state’s first openly gay attorney general, said during her campaign that she wouldn’t defend the state law allowing faith-based adoption groups to reject same-sex couples. In January, she filed a stay in the case to negotiate a settlement.

“Discrimination in the provision of foster care case management and adoption services is illegal, no matter the rationale,” Nessel said in a Friday statement.

“Limiting the opportunity for a child to be adopted or fostered by a loving home not only goes against the state’s goal of finding a home for every child, it is a direct violation of the contract every child placing agency enters into with the state.”

Senate Majority Leader Mike Shirkey, R-Clarklake, said the settlement, which he estimates will affect 25 percent of the licensed adoption agencies in Michigan, is proof Nessel took office to "further her own personal political agenda," with little care for the Constitution or children at risk of losing advocacy through those faith-based agencies.

"I am deeply saddened and outraged by the blatant political actions taken by Nessel to limit opportunities for so many kids," Shirkey said in a statement.

The state should not be allowed to discriminate through its contracts and, in that sense, the settlement is the appropriate outcome, said Peter Hammer, a Wayne State University law professor and director of the Damon J. Keith Center for Civil Rights. Hammer also sits on the board of the ACLU.

But the settlement’s potential conflict with the state’s 2015 law is not as clear cut, Hammer said, as the interplay between religious freedom and non-discrimination remains “a mess.”

“That area is just completely unsettled,” he said. “That is as much a political question as it is a legal question. We’re going to all live in a bit of uncertainty as those issues get sorted out.”

In a summary of the settlement, Nessel's office maintained the agreement does not conflict with the 2015 law protecting faith-based agencies that declined to provide services based on religious beliefs because the law applies to "private action," not state-contracted services.

While the settlement allows a child placement agency to decline a referral from the department based on religious beliefs, after accepting the referral, the 2015 law "no longer applies to the agency's provision of these services to the accepted child or individual," according to Nessel's office.

The state department signed the settlement and is in agreement with its provisions, said Wheaton.

"MDHHS is required to maintain a sufficient array of foster family and adoptive homes to meet the needs of children placed in foster care due to abuse and neglect," Wheaton said. "The settlement agreement is consistent with that priority."

The settlement reinforces the contractual obligations that agencies have to meet if they provide foster or adoption services for the state, said Nessel’s spokeswoman Kelly Rossman-McKinney.

“They can choose not to take a child from DHHS,” Rossman-McKinney said. “But once they chose to provide services to and for a child of the state, they are required to comply with all contractual obligations,” including those related to non-discrimination.

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