Appeals Court Upholds Funding Restrictions

November 23, 2009

November 23, 2009


Washington, DC -- A federal appeals court has upheld 1996 restrictions on the activities of programs funded by the Legal Services Corporation (LSC), including activities paid for by non-LSC funds.

The U.S. Court of Appeals for the Ninth Circuit, in a 2-to-1 decision on November 23, ruled in favor of LSC in an appeal of a federal district court ruling in a case brought by Legal Aid Services of Oregon (LASO), a grantee of LSC, the Oregon Law Center (OLC), a non-LSC program, and other plaintiffs.

The majority opinion found that the 1996 funding restrictions do not discriminate against a particular viewpoint and are constitutional. "The Restrictions simply limit specific procedural tools and strategies that grantee attorneys may utilize in the course of carrying out their legal advocacy," the appeals court wrote.

The 1974 LSC Act prohibits LSC-funded programs from using either LSC or private money for certain activities. In 1996, Congress approved additional restrictions that also limit the use of public, non-LSC funds. LASO and OLC challenged LSC's application of four of those restrictions. They prohibited attempts to influence legislation and/or administrative rule-making processes; initiation of, and participation in, class-action lawsuits; claiming, collecting or retaining attorneys' fees pursuant to any federal or state law, and soliciting clients in person.

To enforce restrictions, LSC adopted a "program integrity rule" that requires LSC grantees to maintain objective integrity and independence from any entity that engages in prohibited activities. In 2005, LASO and OLC proposed to merge into a single, nonprofit corporation with two financially separate divisions, operating under the leadership of a single executive director and sharing personnel in a variety of staff positions. LSC rejected the proposal, saying that LASO must be a legally separate entity and must have greater physical and financial separation than proposed.

Ninth Circuit Judges Pamela Ann Rymer and A. Wallace Tashima upheld the 1996 restrictions and LSC's application of them to LASO. Their majority opinion cited previous federal court cases involving challenges to the funding restrictions, and noted that a prior U.S. Supreme Court ruling involving these restrictions "did not establish a new First Amendment test that hinges on whether restrictions on a given government subsidy distort an existing medium of expression."

The case also challenged LSC's application of the restrictions to LASO and their relationship with OLC. In rejecting LASO's case, the court stated, "In sum, the record reflects that LSC employs a flexible, fact-intensive process for determining whether a grantee maintains objective integrity and independence" from non-grantees.

Judge Harry Pregerson of the Ninth Circuit wrote a partial dissent, saying the funding restrictions at issue in the case were unreasonable. "Upholding these four Restrictions severely constrains those dedicated lawyers who choose to serve the poor by seriously and fundamentally limiting their ability to effectively represent their clients," he wrote.

Earlier this year, the Ninth Circuit Court of Appeals rejected a complaint filed by the State of Oregon that also challenged the LSC program integrity rule.

LSC was created by Congress 35 years ago to promote equal access to justice and to ensure the provision of high-quality civil legal assistance to low-income Americans. To help fulfill that mission, the Corporation funds 137 nonprofit programs with 918 offices across the nation.

Legal Services Corporation (LSC) is an independent nonprofit established by Congress in 1974 to provide financial support for civil legal aid to low-income Americans. The Corporation currently provides funding to 133 independent nonprofit legal aid programs in every state, the District of Columbia, and U.S. territories.