Federal Funding Restrictions and the Legal Services Corporation: a Case Study

FEDERAL FUNDING RESTRICTIONS AND THE LEGAL SERVICES CORPORATION: A CASE STUDY

Legal Services Corporation v. Velazquez

Public Interest Law and Policy

Spring 2013

Gavin Robinson

Megan Morton

INTRODUCTION:

The Legal Services Corporation

The Legal Services Corporation (“LSC”) is a non-profit government funded corporation created by the Federal Government in the Legal Services Corporation Act of 1974(“LSCA”). 42 U.S.C. §2996;Velazquez v. Legal Services Corp.,164 F.3d 757, 759 (2nd Cir 1999). The purpose of the Legal Services Corporation is to “provide financial support for legal assistance in noncriminal proceedings or matters to persons financially unable to afford legal assistance.” 42 U.S.C. §2996(b)(a). The LSC fulfills this duty by providing and administering grants to hundreds of non-profit legal organizations that in turn provide legal assistance to those that are otherwise unable to afford legal services. Velazquez, 164 F.3d at 759. The LSC does not itself provide legal assistance to indigent clients, but plays a vital role in providing funding to the organizations that may themselves represent these clients. Id. On average, these organizations provide free legal assistance to between 1,000,000 and 2,000,000 indigent clients annually, and most of these grantees are funded by a combination of LSC funds and funding from other sources. Id.; See Texas Rural Legal Aid v. Legal Services Corp., 940 F.2d 685, 688 (D.C. Cir. 1991).

The LSC is structured in the vein of a Federal Administrative Agency and functions through the traditional administrative rulemaking process. Id. at 692. The LSC is headquartered in Washington, D.C. and is run by a board of eleven directors, appointed by the President and confirmed by the United States Senate. Fact Sheet on the Legal Services Corporation (2013) .The board is bipartisan by law, and is funded by Congress but functions as an independent agency. Id. In 2007 the LSC was granted a budget of $350 million to allow the federal government to provide federal civil legal aid, and the budget has stayed relatively consistent. Id., see infra pp. 5-7.Similarly, LSC grantee organizations are governed by local Boards of Directors, who “set policies and priorities in response to local conditions and client needs.” Velazquez, 164 F.3d at 759.

LSC grantees are and have always been limited in their use of LSC funding by the LSCA. See 42 U.S.C. §2996(f)(b)(1)-(10). Generally, grantee organizations are barred from using federal funds for any purpose other than those specified in the act, and may not use nonfederal funds for any purpose specified in the act. Id. Specifically, LSC funds may not be used for activities such as criminal proceedings, political activities, and litigation involving nontherapeutic abortion, desegregation, or military desertion.

In 1996, Congress substantially increased the restrictions placed on LSC grantees in the Omnibus Consolidated Rescissions and Appropriations Act of 1996 (“OCRAA”). Pub.L. No. 104-134, §504, 110 Stat. 1321-53 (1996). The restrictions fall into four general categories: (1) a prohibition on influencing government, (2) restrictions on which clients grantees may represent, (3) restrictions on the type of cases grantees may take, and (4) restrictions on how attorneys represent clients. Id. Among these restrictions, section 504 of the Act bars the use of LSC funds to legal aid entities that perform various activities, including “lobbying, participation in classactions, providing legal assistance to aliens in certain categories, supporting advocacy training programs, collecting attorney’s fees under fee shifting laws, litigating on behalf of prisoners, and seeking to reform welfare.” OCRAA §504(a)(2)-(16).

Most importantly, section 504(a)(16) of the OCRAA very specifically prohibits LSC funding to any organization,

“that initiates legal representation or participates in any other way, in litigation, lobbying, or rulemaking, involving an effort to reform a Federal or State welfare system, except that this paragraph shall not be construed to preclude a recipient from representing an individual eligible client who is seeking specific relief from a welfare agency if such relief does not involve an effort to amend or otherwise challenge existing law in effect on the date of the initiation of the representation.”

OCRAA, §504(a)(16) (emphasis added).

The prohibitions apply to all of the activities of an LSC grantee organization, including those paid for by non-LSC funds. Section 504(a)(16) in effect served to limit any LSC funded organization from representing any client or participating in any litigation that threatened or attempted to challenge any existing welfare laws of the United States government. If an LSC funded attorney found themselves involved in a case in which a statutory or constitutional challenge became apparent after the outset of the litigation, the LSC advised that the attorneys must withdraw from the case. Id.; Legal Services Corp. v. Velazquez, 531 U.S. 533 (2001). If an organization or attorney chose to proceed with said litigation, they would loose all funding from the LSC.OCRAA §509(c)(1)-(2).The application of the OCRAA caused much contention within courts and issues began to arise almost immediately after the passage of the act, specifically in the Second Circuit and the Ninth Circuit. See Legal Aid Soc'y of Hawaii v. Legal Servs. Corp.,145 F.3d 1017 (9th Cir. 1998). Velazquez v. Legal Servs. Corp., 164 F.3d 757 (2nd Cir. 1999).

Ultimately, it was the 1996 OCRAA restrictions on the usage of LSC funding that lead to the landmark 2001 Supreme Court decision Legal Services Corporation v. Velazquez, et al.The court addressed the issue whether one of the conditions imposed by Congress on the use of LSC funds (section 504(a)(16)) violated the First Amendment rights of LSC grantees and their clients. Legal Services Corp., 531 U.S. at 536. The court held that the specific restriction did violate Free Speech guarantees under the First Amendment. Id. Because the LSC facilitates “private speech” of the LSC grantees and their clients and not public “government speech,” the provision was held to be unconstitutional and the government was prohibited from making such viewpoint-based restrictions of private speech. Id. at 548, 549. See supra.pp. 17-19.

In order to fully understand the extent and the effects of Legal Services Corporation v. Velazquez, it is necessary to analyze the circumstances and the factors that led to the litigation of the case.This case study will explore an in-depth history of the Legal Services Corporation and the Legal Services Corporation Act itself, the social and political climate of the 1990s, andthe story of the litigants, the lawyers, and all parties involved. It will also analyzethe details of the case and the lasting effects of the decision in an effort to ascertain the impact of Legal Services Corporation v. Velazquez on the legal system in general and on society as a whole.

HISTORY:

The LSC and the Legal Services Corporation Act

The LSC as it functions today is a product of a long history of turmoil between the President, Congress andthe political parties. The LSC is one of the organizational descendants of the former Legal Services Program in the Office of Economic Opportunity (“OEO”), which was created in 1964 by the Economic Opportunity Act and as part of President Lyndon B. Johnson’s “Great Society” vision. J. Dwight Yoder, “Justice or Injustice for the Poor? A Look at the Constitutionality of Congressional Restrictions on Legal Services”6 Wm. & Mary Bill Rts. J. 827, 833 (1998). After much conservative political opposition to the OEO, President Nixon sought to dismantle the program entirely. Id. Nixon’s effort failed, however, but led Congress to form an entirely Congressionally funded but politically independent administrative body to carry out essentially the same task. Id. Thus the Legal Services Corporation Act was signed into law by President Nixon in 1974, effectively creating the Legal Services Corporation and granting all its authority. Id.

The life of the LSC proved to be tumultuous throughout subsequent Presidential terms, and the struggle to keep the LSC politically neutral and independent proved to be an uphill battle. Id. In the late 1970s President Carter made many efforts to advance the LSC, followed by an attempt by President Reagan to eliminate the program all together in the 1980s. Id. While the Reagan administration failed to eliminate the LSC, it succeeded in cutting LSC funding and “institut[ing] a number of other changes ostensibly designed to rein in the perceived left-wing radicals allegedly in control of legal services programs across the country.”Id. During the same time period, Republicans in Congress began an extensive monitoring program to search for misappropriation and misuse of Federal funds, and continued to attack the LSC throughout the late 1980s and 1990s. Id.

Although there was significant opposition to the LSC, there were also many advances made. Hillary Rodham Clinton was elected to the board of the LSC by President Jimmy Carterin 1977 and she sought to make substantial advances in its funding and support.The American Presidency Project, Jimmy Carter: Nominations Submitted to the Senate (December 16, 1977). the decade, Clinton worked with the LSC to reform laws and regulations that were “unresponsive to the poor” and to provide bipartisan legal services for the low-income and underrepresented. Brock, David,The Seduction of Hillary Rodham.pp. 96–97 (1996).

Throughout the Regan Era in the 1980s and the George H.W. Bush Era in the early 1990s, the LSC continued to endure hostility. When President Clinton was elected in 1994, the LSC was still in the midst of attack by House and Senate Republicans. The first two years of the Clinton administration saw more growth for the LSC, but things quickly changed in 1996 with the Republican takeover of Congress and significant LSC funding cuts.The Legal Services Corporation: Funding History (2013). in Congress again attempted to disband the LSC in 1994, but failed when President Clinton vetoed their budget plan. Id. In an effort to compromise, Congress agreed to retain the LSC, but imposed drastically modified restrictions on the federal funding given to the program. See Velazquez, 985 F.Supp. at 323, Omnibus Consolidated Rescissions and Appropriations Act of 1996, Pub.L. No. 104-134, §504, 110 Stat. 1321-53 (1996). It was as a result of this tumultuous political climate that the OCRAA was adopted in 1996, articulating the new Congressional restrictions on the use of federal funding for the LSC. Id.;See infra p. 3-4.

POLITICAL AND SOCIAL CLIMATE:

The 1990s

The Legal Services Corporation Act and Legal Services Corp. v. Velazquez was greatly a result of the political and social climate of the 1990s and major changes in legislation, welfare reform, and the attitudes of society. As stated above, the life of the LSC was tumultuous from the start, and the OCRAA restrictions came to fruition in a time where Democrats controlled the executive branch and Republicans controlled Congress. See infra pp. 5-7. At the time the OCRAA was passed, Bill Clinton was elected President in 1994, and the 104th United States Congress was in power from January 3, 1995 to January 3, 1997. U.S. Government Printing Office, Congressional Documents of the 104th Congress (2013). Most importantly, Republicans had gained control of both the Senate and the House of Representatives for the first time since the 1950s. United States Senate, “Political Parties and Leadership” (2013). Gore was the Democratic Senate President, while Newt Ginrich was the Republican Speaker of the House. Id.The 104th Congress passed legislation ranging from the Lobbying Disclosure Act and the Private Securities Litigation Reform Act to the Antiterrorism and Effective Death Penalty Act and the Defense of Marriage Act. See Pub.L. 104–65, 109Stat.691, 2 U.S.C.ch.26; Pub.L. 104–67, 109Stat.737; Pub.L. 104–132, 110Stat.1214; Pub.L. 104–199, 110Stat.2419. With the undercurrent of animosity toward the Legal Services Corporation and its liberal attitudes toward funding and legal aid to the poor, it is unsurprising that Congress Republicans were eager to impose restrictions on the LSCA.

The 1990s also saw major events such as the Oklahoma City bombing on April 19, 1995, along with the re-election of President Bill Clinton and Vice President Al Gore on November 5, 1996. The American Experience: “The Legacy of the Clinton Administration” (2013). NATO began their operation Deliberate Force against Serbs in Bosnia and Herzegovina, and President Clinton invoked emergency powers to extend a $20 billion loan to help Mexico avert financial collapse.Id. After a major budget conflict between Congress and the Clinton Administration, specifically between Clinton and House Speaker Newt Ginrich, the federal government shutdown all non-essential functions from December 16, 1995 through January 6, 1996. The Seattle Times,“Clinton Vetoes Borrowing Bill -- Government Shutdown Nears As Rhetoric Continues To Roil"(November 13, 1995). Unsurprisingly, the increased political pressure and turmoil had a significant effect on legislation passed at the time, including the ORCAA and the LSCA restrictions.

The 1990s also saw changes in public interest and welfare laws in general. President Clinton himself pledged to “end welfare as we know it” before taking office in 1992.See “The Legacy of the Clinton Administration.”However, although Clinton successfully persuaded Congress to expand the Earned Income Tax Credit in 1993, his plan for Universal Healthcare failed, and his proposed plan for welfare reform was postponed. Id. After Republicans took over Congress in 1996, Clinton reluctantly signed into law a new welfare provision making work requirements more stringent and significantly decreasing welfare subsidies. The American Prospect,“1990: Welfare then and now” (2013). The number of families receiving welfare fell from almost 4.5 million in 1996 to 2 million in June 2003, but poverty levels among single mothers also fell from 42 percent in 1996 to 33 percent in 2000. Id. On the bright side, declines in welfare rates left states more money to subsidize childcare and to expand Medicaid coverage, thus increasing coverage in other areas of the law.Id.

The message had become clear in the 1990s that the President was concerned with ending welfare altogether, while Congress was concerned with limiting any federal funding going towards welfare programs and heightening welfare program requirements. In short, the climate was not ideal for the success of a federal agency providing millions of dollars in legal services for the poor. It was as a result of this political and social climate that the Republican-controlled Congress took the opportunity to impose major restrictions on the LSC, passing the OCRAAin 1996 and starting the journey of Legal Services Corporation v. Velazquez.

LEGAL SERVICES CORP. V. VELAZQUEZ:

The Litigants and the Lawyers

Before considering the legal, social and political effects of Legal Services Corp. v. Velazquez, it is important to consider exactly who the people were who participated in the case and what paths brought them to the Velazquez.

Burt Neuborne for Carmen Velazquez, et al, Plaintiffs-Respondents

On the Plaintiff-Respondent side of the case was Carmen Velazquez, a grandmother living in the Bronx, New York. Respondents' Brief, Velazquez, 2000 WL 991809, at *3 (July 17, 2000). As a result of the OCRAA restrictions on LSC funding, section 504(a)(16) required Velazquez’s attorney, a Bronx Legal Services attorney funded by the LSC, to withdraw from representing her in a public-assistance claim. Id. Velazquez’s central argument in her public-assistancecase was that a particular New York regulation was unlawful because “it did not afford her a pre-termination opportunity to demonstrate that physical impairments prevented her from working.” Id. As her case fell under the restriction preventing LSC funded attorneys from representing any claim that involved a challenge to existing welfare laws, her attorney was forced to drop her case or lose all LSC funding. Id. see ORCAA §504(a)(16).Velazquez also felt the prohibition preventing LSC funding from bring used to fund any kind of class action litigation was unwarranted, and she wished to challenge this restriction as well. Velazquez, 985 F.Supp. at 323.

Velazquez was subsequently listed as representative of a group of plaintiffs in Velazquez v. Legal Services Corp., 985 F.Supp. 323 (E.D. NY 1997). Velazquez, 164 F.3d at 759. Specifically, the plaintiff group included lawyers employed by New York City LSC grantees, their indigent clients, private contributors to LSC grantees, and state and local public officials whose governments contribute to LSC grantees. The named plaintiffs included the following persons and not for profit corporations: Carmen Velazquez; Elisabeth Benjamin; Andrew J. Connick; Peggy Earisman; C. Virginia Fields; Guillermo Linares; Stanley Michels; Adam Clayton Powell, IV; Lawrence Seabrook; Lauren Shapiro; Olive Karen Stamm; Scott M. Stringer; Jeanette Zelhof; Centro Independiente de TrabajadoresAgricolas, Inc.; Community Service Society of New York, Inc.; Farmworkers Legal Services of New York, Inc.; Greater New York Labor-Religion Coalition; New York City Coalition to End Lead Poisoning; and WEP Workers Together.Respondents' Brief, Velazquez, 2000 WL 991809, at *3 (July 17, 2000).

Attorney Burt Neuborne, a nationally renowned civil liberties defender, represented the Plaintiff class in the litigation. Velazquez, 164 F.3d at 759, Legal Services Corp., 531 U.S. at 536. Mr. Neuborne was a former National Legal Director of the American Civil Liberties Union (ACLU), and is currently on the faculty of New York University School Law. Curriculum Vitae of Burt Neurborne, New York Law Faculty Profiles (2012). is also the Legal Director for the Brennan Center for Justice and a member of the New York City Human Rights Commission.Id. He received his law degree from Harvard Law School in 1964, and has spent his career fighting tirelessly for the rights of litigants whose civil rights have been violated. Id. Professionally, Mr. Neuborne strives to persuade judges to view the U.S. Constitution as a “living document” that must be re-interpreted every generation. The Case for Independence, 61 Or. St. B. Bull. 8, 16 (April 2001). He is a strong proponent of a broad interpretation of the Constitution and believes that a textualist interpretation alone is never sufficient. Id.

Alan Levine for the Legal Services Corporation, Defendant-Petitioner

Alternatively, on the Defendant-Petitioner side of the case was the Legal Services Corporation. As stated above, the Legal Services Corporation is a non-profit government-funded corporation, created by the Legal Services Corporation Act of 1974 for the purpose of providing funding for organizations that provide legal assistance to persons unable to otherwise afford representation. See supra pp. 2-5. The Legal Services Corporation of New York, the specific umbrella entity that operated in New York to receive and disburse LSC funds to grantee organizations in the New York City area, chose not to participate in the Velazquez v. Legal Services Corp. litigation. Respondents' Brief, Velazquez, 2000 WL 991809, at *3 (July 17, 2000).