608 F.3d 1084 (9th Cir. 2010), 08-35467, Legal Aid Services of Oregon v. Legal Services Corp.

Docket Nº:08-35467, 08-35483, 08-35492.
Citation:608 F.3d 1084
Opinion Judge:TASHIMA, Circuit Judge:
Party Name:LEGAL AID SERVICES OF OREGON; Arron Guevara; Janice Morgan; Sharon Lee Schwartz; Donna Sather, Plaintiffs-Appellants, v. LEGAL SERVICES CORPORATION, Defendant-Appellee, and Oregon Law Center; David Henretty; Diane Schwartz Sykes; Lorey Freeman; Community Alliance of Tenants; Campaign for Equal Justice, Plaintiffs, United States of America, Defendan
Attorney:Stephen S. Walters (argued), Allen Matkins Leck Gamble Mallory & Natsis, San Francisco, CA, and Beverly C. Pearman, Stoel Rives, Portland, OR, for plaintiffs-appellants Legal Aid Services of Oregon and LASO plaintiffs. Don H. Marmaduke, Tonkon Torp, Portland, OR, for plaintiffs-appellants Oregon ...
Judge Panel:Before HARRY PREGERSON, PAMELA ANN RYMER, and A. WALLACE TASHIMA, Circuit Judges. PREGERSON, Circuit Judge, amended partial dissent:
Case Date:June 04, 2010
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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608 F.3d 1084 (9th Cir. 2010)

LEGAL AID SERVICES OF OREGON; Arron Guevara; Janice Morgan; Sharon Lee Schwartz; Donna Sather, Plaintiffs-Appellants,

and

Oregon Law Center; David Henretty; Diane Schwartz Sykes; Lorey Freeman; Community Alliance of Tenants; Campaign for Equal Justice, Plaintiffs,

v.

LEGAL SERVICES CORPORATION, Defendant-Appellee,

United States of America, Defendant-Intervenor-Appellee.

Legal Aid Services of Oregon; Arron Guevara; Janice Morgan; Sharon Lee Schwartz; Donna Sather; Oregon Law Center; David Henretty; Diane Schwartz Sykes; Lorey Freeman; Community Alliance of Tenants, Plaintiffs,

and

Campaign for Equal Justice, Plaintiff-Appellant,

v.

Legal Services Corporation, Defendant-Appellee,

United States of America, Defendant-Intervenor-Appellee.

Legal Aid Services of Oregon; Arron Guevara; Janice Morgan; Sharon Lee Schwartz; Donna Sather, Plaintiffs,

Campaign for Equal Justice, Plaintiff,

and

Oregon Law Center; David Henretty; Diane Schwartz Sykes; Lorey Freeman; Community Alliance of Tenants, Plaintiffs-Appellants,

v.

Legal Services Corporation, Defendant-Appellee,

United States of America, Defendant-Intervenor-Appellee.

Nos. 08-35467, 08-35483, 08-35492.

United States Court of Appeals, Ninth Circuit.

June 4, 2010

Argued and Submitted July 7, 2009.

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Stephen S. Walters (argued), Allen Matkins Leck Gamble Mallory & Natsis, San Francisco, CA, and Beverly C. Pearman, Stoel Rives, Portland, OR, for plaintiffs-appellants Legal Aid Services of Oregon and LASO plaintiffs.

Don H. Marmaduke, Tonkon Torp, Portland, OR, for plaintiffs-appellants Oregon Law Center and OLC plaintiffs.

Kent B. Thurber, Davis Wright Tremaine, Portland, OR, for plaintiff-appellant Campaign for Equal Justice.

William S. Freeman, Palo Alto, CA, for defendant-appellee.

Matthew M. Collette, Civil Division, U.S. Department of Justice, Washington, D.C., for defendant-intervenor-appellant.

Appeals from the United States District Court for the District of Oregon, Paul J. Papak, Magistrate Judge, Presiding. DC Nos. CV 05-1444 PK, CV 05-1443 PK.

Before HARRY PREGERSON, PAMELA ANN RYMER, and A. WALLACE TASHIMA, Circuit Judges.

ORDER

The opinion and partially dissenting opinion filed on November 23, 2009, and reported at 587 F.3d 1006, are hereby withdrawn and replaced by an amended opinion and amended partially dissenting opinion filed concurrently with this order. With these amendments, the panel has voted to deny the petition for panel rehearing, with Judge Pregerson voting to grant the petition. Judge Rymer has voted to deny the petition for rehearing en banc and Judge Tashima recommends denial. Judge Pregerson has voted to grant the petition for rehearing en banc.

The full court has been advised of the petition for rehearing en banc and no judge has requested a vote on whether to rehear the matter en banc. See Fed. R.App. P. 35(f). The petition for rehearing en banc is denied. No further petitions for rehearing will be entertained.

OPINION

TASHIMA, Circuit Judge:

We must determine whether restrictions on lobbying, soliciting clients, and participating in class actions (collectively, the " Restrictions" ) that Congress has imposed on legal aid organizations that receive federal grants through the Legal Services Corporation (" LSC" ), comport with the requirements of the First Amendment. In Legal Aid Soc'y of Haw. v. Legal Serv. Corp., 145 F.3d 1017 (9th Cir.1998) (" LASH III " ), we upheld the Restrictions as facially constitutional. We concluded that LSC's program integrity rule (" PIR" ) permits grantees to channel restricted speech, paid for with nonfederal dollars, through unrestricted affiliates, and thus, the Restrictions do not unconstitutionally condition the receipt of federal funds on the relinquishment of First Amendment rights. Id. at 1025.

Legal Aid Services of Oregon (" LASO" ), Oregon Law Center (" OLC" ), individual LASO and OLC attorneys and board members, and organizations representing LASO clients and private donors (collectively " Plaintiffs" ), present a two-pronged attack on the Restrictions and PIR. First, they contend that the Supreme Court's decision in Legal Serv. Corp. v. Velazquez, 531 U.S. 533, 121 S.Ct. 1043, 149 L.Ed.2d 63 (2001) (" Velazquez III " ) superseded LASH III, and that under Velazquez III, the Restrictions must be struck down as facially violative of the First Amendment. Next, they contend that, even if LASH III remains good law, LSC has applied the PIR to them in a manner that cuts off alternative avenues for engaging in protected speech.

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The district court dismissed Plaintiffs' facial challenge to the Restrictions, granted summary judgment in favor of LSC on their as-applied challenge to the PIR, and denied their motion for a new trial.

We have jurisdiction to review the final judgment of the district court under 28 U.S.C. § 1291, and affirm.

BACKGROUND AND PROCEEDINGS

I. LSC and the Restrictions

In 1974 Congress enacted the Legal Services Corporation Act (the " 1974 Act" ), Pub.L. No. 93-355, 88 Stat. 378 (codified as amended at 42 U.S.C. §§ 2996-2996 l ), establishing LSC as an independent nonprofit corporation. LSC's mission is to distribute congressionally appropriated funds to qualifying organizations " for the purpose of providing financial support for legal assistance in noncriminal proceedings or matters to persons financially unable to afford legal assistance." 42 U.S.C. § 2996b(a).

Congress has restricted the activities of LSC grantees since the grant program's inception, and the scope of those restrictions has expanded over time. The 1974 Act, for example, provided that LSC funds could not be used to provide legal assistance in school desegregation cases, cases in which a client seeks to procure an abortion or compel an institution to provide an abortion, military desertion cases, any " fee-generating case," and collateral attacks on criminal convictions. Id. § 2996f(b). Further, every year between 1983 and 1996, Congress included an appropriations rider in its annual spending bill " purport[ing] to eliminate legislative lobbying and administrative advocacy" among LSC grantees. S. Rep. 104-392 at 3 (Sept. 30, 1996).

In 1996, responding to concerns that LSC had strayed from its core mission of " fund[ing] basic legal services for poor individuals," id. at 1, Congress imposed new restrictions on the activities of LSC grantees. See Omnibus Consolidated Rescissions and Appropriations Act of 1996, Pub.L. No. 104-134, § 504, 110 Stat. 1321, 1321-53-57 (1996) (the " 1996 Act" ), reenacted in the Omnibus Consolidated Appropriations Act of 1997, Pub.L. 104-208, § 502, 110 Stat. 3009, 3009-59-60 (1997). The 1996 Act enacted, and subsequent LSC regulations implemented, restrictions on: (1) attempts to influence legislation and/or administrative rulemaking processes, 45 C.F.R. § 1612 et seq. ; (2) initiation of, and participation in, class action lawsuits, id. § 1617 et seq.; (3) soliciting clients, id. § 1638 et seq. 1 The Restrictions apply to all of the activities of an LSC grantee, including those paid for by non-LSC funds. 45 C.F.R. § 1610.4.

II. PIR and the LASH Litigation

In 1997, in response to a federal district court's injunction declaring several of the 1996 Act's restrictions facially unconstitutional insofar as they applied to LSC grantees' nonfederally funded activities, see Legal Aid Soc'y of Haw. v. Legal Serv. Corp., 961 F.Supp. 1402, 1422 (D.Haw.1997) ( " LASH I " ), LSC promulgated the

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PIR to clarify the circumstances under which a grantee could affiliate with an organization that engages in restricted activities.2 See 45 C.F.R. § 1610.8. The PIR provides that:

(a) A[n] [LSC grant] recipient must have objective integrity and independence from any organization that engages in restricted activities.

A recipient will be found to have objective integrity and independence from such an organization if:

(1) The other organization is a legally separate entity;

(2) The other organization receives no transfer of LSC funds, and LSC funds do not subsidize restricted activities; and

(3) The recipient is physically and financially separate from the other organization. Mere bookkeeping separation of LSC funds from other funds is not sufficient. Whether sufficient physical and financial separation exists will be determined on a case-by-case basis and will be based on the totality of the facts. The presence or absence of any one or more factors will not be determinative. Factors relevant to this determination shall include but will not be limited to:

(i) The existence of separate personnel;

(ii) The existence of separate accounting and timekeeping records;

(iii) The degree of separation from facilities in which restricted activities occur, and the extent of such restricted activities; and

(iv) The extent to which signs and other forms of identification which distinguish the recipient from the organization are present.

(b) Each recipient's governing body must certify to [LSC] within 180 days of the effective date of this part that the recipient is in compliance with the requirements of this section. Thereafter, the recipient's governing body must certify such compliance to [LSC] on an annual basis.

Id. LSC drafted the PIR to mirror the program integrity regulations associated with federal grants provided under Title X of the Public Health Service Act; regulations that withstood First Amendment scrutiny in Rust v. Sullivan, 500 U.S. 173, 111 S.Ct. 1759, 114 L.Ed.2d 233...

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