Texas Rural Legal Aid, Inc. v. Legal Services Corp., 90-7109

Citation940 F.2d 685
Decision Date02 August 1991
Docket NumberNo. 90-7109,90-7109
Parties, 60 USLW 2093 TEXAS RURAL LEGAL AID, INC., et al. v. LEGAL SERVICES CORPORATION, Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Appeal from the United States District Court for the District of Columbia (Civil Action No. 89-3442).

Charles J. Cooper, with whom Michael A. Carvin was on the brief, Washington, D.C., for appellant.

Paul Nielsen, with whom Richard J. Oparil, Alan W. Houseman, and Linda E. Perle were on the brief, Washington, D.C., for appellees.

Before MIKVA, Chief Judge, and D.H. GINSBURG and SENTELLE, Circuit Judges.

Opinion for the Court filed by Chief Judge MIKVA.

MIKVA, Chief Judge:

Three legal services organizations funded by the national Legal Services Corporation ("LSC") brought suit in district court to enjoin the enforcement of a regulation promulgated by LSC that prohibits recipient programs from engaging in redistricting litigation or related activities. See 45 C.F.R. Part 1632 (1990). The district court ruled in favor of the local organizations and granted the injunction, holding that LSC lacked statutory authority to promulgate the regulation because caseload selection and priority decisions are committed by statute to the discretion of local program recipients. See Texas Rural Legal Aid, Inc. v. Legal Services Corp., 740 F.Supp. 880 (D.D.C.1990). We reverse the district court and uphold LSC's interpretation of its statutory authority to issue regulations of this kind. We reject LSC's argument, however, that the district court should be directed to dismiss appellees' claim that LSC acted arbitrarily and capriciously in promulgating the redistricting regulation or, alternatively, that this court should decide the claim on its merits. The district court, because of its resolution of the statutory question, did not reach this claim, and we believe it should have the opportunity to do so on remand. Finally, we also decline to reach appellees' First Amendment challenge (also not reached by the district court) to one aspect of the regulation.

I. BACKGROUND

LSC was created by the Legal Services Corporation Act of 1974 ("LSCA" or "the Act"), Pub.L. No. 93-355, 88 Stat. 378 (codified as amended at 42 U.S.C. Secs. 2996-2996l (1988)), "for the purpose of providing financial support for legal assistance in noncriminal proceedings or matters to persons financially unable to afford legal assistance." LSCA Sec. 1003(a), 42 U.S.C. Sec. 2996b(a). LSC makes and administers grants to approximately 325 local organizations that provide free legal assistance to eligible clients or perform other functions supporting the provision of legal services to clients. See LSCA Sec. 1006(a), 42 U.S.C. Sec. 2996e(a). The program recipients that directly assist clients (known as "basic field programs") employ more than 4,000 attorneys and serve more than 1.3 million clients annually. Their collective service areas cover the entire United States.

The Act requires basic field programs to assess the legal needs of the eligible client populations in their respective service areas and to establish caseload priorities responsive to those needs. See LSCA Sec. 1007(a)(2)(C), 42 U.S.C. Sec. 2996f(a)(2)(C). Although specific priorities vary, the basic field programs commit the bulk of their resources to providing legal assistance in areas such as housing, family law, entitlement programs, and consumer matters. See 54 Fed.Reg. 10,569 (1989).

The basic field programs traditionally have established their priorities without interference from LSC concerning the substantive nature of the matters they may handle, although the Act itself contains a number of limitations. These include bars on the use of funds granted under the Act for, inter alia, criminal defense work, political activity, labor organizing, strikes, abortion and school desegregation litigation, and lobbying. See LSCA Sec. 1007, 42 U.S.C. Sec. 2996f. Recipient programs are also prohibited from using private funds for any activity proscribed by the Act. See LSCA Sec. 1010(c), 42 U.S.C. Sec. 2996i(c). Recipient staff attorneys are barred from engaging in political activities, see LSCA Secs. 1006(e), 1007(a)(6), 42 U.S.C. Secs. 2996e(e), 2996f(a)(6), and generally may not engage in the outside practice of law. See LSCA Sec. 1007(a)(4), 42 U.S.C. Sec. 2996f(a)(4). LSC appropriations acts in recent years have added further limitations on the use of LSC funds. See Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1991, Pub.L. No. 101-515, Sec. 607, 104 Stat. 2101, 2148-53 (1990) (detailing restrictions currently in effect).

In March 1989, LSC published a proposed regulation prohibiting "any redistricting activity" by program recipients. 54 Fed.Reg. 10,569 (1989). After receiving and considering written comments, LSC revised the rule in certain respects and published it in final form on August 3, 1989, to be effective September 5, 1989. See 54 Fed.Reg. 31,954 (1989). The regulation defines "redistricting" as "any effort, directly or indirectly, to participate in the revision or reapportionment of a legislative, judicial, or elective district at any level of government, including influencing the timing or manner of the taking of a census." 45 C.F.R. Sec. 1632.2. Program recipients are prohibited under the regulation from "advocating or opposing any plan, proposal, or litigation intended to or having the effect of altering any redistricting at any level of government." 45 C.F.R. Sec. 1632.3. As revised prior to being finalized, the regulation makes clear that (1) litigation under the Voting Rights Act is permissible so long as it does not involve redistricting; (2) the prohibition does not prevent recipients from using public or tribal funds for the purposes for which they were provided, including redistricting (this tracks a general exception in section 1010(c) of the Act, 42 U.S.C. Sec. 2996i(c), regarding use of such funds for otherwise prohibited activities); (3) employees of recipients may be involved in redistricting activities so long as their involvement does not make use of program resources and is done on their own time, does not involve identification with the program, and is not done in the context of legal advice and representation; and (4) the regulation does not prohibit activities permitted by 45 C.F.R. Part 1604, governing the outside practice of law by program attorneys. See 45 C.F.R. Sec. 1632.4.

LSC's stated reason for promulgating the regulation was that redistricting activities "are not related to the delivery of basic day-to-day legal services to the poor and are intertwined with impermissible political activity." 54 Fed.Reg. at 10,569. LSC also argued that alternative sources of legal assistance typically are available to handle redistricting matters and that, because redistricting cases usually generate attorneys' fees, permitting recipients to work on such cases places them in competition with members of the private bar. See id.

Appellees, three basic field programs funded by LSC, filed suit in district court alleging that LSC lacked statutory authority to issue the regulation, that LSC acted arbitrarily and capriciously in promulgating the regulation, and that the regulation violates the First Amendment. The district court ruled on behalf of appellees on the basis of their statutory claim and therefore did not reach the other issues raised. The court relied primarily on section 1007(a)(2)(C) of the Act, as amended, 42 U.S.C. Sec. 2996f(a)(2)(C), which provides that LSC shall "insure that ... recipients, consistent with goals established by the Corporation, adopt procedures for determining and implementing priorities for the provision of [legal] assistance...." According to the district court, the language and legislative history of this provision demonstrate that "Congress intended that recipients be permitted to select their cases free of LSC control and subject only to congressional prohibitions." Texas Rural Legal Aid, 740 F.Supp. at 884. The Act authorizes LSC to play only a "limited administrative role," the court continued, and LSC's contrary position "distort[s] the text of the LSC Act into a grant of almost unlimited policy control of the entire program." Id. at 885. Accordingly, the court entered summary judgment in favor of appellees and enjoined enforcement of the regulation.

II. ANALYSIS
A. Chevron's Applicability to LSC Rulemaking

LSC is a federally-chartered nonprofit corporation of the District of Columbia. See LSCA Sec. 1003, 42 U.S.C. Sec. 2996b. Under the Act, LSC is not deemed an agency, department, or instrumentality of the federal government, nor are its directors or employees deemed to be officers or employees of the United States. See LSCA Secs. 1005(e), 1004(c), 42 U.S.C. Secs. 2996d(e), 2996c(c). There appear to be no federal court decisions addressing the applicability of the deference principles of Chevron U.S.A. Inc. v. Natural Resources Defense Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), to a federally-chartered corporation of this sort. Both parties assume that Chevron applies to interpretations of the Act by LSC and that deference therefore must be accorded to any reasonable interpretation it advances of ambiguous statutory provisions. The district court did not address the issue, although the court's opinion suggests that no deference is owed to LSC's position because it clearly conflicts with the Act and its legislative history.

We conclude that the basic principles of Chevron apply to the statutory scheme created by the Act and the role contemplated for LSC under it. Congress has "entrusted" LSC with the duty to "administer" the Act, see Chevron, 467 U.S. at 844, 104 S.Ct at 2782, and (as discussed more fully below) has delegated to LSC the authority to " 'fill any gap left ... by Congress.' " Id. at 843...

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