Legal Aid Services of or. v. Legal Services Corp.

Decision Date07 April 2008
Docket NumberNo. CV 05-1444-PK.,CV 05-1444-PK.
PartiesLEGAL 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, and Campaign for Equal Justice, Plaintiffs, v. LEGAL SERVICES CORPORATION, Defendant.
CourtU.S. District Court — District of Oregon

Michael B. Hallinan, Beverly C. Pearman, Stoel Rives, LLP, Don Hall Marmaduke, Anna Sortun, Scott G. Seidman, Tonkon Torp LLP, Kent B. Thurber, Davis Wright Tremaine, LLP, Portland, OR, Stephen Scott Walters, Allen Matkins Leek Gamble Mallory & Natsis LLP, San Francisco, CA, for Plaintiffs.

Alan Levine, Rachel B. Kane, Cooley Godward Kronish LLP, Allison J. Hersh, Kronish Lieb Weiner & Hellman, LLP, New York, NY, Richard J. Vangelisti, Vangelisti Kocher LLP, Portland, OR, William S. Freeman, Cooley Godward Kronish LLP, Palo Alto, CA, for Defendant.


PAPAK, United States Magistrate Judge.

On September 16, 2005, plaintiffs Legal Aid Services of Oregon ("LASO"), Oregon Law Center ("OLC"), Community Alliance of Tenants ("CAT"), Campaign for Equal Justice ("CEJ"), LASO employees Arron Guevara, Janice Morgan, and Sharon Lee Schwartz (collectively, the "LASO employees" and, collectively with LASO, the "LASO plaintiffs"), OLC employees David Henretty, Diane Schwartz Sykes and Lorey Freeman (collectively, the "OLC employees"), and LASO and OLC board member Donna Sather (collectively with LASO, OLC, CAT, CEJ, the LASO employees, and the OLC employees, the "nongovernmental plaintiffs"), filed this action against defendant Legal Services Corporation ("LSC") under 28 U.S.C. § 2201, alleging that certain restrictions placed on their activities by the Omnibus Consolidated Rescissions and Appropriations Act ("OCRAA") of 1996, Pub.L. No. 104-134, § 504, 110 Stat. 1321 (1996), reenacted in the Omnibus Consolidated Appropriations Act of 1997, Pub.L. No. 104-208, § 502, 110 Stat. 3009 (1997), and the implementing regulations promulgated thereunder by LSC, 45 C.F.R. § 1600 et seq., were unconstitutional both facially and as applied under the First and Fifth Amendments to the U.S. Constitution. The State of Oregon filed a separate action against LSC alleging that one of the implementing regulations, 45 C.F.R. § 1610.8 (the "Program Integrity Rule" or "PIR"), both impermissibly infringed on its sovereignty in violation of the Tenth Amendment and exceeded federal authority under the Spending Clause of the United States Constitution. Upon unopposed motion, the two actions were consolidated effective November 7, 2005. In addition, the U.S. Department of Justice's unopposed motion to intervene in the consolidated action was granted effective January 10, 2006.

On July 10, 2006, this court issued Findings and Recommendations recommending that all claims be dismissed other than the nongovernmental plaintiffs' as-applied challenge, as to which the court granted plaintiffs' oral motion requesting additional relevant discovery pursuant to Federal Civil Procedure Rule 56(f). On October 20, 2006, Judge Jones adopted this court's recommendation without modification.1

Now before the court are the United States' motion for summary judgment (# 106), LSC's motion for summary judgment (# 109), the LASO plaintiffs' motion for partial summary judgment as to the as-applied unconstitutionality of the PIR and substantive restrictions (# 115), and the LASO plaintiffs' motion to strike the declaration of Mark Freedman in support of LSC's motion for summary judgment (# 147). This court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331 and 1346(a)(2). For all of the reasons that follow, the LASO plaintiffs' motion to strike and motion for partial summary judgment are each denied, and the United States' and LSC's motions for summary judgment are each granted.

II. Motion for Summary Judgment

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Summary judgment is not proper if material factual issues exist for trial. See, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir.1995), cert. denied, 516 U.S. 1171, 116 S.Ct. 1261, 134 L.Ed.2d 209 (1996). In evaluating a motion for summary judgment, the district courts of the United States must draw all reasonable inferences in favor of the nonmoving party, and may neither make credibility determinations nor perform any weighing of the evidence. See, e.g., Lytle v. Household Mfg., Inc., 494 U.S. 545, 554-55, 110 S.Ct. 1331, 108 L.Ed.2d 504 (1990); Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000).

I. The Parties

Defendant Legal Services Corporation is a non-profit government-funded corporation created by Congress "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)2. The business of LSC is to make and administer grants to qualified civil legal services programs in each state of the nation. LSC grantee organizations use these federal funds to provide free legal services to indigent clients.

The United States Department of Justice has intervened in this matter to defend the challenged statutes and implementing regulations.

Plaintiff Legal Aid Services of Oregon is a nonprofit LSC grantee organization that provides civil legal services to low-income clients in Oregon. LASO operates out of approximately ten regional offices located throughout the state of Oregon, and serves over 50,000 clients per year (a number estimated to be under 18 percent of eligible Oregonians who need legal aid). LASO receives approximately 45 percent of its funding from the LSC. LASO brings this action in its own right and on behalf of its lawyer employees, including those who are not named parties to this action.

Named plaintiffs and LASO employees Arron Guevara, Janice Morgan, and Sharon Lee Schwartz bring this action in their own right as lawyer employees of LASO and also on behalf of the legal sendees clients with whom they share a confidential relationship. Plaintiff Guevara is the regional director of LASO's Pendleton office, plaintiff Morgan is the director of the LASO Farm Workers Program, which provides legal services to agricultural employees throughout the State of Oregon, and plaintiff Schwartz is the regional director of LASO's Roseburg office, which is responsible for providing legal services to Douglas County.

The Oregon Law Center is a nonprofit corporation established in 1995 as an affiliate of LASO. Like LASO, the OLC provides civil legal services to low-income clients in Oregon; unlike LASO, the OLC does not receive funding from the LSC, but rather relies on funding from other sources. Because the OLC does not receive funding from the LSC, it is not subject to the OCRAA restrictions, the as-applied constitutionality of which is the subject of this lawsuit. The OLC has six offices that are "paired" with LASO offices to coordinate the two organizations' delivery of services.

Named plaintiffs and OLC employees David Henretty, Diane Schwartz Sykes and Lorey Freeman, like the LASO employee plaintiffs, bring this action in their own right and on behalf of their clients with whom they share a confidential relationship. Plaintiff Henretty is the managing attorney of the OLC's Ontario office, plaintiff Sykes represents immigration, housing, and domestic violence clients in ten Oregon counties covering a combined area in excess of 10,000 square miles, and plaintiff Freeman is an attorney in the OLC's Portland office.

Plaintiff Donna Sather sits on the boards of directors of both LASO and the OLC, in both cases as a client representative.

Plaintiff Community Alliance of Tenants is a grassroots, tenant-membership organization that conducts housing rights education, and works on issues related to housing policy by administrative and legislative lobbying. CAT also manages a rental rights hotline that is staffed by volunteers. CAT has a high percentage of members who are low-income and regularly refers its members to LASO and OLC.

Plaintiff Campaign for Equal Justice is a private, nonprofit corporation that was formed by attorneys in 1991 to fund programs that provide civil legal services to poor Oregonians and to improve access to the civil justice system. CEJ has raised millions of dollars, primarily from individual Oregon attorneys and law firms, and in the past donated most of its funds to LASO. Since enactment of the OCRAA, CEJ has split its donations between LASO and OLC.

II. The 1996 Restrictions and the Interrelated Organizations Rule

From the inception of the LSC grant program, grantees have been subject to restrictions on their use of LSC funds. See 42 U.S.C. § 2996f(b)(1)-(10). These restrictions were substantially expanded in 1996, when Congress responded to criticisms of the LSC program by...

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