Neighborhood Legal Services v. Legal Services Corp.

• Decision Date: 16 January 1979
• Docket Number: Civ. No. H-78-627.
• Court: U.S. District Court — District of Connecticut
• Parties: NEIGHBORHOOD LEGAL SERVICES, INC. v. LEGAL SERVICES CORPORATION.

466 F. Supp. 1148

NEIGHBORHOOD LEGAL SERVICES, INC. v. LEGAL SERVICES CORPORATION.

Civ. No. H-78-627.

United States District Court, D. Connecticut.

January 16, 1979.

COPYRIGHT MATERIAL OMITTED

John Rose, Jr., Louden, Byrne, Shechtman, Slater & Rose, Hartford, Conn., for plaintiff.

William H. Clendenen, Jr., Clendenen & Lesser, New Haven, Conn., for defendant.

MEMORANDUM OF DECISION

NEWMAN, District Judge.

This suit challenges the decision of defendant Legal Services Corporation ("the Corporation") to deny refunding to the plaintiff Neighborhood Legal Services, Inc. ("NLS") for the Farmworker Division of NLS. The Corporation, organized under the laws of the District of Columbia with its principal place of business there, was created by Congress in 1974 to provide funding for civil legal assistance to indigents, Pub.L. No.93-355, as the successor to the legal services component of the Office of Economic Opportunity. NLS is a private non-profit corporation, organized under the laws of the State of Connecticut and with its principal place of business in Hartford, Connecticut, providing legal services to low income persons in the Hartford area. In 1977 the Corporation provided $310,000 of the $550,000 budget of NLS, including $58,250 for the Farmworker Division.

On November 28, 1977, the Regional Director of the Corporation informed NLS of a preliminary decision to deny the application for refunding of the Farmworker Division. The Regional Director noted that prior to 1975 nearly 10,000 migrant workers had come from Puerto Rico to Connecticut annually to pick tobacco, and that with the 1975 decision of the tobacco growers to cease recruiting Puerto Rican migrant farm workers, this influx has been "virtually shut off."¹ NLS sought administrative review of this preliminary denial. See 45 C.F.R. § 1606.7. A hearing examiner was designated, and a hearing was held in April, 1978. On September 1, 1978, the hearing examiner submitted to the President of the Corporation proposed findings of fact, conclusions of law, and a memorandum opinion. The examiner concluded that there were 7,000 migrant workers and dependents in the area served by the NLS Farmworker Division and that the Corporation had a policy of funding migrant worker programs only where the service area included at least 10,000 migrant workers and dependents. However, the examiner concluded that the Corporation had violated 42 U.S. C.A. § 2996g(e) by failing to publish in the Federal Register its policies concerning funding of migrant worker programs. He identified two or three policies that required prior publication. In his memorandum opinion, he referred to the Corporation's decision to use migrant worker funds only for services to migrant workers, and the decision to fund only programs serving more than 10,000 migrant workers. In his conclusions of law (no. 6), he also referred to the need for publication of the Corporation's definition of "migrant." He concluded that the lack of publication of these policies rendered them an "ineffectual" basis for the denial of NLS's request for refunding (no. 5). He recommended that the 1978 application of NLS's Farmworker Division be funded (Examiner's opinion 1).

Pursuant to 45 C.F.R. § 1606.15, the President of the Corporation issued his final determination on October 19, 1978. He concluded that policies affecting the decision-making process of the Corporation's staff concerning allocation of funds are not required to be published. He therefore concluded that the Regional Director's preliminary decision to deny refunding should become the Corporation's final decision. This suit followed.

Jurisdiction of this Court is invoked pursuant to 28 U.S.C. §§ 1331 and 1332 and the Administrative Procedure Act. While the A.P.A. does not provide jurisdiction, Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977), federal question jurisdiction is present, as is diversity jurisdiction.

As a threshold matter, NLS contends that the decision of the President of the Corporation is a nullity because rendered beyond the 20-day limit specified in 45 C.F.R. § 1606.15. The President's decision was rendered after the 20-day period provided by regulation, but satisfied the more general statutory requirement of "timely" consideration. 42 U.S.C.A. § 2996j(2). While a decision rendered after the 20-day period specified in the regulation might warrant relief in some circumstances, it does not do so here. The Corporation provided NLS with interim funding not only during the time the matter was pending before the President, but for an additional 30 days after his decision.

The basic complaint of NLS is that the Corporation's policies concerning funding of migrant worker programs cannot be used to deny its application for 1978 funding for lack of publication in the Federal Register and an opportunity for public comment prior to their becoming effective. While NLS is thus complaining that the Corporation failed to observe a required rule-making procedure, its lawsuit also raises issues concerning lack of required publication. The requirements are distinct. Rule-making requires publication of a proposed rule in the Federal Register and an opportunity for public participation in the development of the final version of the rule. A publication requirement assures at least public notice, through the medium of the Federal Register, of an agency policy, even though the policy can become effective promptly.

The legislation creating the Corporation provides that the Corporation shall not be considered an agency of the Federal Government, 42 U.S.C.A. § 2996d(e)(1), and it is therefore exempt from the general coverage of the Administrative Procedure Act, including the A.P.A.'s rule-making provisions, 5 U.S.C.A. § 553. However, the Corporation's authorizing statute contains its own rule-making and publication requirements, 42 U.S.C.A. § 2996g(e).

Section 2996g(e) provides:

The Corporation shall afford notice and reasonable opportunity for comment to interested parties prior to issuing rules, regulations, and guidelines, and it shall publish in the Federal Register at least 30 days prior to their effective date all its rules, regulations, guidelines, and instructions.

The Corporation has apparently lumped the rule-making and publication requirements together and construed § 2996g(e) to require publication of "all generally applicable directives concerning the activities or conduct of recipients" but not "documents intended solely to govern the conduct of the Corporation's personnel." (May 15, 1978, Memorandum of Corporation's General Counsel, attached to response to hearing examiner's opinion). This distinction is consistent with judicial construction of the rule-making requirements of the A.P.A. See Noel v. Chapman, 508 F.2d 1023 (2d Cir. 1975). Some instructions to staff may have the effect of regulating the conduct of recipients, but with respect to criteria for funding, no rule-making requirement should be read into § 2996g(e) that is more rigorous than the rule-making provisions of the A.P.A., which specifically exempt matters relating to grants. 5 U.S. C.A. § 553(a)(2). See Opelika Nursing Home, Inc. v. Richardson, 356 F.Supp. 1338 (D.C.Ala.1973); Rodriguez v. Swank, 318 F.Supp. 289 (N.D.Ill.1970), aff'd, 403 U.S. 901, 91 S.Ct. 2202, 29 L.Ed.2d 677 (1971). Since Congress has not applied the rule-making provisions of the A.P.A. to the Corporation, the Corporation is entitled to conclude that its own rule-making requirement is not more rigorous than that of the A.P.A.

However, § 2996g(e), like the A.P.A., contains both a rule-making requirement and a publication requirement. Furthermore, the publication requirement of the A.P.A., § 3 of the original 1946 Act, as amended by the Freedom of Information Act (F.O.I.A.), 5 U.S.C.A. § 552, has been specifically applied by Congress to the Corporation. 42 U.S. C.A. § 2996d(g). Apart from rule-making requirements, this case thus presents the issues of whether funding criteria must be published and, if so, what consequences result from a failure to publish such criteria.

As with rule-making, there is no reason to think that the publication requirement imposed upon the Corporation by its own statute is more rigorous than the A.P.A. requirements. Unfortunately, neither the text nor the legislative history of § 2996g(e) sheds much light on its meaning. The House bill, H.R.7824, 93d Cong., 1st Sess., § 8(f) (1973), required publication of the Corporation's bylaws, rules, regulations, and guidelines. There is no indication of the coverage of these terms, although since bylaws were not subject to notice and comment requirements, the House bill does reflect the view that the publication requirement is broader than the rule-making requirement. The Senate Bill, S.2686, 93d Cong., 1st Sess., § 1008(f) (1973), required publication of the Corporation's rules, regulations, guidelines, instructions, and application forms. Since only rules, regulations, and guidelines were subject to notice and comment requirements, the Senate bill plainly contemplated a publication requirement broader than the rule-making requirement. The Conference Committee deleted "application forms" but left "instructions" within the category of documents required to be published but not subject to notice and comment. Conf.Rep.93-247, 93d Cong., 2d Sess. (1974), reprinted in 1974 U.S.Code Cong. & Admin.News, pp. 3872, 3897.

Nor does the legislative history of the Corporation's statute illuminate the provision subjecting the Corporation to the publication requirement of the F.O.I.A. This provision originated in § 8(e) of the House bill. The House Report states that the Corporation was made subject to the F.O.I.A. "so that appropriate documents in the Corporation's custody may be examined by members of the public." H.Rep.93-247, 93d Cong., 1st Sess. 13 (1973), reprinted in 1974 U.S.Code Cong. & Admin.News, pp. 3872, 3884. This...