Regional Management Corp. v. Legal Services Corp.
| Decision Date | 02 July 1998 |
| Docket Number | No. 6:97-1311-20.,6:97-1311-20. |
| Citation | 10 F.Supp.2d 565 |
| Court | U.S. District Court — District of South Carolina |
| Parties | REGIONAL MANAGEMENT CORPORATION, INC.; Regional Finance Corporation of South Carolina, Inc.; and Regional Finance Corporation of Georgia, Inc., Plaintiffs, v. LEGAL SERVICES CORPORATION, Defendant. |
Wallace K. Lightsey, Gregory J. English, Greenville, SC, for Plaintiffs.
Roger G. Chandler, Spartanburg, SC, Peter Tepley, Columbia, SC, for Defendant.
This matter is before the court on the cross-motions of Regional Management Corporation, Inc.; Regional Finance Corporation of South Carolina, Inc.; Regional Finance Corporation of Georgia, Inc. (collectively, "RMC"); and Legal Services Corporation ("LSC") for summary judgment. With the consent of the parties, the court will consider these motions and resolve this case on the merits. All motions, responses, and replies are now before the court. Having read and digested the parties' arguments, for the reasons set forth herein, the court grants the plaintiff's motion in part and denies it in part. Similarly, the court grants a portion of the defendant's motion for summary judgment and denies the defendant's motion in part.
On February 1, 1996, RMC filed an administrative complaint with LSC, alleging wrongdoing by several local legal services organizations. RMC accused the South Carolina Legal Services Association ("SCLSA"), Palmetto Legal Services, Inc. ("PLS"), Neighborhood Legal Assistance Program, Inc. ("NLAP"), Susan B. Berkowitz ("Berkowitz"), Gary Weatherhead ("Weatherhead"), and Deborah Dantzler ("Dantzler") (hereinafter referred to by last name or collectively as "legal services attorneys") of lobbying in violation of federal law and LSC guidelines. Following this filing, RMC requested certain documents generated during LSC's investigation, citing the Freedom of Information Act, 5 U.S.C. §§ 552 et seq. ("FOIA"). Under a long-standing LSC policy, LSC refused to produce the documents. LSC issued its decision on December 16, 1996, concluding that no party named in RMC's complaint violated any federal law or LSC regulation. Following its decision, LSC released the disputed investigative documents to RMC.
On May 6, 1997, RMC filed the instant action seeking judicial review of LSC's decision. On March 18, 1998, following a hearing regarding discovery in the case, both parties agreed to allow the court to rule on the merits of the case. The parties filed motions for summary judgment on April 30, 1998. LSC filed a memorandum opposing RMC's motion on May 14, 1998. On May 15, 1998, RMC filed a corresponding opposition motion. Finally, on May 29, 1998, both RMC and LSC replied to one another's opposition motions. The matter is ripe for a decision.
This is a case about money and politics. RMC is a corporation that provides loans in various states, including South Carolina and Georgia. RMC lends its money to individuals who would not be able to obtain financial assistance from other institutions. LSC is a quasi-public corporation created by the United States Congress. See 42 U.S.C. §§ 2996, et seq. ("the Act"). LSC's charge is to "provide high quality legal assistance to those who would be otherwise unable to afford adequate legal counsel[.]" Id. at § 2996(2). It does this through the administration of funds to various local legal services organizations located throughout the country. RMC and LSC service the same clientele: individuals with low income who would not be able to obtain similar services elsewhere. The present conflict arose when these two entities attempted to offer their respective services to the same pool of individuals.
The episodes that form the basis of this action occurred at two distinct times and places. First, RMC asserts that Berkowitz, on behalf of SCLSA and PLS, illegally lobbied the 1994-95 session of the South Carolina General Assembly ("General Assembly") for the passage of a specific piece of legislation. Second, Berkowitz and the remaining legal services attorneys and groups are said to have violated federal guidelines by testifying before a Georgia administrative agency in 1995. The court will address each instance in turn.
In 1994 and 1995, LSC granted funds to several South Carolina legal service organizations, including SCLSA, PLS, and NLAP.1 All of these local groups performed similar functions which, in addition to traditional legal representation, included presenting client concerns to the South Carolina legislature. During the 1994-95 legislative year, the General Assembly considered South Carolina Act 135 of 1995 ("Act 135"). Act 135 sought to restrict the ability of financial institutions, such as RMC, to refinance certain outstanding loans and communicate with clients whose accounts were past due. Berkowitz, working through SCLSA and PLS, spoke with several legislators about the necessity of Act 135. Act 135 ultimately became law in South Carolina. Berkowitz, a registered lobbyist, does not deny these allegations. However, she maintains that she properly lobbied the General Assembly on behalf of one of her indigent clients.
The second incident crosses the border into Georgia. On November 6, 1995, Berkowitz, Weatherhead, and Dantzler, on behalf of SCLSA, PLS, and NLAP, respectively, traveled to Georgia at the request of the Georgia Commissioner of Insurance ("Georgia Commissioner"). The Georgia Commissioner was considering five separate license applications from RMC's Georgia subsidiary and sought information regarding RMC's business practices. Berkowitz, Weatherhead, and Dantzler all testified that RMC was not a reputable lending institution and that the Georgia Commissioner should deny RMC's requests. The Georgia Commissioner refused to grant RMC any licenses to do business in Georgia.
Convinced that Berkowitz, Weatherhead, and Dantzler had overstepped their bounds under the law, RMC filed an administrative complaint with LSC on February 1, 1996. RMC accused these individuals of violating federal rules regarding lobbying by LSC grant recipients. The following day, RMC, through their counsel, requested several items of information under the FOIA from LSC, including information regarding LSC's investigation of SCLSA, PLS and NLAP. While it produced many requested items, LSC told RMC that it would not provide any correspondence from the pending investigation, citing long-standing LSC policy. After exchanging several letters, on July 25, 1996, LSC sent RMC a final denial, refusing to provide any of the requested investigation materials. In this letter, LSC stated that the requested items were exempt from the FOIA under 5 U.S.C. § 552(b)(7)(A). Furthermore, LSC wrote that its investigation would be closed "within several weeks." (Mem. in Supp. of Pls.' Mot. for Summ. J. Ex. D, at. 1-2.)
Anticipating a quick decision by LSC, RMC did not immediately appeal this denial. After several weeks passed, with no conclusion to the investigation in sight, RMC filed an appeal of LSC's FOIA denial on October 21, 1996. RMC never received a response. On December 16, 1996, LSC issued its decision on RMC's administrative complaint, concluding that the lobbying at issue in both states did not violate federal guidelines. LSC then released the disputed FOIA documents to RMC on January 27, 1997. RMC filed the instant action on May 6, 1997.
The court runs square into the quagmire that has plagued this country's attempt to furnish legal assistance to the indigent. The dilemma involves the federal government's desire to fund indigent legal services while avoiding unwanted political activity. The plaintiff, RMC, charges that several LSC grant recipients overstepped their bounds and ventured into improper political activity with public funds. LSC, defending its review of these allegations, maintains that its grant recipients did no such thing. While their activity was political in nature, LSC declares that the activities of the local groups did not breach the federal legal services guidelines. In fact, LSC argues that RMC may not even challenge LSC's decision in this court. See (Def.'s Mem. in Supp. of Mot. for Summ. J. at 10-17.)
The court will first establish its authority over the issues and will then discuss the merits of the case.
1. History of LSC
In the early history of our country, private groups, funded by "private charities, municipalities, bar associations, and law schools," provided legal services to the poor. Paula Galowitz, Restrictions on Lobbying by Legal Services Attorneys: Redefining Professional Norms and Obligations, 4 B.U.Pub.Int.L.J. 39, 46 (1994). This continued until 1964, when the federal Office of Economic Opportunity commissioned a "task force to analyze the role of lawyers in the attack on poverty." Id. at 47; see also Warren E. George, Development of the Legal Services Corporation, 61 Cornell L.Rev. 681, 682 (1976). This commission led to the creation of an Office of Legal Services, designed to "give a full range of representation, including the advocacy of reforms in statutes, regulations, and administrative practices." Galowitz, supra, at 47. However, as the idea of legal services evolved, the organization quickly realized that to continue its public funding, it needed to distance itself from all things political.
This struggle to provide publicly-funded, non-political legal services to the poor would continue. In 1971, a Presidential advisory board combined with the American Bar Association to recommend the creation of a new corporation, separate from the Executive Branch, that would serve as an advocate for the nation's poor. Id. The result of this effort led to the creation of the Legal Services Corporation in 1974. In order to secure public funding for the new organization, its supporters had to...
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