US Supreme Court Briefs

Nos. 99-603 and 99-960


In the Supreme Court of the United States

LEGAL SERVICES CORPORATION, PETITIONER
v.
CARMEN VELAZQUEZ, ET AL.

UNITED STATES OF AMERICA, PETITIONER
v.
CARMEN VELAZQUEZ, ET AL.

ON WRITS OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES

SETH P. WAXMAN
Solicitor General
Counsel of Record
DAVID W. OGDEN
Acting Assistant Attorney
General
EDWIN S. KNEEDLER
Deputy Solicitor General
BETH S. BRINKMANN
Assistant to the Solicitor
General
BARBARA L. HERWIG
MATTHEW M. COLLETTE
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217


QUESTION PRESENTED

Section 504(a) of the Omnibus Consolidated Rescissions and AppropriationsAct of 1996, Pub. L. No. 104-134, 110 Stat. 1321-53, and subsequent appropriationsstatutes incorporating that provision, preclude entities that receive federalfunds from the Legal Services Corporation (LSC) from "initiat[ing]legal representation or participat[ing] in any other way, in litigation,lobbying, or rulemaking, involving an effort to reform a Federal or Statewelfare system." § 504(a)(16), 110 Stat. 1321-55. Section 504(a)(16)specifies that the provision should not be construed, however, "topreclude a recipient from representing an individual eligible client whois seeking specific relief from a welfare agency if such relief does notinvolve an effort to amend or otherwise challenge existing law in effecton the date of the initiation of the representation." Ibid.

The question presented is whether the statutory provision permitting recipientsof LSC funds to represent individuals seeking relief from a welfare agencyonly if the relief sought would not amend or change existing law is faciallyinvalid under the First Amendment.

PARTIES TO THE PROCEEDING

The United States intervened in the district court, was intervenor-appelleein the court of appeals, and is petitioner in United States v. Velazquez,No. 99-960. The Legal Services Corporation was a defendant in the districtcourt, was appellee in the court of appeals, and is petitioner in LegalServices Corp. v. Velazquez, No. 99-603. The Court granted the petitionsfor a writ of certiorari in the two cases at the same time and consolidatedthe cases. 120 S. Ct. 1553 (2000).

The following parties were plaintiffs in the district court, were appellantsin the court of appeals, and are respondents before this Court in both cases:Carmen Velazquez; WEP Workers Together!; Community Service Society of NewYork, Inc.; New York City Coalition to End Lead Poisoning; Centro Independientede Trabajadores Agricolas, Inc.; Greater New York Labor-Religion Coalition;Farmworkers Legal Services of New York, Inc.; Peggy Earisman; Olive KarenStamm; Jeanette Zelhof; Elisabeth Benjamin; Jill Ann Boskey; Lauren Shapiro;Andrew J. Connick; C. Virginia Fields; Guillermo Linares; Stanley Michels;Adam Clayton Powell, Jr. IV; Lawrence Seabrook; and Scott M. Stringer.




In the Supreme Court of the United States

No. 99-603

LEGAL SERVICES CORPORATION, PETITIONER
v.
CARMEN VELAZQUEZ, ET AL.

No. 99-960
UNITED STATES OF AMERICA, PETITIONER
v.
CARMEN VELAZQUEZ, ET AL.

ON WRITS OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES


OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-50a)1 is reported at 164F.3d 757. The opinion of the district court (Pet. App. 51a-99a) is reportedat 985 F. Supp. 323.

JURISDICTION

The judgment of the court of appeals was entered on January 7, 1999. A petitionfor rehearing was denied on July 8, 1999. The Legal Services Corporationfiled a petition for a writ of certiorari on October 6, 1999. Legal Servs.Corp. v. Velazquez, No. 99-603. On September 28, 1999, Justice Ginsburgextended the time for the United States to file a petition for a writ ofcertiorari to and including November 5, 1999, and, on October 27, 1999,further extended the time to and including December 5, 1999 (a Sunday).The United States filed a petition for a writ of certiorari on December6, 1999 (No. 99-960). On April 3, 2000, the Court granted the petitionsfor a writ of certiorari and consolidated the cases. 120 S. Ct. 1553. Thejurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

CONSTITUTIONAL PROVISIONS, STATUTES AND REGULATIONS INVOLVED

1. The First Amendment to the United States Constitution provides, in relevantpart:

Congress shall make no law * * * abridging the freedom of speech, or ofthe press; or the right of the people peaceably to assemble, and to petitionthe Government for a redress of grievances.

2. Section 504(a) of the Omnibus Consolidated Rescissions and AppropriationsAct of 1996, Pub. L. No. 104-134, 110 Stat. 1321-53, is set forth in relevantpart at App., infra, 1a-9a.

The provisions in subsequent annual appropriations acts specifying thatSection 504 shall continue to apply to recipients of funds from the LegalServices Corporation are set forth in relevant part at App., infra, 18a-25a.

3. The regulations promulgated by the Legal Services Corporation regardingprogram integrity requirements for its fund recipients and the implementationof Section 504(a)(16), 45 C.F.R. 1610.8, 1639.1-1639.6, are set forth atApp., infra, 26a- 30a.

STATEMENT

1. a. In 1974, Congress enacted the Legal Services Corporation Act (theLSC Act), Pub. L. No. 93-355, 88 Stat. 378, 42 U.S.C. 2996 et seq., creatingthe Legal Services Corporation (LSC) as an independent, non-profit corporationto "provide financial assistance to qualified programs furnishing legalassistance to eligible clients." 42 U.S.C. 2996e(a)(1)(A). The Actauthorizes LSC to make grants to, and to contract with, individuals, organizations,and (in certain limited circumstances) state and local governments, forthe purpose of providing legal assistance to eligible clients. Ibid. LSCreceives funds appropriated annually by Congress to provide such financialassistance. LSC then distributes those funds to programs, individuals, andother entities that have submitted applications describing their proposedlegal services activities. 42 U.S.C. 2996b(a), 2996e(a). The LSC Act limitsLSC financial support to "legal assistance in noncriminal proceedingsor matters" for "persons financially unable to afford legal assistance."42 U.S.C. 2996b(a).

From the outset, the LSC Act has prohibited fund recipients from, interalia, making available any LSC funds, program personnel, or equipment toany political party, to any political campaign, or for use in "advocatingor opposing any ballot measures." 42 U.S.C. 2996e(d)(3) and (4). TheLSC Act also has prohibited the use of LSC funds to influence any governmentalagency action or legislation, except upon request or when necessary to representan eligible client. 42 U.S.C. 2996f(a)(5). And the LSC Act has prohibitedthe use of LSC funds to provide legal assistance with regard to any proceedingsrelating to any nontherapeutic abortion, elementary or secondary schooldesegregation, military desertion, or violation of the selective servicestatute. 42 U.S.C. 2996f(b)(8)-(10) (1994 & Supp. III 1997). Finally,the LSC Act has, from the outset, prohibited LSC fund recipients from bringingany class action suits directly, or through others, unless express approvalis obtained from the recipient's project director according to establishedpolicies. 42 U.S.C. 2996e(d)(5). Those restrictions in the LSC Act applyto recipients' activities supported by other federal funds or private funds,but not those supported by non- federal public funds or tribal funds. 42U.S.C. 2996i(c).2

b. On April 26, 1996, at a time when proposals were before Congress to eliminateLSC because of controversy over certain activities pursued by some LSC fundrecipients, Congress enacted a provision (Section 504) that expanded thescope of restrictions on the activities of LSC fund recipients. See OmnibusConsolidated Rescissions and Appropriations Act of 1996 (1996 Act), Pub.L. No. 104-134, § 504, 110 Stat. 1321-53. In each subsequent annualappropriations act, Congress has specified that Section 504 shall continueto apply to LSC fund recipients.3

Section 504 precludes LSC fund recipients from representing certain partiesin a variety of specified circumstances. Under Section 504(a)(16), whichis at issue here, recipients may not "initiate[] legal representationor participate[] in any other way, in litigation, lobbying, or rulemaking,involving an effort to reform a Federal or State welfare system." 1996 Act,§ 504(a)(16), 110 Stat. 1321-55. That section further specifies, however,that it "shall not be construed to preclude a recipient from representingan individual eligible client who is seeking specific relief from a welfareagency if such relief does not involve an effort to amend or otherwise challengeexisting law in effect on the date of the initiation of the representation."§ 504(a)(16), 110 Stat. 1321-55 to 1321-56.

Other restrictions set forth in Section 504 provide, inter alia, that LSCfund recipients may not: advocate or oppose reapportionment of a legislative,judicial, or elective district, or participate in any litigation relatedthereto; attempt to influence the "issuance, amendment, or revocationof any executive order, regulation," or similar government promulgation;attempt "to influence any part of any adjudicatory proceeding of anyFederal, State, or local agency" that is formulating general agencypolicy; attempt to influence "the passage or defeat of any legislation,constitutional amendment, referendum, initiative * * * of the Congress ora State or local legislative body"; initiate or participate in class-actionlawsuits; represent aliens who are unlawfully present in the United Statesexcept in cases of domestic violence; conduct a training program "forthe purpose of advocating a particular public policy or encouraging a politicalactivity"; participate "in any litigation with respect to abortion";"participate[] in any litigation on behalf of a person incarceratedin a Federal, State, or local prison"; or defend a person in a proceedingto evict the person from a public housing project if the person has beencharged with engaging in illegal drug activity that threatens the healthor safety of a tenant or employee of the housing agency. 1996 Act, §504(a)(1), (2), (3), (4), (7), (11), (12), (14), (15) and (17); 110 Stat. 1321-53 to 1321-56; 1997 Act, § 502(a)(2)(C), 110 Stat. 3009-60. Those restrictions apply to allof the activities of an LSC fund recipient, including those paid for bynon-LSC funds (except for tribal funds). 1996 Act, § 504(d)(1) and(2), 110 Stat. 1321-56.4

2. On December 2, 1996, LSC issued a final rule to "clarif[y] the extentto which conditions on a recipient's non-LSC funds apply when a recipienttransfers its funds to another person or entity." 61 Fed. Reg. 63,749.5LSC noted that the statutes do not themselves address how and to what extentthe restrictions they impose should be applied with respect to funds thatare transferred by a recipient to another entity. LSC explained, however,that it "has historically applied such provisions to transfers of arecipient's funds," and that that "policy reflects the intentof [LSC] that transfers of funds not become a means to circumvent statutoryconditions on a recipient's LSC and non-LSC funds." Id. at 63,752.

The final rule differentiated between the transfer of LSC and non-LSC funds.With respect to transfers of LSC funds, the rule specified that the Section504 prohibitions and requirements would generally "apply to both theLSC funds and the non-LSC funds of the entity" to which LSC funds weretransferred. LSC explained that

[t]his requirement is based on [LSC's] interpretation of legislative intentthat the statutory conditions on LSC funds attach to a recipient's non-LSCfunds and that, in most situations, this should also be the case when LSCfunds are transferred by a recipient. Otherwise, recipients would be ableto avoid legislative intent by simply transferring their LSC funds to otherpersons or entities.

61 Fed. Reg. at 63,752. In the case of a transfer of non-LSC funds, theprohibitions and requirements on the use of funds generally applied "tothe funds transferred, but * * * not * * * to the other non-LSC funds"of the transferee. Id. at 63,753.

Another issue that LSC had to resolve was whether, and to what extent, thestatutes' restrictions should apply to organizations that are "interrelated"with an LSC fund recipient. LSC made clear that the new restrictions onthe use of LSC and non-LSC funds apply to any "interrelated" organizationjust as if it were the recipient itself. J.A. 66-67. LSC previously haddefined the term "interrelated organization" as an organizationfor which the LSC fund recipient determined "the direction of managementand policies" or influenced the organization "to the extent thatan arm's length transaction may not be achieved." 50 Fed. Reg. 49,279(1985).

3. a. In January, 1997, a suit was brought against LSC in the United StatesDistrict Court for the District of Hawaii. The plaintiffs contended, interalia, that the 1996 and 1997 Acts and the implementing regulations werefacially invalid under the First and Fifth Amendments to the extent theyprevented LSC fund recipients from spending non-federal funds to pursueactivities protected by the First Amendment. See Legal Aid Soc'y of Haw.v. Legal Servs. Corp., 961 F. Supp. 1402 (D. Haw. 1997) (LASH I).

On February 14, 1997, the district court in LASH I entered a preliminaryinjunction against enforcement of certain of the restrictions, includingSection 504(a)(16). It reasoned that Congress may restrict the use of fundsin conjunction with a federally subsidized program only if adequate alternativechannels exist whereby the grant recipients can pursue the unsubsidizedactivities. LASH I, 961 F. Supp. at 1408, 1412-1414 (citing Rust v. Sullivan,500 U.S. 173 (1991); FCC v. League of Women Voters, 468 U.S. 364 (1984);Regan v. Taxation With Representation, 461 U.S. 540 (1983)). The LASH Idistrict court found that there was a fair likelihood that the plaintiffscould establish that LSC's regulations, and in particular LSC's interrelated-organizationstandard (see pp. 7-8, supra), did not allow a recipient to form an affiliateorganization through which it could pursue restricted activities using non-LSCfunds and, therefore, did not provide alternative channels through whichrecipients could exercise their First Amendment rights. Id. at 1414-1417.

b. On March 14, 1997, following the decision in LASH I, LSC issued a newinterim rule concerning the use of non-LSC funds by LSC fund recipients.62 Fed. Reg. 12,101-12,104. The revisions were intended to "reinforce[LSC's] commitment to the statutory structure of prohibitions and restrictionsintended by Congress, without risking the possible infringement of constitutionalrights where the prohibited activities are supported entirely by non-LSCfunds and carried out without subsidization by the LSC grantee." Id.at 12,101. LSC explained that the court's preliminary injunction in LASHI "was grounded in pertinent part on its understanding of [LSC's] interrelatedorganization policy." Ibid. In an effort to address the alleged constitutionalinfirmities, the new interim rule deleted the provisions on transfers ofnon-LSC funds and added a new section allowing LSC fund recipients "tohave an affiliation or relationship" with a separate organization thatengages in restricted activities with non-LSC funds so long as the relationshipmeets new standards of program integrity, even if the recipient and organizationare interrelated-i.e., even if the recipient controls, is controlled by,or shares common control with the other organization. Id. at 12,101-12,102.

c. On May 21, 1997, after receiving comments, LSC issued a new final rule.62 Fed. Reg. 27,695. LSC noted that parts of its 1996 final rule remainedunchanged, including the provision that, when a recipient transfers LSCfunds, the restrictions regarding the use of funds generally apply bothto the transferred LSC funds and to the non-LSC funds of the transferee.Id. at 27,696-27,697; see 61 Fed. Reg. at 63,752. At the same time, however,LSC confirmed its deletion (as set forth in the March 14, 1997, interimrule) of the provision concerning an LSC fund recipient's transfer of non-LSCfunds, noting that "[t]here is no statutory provision requiring thata transfer of non-LSC funds be subject to LSC restrictions." 62 Fed.Reg. 27,697.

The new final rule revised the program-integrity standards to delete entirelythe provisions regarding interrelated organizations and to provide "guidanceregarding a recipient's relationship with any organization, independentor affiliated, that engages in restricted activities." 62 Fed. Reg.at 27,697. The new final rule provides that an LSC fund recipient must havean objective integrity and independence from any organization that engagesin restricted activities, and in particular that three requirements mustbe satisfied:

(1) the other organization must be a separate legal entity; (2) the otherorganization must not receive LSC funds directly or through any transfer,and no LSC funds may subsidize restricted activities; and (3) the LSC fundrecipient must maintain a physical and financial separation from the otherorganization. The last factor is to be applied based on the totality ofcircumstances, including the existence of separate personnel, accountingand timekeeping records, the degree of separation of facilities, and theextent to which the entities are distinguished from each other by signsor other indicia. Id. at 27,698, 27,700; 45 C.F.R. 1610.8(a)(3)(i)-(iv).LSC noted that "because the standards will allow control at the Boardlevel, recipients will have an avenue through which to engage in restrictedactivities as long as they comply with the program integrity standards."62 Fed. Reg. at 27,697. LSC noted that the program-integrity standards werefashioned after those found to be constitutional in Rust v. Sullivan, 500U.S. 173 (1991). 62 Fed. Reg. at 27,697.6

d. On June 5, 1997, LSC adopted final regulations clarifying the provisionsof Section 504(a)(16). 62 Fed. Reg. 30,766. The regulations interpretedthe statutory phrase "an effort to reform a Federal or State welfaresystem," to include "all of the provisions, except for the ChildSupport Enforcement provisions of Title III, of the Personal Responsibilityand Work Opportunity Reconciliation Act of 1996, * * * 110 Stat. 2105 (1996),and subsequent legislation enacted by Congress or the States to implement,replace or modify key components" of that Act, and legislation enacted"by States to replace or modify key components of their General Assistanceor similar means-tested programs." 45 C.F.R. 1639.2(a); see App., infra,28a. In addition, the regulations defined the statutory term "existinglaw" to mean "Federal, State or local statutory laws or ordinanceswhich are enacted as an effort to reform a Federal or State welfare systemand regulations issued pursuant thereto." 62 Fed. Reg. at 30,766; 45C.F.R. 1639.2(b).

4. Respondents filed the instant suit in the United States District Courtfor the Eastern District of New York on January 14, 1997. Respondents arecertain lawyers employed by LSC fund recipients, their indigent clients,and various contributors to LSC fund recipients. They alleged that the restrictionson the use of LSC and non-LSC funds by LSC fund recipients violated a varietyof federal constitutional provisions. The United States intervened pursuantto 28 U.S.C. 2403(a) to defend the constitutionality of the restrictions.C.A. App. 437, 504.

On March 21, 1997 (before the new final rule was issued by LSC on May 27,1997), respondents moved for class certification and a preliminary injunction,seeking to prevent LSC from imposing any sanctions on anyone based on theuse of non-LSC funds by LSC fund recipients to engage in certain activities,including "to challenge the constitutionality of welfare statutes"or "to challenge the legality of welfare regulations or statutes."C.A. App. 129-130. On December 22, 1997 (after LSC issued its new finalrule), the district court denied respondents' motion for a preliminary injunction.7The court concluded that respondents had failed to establish a probabilityof success on the merits. Pet. App. 53a-54a. The court held, following Rustv. Sullivan, 500 U.S. 173 (1991), that LSC's final regulations leave openadequate alternative channels through which LSC fund recipients may engagein otherwise prohibited activities, because the regulations allow recipientsto create and control affiliate organizations that engage in such activities.The court found that LSC's regulations requiring separation between LSCfund recipients and their affiliates are consistent with the statutory fundingrestrictions, Pet. App. 83a-88a, and that LSC's program-integrity requirementsare appropriately tailored to serve the government's interest in preventingthe appearance that the government is endorsing activities that Congressdoes not wish to fund. Id. at 88a-94a.

Respondents sought to distinguish Rust (which concerned regulations thatprecluded programs receiving federal funding for family-planning servicesfrom engaging in abortion counseling, referral, and activities advocatingabortion as a method of family planning) on the grounds that Rust did notinvolve a lawyer-client relationship. Pet. App. 95a-98a. The court rejectedthat argument because, while the lawyer-client relationship implicates FirstAmendment values, "the restrictions pertaining to LSC fund recipientsdo not significantly impinge on the lawyer-client relationship." Id.at 97a. The court noted in this regard that the LSC regulations "broadlypromote the lawyer-client relationship by providing that the lawyer maycounsel the client, refer the client to another attorney, and explain tothe client that LSC restrictions preclude the lawyer from engaging in theactivity the client may wish to undertake." Id. at 98a.8

5. The court of appeals affirmed in part and reversed in part. Pet. App.1a-50a.

a. The court first rejected respondents' argument that LSC's final regulations(allowing recipients to create affiliated organizations to engage in activitiesthat are prohibited to recipients or transferees of LSC funds) are not basedon a reasonable interpretation of the 1996 Act and that, without the regulations,the statutory provisions are unconstitutional because they do not leaveopen adequate alternative channels for expressive activities. See Pet. App.12a-14a. The court noted that LSC's regulations are entitled to deferenceunder Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467U.S. 837 (1984). The court then emphasized that the 1996 Act does not addresswhether a recipient's transfer of non-LSC funds to an affiliate and theaffiliate's use of those funds for a restricted activity constitutes anexpenditure by a recipient under the Act. Pet. App. 13a-14a. The court concludedthat LSC's final regulations allowing such arrangements rest on a permissibleconstruction of the Act and, therefore, are valid under Chevron. Id. at12a-14a.9

The court also held that LSC's program-integrity regulations, which aredesigned to ensure the independence of an affiliated organization from theLSC fund recipient, do not impose "unconstitutional conditions"on the recipient of LSC funds by unreasonably burdening a recipient's useof nonfederal funds to engage in activity protected by the First Amendment.Pet. App. 17a-23a. The court found that the existence of adequate alternativeavenues for engaging in restricted activities through affiliates is sufficientto satisfy First Amendment scrutiny. Id. at 17a-21a (discussing TaxationWith Representation, League of Women Voters, and Rust). The court furtherheld that respondents' allegations that the program-integrity regulationsare unduly burdensome and inadequately justified were insufficient to sustaintheir facial challenge to those regulations. Id. at 22a-23a. The court noted,however, that LSC fund recipients remain free to bring as-applied challengesto the program-integrity rules. Id. at 23a.

The court rejected respondents' claim that certain restrictions on the useof non-LSC funds, including the welfare reform provision, impermissiblyencroach on the relationship between lawyer and client. Pet. App. 15a-17a.The court pointed out that this Court had observed in Rust that "[i]tcould be argued * * * that traditional relationships such as that betweendoctor and patient should enjoy protection under the First Amendment fromGovernment regulation, even when subsidized by the Government." Id.at 15a (quoting Rust, 500 U.S. at 200). The Court in Rust did not addressthat argument, however, because it found that the doctor-patient relationshipestablished under the program at issue was not "sufficiently all encompassingso as to justify an expectation on the part of the patient of comprehensivemedical advice." Ibid. Similarly here, the court of appeals reasonedthat, even assuming "that an 'all-encompassing' lawyer-client relationshipenjoys heightened protection from government regulation, the lawyer-clientrelationships funded by LSC are no more 'all-encompassing' than the doctor-patientrelationships * * * which were considered in Rust." Id. at 16a. Thecourt of appeals noted that the LSC Act has always limited the range ofservices available through LSC grantees (see pp. 3-4, supra) and that granteeshave historically limited their representation to selected issues and are"typically 'able to meet only a fraction of the demand for their services.'"Ibid. (quoting Overview of LSC at 4 (1996) (http://Hsi.nes/lsc/ about.html)).The court also noted that because LSC-funded lawyers are bound to explainthe restrictions to potential and actual clients, and are able to referclients to lawyers who are not subject to such restrictions, there is noreason to fear that clients will detrimentally rely on LSC-funded lawyersfor a full range of legal services. Ibid.

The court of appeals rejected respondents' claims of impermissible viewpointdiscrimination with respect to the general restrictions on lobbying of legislativebodies (§ 504(a)(4), 110 Stat. 1321-53); attempting to influence theissuance, amendment, or revocation of execu- tive orders, or regulations,or statements of general applicability by any federal, state, or local agency (§ 504(a)(2), 110 Stat. 1321-53); and attempting to influence any partof an adjudicatory proceeding of any federal, state, or local agency thatis designed for the formulation or modification of any agency policy ofgeneral applicability (§ 504(a)(3), 110 Stat. 1321-53). Pet. App. 23a-25a.The court held that those restrictions are "based on subject matter,not viewpoint," and merely prohibit fund recipients from engaging inactivities outside the scope of the program. Id. at 24a.

Finally, with regard to the parallel restriction in Section 504(a)(16),the court similarly upheld as viewpoint neutral the general prohibitionsagainst an LSC fund recipient initiating legal representation or otherwiseparticipating in litigation, lobbying, or rulemaking "involving aneffort to reform a Federal or State welfare system," because thoseprohibitions can be read as prohibiting activity that either supports oropposes welfare reform. Pet. App. 25a-28a. The court invalidated, however,as impermissible viewpoint discrimination, the proviso to Section 504(a)(16)that allows individual representation of a client seeking specific relieffrom a welfare agency, but only if the relief does not involve an effortto amend or otherwise challenge existing law. Id. at 28a.

The court acknowledged that in Rust this Court stated that "the Governmenthas not discriminated on the basis of viewpoint" when "it hasmerely chosen to fund one activity to the exclusion of the other,"Pet. App. 30a, and that those words from Rust "seem on their face"to support the dissenting view of Judge Jacobs, who would have sustainedthe provision. Id. at 31a. The majority stated, however, that it "doubt[ed]these words can reliably be taken at face value." Ibid. The court thoughtit "inconceivable that the Supreme Court that approved the Rust regulationwould have intended its language to authorize grants funding support for,but barring criticism of, governmental policy." Id. at 32a. The courtdistinguished Rust and National Endowment for the Arts v. Finley, 524 U.S.569 (1998), on the ground that, in its view, a lawyer's argument that astatute or rule is unconstitutional or otherwise illegal "falls farcloser to the First Amendment's most protected categories of speech thanabortion counseling or indecent art," and that the welfare provisorepresents an attempt to drive ideas from the "marketplace" ofthe courtroom. Pet. App. 33a-34a.

The court of appeals directed the district court to enter a preliminaryinjunction barring enforcement of the proviso against an LSC fund recipientrepresenting individual clients who seek relief that would involve amendmentor invalidation of existing law. Pet. App. 37a. The court thereby effectivelybroadened the provision allowing representation in individual welfare casesto extend the clause to all cases where an individual client seeks specificrelief from a welfare agency. Id. at 38a.

b. Judge Jacobs concurred in the majority's decision insofar as it sustainedthe funding restrictions, but dissented insofar as it struck down the provisoin Section 504(a)(16). Pet. App. 38a-50a. In Judge Jacobs' view, this casefalls within the teaching of Rust because the LSC Act as a whole funds aprogram that provides certain services and the proviso to Section 504(a)(16)merely prohibits LSC fund recipients from "rendering services thatfall outside the scope of the program." Id. at 44a; see also id. at40a, 46a-47a. He did not view as controlling this Court's decision in Rosenbergerv. Rector & Visitors of University of Virginia, 515 U.S. 819 (1995),cited by the majority (Pet. App. 29a-30a), because an LSC fund recipient"is not a public forum or the participant in a public forum in whichit is invited to contribute its point of view; it is a contractor furnishingservices that the government wants provided, and in that way it resemblesthe recipients of Title X funds in Rust, and any of the private agenciesthat carry out myriad other government programs that have limited and specifiedpurposes." Id. at 40a.

Judge Jacobs emphasized that the invalidated proviso does not disfavor thespeech of clients, because the limitation applies regardless of the groundon which the client seeks relief that would amend or invalidate existinglaw. He also emphasized that "[t]he majority has not successfully identifieda disfavored viewpoint of any person in any public forum. To the extentthat this legislation funds a 'viewpoint' at all, it is one that advocatesthe delivery of welfare benefits to claimants." Pet. App. 39a.

SUMMARY OF ARGUMENT

Section 504(a)(16) of the Omnibus Consolidated Rescissions and AppropriationsAct of 1996, Pub. L. No. 104-134, 110 Stat. 1321-55, prohibits representationby LSC fund recipients of an individual seeking relief from a welfare agency,if the relief sought involves an effort to amend or otherwise challengeexisting welfare law. Thus, the proviso identifies a category of cases inwhich LSC fund recipients may not provide legal representation-cases inwhich the relief sought includes an effort to amend or otherwise challengeexisting welfare law. That limitation on the LSC program does not constituteimpermissible viewpoint discrimination. The Section 504(a)(16) proviso ispart of a generally applicable and permissible limitation on a federal programand furthers implementation of welfare programs by providing LSC-fundedlegal representation to individuals who have been wrongly denied benefitsthe government intended for them to receive under the welfare programs.The fact that Congress did not also establish an LSC program to fund challengesto the welfare programs themselves does not make the LSC program it didfund an unconstitutional exercise in viewpoint discrimination. As this Courtmade clear in Rust v. Sullivan, 500 U.S. 173, 193 (1991), "[t]he Governmentcan, without violating the Constitution, selectively fund a program to encouragecertain activities it believes to be in the public interest, without atthe same time funding an alternative program which seeks to deal with theproblem in another way. In so doing, the Government has not discriminatedon the basis of viewpoint; it has merely chosen to fund one activity tothe exclusion of the other."

That is particularly true in the present setting because an LSC fund recipientis free fully to explain to any individual seeking representation why itcannot accept representation, and it may freely refer the individual toany other attorney, a pro bono project, or any non-LSC funded office. Attorneysemployed by LSC fund recipients are free to express their own views regardingany legal matter-including offering the view that a welfare provision isunlawful or unconstitutional-and to refer individuals to an attorney whowill represent them in litigation that attorneys employed by the LSC fundrecipient may not conduct themselves. Thus, the Section 504(a)(16) provisois not aimed at the suppression of dangerous ideas or driving certain ideasfrom the marketplace. Recipients and their employees remain free to communicatewhatever message they desire to the public, or to their clients, or to individualswho seek representation; and their actual or potential clients remain freeto engage in whatever activities they desire, including administrative proceedingsor litigation to amend or challenge existing welfare law, albeit withoutfederally funded legal representation. As in National Endowment for theArts v. Finley, 524 U.S. 569 (1998), Congress chose to allocate the limitedresources of a funding program in a manner that takes into account the natureof the activities of the applicants. It may constitutionally do so for awide variety of reasons, id. at 585, 587-588, including to target federalfunding of legal representation for individuals improperly denied welfarebenefits under existing law, but not for those who are not eligible underexisting law.

The court of appeals also erred in applying what appears to be a publicforum analysis, in reliance upon this Court's decision in Rosenberger v.Rector & Visitors of University of Virginia, 515 U.S. 819 (1995). Unlikethe program at issue in Rosenberger, the LSC program is not dedicated tothe promotion of diverse private expression in a public forum; it existsto subsidize certain discrete legal representation. The Ninth Circuit madethis clear in Legal Aid Society of Hawaii v. Legal Services Corp., 145 F.3d1017 (LASH III), cert. denied, 525 U.S. 1015 (1998), where the court rejectedthe contention that Rosenberger undermines the validity of the LSC limitations.

ARGUMENT

THE PROVISION IN SECTION 504(a)(16), PERMITTING REPRESENTATION BY LSC FUNDRECIPIENTS OF INDIVIDUALS SEEKING RELIEF FROM A WELFARE AGENCY ONLY IF THERELIEF SOUGHT WOULD NOT AMEND OR CHANGE EXISTING LAW, IS CONSISTENT WITHTHE FIRST AMENDMENT.

A. Section 504(a)(16) Imposes A Reasonable Limitation Of General ApplicabilityOn The Types Of Legal Representation Or Other Activities That An LSC FundRecipient May Undertake

1. Section 504(a)(16) of the Omnibus Consolidated Rescissions and AppropriationsAct of 1996, Pub. L. No. 104-134, 110 Stat. 1321-55, identifies a categoryof cases in which LSC fund recipients may not participate. It first setsforth a general prohibition against LSC fund recipients initiating any "legalrepresentation or participat[ing] in any other way, in litigation, lobbying,or rulemaking, involving an effort to reform a Federal or State welfaresystem." The court of appeals sustained that general restriction. Pet.App. 25a-28a.

Section 504(a)(16) then continues by providing a rule of construction, whichstates that the general prohibition "shall not be construed to precludea recipient from representing an individual eligible client who is seekingspecific relief from a welfare agency if such relief does not involve aneffort to amend or otherwise challenge existing law in effect on the dateof the initiation of the representation." § 504(a)(16), 110 Stat.1321-55 to 1321-56. The final clause in that rule of construction-the provisobeginning with "if such relief"-serves to ensure that the generalprohibition in the beginning of Section 504(a)(16) against participatingin efforts to reform a welfare system remains applicable even in a situationin which the LSC fund recipient is asked to represent an individual whoseeks relief from a welfare agency.10 Thus, under Section 504(a)(16), anLSC fund recipient may represent an individual who is seeking to obtainbenefits under an existing welfare system, but not one who is seeking tochange that existing system. Consequently, if an individual is seeking reliefthat would involve an amendment of or a challenge to existing welfare lawand requests representation by an LSC fund recipient, the LSC fund recipientmust decline the representation. The LSC fund recipient is free, however,to provide full information to the individual about the reasons for decliningthe representation and may refer the individual to any other attorney, apro bono project, or any non-LSC funded office.11

Respondents repeatedly mischaracterize the proviso when they describe itas a prohibition against an LSC-funded attorney making particular argumentson behalf of a client in the course of litigation. See 99-603 Br. in Opp.6, 10, 12, 18, 19; 99-960 Br. in Opp. 9-10, 11. As the dissent below recognized,"[t]he proviso on welfare litigation is not * * * an effort to weedout a certain class of arguments in cases in which LSC-funded lawyers appear.The statute nowhere contemplates or requires that an LSC-funded lawyer appearin a case in which he or she must forbear from challenging a welfare statuteon meritorious constitutional grounds; to the contrary, the proviso saysthat a lawyer or grantee may not take on such a representation in the firstplace." Pet. App. 42a (Jacobs, J., dissenting in part).12

The Section 504(a)(16) proviso serves to ensure that LSC fund recipientsuse limited financial resources to provide assistance to individual eligibleclients who are entitled to benefits under existing welfare law, but needlegal representation to obtain them in administrative proceedings beforea welfare agency or through an action in court. At the same time, by prohibitingLSC fund recipients from pursuing matters that involve efforts to amendor challenge existing welfare laws, Section 504(a)(16) directs LSC-fundedefforts away from representation that is more complex, and more likely tobe time-consuming and expensive, than the straightforward erroneous-denial-of-benefitscase. The Section 504(a)(16) proviso thus serves to channel money to "theadministration of a complex existing statute so that everyone can get whatthe statute provides." Pet. App. 48a (Jacobs, J., dissenting in part).It excludes expensive constitutional litigation and statutory challengesand "maximizes the expenditure of limited available funds for lessexpensive benefit-collection lawsuits." Id. at 50a. Indeed, the morecomplex cases involving constitutional challenges or other efforts to amendwelfare laws are more likely to be high-profile cases and may be more attractiveto pro bono programs or projects supported by private funds.

2. These evident purposes of the funding restriction are confirmed by thelegislative history of Section 504.

The House Report, for example, explained with respect to the funding restrictionsgenerally:

It is both the right and the responsibility of the Congress to decide whatprograms and activities will be supported by Federal funds. Therefore, theCommittee has included numerous terms and conditions which target scarceresources to programs whose mission is to provide basic legal assistanceto the poor.

H.R. Rep. No. 196, 104th Cong., 1st Sess. 119-120 (1995).

Similarly, Senator Dole (in the course of advocating a program of blockgrants to the States) commented on a report that those engaged in furnishinglegal services for the poor had moved away from helping individual clientstoward conceiving of their task as the representation of the poor as a group.He expressed concern that, "despite many dedicated lawyers who haveundoubtedly helped poor clients through Legal Services grants, the inevitableresult of this shift in focus has been to hurt those whom the Corporationwas created to help. The impoverished individual who has run-of-the-mill,but important, legal needs is shunted aside by Legal Services lawyers insearch of sexy issues and deep pockets." 141 Cong. Rec. 27,020 (1995);see also id. at 27,001 (Sen. Domenici) (suing States over welfare reformshould not be done by legal services, but rather "they should leavethat to somebody else"; "this program ought to be for the individualpoor people who have a need for a lawyer"); id. at 26,819 (Sen. Gramm)(individuals have a right to file a lawsuit to challenge the constitutionalityof a state welfare law, but "they ought not to use taxpayers' moneyto do it"); 119 Cong. Rec. 20,688 (1973) (Rep. Biester) (commentingon the original LSC Act ) (LSC fund recipients should provide individualrepresentation to those who most need it and should not be "spendingtheir time reforming laws they find discriminatory against the poor throughclass action and test-case litigation").

Section 504(a)(16) furthers those congressional purposes by precluding anLSC fund recipient from becoming involved in litigation, rulemaking, orsimilar proceedings that seek to amend or challenge existing welfare laws,and thereby diverting resources and efforts away from helping individualclients who were erroneously denied benefits. The application of the provisoto an LSC fund recipient's use of non-LSC funds is important to that objective.Because of the fungibility of money, a limitation on the use of non-LSCfunds is appropriate to prevent LSC funds from subsidizing what Congresschose not to fund. As the district court (and a 1996 Senate Report concerninga subsequent authorization bill) explained:

First, many legal services grantees currently receive funds from both publicand private sources. Since the money is basically fungible, it would bedifficult if not impossible to place restrictions only on the Federal funds.Second, the public cannot differentiate between LSC advocacy subsidizedwith public versus private funds. As a result, the public grows weary ofwatching LSC attorneys lobby legislators-even if that dismay might sometimesbe misplaced.

Pet. App. 86a-87a (quoting S. Rep. No. 392, 104th Cong., 2d Sess. 7 (1996)).

B. Section 504(a)(16) Is Not Based On Impermissible Viewpoint Discrimination

1. The court of appeals declined to recognize the Section 504(a)(16) provisoas part of a framework of generally applicable and permissible limitationson the federal program that Congress chose to establish and fund. The courtof appeals instead regarded Section 504(a)(16) as based on unconstitutionalviewpoint discrimination. That was error. Congress included the rule ofconstruction permitting representation in connection with individual benefitclaims in Section 504(a)(16) to further the implementation of welfare programsby providing LSC legal representation to individuals who have been wronglydenied benefits that the government intended for them to receive under thoseprograms. The fact that Congress at the same time enacted a general prohibitionagainst LSC fund recipients participating in litigation, lobbying, or rulemakinginvolving an effort to reform a welfare system simply means that Congressdid not also establish a program to fund challenges to the welfare programsthemselves. That judgment by Congress does not render the program it didfund an unconstitutional exercise in viewpoint discrimination.

As the dissent below pointed out, the LSC program that Congress tailoredin this way is similar to a hypothetical program in which the federal governmentprovides funds to a contractor to provide middle-class taxpayers with representationby tax lawyers and advice from accountants in connection with determininghow much tax they owe. A proviso that limited the federally funded assistanceby lawyers to obtaining the proper amount due under the present tax code,but prohibited those lawyers from taking on cases aimed at tax reform orother efforts to reform or challenge the tax system, would not make theprogram impermissibly viewpoint-based. See Pet. App. 48a. Like Section 504(a)(16),it would merely ensure that the program operated within its intended limits(to assist people in getting what they were owed under existing law).

Congress's choice of the limits of the program may leave some needy individualswithout the ability to obtain legal assistance from an LSC fund recipientin some agency or judicial proceedings. That, however, is the natural consequenceof every choice Congress makes about the use of funds by organizations thatreceive federal funds under the LSC Act. Indeed, the court below, in thecourse of rejecting another of respondents' claims, emphasized that LSCfund recipients "have historically limited their representations toselected issues, and are typically 'able to meet only a fraction of thedemand for their services.'" Pet. App. 16a (citation omitted). And,as Judge Jacobs pointed out in dissent, "[t]here is nothing remarkableabout this. Lawyers often turn down representations that they cannot fulfill,either by reason of conflict or otherwise (such as availability of timeand resources, or lack of expertise)." Id. at 42a-43a. The fact thatCongress chose one means and not another to address a particular set ofproblems does not render the program it established impermissibly viewpointbased. It certainly cannot mean that the federal statute is susceptibleto facial constitutional invalidation-relief that is "'manifestly,strong medicine' that 'has been employed by the Court sparingly and onlyas a last resort.'" Finley, 524 U.S. at 580 (quoting Broadrick v. Oklahoma,413 U.S. 601, 613 (1973)).

This Court has made clear that "[t]he Government can, without violatingthe Constitution, selectively fund a program to encourage certain activitiesit believes to be in the public interest, without at the same time fundingan alternative program which seeks to deal with the problem in another way.In so doing, the Government has not discriminated on the basis of viewpoint;it has merely chosen to fund one activity to the exclusion of the other."Rust v. Sullivan, 500 U.S. 173, 193 (1991). That is particularly true inthe present setting, since the LSC fund recipient may exercise First Amendmentrights through other channels. See note 11, supra.

In Rust, the petitioners made an argument almost identical to respondents'argument here, contending that a program funding family-planning servicesdiscriminated on the basis of viewpoint because it allowed speech discussingsome viewpoints (those favoring certain family planning options) while prohibitingcompeting viewpoints (those favoring abortion as a method of family planning).500 U.S. at 192. This Court expressly rejected that argument, holding, asset forth above, that Congress may choose to fund one program and not anotherand that such a choice does not constitute impermissible viewpoint discrimination.Id. at 193. Thus, Rust was "not a case of the Government 'suppressinga dangerous idea,' but of a prohibition on a project grantee or its employeesfrom engaging in activities outside the project's scope." Id. at 194;accord Finley, 524 U.S. at 587-588.

The same is true here. As in Rust, Congress has chosen to fund a certainprogram to the exclusion of another. Congress has chosen to fund representationin administrative or judicial proceedings in which individuals seek to establishtheir entitlement to benefits under a current welfare program (which isitself funded by the government), but not to fund representation in suchproceedings in which individuals would ask the agency to amend or the courtto invalidate that very program in some respect. In that way, Congress hassought to maximize the availability of funds to pay for legal assistancethat will enhance the value of the current welfare program to its intendedbeneficiaries by providing assistance to persons who believe they were wrongfullydenied the benefits that the program, as currently constituted, makes available.

Attorneys employed by LSC fund recipients who are asked to represent otherindividuals, whose entitlement to welfare benefits would depend on revisionor invalidation of the current welfare program in some respect, are freeto inform those individuals that such representation is beyond the scopeof the LSC program and to refer the individuals concerned to legal counseloutside the program, including any lawyer employed by an affiliated organizationthat the LSC fund recipient may have established in conformity with theLSC regulations. See p. 16, supra. The LSC program is thereby less restrictivethan the program upheld in Rust, which prohibited physicians and other fund-recipientpersonnel from "referring a pregnant woman to an abortion provider,even upon specific request," and from providing any counseling aboutabortion. 500 U.S. at 180. Attorneys employed by LSC fund recipients arefree to express their views, to actual or potential clients or anyone else,regarding any legal matter-including offering the view that a welfare provisionis unlawful or unconstitutional-and to refer individuals to an attorneywho will represent them in litigation that attorneys employed by the LSCfund recipient may not conduct themselves.

Thus, the Section 504(a)(16) proviso is not aimed at the suppression ofdangerous ideas or driving certain ideas from the marketplace. See Finley,524 U.S. at 585-587. Recipients and their employees remain free to communicatewhatever message they desire to the public, to their clients, or to individualswho seek representation; and their actual or potential clients remain freeto engage in whatever activities they desire, including administrative proceedingsor litigation to amend or challenge existing welfare law, albeit withoutfederally funded legal representation. As in Finley, Congress chose to allocatethe limited resources of a federally funded program in a manner that takesinto account the nature of the activities of the applicants. It may do soconstitutionally for a wide variety of reasons, id. at 585, 587-588, includingto target federal funding of legal representation for individuals improperlydenied welfare benefits under existing law, but not for those who are noteligible under existing law. That choice by Congress is as valid as areall the other choices Congress has made from the outset of the LSC programin 1974 to specify the types of legal representation that are covered bythe program and the types that are beyond its scope. Congress never intendedfor LSC attorneys to provide comprehensive legal services to their clients;Congress intended for them to furnish the types of legal services that itbelieved best served the public interest, and Congress does not act unconstitutionallywhen it specifies those services in legislation.

2. The court of appeals attempted to distinguish this case from Rust andFinley on the rationale that this case involves restrictions on speech thatis critical of the government, which the court regarded as more protectedby the First Amendment than abortion counseling or indecent art. But thatrationale was based on the court of appeals' erroneous construction of theSection 504(a)(16) proviso as preventing LSC-funded lawyers from makingcertain arguments during the course of legal representation. See Pet. App.33a-34a. As discussed above, the Section 504(a)(16) proviso prevents LSCfund recipients from engaging in representation at all if a case involvesa request for a particular form of relief-namely, amendment or invalidationof a welfare statute or regulation. See id. at 42a-43a (Jacobs, J., dissentingin part). Thus, the proviso does not exclude certain viewpoints in the courseof litigating a particular case; it excludes a certain class of cases fromthe scope of the program altogether, in order to ensure that the programfocuses on the day-to-day legal problems of poor people who are attemptingto obtain benefits to which they claim entitlement under existing welfareprograms.13

The court of appeals also erred in applying what appears to be a publicforum analysis, in reliance upon this Court's decision in Rosenberger. Theprogram at issue in Rosenberger was very different from the programs atissue in Rust and here. It was designed to encourage diverse private expression,and the Court held that the university had, in effect, created a limitedpublic forum for such private expression. 515 U.S. at 829-830; see Finley,524 U.S. at 586; see also id. at 598-599 (Scalia, J., concurring) (notingthat Rosenberger "found the viewpoint discrimination unconstitutional,not because funding of 'private' speech was involved, but because the governmenthad established a limited public forum"); cf. Board of Regents of theUniv. of Wis. Sys. v. Southworth, 120 S. Ct. 1346, 1355 (2000) ("Thespeech the University seeks to encourage in the program before us is distinguishednot by discernable limits but by its vast, unexplored bounds.").

The LSC program, by contrast, is not dedicated to the promotion of diverseprivate expression in a public forum; it exists to subsidize certain discretelegal representation before an agency or in court. See Pet. App. 49a-50a(Jacobs, J., dissenting in part). The Ninth Circuit made this clear in LegalAid Society of Hawaii v. Legal Services Corp., 145 F.3d 1017 (LASH III),cert. denied, 525 U.S. 1015 (1998), where the court (per Justice White,sitting by designation) expressly rejected the contention that Rosenbergerundermines the validity of the LSC limitations. The court concluded that,unlike in Rosenberger, where the government expended funds to encouragea diversity of views from private speakers, but "[l]ike the Title Xprogram in Rust, the LSC program is designed to provide professional servicesof limited scope to indigent persons, not create a forum for the free expressionof ideas." 145 F.3d at 1028 (emphasis supplied).

CONCLUSION

The judgment of the court of appeals should be reversed insofar as it holdsunconstitutional the proviso in Section 504(a)(16).

Respectfully submitted.

SETH P. WAXMAN
Solicitor General
DAVID W. OGDEN
Acting Assistant Attorney
General
EDWIN S. KNEEDLER
Deputy Solicitor General
BETH S. BRINKMANN
Assistant to the Solicitor
General
BARBARA L. HERWIG
MATTHEW M. COLLETTE
Attorneys

JUNE 2000


1 Pet. App. refers to the appendix to the petition for a writ of certiorariin United States v. Velazquez, No. 99-960.

2 The LSC Act vests LSC with the authority "to insure the complianceof recipients and their employees with the provisions of [the LSC Act] andthe rules, regulations, and guidelines promulgated pursuant to [the LSCAct], and to terminate, after a hearing * * *, financial support to a recipientwhich fails to comply." 42 U.S.C. 2996e(b)(1)(A). The LSC Act alsoauthorizes LSC to "issue rules and regulations to provide for the enforcement"of that and other requirements of the Act. 42 U.S.C. 2996e(b)(5); see also42 U.S.C. 2996g(e).

3 See Omnibus Consolidated Appropriations Act, 1997 (1997 Act), Pub. L.No. 104-208, § 502(a), 110 Stat. 3009-59; Departments of Commerce,Justice, and State, the Judiciary, and Related Agencies Appropriations Act,1998, Pub. L. No. 105-119, § 502(a), 111 Stat. 2510; Omnibus Consolidatedand Emergency Supplemental Appropriations Act, 1999, Pub. L. No. 105-277,Tit. V, 112 Stat. 2681-107; Consolidated Appropriations Act, 2000, Pub.L. No. 106-113, Tit. V, 113 Stat. 1501A-49.

4 LSC fund recipients may, however, use non-LSC funds "to comment onpublic rulemaking or to respond to [an unsolicited] written request forinformation or testimony from a Federal, State or local agency, legislativebody, or committee," 1996 Act, § 504(e), 110 Stat. 1321-57, and"for the purpose of contacting, communicating with, or responding toa request from, a State or local government agency, a State or local legislativebody or committee, or a member thereof, regarding funding for the recipient,"1996 Act, § 504(b), 110 Stat. 1321-56.

5 LSC had published an interim rule on August 16, 1996, concerning thatand other aspects of the restrictions. 61 Fed. Reg. 41,960.

6 LSC rejected arguments that separate bookkeeping should be sufficientfor there to be a permissible relationship between a recipient and an organizationthat engages in restricted activities because LSC explained that "sucha situation would violate the Congressional requirement that entities itfunds not engage in restricted activities." 62 Fed. Reg. at 27,698.Rather, "determinations taking into account the physical and financialseparation standards must ensure that there is no identification of therecipient with restricted activities and that the other organization isnot so closely identified with the recipient that there might be confusionor misunderstanding about the recipient's involvement with or endorsementof prohibited activities." Ibid.; see also id. at 12,102.

LSC also emphasized that, "consistent with [LSC's] longstanding practiceregarding compliance issues, individual recipients are welcome to submitall the relevant 'program integrity' information and request a review by[LSC] of any existing or contemplated relationship with an organizationthat engages in restricted activities." 62 Fed. Reg. at 27,698.

7 On August 1, 1997, the district court in the LASH litigation entered anorder granting summary judgment to LSC and the United States. Legal AidSoc'y of Haw. v. Legal Servs. Corp., 981 F. Supp. 1288, 1301 (D. Haw.) (LASHII). On May 18, 1998, the Ninth Circuit affirmed in relevant part. LegalAid Soc'y of Haw. v. Legal Servs. Corp., 145 F.3d 1017 (LASH III), cert.denied, 525 U.S. 1015 (1998).

8 The district court rejected respondents' "rather casual due processand equal protection claims." Pet. App. 98a. The due process claimfailed "for the same reasons the analogous claim failed in Rust - namely,because plaintiffs are not absolutely precluded from engaging in prohibitedactivities and, furthermore, have no constitutional entitlement to the benefitsprovided by the legal services program." Ibid. The equal protectionclaim failed because "the Government had a rational basis for restrictingthe activities of recipients, and because poverty is not a suspect classification."Ibid.

9 The court also expressed reluctance to accept respondents' statutory interpretationbecause of "the rule favoring an interpretation of a statute that preservesits constitutionality." Pet. App. 14a.

10 As noted above (see pp. 11-12, supra), LSC's regulations define "existinglaw" to mean certain federal, state or local welfare statutes, regulationsand ordinances. 45 C.F.R. 1639.2(b).

11 As we explained at pages 10-11, supra, the LSC statutory and regulatoryframework also allows LSC fund recipients to establish affiliated organizationsthat engage in restricted activities, so long as the LSC program-integritystandards are met. The court of appeals held that this framework, on itsface, allows respondents adequate alternative channels for protected expressionand defeats respondents' "unconstitutional conditions" argument.Pet. App. 17a-23a. Respondents seek review of that ruling in their petitionin No. 99-604, Velazquez v. Legal Services Corp. The Court did not grantthat petition when it accepted review in these cases. The court of appeals'ruling is correct, and further review by this Court is not warranted forthe reasons set forth in our brief in opposition to that petition. 99-604U.S. Br. in Opp. 12-18.

12 To the extent respondents speculate about ethical issues that an LSC-fundedattorney might face in a particular case if a situation covered by the provisoarose in the midst of litigation (see 99-960 Br. in Opp. 9-10), those issuescannot properly be considered in the context of the instant case, whichpresents a facial challenge. Those issues involve as-applied hypotheticals.See Finley, 524 U.S. at 584 (noting the Court's reluctance to invalidatea statute based on hypothetical applications not before the Court). Moreover,respondents' contention that a general exception should be carved out ofSection 504(a)(16) to allow representation by LSC fund recipients generally,notwithstanding the proviso, because of ethical issues that might arisein a particular case does not constitute an alternative basis for affirmance,as respondents claim. See 99-603 Br. in Opp. 9-11; 99-960 Br. in Opp. 9-10.Rather, such a construction of Section 504(a)(16) would require reversalof the court of appeals' judgment because it would confirm that Section504(a)(16) is not vulnerable to a facial attack.

In any event, respondents' arguments are based on a misunderstanding ofthe applicable ethical standards. See ABA Comm. on Ethics and ProfessionalResponsibility, Formal Op. 96-399 (1996) (providing detailed analysis ofa variety of ethical issues arising out of LSC restrictions and emphasizing,inter alia, that: certain representations cannot be undertaken at all; casesin which issues could arise mid-litigation should be avoided or back-upnon-LSC counsel should be arranged from the outset; and, in certain othersituations, cases might have to be transferred to non-LSC lawyers or a separateorganization may be created to represent clients not eligible for LSC representation).

13 A proper understanding of the Section 504(a)(16) proviso wholly underminesrespondents' suggestion (99-603 Br. in Opp. 18-20) that the judgment belowcould be affirmed on separation-of-powers grounds. First, the proviso inno way interferes with a court's duty to interpret the Constitution. Itdoes not authorize LSC attorneys to represent certain clients and then barthem from calling constitutional issues to the court's attention, as respondentswould have it. Id. at 19. An LSC fund recipient is not authorized to representthat client at all. Second, the proviso does not mandate any rule of decisionfor courts. Individuals seeking welfare benefits by seeking to amend orchallenge existing law are entitled to make any legal arguments they wishin support of their claim. They are not entitled, however, to have a federallyfunded attorney represent them in that litigation.


APPENDIX

1. The Omnibus Consolidated Rescissions and Appropriations Act of 1996,Pub. L. No. 104-134, 110 Stat 1321, 1321-50 to 1321-59, provides in relevantpart:

TITLE V-RELATED AGENCIES

* * * * *

LEGAL SERVICES CORPORATION

PAYMENT TO THE LEGAL SERVICES CORPORATION

For payment to the Legal Services Corporation to carry out the purposesof the Legal Services Corporation Act of 1974, as amended, $278,000,000,of which $269,400,000 is for basic field programs and required independentaudits carried out in accordance with section 509; $1,500,000 is for theOffice of the Inspector General, of which such amounts as may be necessarymay be used to conduct additional audits of recipients in accordance withsection 509 of this Act; and $7,100,000 is for management and administration:Provided, That $198,750,000 of the total amount provided under this headingfor basic field programs shall not be available except for the competitiveaward of grants and contracts under section 503 of this Act.

ADMINISTRATIVE PROVISIONS-LEGAL SERVICES CORPORATION

* * * * *

SEC. 504. (a) None of the funds appropriated in this Act to the Legal ServicesCorporation may be used to provide financial assistance to any person orentity (which may be referred to in this section as a "recipient")-

(1) that makes available any funds, personnel, or equipment for use in advocatingor opposing any plan or proposal, or represents any party or participatesin any other way in litigation, that is intended to or has the effect ofaltering, revising, or reapportioning a legislative, judicial, or electivedistrict at any level of government, including influencing the timing ormanner of the taking of a census;

(2) that attempts to influence the issuance, amendment, or revocation ofany executive order, regulation, or other statement of general applicabilityand future effect by any Federal, State, or local agency;

(3) that attempts to influence any part of any adjudicatory proceeding ofany Federal, State, or local agency if such part of the proceeding is designedfor the formulation or modification of any agency policy of general applicabilityand future effect;

(4) that attempts to influence the passage or defeat of any legislation,constitutional amendment, referendum, initiative, or any similar procedureof the Congress or a State or local legislative body;

(5) that attempts to influence the conduct of oversight proceedings of theCorporation or any person or entity receiving financial assistance providedby the Corporation;

(6) that pays for any personal service, advertisement, telegram, telephonecommunication, letter, printed or written matter, administrative expense,or related expense, associated with an activity prohibited in this section;

(7) that initiates or participates in a class action suit;

(8) that files a complaint or otherwise initiates or participates in litigationagainst a defendant, or engages in a precomplaint settlement negotiationwith a prospective defendant, unless-

(A) each plaintiff has been specifically identified, by name, in any complaintfiled for purposes of such litigation or prior to the precomplaint settlementnegotiation; and

(B) a statement or statements of facts written in English and, if necessary,in a language that the plaintiffs understand, that enumerate the particularfacts known to the plaintiffs on which the complaint is based, have beensigned by the plaintiffs, are kept on file by the recipient, and are madeavailable to any Federal department or agency that is auditing or monitoringthe activities of the Corporation or of the recipient, and to any auditoror monitor receiving Federal funds to conduct such auditing or monitoring,including any auditor or monitor of the Corporation: Provided, That uponestablishment of reasonable cause that an injunction is necessary to preventprobable, serious harm to such potential plaintiff, a court of competentjurisdiction may enjoin the disclosure of the identity of any potentialplaintiff pending the outcome of such litigation or negotiations after noticeand an opportunity for a hearing is provided to potential parties to thelitigation or the negotiations: Provided further, That other parties tothe litigation or negotiation shall have access to the statement of factsreferred to in subparagraph (B) only through the discovery process afterlitigation has begun;

(9) unless-

(A) prior to the provision of financial assistance-

(i) if the person or entity is a nonprofit organization, the governing boardof the person or entity has set specific priorities in writing, pursuantto section 1007(a)(2)(C)(i) of the Legal Services Corporation Act (42 U.S.C.2996f(a)(2)(C)(i)), of the types of matters and cases to which the staffof the nonprofit organization shall devote time and resources; and

(ii) the staff of such person or entity has signed a written agreement notto undertake cases or matters other than in accordance with the specificpriorities set by such governing board, except in emergency situations definedby such board and in accordance with the written procedures of such boardfor such situations; and

(B) the staff of such person or entity provides to the governing board ona quarterly basis, and to the Corporation on an annual basis, informationon all cases or matters undertaken other than cases or matters undertakenin accordance with such priorities;

(10) unless-

(A) prior to receiving the financial assistance, such person or entity agreesto maintain records of time spent on each case or matter with respect towhich the person or entity is engaged;

(B) any funds, including Interest on Lawyers Trust Account funds, receivedfrom a source other than the Corporation by the person or entity, and disbursementsof such funds, are accounted for and reported as receipts and disbursements,respectively, separate and distinct from Corporation funds; and

(C) the person or entity agrees (notwithstanding section 1006(b)(3) of theLegal Services Corporation Act (42 U.S.C. 2996e(b)(3)) to make the recordsdescribed in this paragraph available to any Federal department or agencythat is auditing or monitoring the activities of the Corporation or of therecipient, and to any independent auditor or monitor receiving Federal fundsto conduct such auditing or monitoring, including any auditor or monitorof the Corporation;

(11) that provides legal assistance for or on behalf of any alien, unlessthe alien is present in the United States and is-

(A) an alien lawfully admitted for permanent residence as defined in section101(a)(20) of the Immigration and Nationality Act (8 U.S.C. 1101(a)(20));

(B) an alien who-

(i) is married to a United States citizen or is a parent or an unmarriedchild under the age of 21 years of such a citizen; and

(ii) has filed an application to adjust the status of the alien to the statusof a lawful permanent resident under the Immigration and Nationality Act(8 U.S.C. 1101 et seq.), which application has not been rejected;

(C) an alien who is lawfully present in the United States pursuant to anadmission under section 207 of the Immigration and Nationality Act (8 U.S.C.1157) (relating to refugee admission) or who has been granted asylum bythe Attorney General under such Act;

(D) an alien who is lawfully present in the United States as a result ofwithholding of deportation by the Attorney General pursuant to section 243(h)of the Immigration and Nationality Act (8 U.S.C. 1253(h));

(E) an alien to whom section 305 of the Immigration Reform and Control Actof 1986 (8 U.S.C. 1101 note) applies, but only to the extent that the legalassistance provided is the legal assistance described in such section; or

(F) an alien who is lawfully present in the United States as a result ofbeing granted conditional entry to the United States before April 1, 1980,pursuant to section 203(a)(7) of the Immigration and Nationality Act (8U.S.C. 1153(a)(7)), as in effect on March 31, 1980, because of persecutionor fear of persecution on account of race, religion, or political calamity;

(12) that supports or conducts a training program for the purpose of advocatinga particular public policy or encouraging a political activity, a laboror antilabor activity, a boycott, picketing, a strike, or a demonstration,including the dissemination of information about such a policy or activity,except that this paragraph shall not be construed to prohibit the provisionof training to an attorney or a paralegal to prepare the attorney or paralegalto provide-

(A) adequate legal assistance to eligible clients; or

(B) advice to any eligible client as to the legal rights of the client;

(13) that claims (or whose employee claims), or collects and retains, attorneys'fees pursuant to any Federal or State law permitting or requiring the awardingof such fees;

(14) that participates in any litigation with respect to abortion;

(15) that participates in any litigation on behalf of a person incarceratedin a Federal, State, or local prison;

(16) that initiates legal representation or participates in any other way,in litigation, lobbying, or rulemaking, involving an effort to reform aFederal or State welfare system, except that this paragraph shall not beconstrued to preclude a recipient from representing an individual eligibleclient who is seeking specific relief from a welfare agency if such reliefdoes not involve an effort to amend or otherwise challenge existing lawin effect on the date of the initiation of the representation;

(17) that defends a person in a proceeding to evict the person from a publichousing project if-

(A) the person has been charged with the illegal sale or distribution ofa controlled substance; and

(B) the eviction proceeding is brought by a public housing agency becausethe illegal drug activity of the person threatens the health or safety ofanother tenant residing in the public housing project or employee of thepublic housing agency;

(18) unless such person or entity agrees that the person or entity, andthe employees of the person or entity, will not accept employment resultingfrom in-person unsolicited advice to a nonattorney that such nonattorneyshould obtain counsel or take legal action, and will not refer such nonattorneyto another person or entity or an employee of the person or entity, thatis receiving financial assistance provided by the Corporation; or

(19) unless such person or entity enters into a contractual agreement tobe subject to all provisions of Federal law relating to the proper use ofFederal funds, the violation of which shall render any grant or contractualagreement to provide funding null and void, and, for such purposes, theCorporation shall be considered to be a Federal agency and all funds providedby the Corporation shall be considered to be Federal funds provided by grantor contract.

(b) Nothing in this section shall be construed to prohibit a recipient fromusing funds from a source other than the Legal Services Corporation forthe purpose of contacting, communicating with, or responding to a requestfrom, a State or local government agency, a State or local legislative bodyor committee, or a member thereof, regarding funding for the recipient,including a pending or proposed legislative or agency proposal to fund suchrecipient.

(c) Not later than 30 days after the date of enactment of this Act, theLegal Services Corporation shall promulgate a suggested list of prioritiesthat boards of directors may use in setting priorities under subsection(a)(9).

(d)(1) The Legal Services Corporation shall not accept any non-Federal funds,and no recipient shall accept funds from any source other than the Corporation,unless the Corporation or the recipient, as the case may be, notifies inwriting the source of the funds that the funds may not be expended for anypurpose prohibited by the Legal Services Corporation Act or this title.

(2) Paragraph (1) shall not prevent a recipient from-

(A) receiving Indian tribal funds (including funds from private nonprofitorganizations for the benefit of Indians or Indian tribes) and expendingthe tribal funds in accordance with the specific purposes for which thetribal funds are provided; or

(B) using funds received from a source other than the Legal Services Corporationto provide legal assistance to a covered individual if such funds are usedfor the specific purposes for which such funds were received, except thatsuch funds may not be expended by recipients for any purpose prohibitedby this Act or by the Legal Services Corporation Act.

(e) Nothing in this section shall be construed to prohibit a recipient fromusing funds derived from a source other than the Legal Services Corporationto comment on public rulemaking or to respond to a written request for informationor testimony from a Federal, State or local agency, legislative body orcommittee, or a member of such an agency, body, or committee, so long asthe response is made only to the parties that make the request and the recipientdoes not arrange for the request to be made.

(f) As used in this section:

(1) The term "controlled substance" has the meaning given theterm in section 102 of the Controlled Substances Act (21 U.S.C. 802).

(2) The term "covered individual" means any person who-

(A) except as provided in subparagraph (B), meets the requirements of thisAct and the Legal Services Corporation Act relating to eligibility for legalassistance; and

(B) may or may not be financially unable to afford legal assistance.

(3) The term "public housing project" has the meaning as usedwithin, and the term "public housing agency" has the meaning giventhe term, in section 3 of the United States Housing Act of 1937 (42 U.S.C.1437a).

SEC. 505. None of the funds appropriated in this Act to the Legal ServicesCorporation or provided by the Corporation to any entity or person may beused to pay membership dues to any private or nonprofit organization.

SEC. 506. None of the funds appropriated in this Act to the Legal ServicesCorporation may be used by any person or entity receiving financial assistancefrom the Corporation to file or pursue a lawsuit against the Corporation.

SEC. 507. None of the funds appropriated in this Act to the Legal ServicesCorporation may be used for any purpose prohibited or contrary to any ofthe provisions of authorization legislation for fiscal year 1996 for theLegal Services Corporation that is enacted into law. Upon the enactmentof such Legal Services Corporation reauthorization legislation, fundingprovided in this Act shall from that date be subject to the provisions ofthat legislation and any provisions in this Act that are inconsistent withthat legislation shall no longer have effect.

SEC . 508. (a) The requirements of section 504 shall apply to the activitiesof a recipient described in section 504, or an employee of such a recipient,during the provision of legal assistance for a case or matter, if the recipientor employee begins to provide the legal assistance on or after the dateof enactment of this Act.

(b) If the recipient or employee began to provide legal assistance for thecase or matter prior to the date of enactment of this Act-

(1) each of the requirements of section 504 (other than paragraphs (7),(11), (13), and (15) of subsection (a) of such section) shall, beginningon the date of enactment of this Act, apply to the activities of the recipientor employee during the provision of legal assistance for the case or matter;

(2) the requirements of paragraphs (7), (11), and (15) of section 504(a)shall apply-

(A) beginning on the date of enactment of this Act, to the activities ofthe recipient or employee during the provision of legal assistance for anyadditional related claim for which the recipient or employee begins to providelegal assistance on or after such date; and

(B) beginning August 1, 1996, to all other activities of the recipient oremployee during the provision of legal assistance for the case or matter;and

(3) the requirements of paragraph (13) of section 504(a)-

(A) shall apply beginning on the date of enactment of this Act to the activitiesof the recipient or employee during the provision of legal assistance forany additional related claim for which the recipient or employee beginsto provide legal assistance on or after such date; and

(B) shall not apply to all other activities of the recipient or employeeduring the provision of legal assistance for the case or matter.

(c) The Legal Services Corporation shall, every 60 days, submit to the Committeeson Appropriations of the Senate and House of Representatives a report settingforth the status of cases and matters referred to in subsection (b)(2).

SEC. 509. (a) An audit of each person or entity receiving financial assistancefrom the Legal Services Corporation under this Act (referred to in thissection as a "recipient") shall be conducted in accordance withgenerally accepted government auditing standards and guidance establishedby the Office of the Inspector General and shall report whether-

(1) the financial statements of the recipient present fairly its financialposition and the results of its financial operations in accordance withgenerally accepted accounting principles;

(2) the recipient has internal control systems to provide reasonable assurancethat it is managing funds, regardless of source, in compliance with Federallaws and regulations; and

(3) the recipient has complied with Federal laws and regulations applicableto funds received, regardless of source.

(b) In carrying out the requirements of subsection (a)(3), the auditor shallselect and test a representative number of transactions and report all instancesof noncompliance to the recipient. The recipient shall report in writingany noncompliance found by the auditor during the audit under this sectionwithin 5 business days to the Office of the Inspector General and shallprovide a copy of the report simultaneously to the auditor. If the recipientfails to report the noncompliance, the auditor shall report the noncompliancedirectly to the Office of the Inspector General within 5 business days ofthe recipient's failure to report. The auditor shall not be liable in aprivate action for any finding, conclusion, or statement expressed in areport made pursuant to this section.

(c) The audits required under this section shall be provided for by therecipients and performed by independent public accountants. The cost ofsuch audits shall be shared on a pro rata basis among all of the recipient'sfunding providers and the appropriate share shall be an allowable chargeto the Federal funds provided by the Legal Services Corporation. No auditcosts may be charged to the Federal funds when the audit required by thissection has not been made in accordance with the guidance promulgated bythe Office of the Inspector General.

If the recipient fails to have an acceptable audit in accordance with theguidance promulgated by the Office of the Inspector General, the followingsanctions shall be available to the Corporation as recommended by the Officeof the Inspector General:

(1) The withholding of a percentage of the recipient's funding until theaudit is completed satisfactorily.

(2) The suspension of recipient's funding until an acceptable audit is completed.

(d) The Office of the Inspector General may remove, suspend, or bar an independentpublic accountant, upon a showing of good cause, from performing audit servicesrequired by this section. Any such action to remove, suspend, or bar anauditor shall be only after notice to the auditor and an opportunity forhearing. The Office of the Inspector General shall develop and issue rulesof practice to implement this paragraph.

(e) Any independent public accountant performing an audit under this sectionwho subsequently ceases to be the accountant for the recipient shall promptlynotify the Office of the Inspector General pursuant to such rules as theOffice of the Inspector General shall prescribe.

(f) Audits conducted in accordance with this section shall be in lieu ofthe financial audits otherwise required by section 1009(c) of the LegalServices Corporation Act (42 U.S.C. 2996h(c)).

(g) The Office of the Inspector General is authorized to conduct on-sitemonitoring, audits, and inspections in accordance with Federal standards.

(h) Notwithstanding section 1006(b)(3) of the Legal Services CorporationAct (42 U.S.C. 2996e(b)(3)), financial records, time records, retainer agreements,client trust fund and eligibility records, and client names, for each recipientshall be made available to any auditor or monitor of the recipient, includingany Federal department or agency that is auditing or monitoring the activitiesof the Corporation or of the recipient, and any independent auditor or monitorreceiving Federal funds to conduct such auditing or monitoring, includingany auditor or monitor of the Corporation, except for reports or recordssubject to the attorney-client privilege.

(i) The Legal Services Corporation shall not disclose any name or documentreferred to in subsection (h), except to-

(1) a Federal, State, or local law enforcement official; or

(2) an official of an appropriate bar association for the purpose of enablingthe official to conduct an investigation of a rule of professional conduct.

(j) The recipient management shall be responsible for expeditiously resolvingall reported audit reportable conditions, findings, and recommendations,including those of sub-recipients.

(k) The Legal Services Corporation shall-

(1) follow up on significant reportable conditions, findings, and recommendationsfound by the independent public accountants and reported to Corporationmanagement by the Office of the Inspector General to ensure that instancesof deficiencies and noncompliance are resolved in a timely manner, and

(2) Develop procedures to ensure effective follow-up that meet at a minimumthe requirements of Office of Management and Budget Circular Number A-50.

(l) The requirements of this section shall apply to a recipient for itsfirst fiscal year beginning on or after January 1, 1996.

2. The Omnibus Consolidated Appropriations Act, 1997, Pub. L. No. 104-208,110 Stat 3009, 3009-59 to 3009-60, provides in relevant part:

TITLE V-RELATED AGENCIES

* * * * *

LEGAL SERVICES CORPORATION

PAYMENT TO THE LEGAL SERVICES CORPORATION

For payment to the Legal Services Corporation to carry out the purposesof the Legal Services Corporation Act of 1974, as amended, $283,000,000,of which $274,400,000 is for basic field programs and required independentaudits; $1,500,000 is for the Office of Inspector General, of which suchamounts as may be necessary may be used to conduct additional audits ofrecipients; and $7,100,000 is for management and administration.

ADMINISTRATIVE PROVISIONS-LEGAL

SERVICES CORPORATION

* * * * *

SEC. 502. (a) CONTINUATION OF REQUIREMENTS AND RESTRICTIONS.-None of thefunds appropriated in this Act to the Legal Services Corporation shall beexpended for any purpose prohibited or limited by, or contrary to any ofthe provisions of-

(1) sections 501, 502, 505, 506, and 507 of Public Law 104-134 (110 Stat.1321-51 et seq.), and all funds appropriated in this Act to the Legal ServicesCorporation shall be subject to the same terms and conditions as set forthin such sections, except that all references in such sections to 1995 and1996 shall be deemed to refer instead to 1996 and 1997, respectively; and

(2) section 504 of Public Law 104-134 (110 Stat. 1321-53 et seq.), and allfunds appropriated in this Act to the Legal Services Corporation shall besubject to the same terms and conditions set forth in such section, exceptthat-

(A) subsection (c) of such section 504 shall not apply;

(B) paragraph (3) of section 508(b) of Public Law 104-134 (110 Stat. 1321-58)shall apply with respect to the requirements of subsection (a)(13) of suchsection 504, except that all references in such section 508(b) to the dateof enactment shall be deemed to refer to April 26, 1996;

* * * * *

SEC. 503. (a) CONTINUATION OF AUDIT REQUIREMENTS.-The requirements of section509 of Public Law 104-134 (110 Stat. 1321-58 et seq.), other than subsection(l) of such section, shall apply during fiscal year 1997.

(b) REQUIREMENT OF ANNUAL AUDIT.-An annual audit of each person or entityreceiving financial assistance from the Legal Services Corporation underthis Act shall be conducted during fiscal year 1997 in accordance with therequirements referred to in subsection (a).

3. The Departments of Commerce, Justice, and State, the Judiciary, and RelatedAgencies Appropriations Act, 1998, Pub. L. No. 105-119, 111 Stat 2440, 2510-2512,provides in relevant part:

TITLE V-RELATED AGENCIES

* * * * *

LEGAL SERVICES CORPORATION

PAYMENT TO THE LEGAL SERVICES CORPORATION

For payment to the Legal Services Corporation to carry out the purposesof the Legal Services Corporation Act of 1974, as amended, $283,000,000,of which $274,400,000 is for basic field programs and required independentaudits; $1,500,000 is for the Office of Inspector General, of which suchamounts as may be necessary may be used to conduct additional audits ofrecipients; and $7,100,000 is for management and administration.

ADMINISTRATIVE PROVISIONS-LEGAL

SERVICES CORPORATION

* * * * *

SEC. 502. (a) CONTINUATION OF REQUIREMENTS AND RESTRICTIONS.-None of thefunds appropriated in this Act to the Legal Services Corporation shall beexpended for any purpose prohibited or limited by, or contrary to any ofthe provisions of-

(1) sections 501, 502, 505, 506, and 507 of Public Law 104-134 (110 Stat.1321-51 et seq.), and all funds appropriated in this Act to the Legal ServicesCorporation shall be subject to the same terms and conditions as set forthin such sections, except that all references in such sections to 1995 and1996 shall be deemed to refer instead to 1997 and 1998, respectively; and

(2) section 504 of Public Law 104-134 (110 Stat. 1321-53 et seq.), and allfunds appropriated in this Act to the Legal Services Corporation shall besubject to the same terms and conditions set forth in such section, exceptthat-

(A) subsection (c) of such section 504 shall not apply;

(B) paragraph (3) of section 508(b) of Public Law 104-134 (110 Stat. 1321-58)shall apply with respect to the requirements of subsection (a)(13) of suchsection 504, except that all references in such section 508(b) to the dateof enactment shall be deemed to refer to April 26, 1996;

* * * * *

SEC. 503. (a) CONTINUATION OF AUDIT REQUIREMENTS.-The requirements of section509 of Public Law 104-134 (110 Stat. 1321-58 et seq.), other than subsection(l) of such section, shall apply during fiscal year 1998.

(b) REQUIREMENT OF ANNUAL AUDIT.-An annual audit of each person or entityreceiving financial assistance from the Legal Services Corporation underthis Act shall be conducted during fiscal year 1998 in accordance with therequirements referred to in subsection (a).

SEC. 504. (a) DEBARMENT.-The Legal Services Corporation may debar a recipient,on a showing of good cause, from receiving an additional award of financialassistance from the Corporation. Any such action to debar a recipient shallbe instituted after the Corporation provides notice and an opportunity fora hearing to the recipient.

(b) REGULATIONS.-The Legal Services Corporation shall promulgate regulationsto implement this section.

(c) GOOD CAUSE.-In this section, the term "good cause", used withrespect to debarment, includes-

(1) prior termination of the financial assistance of the recipient, underpart 1640 of title 45, Code of Federal Regulations (or any similar correspondingregulation or ruling);

(2) prior termination in whole, under part 1606 of title 45, Code of FederalRegulations (or any similar corresponding regulation or ruling), of themost recent financial assistance received by the recipient, prior to dateof the debarment decision;

(3) substantial violation by the recipient of the statutory or regulatoryrestrictions that prohibit recipients from using financial assistance madeavailable by the Legal Services Corporation or other financial assistancefor purposes prohibited under the Legal Services Corporation Act (42 U.S.C.2996 et seq.) or for involvement in any activity prohibited by, or inconsistentwith, section 504 of Public Law 104-134 (110 Stat. 1321-53 et seq.), section502(a)(2) of Public Law 104-208 (110 Stat. 3009-59 et seq.), or section502(a)(2) of this Act;

(4) knowing entry by the recipient into a subgrant, subcontract, or otheragreement with an entity that had been debarred by the Corporation; or

(5) the filing of a lawsuit by the recipient, on behalf of the recipient,as part of any program receiving any Federal funds, naming the Corporation,or any agency or employee of a Federal, State, or local government, as adefendant.



4. The Omnibus Consolidated and Emergency Supplemental Appropriations Act,1999, Pub. L. No. 105-277, 112 Stat 2681, 2681-107, provides in relevantpart:

TITLE V-RELATED AGENCIES

* * * * *

LEGAL SERVICES CORPORATION

PAYMENT TO THE LEGAL SERVICES CORPORATION

For payment to the Legal Services Corporation to carry out the purposesof the Legal Services Corporation Act of 1974, as amended, $300,000,000,of which $289,000,000 is for basic field programs and required independentaudits; $2,015,000 is for the Office of Inspector General, of which suchamounts as may be necessary may be used to conduct additional audits ofrecipients; and $8,985,000 is for management and administration.

ADMINISTRATIVE PROVISION-LEGAL SERVICES CORPORATION

None of the funds appropriated in this Act to the Legal Services Corporationshall be expended for any purpose prohibited or limited by, or contraryto any of the provisions of, sections 501, 502, 503, 504, 505, and 506 ofPublic Law 105-119, and all funds appropriated in this Act to the LegalServices Corporation shall be subject to the same terms and conditions setforth in such sections, except that all references in sections 502 and 503to 1997 and 1998 shall be deemed to refer instead to 1998 and 1999, respectively.

5. The Consolidated Appropriations Act, 2000, Pub. L. No. 106-113, 113 Stat.1501, 1501A-49, provides in relevant part:

TITLE V-RELATED AGENCIES

* * * * *

LEGAL SERVICES CORPORATION

PAYMENT TO THE LEGAL SERVICES CORPORATION

For payment to the Legal Services Corporation to carry out the purposesof the Legal Services Corporation Act of 1974, as amended, $305,000,000,of which $289,000,000 is for basic field programs and required independentaudits; $2,100,000 is for the Office of Inspector General, of which suchamounts as may be necessary may be used to conduct additional audits ofrecipients; $8,900,000 is for management and administration; and $5,000,000is for client self-help and information technology.

ADMINISTRATIVE PROVISION-LEGAL SERVICES CORPORATION

None of the funds appropriated in this Act to the Legal Services Corporationshall be expended for any purpose prohibited or limited by, or contraryto any of the provisions of, sections 501, 502, 503, 504, 505, and 506 ofPublic Law 105-119, and all funds appropriated in this Act to the LegalServices Corporation shall be subject to the same terms and conditions setforth in such sections, except that all references in sections 502 and 503to 1997 and 1998 shall be deemed to refer instead to 1999 and 2000, respectively.

6. Section 1610.8 of Title 45 of the Code of Federal Regulations providesin relevant part:

PART 1610-USE OF NON-LSC FUNDS, TRANSFERS OF LSC FUNDS, PROGRAM INTEGRITY

* * * * *

§ 1610.8 Program integrity of recipient.

(a) A recipient must have objective integrity and independence from anyorganization that engages in restricted activities. A recipient will befound to have objective integrity and independence from such an organizationif:

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

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

(3) The recipient is physically and financially separate from the otherorganization. Mere bookkeeping separation of LSC funds from other fundsis not sufficient. Whether sufficient physical and financial separationexists will be determined on a case-by-case basis and will be based on thetotality of the facts. The presence or absence of any one or more factorswill not be determinative. Factors relevant to this determination shallinclude 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 activitiesoccur, and the extent of such restricted activities; and

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

(b) Each recipient's governing body must certify to the Corporation within180 days of the effective date of this part that the recipient is in compliancewith the requirements of this section. Thereafter, the recipient's governingbody must certify such compliance to the Corporation on an annual basis.



7. Part 1639 of Title 45 of the Code of Federal Regulations provides inrelevant part:

PART 1639-WELFARE REFORM

§ 1639.1 Purpose.

The purpose of this rule is to ensure that LSC recipients do not initiatelitigation involving, or challenge or participate in, efforts to reforma Federal or State welfare system. The rule also clarifies when recipientsmay engage in representation on behalf of an individual client seeking specificrelief from a welfare agency and under what circumstances recipients mayuse funds from sources other than the Corporation to comment on public rulemakingor respond to requests from legislative or administrative officials involvinga reform of a Federal or State welfare system.

§ 1639.2 Definitions.

(a) An effort to reform a Federal or State welfare system includes all ofthe provisions, except for the Child Support Enforcement provisions of TitleIII, of the Personal Responsibility and Work Opportunity ReconciliationAct of 1996 (Personal Responsibility Act), 110 Stat. 2105 (1996), and subsequentlegislation enacted by Congress or the States to implement, replace or modifykey components of the provisions of the Personal Responsibility Act or byStates to replace or modify key components of their General Assistance orsimilar means-tested programs conducted by States or by counties with Statefunding or under State mandates.

(b) Existing law as used in this part means Federal, State or local statutorylaws or ordinances which are enacted as an effort to reform a Federal orState welfare system and regulations issued pursuant thereto that have beenformally promulgated pursuant to public notice and comment procedures.

§ 1639.3 Prohibition.

Except as provided in §§ 1639.4 and 1639.5, recipients may notinitiate legal representation, or participate in any other way in litigation,lobbying or rulemaking, involving an effort to reform a Federal or Statewelfare system. Prohibited activities include participation in:

(a) Litigation challenging laws or regulations enacted as part of an effortto reform a Federal or State welfare system.

(b) Rulemaking involving proposals that are being considered to implementan effort to reform a Federal or State welfare system.

(c) Lobbying before legislative or administrative bodies undertaken directlyor through grassroots efforts involving pending or proposed legislationthat is part of an effort to reform a Federal or State welfare system.

§ 1639.4 Permissible representation of eligible clients.

Recipients may represent an individual eligible client who is seeking specificrelief from a welfare agency, if such relief does not involve an effortto amend or otherwise challenge existing law in effect on the date of theinitiation of the representation.

§ 1639.5 Exceptions for public rulemaking and responding to requestswith non-LSC funds.

Consistent with the provisions of 45 CFR 1612.6 (a) through (e), recipientsmay use non-LSC funds to comment in a public rulemaking proceeding or respondto a written request for information or testimony from a Federal, Stateor local agency, legislative body, or committee, or a member thereof, regardingan effort to reform a Federal or State welfare system.

§ 1639.6 Recipient policies and procedures.

Each recipient shall adopt written policies and procedures to guide itsstaff in complying with this part.

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