No. 99-960 

In the Supreme Court of the United States 

UNITED STATES OF AMERICA, PETITIONER 

v. 

CARMEN VELAZQUEZ, ET AL. 

ON PETITION FOR A WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE SECOND CIRCUIT 

PETITION FOR A WRIT OF CERTIORARI 

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)(16) of the Omnibus Consolidated Re- 
scissions and Appropriations Act of 1996, Pub. L. No. 
104-134, 110 Stat. 1321-55, precludes recipients of Legal 
Services Corporation funds from participating in “liti- 
gation, lobbying, or rulemaking, involving an effort to 
reform a Federal or State welfare system,” except that 
it allows representation of “an individual eligible client 
who is seeking specific relief from a welfare agency if 
such relief does not involve an effort to amend or 
otherwise challenge existing law in effect on the date of 
the initiation of the representation.” The question pre- 
sented is whether that provision violates the First 
Amendment. 

(I) 

TABLE OF CONTENTS 

Page 

Opinions below ............................................................................... 
1 

Jurisdiction ...................................................................................... 1 

Statutory provision involved ....................................................... 
2 

Statement ........................................................................................ 2 

Reasons for granting the petition ............................................... 
14 

Conclusion ....................................................................................... 21 

Appendix A ................................................................................... 
1a 

Appendix B ................................................................................... 51a 

Appendix C ................................................................................... 100a 

TABLE OF AUTHORITIES 

Cases: 

Kelly v. Municipal Court , 852 F. Supp. 724 (S.D. Ind. 

1994), aff ’d, 97 F.3d 902 (7th Cir. 1996) ............................. 

20, 21 

Legal Aid Society of Hawaii v. Legal Servs. Corp., 145 

F.3d 1017 (9th Cir.), cert. denied, 119 S. Ct. 539 

(1998) ......................................................................... 

13, 16, 19, 20 

National Endowment for the Arts v. Finley, 524 

U.S. 569 (1998) ........................................................................ 

16, 18 

Rosenberger v. Rector & Visitors of the Univ. of 

Va., 515 U.S. 819 (1995) ....................................................... 

15, 19 

Rust v. Sullivan, 500 U.S. 173 (1991) .......... 

7, 9, 10, 15, 16, 18 

Zal v. Steppe, 968 F.2d 924 (9th Cir.), cert. denied, 

506 U.S. 1021 (1992) .............................................................. 

20-21 

Constitution, statutes and regulations: 

U.S. Const. Amend. I ............................................ 

10, 11, 13, 16, 18 

Departments of Commerce, Justice, and State, 

the Judiciary, and Related Agencies Appropriations 

Act, 1998, Pub. L. No. 105-119, § 502, 111 Stat. 

2510 ........................................................................................... 4 

(III) 

IV 

Statutes and regulations—Continued: 

Page 

Legal Services Corporation Act of 1974, Pub. L. No. 

93-355, 88 Stat. 378, 42 U.S.C. 2996 et seq. ........................ 

2 

42 U.S.C. 2996(6) ............................................................ 

6 

42 U.S.C. 2996b(a) .......................................................... 

3 

42 U.S.C. 2996e(a) .......................................................... 

3 

42 U.S.C. 2996e(a)(1)(A) ................................................ 

3 

42 U.S.C. 2996e(b)(3) ..................................................... 

6 

42 U.S.C. 2996e(d)(3) ..................................................... 

3 

42 U.S.C. 2996e(d)(4) ..................................................... 

3 

42 U.S.C. 2996e(d)(5) ..................................................... 

4 

42 U.S.C. 2996f(a)(5) ...................................................... 

3 

42 U.S.C. 2996f(b)(8)-(10) .............................................. 

4 

42 U.S.C. 2996i(c) ........................................................... 

4 

Omnibus Consolidated and Emergency Supplemental 

Appropriations Act, 1999, Pub. L. No. 105-277, 

§ 411, 112 Stat. 281-104 ......................................................... 

4 

Omnibus Consolidated Appropriations Act, 1997, 

Pub. L. No. 104-208, 110 Stat. 3009: 

§ 502(a), 110 Stat. 3009-59 ............................................. 

4 

§ 502(a)(2)(C), 110 Stat. 3009-60 .................................. 

6 

Omnibus Consolidated Rescissions and Appropriations 

Act of 1996, Pub. L. No. 104-134, 110 Stat. 1321: 

§ 504, 110 Stat. 1321-53 .................................................... 

4 

§ 504(a), 110 Stat. 1321-53 ............................................... 

2 

§ 504(a)(1), 110 Stat. 1321-53 .......................................... 

5 

§ 504(a)(2), 110 Stat. 1321-53 .......................................... 

5 

§ 504(a)(3), 110 Stat. 1321-53 .......................................... 

5 

§ 504(a)(4), 110 Stat. 1321-53 .......................................... 

5 

§ 504(a)(7), 110 Stat. 1321-53 .......................................... 

5 

§ 504(a)(11), 110 Stat. 1321-54 ........................................ 

5 

§ 504(a)(12), 110 Stat. 1321-55 ........................................ 

5 

§ 504(a)(13), 110 Stat. 1321-55 ........................................ 

5 

§ 504(a)(14), 110 Stat. 1321-55 ........................................ 

5 

§ 504(a)(15), 110 Stat. 1321-55 ........................................ 

5 

§ 504(a)(16), 110 Stat. 1321-55 ........................................ 5, 15 

V 

Statutes and regulations—Continued: 

Page 

§ 504(a)(17), 110 Stat. 1321-56 ........................................ 

6 

§ 504(b), 110 Stat. 1321-56 .............................................. 

6 

§ 504(d)(1), 110 Stat. 1321-56........................................... 

6 

§ 504(d)(2), 110 Stat. 1321-56........................................... 

6 

§ 504(e), 110 Stat. 1321-57 ............................................... 

6 

28 U.S.C. 2403(a) ....................................................................... 

9 

45 C.F.R.: 

Section 1610.7 .................................................................... 

8 

Section 1610.8(a) ............................................................... 

8, 16 

Section 1610.8(a)(1)-(3) .................................................... 

8 

Section 1610.8(a)(3)(i)-(iv) ............................................... 

8 

Miscellaneous: 

119 Cong. Rec. 20,688 (1973) ................................................... 

3 

142 Cong. Rec. H8189 (daily ed. July 3, 1996) ..................... 
3 

50 Fed. Reg. (1985): 

p. 49,276 ................................................................................... 

7 

p. 49,279 ................................................................................... 
7 

61 Fed. Reg. (1996): 

p. 41,960 ................................................................................... 

7 

p. 63,749 ................................................................................... 
7 

p. 63,752 ................................................................................... 
7 

62 Fed. Reg. (1997): 

p. 12,101 ................................................................................... 

7 

p. 12,104 ................................................................................... 
7 

p. 27,695 ................................................................................... 
8 

pp. 27,696-27,697 ................................................................ 8 

In the Supreme Court of the United States 

No. 99-960 

UNITED STATES OF AMERICA, PETITIONER 

v. 

CARMEN VELAZQUEZ, ET AL. 

ON PETITION FOR A WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE SECOND CIRCUIT 

PETITION FOR A WRIT OF CERTIORARI 

The Solicitor General, on behalf of the United States, 
respectfully petitions for a writ of certiorari to review 
the judgment of the United States Court of Appeals for 
the Second Circuit in this case. 

OPINIONS BELOW 

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

JURISDICTION 

The court of appeals entered its judgment on January 
7, 1999. A timely petition for rehearing was denied on 
July 8, 1999. On September 28, 1999, Justice Ginsburg 
extended the time for filing a petition for a writ of certi- 
orari to and including November 5, 1999, and on 

(1) 

2 

October 27, 1999, she further extended the time for 
filing to and including December 5, 1999 (a Sunday). 
The jurisdiction of this Court is invoked under 28 
U.S.C. 1254(1). 

STATUTORY PROVISION INVOLVED 

Section 504(a) of the Omnibus Consolidated Rescis- 
sions and Appropriations Act of 1996, Pub. L. No. 104- 
134, 110 Stat. 1321-55, provides, in pertinent part: 

None of the funds appropriated in this Act to the 
Legal Services Corporation may be used to provide 
financial assistance to any person or entity * * *— 

* * * * * 

(16) that initiates legal representation or parti- 
cipates in any other way, in litigation, lobbying, 
or rulemaking, involving an effort to reform a 
Federal or State welfare system, except that this 
paragraph shall not be construed to preclude a 
recipient from representing an individual eligible 
client who is seeking specific relief from a 
welfare agency if such relief does not involve an 
effort to amend or otherwise challenge existing 
law in effect on the date of the initiation of the 
representation. 

This restriction was carried forward in subsequent 
appropriations acts. See p. 4, infra. 

STATEMENT 

1. a. In 1974, Congress enacted the Legal Services 
Corporation Act (the LSC Act), Pub. L. No. 93-355, 88 
Stat. 378, 42 U.S.C. 2996 et seq., which creat[ed] the 
Legal Services Corporation (LSC) as an independent, 
non-profit corporation to “provide financial assistance 

3 

to qualified programs furnishing legal assistance to 
eligible clients.” 42 U.S.C. 2996e(a)(1)(A). The LSC 
Act authorizes the LSC to make grants to, and to 
contract with, individuals, organizations and (in certain 
limited circumstances) state and local governments, 
for the purpose of providing legal assistance to eligible 
clients. Ibid. The LSC receives funds appropriated 
annually by Congress to provide such financial assis- 
tance. The LSC then distributes those funds to pro- 
grams, individuals, and other entities that submit appli- 
cations describing their proposed legal services activi- 
ties. 42 U.S.C. 2996b(a), 2996e(a). 

The LSC Act limits LSC financial support to “legal 
assistance in noncriminal proceedings or matters” for 
“persons financially unable to afford legal assistance.” 
42 U.S.C. 2996b(a). The LSC program was designed to 
target the “day-to-day” legal problems of the poor. 119 
Cong. Rec. 20,688 (1973) (statement of Rep. Biester); 
see also 142 Cong. Rec. H8189 (daily ed. July 23, 1996) 
(statement of Rep. Torkildson) (the Act’s primary focus 
is on “bread-and-butter services” to the poor). 

Recipients of LSC funds have long been subject to 
restrictions to ensure the focus on basic legal services. 
The LSC Act has, from the outset, prohibited LSC fund 
recipients from, inter alia, making available any LSC 
funds, program personnel, or equipment to any political 
party, to any political campaign, or for use in “advo- 
cating or opposing any ballot measures.” 42 U.S.C. 
2996e(d)(3) and (4). The LSC Act has also prohibited 
LSC funds from being used to influence any govern- 
mental agency action or legislation, except upon re- 
quest or when necessary to represent an eligible client. 
42 U.S.C. 2996f(a)(5). And the Act has prohibited LSC 
funds from being used to provide legal assistance with 
regard to any proceeding relating to any nontherapeu- 

4 

tic abortion, elementary or secondary school desegrega- 
tion, military desertion, or violation of the selective 
service statute. 42 U.S.C. 2996f(b)(8)-(10). Finally, the 
LSC Act has, from the outset, prohibited LSC fund- 
recipients from bringing any class action suits directly, 
or through others, unless express approval is obtained 
from the LSC fund recipient’s project director 
according to established policies. 42 U.S.C. 2996e(d)(5). 
The LSC Act restrictions apply to LSC fund recipients’ 
activities supported by LSC funds as well as by other 
nonpublic and nontribal funds. 42 U.S.C. 2996i(c). 

b. In 1996, at a time when proposals were before 
Congress to eliminate the LSC altogether because of 
controversy over certain activities pursued by some 
LSC fund recipients, Congress enacted compromise 
legislation that expanded the scope of restrictions on 
the activities of LSC fund recipients. See Omnibus 
Consolidated Rescissions and Appropriations Act of 
1996, Pub. L. No. 104-134, § 504, 110 Stat. 1321-53 (1996 
Act). Congress carried forward the restrictions again 
in the Omnibus Consolidated Appropriations Act, 1997, 
Pub. L. 104-208, § 502(a), 110 Stat. 3009-59 (1997 Act), 
and has continued the restrictions in subsequent leg- 
islation. See the Departments of Commerce, Justice, 
and State, the Judiciary, and Related Agencies Ap- 
propriations Act, 1998, Pub. L. No. 105-119, § 502, 111 
Stat. 2510; Omnibus Consolidated and Emergency 
Supplemental Appropriations Act, 1999, Pub. L. No. 
105-277, § 411, 112 Stat. 2681-107. 

Under those Appropriations Acts, LSC fund reci- 
pients are precluded from representing certain parties 
in specified circumstances. In the provision at issue 
here, the Acts prohibit LSC fund recipients from 
participating in “litigation, lobbying, or rulemaking, in- 

5 

volving an effort to reform a Federal or State welfare 
system,” except that representation is allowed of an 
individual client “seeking specific relief from a welfare 
agency if such relief does not involve an effort to amend 
or otherwise challenge existing law in effect on the date 
of the initiation of the representation.” 1996 Act, 
§ 504(a)(16), 110 Stat. 1321-55 to 1321-56. 

In addition, LSC fund recipients may not: advocate 
or oppose any reapportionment of a legislative, judicial, 
or elective district, or participate in any litigation 
related thereto; attempt to influence the “issuance, 
amendment, or revocation of any executive order, regu- 
lation” or similar government promulgation; attempt 
“to influence any part of any adjudicatory proceeding of 
any Federal, State, or local agency” that is formulating 
general agency policy; attempt to influence “the pass- 
age or defeat of any legislation, constitutional amend- 
ment, referendum, initiative * * * of the Congress or 
a State or local legislative body”; initiate or participate 
in class-action lawsuits; represent aliens who are 
unlawfully present in the United States except in cases 
of domestic violence; conduct a training program “for 
the purpose of advocating a particular public policy or 
encouraging a political activity”; claim or collect 
attorneys’ fees; participate “in any litigation with re- 
spect to abortion”; “participat[e] in any litigation on 
behalf of a person incarcerated in a Federal, State, or 
local prison;” defend a person in a proceeding to evict 
the person from a public housing project if the person 
has been charged with illegal engaging in illegal drug 
activity which threatens the health or safety of a tenant 
or employee of the housing agency. 1996 Act, 
§§ 504(a)(1), (2), (3), (4), (7), (11), (12), (13), (14), (15) 

6 

and (17), 110 Stat. 1321-53 to 1321-56; 1997 Act, 
§ 502(a)(2)(C), 110 Stat. 3009-60.1 

The restrictions apply to the use by LSC fund reci- 
pients of funds received both from the LSC and from 
non-federal sources (except for Indian tribal funds). 
1996 Act, §§ 504(d)(1) and (2), 110 Stat. 1321-56. LSC 
fund recipients must notify non-federal fund donors 
“that the funds may not be expended for any purpose 
prohibited” by the Act. 1996 Act, § 504(d)(1), 110 Stat. 
1321-56.2 

c. Shortly after passage of the 1996 Act, the LSC 
published regulations implementing the new statutory 

1 The restrictions do not preclude LSC fund recipients from 
using non-LSC funds “to comment on public rulemaking or to 
respond to a written request for information or testimony from a 
Federal, State or local agency, legislative body, or committee,” 
1996 Act, § 504(e), 110 Stat. 1321-57, or “for the purpose of con- 
tacting, communicating with, or responding to a request from, a 
State or local government agency, a State or local legislative body 
or committee, or a member thereof, regarding funding for the 
recipient,” 1996 Act, § 504(b), 110 Stat. 1321-56. 

2 The LSC Act has also provided since 1974 that “attorneys 
providing legal assistance must have full freedom to protect the 
best interests of their clients in keeping with the Code of Pro- 
fessional Responsibility, the Canons of Ethics, and the high 
standards of the legal profession.” 42 U.S.C. 2996(6); see also 42 
U.S.C. 2996e(b)(3) (LSC “shall not, under any provision of this 
subchapter, interfere with any attorney in carrying out his 
professional responsibilities to his client as established in the 
Canons of Ethics and the Code of Professional Responsibility of 
the American Bar Association * * * or abrogate as to attorneys 
in programs assisted under this subchapter the authority of a State 
or other jurisdiction to enforce the standards of professional re- 
sponsibility generally applicable to attorneys in such jurisdiction. 
The Corporation shall ensure that activities under this subchapter 
are carried out in a manner consistent with attorneys’ professional 
responsibilities.”). 

7 

restrictions. See 61 Fed. Reg. 41,960 (1996); 61 Fed. 
Reg. at 63,749. Coupled with pre-existing guidelines, 
the regulations applied the new restrictions not only to 
LSC fund recipients but also to any “interrelated” 
organization, defined as an organization as to which the 
LSC fund recipient determined “the direction of 
management and policies” or influenced them “to the 
extent an arm’s length transaction may not be 
achieved.” 50 Fed. Reg. 49,279 (1985).3 

2. a. 

On January 14, 1997, certain lawyers employed 

by LSC fund recipients, their indigent clients, and 
various contributors to LSC fund recipients (respond- 
ents) brought this suit in the United States District 
Court for the Eastern District of New York against the 
Legal Services Corporation and Legal Services of New 
York. They alleged that the restrictions on the use by 
LSC fund recipients of federal and non-federal funds 
violate a variety of federal constitutional provisions. 

b. On March 14, 1997, the LSC announced its inten- 
tion to amend its regulations to allow LSC fund reci- 
pients “to have an affiliation or relationship with 
separate organizations which may engage in prohibited 
activities funded solely with non-LSC funds,” 62 Fed. 
Reg. 12,102, in the same manner as was approved for 
separate projects in Rust v. Sullivan, 500 U.S. 173 
(1991), and it issued interim regulations addressing that 
issue. See 62 Fed. Reg. 12,101 to 12,104 (1997). LSC 

3 The regulations also applied the restrictions to any entity 
that received a transfer of funds from an LSC fund recipient. 61 
Fed Reg. at 63,752. If the funds transferred to the entity were 
LSC funds, the restrictions applied to all of the transferee entity’s 
activities; if an LSC fund recipient transferred non-LSC funds, the 
restrictions applied only to the transferred funds. Ibid. 

8 

issued final regulations on May 21, 1997. 62 Fed. Reg. 
at 27,695 (1997). 

Under the final regulations, an LSC fund recipient 
may create an affiliate that may spend non-federal 
funds on activities in which the LSC fund recipient 
itself may not engage (“restricted activities”), so long as 
the LSC fund recipient maintains its “objective integr- 
ity and independence” from the affiliate. 45 C.F.R. 
1610.8(a). An LSC fund recipient “will be found to have 
objective integrity and independence” from an affiliate 
if: (1) the affiliated organization is a “legally separate” 
organization; (2) the affiliate “receives no transfer of 
LSC funds, and LSC funds do not subsidize restricted 
activities”; and (3) the LSC fund recipient is “physically 
and financially separate” from the affiliate. Id. 
§ 1610.8(a)(1)-(3). Satisfaction of the third criterion is to 
be determined on a case-by-case basis according to the 
“totality of the facts,” including, but not limited to: “(i) 
[t]he existence of separate personnel; (ii) [t]he existence 
of separate accounting and timekeeping records; (iii) 
[t]he degree of separation from facilities in which the 
restricted activities occur, and the extent of such 
restricted activities; and (iv) [t]he extent to which signs 
and other forms of identification which distinguish the 
[LSC fund] recipient from the [affiliated] organization 
are present.” Id. § 1610.8(a)(3)(i)-(iv).4 

4 The new regulations also amended the rule governing the 
transfer of funds to provide that the restrictions apply only when 
an LSC recipient transfers LSC funds to another person or entity. 
When a person or entity receives LSC funds from an LSC fund 
recipient, that person or entity is subject to the restrictions with 
respect to both its LSC funds and its non-LSC funds. 45 C.F.R. 
1610.7. However, a person or entity that receives non-LSC funds 
from an LSC fund recipient is not subject to the restrictions. See 
62 Fed. Reg. at 27,696-27,697. 

9 

3. On March 14, 1997, the United States intervened 
in the district court proceedings, pursuant to 28 U.S.C. 
2403(a), to defend the constitutionality of the restric- 
tions. On March 21, 1997, respondents sought a pre- 
liminary injunction against enforcement of the restric- 
tions to the extent they prevent LSC fund recipients 
from using non-federal funds to engage in certain 
activities. The district court denied respondents’ 
motion for a preliminary injunction, concluding that 
respondents had failed to establish a probability of 
success on the merits. App., infra, 53a-54a. 

The court first held, following Rust v. Sullivan, 500 
U.S. 173 (1991), that LSC’s final regulations imple- 
menting the statutory funding restrictions provide for 
adequate alternative channels through which the re- 
spondent LSC fund recipients can engage in otherwise 
prohibited activities, because the regulations allow 
recipients to create and control affiliate organizations 
that engage in such activities. The court found that the 
LSC’s regulations requiring separation between LSC 
fund recipients and their affiliates are consistent with 
the statutory funding restrictions, App., infra, 83a-88a, 
and that the LSC’s program-integrity requirements are 
appropriately tailored to serve the government’s inter- 
est in preventing the appearance that the government 
is endorsing activities that Congress does not wish to 
fund. Id. at 88a-94a. The court rejected respondents’ 
contention that the LSC program integrity require- 
ments, while “embraced by the Court in Rust” (id. at 
88a), are different when applied to lawyer-client rela- 
tionships. 

The district court rejected respondents’ argument 
that the affiliate rules accepted in Rust do not provide 
the appropriate benchmark here because the LSC regu- 
lations “strike at the heart of activities that are laden 

10 

with First Amendment value.” App., infra, 94a 
(citation omitted). The court found that, while the 
lawyer-client relationship implicates First Amendment 
values, “the restrictions pertaining to LSC recipients 
do not significantly impinge on the lawyer-client rela- 
tionship,” especially when contrasted with the “pro- 
active aspects” of Title X, involved in Rust. Id. at 97a. 
In fact, the court noted that the LSC regulations 
“broadly promote the lawyer-client relationship by 
providing that the lawyer may counsel the client, refer 
the client to another attorney, and explain to the client 
that LSC restrictions preclude the lawyer from engag- 
ing in the activity the client may wish to undertake.” 
Id. at 98a.5 

4. The court of appeals affirmed in part and reversed 
in part. App., infra, 1a-50a. 

a. The court held that LSC’s regulations are based 
on a reasonable interpretation of the relevant statutory 
provisions, App., infra, 12a-14a, and that the pro- 
hibition against furnishing LSC funds to entities that 
engage in certain activities does not unconstitutionally 
encroach on the relationship between lawyer and client, 
id. at 15a-17a. The court reasoned that, even assuming 
“that an ‘all-encompassing’ lawyer-client relationship 
enjoys heightened protection from government regu- 

5 The district court rejected respondents’ “rather casual due 
process and equal protection claims” App., infra, 98a. The due 
process claim failed “for the same reasons the analogous claim 
failed in Rust—namely, because plaintiffs are not absolutely 
precluded from engaging in prohibited activities and, furthermore, 
have no constitutional entitlement to the benefits provided by the 
legal services program.” Ibid. The equal protection argument 
failed because “the Government had a rational basis for restricting 
the activities of recipients, and because poverty is not a suspect 
classification.” Ibid. 

11 

lation, the lawyer-client relationships funded by LSC 
are no more ‘all-encompassing’ than the doctor-patient 
relationships funded under Title X, which were con- 
sidered in Rust.” Id. at 16a. 

The court also rejected respondents’ facial challenge 
to the adequacy of the regulations that allow LSC fund 
recipients to establish affiliate organizations that can 
then use non-federal funds to engage in activities that 
are foreclosed to the recipients themselves. App., 
infra, 17a-23a. The court rejected respondents’ argu- 
ment that the restrictions create “unconstitutional con- 
ditions” by unreasonably burdening LSC fund re- 
cipients’ use of nonfederal funds to engage in activity 
protected by the First Amendment. The court noted 
that respondents “provide no basis for concluding that 
the program integrity rules cannot be applied in at least 
some cases without unduly interfering with grantees’ 
First Amendment freedoms.” Id. at 23a. In particular, 
the court found that the existence of adequate alterna- 
tive avenues for the exercise of restricted activities 
through affiliates is sufficient to satisfy First Amend- 
ment scrutiny. Id. at 21a. 

The court of appeals next rejected respondents’ 
claims of impermissible viewpoint discrimination with 
respect to the general restrictions on lobbying and 
attempting to influence a rulemaking proceeding. It 
held that the classifications established by the pro- 
visions were “based on subject matter, not viewpoint.” 
App., infra, 23a-25a. The restrictions do not suppress 
ideas, the court reasoned, but rather merely prohibit 
fund recipients from engaging in activities outside the 
scope of the program. Ibid. 

The court also upheld the prohibitions against 
lobbying and rulemaking “involving an effort to reform 
a * * * welfare system,” App., infra, 25a, and the 

12 

prohibition against “initiat[ing] legal representation 

* * * involving an effort to reform a * * * welfare 
system,” Id. at 25a-26a. The court reasoned that those 
provisions are viewpoint neutral because they could be 
read as prohibiting activity that either supports or 
opposes welfare reform. Id. at 25a-28a. 

The court reversed, however, with regard to one 
aspect of the restrictions related to welfare reform— 
the provision that creates an exception to those restric- 
tions by permitting representation of a client seeking 
specific relief from a welfare agency but only “if such 
relief does not involve an effort to amend or otherwise 
challenge existing law in effect on the date of the initi- 
ation of the representation.” App., infra, 28a. The 
court acknowledged that this Court, in Rust, stated 
that “the Government has not discriminated on the 
basis of viewpoint” when “it has merely chosen to fund 
one activity to the exclusion of the other,” id. at 30a, 
and that those words from Rust “seem on their face” to 
support the view of Judge Jacobs in dissent, who would 
have sustained the provision. Id. at 31a. The court 
stated, however, that it “doubt[ed] that these words can 
reliably be taken at face value.” Ibid. The court 
thought it “inconceivable that the Supreme Court that 
approved the Rust regulation would have intended its 
language to authorize grants funding support for, but 
barring criticism of, governmental policy.” Id. at 32a. 

The court of appeals observed that “the First 
Amendment’s free speech guarantee goes to the right 
to criticize government or advocate change in govern- 
mental policy.” App., infra, 32a. The court then 
reasoned that a lawyer’s argument that a statute or 
rule is unconstitutional or illegal “falls far closer to the 
First Amendment’s most protected categories of speech 
than abortion counseling or indecent art,” id. at 33a, and 

13 

that the welfare proviso represents an attempt to drive 
ideas from the “marketplace” of the courtroom. Id. at 
34a. 

The court of appeals therefore held that the excep- 
tion permitting only certain representation of clients 
seeking relief from a welfare agency constitutes view- 
point discrimination subject to strict First Amendment 
scrutiny, and it perceived no reason why that provision 
survived strict scrutiny. App., infra, 35a. In fashioning 
a remedy, however, the court declined either to in- 
validate the entire welfare reform prohibition or to 
eliminate the individual-benefits exception to that 
prohibition altogether. Instead, the court chose to 
leave the general prohibition in place and to broaden 
the exception by striking the proviso to the exception 
that limits representation to situations in which the 
specific relief sought “involve[s] an effort to amend or 
challenge existing law.” Id. at 35a-37a. The court of 
appeals therefore directed the district court to enter a 
preliminary injunction barring enforcement of that 
restriction on seeking specific relief. 

b. Judge Jacobs filed a separate opinion, concurring 
in the majority’s rulings upholding most of the statu- 
tory provisions but dissenting from the ruling striking 
down the one welfare-related provision as unconsti- 
tutional viewpoint discrimination. App., infra, 38a-50a. 
He pointed to the Ninth Circuit’s decision in Legal Aid 
Society of Hawaii v. Legal Services Corp., 145 F.3d 
1017, cert. denied, 119 S. Ct. 539 (1998) (White, J., 
sitting by designation), which rejected similar chal- 
lenges to LSC restrictions. App., infra, 47a. 

In Judge Jacobs’ view, this case falls within the 
teaching of Rust. App., infra, 45a, 46a-47a (quoting 
Rust, 500 U.S. at 193). He characterized as “sur- 
prising” the majority’s position that Rust cannot “reli- 

14 

ably be taken at face value,” noting that “[t]his ap- 
proach to Supreme Court opinions is not one previously 
employed by this Circuit. I think the Supreme Court 
meant what it said.” Id. at 46a. 

Judge Jacobs also took issue with the notion that “the 
statute promotes one favored view over others in a 
supposed public forum. Whose viewpoint? What 
forum? According to the majority opinion: the govern- 
ment-funded lawyers possess the protected expressive 
interest; and the public forum is the courtroom (an idea 
that may come as a surprise to trial judges).” App., 
infra, 49a. Judge Jacobs similarly rejected the proposi- 
tion that the proviso disfavors the speech of the clients, 
explaining that the limitation applies regardless of the 
ground on which the attorney would seek relief that 
would amend or invalidate existing law: “There are 
certainly people * * * who favor narrowing welfare 
eligibility, or reduced benefits, or abolition of the 
welfare system. But the statute gives them nothing. 
Where then is the viewpoint discrimination, even if one 
assumed (as I do not) that the LSC makes every court- 
room into a public forum?” Id. at 50a. Judge Jacobs 
emphasized that the restriction at issue is viewpoint 
neutral, because it is “not a promotion of advocacy for 
the good old status quo, or a suppression of a point of 
view,” but rather is a means for channeling money for 
“the administration of a complex existing statute so 
that everyone can get what the statute provides.” Id. 
at 48a. 

REASONS FOR GRANTING THE PETITION 

The court of appeals erred in holding unconstitutional 
on its face the provision in successive Acts of Congress 
that creates only a limited individual-benefits exception 
to the general prohibition against participation by LSC 

15 

fund recipients in litigation, lobbying, or rulemaking 
involving an effort to reform a federal or state welfare 
system. That exception allows recipients of Legal 
Services Corporation (LSC) funds to represent 
individual eligible clients who are seeking specific relief 
from a welfare agency “if such relief does not involve an 
effort to amend or otherwise challenge existing law in 
effect on the date of the initiation of the 
representation.” Omnibus Consolidated Rescissions 
and Appropriations Act of 1996, Pub. L. No. 104-134, 
§ 504(a)(16), 110 Stat. 1321-55. The court of appeals 
concluded that the exception constitutes impermissible 
viewpoint discrimination by precluding lawyers 
employed by recipients of LSC funds from representing 
clients who seek such relief. 

This Court has recognized, however, that “[t]he 
Government can, without violating the Constitution, se- 
lectively fund a program to encourage certain activities 
it believes to be in the public interest, without at the 
same time funding an 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). The court of appeals’ ruling conflicts 
with that holding in Rust. 

The court of appeals believed that this case is con- 
trolled not by Rust, but by Rosenberger v. Rector & 
Visitors of the Univ. of Va., 515 U.S. 819 (1995). Unlike 
the University in Rosenberger, however, Congress has 
not, through the LSC Act, chosen to promote a di- 
versity of private views in a public forum. It has simply 
chosen to pay for certain services but not others to 
assist people in seeking benefits under welfare pro- 
grams that are themselves government-funded. 

16 

The Second Circuit’s decision holding that limitation 
unconstitutional is inconsistent with the Ninth Circuit’s 
decision in Legal Aid Society of Hawaii v. Legal 
Services Corp., 145 F.3d 1017, cert. denied, 119 S. Ct. 
539 (1998) (LASH). There, the Ninth Circuit upheld 
against another facial First Amendment challenge 
various restrictions on LSC fund recipients, in light of 
the LSC regulations that permit an LSC fund recipient 
to create an affiliate that may spend non-federal funds 
on activities in which the recipient itself is restricted 
from engaging, so long as the recipient maintains 
its “objective integrity and independence” from the 
affiliate. 45 C.F.R. 1610.8(a). 

1. In Rust, the petitioners made an argument almost 
identical to the one respondents make here, contending 
that a program funding family-planning services imper- 
missibly discriminated on the basis of viewpoint 
because it allowed speech discussing some viewpoints 
(those favoring certain family planning options) while 
prohibiting competing viewpoints (those favoring 
abortion as a family planning option). 500 U.S. at 192. 
This Court rejected that argument, holding that Con- 
gress may “selectively fund a program to encourage 
activities it believes to be in the public interest, without 
at the same time funding an alternative program which 
seeks to deal with the problem in another way.” Id. at 
193. In doing so, the Court explained, “the Government 
has not discriminated on the basis of viewpoint; it has 
merely chosen to fund one activity to the exclusion of 
the other.” Ibid. Thus, Rust was “not a case of the 
Government ‘suppressing a dangerous idea,’ but of a 
prohibition on a project grantee or its employees from 
engaging in activities outside of the project’s scope.” 
Id. at 194. Accord National Endowment for the Arts v. 
Finley, 524 U.S. 569, 587-588 (1998). 

17 

The court of appeals acknowledged that the language 
of Rust supports the view that the limitation on seeking 
certain relief from a welfare agency does not 
discriminate on the basis of viewpoint, but stated that it 
“doubt[ed] that these words can reliably be taken at 
face value.” App., supra, 31a. Contrary to the court of 
appeals’ view, however, the limitation at issue here falls 
squarely within Rust. 

As in Rust, Congress has chosen to fund a certain 
program to the exclusion of another. Congress has 
chosen to fund litigation in which individuals seek to 
establish their entitlement to benefits under a current 
welfare program (which is itself funded by the govern- 
ment), but not to fund litigation in which individuals 
would ask a court to invalidate that very program in 
some respect. In that way, Congress has sought to 
maximize the availability of funds to pay for legal 
assistance that will enhance the value of the current 
welfare program to its intended recipients by providing 
assistance to persons who believe they were wrongfully 
denied the benefits the program makes available. 
Attorneys for LSC fund recipients who are requested 
to represent other individuals, whose entitlement to 
welfare benefits may depend on a court’s invalidation of 
the current welfare program in some respect, are free 
to inform those individuals that such representation is 
beyond the scope of the LSC program and to refer the 
individuals concerned to legal counsel outside the 
program, including any lawyer at an affiliate organi- 
zation that the LSC fund recipient may have estab- 
lished under the LSC regulations. The LSC program is 
thereby less restrictive than the statute upheld in Rust, 
which prohibited physicians and other fund-recipient 
personnel from “referring a pregnant woman to an 
abortion provider, even upon specific request,” and 

18 

from providing even counseling about abortion. 500 
U.S. at 180. Attorneys employed by LSC grantees thus 
are free to express their views, to actual or potential 
clients or anyone else, regarding any legal matter— 
including the view that a welfare rule or statute is 
unlawful or unconstitutional—and to refer clients to 
counsel who will represent them in conducting litigation 
that the attorneys employed by the LSC fund recipient 
cannot conduct themselves. 

The court of appeals attempted to distinguish this 
case from Rust (and from National Endowment for the 
Arts v. Finley, supra) on the rationale that this case 
involves restrictions on speech that is critical of the 
government, which the court regarded as more pro- 
tected by the First Amendment than abortion counsel- 
ing or indecent art. The court of appeals erred in 
suggesting that the limitation on welfare litigation 
prevents LSC-funded lawyers from making certain 
arguments during the course of comprehensive legal 
representation. App., infra, 33a-34a. The limitation 
prevents LSC fund recipients from engaging in 
representation at all if it involves a request for a parti- 
cular form of relief—namely, amendment or invalida- 
tion of a welfare statute or regulation. See App., infra, 
42a-43a (Jacobs, J., dissenting). Thus, the proviso does 
not exclude certain viewpoints in the course of 
litigating a particular case; it excludes a certain class of 
cases from the scope of the program to ensure that the 
program focuses on the day-to-day legal problems of 
the poor people who are attempting to obtain benefits 
to which they may be entitled under the current 
program.6 

6 The court of appeals rejected that interpretation of the pro- 
gram (App., infra, 34a n.9), believing that, “[a]s a practical matter, 

19 

As the dissent below explained, App., infra, 48a, the 
limitation at issue is not viewpoint-based; it merely 
ensures that the program operates within its intended 
limits to determine correctly the benefits owed under 
existing law. Congress reasonably may determine that 
funding legal assistance for people seeking to obtain 
benefits under existing welfare programs best furthers 
the interests of both those programs and the Legal 
Services program itself, without also funding legal re- 
presentation for people who do not qualify under 
existing law. 

2. The court of appeals also erred in applying what 
appears to be a public forum analysis, in reliance upon 
this Court’s decision in Rosenberger. In that case, the 
Court struck down a university program that provided 
funding for student publications but that excluded 
publications with religious viewpoints, noting that the 
university had created a limited public forum for the 
expression of ideas. 515 U.S. at 837. In a situation 
where the government creates a public forum to pro- 
mote a diversity of private views, the exclusion of 
particular viewpoints from that forum “abridges” the 

a lawyer often will not know in advance what arguments must be 
raised” in a particular case. Even if an LSC lawyer has already 
undertaken representation of a client believing that it would not be 
necessary to seek invalidation of a statute or regulation, but then 
concludes that such relief should be sought, the lawyer may at that 
point refer the client to another lawyer. The panel majority ex- 
pressed concern that there may be circumstances in which an 
attorney could not readily “withdraw from litigation that is in 
progress” or where “prejudice to the client * * * may result from 
such a withdrawal.” Ibid. As the dissent pointed out (id. at 43a- 
44a), however, this case presents a facial challenge to the statu- 
tory restrictions. The constitutionality of its application in parti- 
cular instances such as those posited by the court of appeals is not 
at issue. 

20 

freedom of speech in that limited forum. But that is 
not what the LSC Act does. 

In invoking Rosenberger, the court of appeals re- 
garded the courtroom as the relevant public forum. 
The court reasoned that the limitation on seeking cer- 
tain relief from a welfare agency is calculated to drive 
viewpoints that question the validity of statutes or 
regulations from the marketplace in that forum. App., 
infra, 34a. That analysis is inconsistent with the Ninth 
Circuit’s holding in LASH, supra. In that case, the 
Ninth Circuit (per Justice White, sitting by designa- 
tion) rejected the contention that Rosenberger under- 
mines the validity of the LSC restrictions, noting that 
the government in Rosenberger expended funds to en- 
courage a diversity of views, while the LSC program is 
designed to appropriate public funds to promote a 
particular category of professional services. The court 
concluded: “Like the Title X program in Rust, the LSC 
program is designed to provide professional services of 
limited scope to indigent persons, not create a forum for 
the free expression of ideas.” Ibid. (emphasis supplied). 

The notion that litigation in the courtroom is a public 
forum for the free expression of views would, as the dis- 
sent below noted, “come as a surprise to trial judges.” 
App., infra, 49a. While a courtroom might be referred 
to as a public forum in the sense that courts conduct 
public (as opposed to private) proceedings, we are 
aware of no case holding that a courtroom is a public 
forum for the robust expression of ideas by attorneys or 
clients or for applying strict scrutiny to rules regulating 
attorneys’ speech. In fact, courts that have considered 
the matter have held to the contrary. See, e.g., Kelly v. 
Municipal Court, 852 F. Supp. 724, 734-735 (S.D. Ind. 
1994), aff ’d, 97 F.3d 902 (7th Cir. 1996); see also Zal v. 
Steppe, 968 F.2d 924, 932 (9th Cir.) (Trott, J., con- 

21 

curring), cert. denied, 506 U.S. 1021 (1992). As one 
court has reasoned, “[a] courtroom is not a debate hall 
or gathering place for the public to exchange ideas; it is 
a forum for adjudicating the rights and duties of 
litigants. In contrast to discourse in public fora, dis- 
cussions that occur in court are highly regulated by 
rules of evidence and procedure.” Kelly, 852 F. Supp. 
at 735. 

CONCLUSION 

The petition for a writ of certiorari should be 
granted. 

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 

DECEMBER 1999 

APPENDIX A 

UNITED STATES COURT OF APPEALS 
FOR THE SECOND CIRCUIT 

No. 2020, Docket 96-6006 

CARMEN VELAZQUEZ, ET AL, PLAINTIFFS-APPELLANTS, 

v. 

LEGAL SERVICES CORPORATION, 
DEFENDANT-APPELLEE, 

UNITED STATES OF AMERICA, INTERVENOR-APPELLEE. 

[Argued: March 20, 1998 
Decided: Jan. 7, 1999 
Rehearing and Rehearing En Banc Denied: 
July 2, 1999] 

Before: JACOBS, LEVAL, and GIBSON,* Circuit 
Judges. 

Judge JACOBS concurs in part and dissents in part in 
a separate opinion. 

LEVAL, Circuit Judge: 

* The Honorable John R. Gibson of the United States Court of 
Appeals for the Eighth Circuit, sitting by designation. 

(1a) 

2a 

This appeal concerns the validity of restrictions im- 
posed by Congress and the Legal Services Corporation 
(“LSC”) on the professional activities of entities that 
receive funding from LSC (“LSC grantees”). Plaintiffs 
are lawyers employed by New York City LSC grant- 
ees, their indigent clients, private contributors to LSC 
grantees, and state and local public officials whose 
governments contribute to LSC grantees. Plaintiffs 
sought a preliminary injunction against the enforce- 
ment of the restrictions, contending they violate vari- 
ous provisions of the U.S. Constitution. The district 
court denied a preliminary injunction, finding that 
plaintiffs had failed to establish a probability of success 
on the merits. We affirm in part and reverse in part. 

I. Background 

A. The Legal Services Corporation and the 
Challenged Statute. LSC is a non-profit government- 
funded corporation, created by the Legal Services 
Corporation Act of 1974 (“LSCA”), 42 U.S.C. § 2996 et 
seq., “for the purpose of providing financial support for 
legal assistance in noncriminal proceedings or matters 
to persons financially unable to afford legal assistance.” 
42 U.S.C. § 2996b(a). LSC fulfills this mandate by mak- 
ing and administering grants to hundreds of local 
organizations that in turn provide free legal assistance 
to between 1,000,000 and 2,000,000 indigent clients 
annually. See Texas Rural Legal Aid v. Legal Services 
Corp., 940 F.2d 685, 688 (D.C. Cir. 1991); S. Rep. 104- 
392 at 2-3 (1996). Many LSC grantees are funded by 
a combination of LSC funds and other public or private 
sources. S. Rep. 104-392 at 3; A. 225, A. 297. LSC 
grantees are governed by local Boards of Directors who 

3a 

set policies and priorities in response to local conditions 
and client needs. LSC is empowered to implement the 
LSCA through the traditional administrative rule- 
making process. Tex. Rural Legal Aid, 940 F.2d at 692. 

From the outset of the LSC program, LSC grantees 
have been restricted in the use of LSC funds. See 42 
U.S.C. § 2996f(b)(1)-(10) (prohibiting use of LSC funds 
in, inter alia, most criminal proceedings, political activi- 
ties, and litigation involving nontherapeutic abortion, 
desegregation, or military desertion). Recipient organi- 
zations are also barred from using most nonfederal 
funds for any activity proscribed by the LSCA. See 42 
U.S.C. § 2996i(c). 

In 1996, Congress substantially expanded the restric- 
tions on activities of LSC grantees. See Omnibus Con- 
solidated Rescissions and Appropriations Act of 1996, 
Pub. L. No. 104-134, § 504, 110 Stat. 1321, 1321-53-56 
(1996) (“OCRAA,” or “the 1996 Act”), reenacted in the 
Omnibus Consolidated Rescissions and Appropriations 
Act of 1997, Pub. L. 104-208, § 502, 110 Stat. 3009 
(1997). Section 504 of OCRAA, set forth below in per- 
tinent part,1 bars the use of LSC funds to aid entities 

1 None of the funds appropriated in this Act to the Legal 
Services Corporation may be used to provide financial assistance 

to any person or entity . . .— 

(2) that attempts to influence the issuance, amendment, or 

revocation of any executive order, regulation, or other state- 
ment of general applicability and future effect by any Federal, 
State, or local agency (the “executive branch provision”); 

(3) that attempts to influence any part of any adjudicatory 

proceeding of any Federal, State, or local agency if such part 
of the proceeding is designed for the formulation or modifica- 

4a 

tion of any agency policy of general applicability and future 
effect (the “agency adjudication provision”); 

(4) that attempts to influence the passage or defeat of any 

legislation, constitutional amendment, referendum, initiative, 
or any similar procedure of the Congress or a State or local 
legislative body (the “legislation provision”) (subsections (2), 
(3), and (4) are collectively the “lobbying provisions”); 

(5) that attempts to influence the conduct of oversight 

proceedings of the [LSC] or any person or entity receiving 
financial assistance provided by the Corporation (the “LSC 
oversight provision”); ... 

(7) that initiates or participates in a class action suit (the 
“class action provision”); ... 

(11) that provides legal assistance for or on behalf of 
[certain] alien[s] (the “aliens provision”); 

(12) that supports or conducts a training program for the 

purpose of advocating a particular public policy or encourag- 
ing a political activity, a labor or antilabor activity, a boycott, 
picketing, a strike, or a demonstration . . . (the “training 
provision”); 

(13) that claims (or whose employee claims), or collects and 

retains, attorneys’ fees pursuant to any Federal or State law 
permitting or requiring the awarding of such fees (the 
“attorneys’ fees provision”); ... 

(15) that participates in any litigation on behalf of a person 

incarcerated in a Federal, State, or local prison (the “incar- 
cerated client provision”); 

(16) that initiates legal representation or participates in 

any other way in litigation, lobbying, or rulemaking, involving 
an effort to reform a Federal or State welfare system, except 
that this paragraph shall not be construed to preclude a re- 
cipient from representing an individual eligible client who is 
seeking specific relief from a welfare agency if such relief does 
not involve an effort to amend or otherwise challenge existing 

5a 

that perform various activities including lobbying, 
participation in class actions, providing legal assistance 
to aliens in certain categories, supporting advocacy 
training programs, collecting attorneys’ fees under fee 
shifting laws, litigating on behalf of prisoners, and seek- 
ing to reform welfare.2 

Congress left no question of its intention to restrict 
grantees’ use of non-federal and federal funds alike. 
The Act provides that while program recipients may 
“us[e] funds received from a source other than the 
Legal Services Corporation to provide legal assistance, 

. . . such funds may not be expended by recipients for 
any purpose prohibited by this Act.” § 504(d)(2)(B). 
Moreover, § 504(d)(1) requires recipients to notify all 
non-federal donors that their contributions “may not be 
expended for any purpose prohibited by . . . this 
title.” 

In August 1996, LSC proposed regulations to imple- 
ment the 1996 Revisions, which, inter alia, (1) pro- 
hibited a grantee from “us[ing] non-LSC funds for any 
purpose prohibited by the LSC Act,” 61 Fed. Reg. 
41960, 41962 (1996); (2) prohibited any organization con- 
trolled by a grantee from pursuing restricted activities 
(the “interrelated organizations prohibition”), see id.; 50 
Fed. Reg. 49276, 49279 (1985) (defining “control” as 

law in effect on the date of the initiation of the representation 
(the “welfare reform provision”). 

OCRAA, §§ 504(a)(2)-(5), (7), (11)-(13), (15)-(16). 

2 The 1996 legislation also restricted LSC grantees from 
litigation or activity involving political redistricting, § 504(a)(1) and 
from litigation “with respect to abortion,” § 504(a)(14). Plaintiffs do 
not challenge these restrictions. 

6a 

“the ability to determine the direction of [or] influence 
the management or policies” of another organization); 
and (3) applied the OCRAA restrictions to any third 
party to whom a grantee transfers LSC funds, and to 
any private funds transferred from a grantee to a third 
party irrespective whether the funds were private or 
public (the “transfer of funds provision”). 61 Fed. Reg. 
63749, 63752 (1996). The combined effect of the regula- 
tions was to prohibit LSC grantees from engaging in 
any restricted activity, even through a legally distinct 
affiliate organization. These regulations were promul- 
gated in December 1996. See 45 C.F.R. §§ 1610.3, 1610.8 
(1996). 

B. The Challenges to the Statute and Implementing 
Regulations. Plaintiffs filed this lawsuit in January 
1997, alleging that the restrictions on the use of non- 
federal monies violate their rights under First, Fifth, 
and Tenth Amendments to the United States Constitu- 
tion. They also claimed that the restrictions on the 
use of federal funds violate the First Amendment, the 
doctrine of Separation of Powers, and the Tenth 
Amendment. Plaintiffs sought a preliminary injunction 
only to enjoin restrictions on the use of non-federal 
funds. 

Soon after this suit was filed, and before the hearing 
on plaintiffs’ application for a preliminary injunction, a 
federal district court in Hawaii issued an order partially 
granting a motion by a different set of plaintiffs to pre- 
liminarily enjoin enforcement of the OCRAA restric- 
tions. See Legal Aid Society of Hawaii v. Legal Servs. 
Corp., 961 F. Supp. 1402 (D. Haw. 1997) (“LASH I”). 
LASH I concluded that under Rust v. Sullivan, 500 
U.S. 173, 111 S. Ct. 1759, 114 L.Ed.2d 233 (1991) and 

7a 

other Supreme Court decisions, congressional restric- 
tions on the activities of federally-funded entities were 
permissible only so long as they “left open adequate 
channels for [protected] speech.”3 961 F. Supp. at 1414. 

3 Because there is considerable overlap between the issues 
contested in Rust and those presented by this appeal, we briefly 
review that opinion. 

The Rust plaintiffs brought a facial challenge to conditions at- 
tached by the Department of Health and Human Services to family 
planning services provided under Title X of the Public Health 
Service Act. See 500 U.S. at 178-79, 111 S. Ct. 1759. The Act 
provided that no Title X funds “shall be used in programs where 
abortion is a method of family planning.” Id. at 178, 111 S. Ct. 1759 
(quoting statute). The challenged regulations endeavored “to pro- 
vide clear and operational guidance to grantees about how to 
preserve the distinction between Title X programs and abortion as 
a method of family planning.” Id. at 179, 111 S. Ct. 1759 (internal 
quotation marks omitted). 

The regulations attached three principal conditions on the grant 
of federal funds for Title X projects. First, Title X projects were 
precluded from “provid[ing] counseling concerning the use of 
abortion as a method of family planning or provid[ing] referral for 
abortion as a method of family planning.” Id. Second, Title X 
projects could “not encourage, promote, or advocate abortion as a 
method of family planning.” Id. at 180, 111 S. Ct. 1759. Third, the 
regulations provided that the Title X project must be “physically 
and financially separate from prohibited abortion activities.” Id. 
The regulations set forth a nonexclusive list of factors to determine 
whether the separateness requirement had been met. Id. at 180- 
81, 111 S. Ct. 1759. 

The Supreme Court rejected plaintiffs’ viewpoint discrimination 
and unconstitutional conditions arguments. The Court concluded 
that the government “has not discriminated on the basis of view- 
point; it has merely chosen to fund one activity to the exclusion of 
another.” Id. at 193, 111 S. Ct. 1759. The Court rejected the un- 
constitutional conditions claim with the observation that Congress 
has “not denied the right to engage in abortion related activities 

8a 

Applying this standard, the court found that the LSC 
regulations unduly burdened grantees’ protected First 
Amendment rights to lobby, to associate, and to have 
meaningful access to courts. Central to the court’s 
analysis was its finding that the interrelated organi- 
zations prohibition barred LSC grantees from creating 
affiliate organizations that could engage in restricted 
activity. See LASH I, 961 F. Supp. at 1415-16. The 
court held that as implemented, the 1996 restrictions 
denied to grantees not only the ability to undertake 
restricted activity directly, but also all alternative 
channels for exercise of these constitutionally protected 
activities. The court therefore determined that plain- 
tiffs’ constitutional challenge was likely to prevail on 
the merits and enjoined enforcement of portions of the 
OCRAA restrictions. See id. at 1421-22. 

In order to cure these constitutional infirmities, LSC 
issued “interim regulations” in March 1997 modelled 
after the restrictions upheld by the Supreme Court in 
Rust. See 62 Fed. Reg. 12101, 12101-04 (1997) (interim 
regulations “are intended to address constitutional 
challenges raised by the previous rule”); Legal Aid 
Society of Hawaii v. Legal Services Corp., 981 F. Supp. 
1288, 1290 (D. Haw. 1997) (“LASH II”); Velazquez 

v. Legal Services Corp., 985 F. Supp. 323, 332-333 
(E.D.N.Y. 1997). The interim regulations modified the 
earlier rules in two important respects. LSC revised 
the transfer of funds rules so that, in most cases, non- 
federal funds transferred by a grantee to a controlled 
affiliate would cease to be subject to the restrictions. 
Compare 62 Fed. Reg. 12101, 12103, § 1610.7 (1997) 

[but] merely refused to fund such activities out of the public fisc.” 
Id. at 198, 111 S. Ct. 1759. 

9a 

with 45 C.F.R. § 1610.7 (1996) (61 Fed. Reg. 63749, 
63752). Equally important, a new section entitled “Pro- 
gram Integrity of Recipient,” 62 Fed. Reg. 12101 at 
12103-04, § 1610.8, provided that grantees could main- 
tain a relationship with “affiliate” organizations, which 
could in turn engage in restricted activities so long as 
the association between the organizations met stand- 
ards of “program integrity.” The nonexclusive list of 
factors relevant to the determination of program in- 
tegrity were (1) the existence of separate personnel; (2) 
the existence of separate accounting and timekeeping 
records; (3) the existence of separate facilities; and (4) 
the extent to which signage and identification distin- 
guishes recipient from affiliate. Id. at 12104. 

Ten days after the interim rules were promulgated, 
the court below held a hearing on the plaintiffs’ motion 
for a preliminary injunction. See 985 F. Supp. at 332. 
The district court found that “although based on the 
Rust program integrity requirements,” the interim 
regulations differed from those approved in Rust in 
three ways. Id. at 333. First, the LSC regulations, 
unlike Rust, included provisions that organizations 
under the “control” of a grantee would be subject to the 
statutory restrictions, unless the program integrity re- 
quirements were met. See id. Second, while the Rust 
regulations provided that “the ‘degree of separation’ of 
facilities would be considered,” the interim regulations 
required the “existence” of separate facilities. Id. 
Third, the Rust regulations provided that the deter- 
mination “whether a recipient and affiliate were suffi- 
ciently separate would be based on all ‘facts and circum- 
stances’ whereas the interim regulations made no such 
statement, which arguably implied that [to satisfy the 

10a 

separation rules] a recipient would have to satisfy each 
and every program integrity factor.” Id. at 333-34. 

The district court expressed some doubt as to the 
constitutionality of the interim regulations but never- 
theless delayed decision. Observing that “these are 
interim regulations,” the district court determined that 
it might “be provident to withhold judgment until the 
final regulations were promulgated.” Id. at 334. The 
court speculated that “maybe after we have this argu- 
ment today, there will be more regulations,” and 
therefore undertook to “allow[] some period of time to 
let the dust settle until we get final regulations.” Id. 

On May 21, 1997, LSC replaced the interim regula- 
tions with a “Final Rule” (the “final regulations”). See 
id. As the district court noted, “[t]he revised program 
integrity section eliminates virtually every difference 
between the interim regulations and the Rust regula- 
tions in respect to program integrity requirements.” 
Id. at 335. The three differences between the LSC 
regulations and the Title X regulations approved in 
Rust noted by the court at the March hearing were 
eliminated. See id. Concluding that the final regulations 
represented a permissible construction of the 1996 Act, 
see id. at 338-39, and were consistent with the First 
Amendment, the district court determined that the 
statute and regulations were not likely to be invali- 
dated and therefore denied the motion for a preliminary 
injunction. See id. at 326-27.4 This appeal followed. 

4 The district court also rejected plaintiffs’ due process and 
equal protection challenges. See id. at 344. These claims have 
been abandoned on appeal. 

11a 

II. Discussion 

On appeal, plaintiffs object that the final regulations 
represent an unreasonable interpretation of the 1996 
Act, and therefore fail under Chevron USA Inc. v. 
Natural Resources Defense Council, 467 U.S. 837, 104 
S. Ct. 2778, 81 L.Ed.2d 694 (1984). Plaintiffs also chal- 
lenge the constitutionality of the 1996 Act and the final 
regulations, arguing that they impermissibly burden 
grantees’ exercise of First Amendment activities, con- 
trary to the command of Rust v. Sullivan, and that they 
constitute a viewpoint-based restriction on expression. 

The posture of this appeal imposes upon plaintiffs a 
heavy burden. Because this is a facial challenge to 
legislative action, we need only determine whether 
there are “any circumstances under which the pro- 
hibitions of the Act are permissible in order to uphold 
the Act.” Able v. United States, 88 F.3d 1280, 1290 (2d 
Cir. 1996); see also Rust, 500 U.S. at 183, 111 S. Ct. 1759 
(plaintiffs “must establish that no set of circumstances 
exist under which the Act would be valid. The fact that 
the regulations might operate unconstitutionally under 
some conceivable set of circumstances is insufficient to 
render them wholly invalid.”) (citation omitted). 

The LASH court reached a result similar to the decision of the 
district court in this case, dismissing the unconstitutional con- 
ditions challenge with the observation that the “reasoning [of 
Rust] controls the result here.” LASH II, 981 F. Supp. at 1299, 
aff’d in relevant part, Legal Aid Society of Hawaii v. Legal Servs. 
Corp., 145 F.3d 1017 (9th Cir. 1998) (LASH III). Among the issues 
before us, LASH III only addressed the unconstitutional con- 
ditions challenge. The Ninth Circuit did not address the claims 
based on abridgment of the lawyer-client relationship or viewpoint 
discrimination. 

12a 

Plaintiffs’ burden is also increased because the pre- 
liminary injunction they seek is against the govern- 
ment. Grant of a preliminary injunction normally 
requires a showing by the moving party of irreparable 
harm and either (1) a probability of success on the 
merits or (2) sufficiently serious questions going to the 
merits of the case to make them a fair ground for liti- 
gation, and a balancing of the hardships tipping decid- 
edly in favor of the moving party. See Genesee Brewing 
Co. v. Stroh Brewing Co., 124 F.3d 137, 142 (2d Cir. 
1997). But where a preliminary injunction is sought 
against the enforcement of governmental rules, the 
movant may not invoke the “fair ground for litigation 
standard” but must show “likelihood of success.” See 
International Dairy Foods Ass’n v. Amestoy, 92 F.3d 
67, 70 (2d Cir. 1996). 

A. Statutory Claim 

We consider first plaintiffs’ contention that the final 
regulations constitute an unreasonable interpretation of 
the 1996 Act. Plaintiffs claim that LSC’s original rules, 
which precluded grantees from establishing or funding 
affiliates with the purpose of undertaking restricted 
activity, fairly reflected the statutory text. They main- 
tain that the more lenient final rules, crafted after 
LASH I held the original rules unconstitutional, conflict 
with congressional command. Plaintiffs ask us to find 
that the final rules are unauthorized by the statute, and 
that the statute, without the flexibility provided by the 
final rules, is unconstitutional. See Appellants’ Br. at 

40. 

LSC enjoys “the full measure of interpretive author- 
ity under the [LSCA]” and its interpretations of the 

13a 

Act are entitled to deference under Chevron. See Texas 
Rural Legal Aid, 940 F.2d at 690. Under this standard, 
LSC’s regulations must be upheld unless “Congress has 
directly spoken to the precise question at issue” and 
LSC has resolved it contrary to statute, or unless the 
regulation cannot be termed a “permissible construc- 
tion” of the statute or is arbitrary or capricious. See id.; 
Chevron, 467 U.S. at 842-44, 104 S. Ct. 2778. 

Plaintiffs argue that Congress plainly intended to bar 
LSC grantees from undertaking restricted activities 
through affiliate organizations. This argument relies 
principally on § 504(d)(2)(B) of the Act, which provides 
that LSC grantees may “use[ ] funds received from a 
source other than the Legal Services Corporation to 
provide legal assistance . . . except that such funds 
may not be expended by recipients for any purpose 
prohibited by this Act or by the Legal Services Cor- 
poration Act.” According to plaintiffs, this language 
plainly articulates Congress’s desire to prohibit grant- 
ees from engaging in restricted activity through an 
affiliate, even with non-federal funds. By permitting 
grantees to fund affiliates who engage in restricted 
activity, argue plaintiffs, the final rules impermissibly 
allow non-LSC funds to be “expended by recipients” for 
prohibited purposes. Plaintiffs claim to find support in 
the legislative history, which explains that “[t]he legis- 
lation prohibits the use of alternative corporations to 
avoid or evade the provisions of the law.” S. Rep. No. 
104-392 at 13 (1996). Plaintiffs contend that the final 
rules—which authorize grantees to create affiliates and 
fund them with nonfederal moneys allowing them to 
conduct activity proscribed under the Act—facilitate a 
purpose expressly precluded by Congress, and thus fail 
under the first step of Chevron. 

14a 

We are not persuaded. Nowhere in the statute does 
Congress speak directly to the question whether grant- 
ees may create and support affiliate organizations. The 
Act does not indicate whether a transfer of non-federal 
funds by a grantee to an affiliate, or the affiliate’s sub- 
sequent use of such transferred non-federal funds for a 
prohibited purpose, constitutes an “expend[iture] by [a] 
recipient[]” under the Act. We conclude that Congress 
has not spoken clearly regarding grantees’ authority to 
design and fund affiliate organizations, so that the first 
prong of Chevron is inapplicable. 

We are also reluctant to accept plaintiffs’ invitation 
to find that the final regulations are unauthorized, and 
that the statute without those regulations is unconsti- 
tutional, because of the rule favoring an interpretation 
of a statute that preserves its constitutionality. See 
Edward J. DeBartolo Corp. v. Florida Gulf Coast Bldg. 
& Constr. Trades Council, 485 U.S. 568, 575, 108 S. Ct. 
1392, 99 L.Ed.2d 645 (1988); Hooper v. California, 155 
U.S. 648, 657, 15 S. Ct. 207, 39 L.Ed. 297 (1895). 

We find, moreover, that the final rules represent a 
“permissible construction” of the Act and therefore sur- 
vive the second Chevron inquiry. While the legislative 
history may give some support to the view that Con- 
gress intended to prevent grantees from creating affili- 
ates to undertake restricted activity, the statutory text 
is silent on the point. We conclude that the LSC 
regulations are not inconsistent with or unauthorized 
by the terms of the Act. 

15a 

B. Constitutional Claims 

1. Lawyer-Client Relationship. Plaintiffs contend 
that the First Amendment forbids Congress from inter- 
fering with the “intense associational bond” between 
lawyer and client, even when Congress funds the re- 
lationship. Appellants’ Br. at 30. Plaintiffs allege that 
the welfare reform provision, the attorneys’ fees pro- 
vision, and the lobbying provisions encroach upon “the 
autonomy and professional judgments” of LSC lawyers, 
in violation of their First Amendment rights. 

Plaintiffs rely heavily on dictum drawn from Rust v. 
Sullivan. There, the Supreme Court remarked, “It 
could be argued . . . that traditional relationships such 
as that between doctor and patient should enjoy protec- 
tion under the First Amendment from Government 
regulation, even when subsidized by the Government.” 
500 U.S. at 200, 111 S. Ct. 1759. Rather than address 
the argument, however, the Rust court found that “the 
doctor-patient relationship established by the Title X 
program [was not] sufficiently all encompassing so as to 
justify an expectation on the part of the patient of 
comprehensive medical advice.” Id. Because Title X 
patients should be on notice that the scope of care 
received was subject to Congressional limitation, a 
“traditional” or “all-encompassing” doctor-patient re- 
lationship could not be said to exist. Id. Plaintiffs 
interpret this passage to extend constitutional protec- 
tion to the doctor-patient relationship, and, by analogy, 
to the lawyer-client relationship. 

We find the argument unconvincing. As a prelimi- 
nary matter, Rust did not confer constitutional protec- 
tion on the doctor- patient relationship. The opinion 
only speculated that the relationship may be protected 

16a 

from government regulation and expressly declined to 
resolve the question. Id. The question was left open in 
Rust and remains open today. 

Nor need we resolve it here. Even if we assume that 
an “all-encompassing” lawyer-client relationship enjoys 
heightened protection from government regulation, the 
lawyer-client relationships funded by LSC are no more 
“all-encompassing” than the doctor-patient relation- 
ships funded under Title X, which were considered in 
Rust. As noted above, the LSCA has always limited the 
range of legal services available through LSC grantees. 
See 42 U.S.C. § 2996i(c). Indeed, grantees have histori- 
cally limited their representations to selected issues, 
and are typically “able to meet only a fraction of the 
demand for their services.” See Overview of LSC at 4 
(1996)(http://ltsi.ncs/lsc/about.html). Because grantee 
lawyers are bound to explain to prospective and actual 
clients the limitations imposed by the 1996 restrictions, 
and may refer clients to lawyers unencumbered by the 
restrictions, there is no reason to fear that clients will 
detrimentally rely on their LSC lawyers for a full range 
of legal services. The LSC lawyer-client relationship 
cannot, therefore, be considered “sufficiently all encom- 
passing so as to justify an expectation on the part of the 
[client] of comprehensive [legal] advice.” Rust, 500 U.S. 
at 200, 111 S. Ct. 1759. Accordingly, we need not decide 
whether the traditional lawyer-client relationship en- 
joys constitutional protection, because (as in Rust) 
such a relationship does not exist for practitioners and 
clients operating under the challenged statutory 
scheme. 

Nor do plaintiffs provide any basis to question the 
validity of the scheme itself. Just as Congress is 

17a 

entitled to provide a limited range of medical services 
under Title X, it is free to offer a limited menu of legal 
services under the LSCA. We think it clear, for 
example, that Congress could fund a legal aid office but 
limit its practice to specific services such as repre- 
senting the indigent in landlord-tenant disputes or in 
consumer fraud cases. The limitations of the 1996 Act 
are no more suspect simply because they are defined in 
terms of representations that are prohibited rather 
than those that are permitted. We find, therefore, that 
Congress was within its power to limit the scope of 
legal services available under the LSCA. 

2. Unconstitutional Conditions. Plaintiffs’ second 
constitutional contention is that the program integrity 
rules contained in the final regulations unreasonably 
burden a grantee’s ability to use nonfederal funds to 
engage in restricted activity. Because each of the 
provisions of the 1996 Act burdens protected rights of 
association and speech, say plaintiffs, the undue burden 
of the final rules amounts to an unconstitutional con- 
dition on the receipt of LSC subsidies. 

Three Supreme Court cases provide the framework 
for evaluating plaintiffs’ unconstitutional conditions 
claim. In Regan v. Taxation With Representation, 461 
U.S. 540, 103 S. Ct. 1997, 76 L.Ed.2d 129 (1983), Taxa- 
tion With Representation (TWR), a non-profit organiza- 
tion devoted to studying tax issues and lobbying for tax 
reform, challenged Section 501(c)(3) of the Internal 
Revenue Code, which provided that organizations 
engaged in lobbying could not receive tax-deductible 
contributions. See I.R.C. § 501(c)(3). TWR argued that 
§ 501(c)(3) impermissibly conditioned the benefit of 
contribution deductibility on the relinquishment of the 

18a 

First Amendment right to lobby. See Taxation With 
Representation, 461 U.S. at 545, 103 S. Ct. 1997. Be- 
cause this was not an instance where “Congress [had] 
discriminate[d] invidiously in its subsidies in such a way 
as to aim at the suppression of dangerous ideas,” the 
Court applied minimal scrutiny and upheld the law. Id. 
at 548, 103 S. Ct. 1997 (alteration and internal quotation 
marks omitted). Nevertheless, Justice Rehnquist’s ma- 
jority opinion noted, and a concurring opinion relied 
upon, the fact that the I.R.C. allowed § 501(c)(3) organi- 
zations to establish financially independent but wholly 
controlled lobbying affiliates under I.R.C. § 501(c)(4) 
without compromising their eligibility for deductible 
contributions. See id. at 544, 103 S. Ct. 1997 (majority 
opinion); id. at 552-53, 103 S. Ct. 1997 (Blackmun, J., 
concurring) (concluding that § 501(c)(3) alone would be 
“constitutionally defect[ive]”). 

The next Term, the Court invalidated a condition 
denying federal public broadcasting funds to public 
stations that engage in editorializing. See F.C.C. v. 
League of Women Voters, 468 U.S. 364, 104 S. Ct. 3106, 
82 L.Ed.2d 278 (1984). The Court found that because a 
“noncommercial educational station that receives only 
1% of its overall income” from the Corporation for 
Public Broadcasting (CPB) would be barred from 
editorializing, stations “ha[ve] no way of limiting the 
use of [their] federal funds to all noneditorializing 
activities, and, more importantly, [they are] barred 
from using even wholly private funds to finance 
editorial activity.” Id. at 400, 104 S. Ct. 3106. The 
Court emphasized that Congress could cure the statute 
by amending it to allow stations “to establish ‘affiliate’ 
organizations which could then use the station’s facili- 
ties to editorialize with nonfederal funds.” Id. 

19a 

Finally, in Rust, 500 U.S. 173, 111 S. Ct. 1759 (1991), 
recipients of family planning funds under Title X of the 
Public Health Services Act challenged regulations pro- 
hibiting Title X recipients from engaging in abortion 
counseling, referral, and any other activities advocating 
abortion as a means of family planning. In Rust, as in 
the instant case, “program integrity” regulations re- 
quired separation of facilities, personnel and records 
between Title X providers and any medical provider 
dispensing abortion information. See id. at 180-81, 111 
S. Ct. 1759. The Court observed that “[t]he Title X 
grantee can continue to perform abortions, provide 
abortion-related services, and engage in abortion advo- 
cacy; it simply is required to conduct those activities 
through programs that are separate and independent 
from the project that receives Title X funds.” Id. at 
196, 111 S. Ct. 1759 (emphasis omitted). For their part, 
Title X “employees remain free . . . to pursue 
abortion-related activities when they are not acting 
under the auspices of the Title X project.” Id. at 198, 
111 S. Ct. 1759. Because grantees were not “effectively 
prohibit[ed] . . . from engaging in the protected 
conduct outside the scope of the federally funded pro- 
gram,” this circumstance was different from that con- 
sidered in League of Women Voters, and there was no 
unconstitutional conditions violation. Id. at 197, 111 S. 
Ct. 1759. 

Taking these cases together, we infer that, in appro- 
priate circumstances, Congress may burden the First 
Amendment rights of recipients of government benefits 
if the recipients are left with adequate alternative 
channels for protected expression. Section 501(c)(3)’s 
prohibition on lobbying in Taxation With Representa- 
tion was permissible because the organizations receiv- 

20a 

ing the benefit of deductibility could undertake lobby- 
ing activities through a § 501(c)(4) affiliate. In League 
of Women Voters, on the other hand, the prohibition on 
editorializing by CPB grantees was invalidated because 
the law left no adequate alternative avenue for the 
protected expression. 

Notwithstanding Rust’s considerable superficial simi- 
larity to this case, we think it is the least pertinent of 
these precedents. Without diminishing its potential 
importance to some grantees, the speech restriction in 
Rust was nonetheless very narrow; it was limited to 
speech at odds with the values Congress was seeking to 
advance through its grant program. As the Supreme 
Court noted in Rosenberger v. Rector and Visitors of 
University of Virginia, 515 U.S. 819, 833, 115 S. Ct. 
2510, 132 L.Ed.2d 700 (1995), discussing Rust, “When 
the government disburses public funds to private en- 
tities to convey a governmental message, it may . . . 
ensure that its message is neither garbled nor distorted 
by the grantee.” 

In these respects, Rust is unlike the present case. 
The restrictions here placed on grantees are not nar- 
row; they are extremely broad. Grantees are prohibited 
outright from engaging in attempts to influence govern- 
ment’s adoption of laws. Nor does the justification that 
prevailed in Rust—avoiding the distortion or dilution 
of the very government message advanced by the 
program—have any bearing here. For this program, 
unlike Title X in Rust, is not advancing any particular 
set of values that might be diluted or distorted if the 
forbidden speech were permitted. Here Congress has 
simply chosen to rule that organizations which accept 
LSC funds to finance their activities shall not engage in 

21a 

other types of activities. We do not think Rust compels 
the conclusion that program integrity rules modelled on 
those governing Title X necessarily allow adequate 
avenues for protected expression in statutory or factual 
contexts where the burden on speech may be more 
significant or where the relationship between the bur- 
den and the government benefit may be more attenu- 
ated. 

Our conclusion that the First Amendment tolerates 
this restriction on speech is influenced more by Taxa- 
tion With Representation’s approval of the restriction 
in lobbying by § 501(c)(3) organizations and by the 
suggestion in League of Women Voters that the pro- 
hibition in editorializing by CPB grantees would have 
been acceptable if the law allowed them adequate 
alternative avenues for expression through affiliates 
than by the holding of Rust. Nonetheless, Rust is 
consistent with these cases, and tends to support their 
suggestion that the program we consider here can 
withstand at least a facial challenge despite its broad 
restrictions on the speech of LSC grantees. 

Plaintiffs contend that, notwithstanding the author- 
ity of these cases, the 1996 Act is unlawful. They point 
to the “immensely wasteful” program integrity require- 
ments of separate offices, equipment, libraries and 
personnel that grantees must meet in order to be able 
to speak through affiliates. Appellants’ Br. at 37. 
Plaintiffs allege that the revised program integrity 
rules—although virtually identical to those approved in 
Rust5—impose “extraordinary” burdens that imper- 

5 Under both Title X and the 1996 Act regulatory schemes, a 
grantee may provide restricted activities only if the restricted 

22a 

missibly impede grantees from exercising their First 
Amendment rights to associate with clients, to lobby, 
and to litigate. Id. The costs of compliance, they argue, 
are “so substantial” as to be prohibitive. Appellants’ 
Reply Br. at 18. They argue further that the justifica- 
tion in Rust for requiring substantial separation be- 
tween the program recipient and the affiliate—to avoid 
the risk of weakening or garbling the government’s 
message—is not present here, as the government is not 
using its grantees to advocate a message. Thus, plain- 
tiffs argue, there is no justification for requiring the 
degree of separation of affiliates that was upheld in 
Rust. 

We find that plaintiffs’ allegations are insufficient to 
sustain a facial challenge. It may be, as plaintiffs urge, 
that the program integrity rules will, in the case of 
some recipients, prove unduly burdensome and inade- 
quately justified, with the result that the 1996 Act and 
the regulations will suppress impermissibly the speech 
of certain funded organizations and their lawyers. And 
it may be, as plaintiffs contend, that the program 
integrity requirements may prove especially burden- 

service provider is distinguished by (1) separate personnel; (2) 
separate accounting records; (3) physical separation; and (4) signs 
or other outward markers of separation. Compare 45 C.F.R. 
§ 1610.8 with 42 C.F.R. § 59.9 (suspended 1993). Under both 
schemes, whether the funded and restricted programs are 
sufficiently separate is determined on a case-by-case basis. See 45 
C.F.R. § 1610.8(3); Rust, 500 U.S. at 180-81, 111 S. Ct. 1759. In 
almost every respect, the burden of separation is identical under 
the two schemes. See LASH III, 145 F.3d at 1024 (noting that 
“[t]he regulations promulgated by the LSC to preserve the distinc- 
tion between restricted and unrestricted organizations are nearly 
identical to the regulations upheld in Rust”). 

23a 

some in the context of legal services. We are unable to 
assess these contentions on the sparse record before us, 
and we need not assess them to decide this appeal. Any 
grantee capable of demonstrating that the 1996 restric- 
tions in fact unduly burden its capacity to engage in 
protected First Amendment activity remains free to 
bring an as-applied challenge to the 1996 Act. But 
plaintiffs present little evidence to support their pre- 
dictions regarding how seriously the 1996 Act will 
affect grantees generally, and they provide no basis for 
concluding that the program integrity rules cannot be 
applied in at least some cases without unduly inter- 
fering with grantees’ First Amendment freedoms. It 
appears likely that LSC grantees with substantial non- 
federal funding can provide the full range of restricted 
activity through separately incorporated affiliates 
without serious difficulty. Plaintiffs have therefore 
failed to “establish that no set of circumstances exists 
under which the Act would be valid,” and so their facial 
challenge must be rejected. Rust, 500 U.S. at 183, 111 
S. Ct. 1759 (quoting United States v. Salerno, 481 U.S. 
739, 745, 107 S. Ct. 2095, 95 L.Ed.2d 697 (1987)). 

3. Viewpoint Discrimination. We turn finally to 
plaintiffs’ claim that the 1996 Act discriminates against 
certain speech on the basis of viewpoint and is there- 
fore unconstitutional even as applied to the use of 
federal monies. It appears that plaintiffs direct this 
argument against the lobbying provisions and the 
welfare reform provision of the Act.6 

6 The plaintiffs’ brief also suggests that the redistricting 
provision and abortion provision impermissibly discriminate on the 
basis of viewpoint. Brief for Appellants at 27. As noted above, 
however, plaintiffs did not challenge these provisions in the court 

24a 

With respect to the lobbying provisions, the claim is 
misplaced. The classification established by these pro- 
visions is based on subject matter, not viewpoint. We 
think it clear that Congress may discriminate on the 
basis of the subject matter of grantees’ expression, be- 
cause such discrimination properly “confine[s the LSC 
program] to the limited and legitimate purposes for 
which it was created.” Rosenberger, 515 U.S. at 829, 
115 S. Ct. 2510. We thus find that the lobbying restric- 
tions constitute valid limitations on the scope of the 
LSC program. 

The legislation provision, for example, restricts LSC 
grantees from “attempt[ing] to influence the passage or 
defeat of any legislation, constitutional amendment, 
referendum, initiative, or any similar procedure of the 
Congress or a State or local legislative body.” OCRAA, 
§ 504(a)(4). While this language imposes a sweeping 
restriction on grantee activity, it burdens no particular 
viewpoint and favors neither speech in support of legis- 
lative action nor speech opposed. Because it prohibits 
the grantee from “attempt[ing] to influence the passage 
or defeat” of a legislative or constitutional initiative, the 
prohibition applies regardless whether the prohibited 
activity would have sought change or opposed change. 
The provision operates only to restrict LSC-funded en- 
tities from lobbying with respect to legislative deci- 
sions, regardless of viewpoint. 

The agency adjudication provision similarly restricts 
grantees from “attempt[ing] to influence any part of 
any adjudicatory proceeding of any Federal, State, or 

below, and so arguments challenging their validity are not pro- 
perly before us. 

25a 

local agency if such part of the proceeding is designed 
for the formulation or modification of any agency 
policy of general applicability and future effect.” Id. at 
§ 504(a)(3). We perceive nothing in this language that 
burdens one viewpoint more than another; the re- 
striction permits grantees to participate on neither side 
of a rule-creating adjudicatory proceeding. Rather, 
the provision permissibly channels grantee program 
activity away from adjudicatory policymaking in a 
viewpoint-neutral manner. 

The executive branch provision similarly forbids 
grantees from “attempt[ing] to influence the issuance, 
amendment, or revocation of any executive order, regu- 
lation, or other statement of general applicability and 
future effect by any Federal, State, or local agency.” 
Id. at § 504(a)(2). We interpret this provision to define 
a limitation on program content, without favoring policy 
continuity over change or otherwise discriminating 
against any viewpoint. In the language of Rust, the 
provision does not suppress ideas but merely prohibits 
“a project grantee . . . from engaging in activities 
outside the project’s scope.” 500 U.S. at 194, 111 S. Ct. 
1759. 

The welfare reform provision of § 504(a)(16) is more 
obscure. It includes four categories of prohibited activi- 
ties “involving an effort to reform a Federal or State 
welfare system”—initiating legal representation, and 
participating in litigation, lobbying, or rulemaking— 
with an exception relating to the legal representation 
or litigation prohibitions. Under the most natural 
reading of each of these provisions, three appear to pro- 
hibit the type of activity named regardless of view- 

26a 

point, while one might be read to prohibit the activity 
only when it seeks reform. 

The litigation prohibition is clearly viewpoint neutral. 
It denies grant funds to an entity that “participates in 
any . . . way, in litigation . . . involving an effort to 
reform a . . . welfare system.” § 504(a)(16). Litigation 
by definition has at least two sides, and one 
“participates” in the litigation regardless of which side 
one is on. If litigation occurs “involving an effort to 
reform a . . . welfare system,” one “participates” in it 
whether one is on the side seeking reform or the side 
opposing it. Grantees are therefore prohibited not only 
from litigating in an effort to reform a welfare system, 
but also from intervening or filing amicus briefs in such 
litigation in opposition to proposed reforms. We 
therefore conclude that the basic prohibition on parti- 
cipating in litigation involving an effort to reform a 
welfare system is viewpoint neutral. 

The same considerations apply to the prohibition on 
“lobbying” and “rulemaking” “involving an effort to 
reform a . . . welfare system.” One “participates” in 
lobbying and rulemaking “involving an effort to reform” 
whether one’s participation supports or opposes the re- 
forms under consideration. 

The disqualification of an entity that “initiates legal 
representation . . . involving an effort to reform a . . 

. welfare system” is perhaps less clear. One reading of 
this clause seems to prohibit only efforts aimed at 
reform. A person who intended to oppose reform might 
not see himself as covered by a prohibition on activity 
“involving an effort to reform.” On another interpreta- 
tion, the statute could be read to cover both support 

27a 

and opposition to reform. Under this interpretation, if 
some other person is making an effort to reform the 
welfare system, one who initiates a legal representation 
intended to oppose that effort is engaging in activity 
that involves (i.e., concerns) an effort to reform the 
system. 

Even if it involves some linguistic strain to read the 
provision this way, two factors persuade us to do so. 
First, subsection (a)(16) on welfare reform is one of a 
long string of prohibitions on activity related to reform 
efforts. All the others are clearly expressed in a 
manner that bars activity on either side of the issue. It 
is unlikely that, with respect to welfare and welfare 
alone, Congress intended to bar only pro-reform activ- 
ity and not opposition to reform.7 If the welfare pro- 
vision were read to prohibit only activity that sought 
reform and not activity that opposed it, this would 
mean that Congress had acted with respect to welfare 
in a manner inexplicably at variance with the law’s 
numerous parallel provisions. It makes far better sense, 
if the words of the statute permit, to interpret the 
welfare provision as consistent with those provisions. 

Second, to read the welfare provision as viewpoint 
biased would render it unconstitutional. As we noted 
above, see supra at 763, courts should be reluctant to 
read statutes in a manner that renders them unconsti- 

7 This possibility is rendered all the more unlikely by the fact 
that the legislative history shows a particular congressional con- 
cern to block LSC grantees from opposing welfare reform. See 142 
Cong. Rec. H8179 (daily ed. July 23, 1996)(statement of Rep. 
Burton) (“The LSC is fighting the welfare reform plan in 
Wisconsin. . . . 

Why are taxpayers’ dollars being used to fight the 

very things we think are important?”). 

28a 

tutional. If two readings are possible, the one that 
would preserve the statute is generally preferable. See 
Edward J. DeBartolo Corp. v. Florida Gulf Coast Bldg. 
& Constr. Trades Council, 485 U.S. 568, 575, 108 S. Ct. 
1392, 99 L.Ed.2d 645 (1988); Hooper v. California, 155 
U.S. 648, 657, 15 S. Ct. 207, 39 L.Ed. 297 (1895). 

We are therefore constrained to read the basic limita- 
tions of the welfare provision of § 504(a)(16) as view- 
point neutral prohibitions on the specified activities, 
regardless whether the activities are undertaken to 
promote reform or to defeat it. 

There is, however, another specification in the wel- 
fare provision that is inescapably viewpoint-biased. 
Subsection (a) (16) expressly provides that its prohibi- 
tions do not prevent a grantee from representing “an 
eligible client who is seeking specific relief from a 
welfare agency if such relief does not involve an effort 
to amend or otherwise challenge existing law in effect 
on the date of the initiation of the representation” (the 
“suit-for-benefits exception”). According to this 
exception, representation of a client seeking a welfare 
benefit is permitted, but only if the representation will 
not involve any challenge to the propriety of any 
previously existing rule that led to the denial of bene- 
fits. The grantee thus could not argue that the rule 
that led to the denial of the client’s benefits was unau- 
thorized by the governing regulation, that the regula- 
tion was unauthorized by the statute, or that the regu- 
lation or statute was unauthorized by the Constitution. 
Such representation is permitted only if it includes no 
challenge to the underlying law. 

29a 

It seems clear to us that this limitation on the suit- 
for-benefits exception is not viewpoint neutral. It 
accords funding to those who represent clients with- 
out making any challenge to existing rules of law, but 
denies it to those whose representation challenges 
existing rules. It clearly seeks to discourage challenges 
to the status quo. The provision thus discriminates 
on the basis of viewpoint, and requires us to decide 
whether this discrimination is permissible in the con- 
text of the LSCA. 

The government’s “[d]iscrimination against speech 
because of its message” is suspect under the First 
Amendment. Rosenberger v. Rector and Visitors of 
University of Virginia, 515 U.S. 819, 828, 115 S. Ct. 
2510, 132 L.Ed.2d 700 (1995) (noting that such discrimi- 
nation is “presumed to be unconstitutional”). Whether 
a subsidy that is dependent on viewpoint constitutes 
illegal discrimination presents a complex question, 
which is illuminated by three relevant recent Supreme 
Court holdings. 

In Rust v. Sullivan, 500 U.S. 173, 111 S. Ct. 1759, 114 
L.Ed.2d 233 (1991), the Court upheld regulations for- 
bidding recipients of government funds for family plan- 
ning from counselling or advocacy related to abortion. 
See id. at 203, 111 S.Ct. 1759. 

In National Endowment for the Arts v. Finley, 524 
U.S. 569, 118 S. Ct. 2168, 141 L.Ed.2d 500 (1998), the 
Court last term upheld a requirement that the NEA, in 
making grants for the arts based on excellence, also 
“tak[e] into consideration general standards of decency 
and respect for the diverse beliefs and values of the 
American people.” Finley, 118 S. Ct. at 2171. 

30a 

In Rosenberger, the Court struck down a provision in 
a program of governmental grants to support student 
publications that excluded from eligibility publications 
expressing a viewpoint on religion. See Rosenberger, 
515 U.S. at 837, 115 S. Ct. 2510. 

We assess the relevance of these precedents differ- 
ently from our dissenting colleague. Judge Jacobs 
argues that Rust and Finley together establish the 
government’s broad entitlement to discriminate on the 
basis of viewpoint in making financial grants. View- 
point discrimination, he argues, is suspect only where, 
as in Rosenberger, the government seeks to promote a 
diversity of private speech. Judge Jacobs relies heavily 
on explanatory language in the Rust opinion, which was 
quoted by the Supreme Court in Finley: 

The Government can, without violating the Consti- 
tution, selectively fund a program . . . it believes 
to be in the public interest, without at the same time 
funding an 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, 500 U.S. at 193, 111 S. Ct. 1759; see also Finley, 
118 S. Ct. at 2168. 

Under Judge Jacobs’s analysis, just as Congress may 
lawfully fund family planning services conditioned on 
the grantee’s not counseling on the availability of abor- 
tion, so Congress also may fund the legal representa- 
tion of a welfare applicant conditioned on the grantee’s 
not raising arguments that question the validity of any 

31a 

statute, regulation or governmental procedure pertain- 
ing to welfare. 

We acknowledge that the words from Rust that 
Judge Jacobs cites seem on their face to support his 
view. But we doubt that these words can reliably be 
taken at face value. In seeking to understand how a 
judicial precedent in a relatively unexplored area of law 
bears on other undecided questions, it is often more 
instructive to look at what the Court has done, rather 
than at what the Court has said in explanation. Ex- 
planations that seem sound enough in the context of the 
facts for which they are devised often carry impli- 
cations the court would never subscribe to if applied to 
other facts not in contemplation. See Cohens v. 
Virginia, 19 U.S. (6 Wheat.) 264, 399, 5 L.Ed. 257 (1821) 
(Marshall, C.J.) (“It is a maxim, not to be disregarded, 
that general expressions, in every opinion, are to be 
taken in connection with the case in which those 
expressions are used. If they go beyond the case, they 
may be respected, but ought not to control the judg- 
ment in a subsequent suit when the very point is pre- 
sented for decision.”); United States v. Rubin, 609 F.2d 
51, 69 (2d Cir. 1979) (Friendly, J., concurring) (“A 
judge’s power to bind is limited to the issue that is 
before him; he cannot transmute dictum into decision 
by waving a wand and uttering the word ‘hold.’ ”); cf. 
CBS, Inc. v. American Soc’y of Composers, Authors & 
Publishers, 620 F.2d 930, 934-35 (2d Cir. 1980) (New- 
man, J.) (“[T]he safer course is to read judicial opinions 
as deciding only what they purport to decide.”). 

The quotation from Rust, for example, seems on its 
face to imply that Congress could lawfully fund institu- 
tions to study the nation’s foreign or domestic policies, 

32a 

conditioned on the grantee’s not criticizing, or advocat- 
ing change in, the policies of the government. That 
would fall within the parameters of choosing “to fund 
one activity to the exclusion of [an]other.” Congress 
would be “selectively fund[ing] a program . . . it 
believes to be in the public interest, without at the 
same time funding an alternative program which seeks 
to deal with the problem in another way.” Nonetheless, 
we think it inconceivable that the Supreme Court that 
approved the Rust regulation would have intended its 
language to authorize grants funding support for, but 
barring criticism of, governmental policy.8 

We think the resolution lies in the fact that different 
types of speech enjoy different degrees of protection 
under the First Amendment. “Expression on public 
issues ‘has always rested on the highest rung of the 
hierarchy of First Amendment values.’ ” 

NAACP v. 
Claiborne Hardware Co., 458 U.S. 886, 913, 102 S. Ct. 
3409, 73 L.Ed.2d 1215 (1982) (quoting Carey v. Brown, 
447 U.S. 455, 467, 100 S. Ct. 2286, 65 L.Ed.2d 263 
(1980)). The strongest protection of the First Amend- 
ment’s free speech guarantee goes to the right to 
criticism government or advocate change in govern- 
mental policy. “[E]xpression of dissatisfaction with the 

8 Concurring in the judgment in Finley, Justice Scalia did 
argue that the government can allocate subsidies “ad libitum, 
insofar as the First Amendment is concerned.” Finley, 118 S. Ct. 
at 2184 (Scalia, J., concurring in judgment). This position was 
joined by only one other Justice, however. The majority left no 
doubt that the First Amendment “has application in the subsidy 
context,” id. at 2179, and that a subsidy “aim[ed] at the sup- 
pression of dangerous ideas” would violate the First Amendment, 
id. at 2178 (quoting Regan v. Taxation with Representation, 461 
U.S. 540, 550, 103 S. Ct. 1997, 76 L.Ed.2d 129 (1983)). 

33a 

policies of this country [is] situated at the core of 
our First Amendment values.” Texas v. Johnson, 491 
U.S. 397, 411, 109 S.Ct. 2533, 105 L.Ed.2d 342 (1989). 
Criticism of official policy is the kind of speech that an 
oppressive government would be most keen to sup- 
press. It is also speech for which liberty must be pre- 
served to guarantee freedom of political choice to the 
people. For those reasons we think it clear that, not- 
withstanding Rust’s semantic endorsement of Con- 
gress’s right to fund one activity to the exclusion of 
another, the Supreme Court would not approve a grant 
to study governmental policy, conditioned on the 
grantee’s not criticizing the policy. 

In our view, a lawyer’s argument to a court that a 
statute, rule, or governmental practice standing in the 
way of a client’s claim is unconstitutional or otherwise 
illegal falls far closer to the First Amendment’s most 
protected categories of speech than abortion counseling 
or indecent art. The fact that Congress can make 
grants that favor family planning over abortion, or that 
favor decency over indecency, in no way suggests that 
Congress may also make grants to fund the legal repre- 
sentation of welfare applicants under terms that bar the 
attorney from arguing the unconstitutionality or illegal- 
ity of whatever rule blocks the client’s success. Among 
the only directly effective ways to oppose a statute, 
regulation or policy adopted by government is to argue 
to a court having jurisdiction of the matter that the rule 
is either unconstitutional or unauthorized by law. The 
limitation on the suit-for-benefits exception prohibits a 
legal services organization that has received LSC grant 
funds from making such an argument on behalf of a 
client, even though that argument may be necessary to 
establish the client’s rights in precisely the repre- 

34a 

sentation for which the funding was granted.9 Such a 
restriction is a close kin to those “calculated to drive 
‘certain ideas or viewpoints from the marketplace.’ ” 
Finley, 118 S. Ct. at 2179 (quoting Simon & Schuster, 
Inc. v. Members of New York State Crime Victims Bd., 
502 U.S. 105, 116, 112 S. Ct. 501, 116 L.Ed.2d 476 
(1991)). If the idea in question is the unconstitutionality 
or illegality of a governmental rule, the courtroom is 
the prime marketplace for the exposure of that idea. 
Cf. Cooper v. Aaron, 358 U.S. 1, 18, 78 S. Ct. 1401, 3 
L.Ed.2d 5 (1958) (stating the “basic principle that the 
federal judiciary is supreme in the exposition of the law 
of the Constitution”). To forbid a lawyer from articulat- 
ing that idea in the court proceeding effectively drives 
the idea from the marketplace where it can most effec- 
tively be offered. 

The Supreme Court’s discussion in Finley under- 
scores the suspect nature of the limitation on the suits- 
for-benefits exception for a further reason. In Finley, 
considerations of “decency and respect” were merely to 
be taken “into consideration.” The Supreme Court 
stressed that the questioned provision offered “vague 
exhortation[s]” and “impose[d] no categorical require- 
ment.” Id. 118 S.Ct. at 2176, 2177. The NEA might still 
make grants notwithstanding indecency. The Court, in 
fact, seemed to imply that an absolute prohibition, of 

9 We do not agree with Judge Jacobs’ view that the statute 
merely prohibits lawyers from taking on certain representations. 
As a practical matter, a lawyer often will not know in advance 
what arguments must be raised to counter those raised by the 
opposition as the litigation progresses. We think furthermore that 
Judge Jacobs overstates the ease with which a lawyer can with- 
draw from litigation that is in progress and underestimates the 
prejudice to the client that may result from such a withdrawal. 

35a 

the sort “calculated to drive ‘certain ideas or viewpoints 
from the marketplace,’” would have required a different 
result. Id. at 2176, 2179 (internal citation omitted). The 
limitation on the suit- for-benefits exception is just such 
an absolute prohibition: It muzzles grant recipients 
from expressing any and all forbidden arguments. 

For these reasons, we believe that the suit-for-bene- 
fits exception is viewpoint discrimination subject to 
strict First Amendment scrutiny. Defendants offer no 
arguments why the provision can survive such scrutiny 
and we perceive none. We therefore conclude that 
the suit-for-benefits exception of § 504(a)(16) unconsti- 
tutionally restricts freedom of speech, insofar as it re- 
stricts a grantee, seeking relief for a welfare applicant, 
from challenging existing law. 

The next question is which part of the statute should 
be found invalid as a result of the unconstitutionality of 
the viewpoint-based proviso to the suit-for-benefits 
exception. The four most likely candidates for invalida- 
tion are (1) the entire Act; (2) the entire subsection 
(a)(16) relating to welfare reform; (3) the entire suit-for- 
benefits exception; and (4) the proviso to the effect that 
an attorney suing for a client’s benefits may not 
challenge existing law. 

We quickly conclude that the first and second possi- 
bilities go too far. “A court should refrain from invali- 
dating more of [a] statute than is necessary.” Alaska 
Airlines v. Brock, 480 U.S. 678, 683, 107 S. Ct. 1476, 94 
L.Ed.2d 661 (1987) (internal quotation marks omitted). 
In our view, without this restriction, the 1996 Act will 
still “function in a manner consistent with the intent 
of Congress,” id. at 685, 107 S. Ct. 1476 (emphasis 

36a 

omitted). Our finding of unconstitutionality affects only 
one tiny restriction in the statute, which can otherwise 
continue to function as intended. Subsection (a)(16) can 
also continue to bar activities “involving an effort to 
reform a . . . welfare system,” as Congress intended, 
without the unconstitutional provision. 

The more troublesome question is whether the in- 
valid viewpoint-based restriction should result in the 
invalidity of the entire suit-for-benefits exception, or 
only of the proviso that bars a grantee in the course of a 
legal representation of an eligible individual from argu- 
ing to amend or challenge any existing law. We recog- 
nize a reasonable argument that the overall intent of 
the Act is so opposed to challenges to law that the 
intent of Congress would be better served by striking 
down the entire suit-for-benefits exception than by 
allowing a grantee lawyer representing a client to 
argue the invalidity of any existing rule of law. 

On the other hand, because complex legislation re- 
presents an amalgam of different viewpoints and com- 
promises, one might see the suit-for-benefits exception 
as an intentionally more measured provision, one 
recognizing that a lawyer engaged in the representa- 
tion of a client must make the arguments necessary to 
secure the relief their client seeks. The proviso as 
drafted does not forbid grantee lawyers from challeng- 
ing all laws—only those that were in existence at the 
time of the initiation of the representation. Thus, 
notwithstanding its hostility to litigation seeking legal 
reform, Congress intentionally permitted challenges 
to law in the context of individual representation so 
long as the challenge addressed a law passed after the 
initiation of the representation. 

37a 

Because it is unclear which alternative better carries 
out the intent of Congress, we think it best to invalidate 
the smallest possible portion of the statute, excising 
only the viewpoint-based proviso rather than the entire 
exception of which it is a part. This conclusion follows 
the Supreme Court’s guidance that “[u]nless it is evi- 
dent that the legislature would not have enacted those 
provisions which are within its power, independently of 
that which is not, the invalid part may be dropped if 
what is left is fully operative as a law.” Buckley v. 
Valeo, 424 U.S. 1, 108, 96 S. Ct. 612, 46 L.Ed.2d 659 
(1976) (citation and internal quotation marks omitted); 
see also Regan v. Time, Inc., 468 U.S. 641, 653, 104 
S. Ct. 3262, 82 L.Ed.2d 487 (1984) (“[T]he presumption 
is in favor of severability.”). We thus conclude that the 
viewpoint-based proviso barring grantee lawyers re- 
presenting individuals from contesting the legality of an 
existing rule is severable from the overall suit-for- 
benefits exception. The exception permitting a grantee 
to “represent[ ] an individual eligible client [w]ho is 
seeking specific relief from a welfare agency” will sur- 
vive our holding that the viewpoint-based proviso to 
the suit-for-benefits exception is unconstitutional. 

We therefore direct the district court to enter a 
preliminary injunction barring enforcement of that part 
of the suit-for-benefits exception of § 504(a)(16) that 
would make an entity ineligible for an LSC grant if, in 
the course of a representation of an individual client 
seeking specific relief from a welfare agency, that 
entity sought “to amend or otherwise challenge existing 
law in effect on the date of the initiation of the repre- 
sentation.” In all other respects, the statute will con- 
tinue to function as written. Grantees will be barred (on 
penalty of losing their entitlement to grantee status) 

38a 

from engaging in any of the activities prohibited by 
§ 504. They will be prohibited under § 504(a)(16) from 
initiating legal representation, or participating in any 
other way in litigation, lobbying, or rulemaking con- 
cerning “effort[s] [by anyone] to reform a Federal or 
State welfare system.” On the other hand, grantees 
will be permitted to represent “an individual eligible 
client who is seeking specific relief from a welfare 
agency,” regardless whether such representation in- 
cludes arguments that seek “to amend or otherwise 
challenge existing law.” § 504(a)(16). 

Conclusion 

The district court’s denial of a preliminary injunction 
is reversed solely with respect to the limitation on the 
suit-for-benefits exception of § 504(a)(16). In all other 
respects, the district court’s order denying a pre- 
liminary injunction is affirmed. 

JACOBS, Circuit Judge, concurring in part, dissenting 
in part: 

I agree with the conclusions of the majority 
opinion except insofar as it holds unconstitutional a 
critical proviso in a subsection of the Omnibus Con- 
solidated Rescissions and Appropriations Act of 1996 
(“OCRAA”), Pub. L. No. 104-134, § 504(a)(16), 110 Stat. 
1321, 1321-55 to 1321-56 (1996). That subsection 

(i) denies Legal Services Corporation (“LSC”) 
funding to any entity “that initiates legal repre- 
sentation or participates in any other way in litiga- 

39a 

tion, lobbying, or rulemaking, involving an effort to 
reform a Federal or State welfare system,” 

(ii) creates an exception for the representation 
of “an individual eligible client who is seeking 
specific relief from a welfare agency,” 

(iii) subject however to the proviso that bars 
LSC grantees from taking cases that “involve an 
effort to amend or otherwise challenge existing 
law.” 

The majority throws the section out of kilter by pre- 
serving the exception but striking the proviso, on the 
ground that under Rosenberger v. Rector & Visitors of 
the University of Virginia, 515 U.S. 819, 115 S. Ct. 2510, 
132 L.Ed.2d 700 (1995), the proviso amounts to view- 
point discrimination. 

I respectfully dissent because: 

(A) The proviso, which helps specify the type 
of representation that a grant recipient may under- 
take, is part of Congress’s entirely appropriate— 
and necessary—specification of the services avail- 
able in a program it created. 

(B) The majority has not successfully identified 
a disfavored viewpoint of any person in any public 
forum. To the extent that this legislation funds a 
“viewpoint” at all, it is one that advocates the 
delivery of welfare benefits to claimants. 

40a 

A. Program Definition 

In creating a government program, Congress can of 
course specify the goods and services that will be 
provided and the goods and services that will be 
excluded. In so doing, Congress is permitted to fund the 
exercise of some constitutionally protected rights, but 
not others. See Rust v. Sullivan, 500 U.S. 173, 194-95, 
111 S. Ct. 1759, 1773, 114 L.Ed.2d 233 (1991). Although 
Rosenberger curbs the government’s power to fund 
some viewpoints to the exclusion of others, that limita- 
tion operates only when the government creates a 
limited public forum for the expression of diverse view- 
points. A grantee of the Legal Services Corporation is 
not a public forum or the participant in a public forum 
in which it is invited to contribute its point of view; it is 
a contractor furnishing services that the government 
wants provided, and in that way it resembles the re- 
cipients of Title X funds in Rust, and any of the private 
agencies that carry out myriad other government pro- 
grams that have limited and specified purposes. 

1. Statutory Authority 

From its inception, the purpose of the LSC has been 
to fund individual client services for indigent persons 
with legal problems. See 42 U.S.C. § 2996 (1994). Over 
the years, Congress has shaped and clarified the kind of 
legal services that LSC and, in some cases, its grant 
recipients may fund: 

• No “fee-generating” cases. See 42 U.S.C. 
§ 2996f(b)(1) (1994). 

• No felony cases. See 42 U.S.C. § 2996f(b)(2) 
(1994). 

41a 

• No civil actions challenging a criminal con- 
viction. See 42 U.S.C. § 2996f(b)(3) (1994). 

• No cases seeking “to procure a nontherapeu- 
tic abortion.” See 42 U.S.C. § 2996f(b)(8) 
(1994). 

• No school desegregation cases. See 42 U.S.C. 
§ 2996f(b)(9) (1994). 

• No cases involving the Military Selective 
Service Act, 50 App. U.S.C. § 451 et seq. See 
42 U.S.C. § 2996f(b)(10) (1994). 

• No cases involving assisted suicide. See 42 
U.S.C.A. § 2996f(b)(11) (West Supp.1998). 

• No litigation (or other activity) regarding 
“the timing or manner of the taking of a cen- 
sus.” See OCRAA § 504(a)(1), 110 Stat. at 
1321-53. 

• No class action litigation. See id. § 504(a)(7), 
110 Stat. at 1321-53. 

• No legal assistance to certain classes of 
aliens. See id. § 504(a)(11), 110 Stat. at 1321- 
54 to 1321-55. 

• No litigation on behalf of someone incar- 
cerated. See id. § 504(a)(15), 110 Stat. at 
1321-55. 

• No litigation on behalf of persons being evict- 
ed from public housing for selling drugs. See 
id. § 504(a)(17), 110 Stat. at 1321-56. 

42a 

The majority opinion correctly rejects the consti- 
tutional challenges that the plaintiffs make to several of 
these program-shaping provisions. See Majority at 
[page 764] (rejecting challenge to prohibition on fee- 
generating cases); id. at [pages 764-67] (rejecting un- 
constitutional condition challenge to all the § 504 re- 
strictions). 

The restriction that § 504(a)(16) imposes—on the use 
of LSC money to fund political agitation concerning 
welfare policy—is another effort by Congress to define 
the types of services that LSC grantees may provide 
and to channel all the government’s funds (without 
substitution or displacement) to those services and no 
others. The exception for advocacy in suits to collect 
welfare benefits, as limited by the proviso barring ex- 
penditures to challenge existing law, serves the same 
purpose and operates in the same way. 

The proviso on welfare litigation is not (as the major- 
ity appears to believe) an effort to weed out a certain 
class of arguments in cases in which LSC-funded 
lawyers appear. The statute nowhere contemplates or 
requires that an LSC-funded lawyer appear in a case in 
which he or she must forbear from challenging a 
welfare statute on meritorious constitutional grounds; 
to the contrary, the proviso says that a lawyer or 
grantee may not take on such a representation in the 
first place. There is nothing remarkable about this. 
Lawyers often turn down representations that they 
cannot fulfill, either by reason of conflict or otherwise 
(such as availability of time and resources, or lack of 
expertise). For example, a public interest lawyer can- 
not file a claim for job discrimination against a charit- 
able agency she organized or has represented; and a 

43a 

public interest lawyer representing a plaintiff who is 
pressing for school vouchers cannot be expected to take 
on a representation that entails the argument that 
school vouchers are illegal or unconstitutional. The 
LSC’s authorizing legislation as well as rules of legal 
ethics prohibit a lawyer from undertaking a repre- 
sentation in which that lawyer would be barred from 
pursuing a potentially fruitful avenue of argument.1 A 
grantee (or a lawyer employed by a grantee) is ethically 
obliged to decline such a case, and may refer the client 
to a lawyer who can handle it, see Velazquez v. Legal 
Servs. Corp., 985 F. Supp. 323, 343 (E.D.N.Y. 1997), and 
in some instances, the client will be referred to an 
affiliated entity, see Majority at [pages 761- 62]. 

The majority argues that as a “practical matter” an 
attorney will “often” not know what arguments may be 
needed in a given representation. See Majority at [page 
771 n. 9]. Since this is a facial challenge, however, this 
Court may not base its invalidation of this statute on a 

1 See 42 U.S.C. § 2996e(b)(3) (1994) (requiring the LSC to “en- 
sure” that the activities it finances are carried out in accordance 
with attorneys’ ethical obligations); 42 U.S.C. § 2296f(a)(1) (1994) 
(requiring the Corporation to “insure the maintenance of the 
highest quality of service and professional standards”); Model 
Rules of Professional Conduct Rule 1.1 (1995) (requiring attorneys 
to utilize the “legal knowledge, skill, thoroughness and preparation 
reasonably necessary for the representation”); id. Rule 1.2 cmt. 5 
(noting that a “client may not be asked to agree to a representation 
so limited in scope as to violate Rule 1.1”); id. Rule 1.2 cmt. 4 
(“Representation provided through a legal aid agency may be 
subject to limitations on the types of cases the agency handles.”); 
id. Rule 1.16(a)(1) (barring attorney from taking case that would 
result in violation of any ethical rule); id. Rule 1.16 cmt. 1 (“A 
lawyer should not accept representation in a matter unless it can 
be performed competently, promptly . . . and to completion.”). 

44a 

hypothetical set of circumstances, even one it believes 
will “often” occur. See Majority at [page 762] (Plaintiffs 
“must establish that no set of circumstances exist under 
which the Act would be valid.”) (quoting Rust, 500 U.S. 
at 183, 111 S. Ct. 1759 (emphasis added)). Moreover, as 
the majority points out, the LSC does not fund a 
traditional, all-encompassing lawyer-client relationship. 
It has always operated under significant restrictions, 
and it is required to advise prospective clients of these 
limitations. So there is therefore “no reason to fear that 
clients will detrimentally rely on their LSC lawyers for 
a full range of legal services,” Majority at [page 764], 
such as help in mounting a Constitutional challenge to a 
welfare statute. 

2. Supreme Court Authority 

On its face, this statute funds a program that pro- 
vides certain services, and the restriction found in 
§ 504(a)(16) (together with its exception and its proviso) 
prohibits grantees from rendering services that fall 
outside the scope of the program. The Supreme Court 
has recognized the undoubted power of Congress to do 
this. See Rust, 500 U.S. at 192-94, 111 S. Ct. at 1771-73; 
Harris v. McRae, 448 U.S. 297, 100 S. Ct. 2671, 65 
L.Ed.2d 784 (1980). 

In Rust, the Court considered a section of the Public 
Health Service Act prohibiting the use of funds appro- 
priated for family-planning services “in programs 
where abortion is a method of family planning.” Rust, 
500 U.S. at 178, 111 S. Ct. at 1764-65 (quoting 42 U.S.C. 
§ 300a-6). The Court upheld the constitutionality of 
that prohibition because it ensured that grantees did 

45a 

not engage in activities outside the scope of the pro- 
gram: 

The Government can, without violating the Consti- 
tution, selectively fund a program to encourage 
certain activities it believes to be in the public 
interest, without at the same time funding an alter- 
native program which seeks to deal with the pro- 
blem 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. 

Id. at 193, 111 S. Ct. at 1772. The program definition 
upheld in Rust is therefore “not the case of a general 
law singling out a disfavored group on the basis of 
speech content, but a case of the Government refusing 
to fund activities, including speech, which are specifi- 
cally excluded from the scope of the project funded.” 
Id. at 194-95, 111 S. Ct. at 1773. Of the present case it is 
possible to say in paraphrase of Rust that the scope of 
the LSC project is the funding of certain individual 
client services, that the law does not single out any 
“disfavored group,” and that the government has 
simply “refus[ed] to fund activities, including speech, 
which are specifically excluded from the scope of the 
project funded.” 

The error of the majority opinion arises from its inapt 
(and complete) reliance on Rosenberger, a case in which 
the purpose of the government program was to fund 
the expression of politically diverse views. The Uni- 
versity of Virginia was defraying part of the printing 
costs of student publications, but denied funding to 
journals that promoted a religious viewpoint. The 
Supreme Court held that such content-based funding 

46a 

decisions are impermissible when the expenditure of 
funds is intended to facilitate private speech and thus to 
“encourage a diversity of views from private speakers.” 
Rosenberger v. Rector & Visitors of the Univ. of Va., 
515 U.S. 819, 834, 115 S. Ct. 2510, 2519, 132 L.Ed.2d 
700 (1995). The holding of Rosenberger is that when 
government subsidizes private speakers to express 
their own viewpoints, it cannot discriminate among 
potential recipients on the basis of viewpoint. The 
LSC, which supports a defined program of legal repre- 
sentation to indigent clients, of course does not under- 
write the expression of the private speech or view- 
points of its grantees or their lawyers, or (for that 
matter) their clients. 

Rosenberger does not impair the principle—explicitly 
announced in Rust and not implicated by the facts of 
Rosenberger—that when the government funds specific 
services it deems to be in the public interest, it may 
require grantees to get with its program. The ma- 
jority’s surprising, short answer to this argument is 
that the passage from Rust on which I rely cannot 
“reliably be taken at face value.” Majority at [page 
770]. This approach to Supreme Court opinions is not 
one previously employed in this Circuit. I think the 
Supreme Court meant what it said, and that it bears 
repeating: 

The Government can, without violating the Consti- 
tution, selectively fund a program to encourage 
certain activities it believes to be in the public 
interest, without at the same time funding an alter- 
native program which seeks to deal with the 
problem in another way. In so doing, the Govern- 
ment has not discriminated on the basis of view- 

47a 

point; it has merely chosen to fund one activity to 
the exclusion of the other. 

Rust, 500 U.S. at 193, 111 S. Ct. at 1772. Recently the 
Supreme Court itself invoked Rust—and quoted that 
passage—to uphold restrictions on the disbursement of 
funds by the National Endowment for the Arts. See 
National Endowment for the Arts v. Finley, 524 U.S. 
569,——, 118 S. Ct. 2168, 2179, 141 L.Ed.2d 500 (1998) 
(quoting Rust, 500 U.S. at 193, 111 S. Ct. at 1772). 

There is one sure fire way to find out whether the 
Supreme Court meant what it said in Rust and Finley, 
and now that the majority has split with the Ninth 
Circuit on this issue, we may not have long to wait. 
Relying on Rust, the Ninth Circuit rejected a viewpoint 
discrimination challenge to the LSC restrictions that 
are at issue on this appeal. See Legal Aid Soc’y of 
Hawaii v. Legal Servs. Corp., 145 F.3d 1017 (9th Cir.), 
cert. denied, —- U.S. ——, 119 S. Ct. 539, 142 L.Ed.2d 
448 (1998). Justice White (part of the Rust majority), 
sitting by designation on the Ninth Circuit, wrote: 
“Like the Title X program in Rust, the LSC program is 
designed to provide professional services of limited 
scope to indigent persons, not create a forum for the 
free expression of ideas.” Id. at 1028. 

In an attempt to distinguish the Rust opinion from 
the Rust result, the majority offers the hypothetical of 
government-financed think tanks commissioned to 
study American foreign policy, but forbidden to criticize 
it. This hypothetical is far removed from any program 
to furnish legal services; tellingly, it looks very much 
like the University of Virginia’s student-publication 
program in Rosenberger. 

48a 

A closer analogy would be presented if Congress (i) 
decided to out-source the advice that the Internal 
Revenue Service now gives taxpayers on how much 
taxes they owe and how much they can shelter or 
deduct, (ii) underwrote accountants and tax lawyers to 
counsel and represent qualifying middle-class tax- 
payers, and then (iii) discovered that the outside con- 
tractors were expending appreciable grant resources on 
agitation for tax reform along lines favored by the 
contractors and deemed by them to be in the interest of 
the middle classes. Congress could certainly plug that 
drain by specifying that the representation be limited 
to achieving the accurate computation of amounts due 
under the present tax code, and by barring advocacy 
aimed at, inter alia, tax reform, establishing the single 
tax or flat tax, or organizing constitutional litigation to 
challenge particular revenue provisions or the ratifica- 
tion of the 16th Amendment. Congress could do this, 
and if it did, the legislation would look like the restric- 
tion that the majority here holds unconstitutional. 

The LSC restrictions, like my hypothetical statute to 
assist taxpayers, is not a promotion of advocacy for the 
good old status quo, or a suppression of a point of view. 
Both programs channel money to an identified public 
purpose, which is the administration of a complex exist- 
ing statute so that everyone can get what the statute 
provides. I cannot imagine a more viewpoint-neutral 
legislative scheme. 

B. Viewpoint Discrimination 

Considering that the majority has invalidated a 
statute on the ground that it constitutes impermissible 
viewpoint discrimination, it is odd that the majority 

49a 

only vaguely articulates the viewpoint that is sup- 
posedly disfavored by this legislation and (reciprocally) 
never states what viewpoint is favored. The fact is, the 
LSC subject-matter restrictions do not lend themselves 
to analysis in these terms. One subsection bars funding 
“to provide legal assistance in civil actions to persons 
who have been convicted of a criminal charge . . . for 
the purpose of challenging the validity of the criminal 
conviction.” 42 U.S.C. § 2996f(b)(3) (1994). Does the 
statute thereby “discriminate” against the “viewpoint” 
that prisoners have constitutional rights? Another 
provision bars funding “to provide legal assistance with 
respect to any proceeding or litigation relating to the 
desegregation of any elementary or secondary school.” 
42 U.S.C. § 2996(b)(9) (1994). Does the statute thereby 
“discriminate” against the “viewpoint” that schools 
ought to be desegregated? If limitations on classes of 
cases eligible for representation by LSC-financed 
lawyers constitute impermissible discrimination against 
the people who may want to advance theories in such 
cases, then it is hard to see how any of the many 
statutory limitations on LSC funds are constitutional. 

By the same token, I cannot agree that the statute 
promotes one favored view over others in a supposed 
public forum. Whose viewpoint? What forum? Accord- 
ing to the majority opinion: the government-funded 
lawyers possess the protected expressive interest; and 
the public forum is the courtroom (an idea that may 
come as a surprise to trial judges). See Majority at 
[pages 770-71]. But the proviso stricken by the 
majority bars representation in lawsuits. The view- 
points of litigating lawyers in a courtroom cannot 
matter for present purposes, because (among other 
things) the advocacy of a lawyer in litigation is at the 

50a 

service of the client; it would be inaccurate (and unfair) 
to assume that a lawyer’s advocacy expresses that 
lawyer’s personal view on politics or morals. See Model 
Rules of Professional Conduct Rule 1.2(b) (1995). 

It also cannot be said that the proviso disfavors the 
speech of the clients; the only litigants who are funded 
are those who seek benefits. There are certainly people 
on the other side of welfare issues, such as those who 
favor narrowing welfare eligibility, or reduced benefits, 
or abolition of the welfare system. But the statute 
gives them nothing. Where then is the viewpoint dis- 
crimination, even if one assumed (as I do not) that the 
LSC makes every courtroom into a public forum? 

The statute bars constitutional and other challenges 
to the welfare laws, but it certainly does not fund the 
view that the welfare laws are constitutionally im- 
pregnable. The proviso invalidated by the majority 
does not promote or favor any message. It lays down 
specifications for services to be provided to favored 
beneficiaries. And it excludes some of the most expen- 
sive services—constitutional litigation and statutory 
challenges—in the same way that the statute elsewhere 
bars the expenditure of LSC funds for class actions. In 
excluding these expensive initiatives, the statute maxi- 
mizes the expenditure of limited available funds for less 
expensive benefit-collection lawsuits.2 Congress is able 
to do that; and a statute in which Congress does that 
should be able to withstand a facial challenge. 

2 By striking the proviso, the majority essentially appropri- 
ates money for the precise category of expensive (and often 
politically oriented cases) that Congress chose not to fund. 

51a 

APPENDIX B 

UNITED STATES DISTRICT COURT 
FOR THE EASTERN DISTRICT OF NEW YORK 

No. 97-CV-182 (FB) 

CARMEN VELAZQUEZ, WEP WORKERS TOGETHER!, 

COMMUNITY SERVICE SOCIETY OF NEW YORK, INC., 

NEW YORK CITY COALITION TO END LEAD POISONING, 
CENTRO INDEPENDIENTE DE TRABAJADORES 
AGRICOLAS, INC., AND GREATER NEW YORK 
LABOR-RELIGION COALITION, ON BEHALF OF ALL 
SIMILARLY SITUATED INDIVIDUALS, ORGANIZATIONS 
AND THEIR MEMBERS; NAMELY, INDIVIDUALS AND 
ORGANIZATIONS WHO ARE, OR WISH TO BE, 
REPRESENTED BY LAWYERS EMPLOYED BY ENTITIES 
RECEIVING FUNDS FROM THE LEGAL SERVICES 
CORPORATION, AND WHO WISH TO ASSERT LEGAL 
CLAIMS AS MEMBERS OF A CLASS, OR TO BENEFIT 
FROM SOME OTHER LEGAL ADVOCACY ACTIVITY 
PROSCRIBED BY PUB. L. 104-208; 

FARMWORKERS LEGAL SERVICES OF NEW YORK, INC., 
ON BEHALF OF ITSELF, AND ON BEHALF OF ALL 
SIMILARLY SITUATED NOT-FOR-PROFIT LEGAL 

SERVICES ENTITIES; NAMELY, ORGANIZATIONS 
WHO WISH TO BE ELIGIBLE TO RECEIVE FUNDS 
FROM THE LEGAL SERVICES CORPORATION, AND 
WHO WISH TO BE FREE TO ENGAGE IN LEGAL ADVOCACY 
ACTIVITIES THAT ARE PROSCRIBED BY PUB. L. 104-208; 

LUCY A. BILLINGS, PEGGY EARISMAN, OLIVE KAREN 
STAMM, JEANETTE ZELHOF, ELISABETH BENJAMIN, 
JILL ANN BOSKEY, AND LAUREN SHAPIRO, ON BEHALF 
OF EACH, AND ON BEHALF OF ALL SIMILARLY 

52a 

SITUATED INDIVIDUALS; NAMELY, ATTORNEYS 
EMPLOYED OR FORMERLY EMPLOYED BY ENTITIES 
RECEIVING FUNDS FROM THE LEGAL SERVICES 
CORPORATION WHO WISH TO BE FREE TO REPRESENT 
INDIGENT INDIVIDUALS IN CLASS ACTIONS, AND TO 
ENGAGE IN OTHER ATTORNEY-CLIENT ACTIVITIES 
THAT ARE PROSCRIBED BY PUB. L. 104-208; AND 

ANDREW J. CONNICK, COUNCILMEMBER C. VIRGINIA 
FIELDS, COUNCILMEMBER GUILLERMO LINARES, 
COUNCILMEMBER STANLEY MICHELS, 
COUNCILMEMBER ADAM CLAYTON POWELL, IV, 
SENATOR LAWRENCE SEABROOK, AND ASSEMBLYMAN 
SCOTT M. STRINGER, ON BEHALF FF THEMSELVES AND 
ALL SIMILARLY SITUATED INDIVIDUALS; NAMELY, 
INDIVIDUALS WHO HAVE PROVIDED PUBLIC OR PRIVATE 
NONFEDERAL FUNDING TO ENTITIES THAT ALSO 
RECEIVE FUNDS FROM THE LEGAL SERVICES 
CORPORATION, AND WHO WISH THESE FUNDS TO BE 
USED FOR LEGAL ADVOCACY ACTIVITIES THAT ARE 
PROSCRIBED BY PUB. L. 104-208, PLAINTIFFS, 

v. 

LEGAL SERVICES CORPORATION, DEFENDANT 

[Filed: Dec. 22, 1997] 

MEMORANDUM & ORDER 

BLOCK, District Judge. 

Plaintiffs challenge the constitutionality of certain 
provisions of the Omnibus Consolidated Rescissions and 
Appropriations Act of 1996, Pub. L. No. 104-134, § 504, 

53a 

110 Stat. 1321 (1996), which were re-enacted by the 
Omnibus Consolidated Appropriations Act of 1997, Pub. 
L. No. 104-208, § 502, 110 Stat. 3009 (1996) (hereinafter 
collectively referred to as the “Act”), as implemented 
by regulations which were issued subsequent to the 
commencement of this lawsuit. The Act prohibits 
attorneys and organizations that receive federal monies 
from defendant Legal Services Corporation (“LSC”) 
from engaging in a large number of activities (the 
“prohibited activities”), such as lobbying, challenging 
welfare reform legislation, and participating in class 
action litigation. The Act also provides that such LSC- 
funded attorney or entity (“recipients”) cannot engage 
in any of the prohibited activities even if funding for 
the prohibited activity were to come from non-federal 
sources. However, implementing regulations issued by 
the LSC after the commencement of the litigation allow 
recipients to engage in the prohibited activities by 
affiliating with legal services organizations that do not 
receive any federal monies from the LSC. 

Presently before the Court is plaintiffs’ motion for 
preliminary injunctive relief pursuant to Rule 65 of the 
Federal Rules of Civil Procedure.1 Plaintiffs contend 
that the Act’s restrictions, as implemented by the 
LSC’s regulations, are facially violative of the First and 
Fifth Amendment rights of recipients, as well as 
attorneys for, clients of, and donors to, those 
recipients.2 The Court disagrees and, regarding the 

1 On March 24, 1997, the Court held a preliminary injunction 
hearing (“Hearing”) and entertained oral argument from the 
parties. 

2 Plaintiffs’ amended complaint seeks class certification for 
each of these groups. The parties have agreed that the issue of 

54a 

implementing regulations, holds that they are a per- 
missible construction of the Act and are appropriately 
tailored to the Government’s legitimate interests. The 
Court accordingly denies the motion for preliminary 
injunctive relief. 

BACKGROUND 

I. The Legal Services Corporation & The Statutory 
Restrictions 

Congress created the LSC in 1974 in response to, 
inter alia, the “need to provide high quality legal assis- 
tance to those who would be otherwise unable to afford 
adequate legal counsel and to continue the present vital 
legal services program.” 42 U.S.C. § 2996(2). The LSC 
is a nonprofit corporation charged with distributing 
federal funds, in the form of grants, to recipients 
nationwide that provide legal assistance to low-income 
individuals. In 1995, LSC recipient organizations 
served approximately 1,900,000 indigent clients, encom- 
passing over 1,700,000 matters, which benefitted almost 
5,000,000 people living in poverty.3 

The LSC has thus 
been described as “the primary vehicle for insuring that 
the poor are included in this nation’s legal system.”4 
Recipients generally rely on both LSC funds and 
monies raised from a variety of public and private 
sources5 to finance their operations. 

class certification need not be decided pending the Court’s deter- 
mination of the preliminary injunction motion. 

3 S. Rep. 104-392, at 13 (1996). 

4 Id. 

5 These sources include: state and local grants, IOLA (Inter- 
est on Lawyers’ Accounts) programs, and private donations. 

55a 

Despite the success of the LSC in meeting the legal 
needs of the poor, controversy has surrounded the LSC 
since its inception. This controversy has focused on the 
extent to which recipients should be limited in their use 
of LSC funds. At one end of the spectrum, critics of the 
LSC charge that recipients often use federal funds to 
advance activist agendas, and that broad limitations are 
necessary to ensure that LSC funds are spent to meet 
the basic legal needs of the poor. At the other end, 
opponents of such restrictions argue that activist litiga- 
tion is necessary to assist impoverished individuals, and 
that the vast majority of LSC funds are used to help 
the poor in so-called “basic” legal proceedings. 

In response to this debate, Congress has repeatedly 
placed restrictions on the permissible uses of federal 
funds by recipient organizations. For example, the 1974 
Act prohibited the use of LSC funds by any recipient to 
provide legal assistance in any case seeking to obtain a 
nontherapeutic abortion. 42 U.S.C. § 2996f(b)(8). The 
1974 Act and implementing regulations also restricted 
recipients from participating in the following areas: 
political activity, criminal proceedings, training, school 
desegregation, lobbying, violations of the Military Se- 
lective Service Act, and fee-generating cases. 42 U.S.C. 
§§ 2996f(b)(1)-(4), (6)-(10). In 1989, the LSC extended 
the restrictions to include redistricting cases. 45 C.F.R. 
§ 1632. The present dispute arises from the latest 
round of congressional debate and compromise, which 
resulted in continued funding for the LSC, but with an 
additional set of restrictions on recipients of LSC funds. 

Although restrictions on LSC funds have been com- 
monplace since Congress created the LSC, the Act is 
unique because the restrictions apply, for the first time, 

56a 

to recipient activities that are supported by non-federal 
public funds. Previously, recipients were allowed to use 
non-federal funds from public sources as they pleased 
so long as accounting practices documented the segre- 
gation of federal and non-federal funds.6 Thus, while 
the former statute provided that “[n]o funds made 
available by [LSC] may be used” for any of the pro- 
hibited activities, 42 U.S.C. § 2996f(b), the new statute 
provides that “[n]one of the funds appropriated [by 
the LSC] may be used to provide financial assistance to 
any [recipient]” that engages in any of the prohibited 
activities. Act § 504(a). Furthermore, the new statute 
states that recipients are free to “us[e] funds received 
from a source other than the Legal Services Cor- 
poration to provide legal assistance . . . except 
that such funds may not be expended by recipients 
for any purpose prohibited by this Act . . . .” Act 

§ 504(d)(2)(B). 

6 Although Congress has never before prohibited recipients 
from using public non-LSC funds—such as grants from state and 
local entities and IOLA funds—to engage in prohibited activities, 
Congress had previously extended some of the restrictions to 
activities funded with private donations. 42 U.S.C. § 2996i(c); 45 
C.F.R. pts. 1610, 1627 (1995). Despite this curious dichotomy, 
plaintiffs do not challenge the restrictions on private funds, con- 
tending that those prior restrictions on the use of private funds 
were insignificant since public funds constitute the “overwhelming 
majority” of recipients’ non-LSC funds. Memorandum of Law In 
Support of Motion for Preliminary Injunction at 3 n. 2. Therefore, 
the Court’s reference herein to “non-LSC” funds refers to public 
non- LSC funds. 

57a 

Plaintiffs’ amended complaint challenges the consti- 
tutionality of the following prohibited activities set 
forth in the Act:7 

None of the funds appropriated in this Act to the 
Legal Services Corporation may be used to provide 
financial assistance to any [recipient]: 

(2) that attempts to influence the issuance, 
amendment, or revocation of any executive order, 
regulation, or other statement of general applicabil- 
ity and future effect by any Federal, State, or local 
agency [hereinafter “executive order provision”]; 

(3) that attempts to influence any part of any 
adjudicatory proceeding of any Federal, State, or 
local agency if such part of the proceeding is de- 
signed for the formulation or modification of any 
agency policy of general applicability and future 
effect [hereinafter “agency provision”]; 

(4) that attempts to influence the passage or 
defeat of any legislation, constitutional amendment, 
referendum, initiative, or any similar procedure of 
the Congress or a State or local legislative body 
[hereinafter “legislation provision”] [subsections (2), 
(3), and (4) will be referred to collectively as the 
“lobbying provisions”]; 

(5) that attempts to influence the conduct of 
oversight proceedings of the [LSC] or any person or 
entity receiving financial assistance provided by the 

7 Some of the restrictions are new; some were contained in 
prior statutes, such as lobbying. Act § 504(a)(2)-(4); 42 U.S.C. 
§ 2996f(a)(5). 

58a 

Corporation [hereinafter “LSC oversight pro- 
vision”]; 

(7) that initiates or participates in a class action 
suit [hereinafter “class action provision”]; 

(11) that provides legal assistance for or on 
behalf of [certain] alien[s] [hereinafter “aliens pro- 
vision”];8 

(12) that supports or conducts a training pro- 
gram for the purpose of advocating a particular 
public policy or encouraging a political activity, a 
labor or antilabor activity, a boycott, picketing, a 
strike, or a demonstration . . . [hereinafter 
“training provision”]; 

(13) that claims (or whose employee claims), or 
collects and retains, attorneys’ fees pursuant to any 
Federal or State law permitting or requiring the 
awarding of such fees [hereinafter “attorneys’ fees 
provision”]; 

(15) that participates in any litigation on behalf 
of a person incarcerated in a Federal, State, or local 
prison [hereinafter “incarcerated client provision”]; 

(16) that initiates legal representation or partici- 
pates in any other way . . . involving an effort to 
reform a Federal or State welfare system . . . 
[hereinafter “welfare reform provision”]; 

8 The Act sets forth a series of exceptions, such as law- 
fully admitted aliens who are permanent residents. See Act 
§ 504(a)(11)(A)-(F). 

59a 

(18) unless such person or entity agrees that [it] 
will not accept employment resulting from in- 
person unsolicited advice to a nonattorney that such 
nonattorney should obtain counsel or take legal 
action . . . [.] [hereinafter “solicitation provision”] 

. . . . 

Act §§ 504(a)(2)-(5), (7), (11)-(13), (15)-(16), (18). 

II. Evolution of Regulations Establishing Program In- 
tegrity Requirements Governing Alternative Chan- 
znels for Engaging in Prohibited Activities 

A. The Nature of the Regulations at the Time of 

LASH I 

It is well-settled that the LSC has the power to 
promulgate rules and regulations to implement the Act. 
See Act § 503(b) (“the [LSC] shall promulgate regu- 
lations to implement a competitive selection process for 
the recipients”); 42 U.S.C. § 2996g(e) (requiring the 
LSC to publish in the Federal Register “all its rules, 
regulations, guidelines, and instructions”). Although 
the LSC was established as a federally-chartered non- 
profit corporation of the District of Columbia rather 
than as an agency, Congress has manifested its intent 
to treat the LSC as a federal agency for regulatory 
purposes. See Texas Rural Legal Aid, Inc. v. Legal 
Servs. Corp., 940 F.2d 685, 690-91 (D.C. Cir. 1991) (“We 
conclude that the Act clearly grants both general and 
specific rulemaking powers to [the] LSC . . . .”). In 

light of the fact that the Act’s restrictions now apply to 
non-LSC funds, the LSC recognized in the preamble to 

60a 

the first set of regulations passed after the Act that 
new regulations were necessary: 

[These regulations] incorporate[% the restrictions 
imposed by the [Act], which apply to both a 
recipient’s LSC funds and its non-LSC funds. Past 
appropriations acts have applied restrictions con- 
tained in those acts only to the funds appropriated 
thereunder. In contrast, the [Act] prohibits LSC 
from funding any recipient that engages in certain 
specified activities or that fails to act in a manner 
consistent with certain [of the Act’s] requirements. 

61 Fed. Reg. 41,960, 41,960 (Aug. 13, 1996). Central to 
the regulations was the section providing that “[a] 
recipient may not use non-LSC funds for any purpose 
prohibited by the LSC Act or for any activity pro- 
hibited by or inconsistent with section 504 . . . .” 45 

C.F.R. § 1610.3 (1996). 

On December 2, 1996, the LSC promulgated a re- 
vised set of regulations, 61 Fed. Reg. 63,749, which 
included a new regulation entitled “Transfers of recipi- 
ent funds.” It provided that when a recipient trans- 
ferred any funds, whether from LSC or non-LSC 
sources, the prohibitions on use of the funds would 
continue to apply to those transferred funds. 45 C.F.R. 
§ 1610.7 (1996). Comments accompanying the revised 
regulations explained that applying the restrictions to 
transferred non-LSC funds was necessary “because 
otherwise recipients would be able to avoid the con- 
ditions on their non-LSC funds by simply transferring 
the funds.” 61 Fed. Reg. 63,749, 63,752 (1996). 

These new and revised regulations left in place a 
long-standing LSC regulation entitled “Interrelated 

61a 

Organizations,” 50 Fed. Reg. 49,276, 49,279 (Nov. 29, 
1985), which addressed the circumstances under which 
another organization would be deemed “controlled” by 
a recipient. The interrelated organizations regulation 
stated that “[f]unds held by an organization which . . . 
is controlled by . . . a recipient . . . are subject to the 
same restrictions as if the funds were held by the 
recipient.” Id. at 49,279-80. The regulation posited 
eight non-exclusive factors to be weighed to determine 
whether control exists.9 The Act’s extension of restric- 
tions to non-LSC funds placed heightened importance 
on the interrelated organizations policy since non-LSC 
funds of any organization that was “controlled” by a 
recipient were subject to all of the Act’s statutory re- 
strictions. 

B. The Decision in LASH I 

This Court is not the first federal forum to pass on 
the constitutionality of the Act as implemented by LSC 
regulations. On February 14, 1997, a federal district 
court for the District of Hawaii issued an order 

9 These factors were: “(a) Extent and pattern of any overlap 
of officers, directors, or other managers among organizations; (b) 
Contractual and financial relationships; (c) History of relationships 
among the organizations; (d) Close identity of interest; (e) One 
organization has become a mere conduit, ‘incorporated pocket- 
book,’ or ‘straw’ party for another whether or not there was an 
attempt to work an injustice or promote a fraud; (f) Funds are 
solicited by a separate entity in the name of and with the 
expressed or implicit approval of the recipient . . .; (g) A recipient 
transfers resources to another entity that holds these resources for 
the benefit of the recipient; and, (h) A recipient assigns functions 
to an entity whose funding is primarily derived from sources other 
than public contributions.” Audit and Accounting Guide for 
Recipients and Auditors § 1-7, 50 Fed. Reg. 49,276, 49,279 (1985). 

62a 

granting in part and denying in part the plaintiffs’ 
request for preliminary injunctive relief. Legal Aid 
Society of Hawaii, et al. v. Legal Servs. Corp., 961 F. 
Supp. 1402 (D. Haw. 1997) (Kay, J.) (hereinafter re- 
ferred to as “LASH 1”). 

The LASH I court resolved the preliminary injunc- 
tion issue through a two-part analysis. First, the court 
determined the threshold issue of which of the chal- 
lenged restrictions implicated constitutional rights, 
since the “sine qua non of [prevailing on a claim of 
infringement on constitutional rights] is proving that 
the restrictions at least implicate Plaintiffs’ consti- 
tutional rights.” LASH I, 961 F. Supp. at 1408. The 
court then considered whether the restrictions impli- 
cating constitutional rights actually amounted to 
constitutional violations. Id. at 1411. The parties 
before this Court agree that the two-part framework 
adopted by the LASH I court was appropriate. See Pl. 
Supp. Mem. of Law at 3; Def. Supp. Mem. of Law at 1 n. 

2. The court in LASH I concluded that plaintiffs had a 
probability of success on the merits in respect to all but 
three of the restrictions, which it determined did not 
implicate constitutional rights. 

In the first phase of its analysis, the LASH I court 
examined the “laundry list” of constitutional rights 
plaintiffs argued were implicated by the Act’s restric- 
tions. 961 F. Supp. at 1402. The court concluded that 
First Amendment rights to lobby, to associate, and to 
meaningful court access were implicated by all but 
three of the challenged restrictions. Specifically, the 
right to lobby was implicated by the executive order 
provision, the agency provision, the legislation pro- 
vision, and the welfare reform provision, id. at 1408 

63a 

10 the rights of association and 
to meaningful court access were implicated by the 
training provision and the incarcerated client provision. 
Id. at 1409-10 (Act § 504(a)(12), (15)). 

(Act § 504(a)(2)- (4), (16)); 

11 

The LASH I court concluded, however, that the 
aliens, class action, and attorneys’ fees provisions did 
not implicate constitutional rights. The aliens provision 
did not implicate such rights because “[i]f Congress in 
its near plenary power over aliens decides that legal aid 
associations and their lawyers should not represent 
them, that decision should not be disturbed.” Id. at 
1410. As for the class actions provision, the LASH I 
court concluded that adopting plaintiffs’ position would 
in effect constitutionalize Rule 23 of the Federal Rules 
of Civil Procedure, which it found “imprudent . . . 
absent any appellate precedent.” Id. Finally, in respect 
to the attorneys’ fees provision, the LASH I court 
concluded that “[p]laintiffs do not cite any authority 
that fee-shifting provisions violate Due Process or 
implicate the First Amendment,” and that “because the 
provision does not implicate a suspect class, under 

10 The LASH I court also concluded that a restriction on 
participation in reapportionment cases implicated the right to 
lobby. Id. (Act § 504(a)(1)). Plaintiffs in this case have not 
challenged that provision. The Court also notes that, although 
apparently not challenged in LASH I, the LSC oversight pro- 
vision, Act § 504(a)(5), also implicates the right to lobby for the 
same reasons as those articulated by LASH I. 

11 The LASH I court also determined that rights to meaningful 
court access and to associate were implicated by the restriction, 
not challenged by plaintiffs in this case, on representation of 
persons allegedly involved in illegal drug activity in public housing 
eviction proceedings. Id. (Act § 504(a)(17)). 

64a 

Equal Protection the restriction need only pass rational 
basis which it clearly does.” Id. at 1411. 

Having found that all but three of the challenged 
restrictions implicated constitutional rights, the LASH 
I court proceeded to determine whether those restric- 
tions, as implemented by LSC regulations, “not only 
implicate the First Amendment but whether they also 
impinge the First Amendment.” Id. The court’s 
analysis of the constitutional issue focused on the 
regulations promulgated by the LSC rather than the 
restrictions, since those regulations affected the ability 
of recipients to engage in activities prohibited by the 
Act through affiliate organizations. The court stated 
that “the dispositive factor . . . is whether the 
restrictions [leave] open adequate channels for speech 

. . . . [T]herefore, the Plaintiffs’ likelihood of success 

rests on their ability to prove that the LSC restrictions 
prevent the organizations and lawyers from voicing 
their un-subsidized opinions.” Id. at 1414. 

The LASH I court examined the trilogy of leading 
Supreme Court cases on unconstitutional conditions— 
Rust v. Sullivan, 500 U.S. 173, 111 S. Ct. 1759, 114 
L.Ed.2d 233 (1991); FCC v. League of Women Voters, 
468 U.S. 364, 104 S. Ct. 3106, 82 L.Ed.2d 278 (1984); and 
Regan v. Taxation with Representation, 461 U.S. 540, 
103 S. Ct. 1997, 76 L.Ed.2d 129 (1983)—and focused its 
analysis on a comparison between the LSC regulations 
and the regulations upheld by the Supreme Court in 
Rust. The Rust case originated from the enactment in 
1970 of Title X to the Public Health Service Act, “which 
provides federal funding for family-planning services.” 
500 U.S. at 178, 111 S. Ct. at 1764. The regulations at 
issue in Rust (“Rust regulations”) were promulgated in 

65a 

1988 pursuant to a provision requiring that “ ‘[n]one of 
the funds appropriated under this subchapter shall be 
used in programs where abortion is a method of family 
planning.’ ” 

12 The 
Supreme Court noted “three principal conditions on the 
grant of federal funds for Title X projects” created by 
the regulations: “[(1)] a Title X project may not provide 
counseling concerning the use of abortion as a method 
of family planning . . . [(2)] a Title X project [may not] 
engag[e] in activities that encourage, promote or 
advocate abortion as a method of family planning . . . 
[and (3)] Title X projects [must] be organized so that 
they are physically and financially separate from 
prohibited abortion activities.” Id. at 179-80, 111 S. Ct. 
at 1764-65 (internal quotations omitted). 

Although the plaintiffs in Rust raised several 
grounds for their challenge to the Title X regulations, 
most pertinent to the present case is the Rust Court’s 
disposition of the claim that the Title X regulations 
were impermissible “because they condition the receipt 
of a benefit . . . on the relinquishment of a consti- 
tutional right.” Rust, 500 U.S. at 196, 111 S. Ct. at 1773. 
The Supreme Court summarized the unconstitutional 
conditions doctrine as follows: 

[O]ur “unconstitutional conditions” cases involve situations in 

which the Government has placed a condition on the recipient 
of the subsidy rather than on a particular program or service, 
thus effectively prohibiting the recipient from engaging in the 

12 As noted, the statute at issue in the present case provides, in 
almost identical language, that: “None of the funds appropriated in 
this Act to the Legal Services Corporation may be used to provide 
financial assistance to any recipient that [engages in the prohibited 
activities].” Act § 504(a). 

Id. (quoting 42 U.S.C. § 300a-6). 

66a 

protected conduct outside the scope of the federally funded 
program. 

Id. at 197, 111 S. Ct. at 1774. The Court upheld the 
regulations on Title X projects because the regulations 
“do not force the Title X grantee to give up abortion- 
related speech; they merely require that the grantee 
keep such activities separate and distinct from Title X 
activities.” Id. at 196, 111 S. Ct. at 1773. 

The Title X regulations governing the separateness 
of projects engaging in restricted activities, referred to 
as “program integrity” requirements, mandated that to 
conduct prohibited abortion counseling, the grantee had 
to maintain separate facilities, personnel, and records 
for the prohibited activity. The Government defended 
the program integrity requirements on the grounds 
that “they are necessary to assure that Title X grantees 
apply federal funds only to federally authorized pur- 
poses and that grantees avoid creating the appearance 
that the Government is supporting abortion-related 
activities.” Id. at 188, 111 S. Ct. at 1769. 

Ultimately, the Rust Court rejected the unconsti- 
tutional condition claim since: 

By requiring that the Title X grantee engage in 
abortion-related activity separately from activity 
receiving federal funding, Congress has . . . not 
denied it the right to engage in abortion-related 
activities. Congress has merely refused to fund such 
activities out of the public fisc, and the [agency] has 
simply required a certain degree of separation from 
the Title X project in order to ensure the integrity 
of the federally funded program. 

67a 

Id. at 198, 111 S. Ct. at 1774. 

The LASH I court therefore framed the issue as 
follows: “The more difficult question (and the more 
contested between the parties) consists of what side of 
the continuum this case falls with regard to Rust.” 
LASH I, 961 F. Supp. at 1415. Ultimately, the LASH I 
court determined that the LSC regulations were less 
flexible and more burdensome than the Rust regu- 
lations, concluding that “the LSC regulations fall on the 
unconstitutional side of Rust,” and accordingly found 
that the plaintiffs were likely to prevail on the merits. 
Id. at 1416. 

Of particular importance to the LASH I court was 
the combination of the expansion of the restrictions 
with the LSC’s long-standing interrelated organizations 
policy. The court noted that in light of the expan- 
siveness of the factors used to determine whether a 
recipient “controls” an organization, which made likely 
a finding of control between a recipient and any other 
organization in a relationship with the recipient, “the 
LSC regulations cannot be said to be more liberal than 
those in Rust.” Id. In other words, “the Rust regu- 
lations appear far more expansive in allowing an 
organization to pursue” its involvement in prohibited 
activities through other organizations. Id. In its 
probability of success on the merits inquiry, therefore, 
the LASH I court concluded that the LSC regulations 
were most analogous to those in League of Women 
Voters, the only case in the unconstitutional conditions 
doctrine trilogy that held that adequate alternative 
channels were not available for the expression of First 
Amendment rights. Id. 

68a 

C. The Interim Regulations Promulgated Subse- 
quent to LASH I 

On January 27, 1997, little more than two weeks prior 
to the LASH I decision, plaintiffs in this Court filed 
their amended complaint, attacking the same set of 
restrictions at issue in LASH I. In the aftermath of the 
LASH I court’s holding that the challenged regulations 
fell on the unconstitutional side of Rust, on March 14, 
1997 the LSC promulgated new, interim regulations 
which were “intended to address constitutional chal- 
lenges raised by the previous rule.” 62 Fed. Reg. 12,101 
(1997) (“interim regulations”). Although issued after 
plaintiffs’ amended complaint, the interim regulations 
were in place at the time of the preliminary injunction 
Hearing. 

13 Counsel for defendant- intervenor United 
States conceded at the Hearing that passage of the 
interim regulations was an attempt to cure the consti- 
tutional deficiencies found by the LASH I court, Tr. 

14 at 
63, and that the Court should focus its attention on the 
constitutionality of the new regulations. Tr. at 4 (“the 
playing field really has narrowed . . . what we’re 

13 At the Hearing, counsel for plaintiffs argued that the LASH 
I court’s analytical framework and legal conclusions were correct, 
with the exception of the court’s holdings that three of the re- 
strictions did not implicate plaintiffs’ constitutional rights. Thus, a 
holding by this Court at that posture of the litigation that the 
interim regulations were constitutionally impermissible would 
have required the Court to examine those three disputed pro- 
visions. On the other hand, a determination that the regulations 
were sufficient to protect plaintiffs’ constitutional rights would 
render academic the issue of which of the Act’s restrictions 
implicated the constitution in the first instance. 

14 “Tr.” refers to the transcript of the preliminary injunction 
Hearing. 

69a 

really debating about are whether or not the program 
integrity requirements and the new regulations are 
constitutional in light of Rust”); see also 62 Fed. Reg. 
12,101, 12,101 (“limited adjustments” are intended to 
“respond to the constitutional concerns addressed by 
the [LASH I] Court”). Plaintiffs’ counsel also conceded 
at the Hearing that the battle ground had really shifted 
to the new regulations. Tr. at 36-37 (“I don’t believe 
it’s impossible to develop a set of regulations that would 
permit the Government to advance the only interest 
that it has here.”). 

The interim regulations made two critical changes to 
the regulations in existence at the time LASH I was 
decided. First, the transfer of funds provision was 
revised so that transfer by a recipient of non-LSC funds 
would not be burdened by the statutory prohibitions. 
45 C.F.R. § 1610.7. However, the LSC added a new 
section entitled “Program integrity of recipient.” 45 
C.F.R. § 1610.8. As conceded by counsel for LSC and 
counsel for the United States at the Hearing, the pro- 
gram integrity requirements were carefully patterned 
after those approved in Rust. See Tr. at 51 (“These are 
exactly the same kinds of regulations from Rust . . . . 

In fact, the language of them is exactly the same.”) 
(statement by counsel for LSC); Tr. at 63 (“The folks at 
LSC sat down and they promulgated regulations. They 
asked themselves how to do it, and what they did is 
they looked at what the Supreme Court said in Rust 
and they did their level best to copy from Rust.”) 
(statement by counsel for United States). 

Program integrity requirements regulate the ability 
of recipients to maintain a relationship with organi- 
zations, often referred to as “affiliates,” that do not re- 

70a 

ceive any LSC funds and engage in activities prohibited 
by the Act. Unlike organizations “controlled” by 
recipients, which are deemed to be LSC actors, affili- 
ates can maintain a relationship with a recipient yet 
engage in prohibited activities. As in Rust, the use of 
affiliates under the interim regulations was intended to 
strike a balance between providing an outlet to engage 
in advocacy prohibited by the Act and maintaining the 
integrity of the Act by ensuring that no LSC funds 
would be used to subsidize prohibited activities in vio- 
lation of congressional intent. The program integrity 
requirements section of the interim regulations reads, 
in pertinent part: 

[The Act’s restrictions will not be applied to an 
affiliate if it] is physically and financially separate 
from the organization. Mere bookkeeping separa- 
tion of LSC funds from other funds is not sufficient. 
In order to be physically and financially separate, 
the recipient and the [affiliate] must have an objec- 
tive integrity and independence from one another. 
Factors considered to determine whether such 
objective integrity and independence exist shall in- 
clude, but are not limited to: 

(i) The existence of separate personnel; 

(ii) The existence of separate accounting and 
timekeeping records; 

(iii) The existence of separate facilities; and 

(iv) The extent to which signs and other forms of 
identification which distinguish the recipient 
from the [affiliate] are present. 

45 C.F.R. § 1610.8(b)(3). 

71a 

Although based on the Rust program integrity re- 
quirements, the interim regulations did not exactly 
mirror those requirements. Several differences be- 
tween them are noteworthy because they formed the 
basis of plaintiffs’ position at the time of the Hearing 
that the program integrity requirements were un- 
constitutional in part because they were more restric- 
tive than the Rust program integrity regulations. 

First, in addition to the program integrity require- 
ments, a separate section in the interim regulations 
perpetuated the LSC’s former “interrelated organi- 
zations” policy. The regulation provided in that regard: 

If a recipient controls, is controlled by or is subject 
to common control with another organization, the 
two organizations are interrelated organizations and 
the restrictions in this part will be applied to both 
organizations, unless the association between the 
two organizations meets the standards of program 
integrity in paragraph (b) of this section. 

45 C.F.R. § 1610.8(a). This provision formally replaced 
the LSC’s prior “interrelated organizations” regulation. 
62 Fed. Reg. 12,101, 12,101 (1997). Under this new pro- 
vision, therefore, an organization could be “controlled” 
by a recipient yet engage in prohibited activities so long 
as the program integrity requirements were satisfied. 
Despite this exception, no provision regarding control 
appeared in Rust’s program integrity requirements, 
and plaintiffs argued that this provision contributed to 
the regulation’s constitutional infirmity. See Plaintiffs’ 
Reply Memorandum at 8-9. 

The second difference between the interim and Rust 
program integrity requirements concerns one of the 

72a 

four factors used in the program integrity analysis— 
namely, the separateness of the recipient’s and 
affiliate’s facilities. In Rust, the regulation stated that 
the “degree of separation” of facilities would be con- 
sidered, whereas the interim regulation required the 
“existence” of separate facilities. Plaintiffs argued that 
“[t]his difference appears to be more than semantics,” 
id. at 10, and that “[u]nlike the [Rust regulation], which 
measured the degree of separation, the LSC rule fo- 
cuses on the existence of separate facilities.” Id. 

Third, the Rust program integrity requirements 
stated that the determination of whether a recipient 
and affiliate were sufficiently separate would be based 
on all “facts and circumstances,” whereas the interim 
regulations made no such statement, which arguably 
implied that in order to show objective integrity, a 
recipient would have to satisfy each and every program 
integrity factor. Plaintiffs emphasized that unlike the 
Rust program integrity requirements, which “made it 
clear that [each of the four considerations] was only one 
factor in the assessment of program integrity,” the in- 
terim regulations appeared to establish a “per se test.” 
Id. Based on all these differences between the interim 
regulations and the Rust program integrity require- 
ments, plaintiffs concluded that the LSC restrictions on 
the use of affiliates “go[] far beyond the simple segre- 
gation requirements of Rust.” Id. at 12. 

The Court asked plaintiffs’ counsel at the Hearing 
whether it might be provident to withhold judgment 
until the final regulations were promulgated, com- 
menting: 

73a 

[T]hese are interim regulations. Is there not some 
wisdom in allowing some period of time to let the 
dust settle until we get final regulations? They may 
come in a different form two months from now or 
three months from now. You may have to come 
back to this or another court to deal with a whole 
different spate of regulations. 

Tr. at 8. The colloquy continued as follows: 

[PLAINTIFFS]: If there’s any change, we’ll let you 
know immediately, but I should say, I don’t antici- 
pate that there will be a significant change. We 
think that these are the regulations that we’re going 
to be operating on into the foreseeable future. 

THE COURT: You know, there were a spate of 
new regulations after Judge Kay [in LASH I] spoke. 
Maybe after we have this argument today, there 
will be more regulations. 

Tr. at 10. At the conclusion of the Hearing, the Court, 
noting the responsiveness of the rulemaking process to 
the LASH litigation, commented: 

Maybe as a result of this opportunity for all of us to 
discuss these issues, there can be some further way 
in which these matters can be addressed, or there 
will be an ongoing dialogue between people of good 
will and good spirit in our great profession. If [this 
Hearing] has possibly facilitated that possibility, I 
feel that’s also a purpose to be served from my end 
of the spectrum . . . . 

Tr. at 68. 

74a 

D. The Final Program Integrity Requirements 

On May 21, 1997, the LSC replaced the interim regu- 
lations with what it termed the “Final rule,” which 
made revisions to the interim rule “[b]ased on [com- 
ments received by the LSC] and its own internal 
research and review.” 62 Fed. Reg. 27,695, 27,695 (May 
21, 1997) (“final regulations”). The Court therefore will 
treat plaintiffs’ motion as directed at the final regu- 
lations rather than the regulations analyzed in LASH I 
or the interim regulations issued shortly after LASH I 
and in effect at the time of the Hearing. In particular, 
the Court focuses on the revised program integrity 
requirements, which plaintiffs contend are still overly 
restrictive in a manner which renders them facially 
unconstitutional. 

The program integrity section of the final regulations 
provides as follows: 

(a) A recipient must have objective integrity and 
independence from any organization that engages in 
restricted activities. A recipient will be found to 
have objective integrity and independence from 
such an organization if: 

(1) The other organization is a legally sepa- 
rate entity [“separate entity requirement”]; 

(2) The other organization receives no trans- 
fer of LSC funds, and LSC funds do not sub- 
sidize restricted activities [“no subsidy require- 
ment”]; and 

75a 

(3) The recipient is physically and financially 
separate from the other organization. Mere 
bookkeeping separation of LSC funds from 
other funds is not sufficient. Whether suffi- 
cient physical and financial separation exists 
will be determined on a case-by-case basis and 
will be based on the totality of the facts. The 
presence or absence of any one or more factors 
will not be determinative. Factors relevant to 
this determination shall include 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 activities occur, and the ex- 
tent of such restricted activities; and 

(iv) The extent to which signs and other forms 
of identification which distinguish the recipient 
from the organization are present [collectively 
the “separation factors”]. 

45 C.F.R. § 1610.8(a). Significantly, subsection (b) of 
§ 1610.8 provides that recipients must certify to the 
LSC their compliance with the program integrity re- 
quirements. 

The revised program integrity section eliminates 
virtually every difference between the interim regula- 
tions and the Rust regulations in respect to program 
integrity requirements. First, the final requirements 
deleted the provision regarding control of an affiliate by 
a recipient. The LSC removed the provision because 
“the [LSC] determined that if a program is found to be 

76a 

in compliance with the [remainder of the] program 
integrity test, there would be a sufficiently separate 
identity and operational independence from the re- 
cipient.” 62 Fed. Reg. 27695, 27697. 

The final regulations made two further changes in- 
tended to bring the program integrity requirements 
exactly in line with Rust. First, the separate facilities 
factor was changed from “the existence of separate 
facilities” to “the degree of separation from facilities in 
which restricted activities occur.” And second, the LSC 
added language to emphasize that there is no per se rule 
in respect to the factors relevant to the program integ- 
rity determination. In fact, the new language is even 
less restrictive than the Rust regulation since it states 
that “[t]he presence or absence of any one or more 
factors will not be determinative.” 

The Court notes that, despite the similarity between 
the program integrity requirements in Rust and the 
LSC’s final regulations, the Rust regulations placed 
further restrictions on federally-funded family planning 
projects which have no counterpart in the LSC regu- 
lations. First, the Rust regulations limited the content 
of a doctor’s advice to the project’s client; specifically, 
Title X doctors were forbidden from advising women 
regarding abortion. Rust, 500 U.S. at 179, 111 S. Ct. at 
1764 (citing 42 C.F.R. § 59.8(a)(1) (1989)). Second, 
doctors were absolutely prohibited from referring 
clients to a project which performed abortions, which 
included any affiliate of the project. Id. at 179-80, 111 S. 
Ct. at 1764-65 (citing 42 C.F.R. § 59.8(a)(2)). And third, 
doctors were banned from even explaining to the 
patient that the content of the advice given was being 

77a 

curtailed by an administrative rule. Id. at 180, 111 S. 
Ct. at 1765 (citing 42 C.F.R. § 59.8(b)(5)). 

Notably, although the LSC chose to incorporate the 
program integrity requirements from Rust into the 
final regulations, it did not carry over from Rust any 
specific restrictions on: (1) counseling the client; (2) 
referring the client to another group, such as the 
recipient’s affiliate; and (3) explaining to the client that 
it cannot perform the prohibited activity because it is 
barred by LSC regulation. Since the Act itself does not 
state whether the prohibited activities, most of which 
are actions taken outside of the recipient’s office, are 
intended to encompass legal advice, referral to affili- 
ates, and explanation about the Act, the Court inter- 
prets the LSC’s decision not to carry over these 
additional restrictions from the Rust regulations as an 
implicit approval of these three activities. Counsel for 
the LSC recognized this interpretation as the LSC’s 
position in a letter to the Court: 

[In contrast to Rust], the statutory restrictions at 
issue here (as implemented by LSC’s regulations) do 
not prevent LSC-subsidized lawyers from fully ad- 
vising their clients of their legal rights and practical 
options; indeed, the restrictions do not inhibit 
lawyers’ speech to their clients at all. For example, 
an LSC lawyer is free to advise potential clients 
that their case is best suited for class action treat- 
ment, or that they may have a claim that a welfare 
law is unconstitutional. The lawyer is also permit- 
ted to advise potential clients that while the LSC- 
funded entity cannot take the case, the lawyer 
knows of other attorneys who can. Therefore, unlike 

78a 

the women in Rust, who received “skewed” informa- 
tion, the clients of LSC- subsidized lawyers receive 
complete information. 

Letter to the Court from Alan Levine, dated March 31, 
1997 at 2. 

III. LASH II 

Following the issuance of the final program integrity 
requirements, the LSC moved for summary judgment 
in the Hawaii court, contending that the final revisions 
made by the LSC brought the regulations into complete 
conformity with the Rust program integrity require- 
ments, thereby compelling a determination that the 
final program integrity requirements were no more 
burdensome on plaintiffs’ constitutional rights than 
those at issue in Rust. The Hawaii court agreed. In an 
Order dated August 1, 1997, the court dissolved the 
previously entered preliminary injunction as moot, and 
granted LSC’s motion. Legal Aid Society of Hawaii, 
et al. v. Legal Servs. Corp., 981 F. Supp. 1288 (D. Haw. 
1997) (“LASH II”). 

The LASH II court began its analysis by noting that 
the LSC regulations on interrelated organizations had 
been substantially modified by the interim and final 
regulations, and that the issue in the case had therefore 
been reduced to the following: 

[D]oes a legal aid organization’s ability to control a 
separate legal organization with separate personnel 
and facilities provide an alternative channel for the 
exercise of the first legal aid organization’s consti- 
tutional rights as required by the unconstitutional 
conditions doctrine. 

79a 

Id. at 1292. The LASH II court summarized its First 
Amendment holding by emphasizing that the ability of 
recipients to exercise control over affiliates constituted 
an adequate alternative channel for exercising their 
First Amendment rights: 

The Court reads the new regulations as allowing a 
LSC funded organization to control another organi- 
zation that engages in restricted activities so long as 
all the insularity and separate incorporation require- 
ments of the regulations are satisfied. With this 
ability to control the separately incorporated and 
insular second organization, the Court finds that 
alternative channels exist for LSC-funded organi- 
zations to exercise their constitutionally protected 
rights such as lobbying the legislature. Thus, the 
LSC-funded legal aid societies will be able to control 
affiliates who care for the needs of the poor in areas 
from which the regulations restrict the societies. 

LASH II at 1289. 

In reaching this conclusion, the court rejected a 
number of arguments advanced by the plaintiffs in their 
effort to distinguish Rust. First, in respect to the 
insularity requirements, the court rejected plaintiffs’ 
contention that Rust only upheld requirements beyond 
mere bookkeeping separation because it is more diffi- 
cult for doctors than lawyers to account for their time. 
The court held that “[i]t is no more difficult for a doctor 
to categorize his conversation with a patient than it is 
for a lawyer to do so with his client.” Id. at 1292. 

The court then summarily rejected the argument 
that Rust was distinguishable because the Act was not 
intended to convey a Government message, stating that 

80a 

“Congress does not control the analysis and advice of 
either a Title X doctor or a LSC lawyer except for 
prohibiting advice in certain areas such as abortion.” 
Id. at 1292. The court then considered the claim that 
since litigation, unlike communication in a doctor’s 
office, is a traditional sphere of expression, Rust cannot 
control. The court noted that, even assuming litigation 
was a traditional sphere of expression, restrictions on 
those forms of expression are not per se unconsti- 
tutional; rather, such expression is subject to First 
Amendment vagueness and overbreadth doctrines. 
The court did not address the issues of overbreadth or 
vagueness since it determined that plaintiffs “have not 
alleged that the restrictions are vague or overbroad.” 
Id. 

The LASH II court then noted that the final program 
integrity requirements were more restrictive than the 
Rust regulations insofar as the affiliate of LSC recipi- 
ents had to be separately incorporated. This difference, 
the court determined, was insubstantial in light of the 
approbation given to such a requirement by the 
Supreme Court in Regan v. Taxation with Representa- 
tion, 461 U.S. 540, 544 n. 6, 103 S. Ct. 1997, 2000 n. 6, 76 
L.Ed.2d 129 (1983) (noting that such a requirement is 
not “unduly burdensome”). The court thus concluded 
that “[t]he requirement of separate incorporation does 
not in any significant way add to Plaintiffs’ burdens.” 
981 F. Supp. at 1296. 

Finally, the LASH II court dismissed plaintiffs’ due 
process and equal protection arguments. The due 
process claims were rejected primarily on the ground 
that, as dictated by Rust, “Congress’ refusal to fund the 
restricted activities here leaves the indigent clients 

81a 

with the same choices they would have had absent the 
creation of the LSC.” Id. at 1298. The court therefore 
concluded that “the regulations cannot be deemed to 
‘impermissibly burden’ whatever Due Process rights 
the client may have.” Id. The court also emphasized 
that the “ample alternative channels” provided by the 
regulations significantly diminished the impact of the 
restrictions on indigent clients. Id. at 1300. Turning to 
the equal protection claims, the LASH II court rejected 
these contentions for two reasons. First, since poverty 
is not a suspect classification, any discrimination 
against the poor need only have a rational basis to 
survive an equal protection challenge. The court had no 
trouble finding that the regulations passed the rational 
basis level of scrutiny. Id. And second, the court 
dispelled the notion that the equal protection clause 
was violated because of “discriminatory distribution of 
fundamental rights,” noting the “long line of cases 
holding that the government need not fund the exercise 
of a fundamental right.” Id. (citing Harris v. McRae, 
448 U.S. 297, 315, 100 S.Ct. 2671, 2687, 65 L.Ed.2d 784 
(1980)). 

ISSUES CURRENTLY BEFORE THE COURT 

Although there have been no submissions by the 
parties addressing LASH II, based upon prior sub- 
missions to the Court plaintiffs presumably would not 
concur in LASH II’s approbation of the final regu- 
lations, except in respect to the separate incorporation 
requirement, which they do not contest. Plaintiffs’ 
contentions embrace the arguments made by the 
plaintiffs in LASH II, but are in a number of respects 
more expansive. As best the Court can glean from the 
memoranda of law, oral argument, and a number of 

82a 

post-Hearing letters submitted both before and after 
the adoption of the final regulations, the following 
issues are fairly presented to the Court in the context 
of plaintiffs’ preliminary injunction application: (1) can 
the LSC lawfully adopt regulations to guard against the 
appearance that the Government endorses the pro- 
hibited activities; (2) if so, are the regulations enacted 
by the LSC, specifically the “separate personnel” and 
“degree of separate facilities” program integrity re- 
quirements, properly drawn to address that interest 
considering the differences, such as they are, between 
the Title X proscriptions in Rust and the impact in this 
case on the legal profession and the attorney-client 
relationship; and (3) do any of the restrictions or regu- 
lations violate the Due Process or Equal Protection 
clause of the Fifth Amendment? 

DISCUSSION 

I. Preliminary Injunction Standard 

Generally, in order to obtain preliminary injunctive 
relief, a plaintiff must show “a threat of irreparable 
injury and either (1) a probability of success on the 
merits or (2) sufficiently serious questions going to the 
merits of the claims to make them a fair ground of 
litigation, and a balance of hardships tipping decidedly 
in favor of the moving party.” Time Warner Cable v. 
Bloomberg L.P., 118 F.3d 917, 923 (2d Cir. 1997). How- 
ever, when a plaintiff seeks to enjoin “ ‘governmental 
action taken in the public interest pursuant to a statu- 
tory or regulatory scheme,’ ” plaintiffs must meet the 
stricter “probability of success” standard. Id. (quoting 
Plaza Health Lab., Inc. v. Perales, 878 F.2d 577, 580 (2d 

83a 

Cir. 1989)); see also Jolly v. Coughlin, 76 F.3d 468, 473 
(2d Cir. 1996) (When seeking to enjoin such govern- 
mental action, plaintiffs “cannot resort to the ‘fair 
ground for litigation’ standard.”). Plaintiffs recognize 
that, since they seek to enjoin the LSC’s enforcement of 
regulations issued pursuant to a statutory scheme, they 
must demonstrate a probability of success on the 
merits. Memorandum of Law in Support of Motion For 
Preliminary Injunction at 6. 

Since the parties all appropriately agree that the 
final regulations implicate plaintiffs’ First Amendment 
rights, the key inquiry is whether they go so far as to 
actually violate those rights. The Court recognizes 
that, if plaintiffs’ First Amendment rights are violated, 
then they almost certainly have established irreparable 
harm. See Elrod v. Burns, 427 U.S. 347, 373, 96 S. Ct. 
2673, 2689, 49 L.Ed.2d 547 (1976) (“The loss of First 
Amendment freedoms, for even minimal periods of 
time, unquestionably constitute irreparable injury.”). 

II. Permissibility of the Final Regulations 

All parties agree that as a consequence of enactment 
of the subject regulations after the commencement of 
plaintiffs’ lawsuit challenging the constitutionality of 
the Act, the focus of this litigation has essentially 
shifted. Indeed, plaintiffs acknowledge that the Court’s 
principal inquiry is to now determine whether the 
regulations constitutionally “provide a meaningful op- 
portunity for LSC recipients to engage in restricted 
activities using non-LSC funds.” Plaintiffs’ Reply 
Memorandum at 2. However, before turning to the 
constitutionality of the Act as implemented by the final 
regulations, the Court must determine the threshold 

84a 

issue of whether those regulations constitute a permis- 
sible construction of the Act by the LSC. See Rust, 500 
U.S. at 183-87, 111 S. Ct. at 1766-68. This requires an 
analysis of whether the final regulations are consistent 
with the Act’s language and congressional intent. Id. 

Plaintiffs contend that the program integrity require- 
ments are not a permissible construction of the Act 
because they require more than “maintain [ing] ac- 
curate time and expense records distinguishing re- 
stricted from unrestricted activities . . . so that LSC 
could verify that federal funds were not spent on 
restricted activities.” Plaintiffs’ Supplemental Memo- 
randum of Law at 6. From the plaintiffs’ perspective, 
the only permissible regulation the LSC can implement 
to ensure separation between the recipient and affiliate 
is the imposition of such “bookkeeping” requirements. 

The Court’s permissibility analysis is guided by the 
broad-based principle of administrative law that when 
reviewing an agency’s construction of a statute which 
does not “directly [speak] to the precise question at 
issue,” the court must bear in mind that “considerable 
weight should be accorded to an executive depart- 
ment’s construction of a statutory scheme it is en- 
trusted to administer.” Chevron v. Natural Resources 
Defense Council, Inc., 467 U.S. 837, 842-44, 104 S. Ct. 
2778, 2781-82, 81 L.Ed.2d 694 (1984). Moreover, “[i]n 
determining whether a construction is permissible, 
‘[t]he court need not conclude that the agency con- 
struction was the only one it permissibly could have 
adopted . . . or even the reading the court would have 
reached if the question initially had arisen in a judicial 
proceeding.’ ” Rust, 500 U.S. at 184, 111 S. Ct. at 1767 
(quoting Chevron, 467 U.S. at 843 n. 11, 104 S. Ct. at 

85a 

2781 n. 11). Furthermore, the Court notes that the 
United States Court of Appeals for the District of 
Columbia Circuit has held that LSC regulations are 
entitled to full Chevron deference. See Texas Rural 
Legal Aid, Inc. v. Legal Servs. Corp., 940 F.2d 685, 689- 
90 (D.C. Cir. 1991) (“We conclude that the basic prin- 
ciples of Chevron apply to the statutory scheme created 
by the Act and the role contemplated for LSC under 
it.”). 

Chevron’s canon of deference to agency interpreta- 
tions is applicable to this case because nothing in the 
Act speaks to the precise question of how, or even 
whether, program integrity requirements can be main- 
tained. See Rust, 500 U.S. at 184, 111 S. Ct. at 1767 (the 
statute “does not speak directly to the issue[] of . . . 
program integrity”). The Act gives no indication as to 
the steps a recipient must take to separate its LSC- 
authorized activity from its engagement in prohibited 
activity funded by non-LSC sources. The Court there- 
fore turns to the question of whether the LSC’s inter- 
pretation of the Act is consistent with the Act’s lan- 
guage and underlying intent. 

The Court rejects plaintiffs’ proposed construction of 
the Act because it would undermine the Act’s attempt 
to achieve a significant measure of separation between 
recipients and the prohibited activities. The Govern- 
ment interest underlying the Act is broader than just 
preventing the subsidization of prohibited activities 
with federal funds—indeed, if that were the case, there 
would be no need to restrict the use of non-LSC funds 
at all. Rather, the Act reveals an additional interest— 
preventing the appearance of Government endorse- 
ment of the prohibited activities. 

86a 

Congress’ intent to prevent the appearance of 
endorsement through passage of the Act is supported 
by two facts. First, the difference between the wording 
of the Act and its predecessors reflects Congress’ intent 
to move beyond recipients’ prior practice of using 
nothing more than accounting procedures to document 
compliance with the statutory proscriptions on using 
federal funds for prohibited activities. Specifically, the 
pre-Act statutory language focused on the subsidization 
interest by providing that “[n]o funds made available 
by [LSC] may be used” for any of the prohibited 
activities, 42 U.S.C. § 2996f(b), whereas the Act states 
that “[n]one of the funds appropriated [by the LSC] 
may be used to provide financial assistance to any [re- 
cipient]” that engages in any of the prohibited activi- 
ties. Act § 504(a). This broader language evinces an 
intent to distance recipients of any LSC funds from all 
of the prohibited activities rather than merely tracing 
the path of federal funds. 

The second indication of this intent is contained in the 
Senate Report which accompanied the Act when it was 
reported out of the Committee on Labor and Human 
Resources: 

[The Act] also bans LSC attorneys from using 
nonfederal funds for any purpose prohibited by the 
LSC Act, as amended. There are two important 
justifications for this restriction. First, many legal 
services grantees currently receive funds from both 
public and private sources. Since the money is 
basically fungible, it would be difficult if not im- 
possible to place restrictions only on the Federal 
funds. Second, the public cannot differentiate be- 

87a 

tween LSC advocacy subsidized with public versus 
private funds. As a result, the public grows weary 
of watching LSC attorneys lobby legislators—even 
if that dismay might sometimes be misplaced. 

S. Rep. No. 104-392, at 6 (1996). That the LSC shares 
this view of the Government interests at stake is 
confirmed by the preamble to the interim regulations: 

[The program integrity requirements] are necessary 
to ensure that there is no identification of the re- 
cipient with restricted activities and that the 
[affiliate] is not a sham or paper organization and is 
not so closely identified with the recipient that there 
might be confusion or misunderstanding about the 
recipient’s involvement with or endorsement of 
prohibited activities. 

62 Fed. Reg. 12101, 12102. Under the plaintiffs’ inter- 
pretation, the Act would have no practical impact on 
the day-to-day operations of recipient organizations. 
Recipient organizations could simply continue to use 
non-LSC funds for prohibited activities, label such as 
the actions of their “affiliate,” and keep accounting re- 
cords to document this nominal separation. Surely 
Congress did not intend such a meaningless change in 
the law. 

Applying Chevron deference to the LSC’s inter- 
pretation of the Act, the Court concludes that the final 
regulations are consistent with the Act’s language and 
intent, and therefore constitute a permissible construc- 
tion of the Act. The Court rejects plaintiffs’ counter- 
interpretation as contrary to congressional intent to 
achieve both a monetary and clearly identifiable 
separation between recipients and affiliates. 

88a 

It is also apparent that Congress may always law- 
fully decide to disassociate itself from the appearance of 
endorsement of activities it chooses not to subsidize. 
Thus, in League of Women Voters, the Supreme Court 
noted that “the Government certainly has a substantial 
interest in ensuring that the audiences of noncom- 
mercial stations will not be led to think that the 
broadcaster’s editorials reflect the official view of the 
government.” 468 U.S. at 395, 104 S. Ct. at 3125. 
Similarly, the Court in Rust implicitly gave its appro- 
bation to the Government’s contention that program 
integrity requirements “are necessary to assure that 
Title X grantees . . . avoid creating the appearance 
that the Government is supporting abortion-related 
activities.” 500 U.S. at 188, 111 S. Ct. at 1769. 

III. Constitutionality of the Act as Implemented by 
the Final Regulations 

Plaintiffs contend that the program integrity require- 
ments are not appropriately tailored to the Govern- 
ment’s interest in avoiding the appearance of endorse- 
ment. They argue, specifically, that the insularity 
requirements—separate personnel and degree of 
separate facilities—while embraced by the Court in 
Rust, have no warrant in the context of the lawyer- 
client relationships and the nature of the prohibited 
activities in this case. They distinguish Rust as follows: 

The Title X regulations applied to a doctor counsel- 
ing a patient alone in the doctor’s office and the 
prohibition to be effectuated by those regulations 
was preventing the doctor from counseling abortion, 
when funded by the Government. In that context, 
considerations of separate personnel and separation 

89a 

of facilities, and signs and other forms of identifi- 
cation were relevant to making sure that the patient 
understood that when she was receiving abortion 
counseling at the same family planning clinic, it was 
not supported by federal funds. 

Letter to the Court from Peter M. Fishbein, dated June 
5, 1997. 

By contrast, plaintiffs contend that the restricted 
activities here at issue “are actions to be taken outside 
the office,” namely “in courts, administrative agencies 
or legislative bodies,” and that the appearance that 
these activities are being carried out with LSC funds 
can be obviated “simply by requiring that the papers 
filed or the advocate making the presentation clearly 
identify that the activity is being carried out by the 
entity that is not funded by LSC.” Id. 

In addition, plaintiffs attack the final regulations as 
“vague and unworkable” because “arrangements will be 
assessed ‘on a case-by-case basis’ and determinations 
‘will be based on the totality of the facts.’ ” Letter to 
the Court from E. Joshua Rosenkranz, dated May 27, 
1997. Accordingly, plaintiffs conclude that the “LSC 
has created a standardless world in which the only 
rational judgment a Legal Services program could pos- 
sibly make is not to enter into an affiliate relationship 
or, once it did, not tinker with it.” They contend that 
the “LSC can easily draft regulations that provide more 
guidance to recipients of LSC funds.” Id. 

Plaintiffs’ arguments cannot carry the day for a 
number of reasons. Initially, when dealing with an 
interest that is viewpoint neutral and not aimed at 

90a 

suppressing vital, fundamental constitutional rights, 
the Government need only show “a ‘fit’ between the 
legislature’s ends and the means chosen to accomplish 
these ends . . . that employs not necessarily the least 
restrictive means but . . . a means narrowly tailored 
to achieve the desired objective.” Florida Bar v. Went 
For It, Inc., 515 U.S. 618, 632, 115 S. Ct. 2371, 2379, 132 
L.Ed.2d 541 (1995) (quoting Board of Trustees v. Fox, 
492 U.S. 469, 480, 109 S. Ct. 3028, 3034, 106 L.Ed.2d 388 
(1989)); see also Rust, 500 U.S. at 195 n. 4, 111 S. Ct. at 
1773 n. 4; City Council of City of Los Angeles v. Tax- 
payers for Vincent, 466 U.S. 789, 804-05, 104 S. Ct. 2118, 
2128-29, 80 L.Ed.2d 772 (1984); United States v. 
O’Brien, 391 U.S. 367, 377, 88 S. Ct. 1673, 1678, 20 
L.Ed.2d 672 (1968). This would appear to be the proper 
standard to apply when evaluating whether regulations 
are properly drawn to protect the Government’s inter- 
est in avoiding the perception of endorsement of 
programs which it does not subsidize. 

Moreover, in order to sustain their facial challenge to 
the final regulations’ program integrity requirements, 
plaintiffs “must demonstrate that the challenged law 
either ‘could never be applied in a valid manner’ or that 
even though it may be validly applied to the plaintiff 
and others, it nevertheless is so broad that it ‘may 
inhibit the constitutionally protected speech of third 
parties.’ ” 

New York State Club Ass’n, Inc. v. City of 
New York, 487 U.S. 1, 11, 108 S. Ct. 2225, 2232, 101 
L.Ed.2d 1 (1988) (quoting Taxpayers for Vincent, 466 
U.S. at 798, 104 S. Ct. at 2124); see also Sanitation and 
Recycling Indus., Inc. v. City of New York, 107 F.3d 
985, 992 (2d Cir. 1997); Rust, 500 U.S. at 183, 111 S. Ct. 
at 1766 (“A facial challenge . . . is, of course, the most 
difficult challenge to mount successfully, since the 

91a 

challenger must establish that no set of circumstances 
exists under which the Act would be valid. The fact 
that [the regulations] might operate unconstitutionally 
under some conceivable set of circumstances is insuffi- 
cient to render [them] wholly invalid.”) (quoting United 
States v. Salerno, 481 U.S. 739, 745, 107 S. Ct. 2095, 
2100, 95 L.Ed.2d 697 (1987)). 

The Court does not find persuasive plaintiffs’ con- 
tention that the “separate personnel” and “degree of 
separate facilities” requirements, each of which are 
limited to the office environment, are irrelevant to the 
Government’s asserted interest in preventing the ap- 
pearance of endorsement because the prohibited 
activities all take place in a courtroom or other forum 
outside of recipients’ offices and that, in any event, a 
mere disclaimer would be sufficient. Contrary to 
plaintiffs’ assertion, many integral aspects of engaging 
in prohibited activities take place in the recipients’ 
office, such as: taking depositions, drafting pleadings, 
and preparing witnesses for trial. It simply cannot be 
said that potential clients, opposing attorneys, and 
other visitors to the recipient’s office would not be 
exposed and vulnerable to the perception, absent 
separate personnel and facilities, that the Government 
supports the prohibited activities. Furthermore, the 
suggestion by plaintiffs that a mere disclaimer on 
documents submitted to courts and legislatures is suffi- 
cient to prevent the appearance of endorsement does 
not square with reality. Although judges and law 
clerks, as well as legislators and their aides, might 
notice the disclaimer, it is unlikely that the media would 
report the disclaimer to the public. Moreover, even if 
the disclaimer was announced at the commencement of 
or intermittently during a judicial or legislative pro- 

92a 

ceeding, there is simply no reasonable assurance that 
members of the public attending various stages of the 
proceeding would be privy to the announcement. 

Plaintiffs’ contention that the regulations which di- 
rect the LSC to make determinations of program inte- 
grity on a case-by-case basis and not to place deter- 
minative weight on any one factor render them “vague 
and unworkable” fails as well, especially in light of 
Rust. Indeed, this contention runs directly contrary to 
the argument plaintiffs made in their reply memo- 
randum, which criticized the interim regulations for 
imposing a rigid “per se test” rather than adopting from 
Rust a flexible test where no one factor would be 
determinative. Plaintiffs’ Reply Memorandum at 10. 
Now that the LSC has revised its regulations to incor- 
porate the same degree of flexibility as the Rust 
regulations, plaintiffs protest that the regulations are 
unworkable. Plaintiffs’ abrupt about-face undermines 
the integrity of their reconstituted position. In any 
event, the Rust Court specifically noted, and gave its 
implicit approval to, the fact that the program integrity 
factors were “nonexclusive” and were to be applied 
through “case-by-case” determinations. 500 U.S. at 
181, 111 S. Ct. at 1766. Nor are the program integrity 
requirements “void for vagueness.” The separation 
factors give fair warning to recipients of the standards 
by which their program integrity compliance certifi- 
cations will be evaluated. See Grayned v. City of 
Rockford, 408 U.S. 104, 108, 92 S. Ct. 2294, 2298, 33 
L.Ed.2d 222 (1972); cf. Finley v. National Endowment 
for the Arts, 100 F.3d 671, 681 (9th Cir. 1996) (striking 
down as unconstitutionally vague funding criteria re- 
quiring that art works show “decency and respect for 
the diverse beliefs and values of the American public”), 

93a 

cert. granted,—- U.S. ——, 118 S. Ct. 554, 139 L.Ed.2d 
396 (1997). They are “sufficiently clear that the 
speculative danger of arbitrary enforcement does not 
render [them] void for vagueness.” Village of Hoffman 
Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 
489, 503, 102 S. Ct. 1186, 1195, 71 L.Ed.2d 362 (1982). 

In respect to the recipients’ program integrity com- 
pliance certifications, 45 C.F.R. § 1610.8(b), the LSC 
presumably will attach significant credence and pre- 
sumptive validity to such certifications by recipient 
organizations, which are in the main staffed and/or 
supervised by members of the bar. This will un- 
doubtedly minimize the prospects of “as applied” liti- 
gation challenges. The Court therefore determines that 
the “case-by-case basis” and “no one factor is deter- 
minative” language, in conjunction with the separation 
factors, are appropriately tailored to advance the Gov- 
ernment’s interest in preventing the appearance of 
endorsement, and accordingly do not render the regu- 
lations facially invalid. 

Nor, in a similar vein, can the regulations be con- 
sidered unconstitutionally overbroad. The Second 
Circuit has recently emphasized that overbreadth chal- 
lenges are to be accepted “sparingly and only as a last 
resort,” Sanitation and Recycling Indus., Inc., 107 
F.3d at 997 (quoting Broadrick v. Oklahoma, 413 U.S. 
601, 613, 93 S. Ct. 2908, 2916, 37 L.Ed.2d 830 (1973)), 
and that such a challenge “may prevail only if plaintiffs 
can show that an impermissible risk is created that 
ideas may be chilled whenever” the law is applied. 107 
F.3d at 997. Further, “invalidation of a statute on its 
face is permitted ‘only if the overbreadth is sub- 
stantial.’ ” Lebron v. National R.R. Passenger Corp., 69 

94a 

F.3d 650, 660 (2d Cir. 1995) (quoting Board of Airport 
Comm’rs v. Jews for Jesus, Inc., 482 U.S. 569, 574, 107 
S. Ct. 2568, 2571, 96 L.Ed.2d 500 (1987)); see also Dor- 
man v. Satti, 862 F.2d 432, 436 (2d Cir. 1988) (“An act’s 
overbreadth ‘must not only be real, but substantial as 
well, judged in relation to the statute’s plainly legiti- 
mate sweep.’ ”) (quoting Broadrick, 413 U.S. at 615, 93 
S. Ct. at 2917). This Court has not hesitated to invoke 
the overbreadth doctrine in the face of a facial consti- 
tutional challenge whenever a challenged regulation 
“does not aim specifically at evils within the allowable 
area of [government] control, but . . . sweeps within 
its ambit other activities that constitute an exercise” of 
protected constitutional rights. See Scott v. Goodman, 
961 F. Supp. 424, 427 (E.D.N.Y. 1997) (quoting Thorn- 
hill v. Alabama, 310 U.S. 88, 97, 60 S. Ct. 736, 741, 84 
L.Ed. 1093 (1940)). Such, however, is plainly not the 
present case since neither the Act nor the regulations 
can plausibly be perceived as having such a preclusive 
effect upon the exercise of the plaintiffs’ or third 
parties’ First Amendment rights. 

Having determined that the program integrity 
requirements are appropriately tailored to advance the 
Government’s legitimate interest in preventing the ap- 
pearance of endorsement and that they are not over- 
broad, the Court now turns its attention to plaintiffs’ 
overarching argument that “the affiliate rules in Rust 
do not provide the benchmark where, as here, the 
restrictions strike at the heart of activities that are 
laden with First Amendment value.” Letter to the 
Court from E. Joshua Rosenkranz, dated May 27, 1997 
(quoting Plaintiffs’ Reply Memorandum at 2). 

95a 

There is no quarrel amongst the parties, nor could 
there be, that when the Government imposes upon the 
time-honored functions of the lawyer and, in particular, 
the lawyer-client relationship, it treads deeply in 
waters bound up in First Amendment sensibilities. As 
the Court in LASH I correctly assessed, the restric- 
tions embodied by the Act impact, under the umbrella 
of the First Amendment, a broad range of rights 
affecting the pursuit and vindication of legal interests, 
including the right to lobby legislators and admini- 
strators, access to the courts, and even the confidential 
nature of the relationship between lawyers and pro- 
spective clients. LASH I, 961 F. Supp. at 1408-09. 
Because of the spate of new restrictions which Con- 
gress has now added to its prior restrictions upon LSC 
recipients, and the broad range of First Amendment 
rights arguably impacted by these restrictions, 
plaintiffs contend that Rust is not an appropriate ana- 
logue since the limited and narrowly drawn abortion 
counseling constraints did not significantly, if at all, 
impinge on the doctor-patient relationship. By con- 
trast, plaintiffs assert that the profundity of the 
lawyering restrictions here at issue do indeed affect the 
fundamental nature of lawyering and the attorney- 
client relationship. 

The Court in Rust recognized that there are certain 
traditional spheres of free expression “so fundamental 
to the functioning of our society” that the Government’s 
ability to restrict basic First Amendment rights within 
that sphere by attaching conditions to the expenditure 
of Government funds “is restricted by the vagueness 
and overbreadth doctrines of the First Amendment,” 
meaning in that context that the restriction, if justified 
at all, must be especially precise. Rust, 500 U.S. at 200, 

96a 

111 S. Ct. at 1776 (citing Keyishian v. Board of Regents, 
State Univ. of N.Y., 385 U.S. 589, 603, 605-06, 87 S. Ct. 
675, 683, 684-85, 17 L.Ed.2d 629 (1967)) (“We emphasize 
once again that ‘(p)recision of regulation must be the 
touchstone in an area so closely touching our most 
precious freedoms,’ ” 385 U.S. at 603, 87 S. Ct. at 683, 
quoting N.A.A.C.P. v. Button, 371 U.S. 415, 438, 83 
S. Ct. 328, 340, 9 L.Ed.2d 405 (1963)). The Rust Court 
surmised by analogy that it could be argued “that 
traditional relationships such as that between doctor 
and patient should enjoy [special] protection under the 
First Amendment from Government regulation, even 
when subsidized by the Government.” Id. The lawyer- 
client relationship obviously is at least on equal First 
Amendment footing with the doctor-patient relation- 
ship, and given the panoply of the constitutional rights 
of association and speech adhering to the attorney- 
client relationship, one could conceivably argue that the 
First Amendment is even more caught up in the lawyer 
-client relationship than the doctor-patient relationship. 

The Court in Rust, however, did not deem it neces- 
sary to explore the nature of the doctor-patient re- 
lationship since it was of the opinion that the Title X 
program regulations did not “significantly impinge” 
upon that relationship because “[n]othing in them re- 
quires a doctor to represent as his own any opinion that 
he does not in fact hold.” Id. In that respect, the Court 
attached significance to the fact that the regulations did 
not preclude the doctor from advising the patient that 
“advice regarding abortion is simply beyond the scope 
of the program.” It concluded, therefore, that “[i]n 
these circumstances, the general rule that the Govern- 
ment may choose not to subsidize speech applies with 
full force.” Id. 

97a 

While the Court obviously has reverence for the 
majesty of the law, the restrictions pertaining to LSC 
recipients do not significantly impinge on the lawyer- 
client relationship, especially when contrasted with 
Title X’s proactive aspects. Indeed, they simply pro- 
scribe the activities in which LSC recipients may en- 
gage. 

15 Moreover, the extent of the activities which 
LSC recipients are prohibited from engaging in cannot 
enter into the constitutional mix since it is bedrock law 
that Congress need not fund the exercise of consti- 
tutional rights, regardless of their magnitude. See 
Lyng v. International Union, United Auto., Aerospace 
and Agric. Implement Workers, 485 U.S. 360, 368, 108 
S. Ct. 1184, 1190, 99 L.Ed.2d 380 (1988) (“We have held 
in several contexts [including the First Amendment] 
that a legislature’s decision not to subsidize the 
exercise of a fundamental right does not infringe the 
right.”) (quoting Regan v. Taxation with Representa- 
tion, 461 U.S. 540, 549, 103 S. Ct. 1997, 2002, 76 L.Ed.2d 
129 (1983)). It matters not, therefore, whether one or 
more activities are proscribed since the numerosity of 

15 For this reason, the Court also rejects plaintiffs’ contention 
that Rust is distinguishable because here recipients are not acting 
as Government “mouthpieces.” Tr. at 46-47. As the Supreme 
Court recently clarified in Rosenberger v. Rector and Visitors of 
the Univ. of Virginia, 515 U.S. 819, 829-30, 115 S. Ct. 2510, 2516-17, 
132 L.Ed.2d 700 (1995), the “government as speaker” analysis is 
only implicated when the Government engages in viewpoint, 
rather than content, discrimination. Congress can constitutionally 
define the scope of its funding programs by excluding subject 
matter regardless of whether it is attempting to convey a parti- 
cular message. Cf. Rosenberger, 515 U.S. at 831, 115 S. Ct. at 2517 
(“By the very terms of the [regulation], the [government] does not 
exclude religion as a subject matter but selects for disfavored 
treatment those student journalistic efforts with religious editorial 
viewpoints.”). 

98a 

prohibited activities is not correlated to constitutional 
concerns. Furthermore, in contrast to the limited 
nature of doctor-patient counseling provided for in 
Rust, the regulations, as interpreted by LSC’s counsel, 
broadly promote the lawyer-client relationship by 
providing that the lawyer may counsel the client, refer 
the client to another attorney, and explain to the client 
that LSC restrictions preclude the lawyer from en- 
gaging in the activity the client may wish to undertake. 
The Court will take the LSC at its word and will take a 
critical view, as other courts should as well, of any 
restrictions on such basic lawyering, in addition to any 
unreasonable rejections of recipients’ certificates of 
compliance with the program integrity requirements, if 
such issues should arise in any future “as applied” 
litigation. 

In respect to plaintiffs’ rather casual due process and 
equal protection claims, their due process argument 
fails for the same reasons the analogous claim failed in 
Rust—namely, because plaintiffs are not absolutely 
precluded from engaging in prohibited activities and, 
furthermore, have no constitutional entitlement to the 
benefits provided by the legal services program. 500 
U.S. at 201-02, 111 S. Ct. at 1776-77. The Court rejects 
plaintiffs’ equal protection argument since, as explained 
throughout this decision, the Government had a ra- 
tional basis for restricting the activities of recipients, 
and because poverty is not a suspect classification. See 
LASH II, 981 F. Supp. at 1300; see also Maher v. Roe, 
432 U.S. 464, 471, 97 S. Ct. 2376, 2380, 53 L.Ed.2d 484 
(1977) (“this Court has never held that financial need 
alone identifies a suspect class for purposes of equal 
protection” analysis). 

99a 

CONCLUDING COMMENTS 

This is not the same case that first came to the Court. 
It was entirely plausible for plaintiffs to initially 
challenge the constitutionality of the laundry list of 
prohibited activities wrought by the Act. Regardless of 
whether the Court would have agreed with all or any 
part of its sister court’s constitutional conclusions in 
LASH I, this litigation, as plaintiffs have acknowledged, 
took on vastly different contours once the LSC re- 
sponded to the compelling concerns raised in LASH I 
by enacting the interim regulations, and further re- 
sponded in its final regulations to the plaintiffs’ con- 
cerns regarding the interim regulations and to the 
Court’s entreaties during the course of the litigation. 
In many ways, the litigation stands as a testament to 
the continued vibrancy and vitality of the very First 
Amendment rights at the heart of this lawsuit—access 
to the courts, free and open public debate, and freedom 
to associate for the vindication of legal rights. It also 
reflects the value of advocacy in the judicial setting by 
protagonists acting at the highest level of the legal 
profession. In that regard, plaintiffs are commended 
for bringing and furthering this litigation; defendants 
are commended for appropriately addressing plaintiffs’ 
concerns. 

CONCLUSION 

Plaintiffs have failed to establish a probability of 
success on the merits of their facial constitutional 
challenge, and their preliminary injunction motion is 
therefore denied. 

100a 

APPENDIX C 

UNITED STATES COURT OF APPEALS 
FOR THE SECOND CIRCUIT 

No. 96-6006 

CARMEN VELAZQUEZ, ET AL, PLAINTIFFS-APPELLANTS 

v. 

LEGAL SERVICES CORPORATION, 
DEFENDANT-APPELLEE 

UNITED STATES OF AMERICA, INTERVENOR-APPELLEE 

Filed: July 8, 1999 

A petition for panel rehearing and a petition for 
rehearing en banc having been filed herein by the 
appellees Legal Services Corporation, Intervenor- 
Appellee United States of America and the appellants 
Carmen Velazquez et al. 

Upon consideration by the panel that decided the 
appeal, it is ordered that said petition for rehearing is 
DENIED. 

It is further noted that a request for an en banc vote 
having been made by a judge of the panel that heard 
the appeal, and a poll of the judges in regular active 
service having been taken and there being no majority 
in favor thereof, rehearing in banc is DENIED. 

101a 

FOR THE COURT: 
KAREN GREVE MILTON, Acting Clerk 

By: RALPH A. ANDERSON 

RALPH A. ANDERSON, Deputy Clerk 
Acting Operations Manager