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January 19, 1981

Alan CAMPBELL, Director, United States Office of Personnel Management, Defendant; PUERTO RICAN LEGAL DEFENSE AND EDUCATION FUND, INC., Plaintiff, v. Alan CAMPBELL, Defendant

The opinion of the court was delivered by: GESELL


Plaintiffs in these consolidated cases are charitable organizations that have been denied participation in the Combined Federal Campaign ("CFC"), an annual charitable fund-raising drive conducted by the United States Government among its employees. They contend their exclusion was arbitrary and in violation of their First Amendment rights. The facts are not in dispute and the issues are before the Court on cross-motions for summary judgment. Because of a need to resolve the matter prior to the commencement of the next CFC drive, *fn1" the case was briefed and argued on an expedited schedule and is now ripe for decision.

 The Campaign was established pursuant to Executive Order 10927, issued on March 18, 1961, by President Kennedy. That Order delegated authority to the Chairman of the Civil Service Commission to

make arrangements for such national voluntary health and welfare agencies and such other national voluntary agencies as may be appropriate to solicit funds from Federal employees and members of the armed forces at their places of employment or duty stations.

 Executive Order 10927, § 2(a). Procedures and requirements for the Campaign are set forth in the Manual on Fund-Raising Within the Federal Service for Voluntary Health and Welfare Agencies.

 Organizations participate in the CFC on either the national or local level. Eligibility is determined by officials of the Office of Personnel Management, successor to the Civil Service Commission, in accordance with the standards set forth in the Manual. The Campaign is conducted each fall. Contributing individuals may designate either that their donation is to go into a general fund, distributed by a formula among all the qualifying agencies, or that the donation is to go to specific agencies selected by the individual.

 Each of the plaintiff organizations is a civil rights group approved by the Internal Revenue Service as a nonprofit, tax-exempt charitable organization. The primary activity of each group is to support selected litigation designed to benefit large numbers of people in such areas as housing, education, employment, and social services. They each operate on a nationwide basis, supported by voluntary contributions of time and money, and it is unquestioned that each is a responsible organization.

 Both plaintiffs filed timely applications for inclusion in the current CFC drive *fn2" and fully pursued all administrative remedies. Each was denied inclusion, based on a failure to satisfy the criteria set forth in Section 5.21 of the Manual. That section states that

only nonprofit, tax-exempt charitable organizations, supported by voluntary contributions from the general public and providing direct services to persons in the fields of health and welfare services are eligible for approval.

 In each case, defendant contended that the plaintiffs, while otherwise qualified, do not provide "direct services," but rather serve as advocates for groups. Thus defendant stated in its letters to each plaintiff, rejecting their applications, that "Groups which provide direct services, in the area of legal assistance, are those, such as Public Defender or Legal Aid Societies, whose purpose is to represent individuals who are unable to meet the cost of retaining a private attorney, without regard to how that individual's case can influence public policy."

 Plaintiffs advance three theories on which they assert they should be granted relief. First, plaintiffs argue that the "direct services" criterion abridges their First Amendment right to engage in charitable solicitation. Second, they contend that the decision to reject their applications was arbitrary and capricious and an abuse of discretion under the Administrative Procedure Act. Third, plaintiffs assert they have been denied equal protection under the Fifth Amendment because their applications were rejected while the NAACP Special Contribution Fund, a similar but wholly separate organization, was permitted to participate in the CFC drive. Defendant urges this Court to reject each of these arguments.

 The Court must, of course, attempt to resolve this case on statutory grounds, under the APA, before going further and reaching the constitutional issues. But the lines between the two cannot be kept entirely separate. It is clear that whether this case is viewed strictly in constitutional terms, or merely as a challenge to agency action under the APA, there are fundamental First Amendment interests involved which necessarily influence the Court's determination.

 Charitable solicitation is a protected First Amendment activity, as the Supreme Court re-emphasized last Term in Village of Schaumburg v. Citizens for a Better Environment, 444 U.S. 620, 632, 100 S. Ct. 826, 834, 63 L. Ed. 2d 73 (1980). Although the mechanisms of the CFC drive do not allow for the sort of persuasive, informative activity that is often present in solicitations on street corners or door-to-door, see, e. g., Village of Schaumburg, supra; Hynes v. Mayor of Oradell, 425 U.S. 610, 96 S. Ct. 1755, 48 L. Ed. 2d 243 (1976), the participating organizations are afforded favorable publicity concerning their objectives and the money received may be used in some instances for activity that falls squarely within the First Amendment. Furthermore, by providing organizations the opportunity to participate in the CFC, the government has, in effect, provided a billboard or channel of communication through which organizations can disseminate their appeals to federal workers. This process has proven extremely effective in raising charitable contributions. It is clear that the government must meet First Amendment strictures in its regulations concerning access to this channel of communication, which is, in fact, the only channel by which organizations can appeal to government employees at their workplace. See National Black United Fund, Inc. v. Campbell, 494 F.Supp. 748, 755-56 (D.D.C.1980).

 The question, then, is whether the limitation set forth in section 5.21, requiring that to qualify a charitable organization must provide "direct services," meets First Amendment standards. If it does not, any agency action based on that requirement necessarily would be "not in accordance with law" and must ...

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