they assert that the LSC "had no obligation whatsoever to assemble an APA type rulemaking record." Transcript, Preliminary Injunction hearing of January 19, 1984 at 63.
While it is true that the Corporation's decisions do not have to meet the requirements of the APA per se, the LSC must, at a minimum, articulate a rational basis for its administrative decisions. Spokane City Legal Services v. Legal Services Corporation, 614 F.2d 662, 669 (9th Cir. 1980) (construing 42 U.S.C. § 2996d(e)(1)). Compare San Juan Legal Services, Inc. v. Legal Services Corporation, 655 F.2d 434, 439 (1st Cir. 1981) (court declined to decide appropriate standard of review in upholding LSC decision terminating funding of grantee). In some instances, an arbitrary and capricious standard of review has been applied to administrative action which is not subject to the APA. See Baltimore & Annapolis Railroad Co. v. Washington Metropolitan Area Transit Commission, 206 U.S. App. D.C. 397, 642 F.2d 1365, 1370 (D.C.Cir.1980) (court vacated arbitrary and capricious agency action).
Under either standard of review, the evidence in this case raises serious doubts that the promulgation of the Instruction was based on a reasoned decision by the Corporation.
First, the written record does not provide any support for the LSC decision to curtail the direct representation function. Gene Potack and Gregg Hartley, the two individuals chiefly responsible for the Instruction, have provided only vague, nonspecific references to the documents on which they rely for this decision. There is no indication that the cost of providing direct litigation services justifies their curtailment. At most, the declarations indicate that they reviewed a large amount of material in preparing the Instruction, which itself suggests that a comparative analysis of those documents was necessary. The declarations fail to suggest such an analysis, and provide no explanation for this abrupt change in the Corporation's policy. Even if these declarations are not post-hoc administrative rationalizations, see Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 91 S. Ct. 814, 28 L. Ed. 2d 136 (1971), they do not provide a reasoned basis for the LSC decision.
Second, the percentage restrictions contained in the Instruction are not supported by the survey which indicates that 28 percent of the legal services lawyers surveyed needed the assistance of co-counsel from outside the local office. 1977 survey at 47, Figure III-C. Indeed, the availability of co-counsel from the national support centers apparently explains the degree of additional need for these services. Id. Even if a minority of lawyers would require these services in the absence of national support center assistance, the written record and the declarations do not discuss the correlation between the need for direct litigation support and the relative cost of providing these services. If the provision of direct litigation support costs substantially more than the provision of library and research support, the limitations in the Instruction lack a rational explanation.
Third, even if some percentage restrictions are warranted under the defendants' interpretation of the studies and surveys, the record provides no support for the particular restrictions that were chosen.
When an agency establishes percentage restrictions in reliance on data or theory, these percentage restrictions must be correlated with the available evidence. Specific percentage restrictions which follow from data which could justify a variety of percentage restrictions are incompatible with reasoned decision making. San Antonio, Texas v. United States, 203 U.S. App. D.C. 249, 631 F.2d 831, 851-52 (D.C.Cir. 1980).
Fourth, the Instruction is irrational because the prohibition governing the use of LSC funds for branch offices is based solely on the staff's opinions about the overhead expenses of centers with less than $500,000 of LSC funding, Potack memorandum at 3; 48 Fed.Reg. 54305, but the prohibition extends to all of the national support centers. Presumably, a limitation which is based on certain minimum funding amounts should be limited to centers who receive less than this minimum amount.
In addition, the defendants' suggestion that the overhead expenses of branch offices are an inefficient use of resources is not supported by the record because the LSC had not received information about these overhead expenses when the Instruction was promulgated. Hartley Dec. at paras. 32, 35; Hartley Dep. at 185-189; Plaintiffs' Exhibit H-5, Document 4-48.
These omissions are particularly troubling because the Instruction enforces broad sweeping changes in past LSC policy. Where an agency reverses its prior practice, it is particularly important that it provide an adequate explanation for the change. Washington Metropolitan Area Transit Commission, 642 F.2d at 1370. The Corporation's failure to provide such an explanation is an additional reason to enjoin the Instruction pending final disposition of the case on its merits.
The second factor relevant to the issuance of a preliminary injunction is whether the plaintiffs can show that absent such relief they will suffer irreparable injury. Virginia Petroleum Jobbers Ass'n, 259 F.2d at 925. Before issuing an injunction, the Court must find that the plaintiffs have been harmed and determine that compensatory relief or money damages at a later date would not provide adequate compensation for these injuries.
The Instruction harms the plaintiffs by forcing them to cut back on current client responsibilities,
to decline new direct litigation commitments,
and to forego representing clients before legislative and administrative forums.
The declarations of field attorneys show that this assistance is essential to provide adequate representation of legal services clients,
and other declarations indicate that outside resources are insufficient to meet this need.
The national support centers will also suffer injury as the result of the prohibition of the use of LSC funds for branch offices. The unavailability of LSC funding would require the plaintiffs to cease all or most of their branch office activities within a few months time,
and funds from other sources are insufficient to alleviate this harm.
This is a very real harm in view of the need of local legal services offices for access to the expertise of these Washington offices.
Moreover, the harm suffered by the plaintiffs is irreparable because money damages cannot adequately compensate them for their immediate withdrawal from ongoing litigation or their inability to accept new litigation responsibilities.
At a minimum, the plaintiffs would have to make significant, possibly irreversible, changes in their litigation procedures and the operations of their offices in order to comply with the Instruction. The withdrawal of national support center attorneys from pending court actions would entail serious consequences even if the lawyers involved were to later rejoin these actions. Similarly, the problems presented by the closing of the Washington offices could not be solved by the provision of additional funds in the future. Under these circumstances, plaintiffs have met the threshold requirements of irreparable harm. A.O. Smith Corp. v. FTC, 530 F.2d 515, 527-28 (3rd Cir.1976) (allegations of significant change in company's operations and inability to pay debts relevant to irreparable injury).
Harm to Other Interested Persons or the Public
Under the third element of the Holiday Tours analysis, the court must examine the harm to the defendants and to other interested persons, as well as the public interest. This is required in order to determine whether the equities favor the issuance of a preliminary injunction. In this case, preliminary relief will require the defendants to maintain a course of conduct that they have pursued for many years, and will at most affect the expenditure of federal funds over a twelve-month period. The Corporation has never before restricted the use of LSC funds for direct litigation or branch offices, and therefore, an order maintaining the status quo will cause LSC little, if any, harm.
Moreover, a preliminary injunction is in the public interest because it carries out the intent of Congress that no significant changes should be made in LSC grants until a full Board of Directors is confirmed by the Senate. A preliminary injunction also enables legal services attorneys to meet their ongoing client responsibilities, and to provide additional services to "persons financially unable to afford legal assistance." 42 U.S.C. § 2996b(a). It is worthy of note that numerous voluntary bar associations and legal services offices have filed amicus briefs pointing to the public interest served by an injunction. Not a single legal services office has filed an objection to the requested preliminary relief.
In this case, the plaintiffs have demonstrated all the required elements for the issuance of an order maintaining the status quo. Based on the foregoing, the balance of equities favors the grant of a preliminary injunction pending final disposition of the case on its merits. An appropriate order consistent with this opinion will be entered.
ORDER OF PRELIMINARY INJUNCTION
This case came on to be heard on plaintiffs' motion for a preliminary injunction and defendants' opposition thereto. Upon consideration of the papers and arguments in support of and in opposition to the motion, the Court finds and concludes: (1) that there is a substantial likelihood that plaintiffs will succeed on the merits of their suit; (2) that defendants' actions, if not enjoined, will cause grievous and irreparable injury to plaintiffs and to the clients and field lawyers whom they serve; (3) that issuance of this preliminary injunction will cause no irreparable injury to defendants; and (4) that the public interest is best served by issuance of this preliminary injunction. Therefore,
IT IS HEREBY ORDERED that the effective date of the Instruction published at 48 Fed.Reg. 54305 (December 1, 1983), is stayed, pendente lite, until further order of the Court and that the Defendants, their agents and employees are enjoined, pendente lite, from enforcing directly or indirectly any limitation or restriction on funding provided by Legal Services Corporation to the national support centers stated therein.
IT IS FURTHER ORDERED THAT;
(1) the effective date of modifications 1, 2, 4 and 5 to the plaintiffs' 1983 contracts proposed in defendants' offers of contract extensions is hereby stayed, pendente lite, and the defendants, their agents and employees are enjoined from directly or indirectly enforcing said modifications until further order of the Court;
(2) the defendants are enjoined from enforcing any provision in the contract extension offers to plaintiffs which assert that contract modifications 1, 2, 4 and 5 can ever become effective with respect to the period covered by the previous restraining orders or by this preliminary injunction;
(3) the defendants are enjoined from holding plaintiffs accountable for purposes of LSC Instruction 83-9 for expenditures made during 1984 as the result of new client commitments undertaken during the period covered by the previous restraining orders or by this preliminary injunction.
Nothing in this Order shall be construed to prevent the Legal Services Corporation from requiring the national support centers to comply prospectively with Instruction 83-9 in the event that such Instruction is held to be valid in this action, from and after the date of any such order. Notwithstanding any other provision in this Order the Corporation shall have the right to deem Instruction 83-9 to have been in effect since January 1, 1984 for the sole purpose of determining the effective date of such Instruction for purposes of application of 45 C.F.R. § 1606.4, in the event that such Instruction is ultimately held to be valid in this action.