the services provided to its indigent clients and also praised the Center's support activities. In the several years prior to 1984 the Center has received annual commendations from the Corporation. Exs. 24, 25, 55, 54. This praise has been confirmed by numerous legal services organizations, judges, bar leaders, public officials and private attorneys. Ex. 66; Vol. 5, Admin. Record (Declarations and Letters at 1-334).
8. On September 19, 1983, the General Accounting Office ("GAO") issued a report to Senator Orrin Hatch, who had requested the GAO to conduct an investigation of LSC activities in order to determine whether there had been violations of the Legal Services Corporation Act. The GAO report was limited entirely to reviewing selected documents provided by Senator Hatch. The GAO also noted that it was requested by Senator Hatch to issue an interim report within a short time frame. Ex. 1-1.
9. The General Accounting Office report concluded, among other things, that although some of the activities of the Western Center undertaken in 1980 exceeded the limits of permissible activity under the Act, the Corporation could not recoup these funds because it had encouraged the Western Center to undertake the activities. The GAO also concluded that the Corporation should issue clearer regulations to prevent future improper expenditures of federal funds. Ex. 1-1.
10. In October of 1983, the Center applied to the Corporation for renewal of its 1983 state support grant, equaling $860,000. Under the funding formula specified in Pub.L. 98-166, covering appropriations for fiscal year 1984 operations, the plaintiff would have been entitled to a 14.1 per cent increase over its 1983 grant.
11. On November 28, 1983, LSC's Director of the Office of Compliance and Review requested the General Counsel of the Office of Personnel Management ("OPM") to investigate whether the Proposition 9 activities of Alan Rader and other Western Center attorneys violated the Hatch Act, 5 U.S.C. § 1501 et seq., and offered the LSC's services to "cooperate fully in any investigation you deem appropriate." Ex. 2. The letter was accompanied by several supporting documents, including the September 19, 1983 GAO report previously sent to Senator Hatch. On January 26, 1984, the Special Counsel for Prosecution, Merit Systems Protection Board, responded on behalf of the OPM to the LSC request. The Special Counsel opined that the Proposition 9 activities did not violate the Hatch Act. Ex. 62.
12. On January 4, 1984, more than 3 years after the Center's Proposition 9 activities concluded and after a change in presidential administration, the LSC first notified the Center that its activities were in violation of the Act, and informed the Center that its request for 1984 funding would be denied. Ex. 1.
13. The Center made a timely written request for review of this initial decision pursuant to 45 C.F.R. Parts 1606 and 1625. LSC selected the Honorable Ralph Drummond, a retired California state judge, to serve as an independent hearing officer and to conduct the requested hearing.
14. At a pre-hearing conference held before Judge Drummond, the Western Center made certain documentary evidence, including declarations, available to the LSC. The parties agreed that the Corporation's attorney would review those declarations. If he contested any of the declarations, he could then request the presence of the declarants for deposition or cross-examination. Transcript of Feb. 27, 1984, pre-conference hearing, at 8-11, 19, 25.
15. On February 29, 1984, the hearing was held before Judge Drummond. The Corporation elected to rest its case on the documentary evidence and declarations in the record, and to forego cross-examination or deposition of the Center's declarants. The Corporation did, however, object to the introduction of certain exhibits, including Exhibits 18, 45 and 46. Judge Drummond found that Western Center's activities "on behalf of clients opposed to Proposition 9 consisted primarily of gathering information on the potential effects of Proposition 9 and explaining the information to clients and local legal services attorneys"; that the Center did not express its opposition to Proposition 9, did not tell anyone how to vote, did not engage in voter registration activities, and did not transport voters to the polls. Findings of Fact at para. 9. These factual findings have not been challenged by the defendants. On March 12, 1984, Judge Drummond determined that the Corporation's decision to deny refunding was "substantially without merit." Conclusions of Law at para. 23.
16. On April 4, 1984, President Bogard reversed Judge Drummond's decision. Although Mr. Bogard apparently found fault with few factual findings in the recommended decision, he made additional factual findings which were not included below. In sum, Mr. Bogard concluded that the activities which Western Center engaged in were in flagrant defiance of the Act.
17. By the end of June 1984, the Western Center will have available approximately $50,000 to meet its expenses. At present, the monthly expenses of the Western Center are approximately $115,000, and the annual budget of the Center is approximately $1.3 million. Declarations of Mary Burdick (Executive Director), June 21, 1984, and June 14, 1984; Declaration of Philip Henderson (Director of Administration and Treasurer), June 20, 1984.
18. The Western Center is currently providing assistance to eligible low-income clients in more than fifty matters pending throughout the California court system. Most of the cases of the Western Center involve complex and protracted litigation for which legal services attorneys have asked for assistance because they are not able to handle these cases without Western Center co-counsel. Burdick Dec., June 21, 1984; Ex. 12.
CONCLUSIONS OF LAW
Under the familiar standard for injunctive relief set forth in this Circuit, a preliminary injunction is appropriate:
When a serious legal question is presented, when little if any harm will befall other interested persons or the public and when denial of the order would inflict irreparable injury on the movant.
Washington Metropolitan Area Transit Comm'n v. Holiday Tours, 182 U.S. App. D.C. 220, 559 F.2d 841, 844 (D.C.Cir.1977) (interpreting Virginia Petroleum Jobbers Association v. FPC, 104 U.S. App. D.C. 106, 259 F.2d 921 (D.C.Cir.1958). After considering the merits of the plaintiff's claim and balancing the equities in this case, the Court concludes that the plaintiffs are clearly entitled to the relief which they seek.
First, the plaintiffs have presented a formidable case on the merits, even under the strict standard for relief established in Virginia Petroleum Jobbers Association, 104 U.S. App. D.C. 106, 259 F.2d at 925 (finding of likelihood of success requires strong showing that movant is likely to prevail on the merits). Although the numerous deficiencies in President Bogard's decision need not be exhaustively catalogued, a few examples serve to illustrate that the decision to deny refunding to the Center was arbitrary and capricious.
In his decision, President Bogard conceded the applicability of the Corporation's regulations at 45 C.F.R. § 1625.9 to the respective burdens of proof of the parties. In finding that Western Center had not met its burden of proof, however, Bogard failed to properly apply the burden of proof applicable to the Corporation. Section 1625.9 specifically provides that:
The Corporation shall have the obligation of proving, by a preponderance of the evidence contained in the record, any disputed fact relied upon by the Corporation as justification for denial of refunding; with respect to all other issues, the recipient shall have the obligation to establish that the Corporation lacked a substantial basis for denying refunding.