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August 13, 1984


The opinion of the court was delivered by: PARKER

 BARRINGTON D. PARKER, District Judge.

 The issue in this proceeding concerns the legality of the decision of the defendants, the Legal Services Corporation ("LSC" or "Corporation") and its President, Donald Bogard, to deny refunding to the Western Center on Law and Poverty, Inc. ("Western Center" or "Center"), for fiscal year 1984. In 1983, Western Center received several separate grants from the Corporation, including an annual state support center grant designed to enable the Center to provide specialized legal service to indigent clients. Although all of the plaintiff's 1983 grants from the LSC have been terminated, only the propriety of the termination of the state support center grant is presently at issue. *fn1"

 On June 29, 1984, the Court granted Western Center a preliminary injunction which enjoined the defendants from refusing to pay Western Center the monthly payments on its 1984 state support center grant. The monthly figure of $81,781 was calculated pursuant to the 1984 funding formula enacted by the Congress. Fiscal Year 1984 Appropriations Act for the Departments of Commerce, Justice, State, the Judiciary and Related Agencies, Pub.L. 98-166, 97 Stat. 1071, 1088 (1983) ("Pub.L. 98-166"). The preliminary injunction reversed and set aside an earlier decision of President Bogard denying 1984 funding to Western Center. The Court now turns to the plaintiff's motion for partial summary judgment with respect to the termination decision of the defendants. For the reasons set forth below, the Court determines that the defendants' decision to deny refunding to Western Center was arbitrary and capricious, and grants the plaintiff's motion for partial summary judgment. The reasons supporting the Court's determination are set forth below.

 In 1983, the Western Center received an $860,000 state support center grant from the Corporation for the purpose of providing specialized legal services for the benefit of indigent clients. The Center has received similar grants since 1975, when the Corporation came into existence under the Legal Services Corporation Act of 1974 ("Act" or "LSCA"), Pub.L. 93-355, § 1, 88 Stat. 378, codified at 42 U.S.C. § 2996 et seq.

 On January 4, 1984, the Corporation, through President Bogard, informed Western Center by letter that its activities undertaken in connection with a 1980 ballot initiative known as Proposition 9 were illegal, and that the Center's request for 1984 funding was denied. Ex. 1. *fn2" Specifically, Bogard's letter to Western Center's Board of Directors, stated that:

substantial evidence has forced us to conclude that [the Center] has violated . . . the provisions of Sections 1006(d)(4) [ 42 U.S.C. § 2996e(d)(4)] and 1007(a)(5) [ 42 U.S.C. § 2996f(a)(5)] and (6) [ 42 U.S.C. § 2996f(a)(6)] of the Legal Services Corporation Act and subsequent regulations. . . .

 Id. at 1. The letter pointed to "significant evidence" that the Center "organized and directed a campaign to defeat Proposition 9, a tax reduction measure on the California ballot in June, 1980." Id. Howard Jarvis was the chief proponent of this tax proposal.

 It is undisputed that the Center received a $61,000 grant in connection with Proposition 9. These grant funds were expended by June 1980, when Proposition 9 was defeated. Although Bogard's letter does not indicate why the Center's activities related to Proposition 9 were first challenged in January 1984, more than three years after the activities concluded, the exhibits attached to the letter shed some light on the developments which resulted in the termination of funding.

 These exhibits include a letter from Lawrence J. Straw, Jr., to the California Attorney General, dated October 10, 1983, Ex. 1-7, *fn3" and a report prepared by the General Accounting Office ("GAO"), dated September 19, 1983, Ex. 1-1. Straw wrote the letter in his representative capacity as the attorney for Howard Jarvis and the Conservative Caucus. The letter related his clients' belief that the Proposition 9 activities of Western Center, other LSC grantees, and the Corporation were in violation of California state law, and requested a prompt investigation of these charges.

 The GAO report was directed to Senator Orrin Hatch, who had recently requested the GAO to investigate the Center's activities and to determine whether it had violated the Act. Ex. 1-1 at 1. The GAO report was prepared hastily and was based exclusively on selected documents which Senator Hatch had obtained from the LSC files. On the basis of these documents, the GAO found that although some of the Center's activities were impermissible under the Act, the Corporation could not recoup the grant funds because it had encouraged the Center's actions. Ex. 1-1 at 16. The GAO also concluded that LSC should promulgate clearer regulations to prevent future improper expenditures.

 For its part, the Corporation rested its case on the documentary evidence and the declarations submitted by the plaintiff. It chose not to cross-examine or depose the Center's declarants, and limited its objections to three declarations submitted by the Center, as Exhibits 18, 45 and 46.

 On March 12, 1984, Judge Drummond reversed the initial decision issued by the Corporation. Ex. K (Recommended Decision, Findings of Fact and Conclusions of Law). In reaching this result, he found that the Center's Proposition 9 activities were undertaken on behalf of clients, and that these activities "consisted primarily of gathering information on the potential effects of Proposition 9 and explaining the information to clients and local legal services attorneys." Findings of Fact at para. 9. He specifically found that the Center did not express its opposition to Proposition 9, inform people how to vote, engage in voter registration activities, or transport voters to the polls. Id.

 On April 4, 1984, President Bogard reversed Judge Drummond's decision, and affirmed his own initial decision denying the Center's request for funds. Ex. M, Bogard Decision. Although he did not reject Judge Drummond's factual findings, he drew contrary legal conclusions from those facts. The relevant portions of Bogard's decision are succinctly described below.

 First, he concluded that the types of activities conducted by the Center in 1980 violated the Act because they "[were] not required to be performed by attorneys and [did] not involve 'legal advice and representation as an attorney. '" Bogard Decision at 6. These activities were described in a transcript of a videotaped speech given by Alan Rader, a former employee of the Western Center, at a January 1981 meeting of LSC officials in Denver, Colorado. The activities questioned in Bogard's decision in general include: networking with local groups opposed to Proposition 9, hiring coordinators and working with the media to implement this opposition, and providing advice and technical assistance to clients in this connection.

 In reaching his conclusion, President Bogard relied principally on the GAO report, as well as his own determination that the Act permits only a "narrow exception" allowing the use of LSC funds to oppose ballot initiatives, to influence the defeat of state initiative petitions, or to conduct voter registration activities. Id. at 4, 7.

 Bogard also cited a Rader memorandum, dated January 15, 1980, to support his conclusion that the Center's activities did not constitute legal advice and representation. Id. at 6. However, the memorandum on its face does not purport to describe activities which were actually undertaken by the Center, Ex. 1-2, and Bogard did not find that these activities were in fact conducted or point to any evidence supporting such a conclusion.

 Second, Mr. Bogard rejected the Center's argument that the Corporation approved the Proposition 9 work before it was undertaken. He then suggested that even if LSC officials had approved these activities, this acquiescence would not protect the Center. He severely chastised the LSC officials who approved the grant during the Center administration, and concluded that prior approval by LSC officials

not only has no legal significance, it has no practical significance since those officials repeatedly failed to enforce statutory restrictions, and in fact ignored those restrictions.

 Bogard Decision at 11.

 Lastly, Bogard declined to consider the Center's argument that "California programs and eligible clients would be harmed if [the Center] were denied refunding." Id. at 12. He asserted that the "Center's argument has no relevance to the violations charged," id., because the defunding decision was premised on statutory violations, rather than inadequate delivery of legal services. He noted in passing that other California grantees could utilize the available grant funds to provide state support services.


 The matter presented for the Court's consideration is the propriety of the LSC final administrative decision rendered by President Bogard denying refunding to Western Center. In this connection, the plaintiff filed on May 24, 1984 a motion for partial summary judgment urging reversal of the Bogard decision. Although the defendants oppose the plaintiff's motion, their position on the appropriateness of summary judgment is somewhat unclear. The defendants concede that the "case is ripe for summary judgment [with respect] to the content of the administrative record and the decision that was made based on that record," Defendants' Opposition to Plaintiff's Motion for ...

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