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December 7, 1987

National Science And Law Center, Inc., Plaintiff,
Legal Services Corporation, et. al., Defendants

The opinion of the court was delivered by: PENN


 This case is before the Court on Defendants' Motion for Summary Judgment and Plaintiff's Cross Motion for Summary Judgment. Plaintiff, the National Social Science and Law Center, Inc. ("the center" or "NSSLC") seeks declaratory and injunctive relief to prevent the termination of plaintiff's funding by defendants, Legal Services Corporation ("LSC" or "the Corporation") and its President, John H. Bayly, Jr.


 The LSC is a non-profit corporation established in the District of Columbia by the Legal Services Act, 42 U.S.C. § 2966, et seq. Its mandate is to provide financial support for legal assistance in non-criminal proceedings to persons who are financially unable to afford such assistance. The Corporation administers a program of grants or contracts disbursing federal funds to approximately 323 organizations which in turn provide free legal advice and representation to eligible clients.

 The Center is a private non-profit corporation organized in 1977 under the laws of the District of Columbia. NSSLC is one of 17 "national support centers" funded by the Corporation. Each support center provides specialized assistance to attorneys in legal services organizations or private attorneys rendering pro bono legal services. Within this network, the Center's area of expertise is to provide social science research and related empirical data to legal services offices in the field and to other support centers. The Center is also authorized to undertake related research activities, including assistance in management and priority setting activities, training, development of manuals for the field, and preparation of publications on issues relating to social science and poverty law. Since 1978, NSSLC has received funds from LSC to provide social science services to LSC programs. In 1983, the Center received $ 253,416 from LSC; in 1984 it received $ 289,173; and in 1985 it received $ 320,722.

 In March of 1986, LSC sent a monitoring team composed of four individuals *fn1" to review the activities and operations of the Center during the period beginning June 1983 through December 1983. The monitoring team spent approximately one week reviewing records and conducting interviews. The monitoring team's activities consisted of a review of documents in the Center's files, interviews with NSSLC staff and a few current and former members of NSSLC's Board of Directors. During the monitoring visit, NSSLC staff made available the financial records, case files, and related materials that were requested by the monitors.

 A draft monitoring report setting forth the LSC team's preliminary findings was released to the Center for comment in late July 1986. The draft report contained allegations that the Center had engaged in activities in violation of LSC regulations and that the Center was generally inept and inefficient in carrying out its social science and technical assistance functions. The Corporation agreed to allow NSSLC until September 12, 1986, to respond to the findings set forth in the draft monitoring report, and the Center met that deadline by filing its comments on September 12, 1986. Although the Center's comments on the monitors' draft report were not due until September 12, 1986, the Corporation initiated a formal denial-of-refunding proceeding on September 5, 1986. *fn2"

 On September 12, 1987, the Center submitted detailed comments on the draft monitoring report. In its response, the Center alleged that the draft report contained numerous factual errors and improper interpretations and applications of LSC statutes and regulations. The Center also asserted that it had performed economical and effective services of high quality under its grant agreement in accordance with applicable statutes, regulations, and grant conditions. *fn3"

 The bases for the Corporation's decision to seek to deny refunding of the Center, as described in the Corporation's Statement of Factual Grounds for Denial of Refunding fell into three categories: (1) failure to conduct the financial affairs of the Center in a responsible fashion and inadequate management; (2) failure to comply with the Legal Services Corporation Act and the Corporation's regulations; and (3) failure to provide economical and effective legal assistance of high quality. *fn4"

 Following receipt of the denial of refunding, the Center, on October 6, 1986, exercised its right to request a hearing pursuant to 45 C.F.R. § 1625.5. The Honorable George R. Gallagher, a Senior Judge of the District of Columbia Court of Appeals, was designated by the Corporation to preside as the Hearing Examiner. *fn5" The denial-of-refunding hearing began on October 17, 1986 and concluded on December 12, 1986. In addition to contesting the factual allegations in the affidavits derived from the 1986 draft monitoring report, the Center raised procedural objections based on its contention that the Corporation had failed to give the Center notice and an opportunity to correct pursuant to LSC regulations. The hearing included approximately 12 days of testimony as well as the presentation of substantial documentary evidence. Following the hearing, in December 1986, both parties submitted proposed findings of fact and conclusions of law and post-hearing briefs. Also, at the request of the Hearing Examiner, the Center and the Corporation submitted supplemental briefs on the issue of whether the Center was entitled to notice and an opportunity to correct as a pre-condition of denial of refunding.

 The Recommended Decision of the Hearing Examiner was issued on June 19, 1987. The Hearing Examiner determined that the notice and opportunity to correct provision was not a procedural prerequisite to the initiation of the proceeding because the nature of the facts and circumstances of the case revealed that the Center "could not reasonably have been unaware of its deficiencies." Judge Gallagher added that notice and opportunity to correct was not required here and the Corporation's failure to provide it was not material since the Center had been informed by LSC of its underutilization and resultant low productivity as early as the 1979 monitoring reports.

 Second, the Hearing Examiner concluded that NSSLC should be denied refunding on the ground that the Center was underutilized and that the number of social science work products generated by the Center during the monitoring period (June 1983 - December 1985) was not sufficient to justify refunding. The Recommended Decision based this conclusion on the fact that the evidence demonstrated that the Center did not make economical and effective use of its grant funds during the review period. The record before the Hearing Examiner indicated the parties' stipulation that during the 31 month review period the Center produced 281 pieces of work product with a staff averaging 4-5 social science researchers. From this data, it was calculated that the Center produced about nine individual pieces of social science work product per month, or less than 2.5 pieces per week. These figures do not include projects begun before the review period and continued through the review period. The Hearing Examiner also found that the Center's Deputy Director characterized 143 pieces of the Center's work product as "non-written" social science work. Although the Recommended Decision noted that the testimony was often in conflict regarding the estimates of time spent on typical work products, Judge Gallagher acknowledged the great lengths that the Center's witness went to in stressing the amount of time and effort required to respond to field requests. He concluded that in spite of this the Center did not effectively refute the LSC's showing of the paucity of work performed by the Center in proportion to the amount of the funds granted to it.

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