LEGAL AID SERVICES OF OR. v. Legal Services Corp.

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

LEGAL AID SERVICES OF OREGON; 

ARRON GUEVARA; JANICE MORGAN;

SHARON LEE SCHWARTZ; DONNA

SATHER,

Plaintiffs-Appellants,

and

OREGON LAW CENTER; DAVID

HENRETTY; DIANE SCHWARTZ SYKES;

No. 08-35467



LOREY FREEMAN; COMMUNITY

ALLIANCE OF TENANTS; DC No.

CAMPAIGN FOR EQUAL JUSTICE, CV 05-1444 PK

Plaintiffs,

v.

LEGAL SERVICES CORPORATION,

Defendant-Appellee,

UNITED STATES OF AMERICA,

Defendant-Intervenor-Appellee.



7951

7952 LEGAL AID v. LEGAL SERVICES CORP.

LEGAL AID SERVICES OF OREGON; 

ARRON GUEVARA; JANICE MORGAN;

SHARON LEE SCHWARTZ; DONNA

SATHER; OREGON LAW CENTER;

DAVID HENRETTY; DIANE SCHWARTZ

SYKES; LOREY FREEMAN;

COMMUNITY ALLIANCE OF TENANTS,

Plaintiffs,

No. 08-35483

and

CAMPAIGN FOR EQUAL JUSTICE,

 DC No.

CV 05-1444 PK

Plaintiff-Appellant,

v.

LEGAL SERVICES CORPORATION,

Defendant-Appellee,

UNITED STATES OF AMERICA,

Defendant-Intervenor-Appellee.



LEGAL AID v. LEGAL SERVICES CORP. 7953

LEGAL AID SERVICES OF OREGON; 

ARRON GUEVARA; JANICE MORGAN;

SHARON LEE SCHWARTZ; DONNA

SATHER,

Plaintiffs,

CAMPAIGN FOR EQUAL JUSTICE,

Plaintiff, No. 08-35492

and DC Nos.

CV 05-1444 PK



OREGON LAW CENTER; DAVID

HENRETTY; DIANE SCHWARTZ SYKES; CV 05-1443 PK

LOREY FREEMAN; COMMUNITY ORDER AND

ALLIANCE OF TENANTS, AMENDED

Plaintiffs-Appellants, OPINION

v.

LEGAL SERVICES CORPORATION,

Defendant-Appellee,

UNITED STATES OF AMERICA,

Defendant-Intervenor-Appellee.



Appeals from the United States District Court

for the District of Oregon

Paul J. Papak, Magistrate Judge, Presiding

Argued and Submitted

July 7, 2009—Portland, Oregon

Opinion Withdrawn and

Amended Opinion Filed June 4, 2010

7954 LEGAL AID v. LEGAL SERVICES CORP.

Before: Harry Pregerson, Pamela Ann Rymer, and

A. Wallace Tashima, Circuit Judges.

Opinion by Judge Tashima;

Dissent by Judge Pregerson

7956 LEGAL AID v. LEGAL SERVICES CORP.

COUNSEL

Stephen S. Walters (argued), Allen Matkins Leck Gamble

Mallory & Natsis, San Francisco, California, and Beverly C.

LEGAL AID v. LEGAL SERVICES CORP. 7957

Pearman, Stoel Rives, Portland, Oregon, for plaintiffs-

appellants Legal Aid Services of Oregon and LASO plaintiffs.

Don H. Marmaduke, Tonkon Torp, Portland Oregon, for

plaintiffs-appellants Oregon Law Center and OLC plaintiffs.

Kent B. Thurber, Davis Wright Tremaine, Portland, Oregon,

for plaintiff-appellant Campaign for Equal Justice.

William S. Freeman, Palo Alto, California, for defendant-

appellee.

Matthew M. Collette, Civil Division, U.S. Department of Jus-

tice, Washington, DC, for defendant-intervenor-appellant.

ORDER

The opinion and partially dissenting opinion filed on

November 23, 2009, and reported at 587 F.3d 1006, are

hereby withdrawn and replaced by an amended opinion and

amended partially dissenting opinion filed concurrently with

this order. With these amendments, the panel has voted to

deny the petition for panel rehearing, with Judge Pregerson

voting to grant the petition. Judge Rymer has voted to deny

the petition for rehearing en banc and Judge Tashima recom-

mends denial. Judge Pregerson has voted to grant the petition

for rehearing en banc.

The full court has been advised of the petition for rehearing

en banc and no judge has requested a vote on whether to

rehear the matter en banc. See Fed. R. App. P. 35(f). The peti-

tion for rehearing en banc is denied. No further petitions for

rehearing will be entertained.

7958 LEGAL AID v. LEGAL SERVICES CORP.

OPINION

TASHIMA, Circuit Judge:

We must determine whether restrictions on lobbying, solic-

iting clients, and participating in class actions (collectively,

the “Restrictions”) that Congress has imposed on legal aid

organizations that receive federal grants through the Legal

Services Corporation (“LSC”), comport with the requirements

of the First Amendment. In Legal Aid Soc’y of Haw. v. Legal

Serv. Corp., 145 F.3d 1017 (9th Cir. 1998) (“LASH III”), we

upheld the Restrictions as facially constitutional. We con-

cluded that LSC’s program integrity rule (“PIR”) permits

grantees to channel restricted speech, paid for with non-

federal dollars, through unrestricted affiliates, and thus, the

Restrictions do not unconstitutionally condition the receipt of

federal funds on the relinquishment of First Amendment

rights. Id. at 1025.

Legal Aid Services of Oregon (“LASO”), Oregon Law

Center (“OLC”), individual LASO and OLC attorneys and

board members, and organizations representing LASO clients

and private donors (collectively “Plaintiffs”), present a two-

pronged attack on the Restrictions and PIR. First, they con-

tend that the Supreme Court’s decision in Legal Serv. Corp.

v. Velazquez, 531 U.S. 533 (2001) (“Velazquez III”) super-

seded LASH III, and that under Velazquez III, the Restrictions

must be struck down as facially violative of the First Amend-

ment. Next, they contend that, even if LASH III remains good

law, LSC has applied the PIR to them in a manner that cuts

off alternative avenues for engaging in protected speech.

The district court dismissed Plaintiffs’ facial challenge to

the Restrictions, granted summary judgment in favor of LSC

on their as-applied challenge to the PIR, and denied their

motion for a new trial.

We have jurisdiction to review the final judgment of the

district court under 28 U.S.C. § 1291, and affirm.

LEGAL AID v. LEGAL SERVICES CORP. 7959

BACKGROUND AND PROCEEDINGS

I. LSC and the Restrictions

In 1974 Congress enacted the Legal Services Corporation

Act (the “1974 Act”), Pub. L. No. 93-355, 88 Stat. 378 (codi-

fied as amended at 42 U.S.C. §§ 2996-2996l), establishing

LSC as an independent nonprofit corporation. LSC’s mission

is to distribute congressionally appropriated funds to qualify-

ing organizations “for the purpose of providing financial sup-

port for legal assistance in noncriminal proceedings or matters

to persons financially unable to afford legal assistance.” 42

U.S.C. § 2996b(a).

Congress has restricted the activities of LSC grantees since

the grant program’s inception, and the scope of those restric-

tions has expanded over time. The 1974 Act, for example,

provided that LSC funds could not be used to provide legal

assistance in school desegregation cases, cases in which a cli-

ent seeks to procure an abortion or compel an institution to

provide an abortion, military desertion cases, any “fee-

generating case,” and collateral attacks on criminal convic-

tions. Id. § 2996f(b). Further, every year between 1983 and

1996, Congress included an appropriations rider in its annual

spending bill “purport[ing] to eliminate legislative lobbying

and administrative advocacy” among LSC grantees. S. Rep.

104-392 at 3 (Sept. 30, 1996).

In 1996, responding to concerns that LSC had strayed from

its core mission of “fund[ing] basic legal services for poor

individuals,” id. at 1, Congress imposed new restrictions on

the activities of LSC grantees. See Omnibus Consolidated

Rescissions and Appropriations Act of 1996, Pub. L. No. 104-

134, § 504, 110 Stat. 1321, 1321-53-57 (1996) (the “1996

Act”), reenacted in the Omnibus Consolidated Appropriations

Act of 1997, Pub. L. 104-208, § 502, 110 Stat. 3009, 3009-59-

60 (1997). The 1996 Act enacted, and subsequent LSC regu-

lations implemented, restrictions on: (1) attempts to influence

7960 LEGAL AID v. LEGAL SERVICES CORP.

legislation and/or administrative rulemaking processes, 45

C.F.R. § 1612 et seq.; (2) initiation of, and participation in,

class action lawsuits, id. § 1617 et seq.; (3) soliciting clients,

id. § 1638 et seq.1 The Restrictions apply to all of the activi-

ties of an LSC grantee, including those paid for by non-LSC

funds. 45 C.F.R. § 1610.4.

II. PIR and the LASH Litigation

In 1997, in response to a federal district court’s injunction

declaring several of the 1996 Act’s restrictions facially uncon-

stitutional insofar as they applied to LSC grantees’ non-

federally funded activities, see Legal Aid Soc’y of Haw. v.

Legal Serv. Corp. , 961 F. Supp. 1402, 1422 (D. Haw. 1997)

(“LASH I”), LSC promulgated the PIR to clarify the circum-

stances under which a grantee could affiliate with an organi-

zation that engages in restricted activities.2 See 45 C.F.R.

§ 1610.8. The PIR provides that:

(a) A[n] [LSC grant] recipient must have objective

integrity and independence from any organization

that engages in restricted activities.

1

The 1996 Act also prohibited LSC grantees from providing legal assis-

tance to certain classes of aliens, seeking to reform welfare, litigating on

behalf of prisoners, engaging in activity involving political redistricting,

supporting certain advocacy training programs, and litigating cases related

to abortion. See Velazquez v. Legal Serv. Corp., 164 F.3d 757, 760 & n.2

(2d Cir. 1999) (“Velazquez II”). Those restrictions are not at issue in this

appeal. Additionally, the parties agree that the 1996 Act’s restrictions on

claiming, collecting or retaining attorneys’ fees is now moot, having been

recently repealed by Pub. L. No. 111-117, § 533, 123 Stat. 3034, 3157

(Dec. 19, 2009). The attorneys’ fees restriction thus is also no longer an

issue in this appeal.

2

The LASH plaintiffs consisted of several LSC grantee organizations,

lawyers that worked for those organizations, an organization representing

legal aid clients, and two organizations that provided funding to legal aid

organizations. LASH I, 961 F. Supp. at 1406-07.

LEGAL AID v. LEGAL SERVICES CORP. 7961

A recipient will be found to have objective integrity and inde-

pendence from such an organization if:

(1) The other organization is a legally separate

entity;

(2) The other organization receives no transfer of

LSC funds, and LSC funds do not subsidize

restricted activities; and

(3) The recipient is physically and financially sepa-

rate from the other organization. Mere bookkeeping

separation of LSC funds from other funds is not suf-

ficient. Whether sufficient physical and financial

separation exists will be determined on a case-by-

case basis and will be based on the totality of the

facts. The presence or absence of any one or more

factors will not be determinative. Factors relevant to

this determination shall include but will not be lim-

ited to:

(i) The existence of separate personnel;

(ii) The existence of separate accounting

and timekeeping records;

(iii) The degree of separation from facilities

in which restricted activities occur, and the

extent of such restricted activities; and

(iv) The extent to which signs and other

forms of identification which distinguish

the recipient from the organization are pres-

ent.

(b) Each recipient’s governing body must certify to

[LSC] within 180 days of the effective date of this

part that the recipient is in compliance with the

7962 LEGAL AID v. LEGAL SERVICES CORP.

requirements of this section. Thereafter, the recipi-

ent’s governing body must certify such compliance

to [LSC] on an annual basis.

Id.

LSC drafted the PIR to mirror the program integrity regula-

tions associated with federal grants provided under Title X of

the Public Health Service Act; regulations that withstood First

Amendment scrutiny in Rust v. Sullivan, 500 U.S. 173 (1991).

See Velazquez II, 164 F.3d at 761-62 (citing 62 Fed. Reg.

12101, 12101-04 (1997)). The restrictions at issue in Rust

prohibited Title X grantees from providing counseling con-

cerning the use of abortion as a method of family planning,

or engaging in any lobbying effort or legal action aimed at

encouraging abortion. See Rust, 500 U.S. at 179-80. A grant-

ee’s affiliate could engage in restricted activities, but only if

the grantee and affiliate ensured legal, physical, and financial

separation. See id. at 180-81.

The Rust court rejected the Title X grantees’ (and doctors

who worked for those grantees) claim that the restrictions

amounted to an unconstitutional condition. To prevail on such

a claim, the Court explained, a recipient of a federal subsidy

must show that it has been “effectively prohibit[ed] . . . from

engaging in [ ] protected conduct outside the scope of the fed-

erally funded program.” Id. at 197. Because grantees were

free to engage in restricted activities through a legally sepa-

rate affiliate, the Court determined that they had failed to

establish an unconstitutional condition. The Court also con-

cluded that the challenged restrictions did not amount to

impermissible viewpoint discrimination, because Congress

had “not discriminated on the basis of viewpoint; it [ ] merely

chose[ ] to fund one activity to the exclusion of the other.” Id.

at 193.

After the issuance of the PIR, the LASH I district court dis-

solved its injunction and entered summary judgment in favor

LEGAL AID v. LEGAL SERVICES CORP. 7963

of LSC. Legal Aid Soc’y of Haw. v. Legal Serv. Corp., 981 F.

Supp. 1288, 1294, 1301 (D. Haw. 1997).

We affirmed the judgment of the district court, concluding

that the Restrictions and PIR satisfy the standards set forth in

Rust. See LASH III, 145 F.3d at 1024. Because the PIR did not

force LSC grantees to “give up prohibited activities,” but

rather allowed them to engage in those activities so long as

they were carried out through “separate and independent”

entities, we concluded that, under Rust, the Restrictions were

constitutional on their face. See id. at 1025. We rejected the

LASH III plaintiffs’ contention that the practical burdens asso-

ciated with channeling restricted activities through separate

affiliates amounted to an impermissible burden on the exer-

cise of their free speech rights, but left open the possibility

that they could challenge LSC’s application of the PIR in a

subsequent action. Id. at 1027.

III. Velazquez Litigation3

In 1997, legal aid organizations in New York, together with

individual legal aid attorneys, clients, and donors, brought an

action challenging several of the 1996 Act’s funding restric-

tions.4 See Velazquez v. Legal Serv. Corp., 985 F. Supp. 323

(E.D.N.Y. 1997) (“Velazquez I”). The Velazquez plaintiffs

sought a preliminary injunction declaring, in relevant part,

that the challenged restrictions were facially violative of the

First Amendment. Id. at 326. The district court denied the pre-

liminary injunction motion, reasoning that the PIR was in all

relevant respects identical to the program integrity regulations

upheld in Rust; thus, that the plaintiffs were unlikely to suc-

ceed on the merits of their claim. Id. at 326-27.

3

Because the Velazquez litigation sequence addressed the legal ques-

tions at issue in this case, we summarize it at length here.

4

In addition to several restrictions not at issue in this appeal, the Velaz-

quez I plaintiffs challenged the 1996 Act’s bar on participating in class

actions, engaging in lobbying, and soliciting clients. Velazquez I, 985 F.

Supp. at 328.

7964 LEGAL AID v. LEGAL SERVICES CORP.

The Second Circuit affirmed in part, and reversed in part.

It agreed with the district court that, as a facial matter, the PIR

provided LSC grantees with adequate alternative channels for

engaging in protected expression, and thus there was no

unconstitutional conditions violation. See Velazquez II, 164

F.3d at 767. The court concluded, however, that one of the

challenged restrictions — the so-called “suits-for-benefits

exception” — ran afoul of the First Amendment. See id. at

769-72. The suits-for-benefits exception provided that an LSC

grantee could represent an eligible client seeking specific

relief from a welfare agency, but only if the grantee refrained

from challenging the validity of the underlying statutes and

regulations. Id. at 769. Because it permitted funding for legal

actions that accepted the validity of existing welfare laws, but

denied it with respect to those that challenged the status quo,

the Velazquez II court concluded that the suits-for-benefits

exception was viewpoint discrimination subject to strict First

Amendment scrutiny. Id. at 769-70.

The Supreme Court granted the LSC’s certiorari petition,

but declined to review the Second Circuit’s judgment insofar

as it upheld the other substantive restrictions. 532 U.S. 903

(Mem.) (2001) (denying the Velazquez plaintiffs’ petition for

certiorari). The Supreme Court — in a 5-4 decision that we

discuss at length infra — agreed with the Second Circuit that

the suits-for-benefits exception was unconstitutional. Velaz-

quez III, 531 U.S. at 549.

The litigation then returned to the district court where the

Velazquez plaintiffs pursued both an as-applied challenge to

the PIR, and a facial challenge to the class action and solicita-

tion restrictions. Velazquez v. Legal Serv. Corp., 349 F. Supp.

2d 566 (E.D.N.Y. 2004) (“Velazquez IV.”). The district court

dismissed the plaintiffs’ facial challenge, but granted their

application for a preliminary injunction on the as-applied

challenge to the PIR, concluding that LSC’s enforcement of

the PIR “unduly burden[ed]” the plaintiffs’ ability to use non-

federal funds to engage in restricted activities. Id. at 611.

LEGAL AID v. LEGAL SERVICES CORP. 7965

The Second Circuit affirmed in part, reversed in part, and

vacated the district court’s injunction. Brooklyn Legal Serv.

Corp. v. Legal Serv. Corp., 462 F.3d 219, 236 (2d Cir. 2006)

(“Velazquez V”). The court agreed that the Velazquez plain-

tiffs’ facial challenge to the substantive restrictions failed to

state a claim, id. (summarily adopting the reasoning and con-

clusions of the district court with respect to plaintiffs’ facial

challenge), but concluded that the district court erred in apply-

ing an undue burden standard to the as-applied challenge to

the PIR, see id. at 231. The proper standard, the court con-

cluded, was whether grantees had “demonstrated as a factual

matter that the [PIR] ha[d] not left them adequate alternative

channels for protected expression.” Id.

IV. LASO and OLC

LASO is a nonprofit legal aid organization and LSC

grantee. It derives roughly 45 percent of its $6.5 million

annual operating budget from LSC grants, and the remainder

of its funding comes from other federal, state, and private

sources. OLC is an independent legal aid organization that

does not receive funding from LSC; thus, it is not subject to

the Restrictions. The organizations share a common board of

directors.

Since 1995, when LASO spun-off OLC, the two organiza-

tions have coordinated their respective delivery of legal ser-

vices, with OLC providing many of the services that LASO

cannot offer pursuant to the Restrictions. In addition to their

common board, the two organizations coordinate their efforts

by: (1) maintaining separate but adjoining office space; (2)

co-counseling certain cases; (3) holding regular joint planning

meetings; (4) maintaining a single litigation support unit to

aid both OLC and LASO attorneys; (5) dividing the use of

physical resources like libraries, computer services, and

phone systems; and (6) coordinating training, priority setting,

and information sharing regarding administration, finance,

personnel, and other policies.

7966 LEGAL AID v. LEGAL SERVICES CORP.

In May 2005, LASO submitted a new configuration pro-

posal (the “Proposal”) to LSC. Under the Proposal, LASO

and OLC would merge into a single, nonprofit corporation

with two financially separate divisions. The new organization

would operate under the leadership of a single executive

director, and the two divisions would share personnel in a

variety of job categories.

LSC’s Office of Legal Affairs issued a written opinion

rejecting the Proposal. The opinion explained that “[i]n order

to maintain program integrity from OLC, LASO must be a

legally separate entity and must have greater physical and

financial separation than set forth in the proposal.” According

to the declaration of Mark Freedman, LSC’s Assistant Gen-

eral Counsel, LASO did not contact LSC to discuss the Pro-

posal prior to submitting it, nor did it explore alternatives with

LSC after receiving notice that the Proposal had been

rejected. Freedman also stated that “the PIR would permit a

limited number of individual LASO attorneys to work part-

time for OLC, provided the organizations otherwise complied

with the PIR in terms of legal, physical and financial separa-

tion overall.”

V. Proceedings in this Case

In September 2005, Plaintiffs filed this action raising, in

relevant part, facial and as-applied First Amendment claims,

and seeking declaratory and injunctive relief.5 The United

States intervened to defend the constitutionality of the

Restrictions and PIR.

LSC and the United States both filed motions to dismiss all

5

The State of Oregon brought a separate action against LSC challenging

the Restrictions and PIR on Tenth Amendment grounds. The district court

dismissed the State’s action and that dismissal was affirmed on appeal. See

Oregon v. Legal Serv. Corp., 552 F.3d 965 (9th Cir. 2009) (holding that

Oregon lacked Article III standing to challenge the Restrictions).

LEGAL AID v. LEGAL SERVICES CORP. 7967

of Plaintiffs’ claims. The Magistrate Judge, in his Findings

and Recommendations, recommended granting the motions as

to all claims, except for Plaintiffs’ as-applied First Amend-

ment challenge to the PIR. The district adopted the recom-

mendations in their entirety. Ultimately, in its Amended

Order, the district court granted the motions to dismiss as to

all of Plaintiffs’ claims, except for the as-applied challenge to

the PIR.6

The parties then engaged in a lengthy and contentious dis-

covery process, with several disputed motions to compel. The

district court denied Plaintiffs’ requests for production of doc-

uments relating to LSC’s interpretation and enforcement of

the substantive Restrictions, but permitted a great deal of dis-

covery regarding LSC’s enforcement of the PIR.

In December 2007, LSC and the United States filed

motions for summary judgment on Plaintiffs’ remaining as-

applied challenge, and the individual LASO attorneys filed a

cross-motion for partial summary judgment. The court

granted Defendant and Intervenor’s motions and denied the

LASO attorneys’ motion. See Legal Aid Serv. of Or. v. Legal

Serv. Corp., 561 F. Supp. 2d 1187 (D. Or. 2008).

Plaintiffs then filed a motion for new trial or, in the alterna-

tive, to amend/correct the opinion and judgment. In their

motion, Plaintiffs stated that they read the order as granting

summary judgment in favor of LSC on both their as-applied

challenge to the PIR, and their as-applied challenge to the

Restrictions themselves — which they believed were legally

distinct claims. The problem with the judgment, in Plaintiffs’

view, was that district court’s prior Amended Order had dis-

missed all of Plaintiffs’ claims except for the as-applied chal-

lenge to the PIR. Had they known that the as-applied

6

After the district judge filed the Amended Order, the parties consented

to the Magistrate Judge’s full jurisdiction over the case under 28 U.S.C.

§ 636(c).

7968 LEGAL AID v. LEGAL SERVICES CORP.

challenge to the Restrictions was still at issue, Plaintiffs con-

tended, they would have presented additional arguments and

evidence.

After holding two hearings on the matter, the Magistrate

Judge denied Plaintiffs’ motion. He explained that Plaintiffs’

inability to present additional arguments and evidence related

to their as-applied challenge to the Restrictions “couldn’t have

impacted the ultimate decision,” because the only issue before

the court after the dismissal of Plaintiffs’ facial challenge to

the Restrictions was whether the PIR permitted Plaintiffs to

access alternative channels for expressing protected speech.

Plaintiffs timely appealed, seeking review of the district

court’s dismissal of their facial challenge to the Restrictions,

entry of summary judgment on their as-applied challenge,

denial of their motion for a new trial, and denial of several

motions to compel relating to LSC’s enforcement of the

Restrictions.

STANDARDS OF REVIEW

Review of the district court’s dismissal for failure to state

a claim is de novo, “accept[ing] all factual allegations in the

complaint as true and constru[ing] the pleadings in the light

most favorable to the nonmoving party.” Knievel v. ESPN,

393 F.3d 1068, 1072 (9th Cir. 2005).

Review of the district court’s entry of summary judgement

is also de novo. Henderson v. City of Simi Valley, 305 F.3d

1052, 1055 (9th Cir. 2002). Summary judgment is to be

granted only if the pleadings and supporting documents,

viewed in the light most favorable to the non-moving party,

show that there is no genuine issue as to a material fact, and

the moving party is entitled to judgment as a matter of law.

See FED. R. CIV. P. 56(c).

Review of the district court’s ruling on a motion for a new

trial is for abuse of discretion. Doe ex rel. Rudy-Glanzer v.

LEGAL AID v. LEGAL SERVICES CORP. 7969

Glanzer, 232 F.3d 1258, 1263 (9th Cir. 2000). Review of its

rulings limiting the scope of discovery are for “a clear abuse

of discretion.” Blackburn v. United States, 100 F.3d 1426,

1436 (9th Cir. 1996).

DISCUSSION

I. Plaintiffs’ Facial Challenge to the Restrictions

Plaintiffs contend that LASH III is irreconcilable with the

Supreme Court’s subsequent decision in Velazquez III; thus,

that we must reconsider the facial constitutionality of the

Restrictions under the rubric set forth in Velazquez III. See

Miller v. Gammie, 335 F.3d 889, 900 (9th Cir. 2003) (en

banc) (explaining that a three-judge panel of this court is not

bound by circuit precedent where the subsequent decision of

a higher court “undercut[s] the theory or reasoning underlying

the prior circuit precedent in such a way that the cases are

clearly irreconcilable”). Upon careful review of Justice Ken-

nedy’s opinion for the majority in Velazquez III, we agree

with the district court that LASH III continues to control.

In striking down the suits-for-benefits exception, the Velaz-

quez III court distinguished Rust, explaining that “viewpoint-

based funding decisions can be sustained in instances . . . in

which the government ‘use[s] private speakers to transmit

specific information pertaining to its own program.’ ” 531

U.S. at 541 (quoting Rosenberger v. Rector & Visitors of

Univ. of Va., 515 U.S. 819, 833 (1995)). Where it endeavors

to fund certain modes of private expression, however, “Con-

gress’ antecedent funding decision cannot be aimed at the

suppression of ideas thought inimical to the Government’s

own interest.” Id. at 548-49. Because LSC’s grant program

subsidized private expression through the medium of free

legal services, the Court concluded that Rust was not control-

ling. Justice Kennedy also observed that the suits-for-benefits

exception “distorts the legal system by altering the traditional

role of the attorneys,” id. at 544, thereby “prohibit[ing] speech

7970 LEGAL AID v. LEGAL SERVICES CORP.

and expression upon which courts must depend for the proper

exercise of the judicial power,” id. at 545.

According to Plaintiffs, Velazquez III announced a new

First Amendment doctrine applicable in unconstitutional con-

ditions cases — in essence a “distortion test” — eroding the

foundation on which LASH III rested. They contend that in

Velazquez III, as in this case, Congress chose to subsidize pri-

vate expression through a particular medium, and then dis-

torted the functioning of that medium by restricting the

procedural tools and legal strategies that grantee attorneys

were permitted to utilize in the course of their advocacy.

Defendant and Intervenor, for their part, contend that Plain-

tiffs read Velazquez III far too broadly. See, e.g., Intervenor’s

Reply Br. at 23 (contending that “Velazquez III merely stands

for the unremarkable proposition that the government may not

impose viewpoint-based restrictions where it seeks to fund

private speech”). Because the Restrictions do not discriminate

against a particular viewpoint, they argue, Velazquez III is

inapposite, and Justice Kennedy’s discussion of the suits-for-

benefits exception’s distortionary effects does not disturb the

holding in LASH III.

[1] We agree with the district court that Plaintiffs’ distor-

tion theory relies on a mistaken reading of Velazquez III. The

Velazquez III Court analyzed the grantee plaintiffs’ unconsti-

tutional conditions claim through the lens of the Court’s lim-

ited public forum cases.7 See 531 U.S. at 544 (“As this suit

7

A “limited public forum” is “a nonpublic forum that the government

intentionally has opened to certain groups or for the discussion of certain

topics.” Faith Ctr. Church Evangelistic Ministries v. Glover, 480 F.3d

891, 908 (9th Cir.), cert. denied, 128 S. Ct. 143 (2007). As the Supreme

Court has noted, limited public fora can exist “more in a metaphysical

than in a spatial or geographic sense.” Rosenberger, 515 U.S. at 830.

Examples of such fora include a school mail system, see Perry Educ.

Ass’n v. Perry Local Educators’ Ass’n, 460 U.S. 37, 46-47 (1983), a chari-

table contribution program, see Cornelius v. NAACP Legal Defense &

Educ. Fund, Inc., 473 U.S. 788, 801 (1985), and a university program for

subsidizing and distributing student publications, see Rosenberger, 515

U.S. at 830.

LEGAL AID v. LEGAL SERVICES CORP. 7971

involves a subsidy, [the Court’s] limited forum cases . . . may

not be controlling in a strict sense, yet they do provide some

instruction.”); see also Mezibov v. Allen, 411 F.3d 712, 720

(6th Cir. 2005) (stating that “Velazquez [III] involved . . . a

government funding program that the Court deemed a limited

public forum for First Amendment purposes”); Marijuana

Policy Project v. United States, 304 F.3d 82, 87 (D.C. Cir.

2002) (stating that Velazquez III “rests on limited public

forum doctrine”). In a limited public forum, the Court has

held, the government may not “regulat[e] speech when the

specific motivating ideology or the opinion or perspective of

the speaker is the rationale for the restriction.” Rosenberger,

515 U.S. at 829. Content discrimination, however, is permis-

sible in a limited public forum so long as it is “ ‘reasonable

in light of the [forum’s] purpose.’ ” See id. at 829-30 (quoting

Cornelius, 473 U.S. at 806).

[2] Because LSC’s grant program operates much like a lim-

ited public forum, the Velazquez III court explained, it is sub-

ject to the First Amendment principles that govern such

forums. See 531 U.S. at 544. Accordingly, the Court held that

restrictions on the activities of LSC grantees may not target

a particular viewpoint or motivating ideology, and they “can-

not be aimed at the suppression of ideas thought inimical to

the Government’s own interest.” Id. at 549.

[3] Justice Kennedy’s discussion of how the suits-for-

benefits exception “distorts the legal system” is thus ancillary

to the Court’s holding. The reference to distortion is best

understood as underscoring the analytical connection linking

LSC’s grant program to the government properties and pro-

grams that the Court has recognized as limited public fora for

the purposes of the First Amendment — not as elaborating a

novel First Amendment doctrine. See id. at 544 (explaining

that “[r]estricting LSC attorneys in advising their clients and

in presenting arguments and analyses to the courts distorts the

legal system by altering the traditional role of the attorneys in

much the same way broadcast systems or student publication

7972 LEGAL AID v. LEGAL SERVICES CORP.

networks were changed” in the Court’s limited public forum

cases (emphasis added)).

[4] With this understanding of Velazquez III in mind, we

return to the Restrictions. In prohibiting grantees from solicit-

ing clients, lobbying, and participating in class actions, Con-

gress did not discriminate against any particular viewpoint or

motivating ideology, much less did it aim to suppress “ideas

. . . inimical to the Government’s own interest.” Id. at 549.

The Restrictions simply limit specific procedural tools and

strategies that grantee attorneys may utilize in the course of

carrying out their legal advocacy. As such, they are permissi-

ble under Velazquez III.8

[5] In sum, we conclude that Velazquez III did not establish

a new First Amendment test that hinges on whether restric-

tions on a given government subsidy distort an existing

medium of expression. Rather, the Court applied familiar

principles, drawn from the limited public forum doctrine, to

strike down a viewpoint-based restriction on private expres-

sion. Because the Restrictions do not discriminate against a

particular viewpoint, they are constitutional under Velazquez

III. LASH III thus remains controlling precedent, and the dis-

trict court did not err in dismissing Plaintiffs’ facial challenge

to the Restrictions.9

8

Plaintiffs do not contend that the Restrictions are “unreasonable” as the

term is used in the Court’s limited public forum cases. For that reason, we

do not address the issue raised by the dissent that Plaintiffs’ distortion

arguments should be considered as part of a reasonableness inquiry. Addi-

tionally, Plaintiffs do not contend that either the class action, solicitation,

or lobbying restrictions discriminate on the basis of viewpoint.

9

We note that the Second Circuit — the only other circuit to consider

the constitutionality of the Restrictions post-Velazquez III — reached the

same conclusion. See Velazquez V, 462 F.3d at 236 (adopting the district

court’s conclusion in Velazquez IV that the in-person solicitation and class

action restrictions are reasonable and viewpoint neutral, and therefore per-

missible under Velazquez III).

LEGAL AID v. LEGAL SERVICES CORP. 7973

II. As-Applied Challenge

Plaintiffs contend that the PIR, as LSC has interpreted and

applied it, effectively prevents them from expressing pro-

tected speech through alternative channels. Because they have

not “demonstrated as a factual matter that the [PIR] has not

left them adequate alternative channels for protected expres-

sion,” Velazquez V, 462 F.3d at 231, the district court properly

entered summary judgment in favor of LSC. We first address

LASO and its clients’ as-applied claims, and then turn to the

individual LASO attorneys’ claims.10

A. LASO and its Clients

[6] In LASH III we held that, as a facial matter, the PIR

provides LSC grantees (and their employees and clients) with

adequate alternative channels for engaging in restricted

speech. We acknowledged, however, that a grantee could

challenge subsequent applications of the PIR in a separate

action. See LASH III, 145 F.3d at 1024 (noting that “even if

[the LASH plaintiffs] presented a factual situation that sug-

gested the restrictions were unconstitutional in only limited

circumstances . . . [the court] would not strike down the

restrictions as unconstitutional” in the context of a facial chal-

lenge).

[7] An as-applied First Amendment challenge contends that

a given statute or regulation is unconstitutional as it has been

applied to a litigant’s particular speech activity. See Members

of City Council of City of L.A. v. Taxpayers for Vincent, 466

U.S. 789, 802-03 (1984). The underlying constitutional stan-

dard, however, is no different then in a facial challenge. See

10

Plaintiffs do not explain how LSC’s application of the PIR violated

the free speech rights of LASO’s private donors, nor do they address how

OLC, an unrestricted LASO affiliate not subject to the PIR, could suffer

an as-applied First Amendment violation. Accordingly, we do not address

those claims.

7974 LEGAL AID v. LEGAL SERVICES CORP.

Velazquez V, 462 F.3d at 228 (“Facial and as-applied chal-

lenges differ in the extent to which the invalidity of a statute

need be demonstrated . . . [i]nvariant, however, is the substan-

tive rule of law to be used.”). Accordingly, we apply the con-

stitutional standard set forth in LASH III, namely, whether

LSC’s enforcement of the PIR has effectively cut off alterna-

tive channels through which Plaintiffs can express restricted

speech. See LASH III, 145 F.3d at 1025.

[8] Between 1996 and 2005, LASO and OLC coordinated

their efforts to deliver legal services to indigent clients, but

maintained legal, physical, and financial separation from each

other. During that period, LSC did not assert or imply that

LASO’s affiliation with OLC violated the PIR. LSC’s rejec-

tion of the Proposal in 2005 — the only concrete application

of the PIR in the record before us — is thus the focal point

of our analysis.

LSC determines whether a grantee is sufficiently indepen-

dent from a non-restricted affiliate on a case-by-case basis,

taking into consideration the totality of the circumstances. 45

C.F.R. § 1610.8(a)(3). “Mere bookkeeping separation of LSC

funds from other funds is not sufficient.” Id. Other factors,

such as having separate personnel, separate accounting and

timekeeping records, separate facilities, and distinguishing

forms of identification are relevant but not dispositive. Id. All

grantees must annually certify to LSC that their program com-

plies with the PIR, 45 C.F.R. § 1610.8(b), and a grantee

uncertain about whether its relationship with a restricted affil-

iate satisfies the PIR may “submit [to LSC] all the relevant

‘program integrity’ information and request a review by

[LSC] of any existing or contemplated relationship with an

organization that engages in restricted activities,” 62 Fed.

Reg. 27,695, 27,698.

[9] Plaintiffs do not dispute that by eschewing formal legal

separation, the Proposal violated the PIR on its face. Although

LSC generally applies a case-by-case, totality-of-the-

LEGAL AID v. LEGAL SERVICES CORP. 7975

circumstances approach to PIR enforcement, it informs grant-

ees that they “may transfer non-LSC funds to another organi-

zation which engages in restricted activity if, and only if, the

other organization is a legally separate entity.” LSC Instruc-

tions for Certification of Program Integrity at 1. We upheld

the validity of the PIR’s legal separation requirement in LASH

III, and thus, LSC’s rejection of the Proposal on that basis

cannot itself establish an as-applied First Amendment viola-

tion. 145 F.3d at 1027 (“[W]e do not find it significant that

the LSC regulations require that [an] unrestricted [affiliate]

organization be a ‘legally separate entity.’ ” (quoting 45

C.F.R. § 1610.8(a)(1))).

Plaintiffs contend that they cannot risk testing the PIR’s

limits, because doing so could lead to immediate termination

of federal funding they depend on for basic operations. Plain-

tiffs’ professed fear is not sufficient to establish an as-applied

violation of their First Amendment rights. First, we note that

Congress has provided that LSC grant funding “shall not be

suspended unless the grantee, contractor, or person or entity

receiving financial assistance . . . has been given reasonable

notice and opportunity to show cause why such action should

not be taken,” 42 U.S.C. § 2996j(1), and that grantees are

entitled to a pre-deprivation hearing before “an independent

hearing examiner,” id. § 2996j(2). Thus, Plaintiffs’ concerns

about immediate termination of funding without prior notice

appear to be unwarranted.

Further, Plaintiffs have not explained why the prospect of

funding termination prevents them from submitting an

amended configuration proposal (one that, at the very least,

conforms to the PIR’s legal and physical separation require-

ments) to LSC. LSC officials testified that they engage in an

iterative process with grantees to ensure PIR compliance, and

Plaintiffs have offered no evidence suggesting that this char-

acterization of LSC’s general approach is inaccurate. While

submitting an amended proposal (or proposals) may impose

some level of practical burden on LASO and its staff, LASH

7976 LEGAL AID v. LEGAL SERVICES CORP.

III makes clear that a grantee must show more than a burden

on the exercise of protected speech to establish an as-applied

First Amendment violation — the grantee must show that

workable alternative channels do not exist.

Plaintiffs point to enforcement actions that LSC has taken

against other grantees to bolster their as-applied challenge.

They contend that a “prudent” grantee will pay close attention

to PIR compliance audits and investigative reports that LSC

periodically conducts and makes available to the public, and

entered several audits and reports of this kind into the record.

The district court disregarded the evidence of LSC’s applica-

tion of the PIR to grantees other than LASO, concluding that

it was not relevant in the context of an as-applied First

Amendment challenge.

We have held that “[a]n as-applied [First Amendment]

challenge does not implicate the enforcement of the [chal-

lenged] law against third parties.” Foti v. City of Menlo Park,

146 F.3d 629, 635 (9th Cir. 1998). That general principle

clearly applies here. That a grantee may glean insight into

LSC’s enforcement policies by examining publically available

audits and LSC Inspector General reports is not controversial.

Plaintiffs, however, go a step further. They contend that LSC

audits of other, unrelated grantees are tantamount to actual

enforcement actions against LASO, its staff attorneys, and its

clients. Accepting this premise would require the court to

assume that LSC would treat LASO in the same manner that

it has treated other grantees — despite the myriad practical

differences among grantees and LSC’s “totality-of-the-

circumstances” approach to determining PIR compliance —

and then speculate about whether that treatment would violate

the First Amendment. Such an approach is inconsistent with

the limited scope of an as-applied constitutional challenge.

[10] In sum, the record reflects that LSC employs a flexi-

ble, fact-intensive process for determining whether a grantee

maintains objective integrity and independence. LASO has

LEGAL AID v. LEGAL SERVICES CORP. 7977

not been subjected to an LSC audit, nor, according to the

record, has it been threatened with an audit, despite its close

affiliation with OLC. LSC’s rejection of the Proposal, stand-

ing alone, is not sufficient to establish an as-applied First

Amendment violation, and Plaintiffs have not identified any

other concrete application of the PIR that has had the effect

of prohibiting LASO, or the clients the organization serves,

from expressing restricted speech through alternative chan-

nels.

B. LASO Attorneys

The individual LASO attorneys’ separately contend that

they are entitled to summary judgment on their as-applied

challenge to the PIR.

Their argument runs as follows: LSC, in an official guid-

ance document and in audits of other grantees, has stated that

if more than ten percent of a larger grantee’s attorneys work

part-time for a particular unrestricted affiliate, the grantee is

likely not in compliance with the PIR. Therefore, at least

some LASO attorneys that wish to do so (they offer affidavits

from individual LASO attorneys suggesting that more than

ten percent of LASO’s attorneys do in fact wish to work for

OLC part-time), are effectively barred from exercising pro-

tected speech rights. The district court denied the attorneys’

motion for partial summary judgment, concluding that they

had failed to show any specific instance where LSC had

denied an individual LASO attorney’s request to work part-

time (or on his or her own time) for an unrestricted organiza-

tion.11

[11] We agree that the individual LASO attorneys have

failed to show that LSC’s enforcement of the PIR effectively

cuts off alternative channels for engaging in protected speech.

11

An attorney working full-time for an LSC grantee may only engage

in the outside practice of law under limited circumstances. See 45 C.F.R.

§ 1604.4.

7978 LEGAL AID v. LEGAL SERVICES CORP.

A 1997 LSC Guidance Memorandum states the following:

There is no per se bar against a recipient employing

part-time staff who are also employed part-time by

an organization which engages in restricted activity.

Generally speaking, however, the more staff

“shared,” or the greater the responsibilities of the

staff who are employed by both organizations, the

more danger that program integrity will be compro-

mised. Sharing an executive director, for example,

inappropriately tends to blur the organizational lines

between the entities. Likewise, sharing a substantial

number or proportion of recipient staff calls the

recipient’s separateness into question.

In a footnote, the memo explains that “[f]or larger organiza-

tions, 10% of the recipients’s attorney/paralegal staff should

serve as a guide. However, for recipients with smaller staffs,

the program director should use his or her best judgment to

determine whether part-time staff constitute a substantial pro-

portion of the recipient’s legal workforce.”

The above statements outline LSC’s general methodology

for determining whether a grantee and an unrestricted affiliate

are sufficiently separate. The rough “10 percent rule” that the

LASO attorneys rely on does not suggest that only 10 percent

of LASO’s staff may engage in restricted activity part-time,

or on their own time, but rather that, under normal circum-

stances, no more than 10 percent of LASO’s legal staff may

work part-time at the same unrestricted organization. That

the PIR prevents at least some LASO attorneys from working

part-time for OLC does not establish that it effectively cuts

off alternative channels for engaging in protected speech. As

we recognized in LASH III, LASO attorneys are free to pursue

a variety of alternative avenues for expressing restricted

speech, including working full-time for an unrestricted orga-

nization, or alternatively, continuing to work for an LSC

LEGAL AID v. LEGAL SERVICES CORP. 7979

grantee organization and engaging in restricted activities on

their own time. See LASH III, 145 F.3d at 1029.

[12] The district court thus did not err in denying the indi-

vidual LASO attorneys’ motion for partial summary judg-

ment.

III. Motion for New Trial and Related Discovery Issues

[13] Plaintiffs contend that the district court abused its dis-

cretion in denying their motion for a new trial and their

motions to compel the production of documents relating to

LSC’s enforcement of the Restrictions. We disagree.

The basic premise underlying both Plaintiffs’ motion for a

new trial and their motions to compel discovery — that the

Restrictions and the PIR can be challenged in separate as-

applied claims — is flawed. As we have explained, under

LASH III, the Restrictions are constitutional so long as LSC’s

enforcement of the PIR provides grantees with alternative

channels through which they can direct restricted speech.

Velazquez III did not disturb the holding in LASH III; thus, the

district court properly focused the litigation below on the

manner in which LSC has interpreted and applied the PIR.

CONCLUSION

For the reasons set forth above, the judgment of the district

court is

AFFIRMED.

7980 LEGAL AID v. LEGAL SERVICES CORP.

PREGERSON, Circuit Judge, amended partial dissent:

In 1974, Congress established the not-for-profit Legal Ser-

vices Corporation (“LSC”) for the purpose of distributing

grants to enable qualifying legal service organizations to pro-

vide free legal assistance to the poor in non-criminal proceed-

ings. 42 U.S.C. §§ 2996-2996l. In the years since, Congress

has attached a number of restrictions to the ways in which

recipients of LSC grants can provide legal services. See, e.g.,

§ 2996f(b). In 1996, Congress attached another set of restric-

tions to the LSC grants. See Omnibus Consolidated Rescis-

sions and Appropriations Act of 1996, Pub. L. No. 104-134,

§ 504, 110 Stat. 1321, 1321-53-56 (1996) (the “1996 Act”),

reenacted in the Omnibus Consolidated Rescissions and

Appropriations Act of 1997, Pub. L. 104-208, § 502, 110 Stat.

3009 (1997).

In this case, Plaintiffs mounted a facial challenge to three

of the 1996 LSC Restrictions. Specifically, Plaintiffs chal-

lenged the LSC Restrictions on: (1) “attempt[s] to influence”

legislation and/or administrative rule-making processes; (2)

initiation of, and participation in, class action lawsuits; and

(3) soliciting clients. Plaintiffs argued that these three Restric-

tions violate their First Amendment rights to free speech and

association because the Restrictions distort Plaintiffs’ ability

to provide legal services to their clients.

The district court rejected Plaintiffs’ distortion argument. In

so doing, the district court erred. First, determining whether

the three Restrictions distort legal services attorneys’ ability

to effectively represent their clients is key to determining

whether the Restrictions are unreasonable in light of the pur-

pose of the LSC grants, and, thus, violate the First Amend-

ment. Second, the three Restrictions do distort the legal

system by imposing serious and fundamental limits on legal

services attorneys’ ability to effectively represent their clients

such that the Restrictions are unreasonable in light of the pur-

pose of the LSC grants.

LEGAL AID v. LEGAL SERVICES CORP. 7981

I. Distortion Renders the Restrictions Unreasonable

A. Velazquez III

In Velazaquez III, the Supreme Court held that the LSC

“suits-for-benefits” restriction, which prohibited legal services

attorneys from challenging existing welfare laws, was uncon-

stitutional. Legal Servs. Corp. v. Velazquez (Velazquez III),

531 U.S. 533, 536 (2001). As the majority in this case

observes, in Velazquez III, the Supreme Court “did not estab-

lish a new First Amendment test,” but rather analyzed the

suits-for-benefits restriction “through the lens of the Court’s

limited public forum cases.” See Majority Opinion at

7970-72. Under the limited public forum analysis, a restric-

tion on speech must be “reasonable in light of the purpose

served by the forum” and cannot “discriminate against speech

on the basis of its viewpoint.” Rosenberger v. Rector & Visi-

tors of the Univ. of Va., 515 U.S. 819, 829 (1995) (internal

quotation marks omitted). Thus, whether a LSC restriction

violates the First Amendment depends on whether the restric-

tion is (1) reasonable in light of the purpose of the LSC grants

(to provide free legal services to the poor), and (2) viewpoint

neutral.

Applying the limited public forum analysis, the Velazquez

III Court held that the suits-for-benefits restriction was uncon-

stitutional. Id. at 548. The reasons identified by the Court for

reaching this conclusion included the Court’s determinations

that (1) the suits-for-benefits restriction “distorts the legal sys-

tem by altering the traditional role of the attorneys . . . . ,” and

that (2) Congress may not subsidize legal services in a way

that seriously and fundamentally restricts the advocacy of

attorneys. Id. at 544.

The majority contends that Velazquez III was decided on

viewpoint discrimination grounds. See Majority Opinion at

7971-72. This reading of Velazquez III is mistaken. Instead,

Velazquez III struck down the suits-for-benefits restriction on

7982 LEGAL AID v. LEGAL SERVICES CORP.

reasonableness grounds. That Velazquez III was decided on

reasonableness grounds is illustrated by two aspects of the

opinion. First, the Velazquez III majority repeatedly discussed

the suits-for-benefits restriction in the context of the purpose

of the LSC grants.1 This is significant because analysis of the

LSC grants’ purpose goes to whether a restriction is reason-

able, not to whether it discriminates on the basis of viewpoint.

Second, the Velazquez III majority never stated that it was

deciding the case on viewpoint discrimination grounds and

did not dispute the dissent’s contention that the majority did

not challenge whether the suits-for-benefits restriction was

viewpoint neutral. See Velazquez III, 531 U.S. at 549 (Scalia,

J. dissenting) (noting that the majority did not claim the suits-

for-benefits restriction “discriminates on the basis of view-

point.”). This is significant because if the Velazquez III major-

ity intended to overturn the suits-for-benefits restriction on

viewpoint grounds, one would expect the majority to respond

to the dissent’s assertion to the contrary.

Thus, the Velazquez III majority’s discussion of how the

suits-for-benefits restriction “distorts the legal system” can

properly be understood to refer to the “reasonableness” of the

restriction in light of the purpose of the LSC grants rather

than whether the restriction was viewpoint neutral. Because

the suits-for-benefits restriction “distort[ed] the legal system

by altering the traditional role of . . . attorneys,” it was unrea-

sonable in light of the purpose of the LSC grants. And,

because the suits-for-benefits restriction was unreasonable in

1

See, e.g., 531 U.S. at 536 (noting the purpose of LSC grants is to fund

legal representation for the indigent in noncriminal matters); Id. at 537

(explaining that the restriction permitted the attorney-grantees to represent

“indigent clients seeking welfare benefits” but, prohibited the attorney-

grantees from challenging “existing welfare law”); Id. at 543 (noting that

review of the restriction is informed by whether the restriction is necessary

to the program’s purpose); Id. at 544 (noting that the government seeks to

facilitate suits-for-benefits but distorts the judiciary’s ability to resolve the

claims).

LEGAL AID v. LEGAL SERVICES CORP. 7983

light of the purpose of the LSC grants, it violated the First

Amendment under the limited public forum analysis.

B. Plaintiffs’ Distortion Arguments Were Not Properly

Considered

Before the district court, Plaintiffs argued that the three

Restrictions violate the First Amendment because they distort

legal services attorneys’ ability to effectively represent their

clients. Plaintiffs, however, did not frame their distortion

arguments as reasonableness arguments within the limited

public forum analysis. Nonetheless, whether the three Restric-

tions distort legal services attorneys’ ability to effectively rep-

resent their clients is key to determining whether the

Restrictions are unreasonable within the limited public forum

analysis. For this reason, the district court should have consid-

ered Plaintiffs’ distortion arguments as part of the reasonable-

ness inquiry.2

2

The majority concludes that “Plaintiffs do not contend that the Restric-

tions are ‘unreasonable’ as the term is used in the Court’s limited public

forum cases.” See Majority Opinion at 7972 n. 8. For that reason, the

majority does not address Plaintiffs’ distortion arguments as part of the

reasonableness inquiry. See Id. I believe that Plaintiffs have sufficiently

presented this issue for consideration. Plaintiffs argue that under Velaz-

quez III, the three Restrictions violate the First Amendment because they

distort legal services attorneys’ ability to effectively represent their clients.

See Plaintiffs’ Complaint Para. 79-87 (Docket # 1); Plaintiffs’ Opposition

to Defendant LSC’s Motions to Dismiss at 1, 30-35 (Docket # 38); Plain-

tiffs’ Opening Brief at 48-53. Thus, Plaintiffs raise the correct constitu-

tional claim, the controlling case, and the critical argument. That the

Plaintiffs do not more precisely frame that argument as part of the reason-

able inquiry does not prevent this court from so considering it now. Cf.

Elder v. Holloway, 510 U.S. 510, 513-516 (1994) (holding that rather than

considering only the authority relied on by the district court, which “could

occasion appellate affirmation of incorrect legal results,” an appellate

court reviewing a qualified immunity judgment should “use its full knowl-

edge of its own and other relevant precedents”) (internal quotation marks

omitted); Agyeman v. INS, 296 F.3d 871, 877-78 (9th Cir. 2002) (holding

that a petitioner sufficiently raised a due process claim in his appeal to the

Board of Immigration Appeals even though he did not use the phrase “due

process violation”).

7984 LEGAL AID v. LEGAL SERVICES CORP.

The district court, however, did not address the question

whether the three Restrictions distort the process of legal rep-

resentation such that the Restrictions are unreasonable in light

of the purpose of the LSC grants. Because of this failure, the

district court incorrectly analyzed whether the three Restric-

tions violate the First Amendment.

II. The Restrictions Distort Legal Service Attorneys’

Ability to Effectively Represent their Clients

The district court’s failure to properly consider whether the

three Restrictions distort legal services attorneys’ ability to

effectively represent their clients was a critical error because

the Restrictions do distort legal services attorneys’ ability to

effectively represent their clients such that the Restrictions are

unreasonable in light of the purpose of the LSC grants.

To effectively represent their clients, attorneys may need to

use any number of legal tools. Some of the tools an attorney

may use include: making a phone call, writing a letter, trying

to negotiate a settlement, seeking alternative dispute resolu-

tion, filing a lawsuit seeking an injunction, filing a lawsuit

seeking damages, filing a lawsuit challenging the validity of

the underlying law, or seeking to change the underlying law

through lobbying. For example, where a client’s claim has a

particularly small monetary value, an attorney might seek to

combine that client’s claim with similar claims of others

through joinder or through a class action.

Landlord-tenant disputes further illustrate how attorneys

might need to use a variety of legal tools to effectively repre-

sent a poor client. Landlord-tenant disputes often involve very

small sums of money, but carry huge quality of life implica-

tions. A poor tenant, for example, who fails to get her land-

lord to eliminate a lead paint hazard in an apartment might

face the untenable choice of risking harm to the health of her

children by staying or upending her family’s lives and incur-

ring substantial costs by moving out. Where such a tenant

LEGAL AID v. LEGAL SERVICES CORP. 7985

seeks legal help, she could have a winning legal claim that is

nonetheless not a viable solution to her lead paint problem

because the potential damage award is too small to motivate

the landlord to fix the problem. By combining that tenant’s

claim with other tenants’ similar claims, however, an attorney

could increase the potential cost of losing to an amount large

enough to motivate the recalcitrant landlord to remove the

lead paint hazard. But under the Solicitation Restriction at

issue in this case, legal services attorneys are prohibited from

seeking other clients with the same problem. Consequently, in

this hypothetical, were a legal services attorney to take on the

original tenant’s case, that attorney would not be in a position

to effectively represent his client.

Similarly, a client may have a wage and hour claim of such

a small monetary value that even if she were to prevail, a

large and obstinate employer would not be persuaded to

change the underlying practice—thus subjecting the client to

a high probability of future harm. In such a case, a class

action might be the only way to root out the underlying prac-

tice. Alternatively, a client might be suffering an injury that

falls just outside existing wage and hour law. In such a case,

lobbying to change the underlying wage and hour law might

be the client’s only hope of redress. Under the Restrictions,

however, a legal services attorney cannot pursue a class action

or assist a client in lobbying to change an existing law. Conse-

quently, in both these wage and hour hypotheticals, a legal

services attorney would not be able to employ the legal tools

necessary to most effectively represent his client.

This same analysis applies to many of the real life problems

facing the poor. By depriving legal services attorneys of their

ability to pursue class actions, solicit other clients with similar

problems, or lobby to change a law, the three Restrictions at

issue often prevent legal services attorneys from employing

the legal tools that would most effectively redress a client’s

problems. The Restrictions thus distort the legal system

because they seriously and fundamentally limit legal services

7986 LEGAL AID v. LEGAL SERVICES CORP.

attorneys’ ability to effectively represent their clients by cur-

tailing the legal tools that legal services attorneys can employ

to advocate on their clients’ behalf.

III. Conclusion

It is tough for the poor to find good lawyers. The purpose

of LSC grants is to help ameliorate that social problem by

providing funds for legal assistance to people who cannot oth-

erwise pay for a lawyer. Even so, there is still a scarcity of

lawyers serving the poor. Upholding these three Restrictions

severely constrains those dedicated lawyers who choose to

serve the poor by seriously and fundamentally limiting their

ability to effectively represent their clients. The three Restric-

tions thus distort a legal system designed to “do equal right

to the poor and to the rich” (28 U.S.C. § 453, Oaths of justices

and judges) so that all Americans will be the beneficiaries of

a system of government based on equal justice under the law.

Under the limited public forum analysis, because these three

Restrictions distort legal services attorneys ability to effec-

tively represent their clients, they are thus unreasonable in

light of the purpose of the LSC grants and therefore violate

the First Amendment. For this reason, I would reverse the dis-

trict court as to Plaintiffs’ facial challenge to the three Restric-

tions.