Opinion ID: 3065248
Heading Depth: 2
Heading Rank: 1

Heading: LASO and its Clients

Text: [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 suggested the restrictions were unconstitutional in only limited circumstances . . . [the court] would not strike down the restrictions as unconstitutional” in the context of a facial challenge). [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 standard, 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. 15510 LEGAL AID v. LEGAL SERVICES CORP. Velazquez V, 462 F.3d at 228 (“Facial and as-applied challenges differ in the extent to which the invalidity of a statute need be demonstrated . . . [i]nvariant, however, is the substantive rule of law to be used.”). Accordingly, we apply the constitutional standard set forth in LASH III, namely, whether LSC’s enforcement of the PIR has effectively cut off alternative 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 rejection 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 independent 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 complies with the PIR, 45 C.F.R. § 1610.8(b), and a grantee uncertain about whether its relationship with a restricted affiliate 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-theLEGAL AID v. LEGAL SERVICES CORP. 15511 circumstances approach to PIR enforcement, it informs grantees that they “may transfer non-LSC funds to another organization which engages in restricted activity if, and only if, the other organization is a legally separate entity.” LSC Instructions 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 violation. 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. Plaintiffs’ 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 requirements) 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 characterization 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 15512 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 application 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 [challenged] 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-thecircumstances” 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 flexible, fact-intensive process for determining whether a grantee maintains objective integrity and independence. LASO has LEGAL AID v. LEGAL SERVICES CORP. 15513 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, standing 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 channels.