Opinion ID: 220365
Heading Depth: 4
Heading Rank: 1

Heading: Spending Clause and Unconstitutional Conditions Jurisprudence

Text: The Spending Clause of the Constitution empowers Congress to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States. U.S. Const. art. I, § 8, cl. 1. This provision allows Congress to condition[] [the] receipt of federal moneys upon compliance by the recipient with federal statutory and administrative directives. South Dakota v. Dole, 483 U.S. 203, 206, 107 S.Ct. 2793, 97 L.Ed.2d 171 (1987) (quoting Fullilove v. Klutznick, 448 U.S. 448, 474, 100 S.Ct. 2758, 65 L.Ed.2d 902 (1980)). It is well settled that Congress is entitled to further policy goals indirectly through its spending power that it might not be able to achieve by direct regulation. See id. at 207, 107 S.Ct. 2793 ([O]bjectives not thought to be within Article I's enumerated legislative fields may nevertheless be attained through the use of the spending power and the conditional grant of federal funds. (internal quotation marks and citation omitted)). Congress's power under the Spending Clause is broad, as the constitutional limitations on Congress when exercising its spending power are less exacting than those on its authority to regulate directly. Id. at 209, 107 S.Ct. 2793. Defendants contend that because the Leadership Act is a Spending Clause enactment, and Plaintiffs are free to decline funding if they do not wish to comply with its conditions, the Policy Requirement should be subjected to only minimal scrutiny under Dole. But Congress's spending power, while broad, is not unlimited, and other constitutional provisions may provide an independent bar to the conditional grant of federal funds. Pursuant to this unconstitutional conditions doctrine, as it has come to be known, the government may not place a condition on the receipt of a benefit or subsidy that infringes upon the recipient's constitutionally protected rights, even if the government has no obligation to offer the benefit in the first instance. See Perry v. Sindermann, 408 U.S. 593, 597, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972) ([E]ven though a person has no `right' to a valuable governmental benefit and even though the government may deny him the benefit for any number of reasons, there are some reasons upon which the government may not rely. It may not deny a benefit to a person on a basis that infringes his constitutionally protected interests  especially, his interest in freedom of speech.). As the Supreme Court recently reiterated, the government may not deny a benefit to a person on a basis that infringes his constitutionally protected ... freedom of speech even if he has no entitlement to that benefit. Rumsfeld v. Forum for Academic and Institutional Rights, Inc., 547 U.S. 47, 59, 126 S.Ct. 1297, 164 L.Ed.2d 156 (2006) ( FAIR ) (internal quotation marks omitted). This tension between the breadth of Congress's spending power on one hand and the principle that a condition on the receipt of federal funds may not infringe upon the recipient's First Amendment rights on the other has given rise to three seminal Supreme Court decisions and several related cases from our Circuit. The Supreme Court cases are Regan v. Taxation With Representation, 461 U.S. 540, 103 S.Ct. 1997, 76 L.Ed.2d 129 (1983), FCC v. League of Women Voters of California, 468 U.S. 364, 104 S.Ct. 3106, 82 L.Ed.2d 278 (1984), and Rust v. Sullivan, 500 U.S. 173, 111 S.Ct. 1759, 114 L.Ed.2d 233 (1991). Our cases include a series of decisions concerning conditions imposed upon recipients of funding from the Legal Services Corporation (LSC): Velazquez v. Legal Services Corp., 164 F.3d 757 (2d Cir.1999) ( Velazquez I ), Legal Services Corp. v. Velazquez, 531 U.S. 533, 121 S.Ct. 1043, 149 L.Ed.2d 63 (2001) ( Velazquez II ), and Brooklyn Legal Services Corp. v. Legal Services Corp., 462 F.3d 219 (2d Cir.2006) ( BLS ). In Regan, plaintiff Taxation With Representation (TWR), a nonprofit lobbying corporation, challenged a statute that denied tax deductions to organizations that engaged in substantial lobbying. 461 U.S. at 541, 544, 103 S.Ct. 1997; see 26 U.S.C. § 501(c)(3). TWR argued that the prohibition against substantial lobbying by § 501(c)(3) organizations imposed an unconstitutional condition on the receipt of tax-deductible contributions. The Supreme Court disagreed, concluding that TWR remained free to receive deductible contributions to support its nonlobbying activity, and could create a separate, tax-exempt affiliate under § 501(c)(4) to pursue its lobbying activity. Id. at 544-45, 103 S.Ct. 1997. Given that alternative, the Court concluded that Congress ha[d] not infringed any First Amendment rights or regulated any First Amendment activity, but simply chosen not to pay for TWR's lobbying. Id. at 546, 103 S.Ct. 1997. In a concurring opinion, Justice Blackmun emphasized the saving effect of § 501(c)(4), stating his view that § 501(c)(3) alone would be constitutional[ly] defect[ive], but that [a] § 501(c)(3) organization's right to speak is not infringed, because it is free to [lobby] through its § 501(c)(4) affiliate without losing tax benefits for its nonlobbying activities. Id. at 552-53, 103 S.Ct. 1997 (Blackmun, J., concurring). The following term, the Supreme Court decided League of Women Voters, which involved a First Amendment challenge to a provision in the Public Broadcasting Act that prohibited stations receiving federal funds from editorializing. 468 U.S. at 367, 104 S.Ct. 3106. The Court struck down the provision, troubled by the fact that it barred [a grantee] from using even wholly private funds to finance its editorial activity. Id. at 400, 104 S.Ct. 3106 (stating that unlike the situation faced by [TWR], a [station] that receives only 1% of its overall income from [federal] grants is barred absolutely from all editorializing). The Court noted, however, that if recipients were permitted to establish `affiliate' organizations which could then use the station's facilities to editorialize with nonfederal funds, such a statutory mechanism would plainly be valid under the reasoning of [ Regan ], as the recipient would be free, in the same way that [TWR] was free, to make known its views on matters of public importance through its nonfederally funded, editorializing affiliate without losing federal grants for its noneditorializing broadcast activities. Id. The Supreme Court elaborated on these themes in Rust, which involved a facial challenge to HHS regulations implementing Title X of the Public Health Service Act. 500 U.S. at 177-78, 111 S.Ct. 1759. Title X authorizes HHS to make grants to organizations to help them run family planning projects, but provides that no Title X funds shall be used in programs where abortion is a method of family planning. Id. at 178, 111 S.Ct. 1759 (quoting 42 U.S.C. §§ 300(a), 300a-6). The HHS regulations prohibited Title X projects from providing abortion counseling or referrals, or engaging in any activities that encourage, promote, or advocate abortion as a method of family planning. Id. at 179-80, 111 S.Ct. 1759. However, the regulations allowed grantees to engage in abortion-related activities as long as their Title X projects maintained objective integrity and independence from such activities  a determination to be made by HHS based on factors such as the existence of separate personnel, and the degree of separation between the Title X project and facilities used for restricted activities. Id. at 180-81, 111 S.Ct. 1759 (quoting 42 C.F.R. § 59.9 (1989)). The Rust plaintiffs argued that the regulations violated the First Amendment because they discriminat[ed] based on viewpoint [by] prohibit[ing] all discussion about abortion as a lawful option, and because they conditioned the receipt of Title X funds on relinquishing the right to engage in abortion-related speech. Id. at 192, 196, 111 S.Ct. 1759 (internal quotation marks omitted). The Supreme Court disagreed, concluding that the Government has not discriminated on the basis of viewpoint; it has merely chosen to fund one activity to the exclusion of the other. Id. at 193, 111 S.Ct. 1759 (The Government can, without violating the Constitution, selectively fund a program to encourage certain activities it believes to be in the public interest, without at the same time funding an alternative program which seeks to deal with the problem in another way.). It held that the regulations do not force the Title X grantee to give up abortion-related speech, but merely require that the grantee keep such activities separate and distinct from Title X activities. Id. at 196, 111 S.Ct. 1759. The Court emphasized that this was unlike the funding condition found unconstitutional in League of Women Voters, where the Government ha[d] placed [the] condition on the recipient of the subsidy rather than on a particular program or service. Id. at 197, 111 S.Ct. 1759 (emphasis in original). We turn now to three decisions of this Court arising under the Legal Services Corporation Act of 1974, pursuant to which the LSC makes grants to local organizations that provide free legal assistance to indigent clients. Velazquez I, 164 F.3d at 759. In 1996, Congress passed legislation barring LSC grants to entities that engage in certain activities, such as lobbying or class actions, thereby restrict[ing] grantees' use of non-federal and federal funds alike. Id. at 760. In order to cure the constitutional infirmities of the 1996 restrictions, LSC issued program integrity regulations, modeled after those upheld in Rust, allowing grantees to affiliate with organizations that did engage in prohibited activities, as long as the entities maintained adequate physical and financial separation. Id. at 761-62. In Velazquez I, we considered a facial challenge to the 1996 statute and LSC regulations, which the plaintiffs argued impermissibly burden[ed] grantees' exercise of First Amendment activities, and constitut[ed] a viewpoint-based restriction on expression. Id. at 763. Judge Leval, writing for the majority, synthesized Regan, League of Women Voters, and Rust as establishing that, in appropriate circumstances, Congress may burden the First Amendment rights of recipients of government benefits if the recipients are left with adequate alternative channels for protected expression. Id. at 766. The facial challenge therefore failed, because although the affiliate option might, as applied to some LSC grantees, prove unduly burdensome, there was no reason to think this would be true for all grantees. Id. at 767. However, one provision in the 1996 statute, which prohibited grantees from representing clients challenging existing welfare law, was held invalid as impermissible viewpoint discrimination. Id. at 769-72. The Supreme Court affirmed our invalidation of that viewpoint-based restriction in Velazquez II. 531 U.S. at 540-41, 121 S.Ct. 1043. The Court interpreted Rust as having implicitly reli[ed] on the rationale that the counseling activities of the doctors under Title X amounted to governmental speech, explaining that viewpoint-based funding decisions can be sustained in instances in which the government is itself the speaker, or instances, like Rust, in which the government use[s] private speakers to transmit information pertaining to its own program. Id. at 541, 121 S.Ct. 1043 (internal quotation marks and citation omitted). The Velazquez II Court held, however, that the LSC program, unlike Title X, was not designed ... to promote a governmental message, as an LSC-funded lawyer is not the government's speaker, but rather speaks on the behalf of his or her private, indigent client. Id. at 542, 121 S.Ct. 1043. Therefore, Rust did not save the viewpoint-based restriction on seeking welfare reform. The Court declined to review the portion of Velazquez I that had upheld the LSC's program integrity regulations. 532 U.S. 903, 121 S.Ct. 1224, 149 L.Ed.2d 135 (2001) (Mem.) (denying certiorari). Following Velazquez II, the Velazquez plaintiffs brought an as-applied challenge to the LSC regulations. BLS, 462 F.3d at 224. The district court enjoined application of the regulations, reasoning that they imposed an undue burden on the plaintiffs' First Amendment rights, as LSC's interest in program integrity could be fulfilled by means less restrictive. Id. at 222, 229. On appeal, we held that the district court's application of an undue burden/less-restrictive-means test to the regulations was error, reiterating the standard articulated in Velazquez I  that grantees' First Amendment rights may be burdened if they are left with adequate alternative channels for protected expression. Id. at 229-31. We therefore remanded for the district court to evaluate the program integrity regulations under that standard.