Court Opinion

ID: 9472583
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:04:45.843286+00
Date Added: 2024-06-11T17:43:01.664395
License: Public Domain

STARR, Circuit Judge,
dissenting:
I respectfully dissent. The majority’s decision unnecessarily requires the Legal Services Corporation (LSC) to provide East Arkansas Legal Services (EALS) with a hearing under 42 U.S.C. § 2996j (1976 & Supp. V 1981) and 45 C.F.R. § 1606 (1983) prior to withholding a portion of EALS’ fiscal year 1983 (FY 1983) funds in order to offset unexpended funds carried over from FY 1982. In my view, the LSC’s attempted offset of unspent carried over funds does not constitute a “termination” of “financial assistance” within the meaning of the ap*1482plicable statute and regulations. Thus, I would hold that LSC was not required to provide EALS with a pre-termination hearing prior to effecting the offset.
Section 2996j(2) provides that The Corporation shall prescribe procedures to ensure that —(2) financial assistance under this subchapter shall not be terminated, an application for refunding shall not be denied, and a suspension of financial assistance shall not be continued for longer than thirty days, unless the grantee, contractor or person receiving financial assistance under this sub-chapter has been afforded a reasonable notice and opportunity for a timely, full, and fair hearing, and, when requested, such hearing shall be conducted by an independent hearing examiner. Such hearing shall be held prior to any decision by the Corporation to terminate financial assistance or suspend or deny funding.
The procedures implementing this provision are found in 45 C.F.R. § 1606 (1983). The regulations specify a rather elaborate pretermination notice and hearing procedure,1 which is triggered by three specific types of actions affecting the level of funding of an LSC grantee — termination, suspension, or denial of refunding. The regulations define “termination,” the funding action relevant to this case, as “a decision that financial assistance to a recipient will be permanently terminated in whole or in part prior to expiration of the recipient’s grant or contact.” Id. § 1606.2(a).2
As the majority recognizes, neither the statute nor the regulations define the term “financial assistance.” The majority nonetheless concludes that termination of financial assistance includes termination of “the amount of money actually paid to a recipient pursuant to a grant award, not [ ] the amount of funds available to a recipient during a grant year.” Majority Opinion at 1478. The majority reaches this conclusion by arguing that the “common usage” of the term “financial assistance” requires this construction. The majority further argues that the “plain meaning” of the statutory provisions governing the LSC grant-making process and the termination regulations support its interpretation.
Critically, the majority arrives at this “common sense” interpretation of these straightforward words only by overlooking the significance of the basic fact that grant awards to legal services providers are made on an annual basis and are calculated by means of a “minimum access figure.” 3 Contrary to the majority’s suggestion, the annual basis on which grants are awarded supports the LSC’s argument that a termination requires, at a minimum, a reduction of the annual funding level. The annual basis of the funding of LSC grantees also suggests that termination, *1483under the statute and regulations, does not refer to the recapture of excess surplus. Consistent with this interpretation of the statute and regulations, the offset attempted here in no way purports to cut off permanently EALS’ financial assistance, in whole or in part. Rather, EALS’ FY1983 funding is to be continued at its annualized rate. Indeed, there is no contention, nor could there be, that EALS’ funds are being reduced below this normal level. The offset attempted here is intended only to recover unexpended FY82 funds carried over into FY83.
Moreover, the structure and express language of the regulations supports the view that “termination” does not occur when LSC attempts to recoup unspent funds. In particular, the regulations governing denials of refunding, contrary to the majority’s assertion that the regulations do not mention “annual level” of funding, expressly refer to the annualized funding level. A denial of refunding parallels a termination of funding, except that a termination is effective at the time of the current grant, whereas a denial of refunding affects only future grants. 45 C.F.R. § 1606.2(a), (b). Thus, an examination of the criteria for “denial of refunding” is helpful in understanding the type of funding action encompassed by a “termination.” The regulations state that a “denial of refunding” occurs when the recipient (1) “[w]ill not be provided with financial assistance”; (2) “[w]ill have its annual level of financial support reduced to an extent ” that does not result from an overall reduction of LSC funding to legal services agencies and that is more than 10% or $20,000 below the recipient’s current level of assistance; and (3) “[wjill be provided with financial assistance subject to a new condition or restriction not generally applicable in other legal services agencies.” Id. § 1606.2(b) (emphasis added). “Termination,” by analogy, encompasses only reductions in the annual level of funding. Since there has been no reduction in the annual level of EALS' annual funding, no termination has occurred.
Neither the statute nor the regulations purport to require an elaborate hearing for every LSC action regarding funding. Rather, the statute and regulations require a hearing only for terminations, suspensions, and denials of refunding. The application of termination embraced by the majority would drain the term of all meaning. If an offset such as that attempted here requires a hearing, then it is difficult to see how an erroneous overpayment, for example, could be recovered without a hearing. In sum, the broad definition of termination adopted here would trigger the hearing procedure for each and every funding decision, an anomalous result compelled neither by the statute nor regulations.
Finally, it should not go unnoticed that the instant case is but a small portion of a much larger drama. Over the past few years, LSC has been engaged in an effort to remedy what appears to be a vexatious problem with excess fund balances being held by various LSC grantees. See Appellant’s Brief 7-10. Pursuant to its grant-making authority under the Legal Services Corporation Act, 42 U.S.C. § 2996f, LSC is to “insure that grants and contracts are made so as to provide the most economical and effective delivery of legal assistance.” As early as 1980, LSC developed guidelines aimed at limiting and controlling the amount of unspent, excess funds being retained by LSC providers. Despite that initial effort, the problem has apparently remained, and LSC, in 1982, ultimately developed the Fund Balance Instruction at issue in this case. The majority’s decision, requiring as it does a hearing prior to recoupment of those excess, unspent funds, defeats the statutory prescription for the “economical and effective” legal services to the poor. That provision indicates Congress’ clear intent that funds be utilized, not simply held, by legal services providers. Thus, the majority’s requirement of a hearing prior to implementation of the recoupment of excess funds, rather than serving the noble goal of providing the needy with legal services, frustrates that goal.
In sum, nothing in the statute nor the regulations compels the majority’s conclusion. The offset attempted here did not *1484rise to the level of a termination of financial assistance, and thus no hearing was required prior to its implementation. I therefore dissent.

. The regulations provide for notification of the Corporation’s "preliminary determination” that the grant should be terminated or refunding should be denied to the recipient, 45 C.F.R. § 1606.5; for an informal conference procedure at the request of the recipient, id. § 1606.6; and for a fact-finding hearing procedure to be conducted by an independent presiding officer. Id. §§ 1606.7-8. The regulations further specify that the Corporation has the burden of proof by a preponderance of the evidence on issues of fact, id. § 1606.11(a), and that the Corporation has the obligation of proving a "substantial basis” for its actions. Id. § 1606.11(b). After the hearing and any briefing of issues, the presiding officer issues a recommended decision, which is, in turn, reviewable by the President of LSC. Id. §§ 1606.13-.14.

. The decision to terminate current funding may be based on several criteria. These criteria permit termination or denial of refunding (1) when the denial or termination is "required by or will implement a provision of law, a Corporation rule, regulation, guideline or instruction, ... or a funding policy, standard, or criterion approved by the Board”; (2) when the recipient has substantially failed to comply with a provision of law, rule, regulation, or guideline; and (3) when "there has been substantial failure ... to use [ ] resources to provide economical and effective legal assistance.” Funding may not be terminated during the current grant period on the basis of a rule, regulation, guideline or instruction "that was not in effect when the current grant was made or when the current contract was entered into.” Id. § 1606.4.

. In EALS’ case, this figure is $6.20. Thus, the annualized funding level for EALS for FY83 was $605,274.