July 7, 2000
In the Matter of:
California Rural Legal Assistance, Inc.Complainants:
631 Howard Street, Suite 300
San Francisco, CA 94104
National Legal and Policy Center
1309 Vincent Place, Suite 1000
McLean, VA 22101Underwood Ranches
P.O. Box 607
Somis, CA 93066-0607Tierra Linda Corp.
200 South A Street, #302
Oxnard, CA 93030
This complaint alleges that California Rural Legal Assistance, Inc. (CRLA), a program funded by federal tax funds through the Legal Services Corporation (LSC), apparently undertook activities which violated the Legal Services Corporation Act and regulations regarding fee-generating cases.
This complaint further alleges that CRLA's actions appear to have violated federal appropriations law and LSC regulations prohibiting class actions, the initiation of litigation in which each plaintiff has not been specifically identified by name, and the seeking of attorney's fees.
In a complaint filed on February 7, 2000 in Ventura County Superior Court,
CRLA filed a lawsuit seeking:
The activities of CRLA in this case represent an apparent violation of both the LSC Act and regulations regarding fee-generating cases.
The LSC Act addresses the restriction against involvement of LSC-funded programs in fee-generating cases as follows:
No funds made available by the Corporation under this subchapter, either by grant or contract, may be used-
(1) to provide legal assistance (except in accordance with guidelines promulgated by the Corporation) with respect to any fee-generating case (which guidelines shall not preclude the provision of legal assistance in cases in which a client seeks only statutory benefits and appropriate private representation is not available);
The restriction against LSC-funded programs handling fee-generating cases is further described in LSC's regulations at 45 CFR § 1609.42 U.S.C. 2996f(b)(1)
The purpose of the regulation is to "ensure that recipients do not use scarce legal services resources when private attorneys are available to provide effective representation." 45 CFR § 1609.1
The definition of fee-generating case is remarkably straightforward:
"Fee-generating case" means any case or matter which, if undertaken on behalf of an eligible client by an attorney in private practice, reasonably may be expected to result in a fee for legal services from an award to a client, from public funds or from the opposing party.It is beyond dispute that the case being brought by CRLA is a fee-generating case. On page 15 of the attached complaint in a section entitled "Attorneys' Fees and Costs," CRLA explicitly seeks attorneys' fees on behalf of Miner, Barnhill & Galland.45 CFR § 1609.2
It is also beyond dispute that attorneys in private practice are available to take this case because the co-counsel in this case is clearly an attorney in private practice.
Any argument that this is a fee-generating case which could be taken by a LSC
grantee because it was rejected by two local attorneys, as allowed for in 45 CFR
§ 1609.3, is baseless since it was accepted by counsel not funded by LSC and
that counsel is still involved in the case and is still seeking attorney's fees.
The litigation initiated by CRLA in this case repeatedly asserts claims not just for the named plaintiffs, but for a class of unidentified "members of the general public." On page 17 of the complaint (under "As to the Twelfth Cause of Action"), this class is described as "each similarly employed member of the general public." Again, the size of the class is not specified and none of its members are named.
Throughout the complaint, CRLA claims to be litigating on behalf of this class of unidentified individuals for which CRLA doesn't even hazard a guess as to its size. Nor is there anything in the record indicating that any members of this are eligible to be clients of a federally funded legal services program. Under the LSC Act and regulations, only eligible clients may be provided with legal assistance and no assistance may be provided until and unless the eligibility has been determined. If CRLA has determined the eligibility of each member of the class, then one has to wonder why the names of the members have not been provided.
The restriction against class actions found in Public Law 104-134 is neither
ambiguous nor does it state any exceptions:
Sec. 504The fact that Congress prohibited any LSC-funded program from initiating or participating in a class action and chose not to allow any exceptions, especially when other restrictions did allow for certain specified exceptions, underscores Congressional intent to ban the practice of class actions by LSC-funded programs.None of the funds appropriated in this Act to the Legal Services Corporation may be used to provide legal assistance to any person or entity (which may be referred to in this section as "recipient")-
. . .
(7) that initiates or participates in a class action suit;
LSC regulations further codified the restriction against class actions at 45 CFR § 1617. As with the federal law, no exceptions to the prohibition against initiating or participating in class actions were set forth. The broad nature of the prohibition was underscored by the language found in 45 CFR § 1617.3: "Recipients are prohibited from initiating or participating in any class action." (emphasis added)
Nor is there any dilution of the broadness of the restriction in the definition of class action at 45 CFR § 1617.2, which covers not just class actions pursuant to Rule 23 of the Federal Rules of Civil Procedure, but also "comparable State statute or rule of civil procedure applicable in the court in which the action is filed."
Should there be any doubts as to whether a representative action in which legal services lawyers attempt to represent a class of unnamed individuals is a violation of the broad restriction against class actions found in both the law and regulations, one can turn to Ballentine's Law Dictionary to review what that authoritative legal dictionary has to say on the subject. The listing is remarkably unambiguous:
representative action. same as class action.Arguing that a representative action such as the one in the case in question is not a type of class action is truly a distinction without a difference.
Given the enormous costs associated with class actions, any unnecessary delay
by LSC in enjoining CRLA's pursuit of a class action would escalate the
questioned costs associated with CRLA's actions and unfairly burden the
defendants by subjecting them to a practice clearly banned by both federal
appropriations law and LSC regulations.
The complaint filed by CRLA in this case identifies just four plaintiffs yet seeks to assert claims on behalf of a class of individuals who are unidentified. Additionally, CRLA fails to state the size of the class and wholly fails to provide any information as to whether the individuals it is claiming to represent are even eligible for legal assistance.
It goes without saying that if any of the class of individuals which CRLA is claiming to represent are undocumented aliens or have income in excess of the amount allowed by law, then any such representation would be illegal. More precisely, it would be illegal in yet another way since class actions and failing to state the names of plaintiffs in a complaint filed by attorneys funded through LSC represent activities which violate federal appropriations law and LSC regulations.
That filing a complaint or initiating litigation on behalf of unidentified clients violates federal law could scarcely be more clear.
Public Law 104-134 sets forth the restriction as follows:
Sec. 504Applying the law just cited to the facts of this case, it must be asked: Did CRLA specifically identify, by name, each plaintiff it seeks to represent in any complaint filed for the purpose of such litigation? Of course not. It repeatedly asserts that it is representing a class of unidentified "members of the general public" as well as similarly unidentified "similarly employed members of the general public."None of the funds appropriated in this Act to the Legal Services Corporation may be used to provide financial assistance to any person or entity (which may be referred to in this section as "recipient"-)
. . .
(8) that files a complaint or otherwise initiates or participates in litigation against a defendant, or engages in a precomplaint settlement negotiation with a prospective defendant, unless-(A) each plaintiff has been specifically identified, by name, in any complaint filed for the purposes of such litigation or prior to the precomplaint negotiation; and
(B) a statement or statements of facts written in English and, if necessary, in a language that the plaintiffs understand, that enumerate the particular facts known to the plaintiffs on which the complaint is based, have been signed by the plaintiffs, are kept on file by the recipient, and are made available to any Federal department or agency that is auditing or monitoring the activities of the Corporation or of the recipient, and to any auditor or monitor receiving Federal funds to conduct such auditing or monitoring, including any auditor or monitor of the Corporation:...
Also applying the law just cited, did CRLA obtain from all its claimed clients a statement of facts signed by its clients, as required? The law just cited requires such a signed statement and also requires that it "be kept on file by the recipient" and made available to "any Federal department or agency" as well as "any auditor or monitor of the Corporation."
As such, LSC can simply require that CRLA provide it with a copy of all statements of fact signed by all plaintiffs in this case. However, it appears abundantly clear that CRLA does not know the identities of its purported class members or it would have disclosed them in the complaint.
If LSC chooses to ignore violations of law and regulations by LSC-funded programs, Congress can call for a GAO investigation which would have access to statements of fact, inter alia, to show patterns of violations by LSC-funded programs.
Finally, CRLA's litigation represents an apparent violation of both federal appropriations law and LSC regulations regarding attorney's fees.
Congress addressed years of abuses in the legal services program when it
initiated a series of reforms as riders to the Fiscal Year 1996 appropriations
legislation for LSC. The relevant section of Public Law 104-134 is as follows:
Sec. 504In the case at hand, CRLA is seeking attorney's fees, not for itself but for its co-counsel, a private law firm. The seeking of attorney's fees is a violation of the law which flatly forbids seeking such fees. Any argument that such actions are somehow proper because the funds are going to a wealthy law firm already involved in the case has no effect since the law does not allow for such exceptions. Additionally, that explanation is the very heart of the earlier cited violation of the LSC Act and regulations which forbid involvement in fee-generating cases.(a) None of the funds appropriated in this Act to the Legal Services Corporation may be used to provide financial assistance to any person or entity (which may be referred to in this section as "recipient")-
. . .
(13) that claims (or whose employee claims), or collects and retains, attorney's fees pursuant to any Federal or States law permitting or requiring the awarding of such fees;
The actions of CRLA in this case represent flagrant apparent violations of the LSC Act, LSC regulations and federal appropriations law.
LSC-funded programs are prohibited from taking fee-generating cases, yet that is exactly what CRLA has done.
LSC-funded programs are prohibited from seeking attorney's fees, yet that is exactly what CRLA has done.
LSC-funded programs are prohibited from filing complaints unless all plaintiffs are specifically identified by name, yet CRLA's complaint fails to name all plaintiffs they are claiming to represent.
LSC-funded programs are strictly prohibited from initiating or participating in a class action lawsuit, yet that is exactly what CRLA has done.
LSC is legally bound by the LSC Act to ensure that its grantees obey the LSC Act, regulations and federal appropriations law. LSC has repeatedly claimed to Congress, as recently as earlier this year, that it "vigorously" enforces all restrictions. This case represents yet another opportunity for LSC to either do its duty or turn a blind eye to abuses that have become the hallmark of the legal services program.
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