The appeals court's ruling in Regional Management Corp. v. Legal Services Corp., No. 98-2165, 98-2166, 1999 U.S. App. LEXIS 17826 (4th Cir. July 28, 1999), strikes down the decision of a South Carolina federal trial court that held that LSC improperly dismissed the complaint of a company which had been lobbied against by three legal services programs receiving LSC funding. Under federal law, LSC funded groups may not engage in lobbying unless several specific conditions are met, including a requirement that the lobbying must be on behalf of a specific client whose direct legal needs will be addressed by the lobbying activity. In the Regional Management case, it was clear that there was no client involved in any of the lobbying. Nevertheless, LSC refused to find any wrongdoing against the legal services programs involved.
The appeals court hearing the case, the U.S. Court of Appeals for the Fourth Circuit, refused to even discuss the issue of whether the legal services activities were improper because the court held that Regional Management did not even have the legal right to sue LSC over the issue. The crux of the court's ruling is that LSC, which as a government-created "corporation" is not technically a federal agency, is not subject to the Administrative Procedures Act (APA). The APA provides specific rules that federal agencies must follow in promulgating and enforcing agency regulations. The APA also provides affected members of the public legal recourse in federal court if an agency fails to follow its own regulations. A prime example of an agency failing to follow its own regulations would include an agency dismissing an administrative complaint with no rational basis on which to do so, as the lower court held LSC guilty of doing. Ultimately, this court decision means that LSC may interpret restrictions on its activities passed by Congress any way it wishes and enforce (or choose not to enforce) its own regulations in any way it sees fit without any recourse by the public.
From the court's ruling it appears that the only remedy for this lack of
accountability is for Congress to pass legislation that would make the
Administrative Procedures Act applicable to LSC.
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