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FACT SHEET | The Restriction Barring LSC-Funded Lawyers from Bringing Class Actions

Published: September 26, 2003

“None of the funds appro­pri­ated . . . to the Legal Services Corpor­a­tion may be used to provide finan­cial assist­ance to any person or entity . . . that initi­ates or parti­cip­ates in a class action suit.” Omni­bus Consol­id­ated Rescis­sions and Appro­pri­ations Act of 1996, Pub. L. No. 104–134, 504(a)(7), 110 Stat. 1321, 50 (1996).

What is a class action?

  • A class action is a lawsuit brought by one or more repres­ent­at­ives of a group on behalf of all the members of the group. The members of the group, known as the “class,” must be ascer­tain­able, and must share a common interest in the issues of law and fact raised by the class repres­ent­at­ives. See Barron’s Law Diction­ary 74 (3d ed. 1991).

What is the history of the class action restric­tion on lawyers for low-income clients?

  • The Omni­bus Consol­id­ated Rescis­sions and Appro­pri­ations Act of 1996, which was part of the sweep­ing reform of public bene­fits struc­tures enacted by the 104th Congress, prohib­ited Legal Services Corpor­a­tion (“LSC”) grant recip­i­ents from initi­at­ing or parti­cip­at­ing in class action suits. This restric­tion has been re-imposed in each subsequent year’s LSC budget alloc­a­tion. See 45 C.F.R.  1617 (1996).
  • The LSC restric­tion has become the subject of state-level copycat restric­tions. For example, funds from the Texas Interest on Lawyers Accounts (“IOLTA”) program and funds from a court filing fee dedic­ated for the provi­sion of civil legal services to low-income Texans may not be used to finance class action suits. Funds from the Mary­land IOLTA program simil­arly may not be used to finance class action suits. Money alloc­ated by the state of Wash­ing­ton to civil legal services programs also may not be used to finance class action suits.
  • Prior to the 1996 restric­tion on LSC, the rules govern­ing LSC programs required lawyers to obtain permis­sion from program direct­ors prior to filing a class action lawsuit. This rule was designed to ensure attor­ney account­ab­il­ity and program integ­rity. See 45 C.F.R.  1617.3 (1976).

Why is it import­ant for legal services lawyers to be able to bring class actions?

  • Class actions enable legal services lawyers to bring one case that can help many members of a community. When clients are unable to proceed in a class action, they must instead pursue their claims indi­vidu­ally, burden­ing the resources of the legal services program and those of the courts.
  • Class actions can compel govern­ment bureau­cra­cies to follow the law. Indi­vidu­als, acting alone, often lack this power because the govern­ment can dodge the brunt of the lawsuit by fixing the prob­lem for one person while continu­ing to hurt hundreds or even thou­sands of other people. Class actions are the legal example of the common sense prin­ciple that there is strength in numbers.
  • Class actions can help govern­ment fulfill its oblig­a­tions. Mary­land Attor­ney General J. Joseph Curran, whose office some­times finds itself defend­ing the state against class-action suits, says, “Some­times [legal services] attor­neys best enforce the law by filing class-actions against the state . . . Govern­ment is not infal­lible. As uncom­fort­able and irrit­at­ing as it may be, some­times it is class-actions by [LSC-funded] lawyers that require the state to do what it is legally bound to do.”
  • Class actions can be an import­ant tool for encour­aging govern­ment or private actors who are enga­ging in unlaw­ful activ­ity to stop that beha­vior on their own accord, thereby exped­it­ing solu­tions and avoid­ing lengthy litig­a­tion. For example, when the federal govern­ment termin­ated Supple­mental Secur­ity Income (“SSI”) for 150,000 disabled chil­dren and discour­aged those chil­dren’s famil­ies from appeal­ing the denial of bene­fits, Community Legal Services of Phil­adelphia, Pa. prepared papers for a national class action on behalf of the chil­dren. Within three months of receiv­ing notice of the poten­tial class action, the Social Secur­ity Commis­sioner agreed to give a second chance to all former SSI bene­fi­ciar­ies origin­ally discour­aged from appeal­ing.
  • Class action cases permit some indi­vidu­als to gain relief who other­wise might never learn of their legal rights and never be able to bring an inde­pend­ent suit.

Why do LSC’s crit­ics want to prohibit LSC-grantees from bring­ing class actions cases?

  • Conser­vat­ive polit­ical pundits and some members of Congress argue that class actions “promote a left-wing polit­ical agenda.” In real­ity, most legal services class actions require govern­ments and private actors to follow laws that are already in place. The cases above are typical examples of class actions enfor­cing exist­ing laws.
  • Class actions are commonly criti­cized for reas­ons that have noth­ing to do with the work of legal services lawyers. For example, some crit­ics claim that personal injury class action­s—which are often settled—of­fer lawyers huge fees, while indi­vidual class members get only a few dollars each. But legal services lawyers never take money from their clients. And most legal services class actions seek injunct­ive relief that bene­fits all class members by putting a stop to illegal activ­ity. Regard­less of anyone’s opin­ion about the size of fee awards in other cases (and there are opin­ions pro and con), legal services class actions focus directly on help­ing those with genu­ine legal needs.

Who is helped by class action suits brought by LSC-funded programs?

  • Class action suits, brought on behalf of LSC-grantees’ clients, have helped hundreds of thou­sands of Amer­ic­ans, includ­ing the elderly, chil­dren, the infirm and others. In addi­tion to provid­ing remed­ies for the indi­vidual plaintiffs’ injustices, a class action suit can ensure that similar injustices are preven­ted in the future. Some examples of import­ant class actions include:

    • When the city of Phil­adelphia, Pennsylvania deemed chil­dren age four and older ineligible and termin­ated them without any writ­ten notice of oppor­tun­ity for hear­ing from the Women, Infants and Chil­dren (“WIC”) program, which provides food to chil­dren faced with the risk of malnu­tri­tion because of inad­equate income, a class action suit on behalf of those chil­dren obtained a favor­able decision from a judge who deemed the termin­a­tions uncon­sti­tu­tional, required Pennsylvania to devise fair hear­ing regu­la­tions, and ensured that other chil­dren would not go without food in the future due to reck­less bureau­cratic error.
    • When the elderly were improp­erly denied Medi­care reim­burse­ment for treat­ment because the Depart­ment of Health and Human Services (“HHS”) was not monit­or­ing Health Main­ten­ance Organ­iz­a­tions (“HMOs”), a class action won thou­sands exped­ited fair hear­ings from the HMOs and required HHS to cancel contracts with HMOs that failed to provide fair hear­ings and appeals for Medi­care bene­fi­ciar­ies.
    • Indi­vidu­als denied Supple­ment­ary Secur­ity Income disab­il­ity bene­fits chal­lenged an HHS policy of deem­ing their impair­ments “not severe” without inquir­ing into their age, educa­tion, work history, and the combined impact of their multiple health impair­ments. The court required HHS to assist indi­vidu­als in obtain­ing evid­ence of disab­il­ity and to review their claims based on complete records.
    • When African-Amer­ican work­ers at Caulkins Indi­an­town Citrus Company showed that the company had cheated them out of years of wages and bene­fits because of their skin color, more than 730 work­ers obtained damage payments. Lead plaintiff John Henry Robin­son explained that the victory meant even more to him than the money: “When a person is stripped of their dignity and pride, it feels like someone has reached inside of you and tore your heart out.”
    • African-Amer­ican public hous­ing resid­ents in Phil­adelphia, Pennsylvania showed that the city of Phil­adelphia, the Hous­ing Author­ity, the Redevel­op­ment Author­ity, and the federal Depart­ment of Hous­ing and Urban Devel­op­ment had viol­ated their consti­tu­tional rights as well as their rights under civil rights laws by stalling progress on construc­tion of a new public hous­ing devel­op­ment in a primar­ily white neigh­bor­hood. As a result, the public hous­ing devel­op­ment was built and today remains one of Phil­adelphi­a’s most success­ful integ­rated hous­ing devel­op­ments.

      This Fact Sheet was prepared by Elisa­beth Jacobs, Research Asso­ci­ate, Poverty Program, Bren­nan Center for Justice at NYU Law School.  Date—May 10, 2000