The federal legal services program engages in anti-free market litigation
that imposes costly burdens on business and threatens basic constitutional
rights. This is most apparent in legal services advocacy of laws that unfairly
deprive individuals of the full use of their property.
Assails Property Rights
In 1993, Evergreen Legal Services supported a law that forced owners of mobile home parks to pay the relocation costs of tenants. Washington state’s Mobile Home Relocation Assistance Act required park owners to pay up to $1000 per tenant to assist them in relocating to another park. The rationale of the law was to insure that low income persons would have access to affordable housing. However, park owners had to pay the expensive fees regardless of their tenants’ income. Owners complained that the law unconstitutionally deprived them of the full use of their property because of the huge costs imposed upon them. The state supreme court rejected this argument but did find the law unconstitutional on other grounds. Because the law suddenly forced unsuspecting property owners to pay hundreds of thousands of additional dollars just to close their business, the court concluded the law to be unduly oppressive and violative of their 14th amendment rights to due process. The court also noted that it was unfair for government to place the burden of maintaining an adequate supply of low-income housing on a few property owners.
See Guimont v. Clarke, 121 Wash. 2d 586 (Wash. Sup. Ct.)
1993
Evergreen Wins Battle Against Landlords
This year, Evergreen Legal Services succeeded in upholding a Seattle
law that requires landlords to pay low-income tenants $2000 in relocation
expenses. The Tenant Relocation Assistance Ordinance (TRAO) makes landlords
responsible for half of their tenants’ relocation expenses if they must
leave because of the landlords’ decision to redevelop their property.
The city pays the other half. Property owners complained that the law unconstitutionally
deprived them of their 5th amendment property rights. By forcing them to
pay each tenant $2000, they contended that the ordinance illegally takes
a portion of their property without just compensation. However, a federal
district held that the ordinance does not violate landlords’ property rights
because they do not have “to submit to the physical occupation of any of
their property.”
See Garneau v. City of Seattle, C94-914R (US Dist. Ct.) 1995
Legal Services Opposed NationsBank Merger
Several LSC grantees participated in a campaign to stop the 1992 bank
merger between North Carolina National Bank and C&S Sovran Corp. that
created NationsBank. Working with a broad coalition of community activist
groups, including the Association of Community Organizations for Reform
Now (ACORN), legal services objected to the merger on the grounds that
NCNB had neglected the needs of low-income individuals. Under the federal
Community Reinvestment Act (CRA), groups such as legal services and ACORN
can delay or even halt a banking merger if it is found that the bank has
not invested enough money in poor communities. Legal services alleged that
NCNB discriminated against blacks because the bank denied home ownership
loans to blacks at a higher rate than whites. NCNB said that the denial
rate is strictly due to the poorer credit history of blacks (Studies have
shown that Asians have a higher acceptance rates than whites). To put an
end to the activists’ challenge to the merger, NCNB agreed to provide mortgages
at one percentage point below the market rate and to allow ACORN a role
in evaluating mortgage applicants. In addition, NCNB gave ACORN a $125,000
grant. Despite all of that, the Atlanta Legal Aid Society still threatened
to file a suit challenging the merger.
See “Study Shows Race Major Factor,” PR Newswire, Nov. 7, 1991;
“Consumers Bear Costs of Banking Regs.”Consumers’ Research Magazine, October
1992; “ACORN Won’t Challenge NCNB Deal,”The American Banker, Nov. 7 1991.
Legal Aid Accused of Divisive Tactics in Banking Dispute
In 1992, Legal Aid of Western Missouri led the protest against a Missouri bank’s attempt to do business in Kansas. Representing the Kansas City Regional Association for Community Economics (KC RACE), Legal Aid complained that Commerce Bancshares should not be allowed in Kansas because it didn’t invest enough money in the low-income neighborhoods of Kansas City, Missouri. Eventually, Commerce agreed to Legal Aid’s demands that it commit $17 million in loans for poor neighborhoods and “donate” $50,000 to the Black Chamber of Commerce as a condition for dropping its protest. Bank President Jonathan Kemper accused Legal Aid of being divisive and counterproductive throughout the whole process.
See “Battle on Urban Core Issues Fought on Kansas Prairie,”
Kansas City Business Journal, December 4 1992.
Opposed Georgia Bank Merger
In 1988, Georgia Legal Services tried to prevent the merger of First
Savannah and First Georgia. They claimed First Savannah had failed to meet
the credit needs of low-income and minority residents even though the federal
government had officially rated the bank’s CRA performance as satisfactory.
Nevertheless, Georgia Legal Services filed suit claiming that the merger
be set aside until they get a hearing to challenge it. The court turned
down the suit.
See Washington v. Office of the Comptroller of the Currency
, 856 F.2d 1507 (US App. Ct.) 1988