BUSINESS-SPONSORED "PUBLIC INTEREST" LAW FIRMS

Beginning in the early 1970s, the United States Chamber of Commerce solicited Virginia attorney and future Supreme Court Justice Louis Powell to advise about problems faced by the American business community. Powell's memorandum, entitled "Attack on American Free Enterprise System" received wide circulation within the Chamber of Commerce network. Among other things, Powell recommended a business-sponsored legal center to "attack the Naders . . . and others who openly seek destruction of the system." Shortly after the Powell memo, the California Chamber proposed the creation of a legal foundation. This led in 1973 to the formation of the Pacific Legal Foundation (PLF) in Sacramento.

Powell's memo read in part:

This is a vast area of opportunity for the Chamber, if it is willing to undertake the role of spokesman for American business and if, in turn, business is willing to provide the funds.

As with respect to scholars and speakers, the Chamber would need a highly competent staff of lawyers. In special situations it should be authorized to engage, to appear as amicus counsel in the Supreme Court, lawyers of national standing and reputation. The greatest care should be exercised in selecting cases in which to participate, or the suits to institute. But the opportunity merits the necessary effort.

 

This memorandum represents the birth of the business-interest litigation center. It is worthy of note, however, that in Powell's mind the proposal was frankly and flatly a business operation, corporate-supported and Chamber-run. The idea that such legal action would itself qualify as a public interest law firm either did not cross his mind, or if it did, was apparently rejected.

The Pacific Legal Foundation is the oldest and largest of the business-sponsored "public interest" law firms. It is today a major player in the "private property rights" movement, the ultimate goal of which is to overturn regulations enacted by public authorities to protect the environment, consumer health and safety, and the welfare of the general public. In support of this quest PLF, along with other like-minded activists, revived the argument that government regulations which restrict the use of private property constitute "takings" of property without just compensation, and thus violate the Fifth Amendment of the U.S. Constitution. This issue reached its pinnacle in 1987 in Nollan v. California Coastal Commission, 483 U.S. 825 (1987). In addition to the environment and property rights, rent control and affirmative action are also primary areas of concentration for PLF in the 1990s. Specifically, PLF has stated that it will look to the courts to "balance" environmental protection and economic development, protect individuals from the "overwhelming power of government," increase protection of private property rights, overturn "free enterprise stifling regulations, such as rent control," and apply "fairness and balance to liability issues, thus helping cancel the so-called "deep pockets syndrome."

In 1975, shortly after PLF's creation, the National Legal Center for Public Interest (NLCPI) was formed. Its mission was to establish similar PLF centers throughout the country. Over the next few years it created seven additional business-oriented tax-exempt law firms: the Capital Legal Foundation in Washington, D.C.; the Mid-Atlantic Legal Foundation in Philadelphia (now the Atlantic Legal Foundation); the Gulf and Great Plains Legal Foundation in Kansas City (now the Landmark Legal Foundation); the mid-America Legal Foundation in Chicago; the Mountain States Legal Foundation in Denver; the New England Legal Foundation in Boston; and the Southeastern Legal Foundation in Atlanta. With the exception of the Capital Legal Foundation, all are still operating today. These legal foundations challenge environmental regulations, oppose rent control statutes, and generally support pro-business positions and "civil justice reform."

So closely linked are business interests and these law firms that many in the legal community question the legitimacy of the charitable "public interest" status under Section 501(c)(3) of the Internal Revenue Code. A status that exempts the legal foundations and, more important, their funders' contributions from federal tax.

In 1984 Tulane Law Professor Oliver Houck published a study of the public interest law firms in the Yale Law Journal, "With Charity for All," 93 Yale Law Journal 1415 (July 1984). Professor Houck began his article:

This is a study of public interest law and its practice by a group of inter-related legal foundations that were created, funded, and remain largely directed by leaders of American business corporations. The question raised is the extent to which their practice is consistent with accepted notions of charity under federal tax laws and with the more particular requirements for public interest law firms.

In late 1970 the IRS ruled that serving the "public interest" means representing interests that are otherwise unrepresented in the legal process. In this ruling it emphasized that the represented interest must be "wholly" public rather than private. The ruling was designed to base the charitable status not on the merit of the social goals of the organization, but the availability of competent representation that is being deemed charitable rather than the particular cause being serviced. The "wholly public" cause requirement included a guideline that it not be tainted by any substantial private interest. Professor Houck's study reported in the Yale Law Journal found that all of the foundations mentioned were tainted by a substantial private interest, and to define them as "public charities" "stretches the concepts of charity and public interest practice beyond any meaningful definition." 93 Yale Law Journal at 1544.

Most interesting, Professor Houck found corroboration for his finding from an unlikely quarter, "the Hurowitz report." In 1979 the Scaife Foundation, a major underwriter of conservative organizations and of several business public interest law firms, commissioned Michael Hurowitz to analyze the effectiveness of its contributions. His report, captioned "The Public Interest Law Movement: An Analysis with Special Reference to the Role and Practice of Conservative Public Interest Law Firms" (Hurowitz report) saw the public interest law firms as players in a larger clash of philosophies:

A battle that will be won not in the courtroom but in the minds of legislators, judges, the media, and -- ultimately -- the American people.

 

Hurowitz further states that the conservative public interest law firms:

Will make no substantial mark on the American legal profession and American life as long as it is seen as and is in fact an adjunct of a business community possessed of sufficient resources to afford its own legal representation.

Hurowitz further states:

Conservative public interest law firms are seen as being largely oriented to and indeed dominated by business interests, a description which is unhappily not wide of the mark for many such firms.

Hurowitz urges these "public interest" law firms to mitigate their present appearance as duplicative spokesmen for business interests. Suffice it to say that Professor Houck's study conclusively establishes that the so-called "public interest" law firms are handmaidens of the monied-interests in this country.

Operating as watchdogs and defenders of private and commercial interests, these "public interest" law firms have redefined the term "public interest." Traditional public interest organizations represent indigents and other poor and disadvantaged groups or causes which are otherwise denied a voice in our civil justice system. The corporate business-oriented "public interest" firms routinely advance positions that benefit their corporate contributors, which are already well represented and powerful players in the system. In representing these interests, the "public interest" firms give their corporate sponsors two bites of the apple. The second one purchased with a tax deductible contribution.

Professor Houck concludes (93 Yale Law Journal at 1544-45):

One area in which the American public obviously retains its confidence however, if voluntary contributions are any measure, is the field of charity, an area almost uniquely defined by our tax laws. In 1984, George Orwell's famous description of a totalitarian society, one of the chief devices used to corrupt social values was the corruption of language. Peace became a state of continuous war. Truth-speak became lies. The corruption in this case is on less grand a scale but it affects one of the redeeming values, public charity, of a naturally self-interested world. If the public interest has a meaning, it is as a value which transcends the places where private interests go. This is a meaning worth preserving.