The decision by Congress to strip ACORN and its affiliates of funding in reaction to an embezzlement and mismanagement scandal is not an unconstitutional bill of attainder, the 2nd U.S. Circuit Court of Appeals ruled Friday.
The circuit vacated an injunction issued by Eastern District Judge Nina Gershon, who had found that Congress intended to punish ACORN by withholding appropriations to the activist group, the money that made up some 10 percent of the crippled organization's national budget.
"While withholding federal funds may constitute punishment in certain circumstances, a temporary ban on federal assistance to the groups at issue here -- ACORN (which admitted to mismanagement and embezzlement and suffered numerous convictions of its workers,) and Acorn Institute and New York Acorn ... is not comparable to congressional acts of punishment such as permanent disqualification from a certain vocation or criminalizing past conduct," Judges Roger J. Miner, Jose A. Cabranes and Richard C. Wesley said.
The panel remanded the case of ACORN v. United States, 09-5172, to Judge Gershon for further proceedings on plaintiffs' claims under the First Amendment and due process clause.
ACORN, a nationwide grassroots community organization, engages in issues affecting low- and moderate-income people, such as civil rights, employment, housing, predatory lending, voter registration and health care. At one time, ACORN had some 200 entities but by 2008 that number had decreased to some 29 groups.
In June 2008, a whistleblower disclosed that Dale Rathke, the brother of ACORN founder Wade Rathke, had embezzled some $1 million over a two-year period between 1999 and 2000, and that ACORN executives had intentionally kept this information from most of the group's board members as well as law enforcement.
The group was also hit with several accusations of voter registration fraud that led to the convictions of ACORN workers. A 2008 report commissioned by ACORN reached the conclusion that the group suffered from "organizational and supervisory weakness," that made it unable to adequately manage and oversee its operations. Congress asked the Government Accountability Office to investigate and several states suspended funding for ACORN entities.
Congress began to restrict the group's funding on Oct. 1, 2009.
Judge Gershon issued a preliminary injunction on Dec. 11, 2009, and a permanent injunction and declaratory judgment in favor of ACORN on March 10, finding various appropriations laws unconstitutional.
She found ACORN had standing, and that it was singled out by Congress in a way that (1) fell within the historical meaning of legislative punishment, (2) did not further a non-punitive legislative purpose, and (3) showed evidence of intent to punish.
The government appealed and the 2nd Circuit granted its motion to stay Judge Gershon's decision pending oral argument in April (NYLJ, April 21) on the issue of bills of attainder (Article 1, Section 9, of the U.S. Constitution), a rarely litigated bar on legislation punishing a single person or group.
The U.S. Supreme Court has found bills of attainder to have been issued only five times: three times during the Civil War era, when Congress passed laws limiting the rights of people who refused to take an oath that they had not supported the rebellion; and twice during the McCarthy era, where Congress attempted to bar "subversives" or Communist Party members from holding certain jobs.
'Time Out' for Funding
At oral argument, Mark Stern of the U.S. Department of Justice told the circuit panel that ACORN does not have a property interest in government contracts and Congress' move to ban the group from receiving government funds was constitutional.
"This is a case of taking steps on the appropriation of federal funds," Mr. Stern said. "And if Congress sees widespread mismanagement, it says 'time out.'"
But Jules Lobel of the Center for Constitutional Rights said ACORN was directly targeted and the injury to the organization was real. For example, the Mutual Housing Association of New York, formerly known as ACORN Housing Co. Inc., manages some 1,200 apartments and cannot fill vacant units without HUD subsidies.
Outside the courtroom, ACORN CEO Bertha Lewis said Congress' actions had damaged the group's ability to keep staff and raise funds. The national ACORN group is now in bankruptcy and the New York and California chapters have split off to form their own organizations.
No Ban on Activities
Writing for the 2nd Circuit, Judge Miner agreed with Judge Gershon that ACORN had standing and that it had, indeed, been singled out by Congress.
But he said, "The withholding of appropriations, however, does not constitute a traditional form of punishment that is 'considered to be punishment per se.'
"Congress's decision to withhold funds from ACORN and its affiliates constitutes neither imprisonment, banishment, nor death," he said. "The withholding of funds may arguably constitute a punitive confiscation of property at some point, but the plaintiffs do not assert that they have property rights to federal funds that have yet to be disbursed at the agency's discretion."
While ACORN and its affiliates said some members of Congress tainted them "with a note of infamy" and encouraged others to shun ACORN, Judge Miner said, "the plaintiffs are not prohibited from any activities, they are only prohibited from receiving federal funds to continue their activities."
ACORN may have been alienated from its supporters in the process, he said, but "Congress must have the authority to suspend federal funds to an organization that has admitted to significant mismanagement."
In addition to finding that the appropriations bills were not "punishment" as it is historically understood, Judge Miner said the bills also failed to meet the "functional" test of punishment.
"Indeed, because ACORN and its related entities make up such an amorphous and sprawling family of organizations…it was entirely reasonable for Congress to broadly exclude ACORN's affiliates, subsidiaries, and allies from federal funds, and leave it to the agencies to determine which organizations would be excluded to further the congressional purpose of protecting the public fisc from ACORN's admitted failures in management."
He closed by noting that statements by a handful of members of the House of Representatives branding ACORN, for example, "a corrupt and criminal organization" were not enough to impute to Congress in general "unmistakable evidence" of punitive intent.
Bill Quigley, legal director at the Center for Constitutional Rights, said Friday the organization will ask the 2nd Circuit for an en banc rehearing.
"We think it's a flawed decision and we are going to continue to fight," Mr. Quigley said. "We expect to ask the full Second Circuit to reconsider this decision because we think it's important to protect politically unpopular people and organizations from a Congress acting as judge, jury, and executioner."