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Alliance For Open Society International, Inc., Pathfinder v. United States Agency For International Development

July 6, 2011


Appeal from preliminary injunctions entered by the United States District Court for the Southern District of New York (Marrero, J.) enjoining Defendants-Appellants from enforcing U.S.C. § 7631(f), a provision of the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003, 22 U.S.C. § 7601 et seq., against Plaintiffs-Appellees, on the ground that § 7631(f), as applied to Plaintiffs-Appellees, violates the First Amendment.

The opinion of the court was delivered by: Barrington D. Parker, Circuit Judge:

Argued: December 9, 2010

Before: STRAUB, POOLER, and B.D. PARKER, Circuit Judges.


Judge Straub dissents in a separate opinion.

Defendants-Appellants the U.S. Agency for International Development ("USAID"), the 3 U.S. Department of Health and Human Services ("HHS"), and the U.S. Centers for Disease 4 Control and Prevention ("CDC") (collectively, the "Agencies" or "Defendants") appeal from 5 preliminary injunctions entered by the United States District Court for the Southern District of 6 New York (Marrero, J.). The district court enjoined the Agencies from enforcing 22 U.S.C. 7 § 7631(f), a provision of the United States Leadership Against HIV/AIDS, Tuberculosis, and 8 Malaria Act of 2003 ("Leadership Act"), 22 U.S.C. § 7601 et seq., against Plaintiffs-Appellees 9 Alliance for Open Society International, Inc. ("AOSI"), Pathfinder International ("Pathfinder"), 10 Global Health Council ("GHC"), and InterAction. These are non-governmental organizations 11 ("NGOs") engaged in the international fight against HIV/AIDS that receive funding under the 12 Act.

13 Section 7631(f) of the Leadership Act provides that "[n]o funds made available to carry 14 out this Act . . . may be used to provide assistance to any group or organization that does not 15 have a policy explicitly opposing prostitution." This provision, as construed and implemented 16 by the Agencies, requires NGOs, as a condition of receiving Leadership Act funds, to adopt a 17 policy explicitly opposing prostitution, and prohibits recipients from engaging in any activities 18 that are "inconsistent" with an anti-prostitution stance. Certain other recipients of Leadership 19 Act funds, such as the World Health Organization, are not bound by this restriction. 20 As explained below, we conclude that § 7631(f), as implemented by the Agencies, falls 21 well beyond what the Supreme Court and this Court have upheld as permissible conditions on 22 the receipt of government funds. Section 7631(f) does not merely require recipients of 3 1 Leadership Act funds to refrain from certain conduct, but goes substantially further and compels 2 recipients to espouse the government's viewpoint. See 45 C.F.R. § 89.1. Consequently, we 3 agree with the district court that Plaintiffs have demonstrated a likelihood of success on the 4 merits. Finding no abuse of discretion by the district court, we affirm.


The Leadership Act

In 2003, Congress passed the Leadership Act "to strengthen and enhance United States 8 leadership and the effectiveness of the United States response to the HIV/AIDS, tuberculosis, 9 and malaria pandemics." 22 U.S.C. § 7603 (Supp. III 2009).*fn3 The Act designates several 10 avenues through which this international campaign is to be run, including "5-year, global 11 strategies"; the development of vaccines and treatments; and "public-private" partnerships 12 between federal agencies and NGOs, which Congress recognized "have proven effective in 13 combating the HIV/AIDS pandemic." §§ 7601(18), 7603.

14 The Act reflects Congress's concern with the social, cultural, and behavioral causes of 15 HIV/AIDS. See § 7601(15). Section 7601(23), one of forty-one congressional "findings" set 16 forth in § 7601, addresses prostitution: "Prostitution and other sexual victimization are degrading 17 to women and children and it should be the policy of the United States to eradicate such 18 practices. The sex industry, the trafficking of individuals into such industry, and sexual violence 19 are additional causes of and factors in the spread of the HIV/AIDS epidemic."

Congress imposed two prostitution-related conditions on Leadership Act funding. First, 2 it specified that no funds made available to carry out the Act may be used to promote or advocate 3 the legalization or practice of prostitution or sex trafficking. § 7631(e). Second, it imposed a 4 Policy Requirement, which specifies that:

No funds made available to carry out this Act . . . may be used to 7 provide assistance to any group or organization that does not have a 8 policy explicitly opposing prostitution and sex trafficking, except that 9 this subsection shall not apply to the Global Fund to Fight AIDS, 10 Tuberculosis and Malaria, the World Health Organization, the 11 International AIDS Vaccine Initiative or to any United Nations 12 agency.

§ 7631(f). This litigation involves only the Policy Requirement. Plaintiffs do not challenge the 15 Requirement's "sex trafficking" component. 16 Defendants' Initial Implementation of the Policy Requirement 17 The defendant Agencies implement the Leadership Act by, in part, funding U.S.-based 18 NGOs involved in the international fight against HIV/AIDS. AOSI and Pathfinder are two such 19 organizations. AOSI runs a program in Central Asia that aims to prevent the spread of 20 HIV/AIDS by reducing injection drug use, while Pathfinder works to stem the spread of 21 HIV/AIDS by providing family planning and reproductive health services in more than twenty 22 countries. Both receive funding from sources other than the Agencies and neither supports 23 prostitution. But their work does involve engaging, educating, and assisting groups, such as 24 prostitutes, that are vulnerable to HIV/AIDS, as well as advocating approaches and discussing 25 strategies for fighting HIV/AIDS among prostitutes at, among other places, policy conferences 26 and forums.

After the Leadership Act was enacted, the Department of Justice's Office of Legal 2 Counsel ("OLC") warned that applying the Policy Requirement to U.S.-based organizations 3 would be unconstitutional. Heeding that warning, Defendants initially refrained from enforcing 4 it against U.S.-based NGOs. OLC subsequently changed course and withdrew what it 5 characterized as its prior "tentative advice," asserting that "there are reasonable arguments to 6 support the[] constitutionality" of applying the Policy Requirement to U.S.-based organizations, 7 and, starting in mid-2005, the Agencies began applying the Requirement to U.S.-based grantees.

8 Specifically, USAID issued a directive requiring that U.S.-based organizations, as a condition of 9 receiving funding under the Act, "must have a policy explicitly opposing prostitution." 10 Defendants also construed the Policy Requirement as prohibiting grantees from engaging in 11 activities that were inconsistent with a policy opposing prostitution. In an effort to remain 12 eligible for Leadership Act funding, both AOSI and Pathfinder adopted policy statements.

13 Pathfinder's, for example, stated that it "opposes prostitution and sex trafficking because of the 14 harm they cause primarily to women."

The District Court's First Decision

In 2005, AOSI and Pathfinder sued the Agencies, contending that conditioning 17 Leadership Act funding on the affirmative adoption of a policy opposing prostitution violated the 18 First Amendment by compelling grantees to adopt and voice the government's viewpoint on 19 prostitution, and by restricting grantees from engaging in privately funded expression that the 20 Agencies might deem insufficiently opposed to prostitution. They also asserted that the Policy 21 Requirement was unconstitutionally vague with respect to what sorts of prostitution-related 22 activity and expression were, in fact, restricted.

The district court granted AOSI and Pathfinder preliminary injunctive relief. Alliance for 2 Open Soc'y Int'l, Inc. v. U.S. Agency for Int'l Dev., 430 F. Supp. 2d 222 (S.D.N.Y. 2006) 3 ("Alliance I"). The court engaged in a thorough analysis of the Supreme Court's 4 "unconstitutional conditions" jurisprudence--focusing, in particular, on Regan v. Taxation With 5 Representation, 461 U.S. 540 (1983), FCC v. League of Women Voters of California, 468 U.S. 6 364 (1984), and Rust v. Sullivan, 500 U.S. 173 (1991). The court first concluded that, because 7 the Policy Requirement substantially impaired First Amendment protected activity conducted by 8 private entities with private funds as a condition of receiving a government benefit, heightened 9 scrutiny was warranted. Alliance I, 430 F. Supp. 2d at 259. The court then concluded that the 10 Policy Requirement, as applied to AOSI and Pathfinder, violated the First Amendment because it 11 was not narrowly tailored, imposed a viewpoint-based restriction on their use of private funds 12 without allowing for adequate alternative channels of communication, and "compel[led] speech 13 by affirmatively requiring [them] to adopt a policy espousing the government's preferred 14 message." Id. at 268-76. Accordingly, the court held that AOSI and Pathfinder had 15 demonstrated a likelihood of success on the merits, and had met their burden of showing 16 irreparable harm. Id. at 276, 278. The district court thus preliminarily enjoined Defendants from 17 enforcing the Policy Requirement against AOSI or Pathfinder, and Defendants appealed.

The First Appeal

During the course of the first appeal, the Agencies informed us that HHS and USAID 20 were developing guidelines that would allow grantees to establish or work with separate 21 affiliates that would not be subject to the Policy Requirement. The Agencies were of the view 22 that the guidelines would satisfactorily address the relevant constitutional concerns in 7 1 accordance with our decision in Brooklyn Legal Services Corp. v. Legal Services Corp., 462 2 F.3d 219, 223-24 (2d Cir. 2006) ("[I]n appropriate circumstances, Congress may burden the First 3 Amendment rights of recipients of government benefits if the recipients are left with adequate 4 alternative channels for protected expression."). After the guidelines became effective, we 5 remanded the case to the district court to determine in the first instance whether interlocutory 6 relief continued to be appropriate. Alliance for Open Soc'y Int'l, Inc. v. U.S. Agency for Int'l 7 Dev., 254 F. App'x 843, 846 (2d Cir. 2007) ("Alliance II").

The Guidelines

The Guidelines permit recipients of Leadership Act funds to partner with affiliate 10 organizations that do not comply with the Policy Requirement, provided that the recipient and 11 affiliate maintain "adequate separation" so as not to "threaten the integrity of the Government's 12 programs and its message opposing prostitution." HHS Guidance, 72 Fed. Reg. 41,076 (July 26, 13 2007); USAID Acquisition & Assistance Policy Directive ("AAPD") 05-04 Amendment 1 (July 14 23, 2007). The Guidelines (which, as discussed infra, were slightly revised in 2010), require 15 recipients to have "objective integrity and independence" from any affiliate that "engages in 16 activities inconsistent with [an] opposition to the practice[] of prostitution . . . ('restricted 17 activities')." 45 C.F.R. § 89.3 (2010).

The Guidelines, as initially promulgated, provided that a recipient would be deemed to 19 have "objective integrity and independence"--i.e., adequate separation--from an affiliate if (1) 20 the two entities are legally separate; (2) no Leadership Act funds are transferred to the affiliate or 21 used to subsidize its restricted activities; and (3) the entities are physically and financially 22 separate. 72 Fed. Reg. at 41,076. The 2007 Guidelines elaborated that "whether sufficient 1 physical and financial separation exists" would be determined "case-by-case," and set forth five, 2 non-exclusive factors relevant to that determination: (i) the existence of separate personnel, 3 management, and governance; (ii) the existence of separate accounts and records; (iii) the degree 4 of separation between the recipient's facilities and facilities used by the affiliate to conduct 5 restricted activities; (iv) the extent to which signs and other forms of identification distinguish 6 the two entities; and (v) the extent to which the government and the Leadership Act program are 7 "protected from public association with the affiliated organization and its restricted activities."

Id. at 41,077.

The District Court's Second Decision

On remand, AOSI and Pathfinder moved to amend the complaint to add Global Health 11 Council and InterAction (together, the "Associations") as plaintiffs, and to extend the 12 preliminary injunction to cover the Associations. GHC is an alliance of organizations dedicated 13 to international public health. InterAction is an alliance of international development and 14 humanitarian NGOs. Many of the Associations' U.S.-based members--which include 15 Pathfinder, a member of both GHC and InterAction--participate in the international fight against 16 HIV/AIDS, receive Leadership Act funding, are therefore subject to the Policy Requirement, and 17 desire relief from it. These member organizations' HIV/AIDS-prevention work includes 18 administering health services and other programs that expressly target at-risk groups like 19 prostitutes. They also engage in advocacy and discussion concerning controversial global health 20 issues--for example, best practices for reducing HIV/AIDS among prostitutes--at policy forums 21 and conferences.

In August 2008, the district court permitted GHC and InterAction to join the litigation, 2 extended the preliminary injunction to them, and went on to consider whether interlocutory 3 relief continued to be warranted in light of the Guidelines. Alliance for Open Soc'y Int'l, Inc. v. 4 U.S. Agency for Int'l Dev., 570 F. Supp. 2d 533 (S.D.N.Y. 2008) ("Alliance III"). The court held 5 that it was, concluding that the Guidelines did not affect its previous determination that the 6 Policy Requirement impermissibly compelled speech. The court reasoned that "[w]hile the 7 Guidelines may or may not provide an adequate alternate channel for Plaintiffs to express their 8 views regarding prostitution," the clause requiring them to espouse the government's viewpoint 9 "remains intact." Id. It also concluded that heightened scrutiny remained applicable because the 10 Policy Requirement discriminates based on viewpoint, and that the Guidelines were too 11 burdensome to cure the Requirement's constitutional defects. Id. at 546-49. Accordingly, the 12 court declined to disturb its preliminary injunction. Defendants appealed from both the 2006 and 13 2008 preliminary injunction orders.

Additional Guidance Promulgated by Defendants

In April 2010, while this appeal was pending, HHS and USAID promulgated further 16 guidance pertaining to the Policy Requirement--HHS in a formal regulation, USAID in a policy 17 directive. HHS, Organizational Integrity of Entities That Are Implementing Programs and 18 Activities Under the Leadership Act, 75 Fed. Reg. 18,760 (Apr. 13, 2010) (codified at 45 C.F.R. 19 pt. 89); USAID AAPD 05-04 Amendment 3 (Apr. 13, 2010). The new guidance specifies that in 20 order to comply with the Policy Requirement, a Leadership Act grantee must affirmatively state 21 in the funding document that it is "opposed to the practices of prostitution and sex trafficking 22 because of the psychological and physical risks they pose for women, men, and children," 45 10 1 C.F.R. § 89.1; AAPD 05-04 Amend. 3 at 2, and reaffirms that a recipient "cannot engage in 2 activities that are inconsistent with [its] opposition to prostitution," 75 Fed. Reg. at 18,760. 3 Neither the 2010 nor the 2007 guidance offers recipients insight as to what activities may be 4 deemed "inconsistent" with an "opposition to prostitution."

The new guidance also modified the Guidelines for partnering with an affiliate that does 6 not comply with the Policy Requirement. See 45 C.F.R. § 89.3. For example, under the revised 7 Guidelines, which profess to "allow more flexibility for funding recipients," 75 Fed. Reg. at 8 18,762, legal separation is no longer required but only one factor to be considered, and separate 9 management is no longer expressly identified as a relevant factor, in determining whether a 10 recipient has "objective integrity and independence" from an affiliate, 45 C.F.R. § 89.3.


I. Standing

The Agencies initially argue that Plaintiffs lack standing. Plaintiffs bear the burden of 14 establishing standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). "Because 15 standing is challenged [here] on the basis of the pleadings, we accept as true all material 16 allegations of the complaint, and must construe the complaint in favor of [Plaintiffs]." W. R. 17 Huff Asset Mgmt. Co., LLC v. Deloitte & Touche LLP, 549 F.3d 100, 106 (2d Cir. 2008) (internal 18 quotation marks omitted). We review questions of standing de novo. Carver v. City of New 19 York, 621 F.3d 221, 225 (2d Cir. 2010). 20 Three elements comprise the "irreducible constitutional minimum" of standing: (1) the 21 plaintiff must have suffered an injury-in-fact--an invasion of a legally protected interest that is 22 (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical; (2) there must be a causal connection between the injury and the challenged conduct; and (3) it must 2 be likely, as opposed to merely speculative, that the injury will be redressed by a favorable 3 decision. Lujan, 504 U.S. at 560-61.

Because GHC and InterAction are suing on behalf of their members, each must establish 5 associational standing by demonstrating that (a) at least one of the association's members would 6 otherwise have standing to sue in its own right--i.e., has constitutional standing; (b) the interests 7 the association seeks to protect are germane to its purpose; and (c) neither the claim asserted nor 8 the relief requested requires the participation of individual members in the lawsuit. Hunt v. 9 Wash. State Apple Adver. Comm'n, 432 U.S. 333, 342-43 (1977). The district court held that 10 Plaintiffs had established standing. As explained below, we conclude that the district court was 11 correct.

A. Injury-in-Fact

We have little difficulty finding that Plaintiffs have alleged constitutional injury-in-fact, 14 and face actual or imminent harm as a result of the Policy Requirement. They allege that the 15 Requirement has compelled AOSI, Pathfinder, and many of the Associations' members to adopt 16 policy statements that they otherwise would not have adopted, and that it restricts them from 17 engaging in privately funded activities and speech that is essential to their work but that the 18 Agencies might deem inconsistent with an opposition to prostitution.*fn4 Pathfinder, for example, 19 "wishe[s] to remain neutral" on the issue of prostitution, but adopted an anti-prostitution policy 20 statement in order to avoid losing Leadership Act funding, and alleges that it would, in the absence of the injunctions, self-censor its prostitution-related speech at conferences, in publications, and on its website.

Defendants contend that the alleged injuries are merely conjectural because no plaintiff 4 has "attempted to form an affiliate" and "avail [itself] of th[at] alternative avenue[] for 5 communication." Appellants' Br. 22-23. But standing jurisprudence makes clear that Plaintiffs 6 need not go through the potentially burdensome process of setting up an affiliate organization 7 before they can bring a First Amendment challenge. See Virginia v. Am. Booksellers Ass'n, 484 8 U.S. 383, 392-93 (1988) (finding standing where newly enacted statute had not yet been 9 enforced because compliance would have required plaintiffs "to take significant and costly . . . 10 measures," and "the alleged danger of th[e] statute [was], in large measure, one of 11 self-censorship; a harm that can be realized even without an actual prosecution"). Moreover, as 12 elaborated upon below, infra at [33-34], forming an affiliate cannot remedy the grantee's injury 13 resulting from being compelled to affirmatively state the government's position on prostitution.

B. Associational Standing

Defendants contend that GHC and InterAction lack associational standing because they 16 fail the third prong of the Hunt test, under which they must establish that "neither the claim 17 asserted nor the relief requested requires the participation of individual members in the lawsuit." 18 432 U.S. at 343. We disagree. As an initial matter, the third prong of the associational standing 19 test is "prudential," not constitutional, and is "best seen as focusing on . . . matters of 20 administrative convenience and efficiency." United Food & Commercial Workers Union Local 21 751 v. Brown Grp., 517 U.S. 544, 555-56 (1996). Accordingly, district courts possess a degree 22 of discretion in applying it. See Ctr. for Reprod. Law v. Bush, 304 F.3d 183, 196 (2d Cir. 2002) 13 1 (Sotomayor, J.) ("[T]he prudential requirements of standing have been developed by the 2 Supreme Court on its own accord and applied in a more discretionary fashion as rules of judicial 3 self-restraint further to protect, to the extent necessary under the circumstances, the purpose of 4 Article III." (internal quotation marks omitted)). Here, the district court correctly concluded that 5 "neither the claims asserted nor the relief requested by the Associations would require any 6 significant participation of individual members in the lawsuit." Alliance III, 570 F. Supp. 2d at 7 543.

We agree with the district court that the "relief requested" component of the third Hunt 9 prong has been satisfied because the Associations seek an injunction barring enforcement of the 10 Policy Requirement, which will not necessitate the participation of individual members in the 11 lawsuit. See Warth v. Seldin, 422 U.S. 490, 515 (1975) (when an association seeks equitable 12 relief, "it can reasonably be supposed that the remedy, if granted, will inure to the benefit of 13 those members of the association actually injured"). However, as the Agencies correctly assert, 14 the third prong of the Hunt test is not "automatically satisfie[d]" whenever an association 15 "request[s] equitable relief rather than damages." Bano v. Union Carbide Corp., 361 F.3d 696, 16 714 (2d Cir. 2004). Courts "also must examine the claims asserted to determine whether they 17 require individual participation." Rent Stabilization Ass'n v. Dinkins, 5 F.3d 591, 596 (2d Cir. 18 1993); see Bano, 361 F.3d at 714 ("[An] organization lacks standing to assert claims of 19 injunctive relief on behalf of its members where the fact and extent of the injury that gives rise to 20 the claims for injunctive relief would require individualized proof . . . ." (internal quotation 21 marks omitted)).

1 The Agencies argue that "[i]ndividualized proof is required" in this case because 2 resolving whether the Guidelines permit recipients to set up adequate alternative channels for 3 protected expression necessitates a fact-specific determination for each recipient. Appellants' 4 Br. 25. First, it is self-evident that, as the district court concluded, individualized proof is not 5 required for the compelled speech and vagueness claims, "as it is the conduct of Defendants in 6 the form of the Policy Requirement and the Guidelines that will be the primary subject of 7 inquiry." Alliance III, 570 F. Supp. 2d at 543. With respect to the adequate alternative channels 8 analysis, we agree with the district court that while it will "require a more thorough factual 9 development to establish the extent of the burden on the Associations' members," individualized 10 evidence of members' efforts to comply with the Guidelines "would be duplicative and 11 redundant[,] counsel[ing] in favor of granting associational standing in the interests of judicial 12 economy." Id. at 544; see Nat'l Ass'n of Coll. Bookstores v. Cambridge Univ. Press, 990 F. 13 Supp. 245, 250 (S.D.N.Y. 1997) ("The fact that a limited amount of individuated proof may be 14 necessary does not in itself preclude associational standing."). This reasoning finds support in 15 Hunt itself, which held that an association of apple growers had standing to challenge a statute, 16 notwithstanding the varied nature and extent of the burdens suffered by the association's 17 members in complying with the statute. See 432 U.S. at 343-44. Accordingly, we conclude that 18 GHC and InterAction have adequately alleged associational standing.

II. Preliminary Injunctions

We review the grant of a preliminary injunction for abuse of discretion. Alleyne v. N.Y. 21 State Educ. Dep't, 516 F.3d 96, 100 (2d Cir. 2008). "A district court abuses its discretion when 22 (1) its decision rests on an error of law . . . or a clearly erroneous factual finding, or (2) its decision--though not necessarily the product of a legal error or a clearly erroneous factual 2 finding--cannot be located within the range of permissible decisions." Mullins v. City of New 3 York, 626 F.3d 47, 51 (2d Cir. 2010) (internal quotation marks omitted). Where, as here, the 4 moving parties seek to "stay[] government action taken in the public interest pursuant to a 5 statutory or regulatory scheme," they must establish (1) a likelihood of success on the merits, 6 and (2) irreparable harm in the absence of an injunction. Alleyne, 516 F.3d at 100 (internal 7 quotation marks omitted); accord Lynch v. City of New York, 589 F.3d 94, 98 (2d Cir. 2009).

8 Ultimately, "[i]f the underlying constitutional question is close, . . . we should uphold the 9 injunction." VIP of Berlin, LLC v. Town of Berlin, 593 F.3d 179, 185 (2d Cir. 2010) (alteration 10 in original) (quoting Ashcroft v. Am. Civil Liberties Union, 542 U.S. 656, 664 (2004)).

11 On appeal, Defendants challenge the district court's determination that Plaintiffs are 12 likely to succeed on the merits. They do not contest the district court's finding of irreparable 13 harm. We conclude that Plaintiffs have demonstrated a likelihood of success on the merits 14 because the Policy Requirement likely violates the First Amendment by impermissibly 15 compelling Plaintiffs to espouse the government's viewpoint on prostitution.

A. The Policy Requirement Likely Violates the First Amendment

1. Spending Clause and Unconstitutional Conditions Jurisprudence

The Spending Clause of the Constitution empowers Congress to "lay and collect Taxes, 19 Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general 20 Welfare of the United States." U.S. Const. art. I, ยง 8, cl. 1. This provision allows Congress to 21 "condition[] [the] receipt of federal moneys upon compliance by the recipient with federal 22 statutory and administrative directives." South Dakota v. Dole, 483 U.S. 203, 206 (1987) (quoting Fullilove v. Klutznick, 448 U.S. 448, 474 (1980)). It is well settled that Congress is 2 entitled to further policy goals indirectly through its spending power that it might not be able to 3 achieve by direct regulation. See id. at 207 ("[O]bjectives not thought to be within Article I's 4 ...

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