The opinion of the court was delivered by: LACEY
This action arises out of the Economic Opportunity Act of 1964, as amended (the Act) (42 U.S.C. § 2701, et seq.). Monmouth Community Action Program (MCAP) is a community action agency organized and designated as such pursuant to Title II of the Act, and as such operates a legal services program administered by Monmouth Legal Service Organization (MLSO) in accordance with § 2790 of 42 U.S.C. Funding of MLSO since its inception in 1968 has been largely by the Office of Economic Opportunity (OEO), pursuant to 42 U.S.C. § 2809(a)(3). OEO having now advised MLSO that after August 31, 1971, it will no longer be funded as an independent organization, but rather that it will be merged into the Ocean County Legal Services Organization (OCLSO), plaintiffs, being MLSO and other interested and affected organizations and persons, bring this suit to enjoin such action to the end that OEO be compelled to continue MLSO as a separate and independent legal services project under the Act. The pressing issue at this juncture is generated by plaintiffs' application for a preliminary injunction.
The statutory background follows:
42 U.S.C. § 2809 provides
3. A "Legal Services" program to further the cause of justice among persons living in poverty by mobilizing the assistance of lawyers and legal institutions and by providing legal advice, legal representation, legal counseling, education in legal matters, and other appropriate legal services. Projects involving legal advice and representation shall be carried on in a way that assures maintenance of a lawyer-client relationship consistent with the best standards of the legal profession. The Director shall make arrangements under which the State bar association and the principal local bar associations in the community to be served by any proposed project authorized by this paragraph shall be consulted and afforded an adequate opportunity to submit, to the Director, comments and recommendations on the proposed project before such project is approved or funded, and to submit, to the Director, comments and recommendations on the operations of such project, if approved and funded. No funds or personnel made available for such program (whether conducted pursuant to this section or any other section in this part) shall be utilized for the defense of any person indicted (or proceeded against by information) for the commission of a crime, except in extraordinary circumstances where, after consultation with the court having jurisdiction, the Director has determined that adequate legal assistance will not be available for an indigent defendant unless such services are made available. * * *
It is pursuant to this statute that MLSO has been funded by OEO.
From time to time OEO makes on-site evaluations of local legal services programs. (45 C.F.R. § 1061.2-5). Such an evaluation of MLSO occurred in June, 1970. It was conducted at the direction of OEO by two representatives (O'Byrne and Bernwald) of other legal service programs. Their report was never furnished to MLSO, although specifically requested. The evaluators were, it is obvious, arrogant, crude, ignorant, and completely unqualified to render a dispassionate and objective judgment on the MLSO organizational and operational structure. The MLSO Director found them to be more interested in stimulating litigation than in whether MLSO was conforming to the requirements of the 1964 Act. In a letter of protest, never refuted or denied, he charged (Ex. P-2):
* * * they wished to know how many consumer groups we represented, how many tenant groups we represented, whether we participated in advising target area people in rent strike programs, how many actions we had against administrative agencies, and so forth.
* * * They made no attempt to evaluate our program as to what we were doing, our caseload, our management procedures, and so forth. They were interested only in militant and aggressive, direct action on the part of target area persons.
They informed me that their recommendation was to close down Monmouth Legal Services for failure to act sufficiently in the area of law reform and minority group organization and representation. * * *
* * * [They] were interested only in our failure to organize and advise militant groups for the purpose of conducting rent strikes and other protest movements.
* * * they responded that the MCAP program should be abolished for it is led by "Uncle Toms" and is not serving the community.
They then told me what their recommendations were going to be again since the MCAP program was no good, the Monmouth Bar Association was no good, and the Board of Trustees of Monmouth Legal Services was no good. * * *
There must have been even within OEO concern over the validity of this evaluation and so MLSO was evaluated again in September, 1970, by representatives of Auerbach Associates, Inc. A so-called "Pre-Site Profile", probably prepared preliminarily by an Auerbach employee, referred to the June evaluation. (Ex. P-4). This Profile was inadvertently left with MLSO's Director during the Auerbach evaluation conference. The Profile, commenting upon the prior June evaluation report, states:
They open their comments on the project with: "Monmouth County Legal Services Organization (MCLSO) is in the opinion of the evaluators, a 'legal aid' type project, totally devoid of positive features in the area of law reform and community organization, and therefore, should not be refunded."
The Profile also stated that the earlier evaluators reported that the Monmouth County Bar Association controlled MLSO's program and that the Board of MLSO was controlled by a certain named lawyer who "is a conservative who has little interest in test litigation and group representation." According to this Profile, the evaluators further stated that as long as the named lawyer controlled the program MLSO "will continue to be an ineffectual legal aid operation."
What effect this Pre-Site Profile had on the ultimate evaluation of the Auerbach representatives is unknown. Also unknown is whether the full report of the earlier evaluators was turned over to Auerbach, and, if so, the extent to which the Auerbach report was influenced by that earlier report. In an undated letter from Ronald M. Dietrich, Acting Associate Deputy Director for Legal Services in OEO, received by MLSO on or about January 8, 1971, it was stated (Ex. P-15):
* * * The Office of Legal Services has not relied on the June 1970 evaluation. That evaluation contains matter highly critical of the program and of certain personnel in the program. As it is, in addition, irrelevant to this proceeding, I am reluctant to release it. Because no one used the June 1970 report in preparing the proposals affecting Monmouth Legal Services, I do not believe you will be prejudiced by not having it.
It must be reiterated, however, that the record fails to disclose whether or not the Auerbach report was influenced by the earlier evaluation. That the OEO did rely on the Auerbach report is, as will later appear, clear beyond doubt. It was of course Mr. Dietrich, the writer of this letter, who made the decision which has led to this litigation. Plaintiffs were unable to explore this assertion made by him since he flatly refused to testify at the hearing conducted on this application, which led to this Court's granting plaintiffs' motion to strike his affidavit filed in opposition to the motion for the preliminary injunction. Nor was the plaintiffs' counsel able to examine the ...