On Feb. 27, a three-judge panel of the U.S. Circuit Court for the District of Columbia overturned a lower court ruling that voided a USAID requirement that grantees under an HIV/AIDS program adopt certain policies on prostitution. The ruling in DKT International v. USAID is the first decision in two cases in separate federal appeals courts that involve the same issue. DKT expects to seek a re-hearing before the entire Circuit Court. An appeal from another lower court ruling that overturned the same requirement is pending in the U.S. Court of Appeals for the Second Circuit in New York. Conflicting rulings in the two appeals courts could increase the likelihood the issue will reach the Supreme Court. The legal issue in both cases is whether Congress can mandate policy statements outside the scope of the grant project. In this case, DKT International (DKT) sued to block enforcement of Section 7631(f) of the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003, which requires that no grants go to any group "that does not have a policy explicitly opposing prostitution and sex trafficking." It also bars funds from being used to "promote or advocate for legalization" of sex trafficking and prostitution. DKT lost a $60,000 subgrant from Family Health International to market condoms in Vietnam because they refused to certify that they had such a policy. Their refusal was based on concerns that the policy might stigmatize and alienate many of the people it targeted for its HIV/AIDS prevention services. DKT also refused because the group says the certification requirement in Section 7631(f) of the Act violates its First Amendment rights because it applies to other programs that are not federally funded. DKT did not challenge the government's right to control the message funded in the grant program or to prohibit use of federal funds to advocate for legalization of prostitution. Its challenge focused on the requirement that it have a policy that applies beyond the government funded project. The lower court agreed with DKT, finding that the required policy statement and certification "constitute viewpoint based restrictions on speech and they are not narrowly tailored to further a compelling government interest." (Opinion, p. 27) The lower court also noted that, "the Supreme Court has repeatedly held that the government may not compel private individuals or organizations to speak in a content-specific, view-point specific manner as a condition of participating in a government program." (Opinion p. 14) In reversing the lower court, the appeals court stressed the government's right to fund its message. The 2003 Act at Section 7611(a)(4) says, "the reduction of HIV/AIDS behavioral risks shall be a priority of all prevention efforts in terms of funding, educational messages, and activities by promoting abstinence from sexual activity and substance abuse, encouraging monogamy and faithfulness, promoting the effective use of condoms, and eradicating prostitution, the sex trade, rape, sexual assault and sexual exploitation of women and children." Congress also found private organizations to be "critical to the success" of the program. (Opinion p. 3) The appeals court found that because of the Act's educational message, USAID has the right to discriminate based on viewpoint regarding who conveys that message. However, the court applies this principle beyond the government program, based on its interpretation of the Supreme Court case Rust v. Sullivan (500 U.S. 178). In Rust, the Supreme Court said a clinic could provide abortion counseling "through programs that are separate and independent from the project that receives Title X funds." (Rust at p. 196) DKT argued that the Rust case involved projects, not the entire grantee's organization. However, the DKT ruling extends the Rust rationale to cover the entire organization, relying on the Supreme Court's ruling in Regan v. Taxation Without Representation (461 U.S. 540), which upheld limits of legislative lobbying activities of 501(c)(3) organizations because of their ability to create 501(c)(4) affiliates that have no lobbying limits. The court said, "We see no difference here", noting that DKT could set up a subsidiary organization that could adopt the required policy and sign the pledge, thus qualifying for the federal grant "as long as the two organizations' activities were kept sufficiently separate. The parent organization need not adopt the policy." In making this point, the court refers to the government's statements in oral argument, which answered "yes" to the court's question: "All their complaints could be solved by a corporate reorganization?" However, the opinion does not go on to cite further government statements in the oral argument that qualify that answer. At pages 8-9, the government's attorney says, "There could be circumstances in which in order to protect the government's interest here, USAID might seek to impute the speech of one entity to another", saying the government could look at "how separate is separate enough…" There is a long running dispute over such separation requirements in the context of legal services programs. The Second Circuit is currently considering an appeal from a U.S. District Court that found the separation requirements imposed on legal services to be an unconstitutional burden. See Background: Dobbins v. Legal Services Corporation. The government has taken a more flexible approach to separation of religious programs from government programs by faith-based government grantees. See HHS Gives Guidance on Keeping Federal Funds Out of Religious Programs. The policy question of whether grantees should condemn prostitution and sex trafficking has been controversial and has divided some nonprofits. The Chronicle on Philanthropy noted that over 200 charities sent a letter to President Bush opposing the policy, while a coalition of religious groups has supported the policy. Whatever one's view on the policy, nonprofits should beware mixing the policy question with the First Amendment question. The bottom line is whether awarding a federal grant gives the government the right to reach beyond the grant project to dictate the speech and activities it does not fund, thus imposing its will on private donors and the organization as a whole. This expansive government power would seriously undermine the independence of the nonprofit sector, turning government grantees into little more than mini-agencies of the federal government. The second case involving the anti-prostitution pledge is pending in the Court of Appeals for the Second Circuit. The plaintiffs are the Alliance for Open Society International (AOSI) and its affiliate, the Open Society Institute (OSI) and Pathfinder International. Details on that case are available on the Brennan Center for Justice website.