This section contains the nature of the case and procedural background.

CLS is a non-profit legal services corporation the sole purpose of which is to provide legal services to the poor. It receives approximately half of its operating budget directly from the federal Legal Services Corporation under the Legal Services Corporation Act, 42 U.S.C. § 2996, et seq. The remaining half is received under Title XX of the Social Security Act, 42 U.S.C. § 1397, et seq. Appendix at 107a-108a. Title XX funding is channeled from the United States Department of Health and Human Services to DPW. DPW then allocates a portion of the federal funds, together with a 25% matching state grant, to various community based legal services programs, including CLS. CLS entered into a series of annual contracts with PLSC for the fiscal years 1978-1981, during which CLS performed much of the work in the preparation of this case. The contracts prevented CLS from requesting attorneys' fees arising out of litigation against the Commonwealth or Commonwealth employees. With each no fee contract, CLS attached a letter asserting that CLS did not, by executing the contract, waive its right to challenge the legality and enforceability of the no fees provision. With each no fee contract, CLS attached a letter asserting that CLS did not waive its right to challenge the legality and enforceability of the no fees provision. Ps won their suit against Ds and then applied for legal fees. The court agreed with P and CLS and awarded the fees. Ds appealed.

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