Rulemaking Notice
LEGAL SERVICES CORPORATION
45 CFR Part 1604 Outside Practice of Law
AGENCY: Legal Services Corporation.
ACTION: Notice of Proposed
Rulemaking
SUMMARY: The Legal Services
Corporation proposes to amend its regulation relating to the outside practice of
law by full-time legal services attorneys. The rule would be substantively
restructured and revised to clarify the scope of the restrictions on outside
practice so that program attorneys would not face undue restrictions in
complying with their professional obligations. The proposed rule would
also amend several definitions and allow for the separate treatment of court
appointments.
DATES: Comments should be
received on or before [insert date 60 days from date of publication].
ADDRESSES: Comments
must be submitted in writing and may be sent by regular mail, or may be
transmitted by fax or email to: Mattie C. Condray, Senior Assistant General
Counsel, Office of Legal Affairs, Legal Services Corporation, 750 First St.,
NE., 11th Floor, Washington, DC 20002‑ 4250; 202/336-8952 (fax); mcondray@lsc.gov
(email).
FOR FURTHER INFORMATION CONTACT: Mattie C.
Condray, Senior Assistant General Counsel, Office of Legal Affairs, Legal
Services Corporation, 750 First St., NE., 11th Floor, Washington, DC
20002‑ 4250; (202) 336‑ 8817 (phone); 202/336-8952 (fax); mcondray@lsc.gov
(email).
SUPPLEMENTARY INFORMATION: On January 17, 1995, the
Legal Services Corporation (LSC or the Corporation) published for public comment
proposed revisions to 45 CFR Part 1604, LSC's regulation on the outside
practice of law. 60 Fed. Reg. 3367. Although
LSC received public comment on the proposed revisions, no final action was ever
taken on the rule. Many of the issues outstanding in 1995 remain important
today and LSC is interested in adopting final revisions to Part 1604. LSC
is not, however, issuing a final rule because several of the prior proposed
revisions may not be consistent with statutory changes imposed by Congress in
the intervening years. Moreover, there may be other issues with the
regulation which have arisen in the past seven years which are not adequately
addressed by the prior proposed rule without further consideration.
Accordingly, LSC is re-issuing a Notice of Proposed Rulemaking (NPRM). LSC
specifically invites comment on the impact of the restriction on claiming and
accepting attorneys' fees, other restrictions stemming from the 1996
appropriations act, program integrity requirements, and time-keeping
requirements on the proposals contained herein and the general issue of outside
practice of law by LSC recipient attorneys.
Section-by-Section Analysis
Section 1604.1 Purpose
This section sets out the framework for
other changes that appear in this NPRM. LSC proposes to add language to
authorize a recipient to adopt written policies to permit its program attorneys
to engage in pro bono legal assistance and to comply with their obligations as
members of the Bar and officers of the court. The proposed rule
recognizes, however, that those demands must not interfere with the attorneys'
overriding responsibility to serve the program's clients. LSC further
proposes to clarify that this part should not be construed to permit recipients
to unduly restrict legal services attorneys from engaging in those activities.
The use of the word "unduly" acknowledges that there may be some
restrictions imposed by the LSC Act, LSC appropriations or other legislation
and/or LSC regulations, or by recipients that are necessary to comply with
applicable law or accomplish the overriding goals of the LSC Act.
Section 1604.2 Definitions
Section 1604.2(a) "Full-time Attorney"
LSC
proposes to delete the definition of "attorney," because it is inconsistent
with the definition of "attorney" in Part 1600 of the Corporation's
regulations, Definitions. Instead, LSC proposes to substitute a definition of
"full-time attorney" that incorporates the definition of "attorney" in
Part 1600. Under the proposed rule, a "full-time attorney" would be
defined as an attorney who is a full-time employee of a recipient. LSC has
not proposed a separate definition for the term "full-time," preferring to
leave the decision as to what constitutes "full-time" to the recipient's own
personnel and outside practice policies and to any appropriate statutory
definitions found elsewhere.
Section 1604.2(b) "Outside Practice of Law"
LSC
proposes to amend this definition to explain what outside practice is, rather
than what it is not. The regulation is intended to and currently applies
only to the outside practice of law by recipients' employees and not to other
outside activities by recipients' employees that do not constitute the outside
practice of law. LSC believes that this amendment will clarify this point
and aid in the comprehension and usability of the regulation.
LSC
further proposes to substitute the words "receiving that" for "entitled to
receive." This revision would makes it clear that an attorney could represent
a client in an outside practice case who is eligible for representation from the
recipient even if the client is also receiving legal assistance from the
recipient, as long as the recipient is representing the client on a different
matter.
LSC
notes that this definition is not intended to include work done by legal
services attorneys when serving in the military reserves as JAG Corps attorneys.
Although LSC has chosen not to include language on this issue in the rule, it
intends to continue the policy established in prior General Counsel opinions,
which have consistently found that an attorney is not engaged in the outside
practice of law while serving as a JAG Corps reserve officer. Comments are
solicited as to whether the rule should include language expressly stating this
policy.
Section 1604.2(c) "Court Appointment"
LSC
proposes to add a definition for the term "court appointment." The
proposed definition, "an appointment in a criminal or civil case made by
a court or administrative agency under a statute or court rule or practice,"
is based on the language relating to court appointments currently found in
sections 1604.4 and 1604.5 of the regulation. rather than the following
language in § 1006(d)(6) of the Act:
Attorneys employed
by a recipient shall be appointed to provide legal assistance without reasonable
compensation only when such appointment is made pursuant
to a statute, rule, or practice applied generally to attorneys practicing in the
court where the appointment is made.
The proposed definition on appointments is broader than the statutory
one, which applies only to uncompensated appointments; but LSC believes it is
appropriate because it is more protective of program resources.
Section 1604.3 General Policy
LSC
proposes to expand and amend this section to require recipients to adopt written
policies relating to the outside practice of law, rather than permitting
programs to determine on an ad hoc basis, whether outside practice is to be
permitted in a particular instance (as is the case under the existing rule).
LSC anticipates, however, the such policies would give the
recipient's executive director substantial discretion in making outside
practice of law determinations.
Under
the proposed rule, the required policies would be permitted to permit the
outside practice of law by full-time attorneys only to the extent permitted by
Part 1604, but would be permitted to contain additional limitations not imposed
by Part 1604. This provision is intended to address the concern that, in
revising this regulation to take account of the evolving obligations of all
attorneys to do pro bono work, recipients would be subject to pressures from
their attorneys to do outside practice that was not absolutely required by
professional obligations and that interfered with the program's ability to serve
the clients it is funded to serve. This concern is especially important in
view of the fact that LSC recipients lack adequate resources to serve more than
a small fraction of the eligible persons who have real legal needs. LSC believes
that the proposed language will ensure that recipients can adopt policies that
balance the demands of the profession, the attorney's desire to do outside work,
and the needs of the community served by the program.
The
restrictions of this part, as currently applicable and as proposed, apply only
to full-time attorneys. Although LSC does not propose to address the outside
practice of law by part-time attorneys, the regulation would expressly provide
that recipients' policies may include restrictions on outside practice by
part-time attorneys.
Section 1604.4 Permissible Outside
Practice
LSC
proposes to combine and revise the provisions currently in sections 1604.4,
Compensated Outside Practice, and 1604.5, Uncompensated Outside Practice, into
one section retitled Permissible Outside Practice.
Under
the current structure of the regulation, the general rule on the outside
practice of law is stated in the negative; that is, the outside practice of law
is prohibited except as provided. LSC proposes to, instead,
state the rule in the affirmative, providing guidance on the terms under which
the outside practice of law may be approved. The proposed revision also
refers to a full-time attorney's responsibilities to clients, rather
than simply "full-time responsibilities." LSC intends an executive
director to make a case-by-case determination as to whether involvement in a
specific case or matter would be consistent with a full-time attorney's
responsibilities to the program's clients. A full-time attorney's
responsibilities to program clients should be determined by reference to the
program's definition of "full-time," not by reference to a specific
attorney's working habits. Thus, an attorney in the habit of working
substantial amounts of overtime on program activities should not be penalized
for deciding to allot some of that
attorney's own time to an outside practice case rather than to program
activities. In addition, an attorney should be permitted to take
reasonable amounts of leave to engage in permitted outside practice.
LSC
proposes to include language intended to address a concern that, if a
program attorney handled outside practice cases that were controversial or dealt
with areas prohibited to the recipient (e.g., abortion litigation), the
employing recipient would be seen as handling the cases and viewed as using
outside practice as a way to get around other restrictions. The proposed
language, which is similar to language in the regulation on prohibited political
activities, would require the attorney to make it clear that this was not a
program case, and to do whatever was necessary to ensure that it not be
perceived as such. In practical terms, the restriction might require the
attorney to use a home address or post office box for correspondence, or a home
telephone number or direct dial number that would not go through the
recipient's switchboard or voice mail greeting, or other similar processes to
ensure that the recipient was not identified as the sponsor of the
representation. The proposed restriction on identification would not apply
to court appointments or to cases which are undertaken to fulfill a mandatory
pro bono obligation, which are treated separately in the regulation
Proposed
paragraph (c) sets forth the five specific situations in which the outside
practice of law would be permitted: a newly employed closing cases from a
previous law practice; when the attorney is acting on behalf of him or
herself, a close friend, family member or another member of the recipient's
staff; when the attorney is acting on behalf of a religious, community, or
charitable group; when the attorney is participating in a pro bono or legal
referral program affiliated with or sponsored by a bar association, other legal
organization or religious, community or charitable group; or when the attorney
is satisfying an obligation to participate in pro bono work under applicable
State or local rules or practices of professional responsibility
With
respect to newly employed attorneys, proposed paragraph (c)(1) is intended to
make explicit what has always been implicit under the current Part 1604, i.e.,
that work for a client from a previous practice should not be done on program
time.
LSC
proposes to expressly permit an attorney to represent another member of the
recipient's staff without having to prove that the individual is a close friend.
LSC also proposes to add language to make it clear that the attorney may
represent him or herself.
LSC
also proposes to amend the current provision permitting representation of
religious, community or charitable groups, to permit the representation of an
individual client who has been referred to him or her by such a group through a
formal pro bono or referral program that does regular referrals. For
example, under the proposed rule it would permissible for an attorney to
represent a client who has been referred by
the ACLU, NAACP or Catholic Charities. Prior General Counsel opinions have
permitted outside practice both on behalf of organizations as well as on behalf
of individuals referred by those organizations and LSC believes that it is
appropriate to incorporate these interpretations into the rule.
LSC
proposes to add a paragraph, (c)(5), to make it clear that legal services
attorneys should be permitted to act in the same way as other attorneys with
respect to pro bono work that is undertaken to meet professional obligations,
whether the obligation is aspirational, as under state rules that are modeled on
Rule 6.1 of the American Bar Association's ("ABA") Model Rules of
Professional Conduct, or mandatory, as is now the case in a few local
jurisdictions across the country.
Section 1604.5 Compensation
The
1995 NPRM contained a new proposed provision on compensation, providing, among
other things, that a recipient would be allowed to permit an attorney to accept
attorneys' fees for certain cases, as long as the fees would be remitted to the
recipient. While this proposed provision was clearly permissible at the
time it was proposed, LSC is concerned that it is no longer consistent with the
current statutory and regulatory restrictions on the claiming, collecting and
retention of attorney's fees. In order to solicit comment on this issue,
LSC is reprinting the original text of the preamble and the proposed regulatory
text as they appeared in 1995:
Although the statute
prohibits all compensated outside practice, the exception in proposed paragraph
(a) for work on cases held over from a previous private practice is justified
under the general principle that neither LSC nor the recipient
can interfere with an attorney's professional responsibilities to a client.
Since the representation was undertaken before the lawyer became a legal
services attorney, fairness dictates that the attorney should be permitted to
take fees for completion of the work.
Paragraph (b)
proposes that a recipient may permit an attorney to accept attorneys' fees for
§ 1604.4(c)(2)-(5) cases, as long as the fees are remitted to the recipient.
Several project directors have questioned why an attorney cannot keep fees
awarded for outside practice approved by the recipient. The answer is
simple. The LSC Act provision on outside practice, § 1007(a)(4),
prohibits all compensated outside practice, subject to overriding considerations
of professional responsibility, but permits uncompensated outside practice under
LSC guidelines.
What this section
does, in essence, is to define as "uncompensated outside practice" any
representation where the attorney does not seek or receive personal compensation
for the representation. Thus, the attorney can perform work pro bono,
without any fee, but can also undertake work where fees could potentially be
awarded, as long as the attorney does not keep any such fee but remits it to the
recipient.
Proposed §
1604.5(b)(2) provides that attorneys' fees shall be remitted to a recipient when
allowed by applicable rules of professional responsibility. The Committee
added the reference to the rules of professional responsibility because
of a concern that restrictions on fee-splitting could, in some states, prohibit
an attorney from turning over attorneys' fees from an outside practice case to
the recipient. Recipients would need to consult the status of the law in
their state. The Committee understands that, in general, fee-splitting
between a staff attorney and a legal services organization such as a recipient
is not restricted under state or local rules, but requests comments on the
issue.
The Committee also
raised the issue of how such attorneys' fees would be treated for tax purposes.
Because the Corporation does not generally regulate the tax obligations of
recipients' employees, this issue does not appear to be one that should be
addressed by regulation. Rather, it is a matter of local concern which a
recipient may want to consider when drafting its policies on outside practice.
The LSC Act and
LSC's regulation on fee-generating cases, 45 CFR Part 1609, have consistently
been interpreted as prohibiting recipients from taking attorneys' fees from a
client's recovery of damages or retroactive statutory benefits. That
restriction is accordingly incorporated into this provision of the rule.
Paragraph
(b)(3) is intended to make it clear that if a recipient receives attorneys' fees
from one of its attorneys' outside practice cases, it could reimburse the
attorney, the client, the pro bono or legal referral organization,
or anyone else who had contributed resources to cover costs or out-of-pocket
expenses to support the representation.
Section 1604.6 Use of Recipient Resources
For
the five types of outside practice cases described in proposed §1604.4(c)(1)-(5),
this proposed provision proposes would allow attorneys to use some recipient
resources if necessary to carry out the attorney's professional
responsibilities. However, it would be up to the local recipient to
establish policies that would determine whether its attorneys could use
recipient resources for a specific case to the extent allowed by this rule.
More specifically, LSC proposes, for newly employed attorneys closing old cases,
that a recipient may allow its attorneys to use only a de minimis amount of
program resources, including time. Under a "de minimis" standard, an
attorney could make a brief phone call or use the fax machine during working
hours, but would have to take leave for court appearances. For other
cases, LSC proposes a somewhat less strict standard. In those situations,
a recipient would be permitted to allow its attorneys to use a limited amount of
program resources, including time, for those cases. Under the
"limited" standard, in addition to whatever an attorney could do under the
de minimis standard, the attorney could, for example, make a brief court
appearance during normal working hours without taking leave. An attorney
could also be permitted to use a program computer
or typewriter to prepare pleadings or other documents. However, if the attorney
participated in a long trial or extended negotiation, he or she would normally
be required to take leave to do so. LSC also proposes that if a recipient
has a procedure to identify copying, postage and similar costs, and the attorney
reimbursed the recipient, the use of those resources would also be permissible
under either standard. This position is consistent with the longstanding LSC
policy. Finally, language is included that would allow an attorney to use
a recipient's resources only when the recipient's LSC or private funds are not
used for any activities for which the use of such funds is prohibited.
LSC
seeks comments on the appropriateness of using recipient resources for any
outside practice, and whether or not the distinction between "de
minimis" and "limited" use of resources makes sense and is
workable. In particular, LSC invites comment on the impact the 1996
restrictions, LSC's program integrity rules at 45 CFR Part 1610 and LSC's
timekeeping rules at 45 CFR Part 1635 on the proposals set forth herein.
Section 1604.7 Court Appointments
This proposed section would treat court
appointments and mandatory pro bono representation separately from outside
practice, because there are substantially different considerations for court
appointments and mandatory pro bono than there are for pro bono or other outside
cases that an attorney undertakes on a
strictly voluntary basis.
Proposed
paragraph (a)(1) simply restates a general rule that applies to court
appointments as well as to outside practice under the current Part 1604
regarding the permissibility of a full-time attorney accepting a court
appointment to provide representation. Proposed paragraph (a)(2) is based on §
1006(d)(6) of the LSC Act. It is intended to protect recipients from
efforts that have been made by some judges to appoint legal services attorneys
to handle court appointments in lieu of private attorneys, and/or to refuse to
provide compensation for appointed cases handled by legal services attorneys,
when private attorneys appointed to similar cases would have been paid.
Proposed paragraph (a)(3) is also a requirement carried over from the current
Part 1604, although it makes more sense under this proposal, since the proposed
rule makes it clear that legal services attorneys can handle court appointments
on program time.
LSC
proposes to add a new paragraph providing that, if an attorney is mandated to
engage in pro bono representation by applicable state or local court rules or
practices or by rules of professional responsibility, such representation shall
be treated in the same manner as court appointments for the purposes of
paragraphs (a)(1), (a)(3), (b) and (c) of this section. While LSC
recognizes that the ABA Model Rules do not
currently mandate pro bono services for any attorney, LSC also recognizes that
mandatory pro bono is under active consideration in a number of states and is a
reality in certain local jurisdictions. It is the intent of LSC that legal
services attorneys be permitted to undertake outside representation to fulfill
any mandatory professional obligations to provide pro bono assistance to which
they are now or may be subject in the future.
Finally,
this section would allow a full-time attorney to use program resources to
undertake representation required by court appointment or mandatory pro bono,
and would allow the attorney to identify the recipient as his or her employer
when engaged in such representation.
List of Subjects in 45 CFR Part 1604
Legal services.
For the reasons set forth in the preamble, LSC proposes to revise 45
CFR part 1604 to read as follows:
PART 1604--OUTSIDE PRACTICE OF LAW
Sec.
1604.1 Purpose.
1604.2 Definitions.
1604.3 General Policy.
1604.4 Permissible Outside Practice.
1604.5
Compensation.
1604.6 Use of Recipient Resources.
1604.7 Court Appointments.
Authority: 42 U.S.C. 2996e(b)(3), 2996e(d)(6), 2996f(a)(4), 2996g(e).
§ 1604.1 Purpose.
This part is designed to authorize recipients to adopt written policies
that permit legal services attorneys employed by recipients to engage in pro
bono legal assistance and to comply with the reasonable demands made upon them
as members of the Bar and as officers of the Court, as long as those demands do
not hinder fulfillment of their overriding responsibility to serve those
eligible for assistance under the Act. Nothing in this part shall be
construed to permit recipients to unduly restrict the ability of any attorney to
engage in such activities.
§ 1604.2 Definitions.
As used in this part--
(a) Full-time attorney means an attorney who is employed full-time by a
recipient in legal assistance activities
supported in major part by the Corporation, and who is authorized to practice
law in the jurisdiction where assistance is provided.
(b) Outside practice of law means the provision of legal assistance to
a client who is not receiving that legal assistance from the employer of the
full-time attorney rendering assistance, but does not include court appointments
except where specifically stated.
(c) Court appointment means an appointment in a criminal or civil case
made by a court or administrative agency under a statute or court rule or
practice.
§ 1604.3 General Policy.
(a) A recipient shall adopt written policies governing the outside
practice of law by full-time attorneys that are consistent with the applicable
rules of professional responsibility.
(b) A recipient's policies may permit the outside practice of law by
full-time attorneys only to the extent allowed by this part, but may impose
additional restrictions as necessary to meet the recipient's responsibilities to
clients.
(c) A recipient may also adopt policies that apply to outside practice
by attorneys employed part-time by the recipient, but are not required to do so under
the provisions of this part.
§ 1604.4 Permissible Outside Practice.
A recipient may permit a full-time attorney to engage in a specific
case or matter that constitutes the outside practice of law if:
(a) The director of the recipient or the director's designee
determines that representation in such case or matter is consistent with the
attorney's responsibilities to the recipient's clients;
(b) Except as provided in section 1604.7, the attorney does not
intentionally identify the case or matter with the Corporation or the recipient;
and
(c) The attorney is--
(1) Newly employed and
has a professional responsibility to close cases from a previous law practice,
and does so on the attorney's own time as expeditiously as possible; or
(2) Acting on behalf of
him or herself, a close friend, family member or another member of the
recipient's staff; or
(3) Acting on behalf of
a religious, community, or charitable group; or
(4) Participating in a
pro bono or legal referral program affiliated with or sponsored by a bar
association, other legal organization or religious, community or charitable
group; or
(5)
Satisfying an obligation to participate in pro bono work under applicable State
or local rules or practices of professional responsibility.
§ 1604.5 Compensation.
(a) A recipient may permit a full-time attorney to seek and receive
personal compensation for work performed pursuant to § 1604.4(c)(1).
(b) A recipient may permit a full-time attorney to seek and accept a
fee paid by, awarded or approved by a court or administrative body or included
in a settlement if--
(1) The attorney is
acting pursuant to § 1604.4(c) (2) through (5);
(2) Subject to the
applicable law and rules of professional responsibility, any such fees paid to
the attorney are remitted to the recipient; and
(3) The fee is not
deducted from the individual client's recovery of compensatory damages or
retroactive benefits.
(c) From the fees remitted to the recipient pursuant to paragraph
(b)(2) of this section, the recipient may reimburse any individual or
organization for actual costs or out-of-pocket expenses incurred in the
representation.
§ 1604.6 Use of Recipient Resources.
(a) For cases
undertaken pursuant to § 1604.4(c)(1), a recipient's written policies may
permit a full-time attorney to use de minimis amounts of the recipient's
resources for permissible outside practice if necessary to carry out the
attorney's professional responsibilities, as long as the recipient's
Corporation or private funds are not used for any activities for which the use
of such funds is prohibited.
(b) For cases undertaken pursuant to § 1604.4(c) (2) through (5), a
recipient's written policies may permit a full-time attorney to use limited
amounts of the recipient's resources for permissible outside practice if
necessary to carry out the attorney's professional responsibilities, as long
as the recipient's Corporation or private funds are not used for any
activities for which the use of such funds is prohibited.
§ 1604.7 Court Appointments.
(a) A recipient may permit a full-time attorney to accept a court
appointment if the director of the recipient determines that:
(1) Such an appointment
or case is consistent with the attorney's responsibilities to the
recipient's clients;
(2) The appointment was
made and the attorney will receive compensation for the court appointment under
the same terms and conditions as are applied generally
to attorneys practicing in the court where the appointment is made; and
(3) Subject to the
applicable law and rules of professional responsibility, the attorney agrees to
remit to the recipient any compensation received.
(b) A recipient may permit a full-time attorney to use program
resources to undertake representation pursuant to a court appointment.
(c) A full-time attorney may identify the recipient as his or her
employer when engaged in representation pursuant to a court appointment.
(d) If, under the applicable State or local court rules or practices or
rules of professional responsibility, legal services attorneys are mandated to
provide pro bono legal assistance in addition to the attorneys' work on behalf
of the recipient's clients, such legal assistance shall be treated in the same
manner as court appointments under paragraphs (a)(1), (a) (3), (b) and (c) of
this section.
Victor M. Fortuno
Vice President for Legal Affairs and General Counsel
September 11, 2002
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