[House Report 104-255]
[From the U.S. Government Publishing Office]



                                                                       
104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    104-255
_______________________________________________________________________


 
                         LEGAL AID ACT OF 1995

_______________________________________________________________________


 September 21, 1995.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______


Mr. Gekas, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 2277]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on the Judiciary, to whom was referred the bill 
(H.R. 2277) to abolish the Legal Services Corporation and 
provide the States with money to fund qualified legal services, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.
  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Legal Aid Act of 1995''.

SEC. 2. LEGAL SERVICES CORPORATION

  The Legal Services Corporation Act (42 U.S.C. 2996-2996l) is amended 
to read as follows:

``SECTION 1. SHORT TITLE.

  ``This Act may be cited as the `Legal Aid Grant Act'.

``SEC. 2. DEFINITIONS.

  ``For purposes of this Act:
          ``(1) Qualified legal service provider.--
                  ``(A) In general.--The term `qualified legal 
                service provider' means--
                          ``(i) any individual who is licensed 
                        to practice law in a State for not less 
                        than 3 calendar years, who has 
                        practiced law in such State not less 
                        than 3 calendar years, and who is so 
                        licensed during the period of a 
                        contract under section 4; or
                          ``(ii) a person who employs or 
                        contracts with an individual described 
                        in clause (i) to provide qualified 
                        legal services.
                Nothing in this subparagraph shall be 
                interpreted to prohibit a qualified legal 
                service provider from employing an individual 
                who is not described in clause (i) to assist in 
                providing qualified legal services.
                  ``(B) Not qualified.--No individual shall be 
                considered, or employed by, a qualified legal 
                service provider if such individual during the 
                10 years preceding the submission of a bid for 
                a contract under section 4--
                          ``(i) has been convicted of a felony; 
                        or
                          ``(ii) has been suspended or 
                        disbarred from the practice of law for 
                        misconduct, incompetence, or neglect of 
                        a client in any State; or
                if such individual has a criminal charge 
                pending on the date of the submission of a bid 
                for a contract under section 4. In determining 
                whether to award a contract under section 4, a 
                State may also consider, to the extent the 
                State considers it relevant in evaluating the 
                qualifications of an applicant, whether an 
                applicant has been found in contempt of a court 
                of competent jurisdiction in any State or 
                Federal court or has been sanctioned under 
                Federal Rule of Civil Procedure 11 or an 
                equivalent State rule of procedure applicable 
                in civil actions.
                  ``(C) Additional requirements.--No State may 
                impose a requirement on an individual or person 
                as a condition to bidding on a contract under 
                section 4 or to being awarded such a contract 
                which requirement is different from any other 
                requirement of subparagraph (B).
          ``(2) Qualified legal services.--The term `qualified 
        legal services' means--
                  ``(A) mediation, negotiation, arbitration, 
                counseling, advice, instruction, referral, or 
                representation, and
                  ``(B) legal research or drafting in support 
                of the services described in subparagraph (A),
        provided by or under the supervision of a qualified 
        legal service provider to a qualified client for a 
        qualified cause of action.
          ``(3) Qualified client.--The term `qualified client' 
        means any individual who is a United States citizen or 
        an alien admitted for permanent residence who in the 3 
        months prior to seeking legal assistance from a 
        qualified legal service provider had an income from any 
        source which was equal to or less than the poverty line 
        established under section 673(2) of the Community 
        Services Block Grant Act (42 U.S.C. 9902(2)).
          ``(4) Qualified cause of action.--
                  ``(A) The term `qualified cause of action' 
                means only a civil cause of action which 
                results only from--
                          ``(i) landlord and tenant disputes, 
                        including an eviction from housing 
                        except an eviction where the prima 
                        facie case for the eviction is based on 
                        criminal conduct;
                          ``(ii) foreclosure of a debt on a 
                        qualified client's residence;
                          ``(iii) the filing of a petition 
                        under chapter 7 or 12 of title 11, 
                        United States Code, or under chapter 13 
                        of such title unless a petition of 
                        eviction has preceded the filing of 
                        such petition;
                          ``(iv) enforcement of a debt;
                          ``(v) an application for a statutory 
                        benefit;
                          ``(vi) appeal of a denial of a 
                        statutory benefit on a statutory 
                        ground;
                          ``(vii) child custody and support;
                          ``(viii) action to quiet title;
                          ``(ix) activities involving spousal 
                        or child abuse on behalf of the abused 
                        party;
                          ``(x) an insurance claim;
                          ``(xi) competency hearing;
                          ``(xii) probate;
                          ``(xiii) divorce or separation;
                          ``(xiv) employment matters; or
                          ``(xv) consumer fraud.
                Additional causes of action qualify as a 
                qualified cause of action if they arise out of 
                the same transaction as a cause of action 
                described in this subparagraph unless such 
                additional causes of action are described in 
                clause (i) of subparagraph (B).
                  ``(B) Such term does not include--
                          ``(i) a class action under Federal, 
                        State, or local law; or
                          ``(ii) any challenge to the 
                        constitutionality of any statute.
          ``(5) State.--The term `State' means any State of the 
        United States, the District of Columbia, the 
        Commonwealth of Puerto Rico, the Virgin Islands, Guam, 
        American Samoa, the Trust Territory of the Pacific 
        Islands, and any other territory or possession of the 
        United States and includes any recognized governing 
        body of an Indian Tribe or Alaskan Native Village that 
        carries out substantial governmental powers and duties.

``SEC. 3. GRANTS.

  ``(a) Grant Authority.--The Attorney General shall direct the 
Office of Justice Programs to make grants to States for the 
provision of qualified legal services and to insure compliance 
with the requirements of this Act. To receive a grant under 
this subsection a State shall make an application to the 
Attorney General. Such an application shall be in such form and 
submitted in such manner as the Attorney General may require.
  ``(b) Poverty Line.--Grants shall be made under subsection 
(a) to States in such proportion as the number of residents of 
each State which receive a grant who live in households having 
income equal to or less than the poverty line established under 
section 673(2) of the Community Services Block Grant Act (42 
U.S.C. 9902(2)) bears to the total number of residents in the 
United States living in such households.
  ``(c) Retention of Grant Funds.--Each State may in any fiscal 
year retain for administrative costs not more than 5 percent of 
the amount granted to the State under subsection (a) in such 
fiscal year. The remainder of such grant shall be paid under 
contracts to qualified legal service providers in the State for 
the provision in the State of qualified legal services. If a 
State which has received a grant under subsection (a) has at 
the end of any fiscal year funds which have not been obligated, 
such State shall return such funds to the Attorney General.
  ``(d) Requirements of This Act.--No State may receive a grant 
under subsection (a) unless the State has certified to the 
Attorney General that the State will comply with and enforce 
the requirements of this Act.
  ``(e) Limitation on Use of Grant Funds.--None of the funds 
provided under subsection (a) shall be used by a qualified 
legal service provider--
          ``(1) to make available any funds, personnel, or 
        equipment for use in advocating or opposing any plan or 
        proposal or represent any party or participate in any 
        other way in litigation, that is intended to or has the 
        effect of altering, revising, or reapportioning a 
        legislative, judicial, or elective district at any 
        level of government, including influencing the timing 
        or manner of the taking of a census;
          ``(2) to attempt to influence the issuance, 
        amendment, or revocation of any executive order, 
        regulation, policy, or similar promulgation by any 
        Federal, State, or local agency;
          ``(3) to attempt to influence the passage or defeat 
        of any legislation, constitutional amendment, 
        referendum, initiative, confirmation proceeding, or any 
        similar procedure of the Congress of the United States 
        or by any State or local legislative body;
          ``(4) to support or conduct training programs for the 
        purpose of advocating particular public policies or 
        encouraging political activities, labor or anti-labor 
        activities, boycotts, picketing, strikes, and 
        demonstrations, including the dissemination of 
        information about such policies or activities;
          ``(5) to participate in any litigation, lobbying, 
        rulemaking or any other matter with respect to 
        abortion;
          ``(6) to participate in any litigation or provide any 
        representation on behalf of a local, State, or Federal 
        prisoner;
          ``(7) to pay for any personal service, advertisement, 
        telegram, telephone communication, letter, or printed 
        or written matter or to pay administrative expenses or 
        related expenses, associated with an activity 
        prohibited in paragraph (1), (2), (3), (4), (5), or 
        (6);
          ``(8) to solicit in-person any client for the purpose 
        of providing any legal service; or
          ``(9) to pay any voluntary membership dues to any 
        private or non-profit organization.
  ``(f) Limitation on Use of State Funds.--A State which 
receives a grant under subsection (a) and which also 
distributes State funds for the provision of legal services 
shall require that such State funds be used to provide 
qualified legal services to qualified clients and shall impose 
on the use of such State funds the limitations prescribed by 
subsection (e).
  ``(g) Attorneys' Fees.--A qualified legal service provider of 
any qualified client or any client of such provider may not 
claim or collect attorneys' fees from parties to any litigation 
initiated by such client.
  ``(h) Evasion.--Any attempt to avoid or otherwise evade the 
requirements of this Act is prohibited.
  ``(i) Authorization of Appropriations.--For grants under 
subsection (a) there are authorized to be appropriated to the 
Attorney General $278,000,000 for fiscal year 1996, 
$250,000,000 for fiscal year 1997, 175,000,000 for fiscal year 
1998, and $100,000,000 for fiscal year 1999.

``SEC. 4. CONTRACTS.

  ``(a) In General.--Each State which receives a grant under 
section 3(a) shall make funds under the grant available for 
contracts entered into for the provision of qualified legal 
services within the State.
  ``(b) Bids.--
          ``(1) Authority.--The Governor of each State shall 
        designate the authority of the State which shall be 
        responsible for soliciting and awarding bids for 
        contracts for the provision of qualified legal services 
        within such State.
          ``(2) Service area.--The authority of a State 
        designated under paragraph (1) shall designate service 
        areas within the State. Such service areas shall be the 
        counties or parishes within a State but such authority 
        may combine contiguous counties or parishes to form a 
        service area to assure the adequate provision of 
        qualified legal services.
          ``(3) Non-english-speaking clients.--If 5 percent or 
        more of the population of qualified clients in a 
        qualified legal service provider's service area 
        includes individuals whose household language is other 
        than English, the qualified legal service provider 
        shall include provision in the provider's bid for 
        satisfying the communication needs of that portion of 
        such population.
  ``(c) Availability of Funds.--A State shall allocate grant 
funds for contracts for the provision of qualified legal 
services in a service area on the same basis as grants are made 
available to States under section 3(b).
  ``(d) Contract Awards.--A State shall award a contract for 
the provision of qualified legal services in a service area to 
the applicant who is best qualified, as determined by the 
State, and who in its bid offers to provide, in accordance with 
section 5, the greatest number of hours of qualified legal 
services provided by lawyers or paralegals in such area. In 
determining which applicant is best qualified, a State shall 
consider the reputations of the principals of the applicant, 
the quality, feasibility, and cost effectiveness of plans 
submitted by the applicant for the delivery of qualified legal 
services to the qualified clients to be served, and a 
demonstration of willingness to abide by the restrictions of 
this Act.
  ``(e) Form and Billing.--A State contract awarded under 
subsection (d) shall be in such form as the State requires. The 
contract shall provide for the rendering of bills supported by 
time records at the close of each month in which qualified 
legal services are provided. A State shall make payment to a 
qualified legal service provider at the contract rate only for 
hours of qualified legal services provided and supported by 
appropriate records. The contract rate shall be the total 
dollar amount of the contract divided by the total hours bid by 
the qualified legal service provider. A State shall have 60 
days to make full payment of such bills.

``SEC. 5. REQUIREMENTS FOR THE PROVISION OF QUALIFIED LEGAL SERVICES 
                    UNDER A CONTRACT.

  ``(a) Term.--The term of a contract entered into under 
section 4 shall be not more than 1 year.
  ``(b) Manner of Provision of Services.--A qualified legal 
service provider shall service the legal needs of qualified 
clients under a contract entered into under section 4 in a 
professional manner consistent with applicable law.
  ``(c) Case Files.--A qualified legal service provider shall 
maintain a qualified client's case file, including any 
pleadings and research, at least until the later of 5 years 
after the resolution of client's cause of action or 5 years 
after the termination of the contract under which services were 
provided to such client or as provided by the applicable code 
of professional responsibility.
  ``(d) Time Records.--A qualified legal service provider shall 
keep daily time records of the provision of services to a 
qualified client in one tenth of an hour increments identifying 
such client, the general nature of the work performed in each 
increment, and the account which will be charged for such work.
  ``(e) Questionnaire.--Each qualified client shall be provided 
a self-mailing customer satisfaction questionnaire in a form 
approved by the authority granting the contract under section 4 
which identifies the qualified legal service provider and is 
preaddressed to such authority.
  ``(f) Attorney Client Privilege.--Any qualified client who 
receives legal services other than advice or legal services 
provided by mail or telephone shall execute with respect to 
such services a waiver of attorney client and attorney work 
product privilege as a condition to receiving such service. The 
waiver shall be limited to the extent necessary to determine 
the quantity and quality of the service rendered by the 
qualified legal service provider and compliance with this Act. 
Such waiver shall not constitute a waiver as to other parties. 
The use of such waiver or any information obtained under such 
waiver for any purpose other than determining the quantity and 
quality of the service of a provider or compliance with this 
Act shall be strictly prohibited.
  ``(g) Records of Qualifications.--A qualified legal service 
provider shall make and maintain records detailing the basis 
upon which the provider determined the qualifications of 
qualified clients. Such records shall be made and maintained 
for 3 years following the termination of a contract under 
section 4 for the provision of legal services to such clients.
  ``(h) Audits.--A qualified legal service provider shall 
consent to audits by the Attorney General, the General 
Accounting Office, or the authority which awarded a contract to 
such provider. Any such audit may be conducted at the 
provider's principal place of business. Such an audit shall be 
limited to a determination of whether such provider is meeting 
the requirements of this Act and the provider's contract under 
section 4.
  ``(i) Recovery of Fees.--A contract shall provide for the 
recovery of reasonable attorneys' fees in any successful action 
brought to compel payment to a qualified legal service provider 
under a contract under section 4.
  ``(j) Termination and Recovery of Funds.--The Attorney 
General, the Governor, or the authority which awarded a 
contract shall terminate a qualified legal service provider who 
is found to have a committed a material violation of this Act. 
A material violation shall include involvement with any 
prohibited activity. A breach of contract by a qualified legal 
service provider shall entitle the Governor or the authority to 
terminate the contract, to award a new contract, and to recover 
any funds improperly expended by the provider, together with 
interest at the statutory rate in the State for interest on 
judgments. If such a breach was willful, the provider shall pay 
to the authority which awarded the contract an additional 
amount equal to one half of the amount improperly expended by 
the provider.''.

SEC. 3. TRANSITION AND EFFECTIVE DATE.

  (a) Termination.--The Legal Services Corporation shall 
terminate on the expiration of 6 months after the date of the 
enactment of this Act.
  (b) Pending Cases.--During the 6-month period after the 
termination of the Legal Services Corporation, the Attorney 
General may make funds available to grantees under the Legal 
Services Corporation Act to bring to a completion any legal 
action filed in a State or Federal court on or before the date 
of the enactment of this Act. The Attorney General shall use 
funds appropriated to the Attorney General under section 3(i) 
of the Legal Aid Grant Act to fund such grantees. Such funds 
for such purpose may not exceed 1 percent of the amount 
appropriated to the Attorney General under such section 3(i) 
for fiscal year 1996.
  (c) Transition.--Upon termination of such Corporation all 
assets, liabilities, obligations, property, and records 
employed directly or held or used primarily in connection with 
any function of the President of the Legal Services Corporation 
in carrying out legal services activities under the Legal 
Services Corporation Act shall be transferred to the Attorney 
General.
  (d) Action of the President.--Notwithstanding any other 
provision of law, upon termination of the Legal Services 
Corporation the President of the Legal Services Corporation 
shall take such action as may be necessary--
          (1) to assist the Attorney General in the initial 
        undertaking of the Attorney General's responsibilities 
        under the Legal Aid Grant Act; and
          (2) to transfer to the Attorney General for use under 
        the Legal Aid Grant Act all unexpended balances of 
        funds appropriated for the purpose of carrying out 
        legal services programs and activities under the Legal 
        Services Corporation Act.
  (e) Effective Date.--The amendment made by section 2 shall 
take effect on the date of the enactment of this Act.

                          Summary and Purpose

    The ``Legal Aid Act of 1995'' (H.R. 2277) improves the 
delivery and accountability of legal services to the poor by 
establishing a new system which involves the states in the 
selection and oversight of individual providers.
    The bill approved by the Committee on the Judiciary 
abolishes the Washington, D.C. based Legal Services Corporation 
in order to ensure that federal money authorized for the 
provision of legal services will be more directly applied to 
the legal needs of the poor. Under this Act, the Department of 
Justice will oversee the administration of grant money to the 
states; and the respective governors are charged with the 
responsibility of selecting local providers through a 
competitive bid process.
    Due to the controversial history of the Legal Services 
Corporation Act, the Committee feels it necessary to imbue this 
new system with controls adequate to guarantee that the needs 
of the poor are truly met. The bill defines who is a qualified 
provider and an eligible client, and what constitutes a 
qualified cause of action that a provider may initiate. H.R. 
2277 also restricts providers from engaging in conduct that 
would otherwise derogate from the goal of serving the poor.\1\
    \1\ The restrictions in H.R. 2277 are contained in Section 3(e) and 
are based upon those in H.R. 1806 and commonly referred to as the 
McCollum/Stenholm restrictions. However, similar restrictions have 
consistently been imposed by the Congress as provisions contained in 
appropriations legislation, and have also been proposed in legislation 
to reauthorize the Legal Services Corporation (H.R. 2644 [Bryant] 103rd 
Cong., and H.R. 2039 [Frank] 102nd Cong.). While, in general, these 
restrictions have been conceded as necessary by all sides in order to 
prevent grantees from engaging in inappropriate activities, debate has 
occurred on their specifics. See, Dissenting Views of Mr. McCollum, et 
al. to the report accompanying H.R. 2039, H.R. Rep. No. 102-476, 103rd 
Cong., 2nd Sess. (1992).
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    The bill allows the Legal Services Corporation to continue 
only for a brief transitional period and requires upon its 
termination the transfer of its assets, liabilities, 
obligations, property, and records to the Attorney General. The 
Committee authorizes the Act for four years at $278 million for 
FY 1996, $250 million for FY 1997, $175 million for FY 1998 and 
$100 million for FY 1999. The Committee's intent is to scale 
down the federal commitment to legal services in order to 
prepare the States to assume responsibility for providing legal 
aid in cooperation with the Bar and the private sector.

                Background and Need for the Legislation

    The Legal Services Corporation (LSC) is a private, not-for-
profit, entity incorporated in the District of Columbia, 
designed to provide legal assistance to the poor in non-
criminal proceedings. The Corporation itself does not provide 
this assistance, but merely forwards the money appropriated to 
it by Congress to individual grantees throughout the 
country.\2\
    \2\ The Corporation provides grants to basic field programs, state 
and national support centers and a variety of other recipients such as 
Native American and Migrant programs.
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    The Corporation's roots are in President Lyndon Johnson's 
War on Poverty. Originally established as the Office of Legal 
Services within the Office of Economic Opportunity, it was 
transformed into an independent corporation in 1974 by Public 
Law 93-355 (42 U.S.C. 2996 et seq). The LSC is governed by an 
eleven person board of directors appointed by the President 
with the advice and consent of the Senate. The LSC has been 
extremely controversial since its inception and despite several 
Congressional attempts, has not been reauthorized since 1980. 
Although its survival now depends solely upon the 
appropriations process, the Corporations budget has more than 
quintupled since its inception, from $72 million in 1975 to 
$400 million in 1995.\3\
    \3\ The Corporation requested $500 million for Fiscal Year 1995. 
Congress appropriated $415 and later rescinded $15 million. The 
Corporation's FY 1996 request was for $440 million.
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    Controversy has beset virtually every aspect of the LSC 
throughout its history. Despite a clear statutory requirement 
that all LSC board members be confirmed by the Senate, the 
program has become so politicized that the Senate confirmed 
only one board between 1982 and 1993.\4\ Throughout the past 
fifteen years, the LSC has been a continuing saga of partisan 
wrangling pitting an increasingly remote and isolated national 
board against far-flung and intractable grantees. As more and 
more grantee abuses came to light, the Congress became more 
active in attempting to supervise the entire system--only to 
find that the national board was poorly suited to respond to 
Congressional mandates. Having established a comfortable 
relationship with their funding source, the current grantees 
have enjoyed presumptive refunding, and, among other things, 
have successfully thwarted Congressional attempts to invigorate 
the system by instituting competition. When the LSC has tried 
to enforce congressionally imposed restrictions, it has been 
stymied by resistance from the very grantees it funds.\5\
    \4\ During this period, the board generally consisted of recess 
appointees who, due to lack of Senate confirmation, were without full 
authority to oversee the Corporation.
    \5\ Terrance Wear, LSC's President from 1988 to 1990, has testified 
about his attempt to lower grant amounts to recipients who had 
disregarded Congressional prohibitions against engaging in abortion 
related litigation. He was sued by the errant grantees themselves, who 
utilized federal grant money earmarked for the poor to bring suit on 
their behalf. That litigation, which persisted for over three years, 
was eventually settled in support of the President's actions. 
Unfortunately, the court's ruling was moot since Congressional 
prohibitions like the one on abortion-related litigation have only been 
mandated through Appropriations bills which are only in effect for one 
year.
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    Grantee abuses were detailed during the hearings of the 
Subcommittee on Commercial and Administrative Law and depict a 
program in need of considerable supervision. The expenditure of 
resources on class actions \6\ and constitutional challenges 
has meant that many poor have been left unattended because 
their needs, however urgent, were too prosaic. It is generally 
acknowledged that LSC programs provide assistance to less than 
20 percent of the poor in this country. That figure becomes 
even more distressing when it is coupled with the fact that LSC 
money and manpower is liberally expended helping illegal 
aliens, prisoners, and those who public housing authorities and 
tenant associations have sought to evict for illegal drug 
activities.\7\
    \6\ Considerably alarming is the frequent use of class actions, a 
time-consuming and labor intensive form of litigation which the 
Committee has learned displaces resources that could be brought to bear 
on the immediate needs of individual poor people. In 1989 alone, for 
instance, the Corporation's records indicate that its grantees were 
involved in 1,759 class actions.
    \7\ Jodie Stearns, a farmer and attorney from Ohio, testified 
concerning inordinate expenditure of resources by a Legal Services 
grantee. She cited numerous examples, including: routine assignment of 
three or four attorneys to pretrial conferences; use of two or three 
lawyers, as well as a paralegal, for a simple deposition; flying three 
persons to Miami, Florida for depositions lasting three days; and 
staffing uncomplicated hearings with multiple attorneys. She also 
testified that Legal Services attorneys regularly represent illegal 
aliens under the Migrant Seasonal Agricultural Worker Protection Act 
and various other federal statutes. Hearing on Reauthorization of the 
Legal Services Corporation before the Subcommittee on Commercial and 
Administrative Law of the House Committee on the Judiciary, June 15, 
1995, 104th Cong., 1st Sess. (1995).
    John Hiscox, of the Macon (Georgia) Public Housing Authority, 
testified that one tenant, after purchasing drugs within public housing 
premises, was arrested by police beyond its perimeter. Although he pled 
guilty to the drug offense, Legal Services attorneys represented him to 
prevent his eviction based on the argument that his arrest had occurred 
off public housing premises. As a result of involvement of Legal 
Services attorneys, Mr. Hiscox indicated that the annual cost of 
evictions had increased from $9,000 in 1987 to $90,000 in 1990. Id.
    Harriet Henson, executive Director of Northside Tenants 
Reorganization in Pittsburgh, Pennsylvania testified that while 
visiting a tenant she witnessed the tenant's boyfriend engaging in a 
drug transaction on the premises. Because of Neighborhood Legal 
Services involvement in the matter, eviction of the tenant require two 
years of effort. Id.
    Ken Boehm, former Director of Policy, Development and 
Communications for the Legal Services Corporation, referenced a class 
action suit brought by a Legal Services grantee. In the suit, which 
consumed more than four years, the Legal Services grantee represented 
prisoners who asserted that HIV positive patients should not be treated 
in a segregated medical ward, nor their infection revealed to the 
prison population. Id.
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    Considering the controversy engendered by LSC, reference to 
the Community Services Block Grant program is instructive, 
since both it and the Legal Services Corporation have common 
ancestry in the War on Poverty. One of the most significant 
programs authorized by the Economic Opportunity Act of 1964 was 
Community Action, sometimes referred to as Local Initiative or 
Section 221 of the Act. Under the auspices of the Office of 
Economic Opportunity (OEO), a network of approximately 900 
local Community Action Agencies (CAA) were developed. 
Similarly, as noted earlier, the LSC began as the Office of 
Legal Services within the OEO.
    At approximately the same time that the Legal Services 
Corporation was established as an independent entity, the OEO 
was renamed the Community Services Administration with the 
responsibility for ultimately administering not only the 
network of CAA's but also some 40 Community Development 
Corporations and a number of small categorical grant programs. 
In 1981, the Congress abolished the Community Services 
Administration and created the Community Services Block Grant 
program to be administered by an office within the Department 
of Health and Human Services.\8\ Today, fourteen years after 
the block granting of CSA, a history of incessant political 
rancor and ineffective administration within the Legal Services 
Corporation suggests the wisdom of adopting a similar approach 
for it.
    \8\ Like many of the domestic policy changes that year, the 
Community Services Block Grant legislation was incorporated into the 
Omnibus Budget Reconciliation Act of 1981 (Pub. L. No. 97-35) (1981), 
of which it is technically title VI, Subtitle B.
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    The need for this legislation is clear. The Legal Services 
Corporation has been unauthorized since 1980, nearly fifteen 
years. Even if the Committee were not to suggest such an 
innovative course as that contained in H.R. 2277, it would be 
an abdication of its oversight responsibility to ignore reality 
and prolong this continuing neglect. The current state of the 
LSC makes this legislation all the more necessary if legal 
services to the poor are to become, in any respect, effective.
    The concept of block granting legal services to the states 
is designed to focus the effort closer to the needs of the poor 
in several ways. First, it will facilitate a more specific 
identification of those needs because the authority that 
oversees the providers will be located within their respective 
states, an advantage of propinquity that no Washington entity 
could enjoy. Secondly, it will permit not only closer scrutiny 
of providers but also foster a better working relationship with 
them. During the past fifteen years, LSC's grantees and the 
Washington corporation have viewed each other with distrust 
which has often developed into, blatant hostility. It is 
envisioned that block granting this program will encourage the 
kind of cooperation from the local Bar and private sector that 
can only develop through concerns that are shared in an 
immediate and more local environment. The legislation's 
emphasis on local involvement is essential to its purpose; and 
is supported by recent trends in Congress which suggest that 
local governments will inevitably have to shoulder more, if not 
all, of the burden of providing an array of services to their 
poor residents.\9\
    \9\ Attorney witnesses before the subcommittee recognized the pro 
bono responsibility of the bar. However, debate on how best to 
encourage pro bono activities is warranted not only on the question of 
whether a too active role of government in providing legal services 
discourages such involvement, but also on the extent to which legal 
barriers exist that discourage volunteerism. See, Michael A. Bedke and 
Scott Jay Feder, ``Good Samaritan Legislation,'' Barrister magazine, 
Spring 1995, which discusses the experience of the American Bar 
Association's Young Lawyers Division volunteer efforts on behalf of 
disaster victims.
---------------------------------------------------------------------------
    Although hearings conducted this summer by the Subcommittee 
on Commercial and Administrative Law identified numerous areas 
of abuse within the current system, Congress has been aware of 
problems with the Corporation for many years. Current 
appropriations riders restricting the activities of the 
Corporation or its grantees were developed in response to 
specific and widely held concerns; and many have been in 
effect, albeit unenforced since 1984.
    Given this history, the Committee feels that the 
limitations in H.R. 2277 on the activities of providers, as 
well as those placed on the states, are clearly justified by 
the principle that what is past is prologue. The Committee 
intends to address the real and immediate needs of the poor and 
to discourage litigation which serves little purpose other than 
to pursue the ideological vindications of a particular 
political philosophy.

                                Hearings

    The Subcommittee on Commercial and Administrative Law held 
three days of hearings concerning the reauthorization of the 
Legal Services Corporation. The hearings were held on May 16, 
1995; June 15, 1995; and July 27, 1995.
    The first hearing, convened on May 16, 1995, focused 
primarily on the Corporation and the current statute, and heard 
only from supporters of the current Corporation. Testimony was 
received from the following: Rep. Bill McCollum (R-FL); Rep. 
Charles W. Stenholm (D-TX); Rep. Paul McHale (D-PA); Rep. Ron 
Wyden (D-OR); Rep. Benjamin L. Cardin (D-MD); Abner J. Mikva, 
Counsel to the President, The White House; Jamie Gorelick, 
Deputy Attorney General, U.S. Department of Justice; John 
Carey, General Counsel, Federal Emergency Management Agency; 
Alexander D. Forger, President, Legal Services Corporation; 
Douglas F. Eakely, Chairman of the Board, Legal Services 
Corporation; Thomas F. Smegal, Jr., Member of the Board, Legal 
Services Corporation; and Ernestine P. Watlington, Member of 
the Board, Legal Services Corporation.
    The second day of the hearings, conducted on June 15, 1995, 
focused on testimony from long-time critics of the Legal 
Services Corporation as well as one supportive witness, John 
McKay, Chairman of the Equal Justice Coalition. Testimony 
critical of the current Corporation and statute included 
statement from the following: Rep. Charles Taylor (R-NC); David 
Keene, American Conservative Union; Howard Phillips, Chairman, 
Conservative Caucus; Ken Boehm, Chairman, National Legal and 
Policy Center; Harry Bell, President, South Carolina Farm 
Bureau on behalf of the American Farm Bureau; Judy Mauch, Mauch 
Farms; Jodie Stearns, Esq., Mitchell, Stearns & Hammer; Stan 
Eury, North Carolina Grower's Association; Dan Gerawan, Gerawan 
Ranches; John McKay, Chairman, Equal Justice Coalition; Libby 
Whittley, Farm Business Coalition; John Hiscox, Director, Macon 
Housing Authority; Harriet Henson, Northside Tenants 
Reorganization; Zelma Boggess, Director, Charleston Housing 
Authority; and Michael Pileggi, Esq., Philadelphia Housing 
Authority.
    The final hearing, held on July 27, 1995, focused on 
solutions to current problems facing the Legal Services 
Corporation and inadequacies of the current statute. With an 
eye toward drafting legislation, the subcommittee heard from 
the following: Rep. Howard L. Berman (D-CA); Rep. Robert K. 
Dornan (R-CA); Alan D. Bersin, U.S. Attorney for the Southern 
District of California on behalf of the Department of Justice; 
Thomas J. Madden, Esq., Former General Counsel, Law Enforcement 
Assistance Administration, Department of Justice; Rev. Fred 
Kammer, S.J., President, Catholic Charities, U.S.A.; Robert E. 
Adams, Executive Director, Legal Services of the Fourth 
Judicial District, South Carolina; Jack Martin, Vice President, 
the Ford Motor Company; Neal I. Hogan, General Counsel, Dublin 
Castle Group; Edouard R. Quatrevaux, Inspector General, Legal 
Services Corporation; Penny Pullen, Former Board Member of the 
Legal Services Corporation; Hon. Howard H. Dana, Former Board 
Member of the Legal Services Corporation; Terrance Wear, Former 
President of the Legal Services Corporation; and Mike Wallace, 
Former Chairman of the Legal Services Corporation.
    Additional material was submitted by a number of 
individuals and organizations.

                        Committee Consideration

    On September 13, 1995, the Committee met in open session 
and ordered reported the bill H.R. 2277, with amendments, by a 
vote of 18-13, a quorum being present.

                         Vote of the Committee

    Eight amendments were adopted by voice vote. These were: 
(1) an amendment by Mr. Bono to specifically include divorce or 
separation among the qualified causes of action under the Act; 
(2) an amendment by Mr. Watt to prohibit the use of any 
information gained pursuant to a waiver of the attorney/client 
privilege for any purpose other than determining the quantity 
or quality of the service of a provider or compliance with the 
Act; (3) an amendment by Mr. Hyde to include consumer fraud 
among the qualified causes of action under the Act; (4) an 
amendment by Mr. Watt to provide that states, in determining 
whether to award a legal services contract, may consider 
whether the applicant has been found in contempt of court or 
has been sanctioned under Rule 11 of the Federal Rules of Civil 
Procedure, rather than these being a bar to such an award; (5) 
an amendment by Mr. Reed reformulating the definition of a 
qualified client; (6) of en bloc amendment by Mr. McCollum: (a) 
directing the Office of Justice Programs within the Department 
of Justice to administer the program under the Act; (b) 
prohibiting any attempt to evade provisions of the Act; (c) 
permitting states to consider the number of hours of service to 
be performed by paralegals as well as those to be performed by 
lawyers in awarding contracts; and (d) requiring providers to 
maintain case files for five years after termination of the 
contract or resolution of the cause of action, whichever is 
longer, or as provided by the applicable code of professional 
responsibility; (7) an amendment offered by Mr. McCollum 
directing states to consider several additional factors in 
determining to whom to award a legal services contract; (8) an 
amendment by Mr. Barr relating to the definition of qualified 
causes of action with respect to its inclusion of additional 
causes of action.
    There were ten recorded votes (nine on amendments and one 
on final passage) during the Committee's consideration of H.R. 
2277, as follows:
    1. An amendment in the nature of a substitute by Mr. 
McCollum. Defeated 27 to 17.
        YEAS                          NAYS
Mr. McCollum                        Mr. Hyde
Mr. Schiff                          Mr. Sensenbrenner
Mr. Conyers                         Mr. Gekas
Mrs. Schroeder                      Mr. Coble
Mr. Frank                           Mr. Smith (TX)
Mr. Schumer                         Mr. Gallegly
Mr. Berman                          Mr. Canady
Mr. Boucher                         Mr. Inglis
Mr. Bryant (TX)                     Mr. Goodlatte
Mr. Reed                            Mr. Buyer
Mr. Nadler                          Mr. Hoke
Mr. Scott                           Mr. Bono
Mr. Watt                            Mr. Heineman
Mr. Becerra                         Mr. Bryant (TN)
Mr. Serrano                         Mr. Chabot
Ms. Lofgren                         Mr. Flanagan
Ms. Jackson-Lee                     Mr. Barr

    2. A motion by Mr. Sensenbrenner to reconsider the vote by 
which the McCollum amendment in the nature of a substitute was 
not agreed to. Defeated 17 to 18.
        YEAS                          NAYS
Mr. McCollum                        Mr. Hyde
Mr. Schiff                          Mr. Moorhead
Mr. Conyers                         Mr. Sensenbrenner
Mrs. Schroeder                      Mr. Gekas
Mr. Frank                           Mr. Coble
Mr. Schumer                         Mr. Smith (TX)
Mr. Berman                          Mr. Gallegly
Mr. Boucher                         Mr. Canady
Mr. Bryant (TX)                     Mr. Inglis
Mr. Reed                            Mr. Goodlatte
Mr. Nadler                          Mr. Buyer
Mr. Scott                           Mr. Hoke
Mr. Watt                            Mr. Bono
Mr. Becerra                         Mr. Heineman
Mr. Serrano                         Mr. Bryant (TN)
Ms. Lofgren                         Mr. Chabot
Ms. Jackson-Lee                     Mr. Flanagan
                                    Mr. Barr
    3. An amendment offered by Mr. Scott to provide that 
contracts be awarded to the best qualified applicant as 
determined by the State. Defeated 10 to 17.
        YEAS                          NAYS
Mr. Flanagan                        Mr. Hyde
Mr. Conyers                         Mr. Moorhead
Mr. Berman                          Mr. Gekas
Mr. Boucher                         Mr. Coble
Mr. Reed                            Mr. Smith (TX)
Mr. Scott                           Mr. Schiff
Mr. Watt                            Mr. Gallegly
Mr. Serrano                         Mr. Canady
Ms. Lofgren                         Mr. Inglis
Ms. Jackson-Lee                     Mr. Goodlatte
                                    Mr. Hoke
                                    Mr. Bono
                                    Mr. Heineman
                                    Mr. Bryant (TN)
                                    Mr. Chabot
                                    Mr. Barr

    4. An amendment offered by Mr. Watt to provide for 
continued legal services after the one-year contract term 
expired. Defeated 9 to 19.
        YEAS                          NAYS
Mr. Berman                          Mr. Hyde
Mr. Boucher                         Mr. Moorhead
Mr. Reed                            Mr. Sensenbrenner
Mr. Nadler                          Mr. McCollum
Mr. Scott                           Mr. Gekas
Mr. Watt                            Mr. Coble
Mr. Serrano                         Mr. Smith (TX)
Ms. Lofgren                         Mr. Schiff
Ms. Jackson-Lee                     Mr. Gallegly
                                    Mr. Canady
                                    Mr. Inglis
                                    Mr. Goodlatte
                                    Mr. Hoke
                                    Mr. Bono
                                    Mr. Heineman
                                    Mr. Bryant (TN)
                                    Mr. Chabot
                                    Mr. Flanagan
                                    Mr. Barr

    5. An amendment offered by Mr. Berman to add ``employment 
matters'' to qualified causes of action. Adopted 15 to 11.

        YEAS                          NAYS
Mr. McCollum                        Mr. Hyde
Mr. Canady                          Mr. Moorhead
Mr. Goodlatte                       Mr. Sensenbrenner
Mr. Hoke                            Mr. Gekas
Mr. Flanagan                        Mr. Smith (TX)
Mr. Conyers                         Mr. Gallegly
Mr. Berman                          Mr. Inglis
Mr. Boucher                         Mr. Bono
Mr. Reed                            Mr. Heineman
Mr. Nadler                          Mr. Chabot
Mr. Scott                           Mr. Barr
Mr. Watt
Mr. Serrano
Ms. Lofgren
Ms. Jackson-Lee
    6. An amendment offered by Mr. Nadler making class action 
suits a qualified cause of action. Defeated 9 to 16.
        YEAS                          NAYS
Mr. Conyers                         Mr. Hyde
Mr. Boucher                         Mr. Moorhead
Mr. Reed                            Mr. Sensenbrenner
Mr. Nadler                          Mr. Gekas
Mr. Scott                           Mr. Coble
Mr. Watt                            Mr. Schiff
Mr. Serrano                         Mr. Canady
Ms. Lofgren                         Mr. Inglis
Ms. Jackson-Lee                     Mr. Goodlatte
                                    Mr. Hoke
                                    Mr. Bono
                                    Mr. Heineman
                                    Mr. Bryant (TN)
                                    Mr. Chabot
                                    Mr. Flanagan
                                    Mr. Barr
    7. An amendment offered by Mr. Flanagan to increase the 
authorization for FY 1997 from $141,000,000 to $250,000,000. 
Adopted 14 to 13.
        YEAS                          NAYS
Mr. McCollum                        Mr. Hyde
Mr. Schiff                          Mr. Moorhead
Mr. Goodlatte                       Mr. Sensenbrenner
Mr. Hoke                            Mr. Gekas
Mr. Flanagan                        Mr. Coble
Mr. Conyers                         Mr. Gallegly
Mr. Reed                            Mr. Canady
Mr. Nadler                          Mr. Inglis
Mr. Scott                           Mr. Bono
Mr. Watt                            Mr. Heineman
Mr. Becerra                         Mr. Bryant (TN)
Mr. Serrano                         Mr. Chabot
Ms. Lofgren                         Mr. Barr
Ms. Jackson-Lee

    8. An amendment offered by Mr. Watt to allow legal service 
providers to collect attorneys' fees from parties to 
litigation. Defeated 14 to 16.
        YEAS                          NAYS
Mr. Goodlatte                       Mr. Hyde
Mr. Flanagan                        Mr. Moorhead
Mr. Conyers                         Mr. Sensenbrenner
Mrs. Schroeder                      Mr. McCollum
Mr. Berman                          Mr. Gekas
Mr. Boucher                         Mr. Coble
Mr. Bryant (TX)                     Mr. Schiff
Mr. Reed                            Mr. Canady
Mr. Nadler                          Mr. Inglis
Mr. Scott                           Mr. Buyer
Mr. Watt                            Mr. Hoke
Mr. Becerra                         Mr. Bono
Mr. Serrano                         Mr. Heineman
Ms. Lofgren                         Mr. Bryant (TN)
                                    Mr. Chabot
                                    Mr. Barr

    9. An amendment offered by Mr. McCollum to extend the 
bill's authorization by two years (1998-1999). Adopted 18 to 
13.
        YEAS                          NAYS
Mr. Moorhead                        Mr. Hyde
Mr. McCollum                        Mr. Sensenbrenner
Mr. Schiff                          Mr. Gekas
Mr. Canady                          Mr. Coble
Mr. Goodlatte                       Mr. Smith (TX)
Mr. Flanagan                        Mr. Gallegly
Mr. Conyers                         Mr. Inglis
Mrs. Schroeder                      Mr. Buyer
Mr. Schumer                         Mr. Hoke
Mr. Bryant (TX)                     Mr. Bono
Mr. Reed                            Mr. Heineman
Mr. Nadler                          Mr. Bryant (TN)
Mr. Scott                           Mr. Chabot
Mr. Watt                              
Mr. Becerra                           
Mr. Serrano                           
Ms. Lofgren                           
Ms. Jackson-Lee                       

    10. Vote on final passage on H.R. 2277. Adopted 18 to 13.
        YEAS                          NAYS
Mr. Hyde                            Mr. Conyers
Mr. Sensenbrenner                   Mr. Schumer
Mr. McCollum                        Mr. Berman
Mr. Gekas                           Mr. Boucher
Mr. Coble                           Mr. Bryant (TX)
Mr. Smith (TX)                      Mr. Reed
Mr. Schiff                          Mr. Nadler
Mr. Gallegly                        Mr. Scott
Mr. Canady                          Mr. Watt
Mr. Inglis                          Mr. Becerra
Mr. Goodlatte                       Mr. Serrano
Mr. Buyer                           Ms. Lofgren
Mr. Hoke                            Ms. Jackson-Lee
Mr. Bono                              
Mr. Bryant (TN)                       
Mr. Chabot                            
Mr. Flanagan                          
Mr. Barr                              

    * Mr. Heineman indicated that if present he would have 
voted Yea.

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that the findings and recommendations of the Committee, based 
on oversight activities under clause 2(b)(1) or rule X of the 
Rules of the House of Representatives are incorporated in the 
descriptive portions of this report.

         Committee on Government Reform and Oversight Findings

    No findings or recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(l)(3)(D) of rule XI of the Rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    Clause 2(l)(3)(B) of House rule XI is inapplicable because 
this legislation does not provide new budgetary authority or 
increased expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 2(l)(C)(3) or rule XI of Rules of 
the House of Representatives, the Committee sets forth, with 
respect to H.R. 2277, the following estimate and comparison 
prepared by the Director of the Congressional Budget Office 
under section 403 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 19, 1995.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2277, the Legal 
Aid Act of 1995.
    Enactment of H.R. 2277 would affect direct spending. 
Therefore, pay-as-you-go procedures would apply to the bill.
    If you wish further details on this estimate, we will be 
pleased to provide them.
            Sincerely,
                                              James L. Blum
                                   (For June E. O'Neill, Director).
    Enclosure.

               congressional budget office cost estimate

    1. Bill number: H.R. 2277.
    2. Bill title: Legal Aid Act of 1995.
    3. Bill status: As ordered reported by the House Committee 
on the Judiciary on September 13, 1995.
    4. Bill purpose: H.R. 2277 would abolish the Legal Services 
Corporation (LSC) and replace it with block grants provided 
directly to the states to fund local legal aid programs. The 
bill would authorize appropriations to the Attorney General of 
$278 million for fiscal year 1996, $250 million for fiscal year 
1997, $175 million for fiscal year 1998, and $100 million for 
fiscal year 1999. The bill also would establish eligibility 
criteria for receiving legal services and the type of cases for 
which legal aid would be available.
    5. Estimated cost to the Federal Government: For purposes 
of this estimate, CBO assumes that the amounts authorized by 
the bill would be appropriated for each fiscal year and that 
outlays would reflect the historical spending patterns of 
similar grant programs. CBO also estimates that it would cost 
the federal government about $3 million in direct spending in 
fiscal year 1996 to terminate the LSC. This cost would cover 
severance pay and other administrative costs for eliminating 
the Corporation. Finally, CBO estimates that the Department of 
Justice could incur additional expenses for administering this 
new grant program; however, we do not expect that any 
additional costs would be significant. The following table 
summarizes the estimated budgetary impact of H.R. 2277.

------------------------------------------------------------------------
                           1995    1996    1997    1998    1999    2000 
------------------------------------------------------------------------
                                                                        
   Spending Subject to                                                  
                                                                        
Spending under current                                                  
 law:                                                                   
    Budget authority \1\     415  ......  ......  ......  ......  ......
    Estimated outlays...     413      50  ......  ......  ......  ......
Proposed changes:                                                       
    Authorization level.  ......     278     250     175     100  ......
    Estimated outlays...  ......      70     168     236     185     104
Spending under H.R.                                                     
 2277:                                                                  
    Authorization level                                                 
     \1\................     415     278     250     175     100  ......
    Estimated outlays...     413     120     168     236     185     104
                                                                        
     Direct Spending                                                    
                                                                        
Termination expenses:                                                   
    Estimated budget                                                    
     authority..........  ......       3  ......  ......  ......  ......
    Estimated outlays...  ......       3  ......  ......  ......  ......
------------------------------------------------------------------------
\1\ The 1995 level is the amount actually appropriated.                 

    The costs of this bill fall within budget function 750.
    6. Pay-as-you-go considerations: Section 252 of the 
Balanced Budget and Emergency Deficit Control Act of 1985 sets 
up pay-as-you-go procedures for legislation affecting direct 
spending or receipts through 1998. CBO estimates that enactment 
of H.R. 2277 would increase direct spending by $3.3 million in 
fiscal year 1996 to cover costs for terminating the LSC. The 
following table shows the estimated pay-as-you-go impact of 
this bill.

------------------------------------------------------------------------
                                               1995   1996   1997   1998
------------------------------------------------------------------------
Change in outlays...........................      0      3      0      0
Change in receipts..........................  (\1\)  (\1\)  (\1\)  (\1\)
                                                                        
------------------------------------------------------------------------
\1\ Not applicable.                                                     

    7. Estimated cost to State and local governments: None.
    8. Cost comparison: None.
    9. Previous CBO estimate: None.
    10. Estimate prepared by: Susanne S. Mehlman.
    11. Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

                     Inflationary Impact Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee estimates that H.R. 
2277 will have no significant inflationary impact on prices and 
costs in the national economy.

                      Section-by-Section Analysis

Section 1 of the bill--Short title

    Section 1 of the Bill, H.R. 2277, sets forth its short 
title as ``The Legal Aid Act of 1995.''

Section 2 of the bill--Legal Services Corporation

    Section 2 of H.R. 2277 provides that the ``Legal Services 
Corporation Act'' (42 U.S.C. 2996-29961) is repealed and 
replaced with the ``Legal Aid Grant Act.'' The provisions of 
the ``Legal Aid Grant Act'' are described in the section-by-
section which follows.

Section 1 of the act--Short title

    Section 1 provides a short title for the proposed Act which 
is the ``Legal Aid Grant Act.''

Section 2 of the act--Definitions

    Section 2 of the Act redefines the essential parties to the 
legal services contract and grant process. Current parties to 
that process include the Legal Services Corporation as the 
grantor, the Legal Services grantee, and an eligible client. 
New definitions set forth in Section 2 define those terms as 
the state, the qualified legal service provider, and the 
qualified client. Section 2 further defines a qualified case of 
action under the Act and a qualified legal service.
    Section 2(1)(A) of the Act defines a ``qualified legal 
service provider'' to be any individual who is licensed to and 
who has practiced law in a state for not less than 3 years or a 
person (to include corporations, partnerships or limited 
liability companies) who employs or contracts with an 
individual (who is licensed to and who has practiced law in a 
state for not less than three years). The Committee's intent in 
so defining qualified providers is to encourage additional 
providers to become involved in the process of furnishing legal 
aid and to encourage lawyers who are engaged in an ongoing 
private practice to incorporate legal services into their 
practice.\10\ Section 2(1)(B) clearly disqualifies some persons 
from becoming qualified legal service providers, including any 
individual, who during the ten years prior to submitting a bid 
for a contract under the Act has been convicted of a felony, or 
disbarred from the practice of law for misconduct, incompetence 
or neglect of a client. This section also prohibits anyone from 
bidding on a legal services contract if any criminal charge 
against that individual is pending on the date of submission of 
a bid. Consistent with the provisions of Section 2(1)(A), the 
acts of the officers, directors, partners and employees of a 
corporation, partnership or limited liability company are 
attributed to the entity and will be considered determinative 
in disqualifying any person from bidding for or receiving a 
contract under this Act.
    \10\ An problem inherent in the current LSC program is that the 
same grantees, or legal service providers, have been receiving federal 
funding to provide these services for over a decade. It is the 
Committee's hope that competitive bidding as required under section 4 
of this Act together with this definition of a qualified provider will 
encourage new and different participants to provide legal services 
under this Act.
---------------------------------------------------------------------------
    The Committee adopted an amendment that encourages the 
states to consider two additional factors as potential 
disqualifiers regarding an applicant for a contract under this 
Act. Consequently, Section 2(1)(B) permits states to 
specifically consider whether or not an applicant has ever been 
found in contempt of any state or federal court, or, whether or 
not the applicant has ever been sanctioned pursuant to Federal 
Rule of Civil Procedure 11 or an equivalent state rule 
regarding false pleadings or pleading in bad faith.
    The Committee's intent with regard to these disqualifiers 
is to encourage members of the Bar in good standing, who have a 
reputation of respect for the courts, judges and legal process, 
to make application to provide legal services. It is the 
Committee's intent to discourage from application under this 
Act members of the Bar who have on several occasions been found 
in contempt of court or sanctioned under Civil Rule 11 or its 
state equivalent or whose professional experience exemplifies 
disrespector the Bar, the judiciary or the legal process. It is 
the Committee's intent to prohibit states from awarding 
contracts to applicants whose professional record or reputation 
would indicate any proclivity toward the disqualifying factors 
set forth in Section 2(B).
    Section 2(1)(C) of this Act prohibits the states from 
imposing any additional requirements on individuals or persons 
as conditions to either bidding on a contract or being awarded 
a contract under this Act. It is the Committee's intent to 
impose uniform requirements upon all the states with regard to 
these minimal standards; and to preclude the states from 
imposing any different requirements. It is also the Committee's 
design to encourage lawyers who have not previously been 
involved in legal services to make application for, and 
participate in providing legal aid to the poor. Consequently, 
the Committee's minimum requirements and disqualifiers to 
bidding upon or receiving a contract under this Act are 
intentionally tailored neither to benefit current grantees of 
the LSC nor to create a disadvantage for lawyers who have no 
specific experience in representing the poor.\11\
    \11\ For example, a state which attempts to impose a requirement 
that the successful bidder, under this Act, be one who is able to show 
substantial experience in poverty law would directly contradict the 
Committee's intention regarding this provision.
---------------------------------------------------------------------------
    Section 2(2) of the Act defines the term ``qualified legal 
services'' to mean: mediation, negotiation, arbitration, 
counseling, advice, instruction, referral, or representation; 
and legal research or drafting in support of such services. 
Section 2(2) also requires that such services be provided 
either by a qualified legal service provider or under the 
supervision of a qualified provider; and on behalf of a 
qualified client for a qualified cause of action as defined 
under this Act. This definition is intended to be a general 
description of the types of services a provider is authorized 
to provide to a qualified client. However, this description of 
the types of services is intended to be exclusive. The specific 
subject matter prohibitions and restrictions set forth in 
Sections 2(4) and 3(e) further limit the scope of ``qualified 
legal services.''
    Section 2(3) of the Act defines the term ``qualified 
client'' to mean any individual who is a U.S. citizen or alien 
admitted for permanent residence who is the three months prior 
to seeking legal assistance under this Act had an income from 
any source which was equal to or less than the poverty line 
established under the Community Services Block Grant Act. This 
definition is significant to the Committee's aim through this 
legislation to confine the use of federal funds to the 
representation of U.S. citizens or permanent resident aliens 
and to prohibit such funds from being used in the 
representation of illegal aliens applicants for residence or 
temporary residents.
    The current LSC board acknowledged in testimony before the 
Committee this year, that despite the ever growing annual 
funding for the Corporation, it still only represents twenty 
percent of poor U.S. citizens.\12\ Considering that the current 
LSC grantees are permitted to and do frequently represent 
individuals who are not U.S. citizens,\13\ this twenty percent 
figure becomes even more disturbing. It is the Committee's aim 
to increase the percentage of U.S. citizens and permanent 
resident aliens represented by legal service lawyers. Since 
that the goal requires a definition that excludes temporary 
agricultural workers and illegal aliens from legal services 
representation, this provision facilitates that result. The 
term ``qualified client'' is further defined to require that an 
eligible client be at or below the poverty level for a minimum 
of three months prior to seeking federally funded legal 
assistance. This provision is significant when compared to 
current law, which allows for the representation of any 
individual whose income is equal to 125 percent of the poverty 
line and has no specific time frame to determine such income 
level. Additionally, the definition is section 2(3) 
specifically includes income from any source. In contrast, for 
the purpose of the definition of an eligible client, current 
LSC regulations exclude entire categories of sources of income.
    \12\ LSC proponents also acknowledged to our Committee that LSC 
offices turn away hundreds of needy clients every day. Hearing on 
Reauthorization of the Legal Services Corporation before the Subcomm. 
on Commercial and Administrative Law of the House Comm. on the 
Judiciary, May 16, 1995, 104th Cong. 1st Sess. (1995) (testimony of 
Deputy Attorney General Jamie Gorelick).
    \13\ Congressman Barr referred to several such cases during 
Subcommittee hearings in which Legal Services attorneys represented 
illegal aliens, including: National Center for Immigrants Rights, Inc., 
et. al. v. Immigration and Naturalization Service, 743 F.2d 1365 
(1984), and Recardo Davila-Bardales v. Immigration and Naturalization 
Service, 27 F.3d 1 (1st Cir. 1994). Hearing Subcomm. on Commercial and 
Administrative Law, House Comm. on the Judiciary, May 16, 1995, 104th 
Cong., 1st Sess. (1995).
---------------------------------------------------------------------------
    Section 2(4) of the Act defines a ``qualified cause of 
action'' by setting forth a finite list of specific causes of 
action that shall be considered as qualified under this Act. It 
is the Committee's intent in establishing this list to 
prioritize the expenditure of time and resources of legal 
service providers in a way that will allow them to assist the 
greatest number of eligible clients with legal needs that are 
most urgently required.\14\ The dismal statistic provided by 
the current LSC Board of the Committee which indicates that the 
Corporation currently serves only twenty percent of the poor, 
would appear capable of improvement when considered in 
conjunction with the fact that scarce LSC resources have been 
used to represent illegal aliens in deportation proceedings, 
drug dealers against eviction from public housing authorities, 
and convicted prisoners in various civil proceedings.\15\
    \14\ The most recent data made available to the Committee by the 
LSC indicates that the types of representation prioritized in Section 
2(4) comport with the most frequently provided types of services that 
current eligible clients have sought. Legal Services Corporation Fact 
Book--1990 Cases Closed, by type of Legal Problem (1991).
    \15\ Hearing on Reauthorization of Legal Services, Subcom. on 
Commercial and Administrative Law of the House Comm. on the Judiciary, 
July 17, 1995, 104th Cong. 1st Sess. (1995) (testimony of Terrance 
Wear, Mike Wallace, Penny Pullen and Neal Hogan).
---------------------------------------------------------------------------
    It is the intent of the Committee to prohibit this panoply 
of adventuresome and politically oriented causes of action in 
order to focus the legal service lawyer's time and work product 
on the immediate concerns of qualified and law abiding U.S. 
citizens and permanent resident aliens. While the Committee 
acknowledges that the types of causes permitted under Section 
2(4) may be more mundane than the class of cases which an 
unfettered lawyer might choose, it is the Committee's intent to 
prohibit the use of federal funds to finance these less 
practical types of representatives that LSC grantees have 
heretofore engaged in with the support of federal dollars.
    The types of representation prioritized in the list set 
forth in Section 2(4) include only civil causes of action 
resulting only from the specific descriptions of clauses (i) 
through (xv). Legal service providers are enjoined to avoid 
accepting cases where law enforcement agencies, district 
attorney's offices, or other agencies are able to provide 
adequate service. The causes set out in section 2(4) clause (i) 
include those arising from landlord and tenant disputes and are 
intended to cover all such actions except for the 
representation of a tenant where either a public entity or 
private citizen has instituted an eviction proceeding based 
upon criminal activity. It is the Committee's design to 
explicitly exclude authority for legal service providers to 
represent a tenant in any eviction proceeding who is either 
personally involved in, responsible for, or who knowingly 
allows his or her dwelling to be used for, criminal activity.
    Section 2(4), clause (ii) provides authority for legal 
service providers to represent eligible clients in any 
foreclosure proceedings regarding the client's residence. 
Clause (iii) authorizes providers to become involved in 
bankruptcy-related representation regarding Chapters 7 and 12 
of title 11 of the U.S. Code; and in Chapter 13 proceedings 
with the caveat that no Chapter 13 representation is authorized 
if a petition for eviction of the client has preceded such 
filing. Testimony to the Committee has indicated that current 
LSC grantees frequently advise their clients, in order to delay 
an otherwise inevitable eviction, to file a petition in 
bankruptcy in Chapter 13. The filing of such a petition ensures 
that a landlord or a public housing authority cannot move 
forward in an eviction proceeding for at least 90 days after 
the date of filing. It is the Committee's intent to prohibit 
legal service lawyers from frustrating an otherwise legitimate 
proceeding in eviction through the misuse of the bankruptcy 
courts.
    Clause (iv) of section 2(4) provides authority for 
qualified providers to represent clients regarding the 
enforcement of any debt. Clauses (v) and (vi) of section 2(4) 
allow providers to represent eligible clients who apply for any 
statutory benefit to which they are specifically entitled under 
State or Federal law; and to further represent clients in 
appellate proceedings regarding the denial of such benefits. It 
is significant that clause (vi) limits a provider's 
representation of an appeal regarding the denial of a statutory 
benefit. Since clause (iv) of section 2(4)(B) of this Act 
excludes from the term ``qualified cause of action'' any 
challenge to the constitutionality of any statute, clause (vi) 
of section 2(4)(A) is consistent in restricting appellant 
representation only to the denial of a benefit on a statutory 
ground.
    Clause (vii) of section 2(4)(A) provides authority for a 
qualified provider to represent a qualified client in a child 
custody or child support action. This has proven in the past to 
be an important legal service for the poor, and, the Committee 
intends that it will continue to be a priority under this Act. 
Clause (viii) of section 2(4)(A) provides for representation in 
actions to quiet title, which is intended to provide a wide 
array of representation regarding legitimate and fraudulent 
transactions surrounding real property.
    Clause (ix) of section 2(4)(A) authorizes providers to 
represent individuals who are victims of spousal or child 
abuse. In the past, this type of representation by legal 
service lawyers has been decisive in protecting the rights of 
abused women and children; the Committee intends for such 
representation to continue to be a priority. It is significant 
that the Committee has limited such representation to the 
abused party. It is the Committee's design to avoid a legal 
services lawyer/client relationship like that which has arisen 
under the current program where an LSC lawyer represented the 
abusing party under such circumstances.\16\ It is also the 
Committee's intent by including the prefatory language, 
``activities involving'' in clause (ix) to ensure that divorce-
related representation be provided in conjunction with spousal 
or child abuse cases.
    \16\ In re: Involuntary Termination of E.C.C. to Baby Girl V.H., 
No. 92-1253 (Northhampton County, Penn. Feb. 28, 1995).
---------------------------------------------------------------------------
    Clauses (x)(xi)(xii)(xiii)(xiv) and (xv) of section 2(4)(A) 
provide authority to qualified providers under this Act to 
represent qualified clients on matters involving insurance, 
competency hearings, probate, divorce, employment matters and 
consumer fraud cases. These are all types of representation 
that legal services lawyers have been called upon in the past 
to provide for the poor, and the Committee intends that they 
will continue to be a priority.
    Finally, section 2(4)(B) includes certain catchall language 
at the end of the enumerated list of qualified causes of action 
to authorize additional causes of action which are not 
specifically set out in clauses (i)-(xv) of section 2(4)(A), if 
they arise out of the same transaction as a cause of action 
specified in clauses (i)-(xv) of section 2(4)(A). It is the 
Committee's design through this language to be flexible and to 
authorize full representation of qualified clients for actions 
directly involving those causes specified in section 
2(4)(A)(i)-(xv). However, it is also the Committee's intent 
that this catchall language not be abused as a loophole by a 
qualified provider to allow their involvement in representation 
that is clearly beyond causes directly relevant and arising 
directly from the actions prioritized in section 2(4)(A)(i)-
(xv). It is additionally the Committee's intent, as the wording 
of this catchall provision indicates, to preclude this language 
from being used to circumvent other prohibitions and 
restrictions set forth in this Act.
    Section 2(4)(B) makes explicitly clear that the term 
``qualified cause of action'' does not include any class action 
under Federal, State or local law or any challenge to the 
constitutionality of any statute. This clarification is 
critical to the Committee's intent in prioritizing the 
qualified causes of action authorized in section 2(4)(A). The 
purpose in specifying qualified causes of action is to 
prioritize a provider's use of limited time and resources. 
Class actions and constitutional challenges are explicitly 
excluded pursuant to section 2(4)(B) due to the fact that the 
complexity of those actions necessarily consume inordinate time 
and resources of legal services lawyers to the detriment of 
unserved eligible clients.\17\ Testimony before the Committee 
this year overwhelmingly implored the Committee to disallow 
class actions and constitutional challenges to statutes.
    \17\ Some have argued that class actions represent only a small 
percentage of current LSC cases. However, the most recent data 
available to the Committee from the Corporation indicates that 1,759 
class actions were litigated by Legal Service grantees in 1989. H.R. 
Rep. No. 102-476, 102nd Cong., 2nd Sess. (1992). The Committee has 
concluded that this type of resource drain is a luxury that Legal 
Services providers cannot afford in today's budgetary climate.
---------------------------------------------------------------------------
    Finally, section 2(5) defines the term ``State'' with the 
traditional statutory language which includes the District of 
Columbia and the several U.S. territories. However, section 
2(5) also provides that an authority pursuant to the bill for 
the purposes of receiving grant money, shall be the recognized 
governing body of an American Indian tribe or an Alaskan native 
village that carried out substantial governmental powers and 
duties. This language regarding native Americans was included 
in light of the fact that while many native Americans have in 
the past required legal services, they do not recognize state 
governments as sovereigns. Therefore, pursuant to section 2(5), 
grants may be made directly to the governing body of an Indian 
tribe or Alaskan native village.

Section 3 of the act--Grants

    Section 3(a) of the Act provides certain guidelines to the 
states with regard to applying of grant money and for its use. 
Section 3(a) makes clear that the Attorney General of the 
United States shall direct the Office of Justice Programs in 
the Department of Justice to make grants to the states for the 
purpose of providing qualified legal services. Section 3(b) 
provides that grants shall be made pursuant to this section to 
the states in such proportion as the number of poverty line 
residents of each state bears to the total number of such 
residents in the U.S. Section 3(b) is significant in that it 
ensures that the money made available pursuant to this Act will 
be proportioned amongst the states pursuant to the poverty line 
which will require that more federal money be provided to the 
states with the greatest number of poor residents. Section 3(c) 
requires that states retain not more than 5 percent of any 
grant provided by the Attorney General for administrative 
costs. The Committee allowed each state to retain up to 5 
percent of its grant money for administrative costs to comport 
with an identical provision in the Community Services Block 
Grant Act, which was passed by Congress in 1981.\18\
    \18\ Critics of the legal aid block grant concept argue that 
allowing 5 percent administrative costs for the States is prohibitive 
considering their are 50 different states. Furthermore, they contend 
that the current LSC only expends 3 percent of its Federal money on 
administrative costs. However, the LSC has acknowledged that the 3 
percent figure for administrative costs of the Corporation relates only 
to the administrative costs of the Corporation's headquarters in 
Washington and not to the various 15 or 20 percent administrative costs 
incurred by the 323 different grantees of the Corporation which are 
financed with Federal money. Consequently, it is the Committee's 
estimate that even if all 50 states retained the maximum 5% allowed, 
the aggregate figure for administrative costs for legal services would 
be substantially less than under the current Corporation .
---------------------------------------------------------------------------
    Section 3(d) provides that each state which applies for a 
grant certify to the Attorney General that it will comply with 
and enforce the requirements of this Act. This provision is 
significant in requiring any state which receives a grant 
pursuant to this Act to certify to the U.S. Attorney General 
that it will not only comply with, but enforce the requirements 
of this Act. It is the Committee's intent through section 3(d) 
to require the states to actively monitor qualified providers 
with whom they contract in order to enable the state to enforce 
all the restrictions and prohibitions set forth in this Act. 
This state certification, coupled with current Federal law 
regarding block grants, is intended to ensure dual state and 
federal enforcement of this Act.\19\
    \19\ It is important to note the State's certification to enforce 
the provisions of this Act in conjunction with the Department of 
Justice regulations that currently require the Justice Department to 
enforce all provisions of Federal Grants and Cooperative Agreements 
with State and Local governments. 28 C.F.R. Ch. 1 (7-1-94 Edition) Part 
66-Uniform Administrative Requirements for Grants in Cooperative 
Agreements to State and Local Governments.
---------------------------------------------------------------------------
    Section 3(e) imposes significant restrictions on a 
qualified provider's use of federal grant money should it 
receive a contract from the state to provide such services. 
These restrictions are similar to those found in past 
appropriations riders which have funded the Legal Services 
Corporation, and to restrictions found in the Commerce, State, 
Justice Appropriations legislation which passed the House on 
July 26, 1995. The restrictions of section 3(e) prohibit the 
use of federal funds: in any litigation regarding 
redistricting; for Executive branch or regulatory lobbying; for 
any legislative lobbying of the Congress or any state or local 
legislative body; to conduct training programs for political 
activities or labor or antilabor activities; to participate in 
any litigation or lobbying with respect to abortion or to 
participate in any litigation or representation on behalf of 
any prisoner. Section 3(e) also prohibits the solicitation by 
any qualified provider of any client for the purposes of 
providing legal services. Section 3(e) also prohibits the use 
of federal funds to pay any voluntary membership dues to any 
private or nonprofit organization.\20\ It is the Committee's 
design with regard to the restrictions set forth in section 
3(e) to absolutely prohibit any activities set forth therein; 
and it is expected that pursuant to section 5(j) of this Act, a 
state would terminate a qualified provider who is found to have 
breached any of these prohibitions.
    \20\ In prohibiting the use of Federal funds to pay for voluntary 
membership dues to any private or nonprofit organization, the Committee 
intends to allow requisite State bar membership dues to be paid with 
federal funds and recognizes those as nonvoluntary membership dues; 
however, it explicitly intends to prohibit the use of federal funds to 
pay for any other organizational dues which are not essential to a 
lawyer's legal authority to practice law.
---------------------------------------------------------------------------
    Section 3(f) of the Act limits a participating state's use 
of its own funds expended for the provision of legal services 
to the restrictions set forth in this Act. A fundamental 
problem with the current LSC Act is the complete lack of 
authority it provides the Corporation to account for the 
federal money which the Corporation oversees. There is no 
requirement that LSC grantees maintain any record regarding the 
specific clients served, the nature of the services provided, 
or the funds which pay for any particular legal services. 
Consequently, there is no way to prevent the illicit use of 
non-federal funds by LSC grantees.
    The LSC contends that non-federal funds may be utilized to 
circumvent federal restrictions on LSC activities because they 
are private funds and therefore not subject to federal 
oversight.\21\ The fungibility of Federal, state and private 
funds prevents effective oversight of federal funds to LSC 
grantees by Congress and is frequently proffered as an excuse 
by the LSC board for not disciplining grantees who violate 
attempted congressional mandates. While the Committee does not 
find it constitutionally sound to limit the use by qualified 
providers of purely private funds, it has pursuant to section 
3(f) limited the use of such state funds. The Committee 
provides an incentive to the states to apply the same 
restrictions to state funds as apply to federal funds. In 
return for the states' consent to the restrictions of this Act, 
federal funds are provided for legal services in the states.
    \21\ See Hearing on Reauthorization of the Legal Services 
Corporation, supra, (testimony of Alexander Forger).
---------------------------------------------------------------------------
    Section 3(g) of the Act prohibits a qualified provider and 
qualified client from claiming or collecting attorneys fees 
from parties to any litigation initiated by such client. It is 
the Committee's intent through this Act to encourage the 
private Bar to participate in the representation of the poor. 
The Committee has concluded that if attorneys fees are 
available to a client regarding any particular cause if action, 
it will be attractive to a private sector lawyer. Considering 
the fact that legal services lawyers represent only 20 percent 
of the poor, and so many eligible clients are refused 
representation, the Committee has concluded that legal service 
lawyers should not be put in a position to be competing with 
the private Bar for clients.
    Section 3(h) sets forth language which was adopted by 
amendment during the Committee's consideration of the bill. 
Section 3(h) is intended to prohibit any attempt by any 
qualified provider or client to avoid or, in any way, evade the 
requirements and restrictions of this Act. While such language 
may, when considered with other provisions of this Act, appear 
redundant; the Committee has concluded that a twenty year 
history of LSC grantees' deliberate evasion of congressional 
restrictions warrant this additional provision.
    Section 3(i) of the Act designates the dollar amounts 
authorized to be appropriated for this Act. The original text 
of H.R. 2277 provided funding of $278 million for FY 1996 and 
$141 million for FY 1997; however, the Act as amended by 
Committee provides for $278 million for FY 1996, $250 million 
for FY 1997, $175 million for FY 1998 for $100 million for FY 
1999. It is the Committee's intent to encourage a phasing out 
of federal participation in legal services; and to encourage 
state and local governments and private organizations to become 
more active in funding legal services for the poor.

Section 4 of the act--Contracts

    Section 4(a) of the Act requires each state which receives 
funds under this Act to make such funds available for contracts 
pursuant to a competitive bid process throughout the state. 
Section 4(b)(1) requires the governor of each state to 
designate an authority of the state to administer the legal aid 
program, and to solicit and award bids for the provision of 
legal services within the state. Section 4(b)(2) requires the 
state authority to divide the state into service areas to 
ensure the availability of adequate legal services for the poor 
throughout the state.
    Section 4(b)(3) requires a bidder for a contract with a 
state whose service area includes a client population which is 
at least five percent non-English speaking demonstrate the 
ability to satisfy the communication needs of that population. 
The current LSC Act contains a similar provision; however, it 
imposes no population percentage requirement. It is the 
Committee's intent through section 4(b)(3) to encourage special 
attention for non-English speaking eligible client populations 
regarding legal services, and to do so through a uniform 
standard which will apply to all states. This requirement may 
be satisfied by bilingual staff, paid translators or volunteer 
translators.
    Section 4(c) requires states which receive money pursuant 
to this Act to provide funds throughout that state to its 
service areas on the same basis as grants are made available to 
the states pursuant to section 3(b) of this Act. Section 3(b) 
of this Act references the Community Block Grant Act (42 U.S.C. 
9902(2)). The Committee intends through this provision to 
require the states to make federal money proportionally 
available, through the bidding process, to service areas in the 
state in a manner that ensures that the poorest service areas 
receive the greatest percentage of federal money.
    Section 4(d) of the Act requires the states to award 
contracts for the provision of qualified legal services to the 
applicant who is best qualified, as determined by the state, 
and who in its bid offers to provide the greatest number of 
hours of legal services to qualified clients. It is the 
Committee's intention through section 4(d) to require a start 
to award the contract to an applicant who prevails on both 
prongs of this two prong test: (1) who is best qualified 
according to the state, and (2) who bids to provide the 
greatest number of hours. Section 4(d) further provides that a 
state, in determining which applicant is best qualified, shall 
consider, among other things, the reputation of the principals 
of the applicant, the quality, feasibility and cost-
effectiveness of the bidder's plan and a demonstration of 
willingness to abide by the restrictions of this Act. It is the 
Committee's intention through this provision to encourage 
persons who have not previously acted as LSC grantees to become 
involved in the provision of legal services to the poor. It is 
not the Committee's intention to tilt the scales in favor of or 
against existing legal service providers.
    Section 4(e) is critical to understanding the significance 
of the requirements of section 4(d). Section 4(e) requires that 
contractors under this Act only be paid for hours of service 
rendered, only at the contract rate, and only if such services 
are substantiated by attorney's time records (billable hours) 
and additional client-specific documentation. Section 4(e) 
mandates that the contract rate by determined by dividing the 
total dollar amount of the contract awarded by the number of 
hours bid by the applicant (pursuant to subsection 4(d)). This 
language is critical to the Committee's fundamental intent to 
establish a cost-effective and accountable legal services 
delivery system.
    Clearly, the Committee's requirement in section 4(d) that a 
state contract with the highest bidder is paramount to the 
cost-effective control inherent in section 4(e)'s contract rate 
formula. If they are not encouraged through this competitive 
bid process to bid the greatest number of hours the bidder is 
capable of providing, then the contract rate will not produce 
the most cost-effective provision of qualified legal services 
for the poor.\22\ The Committee intends for the states to 
determine who amongst the highest bidders is otherwise best 
qualified. However, it is not the Committee's intent to allow a 
state to utilize the ``best qualified'' test to undermine the 
Act's aim to award contracts to the most cost-effective bidder. 
Finally, section 4(e) requires a state to make full payment for 
bills rendered by qualified providers to the state within sixty 
days.
    \22\ For example, if a contract is advertised for a specific 
service area at $200,000 and one applicant bids to provide 1,000 hours 
of legal services and another applicant bids to provide 2,000 hours, 
then the first applicant, pursuant to section 4(e) would be paid at a 
rate of $200 per hour, while the second applicant would be paid at $100 
per hour. Pursuant to this Act that is the only rate at which a 
provider may be paid once the terms of the contract are agreed upon.
---------------------------------------------------------------------------

Section 5 of the act--Requirements for the provision of qualified legal 
        services under a contract

    Section 5(a) of the Act provides that the term of a 
contract under Section 4 shall be no longer than one year. The 
Committee recognizes that the Act provides for a limited period 
of authorization and intends that states should be in a 
position to assume the responsibility to provide legal services 
when that period of authorization expires. Contracts of longer 
than one year would not facilitate the assumption of that 
responsibility, nor would they encourage the competitive 
process, particularly at the outset of an innovative program as 
envisioned by this Act.
    Section 5(b) requires qualified legal service providers to 
discharge their responsibilities under a contract in a 
professional manner consistent with applicable law. The 
Committee intends that this section should be interpreted to 
require that all providers under this Act comply with all 
applicable state Bar ethics rules.
    Section 5(c) requires that providers maintain case files on 
qualified clients, which shall include all pleadings and 
research, for five years after the resolution of the client's 
cause of action. The Committee believes that it is important 
that records be available for as long as practicable which 
document the provider's relationship with the client in order 
to verify the provision of quality legal services. The bill, as 
introduced, provided that case files be kept for three years; 
however, the Committee adopted an amendment extending that 
period to five years--evidencing its strong interest in 
insuring quality legal services.
    Section 5(d) requires legal services providers to maintain 
daily time records documenting their provision of qualified 
legal services. These records must be in increments of one-
tenth of an hour and must identify the relevant client, the 
general nature of the work performed and the account charged 
for such work. Timekeeping has long been proposed by those 
seeking to improve the quality of legal service provided by 
Legal Services Corporation grantees, and has been identified by 
them as one of the major obstacles in guaranteeing that current 
grantees adhere to federal restrictions. The Committee believes 
that this provision is critical to the goal of providing an 
accountable delivery system for legal services.
    Section 5(e) provides that qualified clients shall be given 
questionnaires to encourage them to assess the quality of the 
services which they received, in order to assist the 
administrative authority in its supervisory role. Section 5(f) 
provides that qualified clients who receive in person legal 
services shall be required to execute a waiver with respect to 
such services of their attorney/client and attorney work 
product privilege as a condition to receiving such services. 
The waiver is intended to facilitate the determination of the 
quality and quality of such service, as well as compliance with 
the Act, and is limited to such purpose. It does not constitute 
a waiver as to other parties and its use for any other purpose 
is prohibited.
    The Committee has concluded that such a waiver is essential 
if accountability of the provider is to be maintained. The 
Committee notes that in the past, grantees have interposed 
claims of attorney/client privilege to withhold even routine 
client information which is necessary for even the most cursory 
of monitoring functions.\23\ The Committee also notes that 
similar waivers of confidentiality of otherwise privileged 
information are required in other instances by the Federal 
government to protect the integrity and promote the 
effectiveness of federal programs.\24\
    \23\ See, ``Legal Services Corporation: Grantee Attorneys' Handling 
of Migrant Farmworker Disputes With Growers'', Report of the General 
Accounting Office, September 1990 (GAO/HRD 90-144)
    \24\ 42 U.S.C. 1320c-9.
---------------------------------------------------------------------------
    Section 5(g) requires legal service providers to make and 
maintain records indicating the basis upon which they 
determined the eligibility of qualified clients. The records 
must be maintained for three years following the termination of 
a contract. The Committee intends to insure the integrity of 
the program developed under the Act and feels that this can 
only be accomplished by the retention and availability of such 
information to those supervising it.
    Section 5(i) requires that contracts entered into with 
legal service providers shall provide for the recovery of 
reasonable attorneys' fees in a successful action brought to 
compel payments to the provider under the contract. The 
Committee believes that a provider who has been forced to 
resort to an action to compel payment from a state should be 
compensated for its attorneys' fees when such actions are 
successful.
    Section 5(j) requires that the Attorney General, the 
Governor of the respective state, or the authority which 
awarded a contract to terminate a qualified legal service 
provider who is found to have committed a material violation of 
this Act. A material violation shall include, but is not 
limited to, involvement with any prohibited activity. The 
requirement that this power be exercised underscores how 
strongly the Committee a material violation of this Act. A 
material violation shall include, but is not limited to, 
involvement with any prohibited activity. The requirement that 
this power be exercised underscores how strongly the Committee 
feels that providers must adhere to the structure and 
strictures of this Act. The Committee also acknowledges that 
the contract which the provider has entered into with the 
respective state authority may contain additional requirements 
binding the provider. Section 5(j) provides that a breach of 
this contract by a provider shall entitle the Governor or the 
authority to terminate the contract, to award a new contract, 
and to recover any funds improperly expended by the provider 
with interest. If the breach was willful, the provider is 
required to pay to the authority awarding the contract, an 
additional amount equal to one half the amount improperly 
expended by the provider. This is intended as an additional 
enforcement incentive.
    Section 5(h) requires a qualified legal service provider to 
consent to audits by the Attorney General, the General 
Accounting Office and the authority which awarded its contract. 
The audit may be performed at the provider's principal place of 
business and is to be limited to a determination of whether the 
provider is meeting the requirements of this Act and the 
contract. The Committee intends not only to insure the 
efficiency of the program but also to emphasize the maintenance 
of its federal character relative to the application of federal 
criminal laws to those who would misuse funds provided under 
this Act.\25\
    \25\ It is the Committee's understanding and intention that all 
contractors under this Act will be considered federal contractors and, 
therefore, subject to all federal statutes and laws. See, U.S. v. 
Faulks, 905 F.2d 928 (1990); U.S. v. Littriello, 866 F.2d 713 (1989); 
U.S. v. Johnson, 596 F.2d 842; U.S. v. Scott, 784 F.2d 787 (1986) cert. 
den. 476 U.S. 1145 (1986).
---------------------------------------------------------------------------

Section 3 of the bill--Transition and effective date

    Section 3(a) of H.R. 2277 provides that the Legal Services 
Corporation shall terminate six months after the date of 
enactment of this Act. Section 3(b) of the bill provides that 
the Attorney General may make funds available to grantees who 
were funded under the LSC Act in order to complete court 
actions which were filed prior to the date of enactment of this 
Act. The funds available to the Attorney General for this 
purpose must come from funds authorized under the Act, however, 
they may not exceed one percent of the amount appropriated 
under Section 3 of the Act for fiscal year 1996.
    Section 3(c) of the bill provides that upon the 
Corporation's termination, all assets, liabilities, 
obligations, property, and records relating to its activities 
shall be transferred to the Attorney General. Section 3(d) 
provides that upon termination of the Corporation, its 
President shall take whatever action is necessary to assist the 
Attorney General in undertaking her new responsibilities under 
the Act, and transfer to her all unexpended funds which have 
been appropriated to the Corporation for the purpose of 
carrying out its activities. Section 3(e) of the bill provides 
that the Legal Aid Grant Act shall take effect on the date of 
enactment.

                              Agency Views

    The Administration was represented during the hearings by 
the Honorable Abner Mikva, Counsel to the President; Deputy 
Attorney General Jamie Gorelick and John Carey, General 
Counsel, Federal Emergency Management Agency.
    In addition, the following letter with attachments was 
received from the Honorable Abner Mikva and U.S. Attorney 
General Janet Reno.

                            Office of the Attorney General,
                                Washington, DC, September 11, 1995.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: By this letter and its Appendix we want 
to convey the Administration's vigorous opposition to H.R. 
2277, the Legal Aid Act of 1995. We urge the Committee, in the 
strongest terms possible, to reject this proposed legislation.
    Against the 21-year success of the Legal Services 
Corporation in delivering a broad array of needed legal 
services to poor and low-income citizens throughout the country 
at levels of economy, efficiency, and effectiveness rarely 
realized in either public or private management, the Legal Aid 
Act of 1995 would:
          (i) dismantle the well-tested and extraordinarily 
        efficient and effective Legal Services Corporation 
        grants to, and management of, some 300 legal services 
        providers across the nation, and substitute for that 
        system a wholly untested block grant structure to be 
        managed by the Department of Justice and operated 
        through the States;
          (ii) disqualify from eligibility for legal services 
        entire categories of poor and low-income people;
          (iii) disallow from federally funded services many 
        critical causes of action ranging from adoption to 
        constitutional challenges; and
          (iv) set an appropriations course to end federally 
        funded legal services.
    To so narrow the availability and scope of publicly funded 
legal services, and to scrap a successful system and replace it 
with a yet-to-be-developed set of both federal and state 
bureaucracies, is shortsighted. The Legal Aid Act of 1995 makes 
a mockery of the essential American principle ``Equal Justice 
Under Law.'' If enacted, the bill will mean for millions the 
loss of effective, community based legal services and the 
certainty of continuing and aggravated problems that will cost 
us dearly in other ways down the line.
    We urge you, Chairman Hyde, for these reasons and others 
detailed in the accompanying Appendix, to oppose this bill and 
lead the Committee to reject it.
            Sincerely,
                                   Janet Reno,
                                           Attorney General.
                                   Abner Mikva,
                                           Counsel to the President.

                                Appendix

                             i. Background

    Approximately 50% of all low-income households today face 
at least one problem having a legal dimension. The legal 
problems low-income people most frequently face include housing 
problems, family and domestic matters, credit and creditor 
problems, problems concerning benefits conferred by law, and 
health and health care-related problems.
    Low-income people, however, are very often denied access to 
justice because they cannot afford legal help. Nearly three-
fourths of the low-income people with legal needs do not get 
help in the civil justice system--not because the Legal 
Services Corporation is functioning poorly, or because it has 
diverted its resources to matters other than direct client 
representation--but simply because the entire civil justice 
system is overburdened.
    When Congress passed the Legal Services Authorization Act 
in 1974 it was responding to a clear need and acknowledging 
that a large part of society was barred from effective access 
to the legal system. For the last 21 years the Corporation has 
directly channeled federal funding to nonprofit legal services 
programs serving indigent persons whose rights need protecting. 
There are more than 300 of these programs nationwide, operating 
from nearly 12,000 neighborhood law offices.
    Corporation programs operate through small, community-based 
and locally staffed offices headed by independent boards that 
include members of the local bar and other representative 
quarters of the community. These offices are available to low-
income people in every county of every state, and function as 
law firms tailored to meet the needs of each community, and the 
people who staff these offices develop expertise and accumulate 
institutional and community knowledge that cannot be replaced.
    The management of the Corporation is a model for efficient 
and effective public funding. Only 3% of the Corporation's 
budget is spent on administrative functions; the remaining 97% 
is channeled directly to the community-based legal service 
providers for the delivery of legal services to people in need. 
This extraordinary ratio of administrative costs to program 
funding leaves very little room for improvement.
    Legal Services Corporation providers nationwide handle over 
1.7 million cases each year, improving the lives of families 
and the quality of life in their communities. Program providers 
help families secure safe housing, prevent illegal evictions, 
and protect clients' health, educational, and employment 
rights. Approximately 33% of all legal services program cases 
involve issues of family law; 22% involve protection of housing 
rights; and more than 75% involve or directly affect the rights 
of children.
    In May of this year the Deputy Attorney General testified 
before one of your Subcommittees to the continuing need for a 
strong and independent Legal Services Corporation. Judge Mikva 
also testified to that need, based on his observations from 
legislative bodies for nearly 20 years and from the federal 
bench for an additional 15 years. In July Alan Bersin, the 
United States Attorney for the Southern District of California, 
also testified to the important role the Corporation plays in 
law enforcement.

             ii. the ill-conceived provisions of h.r. 2277

    Against this backdrop of legal needs and the Corporation's 
extraordinary record of service and efficiency, the provisions 
of H.R. 2277 are badly flawed.

a. The system of block grants

    We are very strongly opposed to the bill's system of block 
grants to be administered by unknown state entities.
    First, this proposal would not save money. The bill would 
allow each state to retain as an administrative fee 5 percent 
of each federal grant it processes. Currently, however, only 3 
percent of the Corporation's budget is spent on administrative 
functions with the remainder going directly to the delivery of 
legal services.The Corporation involves a staff of 
approximately 125 experienced people and operates at an 
exceptionally high level of economy, efficiency and 
effectiveness. None of these important and rarely achieved 
goals would be served by dissolving this small, experienced and 
specialized group and providing for a larger fee to be charged 
by the states.
    Second, jeopardizing the well-established system of 
neighborhood law offices with experienced attorneys trained to 
meet local legal needs would be extremely wasteful. To disrupt 
the current, proven structure for providing legal services to 
the poor and replace it with an as-yet undeveloped system that 
by its very nature would involve or create a new layer of 
bureaucracy in each of the fifty states would decrease both the 
quality and quantity of legal services available to the poor 
and the working poor. Years of institutional knowledge and 
expertise would be lost.
    Third, the bill's provisions for individual contracts 
obtained by bids risk the result of second-class justice. 
Because it appears that only individual may bid on these 
contracts, low-income persons will lose the benefit of the 
expertise developed by local legal services offices over the 
last 21 years. The critical function of these local offices as 
magnets, or clearinghouses, would also be destroyed, thwarting 
the approximately 130,000 attorneys naitonwide engaging in pro 
bono activities each year but needing a mechanism to do so. 
Similarly, the bill's proposed contracts are for a short 
duration--on year--which presents the very real danger of lack 
of continuity in representation and disruption to pending 
cases.
    Fourth, the involvement of state governmental units in the 
administration of legal services for private persons would 
present the inevitable potential for conflicts of interest. 
Legal providers would hesitate to represent clients whose 
cases, while highly meritorious, challenge a flawed law or 
governmental practice. A provider whose funding could be 
terminated for advancing a legitimate claim on behalf of his or 
her client is put in an unfair position.
    Finally, oversight would not be improved. This Committee 
has for 20 years very capably overseen the operations of the 
Corporation. To delegate this important function to unspecified 
state bureaucracies with no experience in such oversight simply 
is not responsible.\1\
    \1\ Further, because the bill provides for a 50 percent decrease in 
funding from 1996 to 1997 and no funding for 1998, states may lack the 
incentive to create permanent, efficient offices to administer these 
grants.
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B. The Justice Department's administration of the grant program

    We are also very strongly opposed to the provision that the 
Department of Justice administer the grant system.
    First, this system would not increase efficiency or save 
money. As stated above, the Corporation consumes only 3% of its 
budget on administrative expenses. The bill allows states to 
withhold 5% of all grant amounts as administrative expenses; 
this amount is in addition to the increased costs the Justice 
Department would incur in overseeing this program, and that the 
public would have to bear.
    Second, involvement in the delivery of legal services to 
poor and low-income people is outside the scope of, and 
fundamentally inconsistent with, the primary mission of the 
Justice Department. The Department's primary responsibilities 
are criminal and civil law enforcement directly and exclusively 
in the interests of the United States and its constituent 
executive branch agencies. Even indirect involvement in the 
litigation of private interests has never been the job of the 
Department.
    Third, the independent and exclusive mission of the 
Corporation is an important aspect of its professionalism and 
effectiveness for its clients. Access to independent legal 
advice and services is the essence of the civil justice 
equality we are trying to achieve, and that goal is best 
achieved by a single-purpose entity such as the Corporation.
    Fourth, it makes no sense to federalize, or involve state 
governments in, functions relating to the network of legal 
services programs that operate so efficiently and effectively 
at the community level. At a time when the Justice Department 
is grappling with so many issues pertaining to law enforcement, 
public safety and justice reform, and is trying to consolidate 
functions and simplify its operations, the addition of a 
substantial and wholly unrelated administrative task would be 
inconsistent with the goal shared by all agencies--reducing 
size and doing more with less.

C. Limitations and restrictions on the provision of legal services

    The bill so severely limits all aspects of representation 
that the fundamental concept of a lawyer having the 
independence to zealously represent his or her client would 
simply not apply to the bill's supposed beneficiaries. The 
following examples, while not comprehensive, are among the most 
troubling in the bill:
            1. Limitations on a State's use of its own money
    One of the bill's most misguided provisions dictates that 
if a state receives grant money from the federal government and 
also distributes its own funds to legal service providers the 
state must require that only ``qualified clients,'' as defined 
under the federal bill, receive ``qualified legal services,'' 
again as defined under the bill, pursuant to the bill's laundry 
list of restrictions limiting the uses of federal grant money. 
In other words, the federal government restricts in the bill 
the rights of all 50 states to spend their own money as they 
wish in funding legal services, including actions between two 
residents of a given state--or between that state and one of 
its citizens--in a case pending in that state's own courts.
    This extraordinary provision is overreaching and 
inconsistent with the underlying idea that states are capable 
of regulating the administration of the legal affairs of their 
citizens with greater efficiency and wisdom than the 
Corporation's community-based offices. While the thrust of the 
bill appears to be to provide states with more discretion and 
more authority, the logic behind this provision limiting state 
authority is difficult to fathom.
            2. ``Qualified'' clients
    The bill dramatically limits those who may even apply for 
legal services, excluding entire categories of now-eligible 
people who are the most likely to be in need. Its definition of 
a ``qualified client''--a client who is eligible to receive 
legal assistance from a provider--is limited to United States 
citizens and certain aliens admitted for permanent residence. 
This definition would unconscionably deprive many legally-
admitted, low-income aliens of access to the civil justice 
system while they are lawfully in the United States.
            3. ``Qualified'' causes of action
    The bill's listing of ``qualified'' causes of action which 
may be funded by grant money is not only very small but, most 
extraordinarily, excludes a number of commonly brought and 
long-eligible claims such as paternity, adoption, foster care, 
guardianship, hiring discrimination and wage claims, as well as 
actions to protect the rights of the physically disabled. 
Clients with legal problems that do not fit neatly into a 
predesignated pigeonhole are foreclosed from representation, no 
matter how meritorious their cases.\2\
    \2\ Further, even within the context of this limited set of 
eligible cases the bill restricts attorneys representing poor and low-
income persons from engaging in numerous, perfectly legal activities on 
their behalf.
---------------------------------------------------------------------------
    Equally offensive is the specific exclusion of ``any 
challenge to the constitutionality of any statute.'' This 
limitation is illogical and unjustifiable; it should be the 
right of every citizen and legal immigrant to have meaningful 
access to the protection of the Constitution regardless of his 
or her financial means. Under the bill, if a state were to pass 
a statute denying a particular group due process or equal 
protection, or blurring the line between church and state or 
limiting free speech, low-income persons would be denied the 
constitutional protections they are due and that are available 
to those with money.\3\
    \3\ Indeed, if a pending case were to have a constitutional issue 
injected by an opponent or late-arriving third party, an attorney 
funded with grant money would be placed in the ethical bind of having 
to forego the assertion of a meritorious defense or withdraw from the 
case leaving his or her client to attempt a pro se defense.
---------------------------------------------------------------------------
            4. Attorneys fees
    The bill anomalistically provides that legal service 
providers may not, under any circumstances, collect attorneys 
fees from parties in litigation initiated by their clients. 
Thus in the case of a state statute that automatically awards 
fees to prevailing plaintiffs as part of an enforcement 
mechanism, or a state court judge who seeks to award 
discretionary attorneys fees against a private attorney for 
engaging in frivolous conduct wasting the court's time and that 
of a publicly-funded legal services provider, the provider is 
barred from accepting the compensatory award. This provision 
again treads, without reason, on state practice.

D. The appropriation ceiling

    Finally, the bill imposes for fiscal years 1996 and 1997 
increasingly lower ceilings--$278 million and $141 million 
respectively--on future appropriations for the grant program. 
This is yet another indication of the sponsors' not-so-secret 
intent to terminate federally funded legal services altogether. 
This year's appropriation of $400 million, while far greater 
than the 1996 and 1997 authorizations provided in H.R. 2277, 
fell far short of the funding truly needed. If the Committee is 
serious about legal services, however their delivery is 
structured, any reauthorization bill should simply authorize 
the appropriation of such sums as may be necessary rather than 
impose an artificial ceiling.

                               conclusion

    For the reasons outlined above, the Administration 
vigorously opposes passage of H.R. 2277, the Legal Aid Act of 
1995, and respectfully urges the Committee to defeat it and to 
reauthorize the Legal Services Corporation.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italic, existing law in which no change is proposed 
is shown in roman):

                     LEGAL SERVICES CORPORATION ACT

                [TITLE X--LEGAL SERVICES CORPORATION ACT

           [statement of findings and declaration of purpose

  [Sec. 1001. The Congress finds and declares that--
          [(1) there is a need to provide equal access to the 
        system of justice in our Nation for individuals who 
        seek redress of grievances;
          [(2) there is a need to provide high quality legal 
        assistance to those who would be otherwise unable to 
        afford adequate legal counsel and to continue the 
        present vital legal services program;
          [(3) providing legal assistance to those who face an 
        economic barrier to adequate legal counsel will serve 
        best the ends of justice and assist in improving 
        opportunities for low-income persons consistent with 
        the purposes of this Act;
          [(4) for many of our citizens, the availability of 
        legal services has reaffirmed faith in our government 
        of laws;
          [(5) to preserve its strength, the legal services 
        program must be kept free from the influence of or use 
        by it of political pressures; and
          [(6) attorneys providing legal assistance must have 
        full freedom to protect the best interests of their 
        clients in keeping with the Code of Professional 
        Responsibility, the Canons of Ethics, and the high 
        standards of the legal profession.

                              [definitions

  [Sec. 1002. As used in this title, the term--
          [(1) ``Board'' means the Board of Directors of the 
        Legal Services Corporation;
          [(2) ``Corporation'' means the Legal Services 
        Corporation established under this title;
          [(3) ``eligible client'' means any person financially 
        unable to afford legal assistance;
          [(4) ``Governor'' means the chief executive officer 
        of a State;
          [(5) ``legal assistance'' means the provision of any 
        legal services consistent with the purposes and 
        provisions of this title;
          [(6) ``recipient'' means any grantee, contractee, or 
        recipient of financial assistance described in clause 
        (A) of section 1006(a)(1);
          [(7) ``staff attorney'' means an attorney who 
        receives more than one-half of his annual professional 
        income from a recipient organized solely for the 
        provision of legal assistance to eligible clients under 
        this title; and
          [(8) ``State'' means any State of the United States, 
        the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, Guam, American Samoa, the 
        Trust Territory of the Pacific Islands, and any other 
        territory or possession of the United States

                     [establishment of corporation

  [Sec. 1003. (a) There is established in the District of 
Columbia a private nonmembership nonprofit corporation, which 
shall be known as the Legal Services Corporation, for the 
purpose of providing financial support for legal assistance in 
noncriminal proceedings or matters to persons financially 
unable to afford legal assistance.
  [(b) The Corporation shall maintain its principal office in 
the District of Columbia and shall maintain therein a 
designated agent to accept service of process for the 
Corporation. Notice to or service upon the agent shall be 
deemed notice to or service upon the Corporation.
  [The Corporation, and any legal assistance program assisted 
by the Corporation, shall be eligible to be treated as an 
organization described in section 170(c)(2)(B) of the Internal 
Revenue Code of 1954 and as an organization described in 
section 501(c)(3) of the Internal Revenue Code of 1954 which is 
exempt from taxation under section 501(a) of such Code. If such 
treatments are conferred in accordance with the provisions of 
such Code, the Corporation, and legal assistance programs 
assisted by the Corporation, shall be subject to all provisions 
of such Code relevant to the conduct of organizations exempt 
from taxation.

                            [governing body

  [Sec. 1004. (a) The Corporation shall have a Board of 
Directors consisting of eleven voting members appointed by the 
President, by and with the advice and consent of the Senate, no 
more than six of whom shall be of the same political party. A 
majority shall be members of the bar of the highest court of 
any State, and none shall be a full-time employee of the United 
States. Effective with respect to appointments made after the 
date of enactment of the Legal Services Corporation Act 
Amendments of 1977 but not later than July 31, 1978, the 
membership of the Board shall be appointed so as to include 
eligible clients, and to be generally representative of the 
organized bar, attorneys providing legal assistance to eligible 
clients, and the general public.
  [(b) The term of office of each member of the Board shall be 
three years, except that five of the members first appointed, 
as designated by the President at the time of appointment, 
shall serve for a term of two years. Each member of the Board 
shall continue to serve until the successor to such member has 
been appointed and qualified. The term of initial members shall 
be computed from the date of the first meeting of the Board. 
The term of each member other than initial members shall be 
computed from the date of termination of the preceding term. 
Any member appointed to fill a vacancy occurring prior to the 
expiration of the term for which such member's predecessor was 
appointed shall be appointed for the remainder of such term. No 
member shall be reappointed to more than two consecutive terms 
immediately following such member's initial term.
  [(c) The members of the Board shall not, by reason of such 
membership, be deemed officers or employees of the United 
States.
  [(d) The President shall select from among the voting members 
of the board a chairman, who shall serve for a term of three 
years. Thereafter the Board shall annually elect a chairman 
from among its voting members.
  [(e) A member of the Board may be removed by a vote of seven 
members for malfeasance in office or for persistent neglect of 
or inability to discharge duties, or for offenses involving 
moral turpitude, and for no other cause.
  [(f) Within six months after the first meeting of the Board, 
the Board shall request the Governor of each State to appoint a 
nine-member advisory council for such State. A majority of the 
members of the advisory council shall be appointed, after 
recommendations have been received from the State bar 
association, from among the attorneys admitted to practice in 
the State, and the membership of the council shall be subject 
to annual reappointment. If ninety days have elapsed without 
such an advisory council appointed by the Governor, the Board 
is authorized to appoint such a council. The advisory council 
shall be charged with notifying the Corporation of any apparent 
violation of the provisions of this title and applicable rules, 
regulations, and guidelines promulgated pursuant to this title. 
The advisory council shall, at the same time, furnish a copy of 
the notification to any recipient affected thereby, and the 
Corporation shall allow such recipient a reasonable time (but 
in no case less than thirty days) to reply to any allegation 
contained in the notification.
  [(g) All meetings of the Board, of any executive committee of 
the Board, and of any advisory council established in 
connection with this title shall be open and shall be subject 
to the requirements and provisions of section 552b of title 5, 
United States Code (relating to open meetings).
  [(h) The Board shall meet at least four times during each 
calendar year.

                        [officers and employees

  [Sec. 1005. (a) The Board shall appoint the president of the 
Corporation, who shall be a member of the bar of the highest 
court of a State and shall be a non-voting ex officio member of 
the Board, and such other officers as the Board determines to 
be necessary. No officer of the Corporation may receive any 
salary or other compensation for services from any source other 
than the Corporation during his period of employment by the 
Corporation, except as authorized by the Board.
  [(b)(1) The president of the Corporation, subject to general 
policies established by the Board, may appoint and remove such 
employees of the Corporation as he determines necessary to 
carry out the purposes of the Corporation.
  [(2) No political test or political qualification shall be 
used in selecting, appointing, promoting, or taking any other 
personnel action with respect to any officer, agent, or 
employee of the Corporation or of any recipient, or in 
selecting or monitoring any grantee, contractor, or person or 
entity receiving financial assistance under this title.
  [(c) No member of the Board may participate in any decision, 
action, or recommendation with respect to any matter which 
directly benefits such member or pertains specifically to any 
firm or organization with which such member is then associated 
or has been associated within a period of two years.
  [(d) Officers and employees of the Corporation shall be 
compensated at rates determined by the Board, but not in excess 
of the rate of level V of the Executive Schedule specified in 
section 5316 of title 5, United States Code.
  [(e)(1) Except as otherwise specifically provided in this 
title, officers and employees of the Corporation shall not be 
considered officers or employees, and the Corporation shall not 
be considered a department, agency, or instrumentality, of the 
Federal Government.
  [(2) Nothing in this title shall be construed as limiting the 
authority of the Office of Management and Budget to review and 
submit comments upon the Corporation's annual budget request at 
the time it is transmitted to the Congress.
  [(f) Officers and employees of the Corporation shall be 
considered officers and employees of the Federal Government for 
purposes of the following provisions of title 5, United States 
Code: subchapter I of chapter 81 (relating to compensation for 
work injuries); chapter 83 (relating to civil service 
retirement); chapter 87 (relating to life insurance); and 
chapter 89 (relating to health insurance). The Corporation 
shall make contributions at the same rates applicable to 
agencies of the Federal Government under the provisions 
referred to in this subsection.
  [(g) The Corporation and its officers and employees shall be 
subject to the provisions of section 552 of title 5, United 
States Code (relating to freedom of information).

                    [powers, duties, and limitations

  [Sec. 1006. (a) To the extent consistent with the provisions 
of this title, the Corporation shall exercise the powers 
conferred upon a nonprofit corporation by the District of 
Columbia Nonprofit Corporation Act (except for section 1005(o) 
of title 29 of the District of Columbia Code). In addition, the 
Corporation is authorized--
          [(1)(A) to provide financial assistance to qualified 
        programs furnishing legal assistance to eligible 
        clients, and to make grants to and contracts with--
                  [(i) individuals, partnerships, firms, 
                corporation, and nonprofit organizations, and
                  [(ii) State and local governments (only upon 
                application by an appropriate State or local 
                agency or institution and upon a special 
                determination by the Board that the 
                arrangements to be made by such agency or 
                institution will provide services which will 
                not be provided adequately through 
                nongovernmental arrangements),
        for the purpose of providing legal assistance to 
        eligible clients under this title, and (B) to make such 
        other grants and contracts as are necessary to carry 
        out the purposes and provisions of this title;
          [(2) to accept in the name of the Corporation, and 
        employ or dispose of in furtherance of the purposes of 
        this title, any money or property, real, personal, or 
        mixed, tangible or intangible, received by gift, 
        devise, bequest, or otherwise; and
          [(3) to undertake directly, or by grant or contract, 
        the following activities relating to the delivery of 
        legal assistance--
                  [(A) research, except that broad general 
                legal or policy research unrelated to 
                representation of eligible clients may not be 
                undertaken by grant or contract,
                  [(B) training and technical assistance, and
                  [(C) to serve as a clearinghouse for 
                information.
  [(b)(1)(A) The Corporation shall have authority to insure the 
compliance of recipients and their employees with the 
provisions of this title and the rules, regulations, and 
guidelines promulgated pursuant to this title, and to 
terminate, after a hearing in accordance with section 1011, 
financial support to a recipient which fails to comply.
  [(B) No question of whether representation is authorized 
under this title, or the rules, regulations or guidelines 
promulgated pursuant to this title, shall be considered in, or 
affect the final disposition of, any proceeding in which a 
person is represented by a recipient or an employee of a 
recipient. A litigant in such a proceeding may refer any such 
question to the Corporation which shall review and dispose of 
the question promptly, and take appropriate action. This 
subparagraph shall not preclude judicial review available under 
applicable law.
  [(2) If a recipient finds that any of its employees has 
violated or caused the recipient to violate the provisions of 
this title or the rules, regulations, and guidelines 
promulgated pursuant to this title, the recipient shall take 
appropriate remedial or disciplinary action in accordance with 
the types of procedures prescribed in the provisions of section 
1011.
  [(3) The Corporation shall not, under any provision of this 
title, interfere with any attorney in carrying out his 
professional responsibilities to his client as established in 
the Canons of Ethics and the Code of Professional 
Responsibility of the American Bar Association (referred to 
collectively in this title as ``professional 
responsibilities'') or abrogate as to attorneys in programs 
assisted under this title the authority of a State or other 
jurisdiction to enforce the standards of professional 
responsibility generally applicable to attorneys in such 
jurisdiction. The Corporation shall insure that activities 
under this title are carried out in a manner consistent with 
attorneys' professional responsibilities.
  [(4) No attorney shall receive any compensation, either 
directly or indirectly, for the provision of legal assistance 
under this title unless such attorney is admitted or otherwise 
authorized by law, rule, or regulation to practice law or 
provide such assistance in the jurisdiction where such 
assistance is initiated.
  [(5) The Corporation shall insure that (A) no employee of the 
Corporation or of any recipient (except as permitted by law in 
connection with such employee's own employment situation), 
while carrying out legal assistance activities under this 
title, engage in, or encourage others to engage in, any public 
demonstration or picketing, boycott, or strike; and (B) no such 
employee shall, at any time, engage in, or encourage others to 
engage in, any of the following activities; (i) any rioting or 
civil disturbance, (ii) any activity which is in violation of 
an outstanding injunction of any court of competent 
jurisdiction, (iii) any other illegal activity, or (iv) any 
intentional identification of the Corporation or any recipient 
with any political activity prohibited by section 1007(a)(6). 
The Board, within ninety days after its first meeting, shall 
issue rules and regulations to provide for the enforcement of 
this paragraph and section 1007(a)(5), which rules shall 
include, among available remedies, provisions, in accordance 
with the types of procedures prescribed in the provisions of 
section 1011, for suspension of legal assistance supported 
under this title, suspension of an employee of the Corporation 
or of any employee of any recipient by such recipient, and, 
after consideration of other remedial measures and after a 
hearing in accordance with section 1011, the termination of 
such assistance or employment, and deemed appropriate for the 
violation in question.
  [(6) In areas where significant numbers of eligible clients 
speak a language other than English as their principal 
language, the Corporation shall, to the extent feasible, 
provide that their principal language is used in the provision 
of legal assistance to such clients under this title.
  [(c) The Corporation shall not itself--
          [(1) participate in litigation unless the Corporation 
        or a recipient of the Corporation is a party, or a 
        recipient is representing an eligible client in 
        litigation in which the interpretation of this title or 
        a regulation promulgated under this title is an issue, 
        and shall not participate on behalf of any client other 
        than itself; or
          [(2) undertake to influence the passage or defeat of 
        any legislation by the Congress of the United States or 
        by any State or local legislative bodies, except that 
        personnel of the Corporation may testify or make other 
        appropriate communication (A) when formally requested 
        to do so by a legislative body, a committee, or a 
        member thereof, or (B) in connection with legislation 
        or appropriations directly affecting the activities of 
        the Corporation.
  [(d)(1) The Corporation shall have no power to issue any 
shares of stock, or to declare or pay any dividends.
  [(2) No part of the income or assets of the Corporation shall 
inure to the benefit of any director, officer, or employee, 
except as reasonable compensation for services or reimbursement 
for expenses.
  [(3) Neither the Corporation nor any recipient shall 
contribute or make available corporate funds or program 
personnel or equipment to any political party or association, 
or the campaign of any candidate for public or party office.
  [(4) Neither the Corporation nor any recipient shall 
contribute or make available corporate funds or program 
personnel or equipment for use in advocating or opposing any 
ballot measures, initiatives, or referendums. However, an 
attorney may provide legal advice and representation as an 
attorney to any eligible client with respect to such client's 
legal rights.
  [(5) No class action suit, class action appeal, or amicus 
curiae class action may be undertaken, directly or through 
others, by a staff attorney, except with the express approval 
of a project director of a recipient in accordance with 
policies established by the governing body of such recipient.
  [(6) 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.
  [(e)(1) Employees of the Corporation or of recipients shall 
not at any time intentionally identify the Corporation or the 
recipient with any partisan or nonpartisan political activity 
associated with a political party or association, or the 
campaign of any candidate for public or party office.
  [(2) Employees of the Corporation and staff attorneys shall 
be deemed to be State or local employees for purposes of 
chapter 15 of title 5, United States Code, except that no staff 
attorney may be a candidate in a partisan political election.
  [(f) If an action is commenced by the Corporation or by a 
recipient and a final order is entered in favor of the 
defendant and against the Corporation or a recipient's 
plaintiff, the court shall, upon motion by the defendant and 
upon a finding by the court that the action was commenced or 
pursued for the sole purpose of harassment of the defendant or 
that the Corporation or a recipient's plaintiff maliciously 
abused legal process, enter an order (which shall be appealable 
before being made final) award reasonable costs and legal fees 
incurred by the defendant in defense of the action, except when 
in contravention of a State law, a rule of court, or a statute 
of general applicability. Any such costs and fees shall be 
directly paid by the Corporation.

                         [grants and contracts

  [Sec. 1007. (a) With respect to grants or contracts in 
connection with the provision of legal assistance to eligible 
clients under this title, the Corporation shall--
          [(1) insure the maintenance of the highest quality of 
        service and professional standards, the preservation of 
        attorney-client relationships, and the protection of 
        the integrity of the adversary process from any 
        impairment in furnishing legal assistance to eligible 
        clients;
          [(2)(A) establish, in consultation with the Director 
        of the Office of Management and Budget and with the 
        Governors of the several States, maximum income levels 
        (taking into account family size, urban and rural 
        differences, and substantial cost-of-living variations) 
        for individuals eligible for legal assistance under 
        this title;
          [(B) establish guidelines to insure that eligibility 
        of clients will be determined by recipients on the 
        basis of factors which include--
                  [(i) the liquid assets and income level of 
                the client,
                  [(ii) the fixed debts, medical expenses, and 
                other factors which affect the client's ability 
                to pay,
                  [(iii) the cost of living in the locality, 
                and
                  [(iv) such other factors as relate to 
                financial inability to afford legal assistance, 
                which may include evidence of a prior 
                determination that such individual's lack of 
                income results from refusal or unwillingness, 
                without good cause, to seek or accept an 
                employment situation; and
          [(C) insure that (i) recipients, consistent with 
        goals established by the Corporation, adopt procedures 
        for determining and implementing priorities for the 
        provision of such assistance, taking into account the 
        relative needs of eligible clients for such assistance 
        (including such outreach, training, and support 
        services as may be necessary), including particularly 
        the needs for service on the part of significant 
        segments of the population of eligible clients with 
        special difficulties of access to legal services or 
        special legal problems (including elderly and 
        handicapped individuals); and (ii) appropriate training 
        and support services are provided in order to provide 
        such assistance to such significant segments of the 
        population of eligible clients;
          [(3) insure that grants and contracts are made so as 
        to provide the most economical and effective delivery 
        of legal assistance to persons in both urban and rural 
        areas;
          [(4) insure that attorneys employed full time in 
        legal assistance activities supported in major part by 
        the Corporation refrain from (A) any compensated 
        outside practice of law, and (B) any uncompensated 
        outside practice of law except as authorized in 
        guidelines promulgated by the Corporation;
          [(5) insure that no funds made available to 
        recipients by the Corporation shall be used at any 
        time, directly or indirectly, to influence the 
        issuance, amendment, or revocation of any executive 
        order or similar promulgation by any Federal, State, or 
        local agency, or to undertake to influence the passage 
        or defeat of any legislation by the Congress of the 
        United States, or by any State or local legislative 
        bodies, or State proposals by initiative petition, 
        except where--
                  [(A) representation by an employee of a 
                recipient for any eligible client is necessary 
                to the provision of legal advice and 
                representation with respect to such client's 
                legal rights and responsibilities (which shall 
                not be construed to permit an attorney or a 
                recipient employee to solicit a client, in 
                violation of professional responsibilities, for 
                the purpose of making such representation 
                possible); or
                  [(B) a governmental agency, legislative body, 
                a committee, or a member thereof--
                          [(i) requests personnel of the 
                        recipient to testify, draft, or review 
                        measures or to make representations to 
                        such agency, body, committee, or 
                        member, or
                          [(ii) is considering a measure 
                        directly affecting the activities under 
                        this title of the recipient or the 
                        Corporation.
          [(6) insure that all attorneys engaged in legal 
        assistant activities supported in whole or in part by 
        the Corporation refrain, while so engaged, from--
                  [(A) any political activity, or
                  [(B) any activity to provide voters or 
                prospective voters with transportation to the 
                polls or provide similar assistance in 
                connection with an election (other than legal 
                advice and representation), or
                  [(C) any voter registration activity (other 
                than legal advice and representation);
          [(7) require recipients to establish guidelines, 
        consistent with regulations promulgated by the 
        Corporation, for a system for review of appeals to 
        insure the efficient utilization of resources and to 
        avoid frivolous appeals (except that such guidelines or 
        regulations shall in no way interfere with attorneys' 
        professional responsibilities);
          [(8) insure that recipients solicit the 
        recommendations of the organized bar in the community 
        being served before filling staff attorney positions in 
        any project funded pursuant to this title and give 
        preference in filling such positions to qualified 
        persons who reside in the community to be served;
          [(9) insure that every grantee, contractor, or person 
        or entity receiving financial assistance under this 
        title or predecessor authority under this Act which 
        files with the Corporation a timely application for 
        refunding is provided interim funding necessary to 
        maintain its current level of activities until (A) the 
        application for refunding has been approved and funds 
        pursuant thereto received, or (B) the application for 
        refunding has been finally denied in accordance with 
        section 1011 of this Act; and
          [(10) insure that all attorneys, while engaged in 
        legal assistance activities supported in whole or in 
        part by the Corporation, refrain from the persistent 
        incitement of litigation and any other activity 
        prohibited by the Canons of Ethics and Code of 
        Professional Responsibility of the American Bar 
        Association, and insure that such attorneys refrain 
        from personal representation for a private fee in any 
        cases in which they were involved while engaged in such 
        legal assistance activities.
  [(b) No funds made available by the Corporation under this 
title, either by grant or contract, may be used--
          [(1) to provide legal assistance (except in 
        accordance with guidelines promulgated by the 
        Corporation) with respect to any fee-generating case 
        (which guidelines shall not preclude the provision of 
        legal assistance in cases in which a client seeks only 
        statutory benefits and appropriate private 
        representation is not available);
          [(2) to provide legal assistance with respect to any 
        criminal proceeding, except to provide assistance to a 
        person charged with a misdemeanor or lesser offense or 
        its equivalent in an Indian tribal court;
          [(3) to provide legal assistance in civil actions to 
        persons who have been convicted of a criminal charge 
        where the civil action arises out of alleged acts or 
        failures to act and the action is brought against an 
        officer of the court or against a law enforcement 
        official for the purpose of challenging the validity of 
        the criminal conviction;
          [(4) for any of the political activities prohibited 
        in paragraph (6) of subsection (a) of this section;
          [(5) to make grants to or enter into contracts with 
        any private law firm which expends 50 percent or more 
        of its resources and time litigating issues in the 
        board interests of a majority of the public;
          [(6) to support or conduct training programs for the 
        purpose of advocating particular public policies or 
        encouraging political activities, labor or antilabor 
        activities, boycotts, picketing, strikes, and 
        demonstrations, as distinguished from the dissemination 
        of information about such policies or activities, 
        except that this provision shall not be construed to 
        prohibit the training of attorneys or paralegal 
        personnel necessary to prepare them to provide adequate 
        legal assistance to eligible clients;
          [(7) to initiate the formation, or act as an 
        organizer, of any association, federation, or similar 
        entity, except that this paragraph shall not be 
        construed to prohibit the provision of legal assistance 
        to eligible clients;
          [(8) to provide legal assistance with respect to any 
        proceeding or litigation which seeks to procure a 
        nontherapeutic abortion or to compel any individual or 
        institution to perform an abortion, or assist in the 
        performance of an abortion, or provide facilities for 
        the performance of an abortion, contrary to the 
        religious beliefs or moral convictions of such 
        individual or institution.
          [(9) to provide legal assistance with respect to any 
        proceeding or litigation relating to the desegregation 
        of any elementary or secondary school or school system, 
        except that nothing in this paragraph shall prohibit 
        the provision of legal advice to an eligible client 
        with respect to such client's legal rights and 
        responsibilities; or
          [(10) to provide legal assistance with respect to any 
        proceeding or litigation arising out of a violation of 
        the Military Selective Service Act or of desertion from 
        the Armed Forces of the United States, except that 
        legal assistance may be provided to an eligible client 
        in a civil action in which such client alleges that he 
        was improperly classified prior to July 1, 1973, under 
        the Military Selective Service Act or prior 
        corresponding law.
  [(c) In making grants or entering into contracts for legal 
assistance, the Corporation shall insure that any recipient 
organized solely for the purpose of providing legal assistance 
to eligible clients is governed by a body at least 60 percent 
of which consists of attorneys who are members of the bar of a 
State in which the legal assistance is to be provided (except 
that the Corporation (1) shall, upon application, grant waivers 
to permit a legal services program, supported under section 
222(a)(3) of the Economic Opportunity Act of 1964, which on the 
date of enactment of this title has a majority of persons who 
are not attorneys on its policy-making board to continue such a 
nonattorney majority under the provisions of this title, and 
(2) may grant, pursuant to regulations issued by the 
Corporation, such a waiver for recipients which, because of the 
nature of the population they serve, are unable to comply with 
such requirement) and at least one-third of which consists of 
persons who are, when selected, eligible clients who may also 
be representatives of associations or organizations of eligible 
clients. Any such attorney, while serving on such board, shall 
not receive compensation from a recipient.
  [(d) The Corporation shall monitor and evaluate and provide 
for independent evaluations of programs supported in whole or 
in part under this title to insure that the provisions of this 
title and the bylaws of the Corporation and applicable rules, 
regulations, and guidelines promulgated pursuant to this title 
are carried out.
  [(e) The president of the Corporation is authorized to make 
grants and enter into contracts under this title.
  [(f) At least thirty days prior to the approval of any grant 
application or prior to entering into a contract or prior to 
the initiation of any other project, the Corporation shall 
announce publicly, and shall notify the Governor, the State bar 
association of any State, and the principal local bar 
associations (if there be any) of any community, where legal 
assistance will thereby be initiated, of such grant, contract, 
or project. Notification shall include a reasonable description 
of the grant application or proposed contract or project and 
request comments and recommendations.
  [(g) The Corporation shall provide for comprehensive, 
independent study of the existing staff-attorney program under 
this Act and, through the use of appropriate demonstration 
projects, of alternative and supplemental methods of delivery 
of legal services to eligible clients, including judicare, 
vouchers, prepaid legal insurance, and contracts with law 
firms; and, based upon the results of such study, shall make 
recommendations to the President and the Congress, not later 
than two years after the first meeting of the Board, concerning 
improvements, changes, or alternative methods for the 
economical and effective delivery of such services.
  [(h) The Corporation shall conduct a study on whether 
eligible clients who are--
          [(1) veterans,
          [(2) native Americans,
          [(3) migrants or seasonal farm workers,
          [(4) persons with limited English-speaking abilities, 
        and
          [(5) persons in sparsely populated areas where a 
        harsh climate and an inadequate transportation system 
        are significant impediments to receipt of legal 
        services.
have special difficulties of access to legal services or 
special legal problems which are not being met. The Corporation 
shall report to Congress not later than January 1, 1979, on the 
extent and nature of any such problems and difficulties and 
shall include in the report and implement appropriate 
recommendations.

                          [records and reports

  [Sec. 1008. (a) The Corporation is authorized to require such 
reports as it deems necessary from any grantee, contractor, or 
person or entity receiving financial assistance under this 
title regarding activities carried out pursuant to this title.
  [(b) The Corporation is authorized to prescribe the keeping 
of records with respect to funds provided by grant or contract 
and shall have access to such records at all reasonable times 
for the purpose of insuring compliance with the grant or 
contract or the terms and conditions upon which financial 
assistance was provided.
  [(c) The Corporation shall publish an annual report which 
shall be filed by the Corporation with the President and the 
Congress. Such report shall include a description of services 
provided pursuant to section 1007(a)(2)(C) (i) and (ii).
  [(d) Copies of all reports pertinent to the evaluation, 
inspection, or monitoring of any grantee, contractor, or person 
or entity receiving financial assistance under this title shall 
be submitted on a timely basis to such grantee, contractor, or 
person or entity, and shall be maintained in the principal 
office of the Corporation for a period of at least five years 
subsequent to such evaluation, inspection, or monitoring. Such 
reports shall be available for public inspection during regular 
business hours, and copies shall be furnished, upon request, to 
interested parties upon payment of such reasonable fees as the 
Corporation may establish.
  [(e) The Corporation shall afford notice and reasonable 
opportunity for comment to interested parties prior to issuing 
rules, regulations, and guidelines, and it shall publish in the 
Federal Register at least 30 days prior to their effective date 
all its rules, regulations, guidelines, and instructions.

                                [audits

  [Sec. 1009. (a)(1) The accounts of the Corporation shall be 
audited annually. Such audits shall be conducted in accordance 
with generally accepted auditing standards by independent 
certified public accountants who are certified by a regulatory 
authority of the jurisdiction in which the audit is undertaken.
  [(2) The audits shall be conducted at the place or places 
where the accounts of the Corporation are normally kept. All 
books, accounts, financial records, reports, files, and other 
papers or property belonging to or in use by the Corporation 
and necessary to facilitate the audits shall be made available 
to the person or persons conducting the audits; and full 
facilities for verifying transactions with the balances and 
securities held by depositories, fiscal agents, and custodians 
shall be afforded to any such person.
  [(3) The report of the annual audit shall be filed with the 
General Accounting Office and shall be available for public 
inspection during business hours at the principal office of the 
Corporation.
  [(b)(1) In addition to the annual audit, the financial 
transactions of the Corporation for any fiscal year during 
which Federal funds are available to finance any portion of its 
operation may be audited by the General Accounting Office in 
accordance with such rules and regulations as may be prescribed 
by the Comptroller General of the United States.
  [(2) Any such audit shall be conducted at the place or places 
where accounts of the Corporation are normally kept. The 
representatives of the General Accounting Office shall have 
access to all books, accounts, financial records, reports, 
files, and other papers or property belonging to or in use by 
the Corporation and necessary to facilitate the audit; and full 
facilities for verifying transactions with the balances and 
securities held by depositories, fiscal agents, and custodians 
shall be afforded to such representatives. All such books, 
accounts, financial records, reports, files, and other papers 
or property of the Corporation shall remain in the possession 
and custody of the Corporation throughout the period beginning 
on the date such possession or custody commences and ending 
three years after such date, but the General Accounting Office 
may require the retention of such books, accounts, financial 
records, reports, files, papers, or property for a longer 
period under section 117(b) of the Accounting and Auditing Act 
of 1950 (31 U.S.C. 67(b)).
  [(3) A report of such audit shall be made by the Comptroller 
General to the Congress and to the President, together with 
such recommendations with respect thereto as he shall deem 
advisable.
  [(c)(1) The Corporation shall conduct, or require each 
grantee, contractor, or person or entity receiving financial 
assistance under this title to provide for, an annual financial 
audit. The report of each such audit shall be maintained for a 
period of at least five years at the principal office of the 
Corporation.
  [(2) The Corporation shall submit to the Comptroller General 
of the United States copies of such reports, and the 
Comptroller General may, in addition, inspect the books, 
accounts, financial records, files, and other papers or 
property belonging to or in use by such grantee, contractor, or 
person or entity, which relate to the disposition or use of 
funds receive from the Corporation. Such audit reports shall be 
available for public inspection, during regular business hours, 
at the principal office of the Corporation.
  [(d) Notwithstanding the provisions of this section or 
section 1008, neither the Corporation nor the Comptroller 
General shall have access to any reports or records subject to 
the attorney-client privilege.

                               [financing

  [Sec. 1010. (a) There are authorized to be appropriated for 
the purpose of carrying out the activities of the Corporation, 
$90,000,000 for fiscal year 1975, $100,000,000 for fiscal year 
1976, and such sums as may be necessary for fiscal year 1977. 
There are authorized to be appropriated for the purpose of 
carrying out the activities of the Corporation $205,000,000 for 
the fiscal year 1978, and such sums as may be necessary for 
each of the two succeeding fiscal years. The first 
appropriation may be made available to the Corporation at any 
time after six or more members of the Board have been appointed 
and qualified. Appropriations for that purpose shall be made 
for not more than two fiscal years, and shall be paid to the 
Corporation in annual installments at the beginning of each 
fiscal year in such amounts as may be specified in Acts of 
Congress making appropriations.
  [(b) Funds appropriated pursuant to this section shall remain 
available until expended.
  [(c) Non-Federal funds received by the Corporation, and funds 
received by any recipient from a source other than the 
Corporation, shall be accounted for and reported as receipts 
and disbursements separate and distinct from Federal funds; but 
any funds so received for the provision of legal assistance 
shall not be expended by recipients for any purpose prohibited 
by this title, except that this provision shall not be 
construed to prevent recipients from receiving other public 
funds or tribal funds (including foundation funds benefiting 
Indians or Indian tribes) and expending them in accordance with 
the purposes for which they are provided, or to prevent 
contracting or making other arrangements with private 
attorneys, private law firms, or other State or local entities 
of attorneys, or with legal aid societies having separate 
public defender programs, for the provision of legal assistance 
to eligible clients under this title.
  [(d) Not more than 10 percent of the amounts appropriated 
pursuant to subsection (a) of this section for any fiscal year 
shall be available for grants or contracts under section 
1006(a)(3) in any such year.

                          [special limitations

  [Sec. 1011. The Corporation shall prescribe procedures to 
insure that--
          [(1) financial assistance under this title shall not 
        be suspended unless the grantee, contractor, or person 
        or entity receiving financial assistance under this 
        title has been given reasonable notice and opportunity 
        to show cause why such action should not be taken; and
          [(2) financial assistance under this title shall not 
        be terminated, an application for refunding shall not 
        be denied, and a suspension of financial assistance 
        shall not be continued for longer than thirty days, 
        unless the grantee, contractor, or person or entity 
        receiving financial assistance under this title has 
        been afforded reasonable notice and opportunity for a 
        timely, full, and fair hearing, and, when requested, 
        such hearing shall be conducted by an independent 
        hearing examiner. Such hearing shall be held prior to 
        any final decision by the Corporation to terminate 
        financial assistance or suspend or deny funding. 
        Hearing examiners shall be appointed by the Corporation 
        in accordance with procedures established in 
        regulations promulgated by the Corporation.

                             [coordination

  [Sec. 1012. The President may direct that appropriate support 
functions of the Federal Government may be made available to 
the Corporation in carrying out its activities under this 
title, to the extent not inconsistent with other applicable 
law.

                   [right to repeal, alter, or amend

  [Sec. 1013. The right to repeal, alter, or amend this title 
at any time is expressly reserved.

                              [short title

  [Sec. 1014. This title may be cited as the ``Legal Services 
Corporation Act''.]

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Legal Aid Grant Act''.

SEC. 2. DEFINITIONS.

  For purposes of this Act:
          (1) Qualified legal service provider.--
                  (A) In general.--The term ``qualified legal 
                service provider'' means--
                          (i) any individual who is licensed to 
                        practice law in a State for not less 
                        than 3 calendar years, who has 
                        practiced law in such State not less 
                        than 3 calendar years, and who is so 
                        licensed during the period of a 
                        contract under section 4; or
                          (ii) a person who employs or 
                        contracts with an individual described 
                        in clause (i) to provide qualified 
                        legal services.
                Nothing in this subparagraph shall be 
                interpreted to prohibit a qualified legal 
                service provider from employing an individual 
                who is not described in clause (i) to assist in 
                providing qualified legal services.
                  (B) Not qualified.--No individual shall be 
                considered, or employed by, a qualified legal 
                service provider if such individual during the 
                10 years preceding the submission of a bid for 
                a contract under section 4--
                          (i) has been convicted of a felony; 
                        or
                          (ii) has been suspended or disbarred 
                        from the practice of law for 
                        misconduct, incompetence, or neglect of 
                        a client in any State; or
                if such individual has a criminal charge 
                pending on the date of the submission of a bid 
                for a contract under section 4. In determining 
                whether to award a contract under section 4, a 
                State may also consider, to the extent the 
                State considers it relevant in evaluating the 
                qualifications of an applicant, whether an 
                applicant has been found in contempt of a court 
                of competent jurisdiction in any State or 
                Federal court or has been sanctioned under 
                Federal Rule of Civil Procedure 11 or an 
                equivalent State rule of procedure applicable 
                in civil actions.
                  (C) Additional requirements.--No State may 
                impose a requirement on an individual or person 
                as a condition to bidding on a contract under 
                section 4 or to being awarded such a contract 
                which requirement is different from any other 
                requirement of subparagraph (B).
          (2) Qualified legal services.--The term ``qualified 
        legal services'' means--
                  (A) mediation, negotiation, arbitration, 
                counseling, advice, instruction, referral, or 
                representation, and
                  (B) legal research or drafting in support of 
                the services described in subparagraph (A),
        provided by or under the supervision of a qualified 
        legal service provider to a qualified client for a 
        qualified cause of action.
          (3) Qualified client.--The term ``qualified client'' 
        means any individual who is a United States citizen or 
        an alien admitted for permanent residence who in the 3 
        months prior to seeking legal assistance from a 
        qualified legal service provider had an income from any 
        source which was equal to or less than the poverty line 
        established under section 673(2) of the Community 
        Services Block Grant Act (42 U.S.C. 9902(2)).
          (4) Qualified cause of action.--
                  (A) The term ``qualified cause of action'' 
                means only a civil cause of action which 
                results only from--
                          (i) landlord and tenant disputes, 
                        including an eviction from housing 
                        except an eviction where the prima 
                        facie case for the eviction is based on 
                        criminal conduct;
                          (ii) foreclosure of a debt on a 
                        qualified client's residence;
                          (iii) the filing of a petition under 
                        chapter 7 or 12 of title 11, United 
                        States Code, or under chapter 13 of 
                        such title unless a petition of 
                        eviction has preceded the filing of 
                        such petition;
                          (iv) enforcement of a debt;
                          (v) an application for a statutory 
                        benefit;
                          (vi) appeal of a denial of a 
                        statutory benefit on a statutory 
                        ground;
                          (vii) child custody and support;
                          (viii) action to quiet title;
                          (ix) activities involving spousal or 
                        child abuse on behalf of the abused 
                        party;
                          (x) an insurance claim;
                          (xi) competency hearing;
                          (xii) probate;
                          (xiii) divorce or separation;
                          (xiv) employment matters; or
                          (xv) consumer fraud.
                Additional causes of action qualify as a 
                qualified cause of action if they arise out of 
                the same transaction as a cause of action 
                described in this subparagraph unless such 
                additional causes of action are described in 
                clause (i) of subparagraph (B).
                  (B) Such term does not include--
                          (i) a class action under Federal, 
                        State, or local law; or
                          (ii) any challenge to the 
                        constitutionality of any statute.
          (5) State.--The term ``State'' means any State of the 
        United States, the District of Columbia, the 
        Commonwealth of Puerto Rico, the Virgin Islands, Guam, 
        American Samoa, the Trust Territory of the Pacific 
        Islands, and any other territory or possession of the 
        United States and includes any recognized governing 
        body of an Indian Tribe or Alaskan Native Village that 
        carries out substantial governmental powers and duties.

SEC. 3. GRANTS.

  (a) Grant Authority.--The Attorney General shall direct the 
Office of Justice Programs to make grants to States for the 
provision of qualified legal services and to insure compliance 
with the requirements of this Act. To receive a grant under 
this subsection a State shall make an application to the 
Attorney General. Such an application shall be in such form and 
submitted in such manner as the Attorney General may require.
  (b) Poverty Line.--Grants shall be made under subsection (a) 
to States in such proportion as the number of residents of each 
State which receive a grant who live in households having 
income equal to or less than the poverty line established under 
section 673(2) of the Community Services Block Grant Act (42 
U.S.C. 9902(2)) bears to the total number of residents in the 
United States living in such households.
  (c) Retention of Grant Funds.--Each State may in any fiscal 
year retain for administrative costs not more than 5 percent of 
the amount granted to the State under subsection (a) in such 
fiscal year. The remainder of such grant shall be paid under 
contracts to qualified legal service providers in the State for 
the provision in the State of qualified legal services. If a 
State which has received a grant under subsection (a) has at 
the end of any fiscal year funds which have not been obligated, 
such State shall return such funds to the Attorney General.
  (d) Requirements of This Act.--No State may receive a grant 
under subsection (a) unless the State has certified to the 
Attorney General that the State will comply with and enforce 
the requirements of this Act.
  (e) Limitation on Use of Grant Funds.--None of the funds 
provided under subsection (a) shall be used by a qualified 
legal service provider--
          (1) to make available any funds, personnel, or 
        equipment for use in advocating or opposing any plan or 
        proposal or represent any party or participate in any 
        other way in litigation, that is intended to or has the 
        effect of altering, revising, or reapportioning a 
        legislative, judicial, or elective district at any 
        level of government, including influencing the timing 
        or manner of the taking of a census;
          (2) to attempt to influence the issuance, amendment, 
        or revocation of any executive order, regulation, 
        policy, or similar promulgation by any Federal, State, 
        or local agency;
          (3) to attempt to influence the passage or defeat of 
        any legislation, constitutional amendment, referendum, 
        initiative, confirmation proceeding, or any similar 
        procedure of the Congress of the United States or by 
        any State or local legislative body;
          (4) to support or conduct training programs for the 
        purpose of advocating particular public policies or 
        encouraging political activities, labor or anti-labor 
        activities, boycotts, picketing, strikes, and 
        demonstrations, including the dissemination of 
        information about such policies or activities;
          (5) to participate in any litigation, lobbying, 
        rulemaking or any other matter with respect to 
        abortion;
          (6) to participate in any litigation or provide any 
        representation on behalf of a local, State, or Federal 
        prisoner;
          (7) to pay for any personal service, advertisement, 
        telegram, telephone communication, letter, or printed 
        or written matter or to pay administrative expenses or 
        related expenses, associated with an activity 
        prohibited in paragraph (1), (2), (3), (4), (5), or 
        (6);
          (8) to solicit in-person any client for the purpose 
        of providing any legal service; or
          (9) to pay any voluntary membership dues to any 
        private or non-profit organization.
  (f) Limitation on Use of State Funds.--A State which receives 
a grant under subsection (a) and which also distributes State 
funds for the provision of legal services shall require that 
such State funds be used to provide qualified legal services to 
qualified clients and shall impose on the use of such State 
funds the limitations prescribed by subsection (e).
  (g) Attorneys' Fees.--A qualified legal service provider of 
any qualified client or any client of such provider may not 
claim or collect attorneys' fees from parties to any litigation 
initiated by such client.
  (h) Evasion.--Any attempt to avoid or otherwise evade the 
requirements of this Act is prohibited.
  (i) Authorization of Appropriations.--For grants under 
subsection (a) there are authorized to be appropriated to the 
Attorney General $278,000,000 for fiscal year 1996, 
$250,000,000 for fiscal year 1997, 175,000,000 for fiscal year 
1998, and $100,000,000 for fiscal year 1999.

SEC. 4. CONTRACTS.

  (a) In General.--Each State which receives a grant under 
section 3(a) shall make funds under the grant available for 
contracts entered into for the provision of qualified legal 
services within the State.
  (b) Bids.--
          (1) Authority.--The Governor of each State shall 
        designate the authority of the State which shall be 
        responsible for soliciting and awarding bids for 
        contracts for the provision of qualified legal services 
        within such State.
          (2) Service area.--The authority of a State 
        designated under paragraph (1) shall designate service 
        areas within the State. Such service areas shall be the 
        counties or parishes within a State but such authority 
        may combine contiguous counties or parishes to form a 
        service area to assure the adequate provision of 
        qualified legal services.
          (3) Non-english-speaking clients.--If 5 percent or 
        more of the population of qualified clients in a 
        qualified legal service provider's service area 
        includes individuals whose household language is other 
        than English, the qualified legal service provider 
        shall include provision in the provider's bid for 
        satisfying the communication needs of that portion of 
        such population.
  (c) Availability of Funds.--A State shall allocate grant 
funds for contracts for the provision of qualified legal 
services in a service area on the same basis as grants are made 
available to States under section 3(b).
  (d) Contract Awards.--A State shall award a contract for the 
provision of qualified legal services in a service area to the 
applicant who is best qualified, as determined by the State, 
and who in its bid offers to provide, in accordance with 
section 5, the greatest number of hours of qualified legal 
services provided by lawyers or paralegals in such area. In 
determining which applicant is best qualified, a State shall 
consider the reputations of the principals of the applicant, 
the quality, feasibility, and cost effectiveness of plans 
submitted by the applicant for the delivery of qualified legal 
services to the qualified clients to be served, and a 
demonstration of willingness to abide by the restrictions of 
this Act.
  (e) Form and Billing.--A State contract awarded under 
subsection (d) shall be in such form as the State requires. The 
contract shall provide for the rendering of bills supported by 
time records at the close of each month in which qualified 
legal services are provided. A State shall make payment to a 
qualified legal service provider at the contract rate only for 
hours of qualified legal services provided and supported by 
appropriate records. The contract rate shall be the total 
dollar amount of the contract divided by the total hours bid by 
the qualified legal service provider. A State shall have 60 
days to make full payment of such bills.

SEC. 5. REQUIREMENTS FOR THE PROVISION OF QUALIFIED LEGAL SERVICES 
                    UNDER A CONTRACT.

  (a) Term.--The term of a contract entered into under section 
4 shall be not more than 1 year.
  (b) Manner of Provision of Services.--A qualified legal 
service provider shall service the legal needs of qualified 
clients under a contract entered into under section 4 in a 
professional manner consistent with applicable law.
  (c) Case Files.--A qualified legal service provider shall 
maintain a qualified client's case file, including any 
pleadings and research, at least until the later of 5 years 
after the resolution of client's cause of action or 5 years 
after the termination of the contract under which services were 
provided to such client or as provided by the applicable code 
of professional responsibility.
  (d) Time Records.--A qualified legal service provider shall 
keep daily time records of the provision of services to a 
qualified client in one tenth of an hour increments identifying 
such client, the general nature of the work performed in each 
increment, and the account which will be charged for such work.
  (e) Questionnaire.--Each qualified client shall be provided a 
self-mailing customer satisfaction questionnaire in a form 
approved by the authority granting the contract under section 4 
which identifies the qualified legal service provider and is 
preaddressed to such authority.
  (f) Attorney Client Privilege.--Any qualified client who 
receives legal services other than advice or legal services 
provided by mail or telephone shall execute with respect to 
such services a waiver of attorney client and attorney work 
product privilege as a condition to receiving such service. The 
waiver shall be limited to the extent necessary to determine 
the quantity and quality of the service rendered by the 
qualified legal service provider and compliance with this Act. 
Such waiver shall not constitute a waiver as to other parties. 
The use of such waiver or any information obtained under such 
waiver for any purpose other than determining the quantity and 
quality of the service of a provider or compliance with this 
Act shall be strictly prohibited.
  (g) Records of Qualifications.--A qualified legal service 
provider shall make and maintain records detailing the basis 
upon which the provider determined the qualifications of 
qualified clients. Such records shall be made and maintained 
for 3 years following the termination of a contract under 
section 4 for the provision of legal services to such clients.
  (h) Audits.--A qualified legal service provider shall consent 
to audits by the Attorney General, the General Accounting 
Office, or the authority which awarded a contract to such 
provider. Any such audit may be conducted at the provider's 
principal place of business. Such an audit shall be limited to 
a determination of whether such provider is meeting the 
requirements of this Act and the provider's contract under 
section 4.
  (i) Recovery of Fees.--A contract shall provide for the 
recovery of reasonable attorneys' fees in any successful action 
brought to compel payment to a qualified legal service provider 
under a contract under section 4.
  (j) Termination and Recovery of Funds.--The Attorney General, 
the Governor, or the authority which awarded a contract shall 
terminate a qualified legal service provider who is found to 
have a committed a material violation of this Act. A material 
violation shall include involvement with any prohibited 
activity. A breach of contract by a qualified legal service 
provider shall entitle the Governor or the authority to 
terminate the contract, to award a new contract, and to recover 
any funds improperly expended by the provider, together with 
interest at the statutory rate in the State for interest on 
judgments. If such a breach was willful, the provider shall pay 
to the authority which awarded the contract an additional 
amount equal to one half of the amount improperly expended by 
the provider.
                            DISSENTING VIEWS

    We cannot support HR. 2277, a bill that eviscerates a 30-
year federal commitment to civil legal assistance to the poor. 
Without a federal program, millions of low-income Americans 
will lose access to our civil justice system. This we cannot 
support. Nor should the Congress of the United States.
    Equal justice is a fundamental principle of our democratic 
society. The Constitution, its Preamble, the Bill of Rights and 
our Pledge of Allegiance all echo the founding fathers' intent 
to establish justice, assure due process and equal protection 
under the law, and promote liberty and justice for all. One 
system of justice for the rich and a different one for the poor 
is untenable in a democracy. As the Legal Services 
Corporation's first president Thomas Ehrlich stated: ``All 
citizens are required to live under the law, regardless of 
their wealth or poverty; all citizens are entitled to use the 
law as well. If they are not able to do so, the substantive 
rights to which the law entitles them are a sham, and the legal 
system is dangerously skewed.''
    The alternative proposed by HR 2277--a limited, state run 
funding program that provides, at best, fragmented services in 
a few types of cases through lawyers whose hands are tied--will 
not achieve equal justice. The defects in this bill cannot be 
corrected by amending HR 2277 because its approach is 
fundamentally flawed. HR 2277 does not ensure that services 
continue to be available throughout the country, a goal of the 
Legal Services Corporation Act that has largely been achieved. 
Nor does HR 2277 provide legal services in numerous types of 
cases where civil legal assistance is critical. The lawyers 
receiving funds under this bill will be unable to practice law 
for the poor as they would practice for those who can afford to 
pay an attorney. Finally, there is limited accountability for 
expenditure of federal funds and no responsibility to ensure 
that services provided are of high quality. Ironically, and 
contrary to the fundamental principles of federalism, this bill 
attempts to restrict what a state can do with its own funds.

                             I. Background

                 a. need for legal services to the poor

    The need for legal services for the poor could not be 
clearer, and the need has never been greater than it is today. 
More than 39,000,000 Americans live in households with incomes 
below the poverty level. According to the recent American Bar 
Association Comprehensive Legal Needs Study on the legal needs 
of low and moderate income persons, nearly half of low-income 
households faced problems that merited the attention of the 
civil justice system. However, nearly three-fourths of low-
income people with legal needs do not get help. As former 
Representative Guy Molinari stated when he testified before the 
House Appropriations Subcommittee two years ago: ``We can argue 
about the amount of unmet need; but I don't think there is any 
dispute about the fact that there is a very substantial amount 
of people out there who are, in fact, in need of civil legal 
services.''

                b. history of the legal services program

    The first legal aid society was established in New York 
City in 1876. Slowly, other such societies were formed. 
However, as the number of poor persons increased and their 
legal problems grew more complex, legal aid societies could not 
begin to meet the needs of the poor in those jurisdictions 
where they existed, nor were there consistent sources of 
financial support for civil legal assistance in most areas of 
the country.
    In 1973, President Nixon called for the establishment of an 
independent nonprofit corporation--not a Federal or State 
agency--to provide financial support for legal assistance in 
civil proceedings or matters to persons financially unable to 
afford legal assistance. He stressed the need for a program 
with independence and freedom to exercise professional 
judgment. He remarked that ``legal assistance for the poor is 
one of the most constructive ways to help them help themselves. 
* * * that justice is served far better and differences settled 
more rationally within the system than on the street. * * * 
[and that it was] time to make legal services an integral part 
of our judicial system.''
    In 1974, Congress responded and passed--with bipartisan 
support--the Legal Services Corporation Act of 1974 (P.L. 93-
355), which created a private, nonmembership, nonprofit 
corporation whose main purpose was to provide financial support 
to civil legal services programs for assistance to those 
persons unable to afford legal services. The Corporation is not 
a department, agency, or instrumentality of the Federal 
Government and was established to be independent of the 
Executive Branch so that legal assistance would be insulated 
from partisan pressures and would be delivered based on locally 
determined priorities and the independent professional judgment 
of the legal services attorneys and other providers. The 
Corporation, however, was accountable to Congress through the 
process of periodic reauthorization and annual appropriations.

   c. structure of the legal services corporation and its recipients

    The Corporation is governed by an 11-member Board of 
Directors appointed by the President with the advice and 
consent of the Senate. No more than six members may be from the 
same political party, and none may be Federal government 
employees. A majority of the Board must be members of the bar 
of the highest court of a State, and at least two must be 
eligible clients.
    The Board oversees a staff of less than 110 employees who 
administer and oversee a legal services delivery system that 
employs 11,000 lawyers, paralegals and support staff. Only 3% 
of the Corporation's budget is spent on administrative 
functions. The remaining 97% is channeled directly to the 
communities where legal services are delivered to people in 
need.
    The Corporation does not directly represent clients; rather 
it provides funds to local programs to support their provision 
of legal services. With only a few historical exceptions, 
funding on a local level has been through a single recipient in 
a geographic service area, although separate Native American 
and migrant farmworker programs were determined to be necessary 
to address their unique and special legal problems. At the end 
of fiscal year 1994, there were 323 legal services programs 
throughout the 50 States, the Virgin Islands, the District of 
Columbia, Puerto Rico and Micronesia. They operated over 1200 
community-based law offices in every county in the country.
    Each program sets its own priorities for services based on 
an assessment of client needs and available resources in the 
local community. Reliance on locally determined policies rather 
than nationally set priorities has been a hallmark of the legal 
services program and a major reason for its continued success.

                     d. delivery of legal services

1. What legal services programs do

    Of the 1,686,313 cases closed by legal services programs in 
1994, only 8 percent were litigated and only one-tenth of one 
percent were class actions. The other matters were handled 
outside the courtroom through counseling, negotiation and other 
means. The representation provided to poor persons was in a 
variety of categories of cases:
    On a national basis, family matters made up 33.2 percent of 
total closed cases, consisting of adoption, custody, divorce, 
support, parental rights, spouse abuse and other family-related 
matters.
    Income maintenance and housing matters comprised 16 and 
22.2 percent, respectively.
    Consumer matters made up 10.6 percent, consisting of 
contracts, warranties, credit matters, debt collection and 
sales practices, as well as public utilities and energy-related 
issues.
    Education, juvenile, health, individual rights, and 
employment matters constituted 10.5 percent.
    Miscellaneous matters, such as tort defense, tribal 
matters, wills, and auto licenses, made up the remaining 7.5 
percent.
    As is clear from these figures, the vast majority of cases 
handled by legal services programs do address the basic legal 
needs of poor people. These cases often represent matters of 
grave crisis for individual clients and their families, such as 
the loss of a family's home or its only source of income or the 
break-up of the family itself. Left unresolved, such problems 
can cost society far more than the costs of legal services to 
help address them.
    Obtaining child support from absent parents, for example, 
can prevent single parents and their children from being forced 
to turn to welfare to meet their needs. In 1994, LSC attorneys 
handled over 50,000 child support cases.
    Spousal abuse causes not only individual suffering, but 
enormous societal costs as well. In 1994, legal services 
recipients handled 52,000 cases in which individuals sought 
legal protection from violent spouses. Domestic violence was 
also a factor in a significant percent of the 56,326 divorce 
and separation cases that resulted in a court decision.
    Legal services programs have helped individuals from 
falling into dependency by resolving employment disputes, by 
saving small family farms, by preventing the loss of the car 
that the client needed to drive to work or the equipment needed 
to earn a livelihood. They have helped young people remain in 
school and get access to job training programs. They have 
helped veterans suffering from Agent Orange and post-traumatic 
stress disorder. They have protected vulnerable elderly people 
from consumer fraud. They have provided assistance to victims 
of hurricanes in Florida, floods in the Midwest, earthquakes in 
California and the bombings in Oklahoma City. Indeed, as the 
General Counsel for the Federal Emergency Management Agency 
stated before this Committee in May: ``Legal Services 
organizations play a fundamental role in disaster recovery. 
Indeed, they are an important part of the comprehensive 
response and recovery approach that is composed of federal, 
state and local governments and community based 
organizations.''

2. What legal services cannot do

    The LSC Act, appropriations provisions and LSC regulations 
contain a number of explicit prohibitions and restrictions on 
the activities of legal services programs. Recipients cannot 
provide representation in criminal, redistricting, abortion, 
school desegregation, military and selective service cases. 
Only U.S. citizens and legal aliens can be represented. Class 
actions can only be brought after other approaches to settling 
the problem have been exhausted and only with the explicit 
approval of the project director under guidelines issued by the 
local boards of directors. Grassroots lobbying, advocacy 
training and organizing are prohibited. Representation before 
legislative bodies is limited to communicating about a client's 
problem only after all administrative and judicial remedies 
have been exhausted and with approval of the project director 
under guidelines adopted by the program's board. Corporation 
funds cannot be used for self-held lobbying. Recipients cannot 
participate in any way on constitutional amendments, 
referendums and ballot initiatives. Recipient staff cannot 
engage in voter registration or partisan political activity and 
staff attorneys cannot seek partisan elected office.
    There is virtually no evidence, and none has been provided 
in the hearings before this committee, that legal services 
attorneys are violating the current restrictions imposed by law 
and regulation. The so-called ``horror stories'' dredged up by 
critics are riddled with factual inaccuracies. Recipients are 
living within the rules. Monitoring by LSC staff appointed 
during the Reagan Administration never produced any systemic 
evidence that the Act and regulations were being violated.
    Congress can decide what activities to prohibit. When it 
has done so, legal services has stayed within the letter and 
spirit of the law.
    It is one thing to argue for additional prohibitions; it is 
entirely another to claim that legal services should be 
dismantled because recipients engage in activities that 
Congress had not prohibited.

3. Staffing

    Most legal services programs rely primarily on staff 
attorneys and paralegals to provide legal representation to the 
program's clients. In 1994, the last year for which statistics 
are available, legal services programs employed approximately 
4793 full-time (or full-time equivalent) attorneys and 1934 
paralegals. These talented and committed people have developed 
expertise and accumulated institutional and community knowledge 
that cannot be replaced. They work at low salaries under often 
difficult conditions. In 1994, the average entry level salary 
for a legal services attorney was $25,337, in comparison to 
$34,295 for an entry-level attorney in the Department of 
Justice and more than $80,000 in many major law firms.

4. Private attorney involvement

    Since the beginning of the legal services program there has 
been a steady increase in the involvement of private attorneys 
in the delivery of legal services to the poor. Today, at least 
12.5% of a recipient's annual basic field grant must be devoted 
to private attorney involvement activities.
    The Deputy Attorney General described in her testimony the 
critical role of local recipients which ``serve as a hub, and a 
magnet, for marshaling pro bono legal services by private bar 
members.'' These efforts involve private attorneys through 
organized pro bono programs, contracts, reduced-fee panels, 
referral lists, judicare and other locally-determined 
arrangements. More than 130,000 lawyers are registered as 
volunteer attorneys in organized pro bono programs. Last year, 
they handled over 250,000 cases. In addition to coordinating 
and increasing the involvement of private attorneys in the 
delivery of pro bono legal services, legal services recipients 
also provide valuable training to bar members so they can 
handle additional cases under the auspices of the pro bono 
program or on their own. By providing a framework and a 
mechanism through which non-program legal providers can channel 
their efforts, local legal services programs provide fertile 
ground for private bar and local community involvement.

             II. Programs With the Judiciary Committee Bill

              a. elimination of the legal services program

    The Committee bill is designed to both abolish the Legal 
Services Corporation and phase out, over a period of four 
years, the federal commitment to fund legal services for the 
poor. We do not believe that states or the private bar will be 
able to fill this gap.
    The federal program began precisely because certain states 
failed to address the legal needs of their low income resident. 
The American commitment to equal access to justice should not 
be dependent on where an individual lives, anymore than on 
income.
    Most pro bono activity is dependent on the existence of an 
integrated network of legal services providers that are 
available to screen clients for eligibility, develop cases, 
make referrals of clients to appropriate and willing private 
lawyers, provide training and co-counseling assistance on 
complex poverty law issues, as well as keep track of cases and 
generally administer the pro bono programs. Even assuming pro 
bono services could continue in the vacuum created by 
dismantling the current system, it is simply unrealistic to 
presume that enough pro bono private attorney time could be 
made available to make up for the loss of more than 6,000 
attorneys and paralegals who now devote their full-time 
energies to servicing the legal needs of the poor.
    While IOLTA (interest on lawyer's trust accounts) now 
yields approximately $100 million per year to support legal 
services, the program has reached its outer limits of expansion 
and will be constrained by the vagaries of low interest rates, 
high bank fees and unpredictable variations in the business 
cycle. IOLTA is not an elastic resource, and cannot be readily 
increased to make up for a loss of federal funds. In addition, 
many states are eyeing IOLTA as a possible source of funding to 
meet other pressing needs, e.g. to fund the courts or support 
criminal defense representation.
    As we will detail below, this bill will limit the providers 
who can provide civil legal services, eliminate funding for key 
components of the delivery system, impose artificial 
limitations on the clients who can be served and the services 
that can be provided, and inflict far more restrictions and 
prohibitions on activities than are necessary to ensure the 
delivery of high quality, professional representation. The 
funding mechanism proposed will cause huge administrative costs 
without any provision for effective accountability and no 
provision for review and oversight of quality. States will have 
their own funds severely limited if they accept any federal 
funds, thus further impeding the ability to provide a full 
range of civil legal assistance to the poor. The competitive 
bidding system proposed will not work and will only result in 
poor quality representation at higher costs. For these and 
other reasons, this bill will work against ensuring that civil 
legal services continues to be available to our nation's poor.
    Of course, both within the Congress and without, some will 
support this bill as merely a cynical and disingenuous ploy. 
There are people in this nation who believe that poor people 
deserve only the legal representation they can pay for, and 
there are others who simply do not wish poor people to have 
representation at all where that representation is likely to 
impinge on the prerogatives and privileges of special 
interests. In our view, justice is not served when such views 
prevail.

                      b. limitations on providers

    While the Subcommittee Chairman stated at the Committee 
mark-up that existing legal services programs would be eligible 
because nonprofit corporations are considered to be ``persons'' 
under the law, five other provisions in the bill will create 
significant barriers to participation both for legal services 
programs and for other lawyers and law firms.
    First, under Section 2, paragraph (1) of HR 2277, providers 
who bid for legal services contracts from the States are 
subject to minimal requirements. The Committee bill imposes no 
requirement that providers have any knowledge of legal needs of 
poor people or any past experience in delivering the kinds of 
services to be provided under the contract. It does not take 
into account conflicts of interest that may exist between a 
particular bidder and the clients who would be served under the 
contract. Under subparagraph (C), States are not permitted to 
impose additional requirements on providers as a condition of 
bidding or awarding grants. The process could easily become a 
patronage mill for well connected attorneys.
    Under Section 4(e), the Committee bill requires that states 
use a system of cost reimbursable contracts under which they 
have 60 days to make reimbursements. Such a system will limit 
the entities that are likely to bid for the contracts and make 
it almost impossible for a new entity without substantial 
outside funding to submit a bid, since it would have no funds 
to hire, equip and pay staff to deliver the services for which 
reimbursement would be sought. An existing recipient without a 
large fund balance or private resources would have difficulty 
supporting the staff to provide services under a contract until 
the invoices are paid.
    Section 5(a) establishes a one year limitation on contracts 
with no expectations or assurance of refunding. This limitation 
will make it even more unlikely that many will bid on these 
contracts, since they would not provide any reliable source of 
income and support in the long term. If the demand for services 
is higher than expected and funds run out before the end of the 
contract term, the provider has nowhere to turn for money to 
complete pending cases and to meet the legal needs of eligible 
clients for representation in new matters. In order to meet 
their ethical obligations to clients with pending cases, 
providers would have to finish the representation without 
further compensation, or seek to extract fees from clients who 
are, by definition, too poor to pay for legal services. Clients 
with new problems would have to find pro bono help on their own 
or wait until the next year's contract is awarded to get help.
    Section 5(j) includes no meaningful protections for 
providers against wrongful termination of contracts. If the 
state or the Attorney General determines that a legal services 
provider has violated the Act, the state can terminate the 
contract, recover funds determined to have been spent 
improperly and assess attorneys' fees and damages against the 
provider. The bill provides no hearing rights or appeal. There 
is no protection for attorneys or programs that, in the course 
of zealously representing their poor clients, offend the state 
or powerful private interests.
    Finally, Section 5(h) requires providers to consent to 
audits by the Attorney General, GAO and the authority which 
awarded the contracts, presumably the state, tribe or Native 
Alaskan Village. Few private attorneys or law firms are likely 
be willing to take these funds for a one year contract if to do 
so would subject their practices to so many potential 
disruptive and intrusive audits. This is especially true in 
light of the fact that the bill includes no time limit on the 
period beyond the end of the contract term during which a 
former provider would continue to be subject to audit.

      c. limitations on funding for migrants and support services

    Under HR 2277 there is no funding designated for support 
services or migrant representation.

1. Migrant programs

    In 1980, the Corporation completed a study of access 
problems of migrant farmworkers as well as other groups 
required by Section 1007(h) of the LSC Act. That study found 
that (1) migrant workers encounter special barriers which 
severely restrict their ability to access legal assistance 
through the regular basic field programs and (2) that migrants 
face specialized legal problems which are very different from 
those ordinarily faced by basic field clients. As a result, LSC 
continued and expanded the existing system of specialized 
migrant legal services programs because it was the most 
efficient and effective way to overcome these special access 
barriers and address the specialized legal needs of migrants.
    Unless there is funding designed for migrant farmworkers or 
additional changes in the legislation, it will be very 
difficult for states to set up a migrant legal services 
program. In addition to the access barriers and special legal 
problems which make it difficult to deliver legal services to 
migrants through a general delivery system, the funding formula 
used to determine populations to be served does not work for 
migrants. Because migrant labor camps are often extremely 
inaccessible, migrant farmworkers have been historically 
undercounted in the Census. Perhaps more important, they are 
included in Census only in the area where they happen to be 
when the count is taken. Since, by definition, migrant 
farmworkers move from place to place to follow the harvest, the 
area where they were counted is unlikely to be where they are 
when their legal problems arise, so no money would be available 
for their representation in the area where it is needed. While 
states would not be precluded from funding a migrant program to 
deliver services in counties where there are large 
concentrations of migrant farmworkers, it is very unlikely that 
states would fund such a program from their limited state 
allocations particularly where migrants are only in the county 
during brief periods during the year.

2. Support services

    Currently, the Corporation funds 16 national support 
centers and a support effort in each state, as well as training 
programs, a National Clearinghouse and other support 
activities. With reduced funds, there will be changes in 
support. However, particularly if new attorneys with limited 
poverty law expertise are going to be delivering services in 
the future, it is critically important that some funding be 
available for support services. Such front-line attorneys will 
need expert advice and assistance, experienced guidance and 
timely and current information in a cost-effective manner on 
critical poverty law matters that such attorneys confront as 
they provide advice and representation to their clients. No 
provision is made in the bill for such critical services. 
Moreover, because of the restrictions on the use of other state 
funds found in Section 3(f), H.R. 2277 could be interpreted to 
eliminate any discretion for states to use any other funds for 
support activities. Such an outcome would be a terrible 
mistake.
    In order to remedy these problems, the bill should specify 
that support services, such as training, technical assistance 
and clearinghouse activities, could be funded. H.R. 2277 should 
also permit both states and the Attorney General to set aside 
funds for funding of a migrant program. In addition H.R. 2277 
should clarify that states can use their own funds for funding 
of migrant programs and support services.

               d. limitation on clients who can be served

    Section 2, paragraph (3) of the Committee bill permits 
providers to serve only those individual citizens and permanent 
resident aliens whose incomes are equal to or less than the 
poverty line. Under the current LSC Act and regulations, a 
client whose income is equal to or less than 125% of the 
poverty line is eligible for services and exceptions can be 
made under certain circumstances for poor people whose incomes 
are marginally higher. Many of those people whose incomes are 
slightly above the poverty line are members of the working 
poor, whose full-time, minimum wage jobs do not provide 
sufficient income to raise them out of poverty. Thus, under the 
Committee bill, many poor people now served by the legal 
services program would be ineligible for service and would have 
to forego representation or pay for it out of their already 
inadequate wages. Also, under H.R. 2277, both state and federal 
funds are restricted to fund services only to citizens and 
permanent resident aliens, leaving many aliens who are in this 
country legally--such as refugees--and who were previously 
served by legal services programs with either state or federal 
funds without access to legal representation.
    Finally, H.R. 2277 does not permit the provision of legal 
assistance to any group or entity, such as a tenant association 
or an alliance of small businesses in a community, that might 
need legal help to rid a building of drug dealers or to 
encourage investment and job creation in a community. 
Activities such as these can often do more to improve living 
conditions for poor people in a community than individual 
representation on the kinds of matters envisioned under the 
Committee bill.

         e. limitations on services provided and cases brought

    The majority has identified a range of cases brought by 
current recipients of LSC funds that it finds offensive and 
characterizes to be abuses. Not content to prohibit the cases 
that it finds offensive, the majority has taken an extreme 
position in this bill, by limiting legal services providers to 
a narrow range of fifteen permissible case types (``qualified 
causes of action'') found in Section 2, paragraph (4) and ten 
permissible activities (``qualified legal services'') that can 
be undertaken on behalf of poor clients, found in Section 2, 
paragraph (2). Additional causes of action can only be brought 
if they ``arise out of the same transaction as'' one of the 
qualified causes of action. There is no comparable mechanism to 
permit any other activities that may be necessary to address 
the legal needs of poor clients.
    The fact that at mark-up the Committee voted to add several 
additional case types to the list of qualified causes of 
action, merely illustrates what is fundamentally wrong with the 
approach contained in the Committee bill. No list formulated in 
Congressional offices can begin to catalog the myriad of legal 
problems faced by poor people throughout the country in their 
everyday lives. What sense does it make to allow Legal Services 
to probate a will but not to help a poor person prepare a will? 
Adoption, paternity, refinancing a home or family farm are 
among the excluded cases. This list could be expanded ten-fold 
and would still exclude an enormous range of critical problems 
that can only be addressed through legal representation. By 
adopting an approach that identifies what is permissible and 
excludes everything else, HR 2277 substitutes the judgment of 
Congress about what is important for that of the local 
communities where the needs are felt and confronted every day. 
It completely eliminates local control over allocation of 
resources and eliminates any ability to deal with locally 
identified needs and priorities.

               f. prohibitions on the use of grant funds

    In addition to identifying those causes of action that are 
permissible, the Committee bill includes two lists of actions 
and activities that are explicitly prohibited under the Act. 
While the members of the minority may quarrel with the specific 
items included in those lists, we firmly believe that, rather 
than limiting the program to particular services and cases, the 
appropriate approach to deal with perceived abuses of the legal 
services program is to specifically prohibit those activities 
that Congress finds offensive, as is done in Section 2, 
paragraph (4)(B) [class actions and constitutional challenges] 
and Section 3(e), subsections (1) through (9) [redistricting, 
administrative advocacy, legislative advocacy, public policy 
advocacy training, abortion, prisoner representation, 
solicitation and payment of voluntary membership dues to any 
private organization].
    However, we do have serious reservations and objections to 
some of the particular prohibitions as well as concerns about 
the actual language used.

1. Prohibiting constitutional claims

    H.R. 2277 as introduced specifically excluded any challenge 
to the constitutionality of any statute, a provision that 
unconscionably would deny low income Americans the protections 
of the Constitution. Although members of the minority proposed 
an amendment that would have removed this prohibition, the 
substitute language that was adopted by the Committee does not 
fully address the issue and may invite confusion.

2. Class action ban

    We believe the total ban on class actions is unreasonable. 
Unlike HR 1806, the McCollum-Stenholm bill, which permits a 
program to bring class actions under certain narrow conditions, 
HR 2277 bans all class actions under any circumstances. 
However, many legal problems of the poor, just like those of 
the affluent, are better resolved by proceeding as class 
actions. A class action is merely a procedural device to seek a 
legal remedy for many individuals who are in the same 
situation. Instead of doing it in many lawsuits, all of the 
plaintiffs join together to file one lawsuit--which makes 
litigation more cost effective and efficient. It does not 
change what the plaintiffs have to prove to prevail. Under the 
rules of all state and federal courts, the court closely 
supervises and controls the class action process from beginning 
to end.

3. Representation before administrative and legislative bodies

    We also object to the total ban on legislative and 
administrative advocacy found in Section (3)(e), subsections 
(2), (3) and (7). We firmly believe that as legislators and 
administrators revise and craft complex laws, regulations and 
policies that affect poor people, they should have the benefit 
of the knowledge and expertise of legal services providers. 
During the 1980s. Congress succeeded in crafting a set of 
restrictions on legislative and administrative advocacy that 
have worked effectively to ensure that legal services advocates 
speak for their clients and not for themselves when they 
advocate before Congress, state legislatures and administrative 
agencies. At the very least, legal services advocates should be 
permitted to respond to requests of agency officials and 
elected representatives for information about the proposals 
they are considering--advice that proved invaluable to FEMA 
disaster relief efforts, according to testimony received by the 
Committee.

4. Training

    Section 3, paragraph (4), the public policy advocacy 
training provision, is subject to an interpretation that would 
preclude the expenditure of both federal and state funds for 
routine training activities. Unlike HR 1806 and current 
training prohibitions, HR 2277 makes no exception for training 
of attorneys and paralegals. Because the provision bans the 
dissemination of information about particular public policies, 
it could be interpreted to prevent dissemination of information 
about current laws or regulations, which have been defined in 
the past by LSC as ``particular public policies.'' While we 
presume that the Committee did not have this in mind, the 
language needs to be clarified to avoid an unintended result.

             g. role of the attorney general and the states

    Under HR 2277 the administration of this program would be 
parceled out to the Justice Department, more than 50 state and 
territorial governments, as well as countless tribal 
governments and Alaskan Native American Villages. No provision 
is made to ensure that a system is set up to monitor for 
compliance or to ensure the quality and effectiveness of legal 
services delivery. No guaranty is included that federally 
funded legal services would continue to exist in every 
jurisdiction across the country.
    HR 2277 permits a state to refuse its allocation of federal 
funds, either because it does not wish to provide for legal 
services or, more likely, it does not wish to undertake 
administrative responsibility for the program, accept funds 
that are so restricted or restrict its own state legal services 
funds. If a State refuses federal funds, poor people in that 
state will be denied the benefit of federally supported legal 
services. In some states, where other resources are not 
available, this may result in no legal services at all being 
available to poor people.
    HR 2277 would require the creation of hundreds of new 
State, tribal and Native Village bureaucracies to administer 
each jurisdiction's program, and allots up to five percent, 
rather than the current three percent, to run them. The 
Committee bill also gives the Justice Department's Office of 
Justice Programs new administrative and compliance 
responsibilities, but provides no new resources to pay for 
them. The Bill assigns no responsibility and creates no 
mechanism for evaluating the quality or effectiveness of legal 
services delivery and provides for termination of contracts 
only for violations of the Act. The Committee bill thus 
transforms a streamlined and efficient administrative structure 
into a complex array of separate bureaucracies that together 
will eat up far more than the five percent allocated in the 
bill. Inevitably, the increased administrative costs will be 
borne either by the taxpayers of each jurisdiction that is 
involved in the program, including the federal taxpayers who 
support the Justice Department, or by poor people because the 
amount of funds available for direct delivery of legal services 
will be further reduced. And HR 2277 cannot guarantee that the 
services it supports are high quality and effective.
    While the Committee bill gives compliance authority to both 
the States and the Justice Department, it is not at all clear 
how accountability for the use of both federal and state legal 
services funds will be monitored and enforced. For example, can 
the Justice Department look at the compliance of individual 
contracts or just actions of States? Does the Department of 
Justice have authority to second-guess compliance 
determinations made by States? Does the Attorney General really 
have the authority to terminate an individual contract, as the 
bill seems to suggest? Is there any basis on which the Attorney 
General can refuse to provide a funding allocation to a State?
    While it is clear that states have the authority to solicit 
bids, select providers and award contracts, their discretion is 
severely limited by restrictive language in the legislation 
including: (1) the restrictions on what services and cases can 
be funded; (2) the limitation on the selection of providers to 
the criteria stated in the Act; and (3) the prohibition on 
states from taking into consideration additional criteria that 
might be needed to address particular state or local concerns.

        h. limitations on the use of state legal services funds

    Perhaps the greatest and most outrageous restriction on a 
state's discretion under this bill is limitation imposed on the 
use of a state's own legal services funds.
    If a State takes the federal legal services funds provided 
under HR 2277, its own state legal services funds may then only 
be used to fund the same limited ``qualified legal services'' 
on behalf of the same limited pool of ``qualified clients'' 
subject to all of the same prohibitions that are contained in 
the bill and apply to federal funds. Under the language of the 
Committee bill, these limitations could even be read to apply 
to all state legal services funds, even if those funds go to 
providers who do not also receive federal funds provided under 
the bill! Thus, if a State agrees to take its allocation of 
federal funds, it could be effectively tainting all of its own 
legal services funds with the same restrictions that apply to 
federal funds allocated to that State, regardless of who uses 
those funds. If the bill were to be interpreted in this way, 
the only way for a State to avoid the federal restrictions 
would be to refuse to take the federal funds. Clearly, poor 
people in those states that do not take the federal funds will 
suffer a severe diminution in the resources otherwise available 
to assist them with their legal needs. This result is not mere 
speculation. Several governors have already stated that they 
would not take the funds under these constraints.
    The Committee has overreached with this provision far 
beyond what can be justified by reference to any need to ensure 
that federal funds not be used to subsidize improper activity. 
Clearly Congress has the right to restrict the use of federal 
funds by any state or contractor. But no other block grant 
proposal prohibits states from using their own funds in any 
manner they wish. Congress should not restrain a state from 
funding a program to provide legal services when that program 
receives no federal support. If the provision is read in this 
way, it flies in the face of current efforts to give the states 
more room for innovation and creativity in meeting local needs. 
The purpose appears to be a transparent effort to simply 
prevent poor people from exercising their rights under the 
Constitution and the laws of this country, and the effect will 
be that far fewer resources will be available to protect and 
enforce those same legal rights.

                         i. competitive bidding

    Under the Committee bill, states would use a system of 
competitive bidding to award one year contracts. The system 
encourages low cost over other factors related to quality and 
effectiveness,\1\ and permits the use of political patronage in 
awarding contracts. The bill does not permit the consideration 
of actual or potential conflicts of interest in deciding who is 
to be awarded contracts to provide service. Because the bill 
does not require providers to have any experience with or 
knowledge of poverty law or legal services to the poor, the 
system permits funding of relatively inexperienced individual 
attorneys, law firms or corporate entities. The short terms 
discourage the development of expertise in poverty law issues.
    \1\ Without significant changes, HR 2277 will encourage the very 
problems which have arisen in bidding for contract defense services. 
Testimony provided by Robert L. Spangenberg, a nationally recognized 
expert on indigent criminal defense services, in Hearings before the 
Subcommittee on Administrative Law and Governmental Relations (May 9 
and 3, 1990, pp. 89-118), pointed out that in contract defense bidding 
initial low-ball bids were the norm. Over time, costs rose 
substantially and the quality of representation significantly 
deteriorated. In fact, under the contract system, the costs rose to a 
level that exceeded both that of the public defender and assigned 
counsel. In addition, the most qualified and experienced practitioners 
dropped out of the system and were ultimately replaced by recent law 
graduates and marginally competent criminal attorneys. Instability 
among providers increased, resulting in the dismantlement of effective 
public defender programs (which later had to be reinstated because they 
proved to be more effective and efficient providers than the 
contractors that had replaced them.) Funding sources experienced 
substantial administrative costs necessary to process the bids and to 
negotiate the contracts. Finally, in a number of states, the courts 
held the contract defense bidding system unconstitutional. See, e.g., 
State of Arizona v. Smith, 140 Ariz. 355 (1984).
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    Because the Committee bill requires a new competition each 
year, the system will be in constant state of chaos, 
guaranteeing that poor people will be ill-served and that 
precious resources will be wasted as states are forced to run 
constant solicitation, bidding and contract award processes. 
And after the first six months, the bill makes no provision for 
transition or completion of pending cases when a new provider 
is awarded a contract at the conclusion of a contract term.

        j. waiver of attorney-client and work product privilege

    Under the Committee bill, clients who receive more than 
advice services by mail or telephone, would be required to 
execute a waiver of the attorney-client and attorney work 
produce privilege as a condition to receiving such services. 
The waiver would be limited to the extent required to determine 
quantity, quality of service and compliance with Act, and the 
waiver could not be used by third parties. However, the waiver 
would permit a state agency or the Justice Department to review 
client files, even if the United States or the state were the 
defendant in a case. The limitations contained in the bill 
provide no real protection against misuse.
    The Committee bill presumes that a client can waive the 
attorney work-product privilege. However, that privilege 
belongs to the attorney, and is not the client's to waive. It 
was created to ensure that justice was served by encouraging 
lawyers to engage in full and thorough preparation of client's 
cases. It protects from discovery a lawyer's thoughts, 
theories, impressions and strategies, as well as the specific 
documents, letters, interview notes, memoranda and other 
tangible items that are assembled in the course of 
representation. Obviously, it does not protect documents that 
have been filed in court or are otherwise a matter of public 
record.
    The minority believes that in most instances compliance 
with the requirements of a contract and the Act can be ensured 
without access to confidential documents and information that 
either the client or the lawyer would have protected.

                   k. prohibition on attorneys' fees

    Under HR 2277 legal services providers would be prohibited 
from claiming or collecting attorneys' fees from parties in 
litigation with any of the providers' clients. Under the 
language of the bill, this prohibition could be read to apply 
not just to clients whose legal services are covered by the 
contract, but to all of the provider's private clients as well. 
Such a restriction would eliminate an important source of 
additional funds to support the provision of legal services to 
the poor. In addition, it would undermine one of the primary 
purposes of the fee-shifting statutes, i.e., to punish 
wrongdoers who have violated the rights of persons protected 
under the statutes. Assuming that the prohibition does apply to 
all of an attorney's practice, it would also be a significant 
disincentives to private attorneys who might otherwise be 
inclined to seek contracts to handle cases on behalf of the 
poor.
    In closing, we urge our colleagues to reject HR 2277. As 
Attorney General Janet Reno and Counsel to the President Abner 
Mikva wrote to the Committee:

          The Legal Aid Act of 1995 makes a mockery of the 
        essential American principle ``Equal Justice Under 
        Law.'' If enacted, the bill will mean for millions the 
        loss of effective, community based legal services and 
        the certainty of continuing and aggravated problems 
        that will cost us dearly in other ways down the line.

                                   John Conyers, Jr.
                                   Pat Schroeder.
                                   Barney Frank.
                                   Charles E. Schumer.
                                   Howard L. Berman.
                                   Rick Boucher.
                                   John Bryant.
                                   Jack Reed.
                                   Jerrold Nadler.
                                   Robert C. Scott.
                                   Melvin L. Watt.
                                   Xavier Becerra.
                                   Jose E. Serrano.
                                   Zoe Lofgren.
                                   Sheila Jackson-Lee.