[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45765-45767]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21669]
Federal Register / Vol. 61, No. 169 / Thursday, August 29, 1996 /
Rules and Regulations
[[Page 45765]]
=======================================================================
-----------------------------------------------------------------------
LEGAL SERVICES CORPORATION
45 CFR Part 1609
Fee-Generating Cases
AGENCY: Legal Services Corporation.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This proposed regulation would completely revise the Legal
Services Corporation's (``Corporation'' or ``LSC'') regulation relating
to fee-generating cases. A major revision is the removal of the current
regulation's provisions on attorneys' fees. Attorneys' fees are
addressed in part 1642 of the Corporation's regulations, which is also
being published as an interim rule in this publication of the Federal
Register. This proposed rule also makes substantive and clarifying
revisions to several sections. In addition, some sections have been
merged and unnecessary provisions have been eliminated.
DATES: Comments should be received on or before October 28, 1996.
ADDRESSES: Comments should be submitted to the Office of the General
Counsel, Legal Services Corporation, 750 First St. NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Victor M. Fortuno, General Counsel,
(202) 336-8910.
SUPPLEMENTARY INFORMATION: This rule has been under review by the
Operations and Regulations Committee (``Committee'') of the LSC Board
of Directors (``Board'') since September 1994. The Committee held
public hearings on September 17 and October 28, 1994, and February 17,
1995, on proposed revisions. When it became apparent that Congress was
considering substantially revised legislation related to this rule, the
Committee suspended consideration until the new legislation became law.
Public Law 104-134, 110 Stat. 1321 (1996), the Corporation's FY 1996
appropriations act became law on April 26, 1996. The new legislation
did not contain any restrictions on taking of fee-generating cases, but
it did prohibit recipients from claiming, or collecting and retaining,
any attorneys' fees pursuant to any Federal or State law permitting or
requiring the awarding of such fees. See Sec. 504(a)(13) of Pub. L.
104-134. On May 19, 1996, the Committee directed LSC staff to prepare
an interim rule to implement a new legislative restriction on the
taking of attorneys' fees by LSC recipients, an issue implicated in the
current version of this rule.
LSC staff recommended and the Committee decided to promulgate a
separate rule, 45 CFR Part 1642, to address the attorneys' fees issue
which is also published as an interim rule in this volume of the
Federal Register. The Committee met on July 10 and 19, 1996, to
consider a draft of a revised Part 1609 prepared by LSC staff and,
after making some changes, made a recommendation to the Board and the
Board voted to publish this proposed rule in the Federal Register for
public notice and comment.
This proposed rule would revise the current rule entirely. It
deletes the attorneys' fees provisions in order to address, in a
separate part, provisions responsive to the Corporation's FY 1996
appropriations. The other changes made to the rule were under
consideration by the Committee last year. Recipients should note that,
upon publication of an interim rule on attorneys' fees, the attorneys'
fees provisions in the current part 1609 will no longer have the force
and effect of law, regardless of whether any revisions to this proposed
rule are adopted and published as final by the LSC Board.
A section-by-section analysis of this proposed rule is provided
below.
Section 1609.1 Purpose
This section is revised to state more clearly the purposes of this
regulation, which are: (1) To ensure that recipients do not use scarce
resources for cases where private attorneys are available to provide
effective representation, and (2) to assist eligible clients to obtain
appropriate and effective legal assistance.
Section 1609.2 Definition
This section defines ``fee-generating case.'' A technical numerical
change is made to clarify that the definition includes fees from three
sources: an award (1) to a client, (2) from public funds, or (3) from
the opposing party. The definition is also revised to explain what is
not a ``fee-generating case.'' The revision makes it clear that court
appointments are not to be considered fee-generating cases, even where
fees are paid, since such cases are a professional obligation of all
attorneys. The definition also does not include situations where
recipients undertake representation under a contract with a government
agency or other entity. Acceptance of a payment under a contract
arrangement in such a situation does not constitute a fee-generating
case, because a contract payment does not constitute fees that come
from an award to a client or attorneys' fees that come from public
funds or the losing party in a case.
Section 1609.3 General Requirements
This section defines the limits within which recipients may
undertake fee-generating cases. This new section reorganizes and
replaces Secs. 1609.3 and 1609.4 of the current rule in order to make
them easier to understand. It is also retitled. The provision requiring
recipients to establish procedures for the referral of fee-generating
cases is deleted, and a new section on policies and procedures is added
to the rule.
Paragraph (a) provides that, except as provided in paragraph (b) of
this section, a recipient may undertake a fee-generating case only
after the case has been rejected by the local lawyer referral service
or by two private attorneys, or when neither the referral service nor
two attorneys will take the case without a consultation fee. The
current rule states that ``neither the referral service nor any
attorney will consider the case without payment of a consultation
fee.'' [emphasis added] The current rule sets up an impossible burden
for a recipient to meet, and the Committee has decided that the
proposed new standard is reasonable and consistent with the purposes of
this rule.
Paragraph (b) clarifies those circumstances under which a recipient
may undertake a fee-generating case without first attempting to refer
the case to the private bar. The first situation is delineated in
Sec. 1609.3(b)(1) and is based on Sec. 1609.4(d) of the current
regulation. This provision is revised to include any cases which, like
Social Security cases, meet the terms of the underlying statutory
provision. A 1977 amendment to Sec. 1007(b)(1) of the Legal Services
Corporation Act, 42 U.S.C. 2996, prohibits the Corporation from issuing
guidelines on fee-generating cases that would preclude recipients from
taking ``cases in which a client seeks only statutory benefits and
appropriate private representation is not available.'' 42 U.S.C.
2996f(b)(1). The legislative history of this amendment clearly
indicates that Congress intended the provision to apply to the Social
Security Act (``SSA'') and Supplemental Security Income (``SSI'') cases
that are covered by both the current and the proposed rules, and to
``such other cases as the Corporation deems appropriate because the
only recovery sought by the eligible client is the amount of
subsistence benefits to which he or she is statutorily entitled.'' S.
Rep. No. 172, 95th Cong., 1st Sess. 15 (1977). The Committee has
decided to add language to the rule that would include not only Social
Security cases but also any other similar statutory benefits cases. The
Committee is aware that, since the 1977
[[Page 45766]]
amendments to the LSC Act, the rules governing fees in veterans'
benefits appeals, for example, have been changed and seeks comments on
whether those cases or other similar cases should be treated in the
same manner as Social Security cases.
Another circumstance under which a recipient may undertake a fee-
generating case without first attempting to refer the case to the
private bar is set out in Sec. 1609.3(b)(2). This provision is based,
in part, on a provision that appeared in the original LSC regulation
adopted in 1976 that allowed a recipient to determine that the case was
of the type that private attorneys did not accept or did not accept
without a fee. LSC removed that provision as part of its 1984 revision,
in part because of concern that it gave too much discretion to project
directors. This proposal suggests a middle ground between the two
positions. It restores to the discretion of the recipient the decision
about what kinds of cases would qualify, but requires that the
recipient consult with appropriate representatives of the private bar
in making that determination. The recipient has the authority to
determine the appropriate representatives, which could include
representatives of the organized bar, the local referral service or
private attorneys who handle plaintiffs' tort cases, depending on the
make-up of the local bar and the kind of cases being considered. The
provision does not specify whether the governing body or the director
of the recipient is authorized to do the consultation and make the
determination, leaving that judgment to the local decision-making
process.
Numerous revisions are proposed to be made in the language and
organization of Sec. 1609.3(b)(3), which is based on the remaining
provisions of Sec. 1609.4 of the current regulation. The current
regulation uses the term ``free referral'' instead of ``referral to the
private bar.'' The Committee decided that the term ``free referral''
was too vague and has substituted ``referral of the case to the private
bar'' which is more descriptive. This provision makes it clear that the
director of the recipient (or the director's designee) has the express
authority, subject to policies adopted by the recipient, to make the
determinations listed.
Section 1609.3(b)(3)(i) is a new proposal. It recognizes that, in
certain cases, past experience in trying to refer out similar cases has
shown that referral efforts would be futile. The Corporation does not
wish scarce resources to be expended for efforts that the recipient
knows will prove useless. This provision, which is intended to address
the specific circumstances in a particular case, differs from
Sec. 1609.3(b)(2), which deals with categories of case types.
Section 1609.3(b)(3)(ii) is essentially the same as the comparable
provision in the current regulation. It allows a recipient to take a
case if emergency circumstances require immediate action before
referral procedures can be undertaken.
Section 1609.3(b)(3)(iii) is a revised version of the current
1609.4(b). It is included under the category of cases where the
recipient's director or designee needs to make a case-by-case
determination of the appropriate treatment of the case. The Committee
also added the language on statutory fees to make it clear that if
adequate statutory fees were available to attract private counsel, the
recipient should try to refer the case out to the private bar,
regardless of whether recovery of damages is a principal object of the
client's case. This is not clear under the current regulation. Thus,
for such cases, the Committee wished to clarify that if substantial
fees might be available and the cases did not fall under any of the
other categories authorizing representation, then the program was
obligated to attempt referral in accordance with Sec. 1609.3(a).
The language in the current rule relating to ancillary relief and
counterclaims is proposed to be deleted because it is confusing and
unnecessarily complicated, and the Committee wanted the commentary to
include examples of the kinds of circumstances under which the
recipient's director could determine that the recovery of damages was
not the principal object of the case. For example, if the principal
relief sought is equitable or a declaratory judgement, inclusion of a
prayer for damages would not turn the matter into a fee-generating
case. Similarly, if the recipient is representing the defendant in a
case, the inclusion of a counterclaim for damages to protect the
defendant's rights would not make the matter a fee-generating case.
Finally, because this proposed rule has deleted provisions on
attorneys' fees, paragraph (c) directs recipients to refer to the
Corporation's new rule on attorneys' fees, 45 CFR Part 1642.
Section 1609.4 Recipient Policies, Procedures and Recordkeeping
This new section requires that recipients establish written
policies, procedures and recordkeeping requirements that will guide
recipient staff to ensure compliance with this rule.
Miscellaneous Changes
Sections 1609.5 through 1609.7 of the current regulation are
proposed to be deleted and are superseded by a new interim regulation,
45 CFR Part 1642, also published in this publication of the Federal
Register. Accordingly, Secs. 1609.5 through 1609.7 no longer have the
force of law.
List of Subjects in 45 CFR Part 1609
For reasons set forth in the preamble, 45 CFR Part 1609 is proposed
to be revised to read as follows:
PART 1609--FEE-GENERATING CASES
Sec.
1609.1 Purpose.
1609.2 Definition.
1609.3 General requirements.
1609.4 Recipient policies, procedures and recordkeeping.
Authority: 42 U.S.C. 2996f(b)(1) and 2996e(c)(6).
Sec. 1609.1 Purpose.
This part is designed (1) to ensure that recipients do not use
scarce legal services resources when private attorneys are available to
provide effective representation and (2) to assist eligible clients to
obtain appropriate and effective legal assistance.
Sec. 1609.2 Definition.
(a) As used in this part, ``fee-generating case'' means any case or
matter which, if undertaken on behalf of an eligible client by an
attorney in private practice, reasonably may be expected to result in a
fee for legal services from an award (1) to a client, (2) from public
funds or (3) from the opposing party.
(b) ``Fee-generating case'' does not include a case where (1) a
court appoints a recipient or an employee of a recipient to provide
representation in a case pursuant to a statute or a court rule or
practice equally applicable to all attorneys in the jurisdiction, or
(2) a recipient undertakes representation under a contract with a
government agency or other entity.
Sec. 1609.3 General Requirements.
(a) Except as provided in paragraph (b) of this section, a
recipient may provide legal assistance in a fee-generating case only
if:
(1) The case has been rejected by the local lawyer referral
service, or by two private attorneys; or
(2) Neither the referral service nor two private attorneys will
consider the case without payment of a consultation fee.
[[Page 45767]]
(b) A recipient may provide legal assistance in a fee-generating
case without first attempting to refer the case pursuant to paragraph
(a) of this section only when:
(1) An eligible client is seeking only statutory benefits,
including but not limited to, subsistence benefits under Subchapter II
of the Social Security Act, 42 U.S.C. 401 et seq., as amended, Federal
Old Age, Survivors, and Disability Insurance Benefits; or Subchapter
XVI of the Social Security Act, 42 U.S.C. 1381 et seq., as amended,
Supplemental Security Income for Aged, Blind, and Disabled;
(2) The recipient, after consultation with appropriate
representatives of the private bar, has determined that the type of
case is one that private attorneys in the area served by the recipient
ordinarily do not accept, or do not accept without prepayment of a fee;
or
(3) The director of the recipient, or the director's designee, has
determined that referral of the case to the private bar is not possible
because:
(i) Documented attempts to refer similar cases in the past
generally have been futile;
(ii) Emergency circumstances compel immediate action before
referral can be made, but the client is advised that, if appropriate
and consistent with professional responsibility, referral will be
attempted at a later time; or
(iii) Recovery of damages is not the principal object of the
recipient's client's case and substantial statutory attorneys' fees are
not likely to be available.
(c) Recipients should refer to 45 CFR Part 1642 for restrictions on
claiming, or collecting and retaining attorneys' fees.
Sec. 1609.4 Recipient policies, procedures and recordkeeping.
Each recipient shall adopt written policies and procedures to guide
its staff in complying with this part and shall maintain records
sufficient to document the recipient's compliance with this part.
Dated: August 20, 1996.
Suzanne B. Glasow,
Senior Counsel for Operations & Regulations.
[FR Doc. 96-21669 Filed 8-28-96; 8:45 am]
BILLING CODE 7050-01-P