[Federal Register Volume 61, Number 232 (Monday, December 2, 1996)]
[Rules and Regulations]
[Pages 63754-63755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30620]


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LEGAL SERVICES CORPORATION
45 CFR Part 1617


Class Actions

AGENCY: Legal Services Corporation.

ACTION: Final rule.

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SUMMARY: This final rule revises the Legal Services Corporation's 
(``Corporation'' or ``LSC'') interim regulation concerning class 
actions. The revisions are intended to implement a restriction 
contained in the Corporation's Fiscal Year (``FY'') 1996 appropriations 
act which is currently incorporated by reference in the Corporation's 
FY 1997 appropriations act. The restriction prohibits the involvement 
of LSC recipients in class actions.

DATES: This final rule is effective on January 1, 1997.

FOR FURTHER INFORMATION CONTACT: Victor M. Fortuno, General Counsel, 
(202) 336-8910.

SUPPLEMENTARY INFORMATION: On May 19, 1996, the Operations and 
Regulations Committee (``Committee'') of the LSC Board of Directors' 
(``Board'') requested LSC staff to prepare an interim rule to implement 
Sec. 504(a)(7), a restriction in the Corporation's FY 1996 
appropriations act, Pub. L. 104-134, 110 Stat. 1321 (1996), which 
prohibited involvement of LSC recipients in class actions. The 
Committee held public hearings on staff proposals on July 8 and 19, and 
the Board adopted an interim rule on July 20 for publication in the 
Federal Register. Although the interim rule was effective upon 
publication, see 61 FR 41963 (Aug. 13, 1996), the Corporation also 
solicited comments on the rule for review and consideration by the 
Committee and Board.
    The Corporation received 7 comments on the interim rule. The 
Committee held public hearings on the rule on September 29, 1996, and 
made several recommendations for revisions to the Board. The Board 
adopted this final rule on September 30, 1996.
    The Corporation's FY 1997 appropriations act became effective on 
October 1, 1996, see Pub. L. 104-208, 110 Stat. 3009. It incorporated 
by reference the Sec. 504 condition on LSC grants included in the FY 
1996 appropriations act implemented by this rule. Accordingly, the 
preamble and text of this rule continue to refer to the appropriate 
section number of the FY 1996 appropriations act.
    The interim rule was intended to implement a clear prohibition in 
the Corporation's FY 1996 appropriations act on any participation in 
class actions by LSC recipients. Other than providing a transition 
period for programs to withdraw from pending cases, the appropriations 
act provided no exceptions and allowed for no Corporation waivers to 
the prohibition. The legislative history of this provision indicates an 
intent that legal services programs should focus their resources on 
representation of individual poor clients and not be involved in any 
class actions. Accordingly, the interim rule contained a strict 
prohibition on participation in class actions with no exceptions or 
waivers. This final rule continues the interim rule's strict 
prohibition but better clarifies those activities that constitute 
participation in class actions.
    A section-by-section discussion of this final rule is provided 
below.

Section 1617.1  Purpose

    The purpose of this rule is to prohibit involvement by LSC 
recipients in class actions.

Section 1617.2  Definitions

    The definition of ``class action'' in the interim rule deferred to 
widely accepted Federal and local court rules and statutory 
definitions. Thus, a class action for the purposes of this part was 
defined as a class action pursuant to Rule 23 of the Federal Rules of 
Civil Procedure or the comparable State statute or rule of civil 
procedure governing the action in the court where it is filed. No 
comments challenged the definition, and no changes have been made to 
the definition in this final rule.
    The definition of ``initiating or participating in any class 
action'' in the interim rule was intended to clarify that any 
involvement in a class action is prohibited prior to an order granting 
relief. Public comments on part 1617 generally asked for more clarity 
as to the scope of the definition. In general, the Board decided that 
it should state in the rule that all participation, whether before or 
after entry of an order, is prohibited; and the final rule reflects 
that change. In addition, the Board decided to address some of the 
specific issues addressed by the comments.
    One comment urged the deletion of ``non-adversarial'' before 
``monitoring,'' stating that any action, even an adversarial action, 
should be allowed once an order granting relief has been issued. The 
Board did not take this approach. Participation in adversarial actions, 
even after entry of an order, constitutes active participation in a 
class action, and such involvement is not permitted under the law. The 
use of the term ``non-adversarial'' was intentional. The Corporation 
meant to prohibit any adversarial action after relief is granted, and 
the term is retained in this final rule. Furthermore, the term 
``monitoring'' is replaced with ``activities'' because its use seemed 
to imply a more active role for recipients than was intended.
    Comments further indicated that the rule should be more explicit 
about the types of activities the Corporation considers to be 
adversarial and non-adversarial. Accordingly, this final rule adds 
language to clarify what would be considered to be non-adversarial. 
Non-adversarial activities would include efforts to remain informed 
about the terms of an order granting relief as well as efforts to 
explain, clarify, educate or give advice about an order granting 
relief.
    One comment questioned the use of the term ``legal assistance'' in 
the definition of ``initiating or participating in any class action.'' 
Because the term as defined in 45 CFR part 1600 has a different focus 
than is intended in this definition, the Board changed ``legal 
assistance'' to ``representation.''
    Other comments suggested deleting the language in the definition 
that prohibits program attorneys from assisting their clients to 
``withdraw from'' or ``opt out of'' a class action. The comments stated 
that the inclusion of the language in the definition goes beyond the 
intent of the statutory restriction and has the opposite effect of 
``participating'' in a class action. Arguing that representation to 
withdraw from or opt out of a class action may be essential to allow 
individual representation, the comments urged the Corporation to change 
the rule to allow such representation.
    The Board agreed that efforts to withdraw from a class action are 
consistent with the Congressional intent that LSC recipients provide 
representation to individual clients and should not be viewed as 
efforts to participate or to be included in a class action. The Board 
revised paragraph (b) of the definition of ``initiating or 
participating in any class action'' to clarify that the definition does 
not include the representation of an individual client seeking to 
withdraw from or opt out of a class by deleting reference to 
withdrawing or opting out from the definition. This change only 
authorizes actions by a recipient

[[Page 63755]]

necessary to ensure that its client is not included in the class or 
that any class order would not apply to the recipient's client. Any 
other activity in the case, however, is not permitted.
    In summary, the final rule clarifies the definition of ``initiating 
or participating in any class action'' as extending to all types of 
involvement at all stages of a class action. Recipients may not 
initiate a class action or participate in one initiated by others, 
either at the trial or appellate level, nor may they continue 
involvement in a case that is later certified or otherwise determined 
by the court to be a class action. However, in response to comments on 
a situation where the recipient's client does not file for or move for 
certification of a class action, the Board requested that the following 
example be included in this commentary regarding the definition of 
``initiating or participating in a class action'': In a case where the 
recipient files or otherwise initiates action to have the case 
certified as a class action, participation in the case is prohibited 
from the point that the recipient takes such actions. On the other 
hand, if the recipient is representing a client in a pending action 
that was not filed as a class action, and another party moves to have 
the case certified as a class action, the recipient will not be deemed 
to be participating in a class action until the court certifies it as 
such. Finally, recipients may not act as amicus curiae or co-counsel in 
a class action or intervene in a class action on behalf of individual 
clients who seek to intervene in, modify, or challenge the adequacy of 
the representation of a class. Finally, recipients may not represent 
defendants in a class action.
    Certain situations are not within the definition and are thus not 
prohibited by this rule. For example, recipients may advise clients 
about the pendency of a class action or its effect on the client and 
what the client would need to do to benefit from the case. Recipients 
may represent an eligible client in withdrawing from or opting out of a 
class action. Furthermore, the definition of a class action would not 
include a mandamus action or injunctive or declaratory relief actions, 
unless such actions are filed or certified as class actions.
    Recipients may also represent an individual client seeking the 
benefit of the order, provided that any such involvement is only on 
behalf of an individual client and does not involve representation of 
an entire class and may represent an individual client seeking to 
withdraw from or opt out of a class.

Section 1617.3  Prohibition

    This section prohibits LSC recipients from initiating or 
participating in any class action.

Section 1617.4  Recipient Policies and Procedures

    This section requires recipients to adopt written policies and 
procedures to guide the recipient's staff in ensuring compliance with 
this rule.

List of Subjects in 45 CFR Part 1617

    Grant programs--law, Legal services.

    For reasons set out in the preamble, LSC revises 45 CFR part 1617 
to read as follows:

PART 1617--CLASS ACTIONS

Sec.
1617.1  Purpose.
1617.2  Definitions.
1617.3  Prohibition.
1617.4  Recipient policies and procedures.

    Authority: 29 U.S.C. 2996e(d)(5); 110 Stat. 3009 (1996); 110 
Stat. 1321 (1996).


Sec. 1617.1  Purpose.

    This rule is intended to ensure that LSC recipients do not initiate 
or participate in class actions.


Sec. 1617.2  Definitions.

    (a) Class action means a lawsuit filed as, or otherwise declared by 
the court having jurisdiction over the case to be, a class action 
pursuant to Rule 23 of the Federal Rules of Civil Procedure or the 
comparable State statute or rule of civil procedure applicable in the 
court in which the action is filed.
    (b)(1) Initiating or participating in any class action means any 
involvement at any stage of a class action prior to or after an order 
granting relief. ``Involvement'' includes acting as amicus curiae, co-
counsel or otherwise providing representation relating to a class 
action.
    (2) Initiating or participating in any class action does not 
include representation of an individual client seeking to withdraw from 
or opt out of a class or obtain the benefit of relief ordered by the 
court, or non-adversarial activities, including efforts to remain 
informed about, or to explain, clarify, educate or advise others about 
the terms of an order granting relief.


Sec. 1617.3  Prohibition.

    Recipients are prohibited from initiating or participating in any 
class action.


Sec. 1617.4  Recipient policies and procedures.

    Each recipient shall adopt written policies and procedures to guide 
its staff in complying with this part.

    Dated: November 26, 1996.
Victor M. Fortuno,
General Counsel.
[FR Doc. 96-30620 Filed 11-29-96; 8:45 am]
BILLING CODE 7050-01-P