[Federal Register Volume 68, Number 231 (Tuesday, December 2, 2003)]
[Rules and Regulations]
[Pages 67372-67378]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-29874]


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LEGAL SERVICES CORPORATION

45 CFR Part 1604


Outside Practice of Law

AGENCY: Legal Services Corporation.

ACTION: Final rule.

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SUMMARY: The Legal Services Corporation amends its regulation relating 
to the outside practice of law by full-time legal services attorneys. 
The rule is substantively restructured and revised to clarify the scope 
of the restrictions on outside practice. The final rule also amends 
several definitions and allows for the separate treatment of court 
appointments.

DATES: This final rule is effective February 2, 2004.

FOR FURTHER INFORMATION CONTACT: Mattie C. Condray, Senior Assistant 
General Counsel, Office of Legal Affairs, Legal Services Corporation, 
3333 K Street, NW., 3rd Floor, Washington, DC 20007-3522; (202) 295-
1624 (phone); (202) 337-6519 (fax); [email protected] (email).

SUPPLEMENTARY INFORMATION: On January 17, 1995, the Legal Services 
Corporation (LSC or the Corporation) published for public comment 
proposed revisions to 45 CFR part 1604, LSC's regulation on the outside 
practice of law. 60 FR 3367. Although LSC received public comment on 
the proposed revisions, no final action was ever taken on the rule. 
Many of the issues outstanding in 1995 remain important today and LSC 
has been interested in adopting final revisions to Part 1604 for some 
time. Because it had been more than seven years since the publication 
of the 1995 Notice of Proposed Rulemaking (NPRM), LSC reissued the NPRM 
for comment rather than issuing a final rule. The NPRM, published on 
September 11, 2002 (67 FR 57550), specifically invited comment on the 
impact of the restriction on claiming and accepting attorneys' fees, 
other restrictions stemming from the 1996 appropriations act, program 
integrity requirements, and timekeeping requirements on the proposals 
contained therein and other issues related to the regulation of the 
outside practice of law by LSC recipient attorneys which may have 
developed since the publication of the original NPRM in 1995.
    LSC received five comments on the NPRM. After reviewing the 
comments, LSC drafted a Final Rule for the consideration of the Board 
of Directors and its Operations and Regulations Committee. Upon the 
recommendation of the Operations and Regulations

[[Page 67373]]

Committee, the Board of Directors adopted this Final Rule at its 
meeting of November 22, 2003.

Section-by-Section Analysis

Section 1604.1 Purpose

    The NPRM, as a whole, reflected a proposed change in approach from 
emphasizing the limitations on recipients' full-time attorneys 
regarding the outside practice of law to focusing on the situations in 
which outside practice may be approved and on recipients' rights and 
responsibilities in regulating the outside practice of law by their 
full-time attorneys. LSC proposed to revise the language of this 
section to reflect this proposed change in approach. Specifically, LSC 
proposed to amend the existing section 1604.1 to authorize a recipient 
to adopt written policies to permit its program attorneys to engage in 
pro bono legal assistance and to comply with their obligations as 
members of the Bar and officers of the court where those demands do not 
interfere with the attorneys' overriding responsibility to serve the 
program's clients. LSC further proposed to clarify that this part 
should not be construed to permit recipients to unduly restrict legal 
services attorneys from engaging in those activities. The use of the 
word ``unduly'' was intended to acknowledge that there may be some 
restrictions imposed by the LSC Act, LSC appropriations or other 
legislation and/or LSC regulations, or by recipients that are necessary 
to comply with applicable law or accomplish the overriding goals of the 
LSC Act.
    Two of the comments LSC received supported the proposed changes as 
written. One commenter from the field appeared not to oppose the 
specific language proposed, but stated a firm belief that outside 
practice should generally not be permitted. The Office of Inspector 
General opposed the proposed changes, believing that the focus of the 
rule should remain on the statutory prohibition on the outside practice 
of law. In particular, the OIG argued that the last sentence of the 
proposed section implied that LSC's policy favors permitting the 
outside practice of law and should, therefore, be deleted as 
inconsistent with the Act.
    Weighing the comments, LSC believes that the general change in 
approach reflected in the proposed language remains appropriate, but 
agrees with the OIG that the regulation should not imply that LSC 
favors the outside practice of law. While one comment from the field 
noted that encouraging their employees to engage in pro bono activities 
was helpful in attracting pro bono practice among the private bar, 
another program was of the opinion that their program attorneys and 
program resources were already strained, and that encouraging program 
attorneys to engage in additional legal work outside the office was not 
in the program's or clients' best interest. LSC respects both of these 
approaches and believes that the regulation should set forth the 
parameters in which the outside practice of law is permissible under 
the LSC Act and leave it to the discretion of programs to determine how 
the outside practice of law by their full-time attorneys comports with 
their needs regarding providing service to their clients.
    Accordingly, LSC is revising the purpose section to state that it 
is intended to provide guidance to recipients in adopting written 
policies relating to the outside practice of law by recipients' full-
time attorneys and to make clear that recipients are authorized, but 
not required, to permit attorneys, to the extent that such activities 
do not hinder fulfillment of their overriding responsibility to serve 
those eligible for assistance under the Act, to engage in pro bono 
legal assistance and comply with the reasonable demands made upon them 
as members of the Bar and as officers of the Court.

Section 1604.2 Definitions

Section 1604.2(a) ``Full-time Attorney''
    LSC proposed to delete the definition of ``attorney,'' because it 
is inconsistent with the definition of ``attorney'' in Part 1600 of the 
Corporation's regulations, Definitions. Instead, LSC proposed to 
substitute a definition which incorporates the definition of 
``attorney'' in Part 1600, such that ``full-time attorney'' would be 
defined as an attorney who is a full-time employee of a recipient.
    LSC received no objections to this definition, although the OIG 
stated that the preamble should make clear that LSC intends that the 
term ``full-time'' should be defined by the program for the purpose of 
the outside practice of law as the program defines ``full-time'' 
generally; that is as the term is used for other purposes, such as 
employee benefits. LSC agrees. LSC believes that the statement in the 
NPRM ``LSC did not proposed a separate definition for the term ``full-
time,'' preferring to leave the decision as to what constitutes ``full-
time'' to the recipient's own personnel and outside practice policies 
and to any appropriate statutory definitions found elsewhere'' was 
intended to convey that meaning. However, to avoid any confusion, LSC 
believes it is appropriate to clarify that LSC does indeed intend that 
whatever definition of ``full-time'' the program applies for the 
purpose of its outside practice of law policies be the same as it uses 
for other purposes, such as employee benefits. LSC, accordingly, adopts 
the definition as proposed.
Section 1604.2(b) ``Outside Practice of Law''
    LSC proposed to amend this definition to explain what outside 
practice is, rather than what it is not. The regulation is intended, 
and currently applies only, to the outside practice of law by 
recipients' employees and not to other outside activities by 
recipients' employees that do not constitute the outside practice of 
law. LSC further proposed to substitute the words ``receiving that'' 
for ``entitled to receive'' to make clear that an attorney could 
represent a client in an outside practice case who is eligible for 
representation from the recipient even if the client is also receiving 
legal assistance from the recipient, as long as the recipient is 
representing the client on a different matter.
    In the NPRM, LSC noted that the proposed definition was Judge 
Advocate General (JAG) Corps attorneys. Although LSC chose not to 
include language on this issue in the proposed rule, the NPRM noted 
LSC's intent to continue the policy established in prior General 
Counsel opinions, which have consistently found that an attorney is not 
engaged in the outside practice of law while serving as a JAG Corps 
reserve officer and solicited comments as to whether the rule should 
include language expressly stating this policy.
    LSC received two comments supporting including a specific reference 
to JAG Corps attorneys in the rule and one comment which stated that 
the commenter had no objection to such a reference. None of the 
commenters had any other objections to the proposed changes. LSC 
believes that adding a reference to JAG Corps practice and the other 
proposed amendments will clarify the rule and aid in the comprehension 
and usability of the regulation. Accordingly, LSC is adopting the 
definition as proposed, except for the addition of language which 
specifies that the outside practice of law does not include the 
performance of duties as a JAG Corps attorney in the United States 
armed forces reserves.
Section 1604.2(c) ``Court Appointment''
    LSC proposed to add a definition for the term ``court 
appointment.'' The proposed definition, ``an appointment

[[Page 67374]]

in a criminal or civil case made by a court or administrative agency 
under a statute or court rule or practice,'' is based on the language 
relating to court appointments currently found in sections 1604.4 and 
1604.5 of the regulation, rather than the following language in Sec.  
1006(d)(6) of the Act:
    Attorneys employed by a recipient shall be appointed to provide 
legal assistance without reasonable compensation only when such 
appointment is made pursuant to a statute, rule, or practice applied 
generally to attorneys practicing in the court where the appointment is 
made.
    The proposed definition on appointments is broader than the 
statutory one, which applies only to uncompensated appointments; but 
LSC believes it is appropriate because it is more protective of program 
resources.
    Two of the field commenters supported the definition as proposed. 
The OIG suggested that the phrase ``under a statute or court rule or 
practice'' should be changed to ``statute, rule or practice applied 
generally to attorneys practicing in the court or before the 
administrative agency where the appointment is made.'' The OIG noted 
that the language suggested follows the statutory language more closely 
and make it clear that it refers to statutes, rules or practices of 
general applicability and applies to administrative agencies in 
addition to courts. LSC believes that the change suggested by the OIG 
is appropriate without changing the intent of the original language 
proposed in the NPRM. Accordingly, LSC is adopting a revised definition 
of court appointment as an appointment in a criminal or civil case made 
by a court or administrative agency under a statute, rule or practice 
applied generally to attorneys practicing in the court or before the 
administrative agency where the appointment is made.

Section 1604.3 General Policy

    LSC proposed to expand and amend this section to require recipients 
to adopt written policies relating to the outside practice of law, 
rather than permitting programs to determine on an ad hoc basis, 
whether outside practice is to be permitted in a particular instance 
(as is the case under the existing rule). LSC intended that such 
policies would give the recipient's executive director substantial 
discretion in making outside practice of law determinations to ensure 
that recipients can adopt policies that balance the demands of the 
profession, the attorney's desire to do outside work, and the needs of 
the community served by the program. To this end, LSC proposed that the 
required policies would be permitted to permit the outside practice of 
law by full-time attorneys only to the extent permitted by Part 1604, 
but would be permitted to contain additional limitations not imposed by 
Part 1604.
    LSC received one comment supporting this section as proposed and 
two comments recommending conflicting changes. One commenter 
recommended deleting the language expressly authorizing programs to 
adopt more stringent limitations out of a concern that such language 
would imply that LSC was encouraging programs to adopt such 
limitations. The other commenter, however, opposed the proposed 
revision as implying that LSC was encouraging the outside practice of 
law.
    LSC does not believe that paragraphs (a) and (b), as proposed, 
imply a policy preference on the part of LSC either in favor of or 
against the outside practice of law. LSC recognizes that there are 
demands of the profession occasionally imposed upon all attorneys and 
that some attorneys desire to do outside work, while also noting that 
recipient programs have scant resources and that the needs of the 
community served by programs require a significant commitment of time 
and effort by full-time program attorneys. LSC believes that paragraphs 
(a) and (b) represent an acknowledgement and balancing of these 
concerns. Indeed, LSC believes that the provisions in the LSC Act 
concerning the outside practice of law, which provide the basis for 
this regulation, recognize and dictate such a balance. However, LSC 
does believe that the language as proposed can be improved by adding an 
explicit reference to the LSC Act to ensure that the statutory basis 
for the parameters of permissible and impermissible outside practice of 
law are clearly understood.
    The restrictions of this part, as currently applicable and as 
proposed, apply only to full-time attorneys. Although LSC did not 
propose to address the outside practice of law by part-time attorneys, 
the NPRM expressly proposed to provide that recipients' policies may 
include restrictions on outside practice by part-time attorneys.
    One commenter from the field specifically urged LSC to eliminate 
the reference to part-time employees from the rule as unnecessary and, 
again, implying that LSC was encouraging programs to adopt more 
stringent policies. The OIG, on the other hand, recommended that part-
time attorneys be specifically covered by this Part because of the 
increased incidence of part-time employment and the implications on 
program integrity requirements (45 CFR Part 1610). One other commenter 
supported proposed paragraph (c) as written.
    While LSC disagrees that the proposed paragraph (c) implied a 
policy preference for stricter outside practice of law policies, LSC 
does agree that the rule should not reference part-time attorneys. The 
statutory mandate applies only to full-time attorneys; LSC, therefore, 
believes that the regulation should address itself only to full-time 
attorneys. Recipients would have the discretion to include part-time 
employees in its policies even without such express language in the 
regulation. LSC disagrees with the OIG that program integrity concerns 
require including part-time attorneys in the ambit of 1604. Part-time 
attorneys are not limited by the LSC Act or applicable appropriations 
laws in what they can do on their own time and with their own 
resources. As such, LSC does not consider it appropriate to require 
regulation of the outside activities of these attorneys. To the extent 
that there could be program integrity concerns, LSC believes that the 
program integrity and timekeeping rules provide all the protection 
necessary to ensure that the programs remain in compliance with the 
program integrity requirements.
    Accordingly, LSC is adopting paragraphs (a) and (b) as written, 
with the addition of explicit reference to the LSC Act, but declines to 
adopt proposed paragraph (c).

Section 1604.4 Permissible Outside Practice

    LSC proposed to combine and revise the provisions currently in 
sections 1604.4, Compensated Outside Practice, and 1604.5, 
Uncompensated Outside Practice, into one section retitled Permissible 
Outside Practice. Except as noted below, all of the comments generally 
supported this section as proposed and LSC adopts it as proposed, with 
some modifications.
    Under the current structure of the regulation, the general rule on 
the outside practice of law is stated in the negative; that is, the 
outside practice of law is prohibited except as provided. LSC proposed, 
instead, to state the rule in the affirmative, providing guidance on 
the terms under which the outside practice of law may be approved. LSC 
is retaining this structure, but modifying the language proposed to 
refer to a recipient's policies to underscore the requirement that 
recipient will have to adopt policies relating to the outside practice 
of law and that the regulation provides guidance on what the policies 
must require and may permit.

[[Page 67375]]

    The revision also refers to a full-time attorney's responsibilities 
to clients, rather than simply ``full-time responsibilities.'' LSC 
intends an executive director (or that person's designee) to make a 
case-by-case determination as to whether involvement in a specific case 
or matter would be consistent with a full-time attorney's 
responsibilities to the program's clients. A full-time attorney's 
responsibilities to program clients should be determined by reference 
to the program's definition of ``full-time'' (such as used for the 
determination of employee benefits), not by reference to a specific 
attorney's working habits. Thus, an attorney in the habit of working 
substantial amounts of overtime on program activities should not be 
penalized for deciding to allot some of that attorney's own time to an 
outside practice case rather than to program activities. In addition, 
an attorney should be permitted to take reasonable amounts of leave to 
engage in permitted outside practice.
    LSC also includes language intended to address a concern that, if a 
program attorney handled outside practice cases that were controversial 
or dealt with areas prohibited to the recipient (e.g., abortion 
litigation), the employing recipient would be seen as handling the 
cases and viewed as using outside practice as a way to get around 
applicable restrictions. The language, which is similar to language in 
the regulation on prohibited political activities, would require the 
attorney to make it clear that this was not a program case, and to do 
whatever was necessary to ensure that it not be perceived as such. In 
practical terms, the restriction might require the attorney to use a 
home address or post office box for correspondence, or a home telephone 
number or direct dial number that would not go through the recipient's 
switchboard or voice mail greeting, or other similar processes to 
ensure that the recipient was not identified as the sponsor of the 
representation. The restriction on identification would not apply to 
court appointments or to cases which are undertaken to fulfill a 
mandatory pro bono obligation, which are treated separately in the 
regulation.
    Paragraph (c) sets forth the specific situations under which 
recipients' policies may permit the outside practice of law: a newly 
employed attorney closing cases from a previous law practice; when the 
attorney is acting on behalf of him or herself, a close friend, family 
member or another member of the recipient's staff; when the attorney is 
acting on behalf of a religious, community, or charitable group; or 
when the attorney is participating in a mandatory pro bono program or a 
voluntary pro bono or legal referral program affiliated with or 
sponsored by a bar association, other legal organization or religious, 
community or charitable group.
    With respect to newly employed attorneys, paragraph (c)(1) is 
intended to make explicit what has always been implicit under the 
current Part 1604, i.e., that work for a client from a previous 
practice should not be done on program time.
    The revised rule will expressly permit an attorney to represent 
another member of the recipient's staff without having to prove that 
the individual is a close friend. LSC is also adding language to make 
it clear that the attorney may represent him or herself. LSC received 
one comment urging LSC to require recipients' policies to permit an 
attorney to represent him or herself. LSC sees no justification for 
treating this situation different than other potential outside practice 
situations in terms of the program's discretion to permit or restrict 
such outside practice. LSC can imagine a situation in which a 
recipient's director would have no problem permitting a full-time 
employee to represent him or herself. At the same time, LSC can imagine 
a situation in which the recipient's executive director is concerned 
that the attorney's activities representing him or herself could be so 
time consuming as to interfere with the attorney's responsibilities to 
the programs clients. In such a situation, the program needs the 
discretion to disallow that outside practice. Accordingly, LSC declines 
to require recipients' policies to permit an attorney to represent him 
or herself.
    LSC is amending the current provision permitting representation of 
religious, community or charitable groups, to permit the representation 
of an individual client who has been referred to the attorney by such a 
group through a formal pro bono or referral program that does regular 
referrals. For example, under the revised rule it would permissible for 
an attorney to represent a client who has been referred by the ACLU, 
NAACP or Catholic Charities. Prior General Counsel opinions have 
permitted outside practice both on behalf of organizations as well as 
on behalf of individuals referred by those organizations and LSC 
believes that it is appropriate to incorporate these interpretations 
into the rule.
    LSC received one comment specifically addressing this provision. 
Although the commenter did not object to the proposed revision, the 
commenter noted that they did not view this category as essential and 
requested that the preamble make clear that program policies could 
restrict such practice. As with all of the provisions in this section, 
recipients' written policies are permitted to allow for the approval of 
outside practice through a referral program, but need not do so. This 
is a matter committed to the discretion of the program.
    LSC proposed to add a paragraph, (c)(5), to make it clear that 
legal services attorneys should be permitted to act in the same way as 
other attorneys with respect to pro bono work that is undertaken to 
meet professional obligations, whether the obligation is aspirational, 
as under state rules that are modeled on Rule 6.1 of the American Bar 
Association's (``ABA'') Model Rules of Professional Conduct, or 
mandatory, as is now the case in a few local jurisdictions across the 
country. LSC received one comment from a program noting that they did 
not view this category as essential and requesting that the preamble 
make clear that program policies could restrict such practice. The OIG 
suggested that this section apply only to ``mandatory'' pro bono and 
that the phrase ``and practices'' should be deleted as too vague.
    LSC believes that the reference to other than mandatory pro bono 
would be redundant in light of paragraphs (3) and (4) which already 
address voluntary pro bono activities. Moreover, LSC believes that a 
separate paragraph referencing mandatory pro bono is not required as 
mandatory pro bono is covered under section 1604.7, Court Appointments. 
Accordingly, LSC is not adopting proposed paragraph (5). As with all of 
the provisions in this section, recipients' written policies are 
permitted to allow for the approval of outside practice as set forth 
herein, but need not do so, and where permitting it, may address 
circumstances and limitations thereon. This is a matter committed to 
the discretion of the program.

Section 1604.5 Compensation

    The 1995 NPRM contained a new proposed provision on compensation, 
providing, among other things, that a recipient would be allowed to 
permit an attorney to accept attorneys' fees for certain cases, as long 
as the fees would be remitted to the recipient. While this proposed 
provision was clearly permissible at the time it was proposed, LSC has 
determined that it is no longer consistent with the current statutory 
and regulatory restrictions on the claiming, collection and retention 
of attorney's fees. Accordingly, LSC is not

[[Page 67376]]

adopting proposed paragraphs (b) and (c).
    LSC is, instead, adopting language stating that except as provided 
in paragraph (b) of this section and section 1604.7(a) (relating to 
compensation provided to an attorney pursuant to court appointment and 
remitted to the recipient), a recipient's written policies shall not 
permit a full-time attorney to receive any compensation for the outside 
practice of law. The revised paragraph (b) would require that 
recipients' written policies which permit a full-time attorney who 
meets the criteria set forth in Sec.  1604.4(c)(1) to engage in the 
outside practice of law shall permit full-time attorneys to seek and 
receive personal compensation for work performed pursuant to that 
section. Although the statute prohibits all compensated outside 
practice, the exception in proposed paragraph (a) for work on cases 
held over from a previous private practice is justified under the 
general principle that neither LSC nor the recipient can interfere with 
an attorney's professional responsibilities to a client. Since the 
representation was undertaken before the lawyer became a legal services 
attorney, fairness dictates that the attorney should be permitted to 
take fees for completion of the work. This exception is carried over 
from the current rule.

Section 1604.6 Use of Recipient Resources

    LSC proposed to add a new section to the rule governing the use of 
recipient resources in the course of permitted outside practice 
activities. Specifically, LSC proposed to permit recipients' written 
policies to permit a recipient to allow its attorneys to use only a de 
minimis amount of program resources, including time, in cases when 
newly employed attorneys are closing old cases, and, for other 
permitted outside practice situations, to allow its attorneys to use a 
limited amount of program resources, including time. As with other 
aspects of this rule, LSC proposed to authorize recipients to adopt 
written policies more restrictive so as to permit the recipient to 
determine whether its attorneys could use recipient resources for a 
specific case to the extent allowed by this rule. These proposals were 
based on longstanding LSC policy and were intended to codify the 
accepted practice.
    The NPRM solicited comments on the appropriateness of using 
recipient resources for any outside practice, and whether or not the 
distinction between ``de minimis'' and ``limited'' use of resources 
makes sense and is workable. In particular, LSC invited comment on the 
impact of the 1996 restrictions, LSC's program integrity rules at 45 
CFR part 1610 and LSC's timekeeping rules at 45 CFR part 1635 on the 
proposals set forth therein.
    Four of the five comments LSC received address this issue. Two of 
the comments from the field supported the NPRM as proposed. These 
comments noted that the proposed language prohibiting the use of 
recipient resources (LSC and non-LSC) for activities for which the use 
of such funds is prohibited would ensure that no there were no 
violations of the program integrity standards and was consistent with 
the requirements of the timekeeping rules. One field commenter stated 
their opposition to any use of recipient resources for outside practice 
activities, given the scarcity of program resources available for 
program purposes. It was unclear from the comment, however, whether 
this commenter believed that LSC should prohibit the use of all program 
resources, or if it would be sufficient to permit programs the 
authority to prohibit the use of program resources. In contrast, the 
OIG argues that the rule should only permit recipients' written 
policies to permit the de minimis use of recipient in all 
circumstances. Any other use, the OIG contends risks running afoul not 
only of the appropriations act restrictions, but also the allowable 
costs requirements of part 1630. The OIG argues that outside practice 
activities should be subject to requirements of 1635 and other 
limitations applicable to any other personal activities.
    LSC agrees that use of recipient resources to support restricted 
activities is prohibited by law. LSC also agrees, however, with the 
field recipients that the specific limitation on the use of resources 
for prohibited activities that was included in the proposed rule would 
prevent recipients from adopting written policies which would permit 
prohibited uses in connection with outside practice of law activities. 
LSC has amended the proposed language slightly to make this point even 
more explicit. With respect to non-restricted activities, LSC 
acknowledges that if a program permitted a significant enough amount of 
their LSC funded resources to be used in connection with outside 
practice activities, the program could run into a 1630 disallowed costs 
problem. However, LSC notes that the standards proposed reflect the 
longstanding practice and LSC has not, in fact, found this to present 
significant 1630 problems. Accordingly, LSC adopts section 1604.6 as 
proposed except as noted above.
    Under the de minimis standard, an attorney could make a brief phone 
call or use the fax machine during working hours, but would have to 
take leave for court appearances. Under the ``limited'' standard, in 
addition to whatever an attorney could do under the de minimis 
standard, the attorney could, for example, make a brief court 
appearance during normal working hours without taking leave. An 
attorney could also be permitted to use a program computer or 
typewriter to prepare pleadings or other documents, within reason. 
However, if the attorney participated in a long trial or extended 
negotiation, he or she would normally be required to take leave to do 
so. If a recipient has a procedure to identify copying, postage and 
similar costs, and the attorney reimbursed the recipient, the use of 
those resources would also be permissible under either standard. This 
position is consistent with the longstanding LSC policy.

Section 1604.7 Court Appointments

    This proposed section would treat court appointments and mandatory 
pro bono representation separately from outside practice, because there 
are substantially different considerations for court appointments and 
mandatory pro bono than there are for pro bono or other outside cases 
that an attorney undertakes on a strictly voluntary basis.
    Proposed paragraph (a)(1) simply restated a general rule that 
applies to court appointments as well as to outside practice under the 
current part 1604 regarding the permissibility of a full-time attorney 
accepting a court appointment to provide representation. Two of the 
comments supported the language as proposed. The OIG, however, 
suggested that the language of this paragraph be revised to read ``Such 
an appointment is consistent with the recipient's primary 
responsibility to provide legal assistance to eligible clients in civil 
matters'' to bring this provision into harmony with 45 CFR part 
1613.4(a), relating to appointments in criminal proceedings. LSC 
considers the OIG's suggestion to be well taken and not inconsistent 
with the intent of the proposed language. Accordingly, LSC is revising 
paragraph (a)(1) in this final rule.
    LSC received no objections to proposed paragraphs (a)(2) or (3) and 
adopts them as proposed. Paragraph (a)(2) is based on section 
1006(d)(6) of the LSC Act. It is intended to protect recipients from 
efforts that have been made by some judges to appoint legal services 
attorneys to handle court appointments in lieu of private attorneys, 
and/or to refuse to provide

[[Page 67377]]

compensation for appointed cases handled by legal services attorneys, 
when private attorneys appointed to similar cases would have been paid. 
Paragraph (a)(3) is also a requirement carried over from the current 
Part 1604. LSC notes that, in the case of court appointments, 
recipients are permitted to retain attorneys' fees made to a recipient 
or employee of a recipient notwithstanding the general attorneys' fees 
ban because such fees are excluded from the definition of attorneys' 
fees in 45 CFR section 1642.2(b)(1).
    LSC proposed to add a new paragraph (d) providing that, if an 
attorney is mandated to engage in pro bono representation by applicable 
state or local court rules or practices or by rules of professional 
responsibility, such representation shall be treated in the same manner 
as court appointments for the purposes of paragraphs (a)(1), (a)(3), 
(b) and (c) of this section. While LSC recognizes that the ABA Model 
Rules do not currently mandate pro bono services for any attorney, LSC 
also recognizes that mandatory pro bono has been considered in a number 
of states and is a reality in certain local jurisdictions. It is the 
intent of LSC that legal services attorneys be permitted to undertake 
outside representation to fulfill any mandatory professional 
obligations to provide pro bono assistance to which they are now or may 
be subject in the future. Two comments concurred in paragraph (d) as 
proposed, while the OIG recommends making it clear that attorneys may 
not receive compensation for mandatory pro bono activities and adding a 
requirement that mandatory pro bono activities must be in cases or 
matters that are not prohibited because of the use of LSC resources 
permitted by the rule. LSC believes that the rule as proposed would not 
permit an attorney performing mandatory pro bono service to receive 
compensation, but has no objection to making this point clearer in this 
preamble or the regulatory text. In addition, LSC agrees with the OIG 
regarding limitation on mandatory pro bono activities to cases or 
matters not otherwise prohibited and clarifies the rule on this point.
    Finally, this section allows a full-time attorney to use program 
resources to undertake representation required by court appointment or 
mandatory pro bono, and allows the attorney to identify the recipient 
as his or her employer when engaged in such representation. LSC 
received no objections to these provisions (paragraphs (b) and (c)) and 
adopts them as proposed.
    LSC received one other comment on this section, suggesting that the 
reference in this section to the program's executive director should 
include the executive director's designee. LSC agrees that this 
language is consistent both with its usage elsewhere in this rule and 
with other rules under consideration for adoption by LSC.

List of Subjects in 45 CFR Part 1604

    Legal services.


0
For the reasons set forth in the preamble, LSC revises 45 CFR part 1604 
to read as follows:

PART 1604--OUTSIDE PRACTICE OF LAW

Sec.
1604.1 Purpose.
1604.2 Definitions.
1604.3 General policy.
1604.4 Permissible outside practice.
1604.5 Compensation.
1604.6 Use of recipient resources.
1604.7 Court appointments.

    Authority: 42 U.S.C. 2996e(b)(3), 2996e(d)(6), 2996f(a)(4), 
2996g(e).


Sec.  1604.1  Purpose.

    This part is intended to provide guidance to recipients in adopting 
written policies relating to the outside practice of law by recipients' 
full-time attorneys. Under the standards set forth in this part, 
recipients are authorized, but not required, to permit attorneys, to 
the extent that such activities do not hinder fulfillment of their 
overriding responsibility to serve those eligible for assistance under 
the Act, to engage in pro bono legal assistance and comply with the 
reasonable demands made upon them as members of the Bar and as officers 
of the Court.


Sec.  1604.2  Definitions.

    As used in this part--
    (a) Full-time attorney means an attorney who is employed full-time 
by a recipient in legal assistance activities supported in major part 
by the Corporation, and who is authorized to practice law in the 
jurisdiction where assistance is provided.
    (b) Outside practice of law means the provision of legal assistance 
to a client who is not receiving that legal assistance from the 
employer of the full-time attorney rendering assistance, but does not 
include court appointments except where specifically stated or the 
performance of duties as a Judge Advocate General Corps attorney in the 
United States armed forces reserves.
    (c) Court appointment means an appointment in a criminal or civil 
case made by a court or administrative agency under a statute, rule or 
practice applied generally to attorneys practicing in the court or 
before the administrative agency where the appointment is made.


Sec.  1604.3  General policy.

    (a) A recipient shall adopt written policies governing the outside 
practice of law by full-time attorneys that are consistent with the LSC 
Act, this part and applicable rules of professional responsibility.
    (b) A recipient's policies may permit the outside practice of law 
by full-time attorneys only to the extent allowed by the LSC Act and 
this part, but may impose additional restrictions as necessary to meet 
the recipient's responsibilities to clients.


Sec.  1604.4  Permissible outside practice.

    A recipient's written policies may permit a full-time attorney to 
engage in a specific case or matter that constitutes the outside 
practice of law if:
    (a) The director of the recipient or the director's designee 
determines that representation in such case or matter is consistent 
with the attorney's responsibilities to the recipient's clients;
    (b) Except as provided in Sec.  1604.7, the attorney does not 
intentionally identify the case or matter with the Corporation or the 
recipient; and
    (c) The attorney is--
    (1) Newly employed and has a professional responsibility to close 
cases from a previous law practice, and does so on the attorney's own 
time as expeditiously as possible; or
    (2) Acting on behalf of him or herself, a close friend, family 
member or another member of the recipient's staff; or
    (3) Acting on behalf of a religious, community, or charitable 
group; or
    (4) Participating in a voluntary pro bono or legal referral program 
affiliated with or sponsored by a bar association, other legal 
organization or religious, community or charitable group.


Sec.  1604.5  Compensation.

    (a) Except as provided in paragraph (b) of this section and Sec.  
1604.7(a), a recipient's written policies shall not permit a full-time 
attorney to receive any compensation for the outside practice of law.
    (b) A recipient's written policies which permit a full-time 
attorney who meets the criteria set forth in Sec.  1604.4(c)(1) to 
engage in the outside practice of law shall permit full-time attorneys 
to seek and receive personal compensation for work performed pursuant 
to that section.


Sec.  1604.6  Use of recipient resources.

    (a) For cases undertaken pursuant to Sec.  1604.4(c)(1), a 
recipient's written policies may permit a full-time attorney

[[Page 67378]]

to use de minimis amounts of the recipient's resources for permissible 
outside practice if necessary to carry out the attorney's professional 
responsibilities, as long as the recipient's resources, whether funded 
with Corporation or private funds, are not used for any activities for 
which the use of such funds is prohibited.
    (b) For cases undertaken pursuant to Sec.  1604.4(c) (2) through 
(4), a recipient's written policies may permit a full-time attorney to 
use limited amounts of the recipient's resources for permissible 
outside practice if necessary to carry out the attorney's professional 
responsibilities, as long as the recipient's resources, whether funded 
with Corporation or private funds are not used for any activities for 
which the use of such funds is prohibited.


Sec.  1604.7  Court appointments.

    (a) A recipient's written policies may permit a full-time attorney 
to accept a court appointment if the director of the recipient or the 
director's designee determines that:
    (1) Such an appointment is consistent with the recipient's primary 
responsibility to provide legal assistance to eligible clients in civil 
matters;
    (2) The appointment is made and the attorney will receive 
compensation for the court appointment under the same terms and 
conditions as are applied generally to attorneys practicing in the 
court where the appointment is made; and
    (3) Subject to the applicable law and rules of professional 
responsibility, the attorney agrees to remit to the recipient any 
compensation received.
    (b) A recipient's written policies may permit a full-time attorney 
to use program resources to undertake representation pursuant to a 
court appointment.
    (c) A recipient's written policies may permit a full-time attorney 
to identify the recipient as his or her employer when engaged in 
representation pursuant to a court appointment.
    (d) If, under the applicable State or local court rules or 
practices or rules of professional responsibility, legal services 
attorneys are mandated to provide pro bono legal assistance in addition 
to the attorneys' work on behalf of the recipient's clients, the 
recipient's written policies shall treat such legal assistance in the 
same manner as court appointments under paragraphs (a)(1), (a)(3), (b) 
and (c) of this section, provided that the policies may only permit 
mandatory pro bono activities that are not otherwise prohibited by the 
LSC Act, applicable appropriations laws, or LSC regulation.

Victor M. Fortuno,
Vice President for Legal Affairs and General Counsel.
[FR Doc. 03-29874 Filed 12-1-03; 8:45 am]
BILLING CODE 7050-01-P