[Federal Register Volume 79, Number 72 (Tuesday, April 15, 2014)]
[Proposed Rules]
[Pages 21188-21202]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-08353]


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LEGAL SERVICES CORPORATION

45 CFR Part 1614


Private Attorney Involvement

AGENCY: Legal Services Corporation.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This proposed rule updates the Legal Services Corporation (LSC 
or Corporation) regulation on private attorney involvement (PAI) in the 
delivery of legal services to eligible clients.

DATES: Comments must be submitted by June 16, 2014.

ADDRESSES: Written comments must be submitted to Stefanie K. Davis, 
Assistant General Counsel, Legal Services Corporation, 3333 K Street 
NW., Washington, DC 20007; (202) 337-6519 (fax) or 
[email protected]. Electronic submissions are preferred via email 
with attachments in Acrobat PDF format. Written comments sent to any 
other address or received after the end of the comment period may not 
be considered by LSC.

FOR FURTHER INFORMATION CONTACT: Stefanie K. Davis, Assistant General 
Counsel, Legal Services Corporation, 3333 K Street NW., Washington, DC 
20007, (202) 295-1563 (phone), (202) 337-6519 (fax), 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Regulatory History

    In 1981, LSC issued the first instruction (``Instruction'') 
implementing the Corporation's policy that LSC funding recipients 
dedicate a percentage of their basic field grants to involving private 
attorneys in the delivery of legal services to eligible clients. 46 FR 
61017, 61018, Dec. 14, 1981. The goal of the policy was to ensure that 
recipients would provide private attorneys with opportunities to give 
legal assistance to eligible clients ``in the most effective and 
economical manner and consistent with the purposes and requirements of 
the Legal Services Corporation Act.'' Id. at 61017. The Instruction 
gave recipients guidance on the types of opportunities that they could 
consider, such as engaging private attorneys in the direct 
representation of eligible clients or in providing community legal 
education. Id. at 61018. Recipients were directed to consider a number 
of factors in deciding which activities to pursue, including the legal 
needs of eligible clients, the recipient's priorities, the most 
effective and economical means of providing legal assistance, 
linguistic and cultural barriers to effective advocacy, conflicts of 
interest between private attorneys and eligible clients, and the 
substantive expertise of the private attorneys participating in the 
recipients' projects. Id. LSC reissued the Instruction without 
substantive change in 1983. 48 FR 53763, Nov. 29, 1983.
    LSC subsequently promulgated the PAI policy in a regulation 
published at 45 CFR part 1614. 49 FR 21328, May 21, 1984. The new 
regulation adopted the policy and procedures established by the 
Instruction in large part. The rule adopted an amount equivalent to 
12.5% of a recipient's basic field grant as the amount recipients were 
to spend on PAI activities. Id. The rule also adopted the

[[Page 21189]]

factors that recipients were to consider in determining which 
activities to pursue and the procedures by which recipients were to 
establish their PAI plans. Id. at 21328-29. Finally, the rule 
incorporated the Instruction's prohibition on using revolving 
litigation funds as a method of engaging private attorneys. Id. at 
21329.
    LSC published a notice of proposed rulemaking (NPRM) to amend part 
1614 in 1985. 50 FR 34510, Aug. 26, 1985. The NPRM proposed numerous 
revisions to the original rule. A major substantive change was the 
introduction of the mandatory direct delivery provision. Id. at 34511. 
LSC believed that ``the essence of PAI is the direct delivery of legal 
services to the poor by private attorneys,'' and consequently required 
recipients to incorporate direct delivery into their PAI programs. Id. 
However, LSC left to the recipients' discretion the determination of 
what percentage of a recipient's PAI program to dedicate to direct 
delivery. Id. The NPRM also introduced new provisions on joint 
ventures, waivers, and sanctions for failure to comply with the PAI 
requirement. Id. at 34511, 34512. Finally, the NPRM proposed simplified 
audit provisions and a significantly rewritten section prohibiting 
revolving litigation funds. Id. at 34511. The NPRM left the 12.5% PAI 
requirement unchanged. Id. at 34510.
    After receiving comments, the Corporation published the revised 
part 1614 as a final rule with an additional request for comments. 50 
FR 48586, Nov. 26, 1985. LSC requested comments on a new, previously 
unpublished definition of the term ``private attorney.'' Id. at 48586-
87. The original definition of ``private attorney'' substantially 
mirrored the definition that exists today:

As of January 1, 1986, the term ``private attorney'' as used in this 
Part means an attorney who is not a staff attorney as defined in 
Sec.  1600.1 of these regulations. In circumstances where the 
expenditure of funds with respect to a private attorney would 
violate the provisions of the Ethics in Government Act (18 U.S.C. 
207) if the recipients or grantees were federal agencies, such funds 
may not be counted as part of the PAI requirement.

    Id. at 48591. Although LSC is not a federal agency for purposes of 
the Ethics in Government Act, the Corporation chose to follow the Act 
because the Corporation uses taxpayer funds to make grants to its 
recipients. The purpose of the Ethics in Government Act, LSC stated, 
``is to keep people at federal agencies from transferring money to 
former colleagues of theirs who have retired into private practice.'' 
Id. at 48587. The Corporation addressed two issues through the proposed 
definition. The first issue was that the purpose of the PAI rule was to 
reach out to attorneys who had not been involved previously in 
providing legal services to the poor--a purpose that was not 
accomplished by paying former LSC recipient staff attorneys to provide 
legal services. Id. The second was the appearance of impropriety 
created when a recipient paid a former attorney to handle the kinds of 
cases that the attorney worked on while employed by the recipient. Id. 
LSC recognized that there may be circumstances under which the most 
appropriate person to handle a given case would be an attorney 
previously employed by a recipient, and did not prohibit recipients 
from using funds to pay the former staff attorney in such cases. The 
only thing LSC proposed to prohibit was counting such funds toward a 
recipient's PAI requirement. Id.
    The last substantive change to Part 1614 came with the June 13, 
1986 publication of the amended final rule. 51 FR 21558, June 13, 1986. 
In the amended final rule, the Corporation removed the reference to the 
Ethics in Government Act from the definition of ``private attorney.'' 
Id. However, LSC adopted the policy of the Ethics in Government Act by 
including a separate provision prohibiting recipients from including in 
their PAI requirement payments made to individuals who had been staff 
attorneys within the preceding two years. Id. The definition of 
``private attorney'' thus became the definition that exists today:

    As of January 1, 1986, the term ``private attorney'' as used in 
this Part means an attorney who is not a staff attorney as defined 
in Sec.  1600.1 of these regulations

45 CFR 1614.1(d).
    LSC made a technical amendment to Part 1614 in 2013 to bring Sec.  
1614.7, which established procedures for addressing a recipient's 
failure to comply with the PAI requirement, into conformity with the 
Corporation's enforcement policy. 78 FR 10085, 10092, Feb. 13, 2013.
    On January 26, 2013, the LSC Board of Directors (Board) voted to 
authorize LSC to initiate rulemaking to consider revisions to the PAI 
rule in response to the recommendations made by LSC's Pro Bono Task 
Force (Task Force). The Task Force and its recommendations are 
discussed at greater length below. On April 14, 2013, the Board voted 
to convene two rulemaking workshops for the purpose of obtaining input 
from recipients and other stakeholders regarding the Task Force's 
recommendations and potential changes to part 1614. Through a request 
for information published in the Federal Register on May 10, 2013, the 
Corporation invited comments on the recommendations pertaining to part 
1614 and solicited participants for the two rulemaking workshops. 78 FR 
27339, May 10, 2013.
    The first workshop was held on July 21, 2013, in Denver, Colorado, 
immediately following the Board's quarterly meeting. LSC subsequently 
published a second request for information, which posed new questions 
and solicited participants for the second and final rulemaking 
workshop. 78 FR 48848, Aug. 12, 2013. The second rulemaking workshop 
was held on September 17, 2013, at LSC headquarters in Washington, DC. 
The closing date of the comment period for both requests for 
information was October 17, 2013.
    The Corporation considered all comments received in writing and 
provided during the rulemaking workshops in the development of this 
NPRM. On March 3, 2014, the Operations and Regulations Committee 
(Committee) of the Board held a telephonic meeting to discuss the 
proposed text of the rule. On April 7, 2014, the Committee voted to 
recommend that the Board approve publication of the NPRM in the Federal 
Register for public comment. On April 8, 2014, the Board approved the 
NPRM for publication.

II. The Pro Bono Task Force

    On March 31, 2011, the LSC Board of Directors (Board) approved a 
resolution establishing the Pro Bono Task Force. Resolution 2011-009, 
``Establishing a Pro Bono Task Force and Conferring Upon the Chairman 
of the Board Authority to Appoint Its Members,'' Mar. 31, 2011, http://www.lsc.gov/board-directors/resolutions/resolutions-2011. The purpose 
of the Task Force was to ``identify and recommend to the Board new and 
innovative ways in which to promote and enhance pro bono initiatives 
throughout the country[.]'' Id. The Chairman of the Board appointed to 
the Task Force individuals representing legal services providers, 
organized pro bono programs, the judiciary, law firms, government 
attorneys, law schools, bar leadership, corporate general counsels, and 
technology providers.
    The Task Force focused its efforts on identifying ways to increase 
the supply of lawyers available to provide pro bono legal services 
while also engaging attorneys to reduce the demand for legal services. 
Legal Services Corporation, Report of the Pro Bono Task Force at 2,

[[Page 21190]]

October 2012, available at http://lri.lsc.gov/legal-representation/private-attorney-involvement/resources. Members considered strategies 
for expanding outreach to private attorneys and opportunities for 
private attorneys to represent individual clients in areas of interest 
to the attorneys. In addition, the Task Force explored strategies, such 
as appellate advocacy projects or collaborations with special interest 
groups, to help private attorneys address systemic problems as a way to 
decrease the need for legal services on a larger scale than can be 
achieved through individual representation. Id. Finally, the Task Force 
considered ways in which volunteers, including law students, 
paralegals, and members of other professions, could be better used to 
address clients' needs. Id.
    In October, 2012, the Task Force released its report to the 
Corporation. The Task Force made four overarching recommendations to 
LSC in its report.

Recommendation 1: LSC Should Serve as an Information Clearinghouse 
and Source of Coordination and Technical Assistance to Help Grantees 
Develop Strong Pro Bono Programs
Recommendation 2: LSC Should Revise Its Private Attorney Involvement 
(PAI) Regulation to Encourage Pro Bono.
Recommendation 3: LSC Should Launch a Public Relations Campaign on 
the Importance of Pro Bono
Recommendation 4: LSC Should Create a Fellowship Program to Foster a 
Lifelong Commitment to Pro Bono

    The Task Force also requested that the judiciary and bar leaders 
assist LSC in its efforts to expand pro bono by, for example, changing 
or advocating for changes in court rules that would allow retired 
attorneys or practitioners licensed outside of a recipient's 
jurisdiction to engage in pro bono legal representation. Id. at 25-27. 
Collaboration among LSC recipients, the private bar, law schools, and 
other legal services providers was a theme running throughout the Task 
Force's recommendations to the Corporation.
    Recommendation 2 provided the impetus for the NPRM. Recommendation 
2 had three subparts. Each recommendation focused on a portion of the 
PAI rule that the Task Force identified as posing an obstacle to 
effective engagement of private attorneys. Additionally, each 
recommendation identified a policy determination of the Corporation or 
an interpretation of the PAI rule issued by the Office of Legal Affairs 
(OLA) that the Task Force believed created barriers to collaboration 
and the expansion of pro bono legal services. The three subparts are:

    2(a)--Resources spent supervising and training law students, law 
graduates, deferred associates, and others should be counted toward 
grantees' PAI obligations, especially in ``incubator'' initiatives.
    2(b)--Grantees should be allowed to spend PAI resources to 
enhance their screening, advice, and referral programs that often 
attract pro bono volunteers while serving the needs of low-income 
clients.
    2(c)--LSC should reexamine the rule that mandates adherence to 
LSC grantee case handling requirements, including that matters be 
accepted as grantee cases in order for programs to count toward PAI 
requirements.

Id. at 20-21.
    The Task Force observed in Recommendation 2 that the ``PAI 
regulation has resulted in increased collaboration between LSC grantees 
and private attorneys,'' but that the legal market has changed since 
the rule's issuance. Id. at 20. The Task Force suggested that ``there 
are certain areas where the regulation might productively be revised to 
ensure that LSC grantees can use their grants to foster pro bono 
participation.'' Id. at 20. For example, the omission of services 
provided by law students and other non-lawyers and the poor fit of the 
``staff attorney'' construct in the definition of ``private attorney'' 
created complications for recipients attempting to fulfill the PAI 
requirement. Id. at 20-21. The Task Force encouraged LSC to undertake a 
``thoughtful effort to reexamine the regulation to ensure that it 
effectively encourages pro bono participation.'' Id. at 22.

III. Public Comments

    LSC determined that an examination of the PAI rule within the 
context of the Task Force recommendations would benefit from early 
solicitation of input from stakeholders. LSC therefore published two 
requests for information seeking both written comments and 
participation in two rulemaking workshops held in July and September 
2013. The first request for information focused discussion specifically 
on the three parts of Recommendation 2. 78 FR 27339, May 10, 2013. The 
second request for information, published after the July workshop, 
supplemented the first with questions developed in response to issues 
raised at the July workshop. 78 FR 48848, Aug. 12, 2013. In particular, 
the August request for information posed more detailed questions about 
the issues identified in Recommendation 2.
    LSC received a total of twenty-five responses from LSC recipients, 
the American Bar Association (ABA), through its Standing Committee on 
Legal Aid and Indigent Defendants, the National Legal Aid and Defender 
Association, and others involved in pro bono work, including a state 
court judge and a representative of the National Association of Pro 
Bono Professionals. The nature of the written comments and workshop 
presentations led LSC to consider the recommendations of the Task Force 
in the context of overlapping solutions that address more than one of 
the recommendations, rather than discrete responses to each 
recommendation. For example, LSC considered the definition of the term 
``private attorney'' as an issue whose resolution would respond to both 
Recommendations 2(a) and 2(b). This preamble will identify and discuss 
the Task Force recommendations and the comments as the Corporation 
did--within the framework of cross-cutting issues.
    The report of the Pro Bono Task Force, the responses to the 
requests for information, transcripts of workshop presentations, and 
other related materials are available at http://www.lsc.gov/rulemaking-lscs-private-attorney-involvement-pai-regulation.

The Definition of ``Private Attorney''

    The current PAI rule defines ``private attorney'' as ``an attorney 
who is not a staff attorney as defined in Sec.  1600.1 of these 
regulations.'' 45 CFR 1614.1(d). ``Staff attorney,'' in turn, is 
defined as ``an attorney more than one half of whose annual 
professional income is derived from the proceeds of a grant from [LSC] 
or is received from a recipient, subrecipient, grantee, or contractor 
that limits its activities to providing legal assistance to clients 
eligible for assistance under the [LSC] Act.'' 45 CFR 1600.1. Finally, 
LSC has defined ``attorney'' as ``a person who provides legal 
assistance to eligible clients and who is authorized to practice law in 
the jurisdiction in which assistance is rendered.'' 45 CFR 1600.1.
    The ``private attorney'' definition received considerable criticism 
in written responses to the requests for information and during the 
workshops themselves. Commenters called the definition ``confusing and 
limiting'' because the use of the word ``private'' seems to exclude 
government attorneys, in-house counsel, corporate attorneys, attorneys 
at other non-profits, law school professors, and adjunct law 
professors, even though the definition itself does not exclude them. 
They noted that the definition prevents recipients from allocating to 
the PAI requirement costs associated with involving law students, law 
graduates who have not yet become members of a state bar, and 
paralegals in the provision

[[Page 21191]]

of legal information and legal assistance to eligible clients. Finally, 
they discussed the fact that because the definition is tied to the term 
``staff attorney,'' with its inclusion of an attorney who earns more 
than one-half of his or her professional income from an LSC grant, 
recipients cannot pay attorneys who are not otherwise employed, or not 
employed full-time (e.g., a retired attorney or a stay-at-home parent), 
to take cases at a discounted rate without turning them into ``staff 
attorneys'' whose activities are excluded from counting toward the PAI 
requirement. Commenters overwhelmingly recommended revising the term 
``private attorney,'' with many of the recommendations being 
substantially similar to Recommendation 2(a) of the Task Force report.
    In Recommendation 2(a), the Task Force recommended that LSC allow 
resources spent by recipients to supervise and train law students, law 
graduates, deferred associates, and others to be counted toward meeting 
recipients' PAI obligations. Panelists expanded upon this 
recommendation by suggesting that LSC amend the rule to allow 
recipients to allocate to the PAI requirement costs associated with 
involving paralegals, retired attorneys, and other professionals who 
may assist the recipient in providing legal assistance, such as 
accountants or forensic investigators. Some commenters noted that 
paralegals and lay advocates can contribute to recipients' PAI 
activities by participating in training events or representing clients 
in administrative proceedings where permitted by federal or state law. 
Other commenters described the contributions made by non-legal 
professionals to their delivery of legal services, such as financial 
experts conducting forensic accounting and providing expert testimony 
in recipient client cases. A few commenters advocated continuing to 
limit participation in PAI activities to licensed attorneys. On the 
whole, commenters supported including within the PAI rule services 
provided by non-lawyers that directly aid recipients in their delivery 
of legal assistance to eligible clients.
    LSC considered Recommendation 2(a) and all of the comments relevant 
to the definition of ``private attorney'' and determined that a 
revision was in order. As noted by commenters, the existing definition 
excludes many individuals whose participation is instrumental in 
improving and expanding the availability of quality legal assistance to 
LSC-eligible individuals. LSC proposes to address the recommendation 
and comments in two ways. The first is to revise the definition of 
``private attorney.'' The second is to expand the PAI rule to allow 
recipients to allocate to the PAI requirement costs associated with 
engaging law students, law graduates, or other professionals in the 
recipients' provision of legal information and legal assistance to 
eligible clients.
    LSC proposes to revise the definition of the term private attorney 
in three significant ways. First, LSC proposes to remove the reference 
to staff attorney as defined in Sec.  1600.1 and replace it with 
affirmative statements about who a private attorney is. Second, LSC 
proposes to exclude from the term attorneys employed more than 1,000 
hours per calendar year by LSC recipients or subrecipients. Finally, 
LSC proposes to exclude from the definition attorneys employed by non-
LSC-funded legal services providers who are acting within the scope of 
their employment. LSC proposes these exclusions because the purpose of 
the PAI rule is to engage attorneys who are not currently involved in 
the delivery of legal services to low-income individuals as part of 
their regular employment.
    In addition to revising the definition of the term private 
attorney, LSC proposes to add definitions for the new terms law 
graduate, law student, and other professional. As defined, individuals 
in these categories will be included along with private attorneys as 
individuals that recipients may involve in the delivery of legal 
services.

Defining Law Student Involvement

    In Recommendation 2(a), the Task Force noted that ``[c]ontributions 
from law school clinics can be counted only if a private attorney 
supervises the students'' and encouraged the Corporation to ``consider 
amending the regulation to allow grantee organizations to count as PAI 
expenses the funds they expend on training and supervising law 
students.'' Report of the Pro Bono Task Force at 20. Under the current 
rule, recipients may allocate to the PAI requirement costs associated 
with law student activities only when a private attorney, including a 
professor overseeing a law school clinic, supervises the student. See 
OLA External Opinion EX-2005-1001. In its analysis, OLA noted that 
``[n]one of the support or indirect delivery activities listed in Sec.  
1614.3(b)(2) expressly include the supervision of law students or 
discuss activities done solely as an `investment' in potential future 
private attorney involvement[.]'' EX-2005-1001 at 5. OLA concluded that 
because law students did not meet the definition of ``private 
attorney,'' any costs associated with services provided by the students 
could not be allocated to the recipient's PAI requirement. Likewise, 
recipients could not count toward the PAI requirement the time 
recipient attorneys spent supervising the law students because the 
supervision could not be considered support provided by the recipient 
to a private attorney.
    Participants in the rulemaking workshops and other commenters 
echoed Recommendation 2(a). One commenter described a new bar rule in 
New York that will require all applicants to the New York bar to 
provide fifty hours of pro bono legal services prior to applying for 
admission. The same commenter stated that allowing recipients to 
receive PAI credit for training and supervising law students will 
result in more effective and efficient integration of the ``hundreds of 
thousands of new volunteer law student pro bono hours that are becoming 
available into their delivery systems.''
    While commenters generally supported extending PAI to services 
provided by law students, they did so with some caveats. Some 
commenters were concerned that services provided by law students would 
become the focus of some recipients' programs, thus detracting from the 
rule's emphasis on engaging licensed attorneys in the delivery of legal 
services. Others suggested caps on the amount of the 12.5% that could 
be met by credit for supervising law students. Finally, others 
suggested that only those law student activities that involve 
substantive legal work that actually expand recipients' capacity--such 
as research or developing pleadings--should be included within the 
rule.
    LSC considered this issue at length. A significant part of the 
discussion centered on the implicit suggestion in both the Task Force 
report and the comments that recipients should be able to allocate to 
the PAI requirement costs associated with their existing programs 
involving law students. LSC proposes to adopt the part of 
Recommendation 2(a) that advocates including law students within the 
rule. Interviewing clients, legal research, development of standard 
forms for posting on a legal resource Web site, and drafting briefs or 
memoranda are examples of law student work that supports the provision 
of legal information or legal assistance to eligible clients.

Defining Paralegal Involvement

    The Task Force suggested that LSC recipients ``consider ways in 
which they

[[Page 21192]]

can involve other members of the law firm community in pro bono--
including paralegals and other administrative staff.'' Report of the 
Pro Bono Task Force at 11. Although the Task Force did not recommend 
explicitly that LSC consider amending part 1614 to include paralegals 
among the groups that recipients could engage in the delivery of legal 
services, it did suggest in Recommendation 2(a) that ``resources spent 
supervising and training law students, deferred associates, and 
others'' should be counted toward the PAI requirement. Id. at 20.
    Commenters recommended including paralegals within the definition 
of ``private attorney.'' Commenters pointed out that paralegals can 
represent clients in administrative proceedings and assist in will 
preparation under an attorney's supervision. By taking on these types 
of duties, commenters continued, paralegals both expand the 
availability of services to eligible clients and relieve the 
supervising attorney of having to undertake those duties alone, thereby 
increasing her availability to provide legal services.
    LSC is adopting the recommendation to include paralegals in the 
rule. LSC considered establishing paralegals as a separate category of 
individuals recipients may engage in activities under this part. LSC 
researched accrediting standards and job descriptions for paralegals 
and determined that the term ``paralegal'' can cover a wide range of 
roles, from purely administrative support staff to provider of 
substantive legal services under the supervision of a licensed 
attorney. Additionally, LSC found that there is no uniformity across 
states with regard to the education, licensing, or credentialing that 
an individual must have to be called a ``paralegal.'' See, e.g., 
National Federation of Paralegal Associations, Paralegal Regulation by 
State (updated 2012), available at http://www.paralegals.org/default.asp?page=30. Therefore, paralegals are included within the term 
other professional.

Support and Other Activities

    Recommendations 2(b) and 2(c) of the Task Force report formed the 
basis for the most significant proposed changes to part 1614. These 
recommendations focused, respectively, on intake and referral programs 
and on case-handling requirements under the existing regulations. Both 
recommendations touched on common issues: whether PAI activities must 
include screening for LSC eligibility, whether recipients must track 
the outcomes of all cases in which services are provided through 
private attorneys, and whether recipients must accept individual cases 
handled by private attorneys as their own cases. LSC proposes to 
address the issues raised by these recommendations and the relevant 
comments by introducing provisions governing three areas: screening, 
clinics, and intake and referral systems. LSC will discuss the three 
areas separately in this preamble.

Screening

    Recommendation 2(c) of the Task Force report discussed two 
requirements. The first was that recipients accept individuals assisted 
through the clinic as their own clients in order to allocate costs 
associated with supporting the clinic to the PAI requirement. This 
requirement, stated in OLA External Opinion EX-2008-1001, is addressed 
below in the discussion regarding clinics and intake and referral 
systems.
    EX-2008-1001 raised a second issue: whether recipient participation 
in an unscreened clinic could potentially subsidize restricted 
activities, such as providing legal assistance to aliens not eligible 
for LSC-funded services. To put this issue into context, we briefly 
review restrictions imposed by statutes and LSC's regulations.
    The LSC Act requires LSC recipients to provide LSC-funded services 
based on financial eligibility criteria and priorities that are 
determined pursuant to LSC guidelines. 42 U.S.C. 2996f(a)(2). 
Recipients of LSC funding are subject to two types of restrictions 
under the LSC Act and LSC's annual appropriations: restrictions on the 
use of LSC funds and some other funds (``fund restrictions'') and 
restrictions on all activities, regardless of the source of funds 
(``entity restrictions''). Thus, while LSC recipients can use, for 
example, Older Americans Act funds for services to people who are not 
financially eligible (a funds restriction), LSC recipients cannot use 
any funds, other than Tribal funds, for ineligible aliens (an entity 
restriction). The applicability of these restrictions to non-LSC funds 
is governed by 45 CFR part 1610.
    The LSC funds restrictions appear primarily in the LSC Act. See, 
e.g., 42 U.S.C. 2996f(b) (prohibitions on the use of LSC funds for 
various activities including criminal proceedings, political 
activities, and desegregation proceedings). The LSC entity restrictions 
appear primarily in LSC's annual appropriation. Since the early 1980s, 
Congress has imposed restrictions on LSC grantees through riders in 
LSC's appropriation. In 1996, Congress added the current set of 
appropriation restrictions and expanded them to apply to all activities 
of LSC grantees. See, e.g., sec. 504, Pub. L. 104-134, 110 Stat. 1321, 
1321-53--1321-57. Before an LSC recipient may provide legal assistance 
to an individual, the recipient must ensure that the individual meets 
the LSC eligibility criteria or may be assisted by the recipient using 
non-LSC funds, and that the assistance will not involve a restricted 
activity.
    LSC has further defined when recipients must screen for 
eligibility. LSC's Case Service Report (CSR) Handbook describes two 
types of services that recipients may provide: legal assistance and 
legal information. The CSR defines ``legal assistance'' as ``the 
provision of limited service or extended service on behalf of a client 
or clients that meets the criteria of the CSR Closing Categories 
contained in Chapter VIII. Legal assistance is specific to the client's 
unique circumstances and involves a legal analysis that is tailored to 
the client's factual situation. Legal assistance involves applying 
legal judgment in interpreting the particular facts and in applying 
relevant law to the facts presented.'' Legal Services Corporation, Case 
Service Report Handbook, at 3 (2008 ed., as amended 2011). By contrast, 
the CSR Handbook defines ``legal information'' as ``substantive 
information not tailored to address a person's specific legal problem. 
As such, it is general and does not involve applying legal judgment and 
does not recommend a specific course of action.'' Id. LSC does not 
require recipients to determine whether an individual is eligible for 
services if the recipient is providing the individual only with legal 
information as defined in the CSR Handbook. Other Services Report FAQ, 
Nov. 2011, at 8, http://grants.lsc.gov/rin/about-rin/grantee-guidance/other-services-report.
    With these statutory, regulatory, and policy requirements in mind, 
LSC has examined the issue whether recipient participation in an 
unscreened clinic could potentially subsidize restricted activities. 
The Task Force report did not discuss the issue of subsidies. When 
discussing screening in the clinic context, commenters expressed 
minimal concern about the potential for assisting clients who are 
ineligible for LSC-funded services. Most commenters focused on 
expanding the availability of private attorneys to provide pro bono 
legal services and not on the scope of LSC's legal obligations to 
ensure that LSC resources are not used to subsidize restricted 
activities. One commenter suggested that the test for the PAI rule 
should be whether the activity is targeted at the base of eligible 
clients,

[[Page 21193]]

even if the recipient cannot know whether every person assisted would 
be eligible. Another spoke about screened advice clinics, recommending 
that recipients should be able to count resources toward the PAI 
requirement for the time recipients spend supervising such clinics. The 
LSC Office of Inspector General (OIG) expressed concern that a relaxed 
screening requirement for clinics would have the ``unintended effect of 
increasing subsidization of restricted activity.'' OIG urged LSC to 
exercise caution to ``ensure that changes to the PAI rule do not make 
it more difficult to prevent and detect noncompliance with LSC 
regulations and do not increase the risk that LSC funds will be used to 
subsidize, whether intentionally or not, restricted activity.''
    LSC considered the commenters' views on screening and the burden 
that screening may place on recipients' support for clinics operated 
solely by them or through the joint efforts of community organizations. 
LSC considered those views in light of the statutory restrictions 
Congress places on the funds appropriated to LSC and on recipients of 
LSC funds. LSC has concluded that, regardless of whether legal 
assistance is provided directly by a recipient or through PAI 
activities, to avoid impermissible subsidization, individuals must be 
screened for LSC eligibility and legal assistance may be provided only 
to those individuals who may be served consistent with the LSC Act, the 
LSC appropriation statutes, and the applicable regulations. Clinics 
that provide only legal information do not require screening.
    The population to be served through the PAI rule is clearly stated 
in the introductory section of the existing rule: ``This part is 
designed to ensure that recipients of Legal Services Corporation funds 
involve private attorneys in the delivery of legal assistance to 
eligible clients.'' 45 CFR 1614.1(a). In its report, particularly 
Recommendation 2, the Task Force took no position on expanding the 
scope of the rule to allow recipients to provide legal assistance to 
serve populations beyond eligible individuals through their PAI 
programs. Rather, the Task Force emphasized changes to part 1614 that 
would improve recipients' ability to reach out to individuals who 
wanted to become engaged in providing legal services. LSC believes that 
the overall set of proposed changes to the PAI regulation promotes the 
Task Force's recommendations and commenters' expressed desire for 
increased flexibility to engage individuals and to support clinics 
while carrying out the Corporation's obligation to ensure that 
recipients of Corporation funds comply with applicable statutory 
restrictions.

PAI Clinics

    ``Clinics,'' as the term applies in the field, covers a diverse 
array of service delivery methods. Clinics have various screening 
mechanisms, levels of service provided, and involvement of recipients 
and other organizations, such as courts, churches, and community 
organizations. For example, both a training provided by a recipient 
attorney on a particular topic of law to private attorneys who are 
volunteering for a pro bono project and a scheduled, time-limited, 
session open to the public at which individuals can receive brief 
advice or extended representation from a private attorney may be called 
``clinics.'' The varying nature of clinics made it difficult to draft a 
rule that would give recipients the flexibility they desire, and that 
the Task Force recommended, to achieve the goals of the PAI rule while 
simultaneously meeting the Corporation's responsibility to ensure 
accountability for the use of LSC funds and observance of the LSC 
funding restrictions.
    In Recommendation 2(c), the Task Force noted that recipients ``are 
under strict guidelines about what cases they can and cannot handle. . 
. Yet, under the PAI regulations they cannot count placement of any 
cases that they are not themselves able to accept.'' Report of the Pro 
Bono Task Force at 21. The Task Force encouraged LSC to ``reexamine the 
rule that mandates adherence to LSC grantee case handling requirements, 
including that matters be accepted as grantee cases in order for 
programs to count toward PAI requirements.'' Id. The Task Force stated 
that ``the regulation poses challenges to effective pro bono 
collaborations,'' and pointed to OLA External Opinion EX-2008-1001 as 
an example. Id. EX-2008-1001, inter alia, concluded that individuals 
receiving direct services from a private attorney, even in a clinic 
setting, must be screened and must be accepted as clients of the 
recipient in order for the recipient to count the case toward its PAI 
requirement.
    Commenters generally supported Recommendation 2(c). Commenters 
criticized the position set forth in EX-2008-1001 as a hindrance to 
recipients' ability to collaborate effectively and efficiently with 
other providers in carrying out activities that attract the 
participation of private attorneys. One commenter stated that when 
another organization is the main organizer or ``owner'' of a clinic, it 
will often not want to follow another entity's rules in operating the 
clinic. Additionally, the commenter noted that other organizations and 
volunteers would not want to participate in a clinic that has to meet 
all of LSC's CSR requirements because private attorneys do not want to 
follow any more rules than they have to.
    After consideration of Recommendation 2(c), comments at the 
workshops and in response to the requests for information, and EX-2008-
1001, LSC is reversing the requirement that individuals receiving 
direct services from a private attorney, even in a clinic setting, must 
be accepted as clients of the recipient in order for the recipient to 
count the case toward its PAI requirement. LSC considers the 
organizational and technical support described in EX-2008-1001 to be 
more akin to support activities described in Sec.  1614.3(b) than to 
direct delivery activities under Sec.  1614.3(a). LSC proposes to no 
longer require recipients to apply the CSR case-handling requirements 
to legal assistance provided by private attorneys through clinics 
supported by the recipient in order to allocate the associated costs to 
the PAI requirement.
    LSC proposes to establish a new category of activities specifically 
for clinics. This new regulatory provision will allow recipients to 
allocate costs associated with support to clinics to the PAI 
requirement. The new provisions of part 1614 will govern only those 
clinics in which a recipient plays a supporting role. Recipients will 
remain responsible for complying with the screening and CSR case-
handling requirements for those clinics at which recipient attorneys 
provide legal assistance to individuals.

Intake and Referral Systems

    Recommendation 2(b) of the Task Force report proposed revisions to 
part 1614 that would allow recipients ``to spend PAI resources to 
enhance their screening, advice, and referral programs that often 
attract pro bono volunteers while serving the needs of low-income 
clients.'' Report of the Pro Bono Task Force at 21. In its 
recommendation, the Task Force noted that under the existing PAI rule, 
``LSC grantees cannot count money spent to support centralized 
screening and referral services as PAI, even where those referral 
services are needed to support pro bono programs.'' Id. The Task Force 
identified two OLA opinions, AO-2009-1004 and AO-2011-001, as creating 
obstacles to recipients' efforts to maximize their resources by 
participating in integrated pro bono referral systems.
    Panelists and commenters overwhelmingly supported

[[Page 21194]]

Recommendation 2(b). Many of them echoed the Task Force's conclusion 
that intake and referral systems are an especially efficient and 
effective way to reach large numbers of individuals seeking legal 
assistance. Integrated systems in which recipients have already 
screened the cases and identified the individual's legal needs make it 
easier for the private attorney taking the case to simply begin work on 
the case. Intake and referral systems also are an attractive vehicle 
for collaborating with other providers and private attorneys because 
they allow participating individuals to help a large number of clients 
with little time commitment. Like the Task Force, many commenters and 
panelists urged LSC to reverse AO-2009-1004 and AO-2011-001 in the 
interest of removing barriers to collaboration and the efficient 
delivery of legal assistance.
    AO-2009-1004 and AO-2011-001 stand for different propositions. In 
AO-2009-1004, OLA considered whether a recipient could count toward its 
PAI requirement costs associated with a hotline staffed by another 
legal services provider that referred cases back to the four LSC 
funding recipients within the state. OLA determined that because the 
hotline operator was another legal services provider that was either 
handling cases itself or referring the cases to other legal services 
providers including the recipient, the costs associated with the 
recipient's support for the hotline could not be counted toward the PAI 
requirement. As stated above, the purpose of the PAI rule is to engage 
attorneys who are not currently involved in the delivery of legal 
services to low-income individuals as part of their regular employment. 
Accordingly, LSC continues to believe that the result in AO-2009-1004 
is correct and will not rescind the opinion.
    In AO-2011-001, the recipient participated in an intake and 
referral system for which the recipient screened clients for 
eligibility and referred eligible cases out to volunteer attorney 
programs for placement. OLA concluded that the activity was not direct 
delivery under Sec.  1614.3(a) because the recipient did not accept the 
cases as its own prior to referring them out and did not track the 
cases in any way after making the referrals. OLA also concluded, based 
on an LSC policy decision, that the activity did not count as a 
permissible support activity under Sec.  1614.3(b). The policy decision 
turned on the fact that the recipient did not track the referrals in 
any way, so the recipient could not determine whether the referred 
individuals received services or what the outcomes of those services 
were. ``Under such circumstances, without the recipient involvement and 
oversight required by `1614 compliant' direct delivery systems, LSC 
cannot be assured that such systems `generate the most possible legal 
services for eligible clients from available, but limited, resources.' 
'' AO-2011-001, p. 5.
    LSC has determined that the policy position relied on by OLA in AO-
2011-001 was more stringent than necessary. LSC no longer believes that 
it is necessary for recipients to accept the clients being referred as 
their own and to track the outcome of the services provided by the 
private attorney. LSC proposes instead to require that recipients 
participating in intake and referral systems only report the number of 
LSC-eligible individuals referred to lawyer placement programs and the 
number of such individuals who actually are placed with private 
attorneys. If adopted in the final rule, these proposals would serve to 
overturn AO-2011-001.

Flexibility in Choice of PAI Activities

    During the workshops and in the written comments, LSC heard 
differing opinions regarding whether LSC should prescribe or limit with 
some precision how recipients should meet their PAI requirement. For 
example, LSC received comments about whether recipients should be 
required to dedicate a certain percentage of the PAI requirement to the 
direct delivery of legal assistance. As another example, some panelists 
and commenters expressed concern that allowing supervision of law 
students to count toward the PAI requirement would cause recipients to 
direct resources away from expanding opportunities to involve licensed 
attorneys in the delivery of legal assistance. As a further example, 
some panelists and commenters voiced reservations that allowing 
recipients to allocate costs associated with brief service clinics to 
the PAI requirement would result in fewer resources being spent to get 
licensed attorneys to accept individual cases for extended 
representation. Finally, some commenters opposed the Task Force 
recommendation to expand the PAI rule to allow recipients to engage law 
students, law graduates, and non-lawyer professionals. Commenters 
opposing the recommendation generally focused on the rule's purpose of 
engaging attorneys in the delivery of legal assistance.
    The current rule requires recipients to provide direct delivery of 
legal services as part of their PAI activities; however, it does not 
mandate that recipients commit a certain amount of their PAI 
requirement to providing direct delivery. Nor does it place caps on the 
types of support or other activities in which recipients may engage to 
meet the 12.5% requirement. LSC has decided to continue this approach 
to the PAI rule. This determination rests on two bases. First, 
consistent with the recommendations of the Pro Bono Task Force, the 
Corporation decided to expand the categories of individuals that 
recipients may engage in the delivery of legal information and legal 
assistance. A principal purpose of the PAI rule was to engage private 
attorneys in the delivery of legal services, and LSC believes this 
remains a significant goal. However, LSC also believes helping to meet 
the unmet legal needs of eligible clients was and remains a significant 
purpose of the rule. The delivery of legal services has changed since 
the rule's inception, and continues to change, in ways that encourage 
openness and inclusiveness toward other providers as additional 
resources to help meet currently unmet legal needs. As the Task Force 
remarked, law students, law graduates, paralegals, and professionals in 
non-legal fields can make significant contributions to LSC recipients' 
delivery of legal information and legal assistance. LSC wants 
recipients to think creatively about the best means for leveraging 
community resources to improve the delivery of legal information and 
legal assistance to eligible clients.
    Second, LSC believes that there likely is no ``one size fits all'' 
structure for creating the optimal PAI program. The most effective and 
efficient system is a function of, among other factors, the nature of 
the unmet legal needs and the available volunteer resources in a 
recipient's service area. Furthermore, LSC does not believe it has the 
data or the experience to identify a single optimal structure for PAI 
services. As with their priorities, recipients must determine which 
combination of direct delivery, intake and referral systems, clinics, 
or other activities will allow them to meet or exceed their PAI 
requirements and best serve their clients.

IV. Section-by-Section Discussion of the Proposed Changes

1614.1 Purpose

    LSC proposes to revise Sec.  1614.1 to state more clearly the 
purpose of the PAI rule. Proposed Sec.  1614.1 states the Corporation's 
expectation that PAI will be ``an integral part'' of a recipient's 
delivery of legal services. It also states that that the Corporation 
has designed part 1614 to ensure that recipients

[[Page 21195]]

involve private attorneys in the delivery of legal information and 
legal assistance to eligible clients, and encourages recipients to 
engage law students, law graduates, or other professionals in those 
activities.
    LSC proposes to move the requirement that recipients expend an 
amount equal to 12.5% of their annualized basic field grants on PAI 
activities from existing Sec.  1614.1(a) to the statement of general 
policy in Sec.  1614.2(a). Existing Sec.  1614.1(b), regarding the use 
of Native American or migrant funds for PAI activities, is being 
relocated to proposed Sec.  1614.2(b). The Corporation proposes to 
delete existing Sec.  1614.1(c), revise and move Sec.  1614.1(d) to 
Sec.  1614.3, and move Sec.  1614.1(e) to proposed Sec.  1614.5.

1614.2 General Policy

    LSC proposes to revise Sec.  1614.2 to contain the policy 
statements that govern the PAI rule. Proposed Sec.  1614.2(a) is 
adapted from existing Sec.  1614.1(a) and states the requirement that 
recipients expend an amount equal to at least 12.5% of their annualized 
basic field grants on PAI activities. Similarly, LSC proposes to move 
existing Sec.  1614.1(b), regarding the involvement of private 
attorneys in the delivery of legal services supported by Native 
American or migrant funding, to Sec.  1614.2(b). LSC proposes to add 
``law students, law graduates, or other professionals'' in both 
sections to reflect the expansion of the rule to include these 
individuals in recipients' delivery of legal information and legal 
assistance to eligible clients.

1614.3 Definitions

    The Corporation proposes to relocate all parts of existing Sec.  
1614.3 to new sections of part 1614 and create a new definitions 
section in Sec.  1614.3.
    Proposed Sec.  1614.3(a) defines the term attorney for purposes of 
part 1614 only. LSC's regulations define the term attorney at Sec.  
1600.1 to mean an individual providing legal assistance to eligible 
clients who is authorized to practice law in the jurisdiction in which 
services are rendered. 45 CFR 1600.1. This definition does not make 
sense within the context of part 1614, the purpose of which is to 
engage attorneys who are not providing services to eligible clients. 
LSC therefore proposes to except part 1614 from using the definition of 
attorney in Sec.  1600.1 of these regulations.
    Proposed Sec.  1614.3(b) defines the term law graduate to mean an 
individual who has completed the educational or training requirements 
required for application to the bar in any U.S. state or territory. The 
definition is intended to capture two types of individuals: Those who 
have recently graduated from law school, but who are not yet licensed 
attorneys; and those who have completed a practical legal 
apprenticeship program that provided them with the necessary 
qualifications to become licensed in any jurisdiction that admits 
apprentices to the bar. LSC proposes to limit the term law graduate to 
those individuals who have completed their education or training within 
the preceding two years. The reason for this limitation is to capture 
individuals who have completed legal training and intend to enter a 
legal career, but who have not yet been admitted to the bar. If an 
individual defined as a law graduate under this part has not been 
admitted to the bar within two years of completing his or her education 
or training, that individual could fall under the definition of other 
professional in proposed Sec.  1614.3(f).
    Proposed Sec.  1614.3(c) defines the term law student to include 
two groups. The first is individuals who are or have been enrolled in a 
law school that can provide the student with a degree that is a 
qualification for application to the bar in any U.S. state or 
territory. The second is individuals who are or have been participating 
in an apprenticeship program that can provide the individual with 
sufficient qualifications to apply for the bar in any U.S. state or 
territory. LSC recognizes that the delivery of legal education is 
evolving and that there are differences among the states with respect 
to the prerequisites for admission to the bar. Some states may allow 
only graduates of law schools accredited by the American Bar 
Association (ABA) or the American Association of Law Schools (AALS) to 
apply. Others allow graduates of such schools plus schools that are not 
accredited by either the ABA or AALS, but that are approved by the 
state bar or state legislature, to apply. Some states allow individuals 
who have completed legal apprenticeship programs to apply for admission 
to the bar; others do not. LSC proposes to define law student broadly 
enough to give recipients the flexibility to engage individuals who are 
pursuing some form of legal education in the provision of legal 
information or legal assistance to eligible individuals under this 
part.
    LSC proposes to limit the term law student to those individuals who 
are currently enrolled, full-time or part-time, in law school or in an 
apprenticeship program, or who have been so enrolled within the past 
year. The term is intended to capture both current enrollees and those 
who take a brief sabbatical from their legal education. LSC also 
proposes to limit the term to those individuals who have not been 
expelled from law school or terminated from a legal apprenticeship 
program.
    Proposed Sec.  1614.3(d) defines the term legal assistance. This 
definition is substantially adapted from the LSC CSR Handbook, and is 
different from the term legal assistance defined in the LSC Act and in 
Sec.  1600.1 of these regulations. LSC proposes to adopt the CSR 
Handbook definition in the PAI rule for consistency in the treatment of 
legal assistance and compliance with eligibility screening requirements 
by both recipients and private attorneys.
    Proposed Sec.  1614.3(e) defines the term legal information as the 
provision of substantive legal information that is not tailored to 
address an individual's specific legal problem and that does not 
involve applying legal judgment or recommending a specific course of 
action. This definition is also adapted substantially from the CSR 
Handbook for the same reasons stated above with respect to the 
definition of legal assistance.
    Proposed Sec.  1614.3(f) defines the term other professional. Other 
professional means any individual who is not engaged in the practice of 
law, is not employed by the recipient, and is providing services to an 
LSC recipient in furtherance of the recipient's provision of legal 
information or legal assistance to eligible clients. LSC intends this 
definition to cover a wide spectrum of professionals whose services 
will help recipients increase the effectiveness and efficiency of their 
programs. Such professionals include paralegals, accountants, and 
attorneys who are not authorized to practice law in the recipient's 
jurisdiction (such as an attorney licensed in another jurisdiction or a 
retired attorney who is prohibited from practicing by the bar rules). 
These individuals may provide services within their areas of expertise 
to a recipient that would improve the recipient's delivery of legal 
services. For example, a volunteer paralegal representing a client of 
the recipient in a Supplemental Security Income case or a volunteer 
accountant providing a legal information program on the earned income 
tax credit would constitute other professionals assisting a recipient 
in its delivery of legal information or legal assistance to eligible 
clients.
    Proposed Sec.  1614.3(g) defines the term PAI clinic as ``an 
activity under this part in which private attorneys, law students, law 
graduates, or other professionals are involved in providing

[[Page 21196]]

legal information and/or legal assistance to the public at a specified 
time and location.'' PAI clinics may consist solely of a legal 
information session on a specific topic, such as bankruptcy or no-
contest divorce proceedings, that are open to the public and at which 
no individual legal assistance is provided. Or, a PAI clinic may be 
open to the public for walk-in intake and screening, and either the 
provision of individual legal assistance or a referral for services 
from another organization. Some clinics are hybrids of the two models, 
and some clinics are aimed at providing technical assistance to pro se 
litigants, such as help understanding the court procedures or filling 
out pleadings. The common thread among the activities considered to be 
clinics is that they are open to the public and distinct from a 
recipient's regular legal practice.
    Proposed Sec.  1614.3(h) defines the term private attorney. LSC 
proposes to remove the definition of private attorney in existing Sec.  
1614.1(d) and replace it with an entirely new definition. Proposed 
Sec.  1614.3(h)(1) will define private attorney as an attorney who is 
licensed or otherwise authorized to practice law in the jurisdiction in 
which the recipient is located, or an attorney who is employed less 
than 1,000 hours per calendar year by an LSC recipient or subrecipient, 
but only as to activities conducted outside the scope of his or her 
employment by the recipient.
    The proposed definition of private attorney improves upon the 
current definition in multiple ways. It removes the link to the term 
staff attorney. By eliminating the reference to staff attorney, the 
Corporation is also eliminating the obligation of recipients to 
determine how much of a private attorney's income is derived from PAI 
compensation in order to determine whether the recipient may allocate 
costs associated with services provided by the private attorney to the 
PAI requirement. The proposed definition explicitly contemplates that 
any attorney licensed or otherwise authorized, by court rules or 
legislation, to practice law in a jurisdiction may provide legal 
assistance to eligible clients or legal information through a 
recipient's PAI program. The definition does not identify specifically 
government attorneys, corporate attorneys, law professors, retired 
attorneys, and others who may be licensed or otherwise authorized to 
practice law in a particular jurisdiction. However, LSC believes that 
the revised definition makes clear that these categories of attorneys 
are included within the definition.
    The proposed definition also allows attorneys who are employed less 
than 1,000 hours per calendar year at a recipient to be considered 
private attorneys with respect to legal services provided to the 
recipient outside of their employment. This aspect of the definition is 
intended to capture the attorney who is employed half-time or less by a 
recipient. A recipient may allocate to its PAI requirement costs 
associated with this attorney's provision of legal assistance or legal 
information on his or her own time.
    The proposed rule establishes two exceptions to the definition of 
private attorney. The first exception is for attorneys who are employed 
more than 1,000 hours per calendar year by a recipient. The second is 
for attorneys employed by non-LSC-funded legal services providers who 
are acting within the terms of their employment. In both situations, 
the excepted attorney is already engaged, as part of their regular 
employment, in the provision of legal services to low-income 
individuals.
    Proposed Sec.  1614.3(i) defines the term screen for eligibility. 
The proposed definition makes clear that clients who will be receiving 
legal assistance through PAI activities must receive the same level of 
screening that recipients use for their own legal assistance 
activities. Screening for eligibility includes screening for income and 
assets, eligible alien status, citizenship, whether the individual's 
case is within the recipient's priorities, and whether the client seeks 
assistance in an area or through a strategy that is restricted by the 
LSC Act, the LSC appropriation acts, and applicable regulations. 
Screening for eligibility can also include determining whether a client 
can be served using non-LSC funds.

1614.4 Range of Activities

    LSC proposes to move existing Sec.  1614.3(a), (b), and (d) to 
Sec.  1614.4, and to combine the provisions governing the direct 
delivery of legal services in one paragraph. LSC also proposes to 
expand upon the types of other activities, including support 
activities, that recipients may engage in under this part. LSC proposes 
to move existing Sec.  1614.3(c) to proposed Sec.  1646.6, which will 
govern the procedure recipients use to develop their PAI plans. 
Finally, LSC proposes to move existing Sec.  1614.3(e), regarding 
accounting and recordkeeping standards for the PAI program, to a new 
Sec.  1614.7 Compliance.
    Proposed Sec.  1614.4(a) will set forth the requirements applicable 
to direct delivery activities under this part. Proposed Sec.  
1614.4(a)(1) adopts existing Sec.  1614.3(a), which states that 
recipients' PAI programs must include the direct delivery of legal 
services by private attorneys, in its entirety and without change. 
Under proposed Sec.  1614.4(a)(2), recipients may count toward the PAI 
requirement representation of an eligible client by a non-attorney in 
an administrative proceeding where permitted by law. For example, a 
recipient may count toward its PAI requirement a law student or 
paralegal's representation of an eligible client in a Supplemental 
Security Income case, as long as the representation is permitted by law 
and undertaken consistent with the jurisdiction's rules of professional 
responsibility. Proposed Sec.  1614.4(a)(3) adopts existing Sec.  
1614.3(d), which states the minimum requirements that a direct delivery 
system must meet. LSC proposes to combine the provisions relating to 
direct delivery systems in one paragraph for ease of reference.
    LSC proposes to expand Sec.  1614.4(b) to cover support and other 
activities. The proposed rule introduces activities that received 
considerable attention from the Task Force, panelists during the 
rulemaking workshops, and commenters responding to the Requests for 
Information.
    Proposed Sec.  1614.4(b)(1) adopts existing Sec.  1614.3(b)(1) with 
one change. LSC proposes to change the current language from ``support 
provided by private attorneys to the recipient in its delivery of legal 
assistance. . . .'' to ``support provided by private attorneys to the 
recipient as part of its delivery of legal assistance. . . .'' LSC 
proposes this change to make clear that the support covered by the rule 
is support that inures primarily to the benefit of the recipient's 
clients. For example, PAI support activities would not include a 
recipient obtaining pro bono legal counsel to defend the recipient in 
an employment discrimination action brought by one of its own 
employees.
    Consistent with the expansion of the rule to allow recipients to 
involve paralegals and non-legal professionals in the provision of 
legal services under this part, LSC proposes to add a new Sec.  
1614.4(b)(2). Section 1614.4(b)(2) will authorize recipients to 
allocate to the PAI requirement costs associated with support provided 
by other professionals in their areas of professional expertise to the 
recipient as part of the recipient's delivery of legal information or 
legal assistance to eligible clients. Support services would include, 
but not be limited to, intake support, research, training, technical 
assistance, or direct assistance to an eligible client of the 
recipient.
    To qualify as support services under Sec.  1614.4(b)(2), the 
services must inure to

[[Page 21197]]

the benefit of the recipient's clients. For example, an accountant who 
is reviewing financial records of a recipient client who has filed for 
bankruptcy is providing support to the recipient as part of the 
recipient's delivery of legal assistance to an eligible client. 
Similarly, an accountant who is providing information at an earned 
income tax credit clinic organized by the recipient is providing 
support to the recipient as part of the recipient's delivery of legal 
information. An accountant who is reviewing the recipient's financial 
statements to ensure that they accurately reflect the recipient's 
financial activities is not providing support as part of the 
recipient's delivery of legal assistance because the support is 
provided to the recipient for its benefit as an organization, rather 
than for the benefit of its clients.
    As a result of the introduction of proposed Sec.  1614.4(b)(2), 
existing Sec.  1614.3(b)(2), describing support provided by the 
recipient to private attorneys engaged in the delivery of legal 
services, will be incorporated and redesignated as Sec.  1614.4(b)(3). 
The lists of activities in Sec.  1614.4(b)(1), (2), and (3) are 
intended to be illustrative rather than exhaustive.
    Proposed Sec.  1614.4(b)(4) establishes the rules governing 
recipient support for PAI clinics. LSC does not intend this section to 
place any restrictions on recipients' use of funds to support PAI 
clinics beyond the restrictions contained in the LSC Act and the LSC 
appropriations acts.
    Proposed Sec.  1614.4(b)(4)(i) applies to clinics involving private 
attorneys, law students, law graduates, or other professionals that 
provide only general legal information. Individuals receiving general 
legal information through a PAI clinic do not need to be screened for 
eligibility for the reasons stated in the preceding discussion of the 
definition of legal information.
    Proposed Sec.  1614.4(b)(4)(ii) applies to PAI clinics providing 
individualized legal assistance. In order for a recipient to 
participate in or support a legal assistance clinic, the clinic must 
screen for eligibility and provide legal assistance only to those 
individuals who may be served consistent with the LSC Act and relevant 
statutory and regulatory restrictions. In other words, the clinic may 
only provide legal assistance to individuals who either meet the 
requirements to receive legal assistance from an LSC recipient using 
LSC funds (e.g., income and assets, citizenship or eligible alien 
status, case within the recipient's priorities, and assistance that is 
not otherwise restricted), or who are eligible to receive services from 
the recipient that may be supported by non-LSC funds. An example of the 
latter category is an individual who exceeds the income and asset tests 
for LSC eligibility, but is otherwise eligible for assistance. The rule 
makes clear that recipients may not allocate costs associated with the 
latter category of cases to their PAI requirements because the clients 
served are not eligible for LSC-funded legal assistance.
    Some PAI clinics are hybrid clinics at which legal information is 
provided, either as a group presentation or on an individual basis, and 
individual legal assistance is also provided. These clinics are 
addressed under the provisions governing legal assistance clinics in 
proposed Sec.  1614.4(b)(4)(ii)(C). Recipients may support hybrid 
clinics and allocate costs associated with their support to the PAI 
requirements, but only if the clinic screens for LSC eligibility prior 
to providing legal assistance and only provides assistance to 
individuals who may be served by an LSC recipient.
    Consistent with Recommendation 2(c) of the Task Force report, 
recipients are no longer required to treat legal assistance provided 
through PAI clinics as direct delivery activities under proposed Sec.  
1614.4(a) and accept the individuals assisted as their own clients. 
Recipients may, however, choose to treat legal assistance provided by 
private attorneys through PAI clinics as direct delivery activities.
    Proposed Sec.  1614.4(b)(5) establishes the rules governing intake 
and referral systems. This addition to the rule adopts Recommendation 
2(b) by allowing recipients to allocate costs associated with intake 
and referral to private attorneys to their PAI requirement. Section 
1614.4(b)(5) reflects the Corporation's decision to relieve recipients 
of the obligation to accept referred clients as part of their caseload 
and to determine the ultimate resolution of the clients' cases by 
considering intake and referral activities other activities. Cases 
screened and referred through these systems do not need to be accepted 
by the recipient as CSR cases and tracked in order for recipients to 
allocate costs associated with the system to the PAI requirement.
    The rule establishes two requirements for allocating costs. First, 
recipients must screen applicants for services for LSC eligibility. 
Second, recipients must track the number of eligible persons referred 
to a program that places applicants for services with private attorneys 
and the number of eligible persons who were placed with a private 
attorney through the program receiving the referral. LSC believes these 
requirements are necessary to ensure that LSC funds are not being spent 
for restricted purposes and to ensure that programs using intake and 
referral systems to place eligible clients with private attorneys are 
satisfying this goal.
    Proposed Sec.  1614.4(b)(6) establishes the rules for allocating 
costs associated with the work provided by law students to the PAI 
requirement. The screening and other requirements of the rule apply to 
work provided by law students under this part.
    Proposed Sec.  1614.4(c) adopts existing Sec.  1614.3(c) in its 
entirety. LSC proposes to revise the phrase ``involve private attorneys 
in the provision of legal assistance to eligible clients'' to include 
law students, law graduates, or other professionals. LSC proposes this 
change to reflect the rule's inclusion of the other categories of 
individuals that recipients may engage in PAI activities.
    Proposed Sec.  1614.4(d) makes clear that the rule is not intended 
to permit any activities that would conflict with the rules governing 
the unauthorized practice of law in the jurisdiction in which a 
recipient is located.

1614.5 Compensation of Recipient Staff and Private Attorneys; Blackout 
Period

    LSC proposes to introduce a new Sec.  1614.5 establishing rules for 
the treatment of compensation paid to private attorneys, law students, 
law graduates, or other professionals under the PAI rules. Proposed 
1614.5(a) states that recipients may allocate to the PAI requirement 
costs for the compensation of staff for facilitating the involvement of 
private attorneys, law students, law graduates, or other professionals 
in the provision of legal information and legal assistance to eligible 
clients under this part. This section is intended to make clear that 
recipients may not allocate costs associated with compensation, such as 
salaries or stipends, paid to individuals employed by the recipient who 
are providing legal information or legal assistance to eligible clients 
as part of their employment. In other words, a recipient may allocate 
costs to the PAI requirement for compensation paid to a recipient 
attorney responsible for supervising law students or law graduates paid 
a stipend by the recipient, but may not allocate the costs of the 
stipends paid to the law students or law graduates. LSC believes this 
limitation is necessary to allow recipients to allocate costs 
associated with supervising law students and law graduates to the PAI 
requirement, as recommended by the Task Force,

[[Page 21198]]

without diluting the PAI requirement by allowing recipients to also 
allocate the costs associated with compensating those individuals.
    Proposed Sec.  1614.5(b) establishes limits on the amount of 
compensation paid to a private attorney, law student, law graduate, or 
other professional that a recipient may allocate to its PAI 
requirement. LSC proposes to limit the amount of compensation to the 
amount paid for up to 800 hours of service during a calendar year. The 
reason for this limitation is that compensation at a higher level is 
inconsistent with the goal of the PAI rule to engage private attorneys 
in the work of its recipients. It does not seem consistent with that 
goal for a recipient to count toward its PAI requirement compensation 
paid to individuals who are functionally recipient staff.
    Proposed Sec.  1614.5(c) adopts a revised version of existing Sec.  
1614.1(e), which prohibits recipients from allocating to the PAI 
requirement PAI fees paid to a former staff attorney for two years 
after the attorney's employment has ended, except for judicare or 
similar fees. LSC proposes to remove as obsolete the references to the 
effective date of the regulation and contracts made prior to fiscal 
year 1986. LSC also proposes to change the time period of the rule's 
coverage from attorneys employed as staff attorneys for any portion of 
the previous two years to any individual employed by the recipient for 
any portion of the current year and the previous year for more than 
1,000 hours per calendar year, except for individuals employed as law 
students. The latter change is proposed to account for the expansion of 
the rule to allow recipients to engage individuals other than private 
attorneys in activities under this part. In recognition of the fact 
that law students are primarily engaged in educational endeavors, even 
while working at a recipient, LSC proposes to exclude law students from 
the scope of this provision.
    Additionally, LSC proposes to set the threshold for the blackout 
period at 1,000 hours or more worked for the recipient within a 
calendar year. This proposal represents a change from existing Sec.  
1614.1(e), which requires the two-year blackout period for staff 
attorneys. As discussed previously, whether an individual is a staff 
attorney within the meaning of the LSC Act and these regulations turns 
on whether the individual received more than one-half of the 
individual's income from a recipient.
    The proposed rule eases the administrative burden on a recipient by 
allowing the recipient to consider how many hours of legal information 
or legal assistance to eligible clients an individual provides to the 
recipient, rather than inquiring into the individual's finances. 
Furthermore, the proposed rule allows recipients to allocate costs 
associated with the participation in incubator programs of private 
attorneys and law graduates who are not employed by the recipient. 
Finally, the rule allows recipients to count compensation paid to 
attorneys participating in incubator projects toward the PAI 
requirement, but only for those attorneys who are not within the 
blackout period for payments to individuals previously employed by the 
recipient.

1614.6 Procedure

    LSC proposes to move the text of existing Sec.  1614.4, regarding 
the procedure recipients must use to establish their PAI plans, to 
Sec.  1614.6. LSC proposes to include law students, law graduates, or 
other professionals as individuals that recipients may consider 
engaging in activities under this part during the development of their 
PAI plans. However, LSC is not revising proposed Sec.  1614.6(b) to 
require recipients to consult with local associations for other 
professionals. LSC believes that recipients are in the best position to 
know which other professionals they may attempt to engage in their PAI 
programs, and encourages recipients to determine which professional 
associations they may want to consult in developing their PAI plans.
    LSC also proposes to relocate existing Sec.  1614.2(b), regarding 
joint PAI efforts by recipients with adjacent, coterminous, or 
overlapping service areas, to Sec.  1614.6(c) without substantive 
changes. The Corporation believes that existing Sec.  1614.2(b) is more 
appropriately located in the section governing the procedure that 
recipients must follow to establish their PAI plans and that this 
proposed change will improve the structure and logic of the rule.

1614.7 Compliance

    As stated above, LSC proposes to move existing paragraph 1614.3(e) 
regarding compliance in its entirety to a separate section. LSC 
believes that separating the accounting and recordkeeping requirements 
for the PAI program from the section prescribing the types of 
activities that recipients may engage in will improve the 
comprehensibility of the rule. LSC also proposes to divide existing 
Sec.  1614.3(e)(3) into two sections. Proposed Sec.  1614.7(c) will 
contain the statement that in private attorney models, attorneys may be 
reimbursed for actual costs and expenses. Proposed Sec.  1614.7(d) will 
state that fees paid for services under this part may not exceed 50% of 
the current market rate of the local prevailing market for the type of 
service provided. The proposed split of Sec.  1614.3(e)(3) ensures that 
the 50% cap applies to fees paid to law students, law graduates, or 
other professionals, as well as to private attorneys.

1614.8 Prohibition of Revolving Litigation Funds

    LSC proposes to move existing Sec.  1614.5, prohibiting the use of 
revolving litigation funds to meet the PAI requirement, to new Sec.  
1614.8. The only proposed substantive change to this section is the 
inclusion of law students, law graduates, or other professionals.

1614.9 Waivers

    LSC proposes to move existing Sec.  1614.6, governing the 
procedures by which recipients may seek full or partial waivers of the 
PAI requirement, to new Sec.  1614.9 without substantive change. LSC 
proposes to make technical amendments by replacing the references to 
the Office of Field Services (OFS) and the Audit Division of OFS, which 
no longer exist, with references to LSC. The Corporation is making this 
change for ease of administration by obviating the need to revise the 
rule in the event an internal restructuring, which is purely an 
operational event that does not affect substantive rights of 
recipients, causes the responsibility for making waiver decisions to 
transfer from one component to another.

1614.10 Failure To Comply

    LSC proposes to move existing Sec.  1614.7, establishing sanctions 
for a recipient's failure to comply with the PAI requirement or seek a 
waiver of the requirement, to new Sec.  1614.10. LSC proposes to 
relocate existing Sec.  1614.7(c), regarding funds withheld due to a 
failure to meet the PAI requirement or seek a waiver, to new Sec.  
1614.10(c) with one substantive change. Existing Sec.  1614.7(c) 
requires LSC to conduct a competitive grant process for PAI services in 
the recipient's service area. LSC is concerned that the current 
recipient might be the only applicant for those funds, which would 
reduce the deterrent effect of withholding the funds and defeat the 
purpose of holding a competition for additional funds for PAI 
activities. LSC proposes to revise this provision to allow LSC to 
reallocate those funds for any basic field purpose. This revision would 
be consistent with

[[Page 21199]]

the provisions of 45 CFR 1606.13 regarding funds recovered in 
terminations, as well as LSC's practice for funds recovered through 
disallowed costs procedures pursuant to 45 CFR part 1630. Finally, LSC 
proposes to revise Sec.  1614.10(d) to be consistent with the changes 
to the enforcement rules, 78 FR 10085, Feb. 13, 2013.

List of Subjects in 45 CFR Part 1614

    Legal services, Private attorneys, Grant programs--law.

    For the reasons stated in the preamble, and under the authority of 
42 U.S.C. 2996g(e), the Legal Services Corporation proposes to revise 
45 CFR part 1614 to read as follows:

PART 1614--PRIVATE ATTORNEY INVOLVEMENT

Sec.
1614.1 Purpose.
1614.2 General policy.
1614.3 Definitions.
1614.4 Range of activities.
1614.5 Compensation of recipient staff and private attorneys; 
blackout period.
1614.6 Procedure.
1614.7 Compliance.
1614.8 Prohibition of revolving litigation funds.
1614.9 Waivers.
1614.10 Failure to comply.


    Authority: 42 U.S.C. 2996g(e)


Sec.  1614.1  Purpose.

    Private attorney involvement shall be an integral part of a total 
local program undertaken within the established priorities of that 
program in a manner that furthers the statutory requirement of high 
quality, economical, and effective client-centered legal assistance to 
eligible clients. This part is designed to ensure that recipients of 
Legal Services Corporation funds involve private attorneys, and 
encourages recipients to involve law students, law graduates, or other 
professionals, in the delivery of legal information and legal 
assistance to eligible clients.


Sec.  1614.2  General policy.

    (a) Except as provided hereafter, a recipient of Legal Services 
Corporation funding shall devote an amount equal to at least twelve and 
one-half percent (12.5%) of the recipient's LSC annualized basic field 
award to the involvement of private attorneys, law students, law 
graduates, or other professionals in the delivery of legal services to 
eligible clients; this requirement is hereinafter referred to as the 
``PAI requirement.'' Funds received from the Corporation as one-time 
special grants shall not be considered in calculating a recipient's PAI 
requirement.
    (b) Funds received from LSC as Native American or migrant grants 
are not subject to the PAI requirement. However, recipients of Native 
American or migrant funding shall provide opportunity for involvement 
in the delivery of services by private attorneys, law students, law 
graduates, or other professionals in a manner that is generally open to 
broad participation in those activities undertaken with those funds, or 
shall demonstrate to the satisfaction of the Corporation that such 
involvement is not feasible.


Sec.  1614.3  Definitions.

    Attorney, for purposes of this part, does not have the meaning 
stated in 45 CFR 1600.1.
    Law graduate means an individual who, within the last two years, 
has completed the education and/or training requirements necessary for 
application to the bar in any U.S. state or territory.
    Law student means an individual who is, or has been, enrolled, 
full-time or part-time, within the past year, and not expelled from:
    (1) A law school that can provide the student with a degree that is 
a qualification for application to the bar in any U.S. state or 
territory; or
    (2) An apprenticeship program that can provide the student with 
sufficient qualifications for application to the bar in any U.S. state 
or territory.
    Legal assistance means service on behalf of a client or clients 
that is specific to the client's or clients' unique circumstances, 
involves a legal analysis that is tailored to the client's or clients' 
factual situation, and involves applying legal judgment in interpreting 
the particular facts and in applying relevant law to the facts 
presented.
    Legal information means substantive legal information not tailored 
to address a person's specific problem and that does not involve 
applying legal judgment or recommending a specific course of action.
    Other professional means an individual, not engaged in the practice 
of law and not employed by the recipient, providing services to a 
recipient in furtherance of the recipient's provision of legal 
information or legal assistance to eligible clients. For example, a 
paralegal representing a client in a Supplemental Security Income (SSI) 
case, an accountant providing tax advice to an eligible client, or an 
attorney not authorized to practice law in the jurisdiction in which 
the recipient is located would fit within the definition of other 
professional. An individual granted a limited license to provide legal 
services by a body authorized by court rule or state law to grant such 
licenses in the jurisdiction in which the recipient is located would 
also meet the definition of other professional.
    PAI Clinic means an activity under this part in which private 
attorneys, law students, law graduates, or other professionals are 
involved in providing legal information and/or legal assistance to the 
public at a specified time and location.
    Private attorney means:
    (1)(i) An attorney licensed or otherwise authorized to practice law 
in the jurisdiction in which the recipient is located; or
    (ii) An attorney employed less than 1,000 hours per calendar year 
by an LSC recipient or subrecipient, but only as to activities 
conducted outside the scope of his or her employment by the recipient.
    (2) Private attorney does not include:
    (i) An attorney employed 1,000 hours or more per calendar year by 
an LSC recipient or subrecipient; or
    (ii) An attorney employed by a non-LSC-funded legal services 
provider acting within the terms of his or her employment with the non-
LSC-funded provider.
    Screen for eligibility means to screen individuals for eligibility 
using the same criteria recipients use to determine an individual's 
eligibility for cases accepted by the recipient and whether LSC funds 
or non-LSC funds can be used to provide legal assistance (e.g., income 
and assets, citizenship, eligible alien status, within priorities, 
applicability of LSC restrictions).


Sec.  1614.4  Range of activities.

    (a) Direct delivery of legal assistance to recipient clients. (1) 
Activities undertaken by the recipient to meet the requirements of this 
part must include the direct delivery of legal assistance to eligible 
clients by private attorneys through programs such as organized pro 
bono plans, reduced fee plans, judicare panels, private attorney 
contracts, or those modified pro bono plans which provide for the 
payment of nominal fees by eligible clients and/or organized referral 
systems; except that payment of attorney's fees through ``revolving 
litigation fund'' systems, as described in Sec.  1614.8 of this part, 
shall neither be used nor funded under this part nor funded with any 
LSC support.
    (2) In addition to the activities described in paragraph (a)(1) of 
this section, direct delivery of legal assistance to eligible clients 
may include representation by a non-attorney in an administrative 
tribunal

[[Page 21200]]

that permits non-attorneys to represent individuals before the 
tribunal.
    (3) Systems designed to provide direct services to eligible clients 
of the recipient by private attorneys on either a pro bono or reduced 
fee basis, shall include at a minimum, the following components:
    (i) Intake and case acceptance procedures consistent with the 
recipient's established priorities in meeting the legal needs of 
eligible clients;
    (ii) Case assignments which ensure the referral of cases according 
to the nature of the legal problems involved and the skills, expertise, 
and substantive experience of the participating attorney;
    (iii) Case oversight and follow-up procedures to ensure the timely 
disposition of cases to achieve, if possible, the result desired by the 
client and the efficient and economical utilization of recipient 
resources; and
    (iv) Access by private attorneys to LSC recipient resources that 
provide back-up on substantive and procedural issues of the law.
    (b) Support and other activities. Activities undertaken by 
recipients to meet the requirements of this part may also include, but 
are not limited to:
    (1) Support provided by private attorneys to the recipient as part 
of its delivery of legal assistance to eligible clients on either a 
reduced fee or pro bono basis such as the provision of community legal 
education, training, technical assistance, research, advice and 
counsel; co-counseling arrangements; or the use of private law firm 
facilities, libraries, computer-assisted legal research systems or 
other resources;
    (2) Support provided by other professionals in their areas of 
professional expertise to the recipient as part of its delivery of 
legal information or legal assistance to eligible clients on either a 
reduced fee or pro bono basis such as the provision of intake support, 
research, training, technical assistance, or direct assistance to an 
eligible client of the recipient; and
    (3) Support provided by the recipient in furtherance of activities 
undertaken pursuant to this section including the provision of 
training, technical assistance, research, advice and counsel, or the 
use of recipient facilities, libraries, computer assisted legal 
research systems or other resources.
    (4) PAI Clinics--(i) Legal information provided in PAI clinics. A 
recipient may allocate to its PAI requirement costs associated with 
providing support to clinics, regardless of whether the clinic screens 
for eligibility, if the clinic provides only legal information.
    (ii) Legal assistance provided in PAI clinics. If the clinic 
provides legal assistance to individual clients, a recipient may 
provide support for the clinic if the clinic screens for eligibility 
and provides legal assistance only to clients who may be served 
consistent with the LSC Act and relevant statutory and regulatory 
restrictions.
    (A) A recipient may allocate to its PAI requirement costs 
associated with its support of such clinics for legal assistance 
provided to individuals who are eligible to receive LSC-funded legal 
services.
    (B) Where a recipient supports a clinic that provides legal 
assistance to individuals who are eligible for permissible non-LSC-
funded services, the recipient may not allocate to its PAI requirement 
costs associated with the legal assistance provided to such 
individuals. For example, a recipient may not allocate to its PAI 
requirement costs associated with legal assistance provided through a 
clinic to an individual who exceeds the income and asset tests for LSC 
eligibility, but is otherwise eligible.
    (C) For clinics providing both legal information to the public and 
legal assistance to clients screened for eligibility, a recipient may 
allocate to its PAI requirement costs associated with its support of 
both parts of the clinic.
    (5) Screening and referral systems. (i) A recipient may participate 
in a referral system in which the recipient conducts intake screening 
and refers LSC-eligible applicants to programs that assign applicants 
to private attorneys on a pro bono or reduced fee basis.
    (ii) In order to allocate to its PAI requirement costs associated 
with participating in such referral systems, a recipient must be able 
to track the number of eligible persons referred by the recipient to 
each program and the number of eligible persons who were placed with a 
private attorney through the program receiving the referral.
    (6) Law student activities. A recipient may allocate to its PAI 
requirement costs associated with law student work supporting the 
recipient's provision of legal information or delivery of legal 
assistance to eligible clients. Compensation paid by the recipient to 
law students may not be allocated to the PAI requirement.
    (c) Determination of PAI activities. The specific methods to be 
undertaken by a recipient to involve private attorneys, law students, 
law graduates, or other professionals in the provision of legal 
information and legal assistance to eligible clients will be determined 
by the recipient's taking into account the following factors:
    (1) The priorities established pursuant to part 1620 of this 
chapter;
    (2) The effective and economic delivery of legal assistance to 
eligible clients;
    (3) The linguistic and cultural barriers to effective advocacy;
    (4) The actual or potential conflicts of interest between specific 
participating attorneys and individual eligible clients or other 
professionals and individual eligible clients; and
    (5) The substantive and practical expertise, skills, and 
willingness to undertake new or unique areas of the law of 
participating attorneys and other professionals.
    (d) Unauthorized practice of law. This part is not intended to 
permit any activities that would conflict with the rules governing the 
unauthorized practice of law in the recipient's jurisdiction.


Sec.  1614.5  Compensation of recipient staff and private attorneys; 
blackout period.

    (a) A recipient may allocate to its PAI requirement costs 
associated with compensation paid to its employees only for 
facilitating the involvement of private attorneys, law students, law 
graduates, or other professionals in activities under this part.
    (b) A recipient may not allocate to its PAI requirement costs 
associated with compensation paid to a private attorney, law graduate, 
or other professional for services under this part for any hours an 
individual provides above 800 hours per calendar year.
    (c) No PAI funds shall be committed for direct payment to any 
individual who for any portion of the current year or the previous year 
has been employed more than 1,000 hours per calendar year by an LSC 
recipient or subrecipient, except for employment as a law student; 
provided, however:
    (1) This paragraph (c) shall not be construed to restrict the use 
of PAI funds in a pro bono or judicare project on the same terms that 
are available to other attorneys;
    (2) This paragraph (c) shall not apply to the use of PAI funds in 
an incubator project in which a person is employed for less than a year 
at an LSC recipient as part of a program to provide legal training to 
law graduates or newly admitted attorneys who intend to establish their 
own independent law practices; and
    (3) This paragraph (c) shall not be construed to restrict the 
payment of PAI funds as a result of work performed by an attorney or 
other individual who practices in the same business with such former 
employee.

[[Page 21201]]

Sec.  1614.6  Procedure.

    (a) The recipient shall develop a plan and budget to meet the 
requirements of this part which shall be incorporated as a part of the 
refunding application or initial grant application. The budget shall be 
modified as necessary to fulfill this part. That plan shall take into 
consideration:
    (1) The legal needs of eligible clients in the geographical area 
served by the recipient and the relative importance of those needs 
consistent with the priorities established pursuant to section 
1007(a)(2)(C) of the Legal Services Corporation Act (42 U.S.C. 
2996f(a)(2)(C)) and 45 CFR part 1620 adopted pursuant thereto;
    (2) The delivery mechanisms potentially available to provide the 
opportunity for private attorneys, law students, law graduates, or 
other professionals to meet the established priority legal needs of 
eligible clients in an economical and effective manner; and
    (3) The results of the consultation as required below.
    (b) The recipient shall consult with significant segments of the 
client community, private attorneys, and bar associations, including 
minority and women's bar associations, in the recipient's service area 
in the development of its annual plan to provide for the involvement of 
private attorneys, law students, law graduates, or other professionals 
in the provision of legal information and legal assistance to eligible 
clients and shall document that each year its proposed annual plan has 
been presented to all local bar associations within the recipient's 
service area and shall summarize their response.
    (c) In the case of recipients whose service areas are adjacent, 
coterminous, or overlapping, the recipients may enter into joint 
efforts to involve private attorneys, law students, law graduates, or 
other professionals in the delivery of legal information and legal 
assistance to eligible clients, subject to the prior approval of LSC. 
In order to be approved, the joint venture plan must meet the following 
conditions:
    (1) The recipients involved in the joint venture must plan to 
expend at least twelve and one-half percent (12.5%) of the aggregate of 
their basic field awards on PAI. In the case of recipients with 
adjacent service areas, 12.5% of each recipient's grant shall be 
expended to PAI; provided, however, that such expenditure is subject to 
waiver under this section;
    (2) Each recipient in the joint venture must be a bona fide 
participant in the activities undertaken by the joint venture; and
    (3) The joint PAI venture must provide an opportunity for involving 
private attorneys, law students, law graduates, or other professionals 
throughout the entire joint service area(s).


Sec.  1614.7  Compliance.

    The recipient shall demonstrate compliance with this part by 
utilizing financial systems and procedures and maintaining supporting 
documentation to identify and account separately for costs related to 
the PAI effort. Such systems and records shall meet the requirements of 
the Corporation's Audit Guide for Recipients and Auditors and the 
Accounting Guide for LSC Recipients and shall have the following 
characteristics:
    (a) They shall accurately identify and account for:
    (1) The recipient's administrative, overhead, staff, and support 
costs related to PAI activities. Non-personnel costs shall be allocated 
on the basis of reasonable operating data. All methods of allocating 
common costs shall be clearly documented. If any direct or indirect 
time of staff attorneys or paralegals is to be allocated as a cost to 
PAI, such costs must be documented by time sheets accounting for the 
time those employees have spent on PAI activities. The timekeeping 
requirement does not apply to such employees as receptionists, 
secretaries, intake personnel or bookkeepers; however, personnel cost 
allocations for non-attorney or non-paralegal staff should be based on 
other reasonable operating data which is clearly documented;
    (2) Payments to private attorneys for support or direct client 
services rendered. The recipient shall maintain contracts on file which 
set forth payment systems, hourly rates, and maximum allowable fees. 
Bills and/or invoices from private attorneys shall be submitted before 
payments are made. Encumbrances shall not be included in calculating 
whether a recipient has met the requirement of this part;
    (3) Contractual payments to individuals or organizations that 
undertake administrative, support, and/or direct services to eligible 
clients on behalf of the recipient consistent with the provisions of 
this part. Contracts concerning transfer of LSC funds for PAI 
activities shall require that such funds be accounted for by the 
recipient in accordance with LSC guidelines, including the requirements 
of the Audit Guide for Recipients and Auditors and the Accounting Guide 
for LSC Recipients and 45 CFR part 1627;
    (4) Other such actual costs as may be incurred by the recipient in 
this regard.
    (b) Support and expenses relating to the PAI effort must be 
reported separately in the recipient's year-end audit. This shall be 
done by establishing a separate fund or providing a separate schedule 
in the financial statement to account for the entire PAI allocation. 
Recipients are not required to establish separate bank accounts to 
segregate funds allocated to PAI. Auditors are required to perform 
sufficient audit tests to enable them to render an opinion on the 
recipient's compliance with the requirements of this part.
    (c) In private attorney models, attorneys may be reimbursed for 
actual costs and expenses.
    (d) Fees paid to individuals for providing services under this part 
may not exceed 50% of the local prevailing market rate for that type of 
service.


Sec.  1614.8  Prohibition of revolving litigation funds.

    (a) A revolving litigation fund system is a system under which a 
recipient systematically encourages the acceptance of fee-generating 
cases as defined in Sec.  1609.2 of this chapter by advancing funds to 
private attorneys, law students, law graduates, or other professionals 
to enable them to pay costs, expenses, or attorneys' fees for 
representing clients.
    (b) No funds received from the Legal Services Corporation shall be 
used to establish or maintain revolving litigation fund systems.
    (c) The prohibition in paragraph (b) of this section does not 
prevent recipients from reimbursing or paying private attorneys, law 
students, law graduates, or other professionals for costs and expenses, 
provided:
    (1) The private attorney, law student, law graduate, or other 
professional is representing an eligible client in a matter in which 
representation of the eligible client by the recipient would be allowed 
under the Act and under the Corporation's Regulations; and
    (2) The private attorney, law student, law graduate, or other 
professional has expended such funds in accordance with a schedule 
previously approved by the recipient's governing body or, prior to 
initiating action in the matter, has requested the recipient to advance 
the funds.
    (d) Nothing in this section shall prevent a recipient from 
recovering from a private attorney, law student, law graduate, or other 
professional the amount advanced for any costs, expenses, or fees from 
an award to the attorney for representing an eligible client.

[[Page 21202]]

Sec.  1614.9  Waivers.

    (a) While it is the expectation and experience of the Corporation 
that most basic field programs can effectively expend their PAI 
requirement, there are some circumstances, temporary or permanent, 
under which the goal of economical and effective use of Corporation 
funds will be furthered by a partial, or in exceptional circumstances, 
a complete waiver of the PAI requirement.
    (b) A complete waiver shall be granted by LSC when the recipient 
shows to the satisfaction of LSC that:
    (1) Because of the unavailability of qualified private attorneys, 
law students, law graduates, or other professionals an attempt to carry 
out a PAI program would be futile; or
    (2) All qualified private attorneys, law students, law graduates, 
or other professionals in the program's service area either refuse to 
participate or have conflicts generated by their practice which render 
their participation inappropriate.
    (c) A partial waiver shall be granted by LSC when the recipient 
shows to the satisfaction of LSC that:
    (1) The population of qualified private attorneys, law students, 
law graduates, or other professionals available to participate in the 
program is too small to use the full PAI allocation economically and 
effectively; or
    (2) Despite the recipient's best efforts too few qualified private 
attorneys, law students, law graduates, or other professionals are 
willing to participate in the program to use the full PAI allocation 
economically and effectively; or
    (3) Despite a recipient's best efforts--including, but not limited 
to, communicating its problems expending the required amount to LSC and 
requesting and availing itself of assistance and/or advice from LSC 
regarding the problem--expenditures already made during a program year 
are insufficient to meet the PAI requirement, and there is insufficient 
time to make economical and efficient expenditures during the remainder 
of a program year, but in this instance, unless the shortfall resulted 
from unforeseen and unusual circumstances, the recipient shall 
accompany the waiver request with a plan to avoid such a shortfall in 
the future; or
    (4) The recipient uses a fee-for-service program whose current 
encumbrances and projected expenditures for the current fiscal year 
would meet the requirement, but its actual current expenditures do not 
meet the requirement, and could not be increased to do so economically 
and effectively in the remainder of the program year, or could not be 
increased to do so in a fiscally responsible manner in view of 
outstanding encumbrances; or
    (5) The recipient uses a fee-for-service program and its PAI 
expenditures in the prior year exceeded the twelve and one-half percent 
(12.5%) requirement but, because of variances in the timing of work 
performed by the private attorneys and the consequent billing for that 
work, its PAI expenditures for the current year fail to meet the twelve 
and one-half percent (12.5%) requirement; or
    (6) If, in the reasonable judgment of the recipient's governing 
body, it would not be economical and efficient for the recipient to 
expend its full 12.5% of Corporation funds on PAI activities, provided 
that the recipient has handled and expects to continue to handle at 
least 12.5% of cases brought on behalf of eligible clients through its 
PAI program(s).
    (d)(1) A waiver of special accounting and bookkeeping requirements 
of this part may be granted by the Audit Division with the concurrence 
of LSC, if the recipient shows to the satisfaction of the Audit 
Division of LSC that such waiver will advance the purpose of this part 
as expressed in Sec. Sec.  1614.1 and 1614.2.
    (2) As provided in 45 CFR 1627.3(c) with respect to subgrants, 
alternatives to Corporation audit requirements or to the accounting 
requirements of this Part may be approved for subgrants by LSC; such 
alternatives for PAI subgrants shall be approved liberally where 
necessary to foster increased PAI participation.
    (e) Waivers of the PAI expenditure requirement may be full or 
partial, that is, the Corporation may waive all or some of the required 
expenditure for a fiscal year.
    (1) Applications for waivers of any requirement under this Part may 
be for the current, or next fiscal year. All such applications must be 
in writing. Applications for waivers for the current fiscal year must 
be received by the Corporation during the current fiscal year.
    (2) At the expiration of a waiver a recipient may seek a similar or 
identical waiver.
    (f) All waiver requests shall be addressed to LSC or the Audit 
Division as is appropriate under the preceding provisions of this Part. 
The Corporation shall make a written response to each such request 
postmarked not later than thirty (30) days after its receipt. If the 
request is denied, the Corporation will provide the recipient with an 
explanation and statement of the grounds for denial. If the waiver is 
to be denied because the information submitted is insufficient, the 
Corporation will inform the recipient as soon as possible, both orally 
and in writing, about what additional information is needed. Should the 
Corporation fail to so respond, the request shall be deemed to be 
granted.


Sec.  1614.10  Failure to comply.

    (a) If a recipient fails to comply with the expenditure required by 
this part and if that recipient fails without good cause to seek a 
waiver during the term of the grant or contract, the Corporation shall 
withhold from the recipient's support payments an amount equal to the 
difference between the amount expended on PAI and twelve and one-half 
percent (12.5%) of the recipient's basic field award.
    (b) If a recipient fails with good cause to seek a waiver, or 
applies for but does not receive a waiver, or receives a waiver of part 
of the PAI requirement and does not expend the amount required to be 
expended, the PAI expenditure requirement for the ensuing year shall be 
increased for that recipient by an amount equal to the difference 
between the amount actually expended and the amount required to be 
expended.
    (c) Any funds withheld by the Corporation pursuant to this section 
shall be made available by the Corporation for basic field purposes, 
which may include making those funds available for use in providing 
legal services in the recipient's service area through PAI programs. 
Disbursement of these funds for PAI activities in the recipient's 
service area shall be made through a competitive solicitation and 
awarded on the basis of efficiency, quality, creativity, and 
demonstrated commitment to PAI service delivery to low-income people.
    (d) The withholding of funds under this section shall not be 
construed as any action under 45 CFR parts 1606, 1618, 1623, or 1630.

    Dated: April 9, 2014.
Stefanie K. Davis,
Assistant General Counsel.
[FR Doc. 2014-08353 Filed 4-14-14; 8:45 am]
BILLING CODE 7050-01-P