[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45762-45764]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21660]
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LEGAL SERVICES CORPORATION
45 CFR Part 1642
Attorneys' Fees
AGENCY: Legal Services Corporation.
ACTION: Interim rule with request for comments.
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SUMMARY: This interim rule is intended to implement a provision in the
Legal Services Corporation's (``Corporation'' or ``LSC'') FY 1996
appropriations act that prohibits LSC recipients from seeking
attorneys' fees in cases filed after the date of enactment of the
appropriation. Although this interim rule is effective upon
publication, the Corporation also solicits public comment on the
interim rule in anticipation of adoption of a final rule at a later
time.
DATES: This interim rule is effective on August 29, 1996. Comments must
be submitted on or before October 28, 1996.
ADDRESSES: Comments should be submitted to the Office of General
Counsel, Legal Services Corporation, 750 First St, NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Victor Fortuno, General Counsel, (202)
336-8910.
SUPPLEMENTARY INFORMATION: On May 19, 1996, the Operations and
Regulations Committee (``Committee'') of the Legal Services Corporation
(``LSC'' or ``the Corporation'') Board of Directors (``Board'')
requested the LSC staff to prepare interim rules to implement
Sec. 504(a)(13) of the Corporation's FY 1996 appropriations act, Public
Law 104-134, 110 Stat. 1321 (1996), prohibiting LSC recipients and
their employees from claiming, or collecting and retaining attorneys'
fees. The Committee held hearings on July 10 and 19, and the Board
adopted this interim rule on July 20 for publication in the Federal
Register. The Committee recommended and the Board agreed to publish
this rule as an interim rule. An interim rule is necessary in order to
provide prompt and critically necessary guidance to LSC recipients on
legislation that is already in effect and which carries severe
penalties for noncompliance. Because of the great need for guidance on
how to comply with substantially revised legislative requirements,
prior notice and public comment are impracticable, unnecessary, and
contrary to the public interest. 5 U.S.C. 553(b)(3)(B) and 553(d)(3).
Accordingly, this rule is effective upon publication.
However, the Corporation also solicits public comments on the rule
for review and consideration by the Committee. After receipt of written
public comment, the Committee intends to hold public hearings to
consider the written comments and to hear oral comments. The Committee
anticipates that a final rule will be issued which will supersede this
interim rule.
This rule is based, in part, on provisions in 45 CFR Part 1609, the
Corporation's regulation dealing with attorneys' fees in relation to
fee-generating cases. The Corporation has determined that, although
related, the issues of fee-generating cases and attorneys' fees are
sufficiently separate to warrant separate rules. Accordingly, the
provisions on attorneys' fees and acceptance of reimbursement for costs
and expenses in this part supersedes the comparable provisions in Part
1609. A revised version of part 1609 is also published in this
publication of the Federal Register as a proposed rule.
A section-by-section discussion of this interim rule is provided
below.
Section 1642.1 Purpose
The purpose of this rule is to ensure that LSC recipients and their
employees do not seek or retain attorneys' fees awarded pursuant to
Federal or State law, including common law, permitting or requiring
such fees.
Section 1642.2 Definitions
This section defines ``attorneys' fees'' as an award that is
intended to compensate an attorney of the prevailing party as permitted
or required by Federal or State law. An ``award'' is defined as an
order of a court or administrative agency that an unsuccessful party
pay the attorneys' fees of the prevailing party. The definition makes
clear that the term includes attorneys' fees that are awarded as part
of a court or agency approved settlement agreement. The Corporation has
received a number of comments arguing that the restriction was not
intended to apply to attorneys' fees in Social Security cases, because
such fees are paid pursuant to an agreement by the client to pay the
fees out of the client's back benefits. The court or administrative
agency merely approves the agreement, but does not ``award'' the fees.
The definition of ``award'' reflects this interpretation.
Programs which seek fees out of favorable awards to clients should
be aware that the Corporation's interpretation of the statute reflected
in this interim rule may change following receipt of public comment and
any such change could affect a recipient's practices.
[[Page 45763]]
Section 1642.3 Prohibition
This section states the restriction on attorneys' fees contained in
Sec. 504(a)(13) of the Corporation's FY 1996 appropriations act, which
prohibits LSC recipients from claiming, or collecting and retaining
attorneys' fees in any cases. This rule uses the term ``cases'' and
does not refer to ``matters,'' as does the underlying statute, because
attorneys' fees may only be derived from cases. Paragraph (a) prohibits
recipients or their employees from claiming, or collecting and
retaining attorneys' fees in any case, unless allowed under paragraph
(c). Paragraph (b) provides that private attorneys who are paid by LSC
recipients to handle cases for eligible clients as part of a
recipient's PAI program, under a contract or judicare program, may not
seek fees in those cases unless allowed under paragraph (c). The
prohibition applies to those private attorneys who receive funds from a
recipient, because they are persons receiving financial assistance
under the appropriations bill and are thus subject to the prohibition
on attorneys' fees. This would not include pro bono attorneys who
receive no compensation from a recipient to handle cases, because they
are not receiving financial assistance to provide the services.
Paragraph (c) clarifies that the prohibitions in paragraphs (a) and
(b) do not apply to four situations. First, the statute expressly
allows programs to seek and retain attorneys' fees for cases filed
prior to April 26, 1996, but this exception does not extend to any
additional claims for the client filed after April 26, 1996, in any
pending case.
Second, the prohibitions in paragraphs (a) and (b) do not apply to
activity allowed pursuant to 42 U.S.C. 2996e(d)(6) of the LSC Act,
which permits recipient attorneys to accept compensation for legal
services that they provide as officers of the court, i.e., court
appointments.
Third, paragraph (c) clarifies that sanctions imposed by courts on
parties in litigation for behavior that violates court rules may be
accepted by recipients because they are considered to be sanctions
rather than attorneys' fees. Such sanctions often include compensation
for the time spent by the opposing lawyer in litigating against the
sanctioned behavior.
Finally, the restrictions do not apply to the reimbursement of
costs and expenses made by an opposing party.
Section 1642.4 Accounting for and use of Attorneys' Fees
This section is a revised version of Sec. 1609.6, which is
superseded by this interim rule. It includes an accounting requirement
for attorneys' fees that are permitted under Sec. 1642.3(c) of this
part that are received by a recipient. Recipients are required to
allocate such fees that are received from cases or matters supported in
whole or in part with LSC funds to the LSC fund in the same proportion
that the case or matter was funded with LSC funds. Thus, if a
particular case was funded 60% by LSC funds and 40% from non-LSC funds,
a recipient would be required to allocate 60% of the fees received to
the LSC account. There is no requirement that the program allocate the
remaining 40% to any particular account. This is a change from current
law that required allocation to the same fund to which expenses had
been charged. The change is based on a policy that, if a non-LSC funder
does not require that its fund be reimbursed from attorneys' fees
awarded in litigation supported with its funds, LSC should not dictate
how those funds are to be allocated.
Section 1642.5 Acceptance of Reimbursement From a Client
This section allows recipients to accept reimbursement from clients
for out-of-pocket costs and expenses incurred in connection with cases
where the client recovers damages or statutory benefits, provided that
the client has agreed in writing to reimburse the recipient for such
costs and expenses out of any recovery. This section also authorizes
recipients to require clients who do not qualify for in forma pauperis
to pay court costs.
Section 1642.6 Recipient Policies, Procedures and Recordkeeping
This section requires the recipient to establish written policies
and procedures to guide the recipient's staff to ensure compliance with
this rule. Recipients are also required to maintain sufficient
documentation to demonstrate compliance with this part.
List of Subjects in 45 CFR Part 1642
Attorneys' fees; Grant programs--law; Legal services.
For reasons set forth in the preamble, 45 CFR Chapter XVI is
amended by adding part 1642 as follows:
PART 1642--ATTORNEYS' FEES
Sec.
1642.1 Purpose.
1642.2 Definitions.
1642.3 Prohibition.
1642.4 Accounting for and use of attorneys' fees.
1642.5 Acceptance of reimbursement from a client.
1642.6 Recipient policies, procedures and recordkeeping.
Authority: Sec. 504(a)(13), Pub. L. 104-134, 110 Stat 1321; 42
U.S.C. 2996e(d)(6).
Sec. 1642.1 Purpose.
This part is designed to insure that recipients or employees of
recipients do not claim, or collect and retain attorneys' fees
available under any Federal or State law permitting or requiring the
awarding of attorneys' fees.
Sec. 1642.2 Definitions.
(a) Attorneys' fees means an award to compensate an attorney of the
prevailing party made pursuant to common law or Federal or State law
permitting or requiring the awarding of such fees.
(b) An award is an order by a court or an administrative agency
that the unsuccessful party pay the attorneys' fees of the prevailing
party or an order by a court or administrative agency approving a
settlement agreement of the parties which provides for payment of
attorneys' fees by an adversarial party.
Sec. 1642.3 Prohibition.
(a) Except as permitted by paragraph (c) of this section, no
recipient or employee of a recipient may claim, or collect and retain
attorneys' fees in any case undertaken on behalf of a client of the
recipient.
(b) Except as permitted by paragraph (c) of this section, no
recipient and no private attorney who receives compensation from a
recipient to provide legal assistance to eligible clients under the
recipient's private attorney involvement (PAI) program, judicare
program, contract or other arrangement, may claim, or collect and
retain attorneys' fees for such legal assistance.
(c) The prohibitions contained in paragraphs (a) and (b) of this
section shall not apply to:
(1) Cases filed prior to April 26, 1996, except that the
prohibition shall apply to any additional claim for the client made in
a case pending on April 26, 1996;
(2) Cases to which a court appoints a recipient or an employee of a
recipient to provide representation in a case pursuant to a statute or
a court rule or practice equally applicable to all attorneys in the
jurisdiction, and in which the recipient or employee receives
compensation under the same terms and conditions as are applied
generally to attorneys practicing in the
[[Page 45764]]
court in which the appointment is made;
(3) Sanctions imposed by a court for violations of court rules,
including Rule 11 or discovery rules of the Federal Rules of Civil
Procedure, or similar State court rules; or
(4) Reimbursement of costs and expenses from an opposing party.
Sec. 1642.4 Accounting for and use of attorneys' fees.
(a) Attorneys' fees received by a recipient pursuant to
Sec. 1642.3(c) for work supported in whole or in part with funds
provided by the Corporation shall be allocated to the fund in which the
recipient's LSC grant is recorded in the same proportion that the
amount of Corporation funds expended bears to the total amount expended
by the recipient to support the work.
(b) Attorneys' fees shall be recorded during the accounting period
in which the money from the fee award is actually received by the
recipient and may be expended for any purpose permitted by the LSC Act,
regulations and other law applicable at the time the money is received.
Sec. 1642.5 Acceptance of reimbursement from a client.
(a) When a case results in a recovery of damages or statutory
benefits, a recipient may accept reimbursement from the client for out-
of-pocket costs and expenses incurred in connection with the case, if
the client has agreed in writing to reimburse the recipient for such
costs and expenses out of any such recovery.
(b) A recipient may require a client to pay court costs when the
client does not qualify to proceed in forma pauperis under the rules of
the jurisdiction.
Sec. 1642.6 Recipient policies, procedures and recordkeeping.
The recipient shall adopt written policies and procedures to guide
its staff in complying with this part and shall maintain records
sufficient to document the recipient's compliance with this part.
Dated: August 20, 1996.
Suzanne B. Glasow,
Senior Counsel for Operations & Regulations.
[FR Doc. 96-21660 Filed 8-28-96; 8:45 am]
BILLING CODE 7050-01-P
