Rulemaking Agenda for 2019–2020


The Operations and Regulations Committee of the LSC Board of Directors adopted this Rulemaking Agenda on April 7, 2019.

The proposals included in this proposed Rulemaking Agenda are prioritized in three tiers.

Tier 1 consists of one ongoing rulemaking and one rulemaking that Management proposes to initiate action on later this year.

Tier 2, consists of rulemaking actions Management believes are desirable, but should be initiated after the items in Tier 1 are completed or largely completed.

Tier 3 consists of rules Management has identified as appropriate (assuming adequate resources) for preliminary investigation to determine whether or how to initiate rulemaking.

In preparing this proposed Agenda, Management reviewed the regulations, considered its own experience in administering them over the past several years, received input from stakeholders and LSC staff, and received input from the Office of Inspector General.

TIER 1: CURRENT AND PREVIOUSLY AUTHORIZED RULEMAKING PROCEEDINGS

A. Technical revisions to Part 1610 – Use of Non-LSC Funds

LSC originally published Part 1610 in 1976 to implement § 1010(c) of the LSC Act, 42 U.S.C. § 2996i(c). Section 1010(c) prohibited recipients from using funds received from sources other than LSC “for any purpose prohibited by” the LSC Act, unless the funds came from public or tribal sources. LSC amended Part 1610 in 1997 to implement additional restrictions that Congress placed on recipients’ non-LSC funds through the fiscal year 1996 appropriations act. Pub. L. 104-134, title V, § 504, 110 Stat. 1321 (1996). Although LSC made technical amendments to Part 1610 as part of proceedings to rescind or substantively revise other rules — namely, Parts 1642 (Attorneys’ Fees) and 1627 (Subgrants) — there remain some technical issues that should be corrected via rulemaking. For example, Part 1610 is missing relevant references to Part 1612, which covers permissible uses of non-LSC funds to communicate with elected officials or administrative policymakers. Section 1610.7(a)(2) could be revised to clarify that to maintain organizational separation from an organization doing restricted activity, the other organization must not receive a subgrant of LSC funds from the recipient. Finally, Part 1610 generally would benefit from rulemaking to improve its clarity and comprehensibility.

This rulemaking is ongoing. Management presented this Committee with a Justification Memo requesting authority to initiate rulemaking at its January 2019 meeting. This Committee recommended that the Board authorize rulemaking, which the Board did. Management anticipates presenting this Committee and the Board with a notice of proposed rulemaking to revise Part 1610 at the July 2019 meeting.

B. Revise Part 1635 – Timekeeping Requirement

LSC last revised Part 1635 in 1997. Management believes that Part 1635 is appropriate for comprehensive rulemaking because this Part has several provisions that are confusing and difficult to implement. For example, Part 1635 requires both attorneys and paralegals to keep time, but does not define “paralegal.” See 45 C.F.R. § 1635.3(b). Part 1635 also requires attorneys and paralegals to generate time records “contemporaneously,” but does not define that term. The lack of definitions for these terms means that recipients may differ as to which employees they require to keep time and when employees must record their time. These differences can not only lead to inconsistency in recordkeeping, but also contribute to an increased risk of misuse of LSC funds when such funds are used to compensate staff who are not accounting for their time in a trackable manner. For these reasons, OCE and OIG view revisions to Part 1635 as a priority.

Additionally, former Committee Chairman Charles Keckler proposed consideration of a revision to LSC’s timekeeping rule at 45 C.F.R. Part 1635 to place additional data collection requirements on grantees and additional requirements on how they maintain that data. Management believes that any new data collection requirements need to be justified by identifiable benefits to LSC and its grantees.

Rulemaking on Part 1635 would likely require significant resources not only from OLA, but also from OCE, the Office of Program Performance, and the Office of Data Governance and Analysis, as well as substantial input from LSC funding recipients and other stakeholders, such as other funders. Management proposes to initiate an internal review of Part 1635 later this year, in consultation with OIG, and to present this Committee and the Board with a Justification Memo in 2020.

TIER 2: RULEMAKING ACTIONS THAT SHOULD NEXT BE CONSIDERED FOR INITIATION

A. Resolve inconsistency in prior approval thresholds in Parts 1630 – Cost Standards and Procedures and 1631 – Property Purchasing and Management

LSC recently completed rulemaking to update Part 1630 regarding cost standards and move its property acquisition and management policies out of a manual and into the Code of Federal Regulations at Part 1631. LSC updated the prior approval threshold from $10,000 in LSC funds to $25,000 in LSC funds in response to requests from the field to increase the threshold to account for inflation. During the rulemaking, however, drafters used inconsistent language in the provisions governing the prior approval threshold. Compare 45 C.F.R. § 1630.6(b)(1) (“Without LSC's prior written approval, a recipient may not expend $25,000 or more of LSC funds on any of the following[.]”) with 45 C.F.R. § 1631.8(a) (“As required by 45 CFR 1630.6 and 1631.3, a recipient using more than $25,000 of LSC funds to purchase or lease personal property or contract for services must request and receive LSC's prior approval.”) (emphasis added in both). The language in the latter quote above mirrors the language from the previous version of the prior approval rule and is the language that LSC intended to adopt in each provision applicable to the prior approval requirement.

OCE recommends that LSC revise the rules for consistency with the correct language as quickly as possible. Because this rulemaking would be limited to technical, rather than substantive changes, to Parts 1630 and 1631, Management may consider including other technical changes in the rulemaking, such as eliminating obsolete cross references.

B. Proposal to amend Part 1609 to allow grantees to charge modest fees for certain represented cases

            In 2016, former Committee Chairman Keckler proposed revising C.F.R. Part 1609 – Fee-Generating Cases to allow LSC recipients to charge clients modest fees for certain represented cases. Mr. Keckler posited that “a relatively small fee, especially for clients above the Federal Poverty Level and for full representation cases, could provide some benefits to grantees both in case screening and financial supplementation, while not overburdening client resources.” Mr. Keckler’s proposal could expand LSC recipients’ ability to provide legal assistance to eligible clients by authorizing recipients to provide “low bono” assistance to clients who can afford to pay a small fee.

            When the Board revised Part 1609 in 1997, it considered whether “any fees should be allowed to be charged to LSC clients, but the issue was never resolved.” See External Opinion 1998-4-17. While the language of the LSC Act does not prohibit recipients from charging clients fees for legal services, OLA previously has opined that charging eligible clients more than a “nominal” fee would contravene the purpose of the Act. See, e.g., External Opinion 1998-4-17 (“The issue of whether or not LSC recipients may charge fees for its LSC-funded legal assistance is not expressly stated in any LSC regulation or guidance. However, it has been the policy of the Corporation that recipients may not charge fees for LSC-funded legal assistance.”); External Opinion 1994-10-07 (“An eligible client is defined by the LSC Act and regulations as ‘any person financially unable to afford legal assistance,’ 42 U.S.C. §2996a(3) and 45 C.F.R. Part 1600, but these provisions do not explicitly require that the services provided be free.”); External Opinion 1989-03-30 (recipients may not charge a reduced fee as part of a PAI program). Based on these opinions, LSC’s longstanding policy is that recipients are prohibited from charging eligible clients more than “nominal” fees for legal services. Because the LSC Act is silent on the matter of charging fees, however, we believe that the prior opinions do not represent the only permissible reading of the statute, and that LSC may reconsider its position on the matter.

            Mr. Keckler’s proposal could expand LSC recipients’ ability to provide legal assistance to eligible clients by authorizing recipients to provide “low bono” assistance to clients who can afford to pay a small fee. Management believes internal investigation and possibly rulemaking tools, such as requests for information or workshops, would help LSC to determine whether current policy should be changed. Management proposes to conduct preliminary information gathering internally and prepare for the Committee a memorandum stating its views on whether further regulatory action in the form of workshops or requests for information should be considered. Additionally, the Office of Compliance and Enforcement conducted a site visit to Kansas Legal Services, which operates a reduced-fee program using non-LSC funds, in the spring of 2017. Information gathered during that visit will advance this discussion by informing LSC about the actual costs and benefits associated with one type of program that charges some level of fees to clients.

C. Update Definitions

  1. Revise the definition of “staff attorney” at 45 C.F.R. § 1600.1

            The LSC Act defines “staff attorney” as “an attorney who receives more than one-half of his annual professional income from a recipient organized solely for the provision of legal assistance to eligible clients under this title.42 U.S.C. § 2996a(7) (emphasis added). LSC implemented this definition by regulation at 45 C.F.R. § 1600.1. The regulatory definition provides that a staff attorney is an “attorney more than one-half of whose annual professional income is derived from [1] the proceeds of a grant from the Legal Services Corporation or [2] is received from a recipient, subrecipient, grantee, or contractor that limits its activities to providing legal assistance to clients under the Act.” Whether an attorney falls within the second part of this definition depends on whether the source of the attorney’s income is an organization described in the LSC Act as a “recipient organized solely for the provision of legal assistance to eligible clients under [the LSC Act].” See External Opinion 2003-1004, Inquiry About Prohibited Political Activity Under 45 C.F.R. Part 1608 (Mar. 7, 2003).

            Prior to 2003, LSC’s Office of Legal Affairs (OLA) interpreted the phrase “recipients organized solely for the purpose of the provision of legal assistance to eligible clients under [the LSC Act]” to mean programs that exclusively served LSC eligible clients with LSC funds. See, e.g., External Opinion 1996-08-13 (Aug. 13, 1996) (explaining that a sub-recipient of LSC funds was not a “recipient organized solely for the provision of legal assistance to eligible clients under the LSC Act” because the sub-recipient served clients who were not LSC-eligible). In 2003, OLA issued External Opinion 2003-1004, which provided a different interpretation of this phrase. Based on a review of legislative history and the phrase’s use in other parts of the LSC Act and LSC regulations, OLA found that Congress knew that basic field programs were already receiving and using non-LSC funds to serve ineligible clients and that limiting the meaning of the phrase in such a narrow manner would lead to the unreasonable result that only a small number of programs would be subject to the LSC Act’s requirements. See External Opinion 2003-1004 at 4. Therefore, OLA concluded that recipients of basic field grants are considered “recipients organized solely for the purpose of the provision of legal assistance to eligible clients under the [LSC Act],” regardless of whether the programs use non-LSC funds to provide services to clients ineligible under the LSC Act. Id at 6.  Thus, “any attorney employed by [a] program who receives more than one-half of his income from the program’s funds – whether they are LSC funds or non-LSC funds – is considered to be a ‘staff attorney’ for purposes of the LSC Act….” Id.

            Even with this guidance, OLA continues to receive questions about the interpretation of “staff attorney.” Therefore, Management recommends revising the definition of “staff attorney” to reflect the longstanding guidance outlined in External Opinion 2003-1004. Management believes that revising the definition of “staff attorney” would definitively settle this issue in a clear and transparent manner.

  1. Revise the definition of “legal assistance” at 45 C.F.R. Part 1614 and in LSC’s guidance documents

            Section 1002(5) of the LSC Act defines “legal assistance” as “the provision of any legal services consistent with the purposes and provisions of this title.” 42 U.S.C. § 2996a(5). LSC implemented this definition by regulation at 45 C.F.R. § 1600.1 (“legal assistance means the provisions of any legal services consistent with the purposes of the Act or other applicable law”).

            In other parts of LSC’s policies and regulations, however, the term “legal assistance” is defined more narrowly than in the Act and at Part 1600. For example, “legal assistance” is defined in 45 C.F.R. Part 1614 as “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.” 45 C.F.R. § 1614.3(e). Section 2.2 of LSC’s Case Service Reporting Handbook provides definitions of “legal information” and “legal assistance,” which implies that legal information is not encompassed within legal assistance.

            LSC’s decision to define the term “legal assistance” as only services specific to an eligible client’s unique circumstances clients may raise questions about recipients’ authority to use LSC funds to provide general legal information because doing so falls outside the scope of “legal assistance” as defined in Part 1600. Therefore, Management recommends reconsidering LSC’s definition of the term “legal assistance” and possibly replacing it with a term that more accurately describes the work LSC recipients are doing.

TIER 3: OTHER POTENTIAL RULEMAKING PROCEEDINGS

A. Revise Part 1638

             Section 504(a)(18) of LSC’s FY 1996 appropriations act, incorporated by reference in LSC’s annual appropriations thereafter, prohibits LSC funding recipients from accepting “employment resulting from in-person unsolicited advice to a nonattorney that such nonattorney should obtain counsel or take legal action . . . .” Pub. L. 104-134, § 504(a)(18), Title V, 110 Stat. 1321, 1321-51 (1996) (emphasis added). LSC implemented this statutory restriction in LSC’s regulations at 45 C.F.R. Part 1638. Section 1638.3 reiterates the statutory prohibition that “recipients and their employees are prohibited from representing a client as a result of in-person unsolicited advice”. 45 C.F.R. § 1638.3(a) (emphasis added). The regulation then defines “in-person” broadly to include both a “face-to-face encounter” and “a personal encounter via other means of communication such as a personal letter or telephone call.” 45 C.F.R. § 1638.2(a) (emphasis added).

            Management is concerned that the broad definition of “in-person” may restrict more conduct than Congress intended when it enacted the prohibition on client solicitation. Section 504(a)(18) applies only to “in-person advice.” It does not mention “personal encounters via other means of communication,” which Part 1638 does. 45 C.F.R. § 1638.2(a). Congress appears to have based Section 504(a)(8) on ABA Model Rule 7.3, which generally prohibits “in-person, live telephone, or real-time electronic communications.” Model Rule 7.3 also prohibits solicitation through “written, recorded or electronic communications,” but only when such communications are abusive. Thus, Part 1638’s inclusion of “a personal letter” in the definition of “in-person” goes beyond the statutory language of Section 504(a)(18) and the use of the same term by ABA Model Rule 7.3.  The ABA has updated Rule 7.3, and the subsequent changes reinforce the distinction between in-person contacts and written contacts (an electronic contact is in the same category as an “in-person” contact only when it is a “real-time electronic contact.”) (emphasis added).

            Given its concerns about the scope of Part 1638, Management would like to consider whether the rule should be modified. Because LSC issued an advisory opinion in 2016 on this topic, Advisory Opinion AO-2016-001, this item is listed as a lower priority on this agenda.

B. Revise Part 1616 to require recipients to ensure potential attorney hires are in good standing with the organized bar

            Section 1007 of the LSC Act requires LSC to ensure that recipients “solicit the recommendations of the organized bar in the community being served before filling staff attorney positions[.]” 42 U.S.C. § 2996f(a)(8). LSC implemented this requirement through regulation at 45 C.F.R. Part 1616. LSC established six qualifications for recipients to consider including in their position descriptions:

  • Academic training and performance;
  • The nature and extent of prior legal experience;
  • Knowledge and understanding of the legal problems and needs of the poor;
  • Prior working experience in the client community, or in other programs to aid the poor;
  • Ability to communicate with persons in the client community; and
  • Cultural similarity with the client community.

45 C.F.R. § 1616.3.

            OIG has recommended that LSC revise Part 1616 to include certification that the attorney is in good standing with the bar(s) to which he/she is admitted to practice, including any disciplinary history as a qualification. OIG observed that their investigators had encountered situations in which recipient attorneys, prior to being hired by the recipient, were suspended or otherwise subject to discipline by their licensing authorities, and the recipient was unaware of that fact. Management agrees that recipients should be aware of the adverse disciplinary histories of their attorneys and believes that rulemaking to add this factor to Part 1616 is appropriate.