[Federal Register Volume 75, Number 79 (Monday, April 26, 2010)]
[Rules and Regulations]
[Pages 21506-21508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-9397]
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LEGAL SERVICES CORPORATION
45 CFR Parts 1609, 1610, and 1642
Fee-Generating Cases; Use of Non-LSC Funds, Transfers of LSC
Funds, Program Integrity; Attorneys' Fees
AGENCY: Legal Services Corporation.
ACTION: Final rule.
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SUMMARY: On February 11, 2010, LSC issued an Interim Final Rule and
Request for Comments repealing its regulatory prohibition on the
claiming of, and the collection and retention of attorneys' fees
pursuant to Federal and State law permitting or requiring the awarding
of such fees. The action was taken in accordance with the elimination
on the statutory prohibition on attorneys' fees in LSC's FY 2010
appropriation legislation. The rule moved provisions on accounting for
and use of attorneys' fees and acceptance of reimbursements from
clients from part 1642 (which was eliminated) to part 1609 of LSC's
regulations. LSC also made technical changes to its regulations to
remove cross references to the obsolete statutory and regulatory
citations. With this document, LSC is responding to the comments
received and confirming the February 11 rule as final without change.
DATES: This final rule is effective April 26, 2010.
FOR FURTHER INFORMATION CONTACT: Mattie Cohan, Senior Assistant General
Counsel, Office of Legal Affairs, Legal Services Corporation, 3333 K
Street, NW., Washington DC 20007; 202-295-1624 (ph); 202-337-6519
(fax); [email protected].
SUPPLEMENTARY INFORMATION:
Background
LSC's FY 1996 appropriation legislation provided that none of the
funds appropriated in that Act could be used to provide financial
assistance to any person or entity (which may be referred to in this
section as a recipient) that claims (or whose employee claims), or
collects and retains, attorneys' fees pursuant to any Federal or State
law permitting or requiring the awarding of
[[Page 21507]]
such fees. Section 504(a)(13), Public Law 104-134, 110 Stat. 1321
(April 26, 1996). Since appropriations legislation expires with the end
of the Fiscal Year to which it applies, for the statutory restriction
on attorneys' fees to remain in place by statute, it needed to be, and
was, carried forth in each subsequent appropriation law by reference.
See, e.g., Consolidated Appropriations Act, 2009, Public Law 111-8, 123
Stat. 524 (March 11, 2009).
LSC adopted regulations found in 1996 and 1997 which implemented
the statutory attorneys' fees restriction. 45 CFR Part 1642; 61 FR
45762 (August 29, 1996); 62 FR 25862 (May 12, 1997). The attorneys'
fees regulation restates the basic prohibition on claiming or
collecting and retaining attorneys' fees, providing that except as
permitted by Sec. 1642.4 (providing exceptions cases filed prior to
the prohibition and for cases undertaken by private attorneys providing
pro bono services in connection with a recipient's private attorney
involvement program), 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. 46 CFR 1642.3. The regulation
provides further guidance to recipients by, among other things,
providing a regulatory definition of attorneys' fees; setting forth
rules for the applicability of the restriction to private attorneys
providing legal assistance to a recipient's private attorney
involvement program; and providing express authority to recipients to
accept reimbursements of costs from a client. The regulation also sets
forth rules for the accounting for and use of those attorneys' fees
which recipients are not prohibited from claiming, collecting or
retaining.
On December 16, 2009 President Obama signed the Consolidated
Appropriations Act of 2010 into law. Public Law 111-117. This act
provides LSC's appropriation for FY 2010. Like its predecessors, this
law incorporates the various restrictions first imposed by the FY 1996
legislation by reference. However, section 533 of that same law also
provides that Section 504(a) of the Departments of Commerce, Justice,
and State, the Judiciary, and Related Agencies Appropriations Act, 1996
(as contained in Pub. L. 104-134) is amended by striking paragraph
(13). Taken together, these provisions serve to incorporate by
reference all of the restrictions in section 504 of the FY 1996 law,
except for paragraph (a)(13), which contained the restriction on
attorneys' fees. As such, there is no current statutory restriction on
LSC providing the money FY 2010 appropriated to it to any recipient
which claims, or collects and retains attorneys' fees
Repeal of Part 1642 and Issuance of the Interim Final Rule
The current law lifts the statutory restriction, but does not
affirmatively provide recipients the right to claim or collect and
retain attorneys' fees, nor does it prohibit LSC from restricting a
recipient's ability to claim or collect and retain attorneys' fees. As
such, in accordance with LSC inherent regulatory authority, the
regulation remained in place notwithstanding the lifting of the
statutory restriction unless and until repealed. At its Board Meeting
on January 30, 2010, the LSC Board of Director's determined that
retaining the regulatory restriction was no longer either necessary or
appropriate instructed staff to publish an Interim Final Rule repealing
its regulatory prohibition on the claiming of, and the collection and
retention of attorneys' fees pursuant to Federal and State law
permitting or requiring the awarding of such fees. LSC published the
Interim Final Rule and Request for Comments implementing the Board's
direction on February 11, 2010, 75 FR 6816. The Interim Final Rule also
moved provisions on accounting for and use of attorneys' fees and
acceptance of reimbursements from clients from Part 1642 (which is
being eliminated) to Part 1609 of LSC's regulations. LSC also made
technical changes to Part 1609 and Part 1610 of its regulations to
remove cross references to the obsolete statutory and regulatory
citations. The Interim Final Rule became effective on March 15, 2010.
LSC received ten (10) comments on the Interim Final Rule. All of
the comments strongly supported the changes reflected in the Interim
Final Rule and urged LSC to issue a Final Rule making permanent the
Interim Final Rule without further amendment.\1\ At its meeting of
April 17, 2010 the Board of Directors adopted the Interim Final Rule as
permanent and instructed staff to publish this Final Rule in the
Federal Register. Because this Final Rule is retaining the changes made
by the Interim Final Rule without further amendment, prior notice is
unnecessary and contrary to the public interest. See 5 U.S.C.
553(b)(3)(B) and 553(d)(3). Accordingly, this Final Rule is effective
upon publication.
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\1\ One commenter requested that LSC provide clarification in
two places of the preamble. LSC has responded to this request and
the preamble reflects the commenter's concerns.
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In adopting the Interim Final Rule and this Final Rule, LSC's
determination reflects a number of considerations. First, LSC notes
that the lifting of the restriction indicates that Congress itself has
had a change of heart regarding this restriction. Although Congress did
not prohibit LSC from retaining the restriction, the fact that Congress
chose not to re-impose this particular restriction (and no others) does
indicate that support for this restriction has waned and that the
policy arguments in support of the original restriction are no longer
reflective of the will of Congress. Rather, the legislative history
suggests that Congress chose not to re-impose the attorneys' fees
restriction in express recognition of the fact that the restriction
imposes several significant burdens on recipient. See, H. Rpt. 111-149
at p. 163; Transcript of Hearing of the Subcommittee on Commerce,
Justice and Science of the House Committee of Appropriations of April
1, 2009 at pp. 220-223. As such, LSC believes that repealing the
regulatory restriction is consistent with the expectations of Congress.
Moreover, LSC agrees that the restriction imposes unnecessary
burdens on recipients and places clients at a disadvantage with respect
to other litigants. Specifically, the ability to make a claim for
attorneys' fees is often a strategic tool in the lawyers' arsenal to
obtain a favorable settlement from the opposing side. Restricting a
recipient's ability to avail itself of this strategic tool puts clients
at a disadvantage and undermines clients' ability to obtain equal
access to justice. The attorneys' fees restriction can also be said to
undermine one of the primary purposes of fee-shifting statutes, namely
to punish those who have violated the rights of persons protected under
such statutes. In addition, in a time of extremely tight funding, the
inability of a recipient to obtain otherwise legally available
attorneys' fees places an unnecessary financial strain on the
recipient. If a recipient could collect and retain attorneys' fees, it
would free up other funding of the recipient to provide services to
additional clients and help close the justice gap.\2\ More
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fundamental, the restriction results in clients of grantees being
treated differently and less advantageously than all other private
litigants, which LSC believes is unwarranted and fundamentally at odds
with the Corporation's Equal Justice mission.
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\2\ It should be noted that the LSC Act and the implementing
regulatory restriction on fee-generating cases found at 45 CFR Part
1609 restrict recipients from taking fee-generating cases. This
restriction is not affected by the lifting of the statutory ban on
the claiming and collecting and retention of attorneys' fees and is
not be affected by any regulatory amendment to Part 1642.
Accordingly, amendment of Part 1642 does not have an adverse impact
on the private bar nor provide any incentive for recipients to seek
out fee-generating cases at the expense of the needs of other
clients.
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This action makes permanent the Interim Final Rule's lifting of the
regulatory prohibition on claiming, or collecting and retaining
attorneys' fees available under Federal or State law permitting or
requiring the awarding of such fees. Accordingly as of March 15, 2010,
recipients were and remain permitted make claims for attorneys' fees in
any case in which they are otherwise legally permitted to make such a
claim. Recipients are also permitted to collect and retain attorneys'
fees whenever such fees are awarded to them.
With the repeal of the restriction, recipients are permitted to
claim and collect and retain attorneys' fees with respect to any work
they have performed for which fees are available to them, without
regard to when the legal work for which fees are claimed or awarded was
performed. LSC considered whether recipients should be limited seek or
obtain attorneys fees related to ``new'' work; that is, work done only
as of the date of the statutory change or the effective date of the
Interim Final Rule. LSC rejected that position because the attorneys'
fees prohibition applies to the particular activity of seeking and
receiving attorneys' fees, but is irrelevant to the permissibility of
the underlying legal work. Limiting the ability of recipients to seek
and receive attorneys' fees on only future case work would create a
distinction between some work and other work performed by a recipient,
all of which was permissible when performed. LSC continues to find such
a distinction to be artificial and not necessary to effectuate
Congress' intention.
LSC also believes that not limiting the work for which recipients
may now seek or obtain attorneys' fees will best afford recipients the
benefits of the lifting of the restriction. There may well be a number
of ongoing cases where the newly available option of the potentiality
of attorneys' fees will still be effective to level the playing field
and afford recipients additional leverage with respect to opposing
counsel in those cases. Likewise, being able to obtain attorneys' fees
in cases in which prior work has been performed would likely help
relieve more financial pressure on recipients than a ``new work only''
implementation choice would because it would increase sources and
amount of work for which fees might potentially be awarded.
Amendment of Part 1609 and Part 1610
As noted above, Part 1642 contains two provisions not directly
related to the restriction on claiming and collecting attorneys' fees.
These provisions address the accounting for and use of attorneys' fees
and the acceptance of reimbursement from a client. 45 CFR 1642.5 and
1642.6. These provisions used to be incorporated into LSC's regulation
on fee-generating cases at 45 CFR Part 1609, but were separated out and
included in the new Part 1642 regulation when it was adopted. Amending
these provisions was not necessary to effectuate the lifting of the
attorneys' fees restriction and they provide useful guidance to
recipients. In fact, with recipients likely collecting and retaining
fees more often than they have since 1996, the provision on accounting
for and use of attorneys' fees will be of greater importance than it
has been. Retaining these provisions would continue to provide clear
guidance to the benefit of both recipients and LSC. Accordingly, LSC is
adopting as permanent the changes which moved these provisions back
into Part 1609 as Sec. Sec. 1609.4 and 1609.5, with only technical
amendment to the regulatory text to remove references to Part 1642 and
which redesignated Sec. 1609.4 as Sec. 1609.6.\3\
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\3\ For additional information about the provision on the
accounting for attorneys' fees, see the preamble to the 1997
Attorneys' Fees Final Rule: 62 FR 25862 (May 12, 1997) at 25864.
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LSC is also adopting as permanent technical conforming amendments
to delete references to Part 1642 and the attorneys' fees statutory
prohibition that are now obsolete. Having obsolete and meaningless
regulatory provisions is not good regulatory practice and can at the
very least lead to unnecessary confusion. Accordingly, LSC adopts
permanently the deletion of paragraph (c) of Sec. 1609.3, General
requirements, to eliminate that paragraph's reference to the attorneys'
fees restriction in Part 1642. Similarly, LSC adopts permanently a
technical conforming amendment to its regulation at Part 1610. Part
1610 sets forth in regulation the application of the appropriations law
restrictions to a recipient's non-LSC funds. Section 1610.2 sets forth
the list of the restrictions as contained in section 504 of the FY 1996
appropriations act, and the implementing LSC regulations which are
applicable to a recipient's non-LSC funds. Subsection (b)(9) was the
provision that references the attorneys' fees restriction (504(a)(13)
and Part 1642) and which became obsolete.
List of Subjects in 45 CFR Parts 1609, 1610, and 1642
Grant programs--Law, Legal services.
0
Accordingly, for reasons set forth above, and under the authority of 42
U.S.C. 2996g(e), LSC hereby adopts the interim rule published February
11, 2010 (75 FR 6816) as final without change.
Mattie Cohan,
Senior Assistant General Counsel.
[FR Doc. 2010-9397 Filed 4-23-10; 8:45 am]
BILLING CODE 7050-01-P