Private Attorney Involvement, 61770-61785 [2014-24456]

Agencies

• LEGAL SERVICES CORPORATION

[Federal Register Volume 79, Number 199 (Wednesday, October 15, 2014)]
[Rules and Regulations]
[Pages 61770-61785]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-24456]


=======================================================================
-----------------------------------------------------------------------

LEGAL SERVICES CORPORATION

45 CFR Part 1614


Private Attorney Involvement

AGENCY: Legal Services Corporation.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final 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: The rule will be effective November 14, 2014.

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), sdavis@lsc.gov.

SUPPLEMENTARY INFORMATION:

I. Private Attorney Involvement

    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 published the first PAI rule in 1984. 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 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.
    Over the course of the next two years, LSC amended the PAI rule in 
several material respects. In recognition of LSC's belief that ``the 
essence of PAI is the direct delivery of legal services to the poor by 
private attorneys,'' LSC introduced a provision requiring recipients to 
meet at least part of their PAI requirement by engaging private 
attorneys to provide legal assistance directly to eligible clients. 50 
FR 48586, 48588, Nov. 26, 1985. At the same time, LSC introduced rules 
governing joint ventures, waivers, and sanctions for failure to comply 
with the PAI requirement, in addition to establishing simplified audit 
rules. Id. at 48587-89. The following year, LSC made two substantive 
changes to the rule. First, LSC included a definition for the term 
private attorney, which the Corporation defined as ``an attorney who is 
not a staff attorney as defined in Sec.  1600.1 of these regulations.'' 
51 FR 21558, June 13, 1986. Second, LSC promulgated the ``blackout 
provision,'' which prohibited recipients from counting toward their PAI 
requirement payments made to individuals who had been staff attorneys 
within the preceding two years. Id. at 21558-59.
    LSC last amended part 1614 in 2013 as part of the final rule 
revising LSC's enforcement procedures. 79 FR 10085, Feb. 13, 2013. The 
only effect of the 2013 amendments was to harmonize part 1614 with the 
enforcement rules by eliminating references to obsolete rules and 
replacing them with references to the new rules. Id. at 10092.

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, https://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, 
October 2012, available at https://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

[[Page 61771]]

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 
better be 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. 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. History of This Rulemaking

    After receiving the PBTF's report, LSC determined that it would be 
necessary to revise part 1614 to respond to some of the Task Force's 
recommendations. On January 26, 2013, LSC's Board of Directors 
authorized the initiation of rulemaking to explore options for revising 
the PAI requirement.
    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. 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 the 
NPRM. On April 8, 2014, the Board approved the NPRM for publication, 
and the NPRM was published in the Federal Register on April 16, 2014. 
79 FR 21188, Apr. 16, 2014. The comment period was open for sixty days, 
and closed on June 16, 2014. Id.
    LSC analyzed all comments received and sought additional input from 
the Office of Program Performance (OPP), the Office of Compliance and 
Enforcement (OCE), and the Office of Inspector General (OIG). For the 
reasons discussed in the Section-by-Section Analysis below, LSC is not 
making significant revisions to the proposed rule.
    LSC presented this final rule to the Committee on October 5, 2014, 
at which time the Committee voted to recommend that the Board adopt the 
rule, subject to minor amendments. On October 7, 2014, the Board voted 
to adopt the amended final rule and approved it for publication in the 
Federal Register.
    All of the comments and related memos submitted to the LSC Board 
regarding this rulemaking are available in the open rulemaking section 
of LSC's Web site at https://www.lsc.gov/about/regulations-rules/open-rulemaking. After the effective date of the rule, those materials will 
appear in the closed rulemaking section at https://www.lsc.gov/about/regulations-rules/closed-rulemaking.

IV. Section-by-Section Discussion of Comments and Regulatory Provisions

    LSC received eight comments during the public comment period. LSC 
subsequently received one additional comment. Four comments were 
submitted by LSC recipients--California Rural Legal Assistance (CRLA) 
(jointly with the Legal Services Association of Michigan (LSAM), an 
organization representing fourteen LSC and non-LSC civil legal services 
providers in Michigan), Northwest Justice Project (NJP), Legal Aid 
Society of Northeastern New York (LASNNY), and Legal Services NYC 
(LSNYC). The National Legal Aid and Defender Association (NLADA), the 
American Bar Association (ABA), through its Standing Committee on Legal 
Aid and Indigent Defendants and with substantial input from the 
Standing Committee on Pro Bono and Public Service, the New York State 
Bar Association, the California Commission on Access to Justice (Access 
Commission), and the LSC Office of Inspector General (OIG) submitted 
the other five comments.
    Commenters were generally supportive of the changes LSC proposed 
that expanded opportunities to engage interested individuals in 
providing legal assistance and legal information to the poor; however, 
OIG took no position on the proposed changes. Overall, the public 
comments endorsed LSC's decision to adopt the part of Recommendation 
2(a) of the PBTF report that advocated allowing recipients to allocate 
resources spent

[[Page 61772]]

supervising and training law graduates, law students, and others to 
their PAI requirements. The Access Commission noted that this proposed 
change ``reflects the reality that law students, law graduates, and 
other professionals can and do play an important role in helping to 
meet unmet legal needs in a cost-effective and sustainable manner.'' 
LSNYC stated that the changes would ``harmonize[] PAI regulations with 
the pro bono standards of other funders and the pro bono community at 
large.''
    Comments from the public also praised LSC's decision to adopt the 
part of Recommendation 2(a) that advocated exempting attorneys who had 
participated in ``incubator'' projects from the two-year blackout 
period on payments to former staff attorneys. For example, NLADA 
commented that the revision would ``assist[] LSC programs in creating 
incubator programs that benefit new attorneys by giving them a start in 
practice [and] benefit[] recipients by providing trained attorneys to 
handle cases for a modest payment thus expanding the supply of 
available lawyers.''
    Finally, the public comments supported LSC's decision to amend part 
1614 in order to reverse the effect of two opinions published by OLA, 
AO-2011-001 and EX-2008-1001. These opinions interpreted part 1614 as 
requiring recipients to accept eligible clients as their own in order 
to allocate to their PAI requirements the costs incurred by either 
providing support to a pro bono clinic at which participants received 
individualized legal assistance or to screening clients and referring 
them to an established network of volunteer attorneys for placement. 
LSC's decision responded to Recommendations 2(b) and 2(c) of the PBTF 
report. NJP, which operates the screening and referral program that was 
the subject of AO-2011-001, specifically commented that it was 
``heartened by the fact that under the proposed revisions it appears 
that NJP's significant support for the statewide pro bono delivery 
system in Washington, through its telephonic intake and referral system 
. . . will now enjoy recognition of the important role this support 
plays to enhance private bar involvement efforts statewide.'' The 
Access Commission supported the revision as a ``sensible and efficient 
proposal[] that promote[s] use of private attorneys, conservation of 
program resources, and meeting unmet legal needs.'' The ABA and NLADA 
similarly supported amending the rule to reverse the effect of the two 
opinions.

Proposed Sec.  1614.1--Purpose.

    LSC proposed revising this section to state more clearly the 
purpose of the PAI rule and to encourage the inclusion of law students, 
law graduates, and other professionals in recipients' PAI plans. LSC 
received no public comments on this section. LSC is making a technical 
change to the first sentence of the section to make clear that PAI 
programs are to be conducted ``within the established priorities of 
that program, and consistent with LSC's governing statutes and 
regulations[.]''

Proposed Sec.  1614.2--General Policy

    LSC proposed to consolidate all statements of policy scattered 
throughout existing part 1614 into this section. LSC received no public 
comments on this section. LSC is making technical revisions to Sec.  
1614.2 to make clear that the PAI requirement applies only to the 
annualized award to provide legal services to the general low-income 
population living in a specific geographic area (``Basic Field-General 
grants''). Three types of awards are not subject to the PAI 
requirement: awards to provide legal services to Native Americans 
living in a specific geographical area, related to their status as 
Native Americans (``Basic Field-Native American grants'') and awards to 
provide legal services to migrant farmworkers living in a specific 
geographical area, related to their status as migrant farmworkers 
(``Basic Field-Migrant grants''), and any grants outside of basic field 
grants, such as Technology Initiative Grants and the grants to be 
awarded from the Pro Bono Innovation Fund.

Proposed Sec.  1614.3--Definitions

    Organizational note. Because LSC is adding a definition for the 
term incubator project as Sec.  1614.3(b), the terms defined in 
paragraphs (b)-(i) in the NPRM will be redesignated as paragraphs (c)-
(j) in this final rule. In the following discussion of the comments and 
changes to the proposed rule, LSC will refer to the redesignated 
paragraphs by the designation used in the final rule, except where the 
proposed rule is explicitly referenced.
    Sec.  1614.3(a) Attorney. LSC is making editorial changes to the 
proposed definition of the term attorney in response to staff comments. 
Some commenters found the proposed definition, which simply excepted 
attorney from the definition provided in 45 CFR 1600.1 for purposes of 
this part, awkward. LSC revised the definition to mirror the Sec.  
1600.1 definition to the extent possible and still have it make sense 
within the context of the PAI rule. LSC also retained the part of the 
NPRM definition that stated the Sec.  1600.1 definition does not apply 
to part 1614.
    Sec.  1614.3(b) Incubator project. LSC is adding a definition for 
the term incubator project in response to staff comments. LSC took the 
definition proposed in the version of the final rule presented to the 
Committee from proposed Sec.  1614.5(c)(2), which described an 
incubator project as ``a program to provide legal training to law 
graduates or newly admitted attorneys who intend to establish their own 
independent law practices.'' 79 FR 21188, 21200, Apr. 15, 2014. At the 
Committee meeting on October 5, 2014, the ABA proposed revising the 
definition to include law students as individuals who could participate 
in an incubator project and to make clear that participation in an 
incubator project, rather than the project itself, is time-limited. The 
Committee agreed to revise the definition consistent with the ABA's 
proposal, and the version of the final rule approved by the Board 
contained the new language.
    Sec.  1614.3(c) Law graduate. Section 1614.3(b) proposed to define 
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. LSC received no comments on this 
definition.
    Sec.  1614.3(d) Law student. Proposed 1614.3(c) defined the term 
law student to include two groups. The first was 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 was 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 received no comments on this definition.
    Sec.  1614.3(e) Legal assistance. This proposed definition was 
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 proposed 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. LSC received no comments on this definition.
    Sec.  1614.3(f) Legal information. LSC proposed to define the term 
legal information as the provision of

[[Page 61773]]

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 was also adapted substantially from the CSR Handbook for the 
same reasons stated above with respect to the definition of legal 
assistance. LSC received no comments on this definition.
    Sec.  1614.3(g) Other professional. In the NPRM, LSC proposed to 
define other professional as 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 intended 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. LSC received no 
comments on this definition.
    LSC will replace the phrase ``limited license to provide legal 
services'' with the term ``limited license to practice law'' to reflect 
more accurately what limited license legal technicians and others 
similarly situated are authorized to do.
    Sec.  1614.3(h) PAI clinic. Proposed Sec.  1614.3(g) defined 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 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. 
Additionally, a PAI clinic may be open to the public for 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. LSC received no comments on this 
definition.
    Sec.  1614.3(i) Private attorney. Comment 1: LSC received four 
comments objecting to the exclusion of attorneys ``employed by a non-
LSC-funded legal services provider acting within the terms of [their] 
employment with the non-LSC-funded provider'' from the definition of 
private attorney. 79 FR 21188, 21199, Apr. 15, 2014. NLADA, the Access 
Commission, and CRLA/LSAM all asserted that the proposed exclusion was 
ambiguous and overly broad, and would prevent recipients from including 
collaborations with certain other non-profit organizations within their 
PAI plans. The ABA also observed that the term ``legal services 
provider'' was ambiguous and could be interpreted as including private 
law firms.

    CRLA/LSAM observed that

[o]ften times, due to lack of profitability, logistics and conflicts 
the only law firms willing to join rural LSC recipients as attorneys 
willing to co-counsel education, housing and environmental justice 
cases in the remote rural communities we work in are attorneys 
employed by a non-LSC-funded, non-profit legal services provider who 
is acting within the terms of his/her employment . . . . For rural 
grantees to engage in co-counseling cases, they largely rely on non-
LSC funded non-profits with an expertise in specific legal areas, 
but no geographic ties . . . to these rural communities.

Finally, they observed that AO-2009-1004 only prohibited recipients 
from allocating to their PAI requirements costs associated with 
subgrants to staff-model legal services providers to operate a hotline 
that provided advice and referrals. AO-2009-1004 did not, they 
continued ``exclude from PAI counting staff time facilitating, 
supervising, or co-counseling with these same non-profit, non-LSC staff 
model legal providers who donate their time to a recipient.'' It is the 
donation of the services, rather than the donor's nature as a provider 
of legal services to the poor, that ``is at the heart of pro bono legal 
services and should be at the heart of all LSC PAI plans.'' CRLA/LSAM 
recommended that LSC revise the exclusion to apply only to ``[a]n 
attorney who receives more than half of his or her professional income 
from a non-LSC-funded legal services provider which receives a subgrant 
from any recipient, acting within the terms of his or her employment 
with the non-LSC-funded provider.''
    The Access Commission also observed that the ``proposed exclusion 
is ambiguous and overly broad and may unnecessarily restrict the pool 
of attorneys eligible to volunteer with LSC-funded legal services 
programs.'' Like CRLA/LSAM, the Access Commission highlighted 
California's particular concerns about having a limited pool of 
attorneys available to work in its ``vast rural and underserved 
areas.'' Unlike CRLA/LSAM, the Access Commission recommended that LSC 
narrow the exclusion to apply only to ``non-profit organization[s] 
whose primary purpose is delivery of civil legal services to the poor . 
. . .'' They urged that ``the proposed rules be flexible enough to 
encourage the participation of attorneys who do not usually serve low 
income clients while permitting LSC-funded legal services programs to 
recruit and work with available attorneys and organizations in their 
local communities.''
    Finally, NLADA advocated the inclusion of attorneys who work for 
non-profit organizations whose primary purpose is not the delivery of 
legal services to the poor. As examples, NLADA offered two 
organizations: the American Association for Retired Persons (AARP), and 
the protection and advocacy systems (P&As) funded by the federal 
government to ensure the rights of individuals with the full range of 
disabilities. Nationally, AARP provides an array of services and 
benefits to members; in the District of Columbia, AARP supports Legal 
Counsel for the Elderly, which provides free legal assistance in civil 
cases to residents over the age of 60, and in disability cases to 
residents over the age of 55. P&As receive funding from the U.S. 
Department of Education, the U.S. Department of Health and Human 
Services, and the Social Security Administration, to engage in systemic 
advocacy efforts and to provide individual assistance to individuals 
with the full range of emotional, developmental, and physical 
disabilities. P&As may provide legal representation to individuals free 
of charge or on a sliding scale fee basis.
    According to NLADA, these types of organizations ``have invaluable 
specialized expertise and often strong relationships/collaborations 
with private firms operating for profit. Partnerships with these 
organizations

[[Page 61774]]

provide significant opportunities for collaborations that expand a 
recipient's ability to effectively and efficiently serve clients and 
provide increased opportunities for private bar participation.'' 
Similar to the Access Commission, NLADA recommended that LSC limit the 
exclusion to attorneys ``employed by a non-profit organization whose 
primary purpose is the delivery of civil legal services to the poor 
during any time that attorney is acting within the terms of his or her 
employment with that organization[.]''
    In its comment, the ABA stated that it agreed in principle with 
LSC's view that the purpose of the PAI regulation is to engage lawyers 
who are not currently involved in the delivery of legal services to 
low-income individuals as part of their regular employment. The ABA 
recommended that LSC clarify that the term ``legal services provider,'' 
as used in the rule, means ``an entity whose primary purpose is the 
delivery of free legal services to low-income individuals.''
    Response: LSC will revise the language in Sec.  1614.3(i)(2)(ii) to 
narrow the exclusion to attorneys acting within the terms of their 
employment by a non-profit organization whose primary purpose is the 
delivery of free civil legal services to low-income individuals. This 
definition is adapted from the New York State Bar Association's 
definition of ``pro bono service'' in the context of the Empire State 
Counsel Program, which annually recognizes New York attorneys' pro bono 
efforts, and is substantially similar to the definition recommended by 
the ABA. LSC understands the issues raised by CRLA, LSAM, the Access 
Commission, and NLADA, and appreciates the benefits that collaborations 
between LSC recipients and other non-profit organizations bring to the 
populations served by those collaborations. Within the context of the 
PAI rule, however, LSC believes that the focus should be on engaging 
attorneys who are not employed to provide free legal services to low-
income individuals.
    Although LSC is excluding legal aid attorneys acting within the 
scope of their employment from the definition of private attorney, the 
revised language permits recipients to allocate costs to the PAI 
requirement associated with co-counseling arrangements or other 
collaborations with attorneys employed by organizations whose primary 
purpose is not the delivery of free legal services to low-income 
individuals. For example, although CRLA may no longer be able to count 
co-counseling with a legal aid organization toward its PAI requirement, 
it could allocate costs associated with co-counseling a case with 
California's P&A to the PAI requirement. It also permits a recipient to 
count as a private attorney an attorney who is employed by an 
organization whose primary purpose is the delivery of free civil legal 
services to low-income individuals, but who is participating in a PAI 
clinic supported by a recipient on the attorney's own time.
    LSC wants to be clear that its decision to exclude legal aid 
attorneys from the definition of private attorney does not mean that 
recipients should not collaborate with these providers in the delivery 
of legal information and legal assistance to eligible clients. LSC 
supports and encourages recipients to work creatively and to build 
relationships necessary to increase their effectiveness at achieving 
positive outcomes for their clients. The exclusion simply means that 
recipients may not allocate costs associated with those collaborations 
to the PAI requirement.
    Comment 2: LSC received two comments on Sec.  1614.3(h)(2)(i), 
which proposed to exclude from the definition of private attorney 
attorneys employed more than 1,000 hours per year by an LSC recipient 
or subrecipient. In their joint comment, CRLA and LSAM observed that 
proposed Sec.  1614.3(h)(2)(i) precluded the participation of attorneys 
who retired or otherwise moved on from an LSC recipient, but wanted to 
volunteer to handle cases or support the recipient in some fashion. 
They stated that, according to the history of the PAI rule, the two-
year restriction on PAI payments to attorneys who had left a 
recipient's employ was intended to prevent ``situations in which 
programs had laid off staff attorneys and then contracted to pay these 
attorneys for doing the same work they had done before as staff.'' 50 
FR 48586, 48587, Nov. 26, 1985. They additionally noted that ``for our 
purposes here, a recipient could co-counsel with these former staff 
members within 24 hours of their leaving the employ of a recipient and 
the staff time spent co-counseling with the former staff member could 
be counted as PAI.''
    NJP objected to proposed Sec.  1614.3(h)(2)(i) on similar grounds. 
NJP argued that the rule would

exclude attorneys (1) who leave a recipient's employ after 1001 
hours during any year and then seek to volunteer for the program, 
including recently retired attorneys, attorneys leaving the 
recipient upon termination of a grant-based position, or attorneys 
leaving for private employment; and (2) who volunteer for a 
recipient, but may on occasion be employed on a short-term basis to 
fill temporary needs arising from staff vacancies or absences such 
as an extended family medical leave, military leave, short-term 
special project grant funding, or emergency needs occurring from a 
sudden staff departure.''

    In NJP's view, ``[g]iven that a recipient cannot allocate non-PAI 
activity to PAI costs in any event, there seems little reason to limit 
who is considered a `private attorney' for purposes of supporting their 
pro bono services based on duration of employment by a recipient, so 
long as costs are not allocated for time spent while they are employed 
by the recipient.'' NJP urged LSC to eliminate paragraph (2)(i) from 
the definition of private attorney.
    Response: LSC did not intend the result described by the 
commenters. In response to their comment, LSC will revise the language 
in the definition of private attorney. LSC will replace the 1,000 hours 
per calendar year timeframe with a ``half time'' standard. LSC believes 
that using a half time standard will more clearly capture its intent 
that recipients assess an attorney's employment status with the 
recipient contemporaneously with the services for which they seek to 
allocate costs to the PAI requirement. In other words, if a recipient 
employs an attorney ten hours per week, and that attorney also wishes 
to volunteer to provide advice and counsel at a PAI clinic supported by 
the recipient, the recipient may consider the part-time attorney a 
private attorney at the time he or she is providing services at the PAI 
clinic.
    LSC will also make two other changes to Sec.  1614.3(i) in the 
final rule. First, LSC will define private attorney as meaning an 
attorney defined in Sec.  1614.3(a), and relocate all the exceptions to 
the definition to paragraphs (i)(1)-(3). Second, LSC will add paragraph 
(i)(4) to clarify that private attorney does not include an attorney 
acting within the terms of his or her employment by a component of a 
non-profit organization, where the component's primary purpose is the 
delivery of free civil legal services to low-income individuals. In 
other words, attorneys working for the legal aid component of a non-
profit social services organization whose overall mission is to deliver 
free social services to low-income individuals are not private 
attorneys for purposes of part 1614. This exclusion is consistent with 
the rule's primary purpose of engaging attorneys who do not provide 
legal assistance to the poor in the delivery of legal information and 
legal assistance to eligible clients.
    Sec.  1614.3(j) Screen for eligibility. The proposed definition 
made clear that individuals receiving legal assistance

[[Page 61775]]

through PAI activities must get 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. LSC received no comments on this definition.
    Sec.  1614.3(k) Subrecipient. LSC will add a definition for the 
term subrecipient to the final rule. As LSC considered the public 
comments, particularly the comments discussing the definition of the 
term private attorney, and recipients' use of subgrants and fee-for-
service arrangements to carry out PAI activities, LSC discovered that 
the term subrecipient was over-inclusive for purposes of the PAI rule. 
Subrecipient, as defined in Sec.  1627.2(b)(1) includes fee-for-service 
arrangements through which attorneys represent a recipient's clients, 
such as under a contract or a judicare arrangement, when the cost of 
such arrangement exceeds $25,000.
    LSC did not intend to exclude from the definition of private 
attorney attorneys working for a subrecipient that meets the definition 
solely because an LSC recipient is paying the entity more than $25,000 
to provide legal representation to the recipient's clients on a 
contract or judicare basis. For purposes of part 1614, LSC will define 
subrecipient as not including entities receiving more than $25,000 from 
a recipient to provide legal representation to the recipient's clients 
on a contract or judicare basis.

Proposed Sec.  1614.4--Range of Activities

    Sec.  1614.4(a) Direct delivery of legal assistance to eligible 
clients. In the NPRM, LSC proposed to consolidate existing Sec. Sec.  
1614.3(a) and (d) into one paragraph. LSC also proposed to add 
paragraph (a)(2), which stated that direct delivery of legal assistance 
to eligible clients may include representation by a non-attorney in an 
administrative tribunal that permits non-attorney individuals to 
represent individuals. LSC received no comments on this section.
    Sec.  1614.4(b) Support and other activities. Comment: LSNYC 
expressed concern about LSC's proposal to revise existing Sec.  
1614.4(b)(1) to exclude from PAI support activities pro bono work done 
on behalf of the recipient itself, rather than for a client. It 
referred to the ABA and Pro Bono Institute definitions of ``pro bono,'' 
which include legal work provided to organizations ``in matters in 
furtherance of their organizational purposes, where the payment of 
standard legal fees would significantly deplete the organization's 
economic resources or would be otherwise inappropriate,'' and indicated 
that LSC's decision to exclude work on behalf of organizations 
``deviate[s] from the well-reasoned standards of the pro bono 
community.'' LSNYC stated that if it could no longer count toward its 
PAI requirement pro bono work provided to LSNYC as an organization, it 
would either have to spend ``substantial amounts of money on attorneys 
for the organization'' or ``skimp[] on the resources that are available 
to effectively run the organization.'' Finally, LSNYC argued that LSC's 
proposed change would ``ignore[] the contribution of many transactional 
attorneys'' whose skill sets do not necessarily lend themselves to 
individual representation of clients or conducting legal information 
clinics.
    Response: LSC will retain the language from the NPRM, including the 
statement that support provided by private attorneys must be provided 
as part of a recipient's delivery of legal information or legal 
assistance to eligible clients to count toward the PAI requirement. 
Since its original incarnation in 1981 as a special condition on LSC 
grant funds, the purpose of PAI has been to involve private attorneys 
in the delivery of legal services to eligible clients. It does not 
appear from the administrative record that LSC envisioned pro bono 
services to recipients themselves to be support activities within the 
context of the PAI rule. As a result, LSC views the language change 
proposed in the NPRM to represent a clarification of the existing rule, 
rather than a change in policy.
    LSC wants to be clear that LSC supports recipients' efforts to 
leverage resources within their legal communities for the benefit of 
themselves and their clients. LSC recognizes the value or pro bono 
services provided to recipients themselves, as well as the value that 
providing such assistance returns to the pro bono attorneys. Recipients 
can, and should, continue to secure pro bono legal assistance with the 
issues they face as organizations whenever possible. For purposes of 
allocating costs to the PAI requirement, however, recipients must 
obtain services from private attorneys that inures primarily to the 
benefit of the recipients' clients rather than to the recipient in its 
organizational capacity.
    Proposed Sec.  1614.4(b)(4) PAI Clinics. Comment 1: LSC received 
three comments identifying ambiguity in the text of proposed Sec.  
1614.4(b)(4)(ii)(C). The Access Commission, the ABA, and NLADA remarked 
that although proposed Sec.  1614.4(b)(4)(i) allows recipients to 
allocate costs to the PAI requirement associated with support to legal 
information clinics without screening for eligibility, Sec.  
1614.4(b)(4)(ii)(C) appears to allow recipients to allocate costs to 
the PAI requirement associated with ``hybrid'' legal information and 
legal assistance clinics only if the legal assistance portion of the 
clinic screens for eligibility. All three commenters asserted that this 
result does not make sense because recipients may provide legal 
information without screening. In NLADA's words, ``there is no reason 
to prohibit the allocation of PAI to an LSC program's support of a 
clinic's legal information activities which are severable from the 
legal assistance activities of the clinic.''
    Response: LSC intended to allow recipients supporting hybrid PAI 
clinics to allocate to their PAI requirements costs associated with 
support to the legal information portion of the PAI clinic, regardless 
of whether the legal assistance portion of the PAI clinic screens for 
eligibility. In response to these comments, LSC will revise Sec.  
1614.4(b)(4)(ii)(C) to make clear that, in the context of hybrid PAI 
clinics, recipients may allocate costs associated with support of the 
legal information portion of the PAI clinic to their PAI requirements. 
If the legal assistance portion of a hybrid PAI clinic screens for 
eligibility and only provides legal assistance to LSC-eligible 
individuals, the recipient may allocate costs associated with its 
support of both parts of the clinic to the PAI requirement.
    Comment 2: LASNNY commented that the proposed requirement for 
screening at legal assistance clinics would restrict it from continuing 
to participate in some of its current activities. As an example, LASNNY 
described its volunteers' participation in the Albany County Family 
Court Help Center, which provides support and assistance to pro se 
litigants in family court. LASNNY stated that the program does not 
screen for income eligibility, citizenship, or eligible alien status, 
and that it was participating in the program at the request of the 
court's presiding justice and the director of the court's Access to 
Justice initiatives. As a solution, LASNNY proposed that recipients 
could use non-LSC funds to

[[Page 61776]]

provide services to clients who have not been screened for eligibility.
    Response: LSC believes that the screening requirement should not 
preclude recipients from providing support to unscreened clinics that 
give legal information to pro se litigants. In the NPRM, LSC proposed 
that recipients would be able to allocate to the PAI requirement costs 
associated with PAI clinics providing legal assistance only if the 
clinics screened for eligibility and only provided legal assistance to 
LSC-eligible clients. LSC believes this approach is consistent with the 
April 9, 1998 opinion of the LSC Office of the General Counsel (OGC), 
which addressed the regulatory requirements applicable to legal 
information provided by recipients in pro se clinics. In that opinion, 
OGC stated that the recipient, which had received a contract from the 
court to provide assistance to pro se litigants, did not need to comply 
with either the client retainer provision in part 1611 or the provision 
in part 1626 that requires recipients to obtain citizenship 
attestations or documentation of eligible alien status. Importantly, 
OGC opined that compliance with the relevant provisions of parts 1611 
and 1626 was not required ``as long as the litigants are pro se, they 
do not enter into an attorney-client relationship with [a recipient] 
attorney, [and] they are not applicants for or are not seeking legal 
representation from [the recipient.]'' LSC believes that these 
principles should guide recipients' thinking about whether supporting a 
PAI clinic that serves pro se litigants may be considered legal 
information clinics that do not require screening, or instead 
constitute legal assistance clinics that do. Regarding LASNNY's 
suggestion that non-LSC funds could be used for services to unscreened 
clients, some restrictions, such as the alienage restriction in part 
1626, apply to legal assistance that is provided with both LSC and non-
LSC funds.
    Comment 3: The ABA commented that the NPRM did not include several 
important types of clinics within its scope. One type was the hybrid 
legal information/legal assistance clinic discussed above. A second 
type was a clinic with two components: ``one in which LSC-eligible 
clients are provided pro bono advice by one group of lawyers, and 
another component in which non-eligible individuals are provided 
service by either staff of the clinic (who are not employees of a LSC 
recipient) or a separate group of pro bono lawyers.'' In the model 
described by the ABA, individuals are pre-screened and sent to the LSC 
recipient's private attorney if they are LSC-eligible, and to attorneys 
in another part of the clinic if they are not. The ABA believes that 
LSC should allow recipients to support such clinics ``because in many 
communities, the bar association wants to serve through its pro bono 
programs many people who cannot afford an attorney, not just those who 
fall within the LSC eligibility guidelines.''
    The ABA described a final model, in which a court or local bar 
association contacts an LSC recipient to ask for assistance in planning 
a pro bono clinic. According to the ABA, at the time the court or bar 
association asks for the recipient's assistance, it may not be clear 
whether the clinic will provide legal information, legal assistance, or 
both, or whether it will screen for eligibility if it provides legal 
assistance. The ABA ``regards these support activities as permissible 
and as ones that should count toward the PAI requirement because the 
LSC recipient is not assisting lawyers who will be helping ineligible 
clients, but is simply engaging in discussions initiated by the court 
or bar to explore options.''
    Response: As discussed above, LSC agrees that recipients may 
allocate to their PAI requirements costs associated with support of the 
legal information portion of a hybrid clinic, regardless of whether the 
legal assistance portion screens for eligibility. LSC also believes 
that recipients may support clinics of the second type described by the 
ABA. LSC's concern about recipients' providing support to clinics that 
do not screen for eligibility is that recipients will be diverting 
resources to activities that serve individuals who are not eligible for 
LSC-funded legal assistance. This concern is greatest in the context of 
a clinic where no screening occurs. It is still present in the context 
of a clinic that screens for eligibility and provides legal assistance 
to individuals who are not eligible for LSC-funded assistance, but the 
concern is lessened because the recipient's support is limited to the 
part of the clinic that is providing legal assistance to LSC-eligible 
clients.
    With respect to the ABA's third scenario, LSC agrees that the type 
of technical assistance described is a valuable service provided by 
recipients in furtherance of the court or bar association's efforts to 
increase pro bono. LSC also agrees that it is consistent with the 
purposes of the PAI rule to allow recipients to allocate costs to the 
PAI requirement associated with providing support to courts or local 
bar associations in response to requests for assistance in setting up 
clinics at which private attorneys will provide legal information or 
legal assistance. However, LSC considers this type of assistance to be 
support provided to courts or local bar associations in their efforts 
to increase pro bono services, rather than as support for the operation 
of PAI clinic within the meaning of Sec.  1614.4(b)(4). Once the clinic 
begins providing legal information or legal assistance to the public, 
the recipient may provide support consistent with proposed Sec.  
1614.4(b)(4).
    LSC will address the ABA's proposal by including a new paragraph 
(b)(4) that allows recipients to count toward their PAI requirements 
costs incurred assisting bar associations or courts with planning and 
establishing clinics at which private attorneys will provide legal 
information or legal assistance to the public. Consequently, LSC will 
redesignate proposed paragraphs (b)(4)-(b)(6) to paragraphs (b)(5)-
(b)(7) in the final rule.
    Comment 4: NLADA recommended that LSC allow limited screening of 
individuals receiving legal assistance through PAI clinics. NLADA 
asserted that the eligibility screening requirement ``is not necessary 
to ensure compliance with the LSC Act and other statutory 
restrictions[,]'' and offered two alternatives. The first alternative 
was limited screening for financial eligibility and citizenship or 
eligible non-citizen status. NLADA suggested that ``a clinic 
participant could be determined LSC eligible if the applicant attests 
that he is a U.S. citizen or has a green card and either has zero 
income or receives assistance under programs such as SNAP, TANF, 
Medicaid or SSI. While this limited screening may rule out eligible 
clients, the screening could serve as an acceptable and workable method 
for clinic participants to determine who should and who should not be 
referred to LSC program staff participating in the clinic for legal 
assistance.'' The second alternative was periodic limited screening. 
Under this alternative, the clinic would occasionally conduct the 
limited screening described in the first option, and the recipient 
could use the results to ``calculate the percentage of LSC eligible 
applicants served by the clinic and appropriately apportion LSC program 
resources used to support the clinic that can be allocated to PAI.'' 
NLADA noted the additional benefit that ``the clinic would then have 
the option to have LSC grantees not participate in the provision of 
legal assistance to individual clients or have procedures in place to 
conduct limited or full screening with LSC grantees only providing 
legal assistance to LSC eligible individuals.''
    Response: LSC will not revise the requirement for PAI clinics to 
screen for

[[Page 61777]]

eligibility prior to providing legal assistance to individuals. During 
the April 2014 Committee meeting in Washington, DC, LSC made clear that 
it was willing to consider alternatives to the proposed screening 
requirement if the alternatives were supported by a legal analysis of 
how the alternatives would ensure compliance with the LSC Act, the 
restrictions contained in LSC's appropriations acts, and LSC's 
regulations. No commenter, however, has offered any legal analysis 
supporting the assertion that screening ``is not necessary to ensure 
compliance with the LSC Act and other statutory restrictions.''
    LSC considered the issue of limited screening at length during the 
development of the NPRM. During the July 2013 and September 2013 
rulemaking workshops, and in response to the two Requests for 
Information published by LSC last year, multiple commenters recommended 
that LSC allow limited screening for PAI clinics. When discussing 
screening in this 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 for 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, 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. 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 concluded that, regardless of whether legal assistance 
is provided directly by a recipient or through PAI activities 
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. Nothing in NLADA's comment causes LSC to reconsider its 
decision with respect to screening for eligibility in PAI clinics that 
provide legal assistance to individuals.
    LSC recognizes that adopting either the simplified screening 
requirement or a test that a clinic was targeted at the LSC-eligible 
client population would allow recipients to support a broader range of 
clinics at which private attorneys provide legal assistance to low-
income individuals. What neither of these mechanisms ensures is that 
LSC recipients are supporting clinics that provide services permitted 
by LSC's authorizing statutes to individuals eligible to receive those 
services. While Congress has repeatedly supported LSC's efforts to 
expand pro bono consistent with the recommendations of the Pro Bono 
Task Force, it has couched its support in terms of ``increasing the 
involvement of private attorneys in the delivery of legal services to 
their clients.'' S. Rep. 113-78, H.R.Rep. 113-171, incorporated by 
reference by Sec. 4, Pub. L. 113-76, 128 Stat. 5, 7 (2014). LSC does 
not believe that its responses to the Task Force's recommendations can 
include expanding the PAI rule to allow recipients to participate, 
directly or indirectly, in the provision of legal assistance to 
individuals who are not eligible to receive legal assistance from an 
LSC recipient.
    Comment 5: OIG commented that it had ``observed some ambiguity in 
the discussion of PAI support for clinics that provide individualized 
legal assistance. The transcripts of meetings preceding publication of 
the NPRM appear to contain the suggestion that grantees will be able to 
count their direct participation in PAI clinics toward their PAI 
requirement.'' OIG urged LSC to clarify that costs incurred by a 
recipient in supporting a PAI clinic count toward the PAI requirement, 
while costs associated with clinics at which recipient attorneys 
themselves provide the legal information or legal assistance cannot be 
allocated to the PAI requirement.
    Response: LSC understands OIG's concern and believes their comment 
is addressed by the definition of PAI clinic. In the NPRM, LSC defined 
PAI clinic as ``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.'' 79 FR 21188, 21199, Apr. 15, 2014 
(emphasis added). LSC clearly stated its intent regarding the 
application of Sec.  1614.4(b)(4) in the preamble to the NPRM:

    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.

79 FR 21188, 21193.

    Comment 6: OIG also commented on LSC's proposal to promulgate clear 
standards for when a PAI clinic must screen for eligibility. OIG first 
noted that proposed Sec.  1614.4(b)(4) ``describes in some detail 
eligibility constraints on three different types of PAI clinics: 
clinics that exclusively provide legal information not tailored to 
particular clients; clinics that exclusively provide individualized 
legal advice, and clinics that do both.'' OIG also cited the 
observation made by a member of the Board of Directors at the April 
Board meeting that ``without a change in meaning, one could remove the 
proposed eligibility constraints in Section 1614.4(b)(4) and substitute 
language pointing to generally applicable standards governing the use 
of LSC funds as the operative constraint on PAI activities, thereby 
reducing the complexity [of] the proposed rule.'' OIG stated its 
understanding that proposed Sec.  1614.4(b)(4) merely explicated ``the 
straightforward implications of general eligibility requirements found 
in LSC's regulations and governing statutes,'' and recommended that if 
LSC intended to establish new eligibility requirements, LSC should 
clarify that intent before adopting a final rule. Finally, OIG 
recommended that LSC either significantly simplify Sec.  1614.4(b)(4) 
to plainly state the ``generally applicable eligibility requirements'' 
or, if retaining the language proposed in the NPRM, including language 
``to the effect that notwithstanding any other provision or subsection 
of the rule, a grantee may only count toward its PAI requirement funds 
spent in support of activities that the grantee would itself be able to 
undertake with LSC funds.''
    Response: LSC agrees with OIG that it should be clear that the rule 
is not establishing new or additional eligibility requirements or 
screening requirements. LSC believes that the specificity of the

[[Page 61778]]

definition of the term screen for eligibility makes clear that 
individuals being served through PAI clinics must be LSC-eligible. The 
definition does not establish new or additional screening requirements 
for individuals being served by private attorneys through PAI projects.
    LSC understands that part 1614 states its position on when 
individuals must be screened for eligibility more clearly than LSC has 
done in any prior issuance, and that the issue of eligibility to 
receive legal assistance from an LSC recipient is not unique to the PAI 
context. However, as discussed in the response to the comment above 
regarding screening, LSC believed that a clear statement in the PAI 
rule about its requirements for eligibility screening was necessary. 
LSC reiterates now that the screening requirements contained in Sec.  
1614.4(b)(4) do not create new standards for determining the 
eligibility of individuals receiving legal assistance through a PAI 
clinic.
    Sec.  1614.4(b)(5) Screening and referral systems. Section 
1614.4(b)(5) established the rules governing intake and referral 
systems. This addition to the rule adopted Recommendation 2(b) by 
expanding the situations in which recipients may 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. LSC received no comments on this section.
    Sec.  1614.4(b)(6) Law student activities. Section 1614.4(b)(6) 
established the rules for allocating costs associated with the work 
provided by law students to the PAI requirement. LSC received no 
comments on this section.
    Sec.  1614.4(c) Determination of PAI activities. Section 1614.4(c) 
adopted existing Sec.  1614.3(c) in its entirety. LSC proposed 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 proposed this change to reflect 
the rule's inclusion of the other categories of individuals that 
recipients may engage in PAI activities. LSC received no comments on 
this section.
    Sec.  1614.4(d) Unauthorized practice of law. Section 1614.4(d) 
made 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. LSC received 
no comments on this section.
    Proposed Sec.  1614.5 Compensation of recipient staff and private 
attorneys; blackout period. In the NPRM, LSC proposed 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.
    Sec.  1614.5(a). Section 1614.5(a) stated 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 
was 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. LSC received no comments on this section.
    LSC will make one technical edit to this section in the final rule. 
LSC will add ``or employees of subrecipients'' to make clear that 
compensation paid to employees of subrecipients, as defined in Sec.  
1614.3(k), may only be allocated to the PAI requirement if the 
compensation was incurred to facilitate PAI activities.
    Sec.  1614.5(b). Section 1614.5(b) established limits on the amount 
of compensation paid to a private attorney, law graduate, or other 
professional that a recipient may allocate to its PAI requirement. LSC 
proposed 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 was 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. LSC received no comments on this section.
    Sec.  1614.5(c). Section 1614.5(c) adopted 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 available to all participating attorneys. LSC proposed to 
remove as obsolete the references to the effective date of the 
regulation and contracts made prior to fiscal year 1986. LSC also 
proposed 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. LSC 
proposed the latter change 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 proposed to exclude law students from the 
scope of this provision. Finally, the rule exempted from this 
restriction compensation paid to attorneys who had been employed at a 
recipient or subrecipient while participating in incubator projects. 
LSC received no comments on this section during the public comment 
period.
    LSC will make two technical changes to Sec.  1614.5 in response to 
internal comments. First, LSC will replace the term ``PAI funds'' with 
references to allocation of costs to the PAI requirement. ``PAI funds'' 
was language carried over from existing Sec.  1614.1(e), but as LSC 
staff pointed out, part 1614 is a cost allocation regulation, rather 
than authority for the expenditure of funds for a specified purpose. 
Consequently, the language of Sec.  1614.5 has been revised to reflect 
more accurately the nature of the activity covered by the regulation.
    The second technical change is related to the first. With the move 
away from using the term ``PAI funds,'' the language of proposed Sec.  
1614.5(c)(2) became difficult to understand. LSC will simplify 
paragraph (c)(2) by replacing ``PAI funds'' with ``allocation of costs 
to the PAI requirement'' and relocating the description of an incubator 
project to Sec.  1614.3(b) as the definition of the term incubator 
project.
    In response to the final rule presented to the Committee in advance 
of its October 5, 2014 meeting, NJP commented that the prohibition on 
payments to an ``individual who for any portion of the current or 
previous year has been employed more than 1,000 hours per calendar year 
by an LSC recipient or subrecipient'' was confusing. NJP stated that 
the prohibition seemed to conflict with Sec.  1614.5(a), which permits 
recipients to allocate costs to the PAI requirement associated with 
compensation paid to employees for facilitating the involvement of 
private attorneys, law students, law graduates, and other

[[Page 61779]]

professionals in PAI activities. In order to make clear that the 
blackout period described in paragraph (c) applies to individuals who 
are no longer employed by the recipient, LSC proposed revising the 
language to state ``No costs may be allocated to the PAI requirement 
for direct payment to any individual who for any portion of the current 
year or the previous year was employed more than 1,000 hours per 
calendar year by an LSC recipient or subrecipient . . . .''
    LSC staff brought NJP's concern and the language LSC proposed above 
to address the concern to the Board's attention. The Board accepted the 
change, which is now contained in the final rule.
    Proposed Sec.  1614.6 Procedure. LSC moved the text of existing 
Sec.  1614.4, regarding the procedure recipients must use to establish 
their PAI plans, to Sec.  1614.6. LSC proposed 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 did not revise proposed 
Sec.  1614.6(b) to require recipients to consult with local 
associations for other professionals. LSC believed 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. In the interest of simplifying and improving the logic 
of the rule, LSC also proposed 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. LSC received no comments on this section.
    Proposed Sec.  1614.7 Compliance. Comment: NJP commented on the 
omission of current Sec.  1614.3(e)(4) from the NPRM. Existing Sec.  
1614.3(e)(4) states that recipients must make available to LSC auditors 
and monitors ``all records pertaining to a recipient's PAI requirements 
which do not contain client confidences or secrets as defined by 
applicable state law.'' NJP expressed concern that the omission of 
Sec.  1614.3(e)(4) ``seems to extend the proposed changes in 2015 Grant 
Assurances Nos. 10 and 11 (to which NJP strongly objects) to private 
attorneys providing services under a PAI contract. . . . Compelling a 
private attorney to disclose client information in contravention of 
applicable Washington law and Rules of Professional Conduct, creates a 
significant disincentive to participation in a compensated PAI program 
through NJP.'' NJP urged LSC to reinstate the language of existing 
Sec.  1614.3(e)(4).
    Response: LSC understands NJP's concern, but will not reinstate the 
language of current Sec.  1614.3(e)(4). LSC notes that it rescinded the 
proposed changes to Grant Assurances 10 and 11 in response to comments 
made by NJP, discussed above, and others regarding the potential 
adverse effect of the proposed changes.
    LSC intentionally omitted this section in the NPRM as the result of 
internal discussions with OIG. OIG and LSC came to the conclusion that 
existing Sec.  1614.3(e)(4) was unnecessary because it did not 
establish recordkeeping or disclosure requirements beyond those stated 
in LSC's governing statutes and regulations. LSC has not included 
similar disclosure provisions in any of its other regulations. Instead, 
LSC has chosen to prescribe its access to records through the grant 
assurances that recipients must accept each year. Records pertaining to 
a recipient's PAI activities are not subject to different recordkeeping 
or access requirements than records pertaining to its in-house 
activities. LSC believes that its governing statutes, regulations, and 
grant assurances adequately describe the circumstances under which 
recipients must provide LSC access to records pertaining to their PAI 
requirements and the kinds of information that may be withheld. There 
is no need to include a provision explaining that access in part 1614.
    LSC will make one technical change to the title of Sec.  1614.7. 
LSC staff believed that the title ``Compliance'' was misleading because 
Sec.  1614.7 governs only fiscal recordkeeping, rather than 
recordkeeping about all aspects of a recipient's operations, including 
compliance with parts 1626 (eligibility of citizens and certain non-
citizens), 1620 (determination of priorities), and 1611 (financial 
eligibility). We agree with this comment, and will retitle Sec.  1614.7 
``Fiscal recordkeeping.'' Programmatic recordkeeping requirements 
specific to the activities described in Sec.  1614.4 are contained in 
the paragraphs to which they apply.
    Proposed Sec.  1614.8 Prohibition of revolving litigation funds. In 
the NPRM, LSC proposed 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 was 
the inclusion of law students, law graduates, or other professionals. 
LSC received no comments on this section.
    Proposed Sec.  1614.9 Waivers. LSC proposed 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 proposed 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. 
LSC received no comments on this section.
    Proposed Sec.  1614.10 Failure to comply. In the NPRM, LSC proposed 
to move existing Sec.  1614.7, which established sanctions for a 
recipient's failure to comply with the PAI requirement or seek a waiver 
of the requirement, to new Sec.  1614.10.
    Sec.  1614.10(a). Comment: NLADA expressed concern that withholding 
of funds under Sec.  1614.10(a) would not be considered an enforcement 
action under 45 CFR parts 1606, 1618, 1623, or 1630. Section 1614.10(a) 
authorizes the Corporation to withhold funds if a recipient fails to 
meet the PAI requirement for a given year and fails without good cause 
to seek a waiver of the PAI requirement. NLADA wanted to ``ensure that, 
although actions under 1614 are not to be construed as actions under 
the other regulatory sections referenced above, LSC will follow normal 
procedures of due process, including allowing recipients the ability to 
appeal a decision to withhold funds to LSC's President.''
    Response: In light of NLADA's comment, LSC will establish a process 
for considering whether a recipient has failed without cause to seek a 
waiver of the PAI requirement, notifying the recipient of LSC's 
determination, and providing for review of an initial adverse decision. 
LSC believes that the opportunity for review by the President of the 
Corporation is appropriate when a recipient's failure to comply with a 
requirement may result in the loss of funds. LSC will use a process 
modeled substantially on the process described at 45 CFR 1630.7 because 
the withholding of funds for failure to comply with a requirement is 
most akin to a disallowance of questioned costs.
    In considering NLADA's comment, LSC researched the regulatory 
history of existing Sec.  1614.7(a). When it enacted existing Sec.  
1614.7(a) in 1986, LSC received comments from the field that the 
provision placed too much discretion with the staff to determine 
whether recipients were in compliance with the PAI requirement or had 
failed without good cause to seek a waiver. 50 FR 48586, 48590, Nov. 
26, 1986. In response, LSC clarified that the Board

[[Page 61780]]

``intends for this section to minimize staff discretion. The only 
determination left to staff under Sec.  1614.7 is whether or not a 
recipient has failed without good cause, to seek a waiver during the 
term of the grant.'' 50 FR 48586, 48590-91. The Board did not address 
whether a recipient had any recourse in the event that staff determined 
that the recipient failed without good cause to seek a waiver.
    LSC will add Sec.  1614.10(a)(2), which states that the Corporation 
will inform the recipient in writing of its decision about whether the 
recipient failed without good cause to seek a waiver. LSC will also add 
Sec.  1614.10(a)(3), which states that appeals under this section will 
follow the process set forth at 45 CFR 1630.7(c)-(g). Finally, LSC will 
add two provisions that limit the applicability of the process 
described to actions under part 1614. Consistent with the Board's 
intentions, as stated in the preamble to the 1986 final rule, paragraph 
(a)(3)(i) will limit the subject matter of the appeal to the 
Corporation's determination that the recipient failed without good 
cause to seek a waiver. Paragraph (a)(3)(ii) will limit the method by 
which the Corporation may recover funds to withholding, consistent with 
the existing rule.
    Sec.  1614.10(b). This section carried over from existing Sec.  
1614.7(b), and states that recipients who fail with good cause to seek 
a waiver, or who apply for but fail to receive a waiver, or who receive 
a partial waiver but do not expend the amount required will have their 
PAI requirement increased for the following year. The requirement will 
be increased by an amount equal to the difference between the amount 
actually expended and the amount required to be expended. LSC received 
no comments on this section.
    Sec.  1614.10(c). Comment: The ABA commented on LSC's proposal to 
revise this section to allow LSC to reallocate funds withheld under 
Sec.  1614.10(a) for any basic field purpose. The ABA agreed with LSC's 
proposal to allow it to compete the withheld funds outside of a 
recipient's service area if the recipient from whom the funds were 
withheld is the only applicant for the funds. However, the ABA opposed 
the proposal to make funds withheld for failure to meet the PAI 
requirement available for basic field grant purposes because it 
believed the proposal was contrary to the purposes of the PAI 
regulation. According to the ABA, ``[i]f the consequence of failing to 
use funds for PAI is that the funds become available for basic field 
services, this provides a disincentive to comply with the PAI 
requirement.'' Instead, the ABA recommended that LSC revise the rule to 
allow funds withheld under Sec.  1614.10(a) to be competed for PAI 
purposes in another service area if the program from which the funds 
were withheld is the ``only LSC recipient applying for the funds in the 
competitive grant process.''
    Response: LSC concurs with the ABA's comment and will revise Sec.  
1614.10(c) accordingly.
    LSC will make two changes to this section in the final rule. First, 
LSC will include language stating that when the Corporation has 
withheld funds from a recipient and such funds are available for 
competition, LSC shall provide public notice setting forth the details 
of the application process. LSC's notice will include the time, format, 
and content of the application, as well as the procedures for 
submitting an application for the withheld funds. Second, LSC will add 
a new paragraph (c)(2) regarding the relationship of an award of funds 
withheld under Sec.  1614.10(a) to a recipient's annual twelve and one-
half percent (12.5%) PAI requirement. An award of funds pursuant to 
Sec.  1614.10(c)(1) is an additional amount of funding to engage in PAI 
activities beyond a recipient's annual PAI requirement. In other words, 
LSC intends a Sec.  1614.10(c)(1) award to expand a recipient's PAI 
activities, rather than to supplement the amount available to meet the 
recipient's annual twelve and one-half percent (12.5%) requirement. An 
award under Sec.  1614.10(c)(1) will not increase the amount of the 
recipient's PAI requirement by the same amount in subsequent grant 
years. It is intended as a one-time award that has no future effect on 
a recipient's PAI requirement.
    During the October 5, 2014 Committee meeting, the Committee noted 
that the phrase ``in another service area'' in the last sentence of 
paragraph (c)(1) appeared to limit LSC's options for competing withheld 
funds in the event the recipient from whom they were withheld was the 
only applicant for the funds. In other words, it seemed to preclude the 
Corporation from holding a competition in which the recipient's 
application would be considered along with applications from other LSC 
recipients in other service areas. LSC did not intend to limit 
competition in that manner. LSC adopted the Committee's proposed 
language--``in additional service areas''--in the last sentence of 
paragraph (c)(1) to reflect more accurately LSC's intention to allow 
expanded competition. The version of the rule approved by the Board 
contained the revised language.
    Sec.  1614.10(d). LSC proposed to revise Sec.  1614.10(d) to be 
consistent with the changes to the enforcement rules, 78 FR 10085, Feb. 
13, 2013. LSC received no comments on this section.

Other Comments

    LSC received three comments that did not pertain to particular 
sections of the proposed rule. NJP submitted one comment recommending 
that LSC raise the dollar threshold at which recipients must seek 
approval to make payments to private attorneys in excess of $25,000. 
The rule governing subgrants, 45 CFR part 1627, requires recipients to 
obtain approval before making payments in excess of $25,000 to a third 
party to provide services ``that are covered by a fee-for-service 
arrangement, such as those provided by a private law firm or attorney 
representing a recipient's clients on a contract or judicare basis[.]'' 
45 CFR 1627.2(b)(1). NJP noted that the $25,000 limit has not changed 
since its enactment in 1983. They recommended that LSC increase the 
threshold to $60,000, which is the approximate amount that $25,000 in 
1983 represents today.
    The proposed change is outside the scope of this rulemaking, which 
is focused on changes to part 1614. Consequently, LSC will not revise 
part 1627 at this time. However, LSC has placed a priority on resuming 
the rulemaking initiated in 2011 to revise the subgrant rule in part 
1627 and the transfer rule at 45 CFR Sec.  1610.7 as part of the 2014-
2015 rulemaking agenda. LSC will consider NJP's recommendation as part 
of that rulemaking.
    OIG made two general comments regarding the rule. OIG first 
recommended that LSC retitle part 1614 to reflect the expansion of the 
rule to include services provided by individuals other than private 
attorneys. OIG recommended this change in part to avoid ``giving LSC's 
appropriators, oversight authorities, or outside observers the 
misimpression that all funding directed to what is now called private 
attorney involvement is devoted to securing the services of private 
attorneys.'' OIG suggested ``Volunteer and Reduced Fee Services'' or 
``Private Provider Services'' as alternate titles.
    OIG's second comment reiterated their belief that LSC should 
include reporting requirements in the rule. OIG recommended that the 
rule require recipients to provide information that would allow LSC to 
analyze the impact that the changes to the PAI rule have on services 
provided by private attorneys. OIG expressed its concern that ``if the 
PAI rule is revised to make PAI funds

[[Page 61781]]

available to activities other than the involvement of private 
attorneys, the legal services community may end up with fewer private 
attorneys involved in the provision of legal assistance to eligible 
clients.'' In OIG's view, it is essential that the new rule have 
mechanisms in place to measure the ``performance of the revised PAI 
rule from its inception. . . . These measuring mechanisms should, in 
the OIG's view, consist largely of reporting requirements that, at a 
minimum, break out the number of private attorneys (as distinguished 
from other service providers) involved in the program and the magnitude 
of their services.'' OIG concluded by opining that such reporting 
``would minimize the opportunity for confusion on the part of LSC's 
appropriators, oversight authorities, or outside observers concerning 
the extent to which PAI funds are directed toward pro bono services of 
attorneys.''
    Regarding OIG's first comment, LSC has determined that it will not 
change the title of part 1614. Part 1614 has been known as ``Private 
Attorney Involvement'' since 1986; recipients and stakeholders thus 
regularly use the term ``PAI.'' Moreover, because engaging private 
attorneys in the delivery of legal information and legal assistance to 
eligible clients remains the primary vehicle for carrying out the 
purpose of the rule, LSC does not believe a change is necessary.
    With respect to the second comment, LSC agrees with the OIG 
regarding the importance of reporting requirements, but will not 
specify reporting requirements in the final rule. During the March 3, 
2014 Committee meeting, LSC stated that it would not prescribe, through 
the rule, the types of information that recipients must keep about 
services and whether the services were provided by private attorneys or 
others. LSC informed the Committee of two factors relevant to this 
decision. First, LSC is in the midst of a project with the Public 
Welfare Foundation to improve the Corporation's data collection methods 
and measures. As part of this work, recipients have advised LSC about 
the types of data they provide to LSC and to other funders, and what 
types of data collection they find useful. Second, LSC typically 
informs recipients about the data that it wants them to provide through 
guidance, such as the annual grant assurances that recipients must 
accept at the beginning of each grant year. Particularly in light of 
its ongoing work with the Public Welfare Foundation, LSC believes the 
optimal approach is to prescribe data collection through policy 
documents so that LSC has the flexibility to adjust the data collection 
requirements in consultation with recipients and in a timely fashion. 
Promulgating specific data collection requirements in the regulation 
binds LSC and recipients to those requirements until the regulation can 
be amended, which is time-consuming and may delay desired changes. LSC 
agrees with the OIG regarding the importance of data LSC seeks from 
recipients, and intends to solicit OIG's input as it develops 
additional data collection requirements for PAI.

List of Subjects in 45 CFR Part 1614

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

    For the reasons stated in the preamble, the Legal Services 
Corporation revises 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 Fiscal recordkeeping.
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, and consistent with LSC's governing statutes and regulations, 
in a manner that furthers the statutory requirement of providing high 
quality, economical, and effective client-centered legal assistance and 
legal information to eligible clients. This part is designed to ensure 
that recipients of LSC 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) A recipient of LSC funding shall devote an amount equal to at 
least twelve and one-half percent (12.5%) of the recipient's annualized 
Basic Field-General award to the involvement of private attorneys, law 
students, law graduates, or other professionals in the delivery of 
legal information and legal assistance to eligible clients. This 
requirement is hereinafter referred to as the ``PAI requirement.''
    (b) Basic Field-Native American grants, Basic Field-Migrant grants, 
and non-Basic Field grants are not subject to the PAI requirement. For 
example, Technology Initiative 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 legal 
information and legal assistance 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.

    (a) Attorney means a person who is authorized to practice law in 
the jurisdiction in which assistance is rendered. For purposes of this 
part, attorney does not have the meaning stated in 45 CFR 1600.1.
    (b) Incubator project means a program that provides legal training 
and support, for a limited period of time, to law students, law 
graduates, or attorneys who are establishing, or upon graduation and 
bar admission intend to establish, their own independent law practices.
    (c) 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.
    (d) 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.
    (e) 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.
    (f) Legal information means substantive legal information not 
tailored to address a person's specific problem and that does not 
involve applying legal judgment or

[[Page 61782]]

recommending a specific course of action.
    (g) Other professional means an individual, not engaged in the 
practice of law and not employed by the recipient, providing services 
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 practice law 
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.
    (h) 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.
    (i) Private attorney means an attorney. Private attorney does not 
include:
    (1) An attorney employed half time or more per calendar year by an 
LSC recipient or subrecipient; or
    (2) An attorney employed less than half time by an LSC recipient or 
subrecipient acting within the terms of his or her employment by the 
LSC recipient or subrecipient; or
    (3) An attorney acting within the terms of his or her employment by 
a non-profit organization whose primary purpose is the delivery of free 
civil legal services to low-income individuals; or
    (4) An attorney acting within the terms of his or her employment by 
a component of a non-profit organization, where the component's primary 
purpose is the delivery of free civil legal services to low-income 
individuals.
    (j) 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).
    (k) Subrecipient has the meaning stated in 45 CFR 1627.2(b)(1), 
except that as used in this part, such term shall not include entities 
that meet the definition of subrecipient solely because they receive 
more than $25,000 from an LSC recipient for services provided through a 
fee-for-service arrangement, such as services provided by a private law 
firm or attorney representing a recipient's clients on a contract or 
judicare basis.


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, 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 that permits non-attorneys to represent individuals before the 
tribunal.
    (3) Systems designed to provide direct legal assistance 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 or a 
subrecipient as part of its delivery of legal assistance or legal 
information 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 the private attorney's 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) Support provided to bar associations or courts establishing 
legal clinics. A recipient may allocate to its PAI requirement costs 
associated with providing a bar association or court with technical 
assistance in planning and establishing a legal clinic at which private 
attorneys will provide legal information and/or legal assistance.
    (5) 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. A recipient may 
provide support to a PAI clinic that provides legal assistance if the 
PAI clinic screens for eligibility.
    (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 legal information to the public and legal 
assistance to clients screened for eligibility, a recipient may 
allocate to its

[[Page 61783]]

PAI requirement costs associated with its support of both parts of the 
clinic. If the clinic does not screen for eligibility, the recipient 
may allocate to the PAI requirement costs associated with the legal 
information portion of the PAI clinic, but may not allocate to the PAI 
requirement costs associated with the legal assistance portion of the 
clinic.
    (D) In order to allocate to its PAI requirement costs associated 
with support of the legal assistance portion of a clinic, a recipient 
must maintain records sufficient to document that such clinic has an 
eligibility screening process and that each individual provided with 
legal assistance in the portion of the clinic supported by the 
recipient was properly screened for eligibility under the process.
    (6) 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 report 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.
    (7) 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 and 
legal information to eligible clients;
    (3) The linguistic and cultural barriers to effective advocacy;
    (4) The actual or potential conflicts of interest between specific 
participating attorneys, law students, law graduates, 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 costs may be allocated to the PAI requirement for direct 
payment to any individual who for any portion of the current year or 
the previous year was 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 prohibit the 
allocation of costs to the PAI requirement for payments made to such an 
individual participating 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 allocation of costs 
to the PAI requirement for payments to attorneys who were employed for 
less than a year by an LSC recipient or subrecipient as part of an 
incubator project; and
    (3) This paragraph (c) shall not be construed to restrict 
recipients from allocating to their PAI requirement the payment of 
funds as a result of work performed by an attorney or other individual 
who practices in the same business with such former employee.


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, twelve and one-half percent (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  Fiscal recordkeeping.

    The recipient shall demonstrate compliance with this part by 
utilizing financial systems and procedures and maintaining supporting 
documentation to identify and account separately for

[[Page 61784]]

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, law graduates, or other 
professionals for support or direct client services rendered. The 
recipient shall maintain contracts on file that set forth payment 
systems, hourly rates, and maximum allowable fees. Bills and/or 
invoices from private attorneys, law graduates, or other professionals 
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 or subgrants 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 or subgrants 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 parts 
1610, 1627 and 1630;
    (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) Attorneys, law students, law graduates, or other professionals 
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 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 LSC's governing statutes and 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.


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

[[Page 61785]]

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 twelve and one-half percent (12.5%) of Corporation 
funds on PAI activities, provided that the recipient has handled and 
expects to continue to handle at least twelve and one-half percent 
(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 LSC, if the recipient shows to the 
satisfaction 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. 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)(1) If a recipient fails to comply with the expenditure required 
by this part and 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 grant 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.
    (2) If the Corporation determines that a recipient failed without 
good cause to seek a waiver, the Corporation shall give the recipient 
written notice of that determination. The written notice shall state 
the determination, the amount to be withheld, and the process by which 
the recipient may appeal the determination.
    (3) The appeal process will follow the procedures for the appeal of 
disallowed costs set forth at 45 CFR 1630.7(c)-(g), except that:
    (i) The subject matter of the appeal shall be limited to the 
Corporation's determination that the recipient failed without good 
cause to seek a waiver; and
    (ii) Withholding of funds shall be the method for the Corporation 
to recover the amount to be withheld.
    (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)(1) Any funds withheld by the Corporation pursuant to this 
section shall be made available by the Corporation for use in providing 
legal services through PAI programs. When such funds are available for 
competition, LSC shall publish notice of the requirements concerning 
time, format, and content of the application and the procedures for 
submitting an application for such funds. Disbursement of these funds 
for PAI activities 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. 
Competition for these funds may be held in the recipient's service 
area, or if the recipient from which funds are withheld is the only LSC 
recipient applying for the funds in the competitive solicitation, in 
additional service areas.
    (2) Recipients shall expend funds awarded through the competitive 
process in paragraph (c)(1) of this section in addition to twelve and 
one-half percent (12.5%) of their Basic Field-General awards.
    (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: October 9, 2014.
Stefanie K. Davis,
Assistant General Counsel.
[FR Doc. 2014-24456 Filed 10-14-14; 8:45 am]
BILLING CODE P