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                                                       Calendar No. 638
104th Congress                                                   Report
                                 SENATE

 2d Session                                                     104-392
_______________________________________________________________________


 
                   LEGAL SERVICES REFORM ACT OF 1996

                                _______
                                

               September 30, 1996.--Ordered to be printed

_______________________________________________________________________


   Mrs. Kassebaum, from the Committee on Labor and Human Resources, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany S. 1221]

    The Committee on Labor and Human Resources, to which was 
referred the bill (S. 1221) to authorize appropriations for the 
Legal Services Corporation Act, and for other purposes, having 
considered the same, reports favorably thereon with an 
amendment and recommends that the bill as amended do pass.

                                CONTENTS

                                                                   Page
  I. Purpose..........................................................1
 II. Background and need for the legislation..........................2
III. Legislative history and committee action.........................5
 IV. Explanation of bill and committee views..........................6
  V. Cost estimate....................................................9
 VI. Regulatory impact statement.....................................10
VII. Section-by-section analysis.....................................10
VIII.Additional views................................................14

 IX. Changes in existing law.........................................27

                               I. Purpose

    Created in 1974 to improve access to the civil justice 
system for the Nation's poor, the Legal Services Corporation 
(``LSC'') distributes Federal funds to more than 300 local 
legal aid organizations. LSC has faced criticism over the past 
decade for straying from its primary purpose, which is to fund 
basic legal services for poor individuals, and instead engaging 
in numerous controversial activities, such as challenging 
welfare reform efforts, representing drug dealers when public 
housing authorities sought to evict them, and engaging in 
lobbying activities.
    The purpose of the Legal Services Reform Act of 1996, S. 
1221, is to improve the accountability and the effectiveness of 
the Legal Services Corporation and its grantees. S. 1221 will 
refocus LSC on its primary mission, which is to provide basic 
legal services to indigent American citizens. The committee 
envisions legal services recipients focusing on landlord-tenant 
disputes, employment claims, and domestic disputes involving 
child-custody and spousal abuse issues. LSC supporters claim 
there is a great need for these services.
    In fact, LSC officials argue that on average, their program 
provides one lawyer for every 6,000 to 7,000 indigent clients. 
By comparison, for the rest of the population, there is an 
average of one lawyer for every 300 people.\1\ Given this need 
for basic legal representation, the committee reauthorizes LSC 
with the expectation that it will focus its efforts on basic 
legal needs of the poor.
---------------------------------------------------------------------------
    \1\ The New York Times, Mar. 31, 1995.
---------------------------------------------------------------------------
    S. 1221 contains important restrictions on LSC activities. 
Many of these restrictions were enacted by Congress in 1996 
through the annual appropriations process. Because those 
restrictions only apply for the current fiscal year, and 
because Congress has not reauthorized LSC since 1977, the 
committee believes it to be important to codify these 
restrictions permanently into law.
    The Legal Services Reform Act prohibits LSC recipients from 
litigating redistricting cases, lobbying, or conducting 
training for political activities. In addition, LSC recipients 
may not undertake representation related to abortion, 
prisoners' rights cases, or cases involving aliens, unless the 
client was lawfully admitted to the United States.
    The legislation also imposes important measures to improve 
LSC recipients' accountability. Under the bill, LSC lawyers 
must keep time sheets identifying the client and matter. LSC 
recipients must bid competitively for their contracts with the 
Federal Legal Services Corporation, and recipients must assure 
that non-LSC funds are subjected to the same restrictions 
imposed upon Federal LSC funds.
    In sum, S. 1221 is designed to reform our Nation's system 
of legal assistance for low-income Americans. The bill contains 
important restrictions to refocus LSC and its grantees on its 
primary mission. In addition, the legislation will improve 
LSC's accountability, thereby increasing the quality of service 
for LSC clients.

              II. Background and Need for the Legislation

    The Legal Service Corporation is a ``private nonmembership 
nonprofit corporation'' \2\ created and funded by Congress for 
the purpose of providing ``financial support for legal 
assistance in noncriminal proceedings or matters to persons 
financially unable to afford legal assistance.'' \3\ The LSC 
does not itself provide direct legal assistance to low-income 
Americans. Instead, it distributes funds to local legal aid 
organizations for the purpose of assisting poor people in civil 
legal matters. Often, these organizations also receive funds 
from State or local governments, and from private sources.
---------------------------------------------------------------------------
    \2\ 42 U.S.C. 2996b(a).
    \3\ Id.
---------------------------------------------------------------------------
    In 1994, LSC funded more than 300 legal services programs 
throughout the 50 States, the District of Columbia, Guam, the 
Virgin Islands, Puerto Rico, and Micronesia.\4\ The legal 
services program handled roughly 1.7 million cases in that 
year.\5\ In 1994, grantees assisted with 50,000 child support 
cases; 375,000 housing matters; 52,000 spousal abuse cases; and 
251,000 divorce cases. Attorneys supported with LSC funds 
attend to such basic legal needs as assisting veterans to 
obtain their benefits, helping victims of natural disasters to 
qualify for assistance, and advising low-income individuals on 
methods to deal with creditors to avoid bankruptcy.\6\
---------------------------------------------------------------------------
    \4\ ``The Legal Services Corporation,'' CRS Report for Congress. 
Henry Cohen, July 5, 1996.
    \5\ Hearing of the Senate Committee on Labor and Human Resources, 
``the Future of the Legal Services Corporation,'' 104th Cong., 1st 
Sess., S. Hrg. 104-106, June 23, 1995, p. 25. (Hereinafter ``Future of 
LSC,'' S. Hrg. 104-106).
    \6\ ``Future of LSC,`` S. Hrg. 104-106, p. 25.
---------------------------------------------------------------------------
    For some time, concerns have been raised about LSC and its 
grantees straying from their primary mission and undertaking 
political causes. Beginning in 1982, Congress added a series of 
appropriations riders to limit LSC's activities. Rep. McCollum 
sponsored a provision designed to ensure that LSC grantees were 
responsive to the needs of the local community.
    In 1983, another package of LSC restrictions were enacted. 
Those provisions restricted LSC grantees from filing class 
actions suits against the government, purported to eliminate 
legislative lobbying and administrative advocacy, and curbed 
problematic training activity. Those provisions have been 
included in each spending bill since 1983.
    Despite these restrictions, LSC has continued to be a 
controversial program. Alexander Forger, the current president 
of LSC, testified that ``notwithstanding whether criticism is 
justified or not, we recognize that further restrictions are 
inevitable and probably necessary to restore the level of 
confidence that this program needs.'' \7\
---------------------------------------------------------------------------
    \7\ ``Future of LSC'' S. Hrg. 104-106, p. 26.
---------------------------------------------------------------------------
    One witness at the oversight hearing conducted by the 
Senate Committee on Labor and Human Resources complained that 
LSC attorneys continued to undertake political causes, such as 
opposing Proposition 187 (dealing with immigration). In 
addition, they continue to represent plaintiffs in cases that 
the vast majority of Americans do not support. For instance, 
LSC attorneys have opposed attempts by housing authorities to 
screen out violent criminals and drug dealers. They have 
represented prisoners in civil suits (regarding capping the 
prisoner population and segregating HIV prisoners), solicited 
clients in the agricultural industry, and supported a violent 
teenager in his attempt to gain custody of the child he 
fathered by rape when the child's custodians sought 
adoption.\8\
---------------------------------------------------------------------------
    \8\ ``Future of LSC,'' S. Hrg. 104-106, pp. 36-43.
---------------------------------------------------------------------------
    Concerns also were raised about LSC's accountability. 
According to one LSC critic, Federal accountability laws do not 
apply to the corporation's grantees. LSC attorneys do not keep 
time sheets, and auditors do not have access to client records 
to conduct proper audits. Finally, there are no reliable 
figures on the amount of money LSC attorneys spend on each 
case.\9\
---------------------------------------------------------------------------
    \9\ ``Future of LSC,'' S. Hrg. 104-106, pp. 36-43.
---------------------------------------------------------------------------
    Supporters of LSC agreed that some restrictions are 
appropriate. In addition to Mr. Forger's statement that 
``further restrictions are inevitable,'' a senior Democrat on 
the committee noted that he was willing to support restrictions 
on political activity.\10\ In addition, the primary sponsor of 
legislation to reauthorize the Legal Services Corporation in 
the House of Representatives, Rep. William McCollum, told the 
committee that he and Mr. Charles Stenholm believed there 
needed to be legislation to ``institute major and significant 
forms to the Corporation.'' \11\
---------------------------------------------------------------------------
    \10\ ``Future of LSC,'' S. Hrg. 104-106, p. 20.
    \11\ ``Future of LSC,'' S. Hrg. 104-106, p. 8.
---------------------------------------------------------------------------
    Mr. McCollum testified:

          Over the years, we have seen extensive abuses within 
        the Legal Services Corporation by lawyers with their 
        own political agendas actively recruiting clients, 
        creating claims and advancing their own social causes. 
        They have been involved in inappropriate lobbying, 
        highly controversial issues like abortion litigation, 
        and impact litigation in an attempt to socially 
        engineer changes in our laws and rules.
          It is for this reason that Mr. Stenholm and I [are 
        introducing legislation] which calls for extensive 
        reforms in the Legal Services Act. This bill will 
        restore the very limited and appropriate Federal role 
        in the delivery of legal services to the poor. At the 
        same time, the bill enhances accountability and 
        compliance for the restricted and limited activities of 
        the Legal Services Corporation.\12\
---------------------------------------------------------------------------
    \12\ ``Future of Legal Services,'' S. Hrg. 104-106, pp. 8-9.

    The committee also heard testimony from a Missouri farmer, 
Robert DeBruyn, that it cost him $100,000 in legal fees to 
settle what amounted to a landlord-tenant dispute brought by 
the Michigan Migrant Legal Assistance.\13\ He also testified 
that his industry has been targeted with:
---------------------------------------------------------------------------
    \13\ ``Future of Legal Services,'' S. Hrg. 104-106, p. 60.

        client solicitation, union organizing and major class 
        actions lawsuits whose real aim [was] to change and 
        reinterpret Federal and State statutes and regulations, 
        and change the entire ag labor scene. [He also] 
        observe[d] LSC grantees openly lobbying Federal and 
        State legislators and participating as migrant 
        advocates or representatives in regulatory and advisory 
        activities.\14\
---------------------------------------------------------------------------
    \14\ ``Future of Legal Services,'' S. Hrg. 104-106, p. 62.

    Given these concerns, the committee believes that reforms 
are necessary to restore the public's confidence in the legal 
services program. At the same time, the committee concurs with 
the testimony of Reps. McCollum and Stenholm that LSC performs 
a valuable and legitimate function of improving low-income 
Americans' access to the legal system.

             III. Legislative History and Committee Action

    On June 23, 1995, the Senate Committee on Labor and Human 
Resources held an oversight hearing, entitled ``The Future of 
the Legal Services Corporation.'' The following witnesses 
presented testimony.
          Hon. Warren Rudman, former U.S. Senator from New 
        Hampshire;
          Hon. George Gekas, a Representative from the State of 
        Pennsylvania;
          Hon. Charles Stenholm, a Representative from the 
        State of Texas;
          Hon. William McCollum, a Representative from the 
        State of Florida;
          Hon. Alexander Forger, president, Legal Services 
        Corporation in Washington, DC;
          Kenneth Boehm, director, National Legal and Policy 
        Center in Vienna, VA;
          Robert DeBruyn, president, DeBruyn Produce Co. of 
        Zeeland, MI; and
          Dean Kleckner, president, American Farm Bureau 
        Federation of Washington, DC.
    Additional statements and materials were submitted by the 
Hon. Jamie Gorelick, deputy attorney general, U.S. Department 
of Justice; William Mellor, president and general counsel of 
the Institute for Justice in Washington, DC; and F. McCalpin, 
attorney at law at Lewis, Rice and Fingersh of St. Louis, MO.
    On September 7, 1995, Senators Kassebaum and Jeffords 
introduced S. 1221, a companion bill to accompany H.R. 1806.
    On June 26, 1996, the committee met in executive session to 
consider S. 1221.
    Senator Kennedy offered an amendment, modified by Sen. 
Gorton, to permit LSC attorneys to use nonfederal funds to 
engage in self-help lobbying and to participate in 
administrative rulemaking. The Gorton modification would 
prohibit LSC from litigating private property disputes, such as 
water and fishing rights, when the Federal Government already 
represented the clients' interests. The amendment was approve 
(9-4).
        YEAS                          NAYS
Kennedy                             Kassebaum
Jeffords                            Coats
Gorton                              Frist
Pell                                Faircloth
Dodd
Simon
Harkin
Mikulski
Wellstone

    Senator Kennedy moved to reconsider his amendment, the 
motion to reconsider was agreed to by voice vote, and then 
Senator Kennedy withdrew his amendment.
    Senator Kassebaum offered a technical amendment to change 
the date in the title of the bill from 1995 to 1996, which was 
approved by voice vote.
    The committee then voted on final passage of the bill, 
which was approved (10-3).
        YEAS                          NAYS
Kassebaum                           Coats
Jeffords                            Frist
Gorton                              Faircloth
Kennedy
Pell
Dodd
Simon
Harkin
Mikulski
Wellstone

    Not voting: Gregg, DeWine and Ashcroft.

              IV. Explanation of Bill and Committee Views

    The Senate Committee on Labor and Human Resources strongly 
supports the goals of the Nation's legal services program, 
which is to provide legal assistance to low-income individuals. 
There can be no doubt that a gap exists between the legal needs 
of the indigent and the current resources available, both 
public and private, to meet that need. The committee reaffirms 
its commitment to the legal services program.
    The committee believes that the best way to improve the 
legal services program is to retain the current system's 
structure, which includes a Federal Legal Services Corporation 
that makes grants to local legal aid organizations. The 
committee rejects changing the program to a block grant to the 
States.
    Maintaining a central, streamlined LDC structure provides a 
single administrative entity that the public and Congress may 
hold accountable for oversight of the program. In addition, the 
LDC inspector general will be more effective auditing LSC and 
its grantees than it would be if it were required to audit 50 
separate programs under a block grant system.
    Moreover, the committee believes that the block grant 
system would not be as efficient as the Federal corporation, 
which has a unified administrative structure. Senator Rudman 
testified before the committee that he didn't ``see the States 
doing it [administering the legal services program through a 
block grant] so efficiently that they can get below the 3 
percent administrative cost factor.''\15\
---------------------------------------------------------------------------
    \15\ ``Future of LSC,'' S. Hrg. 104-106, p. 21.
---------------------------------------------------------------------------
    Although opposed to abolishing the Legal Services 
Corporation or the Federal commitment to improving access of 
the poor to the American system of justice, the committee 
believes that significant reforms are necessary to restore 
public confidence in the program. S. 1221 is intended to 
depoliticize the legal services program, improve LSC 
accountability, and assure fairness for taxpayers who subsidize 
the program and defendants who are the subject of LSC-assisted 
litigation.

                            Depoliticize LSC

    The committee believes that if LSC is to survive, then it 
must not continue with business as usual. It must remain 
focused on its primary mission, which is to provide basic legal 
assistance to low-income Americans. The committee envisions LSC 
attorneys representing clients mainly in landlord-tenant 
disputes, consumer finance and family law issues.
    To assist the corporation in that function, S. 1221 
prohibits LSC attorneys from litigating redistricting cases. 
The committee believes that redistricting activities are 
inherently political, with both major political parties 
participating on a regular basis. No matter which side LSC took 
in the redistricting effort, it would undermine the important 
work that LSC attorneys do by contributing to the impression 
that LSC attorneys are ``for'' or ``against'' one of the 
political parties.
    The legislation also prohibits LSC attorneys from engaging 
in lobbying, participating in rulemaking activities, or 
litigating abortion cases. Attempting to assist the poor 
through legislative advocacy may be a worthy goal, but the 
public certainly should not be forced to subsidized it. The 
committee believes that these are inappropriate activities for 
LSC attorneys, and such activities further undetermine support 
for the legal services program.
    S. 1221 also bans LSC attorneys from using nonfederal funds 
for any purpose prohibited by the LSC Act, as amended. There 
are two important justifications for this restriction. First, 
many legal services grantees currently receive funds from both 
public and private sources Since the money is basically 
fungible, it would be difficult if not impossible to place 
restrictions only on the Federal funds. Second, the public 
cannot differentiate between LSC advocacy subsidized with 
public versus private funds. As a result, the public grows 
weary of watching LSC attorneys lobby legislators--even if that 
dismay might sometimes be misplaced.

                             Accountability

    S. 1221 also improves the accountability of the Legal 
Services Corporation and its grantees. First, the legislation 
requires LSC attorneys to maintain time sheets that 
specifically identify each matter and the time spent on the 
matter. These records must be accessible to the Federal 
inspector general and other government auditors with proper 
oversight responsibility for the LSC program.
    In addition, the reauthorization requires LSC grantees to 
bid competitively for their grants. In the past, grantees 
enjoyed presumptive renewed funding each year without any 
consideration as to their past performance. Under the 
legislation approved by the committee, each grantee would be 
required to compete periodically with other service providers 
based on quality, service, and compliance with restrictions 
contained in this reauthorization. The committee believes that 
this competitive bidding process will enhance the quality of 
the legal services provided to eligible clients.
    The legislation also holds LSC and its grantees to the same 
fraud, waste, and abuse prohibitions that apply to other 
Federal programs. In the past, LSC funds have been excluded 
from those important protections once the funds were 
distributed to the local legal aid organizations. S. 1221 
closes this loophole.
    Finally, the legislation permits LSC to establish a series 
of demonstration programs of client copayments. Critics of the 
LSC program often claim that LSC attorneys pursue their own 
ideological agenda and simply use clients, who have invested 
very little in the process, to fulfill that agenda. The client 
copayment system is designed to assure that the client has 
invested something of himself or herself in the representation.
    The committee intends the copayments to be modest. The 
copayments are not in any way intended to deter clients from 
pursuing their legitimate legal claims. The committee 
understands that eligible clients have limited means, and LSC 
must not establish a copayment amount that would render LSC 
legal assistance beyond the financial capacity of eligible 
clients.

                                Fairness

    S. 1221 restores fairness to taxpayers who subsidize the 
LSC program and defendants who are the subject of litigation 
initiate by LSC attorneys. In the past, there have been 
concerns raised that LSC attorneys represent incarcerated 
persons, drug dealers begin evicted by public housing 
authorities, or other who have committed wrongdoing in our 
society. In the meantime, LCS claims that it lacks the 
resources to meet the legal needs of the poor. The committee 
believes that LSC must focus its resources on basic legal 
assistance to law abiding citizens and avoid representing drug 
dealers and prisoners in civil cases.
    S. 1221 prohibits LCS attorneys from filing class action 
suits against the government and limits their ability to 
challenge welfare reform initiatives. Legislators at the 
Federal, State, and local levels are responsible for 
establishing welfare policy, and LCS attorneys should not 
attempt to undermine those efforts through challenges in the 
legal system. At the same time, the committee recognizes that 
under S.1221, LCS attorneys may represent a client in an 
individual claim for welfare benefits.
    Finally, the legislation prohibits LCS attorneys from 
seeking attorneys' fees from private defendants. The committee 
believes that those defendants who are sued by LCS-represented 
clients should not ordinarily be required to pay for the 
plaintiff's legal fees. Defendants pay Federal taxes, which 
subsidize the salaries of LCS attorneys. Defendants also pay 
for their own lawyers when they are sued by LCS-represented 
clients. And defendants are required to pay any monetary 
judgment that may result from the lawsuit. This is enough. 
Defendants should not also be required, as a matter of course, 
to pay for the LCS attorneys who represent the plaintiff.
    In conclusion, the committee reaffirms its commitment to 
the legal services mission, which is to provide basic legal 
services to low-income Americans. The committee recognizes that 
the Federal Government cannot meet all of the legal needs of 
the poor. However, the committee believes that the program has 
served an important purpose and believes that the Federal 
program (along with private support) can fill a social need.
    The committee believes that the reauthorizing LCS will 
strengthen and improve the LCS program. In addition, the 
restrictions and accountability provisions will restore public 
confidence in the LCS's ability to deliver legal assistance.

                            V. Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 18, 1996.
Hon. Nancy Landon Kassebaum,
Chairman, Committee on Labor and Human Resources, U.S. Senate, 
        Washington, DC.
    Dear Madam Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1221, the Legal 
Services Reform Act of 1996.
    Enactment of S. 1221 would not affect direct spending or 
receipts. Therefore, pay-as-you-go procedures would not apply 
to the bill.
    If you wish further details on this estimate, we will be 
pleased to provide them.
            Sincerely,
                                              James L. Blum
                                   (For June E. O'Neill, Director).
    Enclosure.

               Congressional Budget Office Cost estimate

    1. Bill number: S. 1221.
    2. Bill title: Legal Services Reform Act of 1996.
    3. Bill status: As ordered reported by the Senate Committee 
on Labor and Human Resources on June 26, 1996.
    4. Bill purpose: S. 1221 would reauthorize the Legal 
Service Corporation (LSC) from 1996 through 2000. It also would 
authorize the appropriation of such sums as may be necessary 
for a fund to pay a defendant's reasonable costs and attorney's 
fees. These fees would be paid when the plaintiff, assisted by 
a recipient of LSC funds, is involved with a violation of rule 
11 of the Federal Rules of Civil Procedure.
    The bill also would restrict the LSC's use of funds for 
cases involving abortions, aliens, redistricting, certain 
eviction proceedings, welfare reform, prisoner litigation, and 
the federal government under certain circumstances. It would 
prohibit the use or any LSC funds for lobbying for a change in 
government policy. Also, the bill would require that all LSC 
grants and contracts be awarded under a competitive bidding 
system. In addition, S. 1221 would institute other 
administrative and procedural changes at the LSC.
    5. Estimated cost to the Federal Government: Assuming the 
appropriation of the authorized amounts, CBO estimates that S. 
1221 would result in additional discretionary spending totaling 
about $1.1 billion over the 1997-2000 period. The bill would 
authorize spending in 1996 as well; however, this year's 
funding has already been provided (at the same level as 
authorized in the bill). Therefore, additional spending 
resulting from the bill is estimated to start in 1997. The 
following table summarizes the estimated budgetary effects of 
S. 1221.

                                    [By fiscal years, in millions of dollars]                                   
----------------------------------------------------------------------------------------------------------------
                                                                  1996   1997   1998   1999   2000   2001   2002
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION                                       
                                                                                                                
Spending Under Current Law:                                                                                     
    Budget authority \1\.......................................    278  .....  .....  .....  .....  .....  .....
    Estimated outlays..........................................    294     33  .....  .....  .....  .....  .....
Proposed Changes:                                                                                               
    Estimated authorization level \2\..........................  .....    278    278    278    278  .....  .....
    Estimated outlays..........................................  .....    245    278    278    278     33  .....
Spending Under S. 1221:                                                                                         
    Estimated authorization level \1\..........................    278    278    278    278    278  .....  .....
    Estimated outlays..........................................    294    278    278    278    278     33  .....
----------------------------------------------------------------------------------------------------------------
\1\ The 1996 level is the amount appropriated for that year.                                                    
\2\ The bill also authorizes appropriations for 1996, but this year's funding has already been enacted; so the  
  bill would have no impact on 1996 spending.                                                                   

    The costs of this bill fall within budget function 750.
    6. Basis of estimate: CBO assumes appropriation of the $278 
million per year authorized over the 1997-2000 period. S. 1221 
also would authorize the appropriation of such sums as 
necessary to pay for the legal costs of the defendant when a 
recipient of an LSC grant violates certain rules. Such 
recipients are generally attorneys or legal-aid organizations. 
Similar violations have been found very rarely in the past. As 
a result, CBO expects that any amounts necessary for paying 
such defendants' legal costs would probably not be significant.
    7. Pay-as-you-go considerations: None.
    8. Estimated impact on State, local, and tribal 
governments: S. 1221 contains no intergovernmental mandates as 
defined in Public Law 104-4 and would have no impact on the 
budgets of state, local, or tribal governments.
    9. Estimated impact on the private sector: S. 1221 contains 
no private-sector mandates as defined in Public Law 104-4.
    10. Previous CBO estimate: On September 19, 1995, the CBO 
prepared a cost estimate for H.R. 2277, the Legal Aid Act of 
1995, as ordered reported by the House Committee on the 
Judiciary on September 13, 1995. H.R. 2277 would abolish the 
Legal Services Corporation and replace it with block grants 
provided directly to the states to fund local legal aid 
programs. The estimated costs of H.R. 2277 are less than those 
of S. 1221 because funding authorized for grants by the House 
bill is less than the amounts authorized for the LSC by S. 
1221.
    11. Estimate prepared by: Federal cost estimate: Jonathan 
Womer and Susanne Mehlman. State and local government impact: 
Leo Lex. Private sector impact: Jay Noell.
    12. Estimate approved by: Robert A. Sunshine (for Paul N. 
Van de Water, Assistant Director for Budget Analysis).

                    VI. Regulatory Impact Statement

    The committee has determined that there will be no increase 
in the regulatory burden imposed by this bill.

                    VII. Section-by-Section Analysis

    Sec. 1. Short title.--The legislation may be cited as the 
``Legal Services Reform Act of 1996.''
    Sec. 2. Findings.--Congress finds that there is a need to 
encourage equal access to justice through private and 
governmental efforts. To preserve the strength of the legal 
services program, efforts must be made to free the system from 
the influence of political pressures and to free the 
corporation and its grantees from lobbying and political 
activity.
    Sec. 3. Authorization of appropriations.--Congress 
authorizes to be appropriated $278 million for fiscal years 
1996-2000.
    Sec. 4. Prohibition on redistricting activity--The 
legislation prohibits legal services attorneys from advocating, 
opposing, and representing any party with respect to 
legislative or judicial redistricting cases.
    Sec. 5. Protection against theft and fraud.--The 
legislation deems taxpayer funds distributed through the Legal 
Services Corporation to be Federal funds for the purposes of 
Federal waste, fraud, and abuse statutes.
    Sec. 6. Solicitation.--The legislation prohibits LSC 
attorneys from accepting employment from any nonattorney after 
giving in-person, unsolicited advice to such nonattorney that 
the nonattorney should obtain counsel or take legal action.
    Sec. 7. Procedural safeguard for litigation.--The 
legislation prohibits LSC attorneys from pursuing litigation or 
engaging in precomplaint settlement negotiations against a 
defendant unless all plaintiffs have been identified by name 
and a statement of facts (signed by the plaintiffs) have been 
compiled upon which the complaint is based. Any federal court 
of competent jurisdiction may enjoin the disclosure of the 
identity of any plaintiff to prevent probable, serious harm to 
the plaintiff.
    Sec. 8. Lobbying.--The legislation prohibits LSC attorneys 
from lobbying or attempting to influence any Federal, State, or 
local government's executive order or legislative proposal, 
except in the case where the order or proposal directly affects 
LSC.
    The legislation also prohibits LSC attorneys from paying 
for any publicity or propaganda designed to influence any 
executive decision or legislative proposal. In addition, the 
bill prohibits grassroots lobbying, where LSC attorneys 
subsidize telegrams, telephone calls, or other printed matter 
designed to influence any decision or legislative proposal, 
including an authorization or appropriation directly affecting 
the funding of LSC attorneys.
    Sec. 9. Timekeeping.--The legislation requires each LSC 
attorney to maintain records of the time spent on each matter, 
there type of matter handled, and the source of funds charged 
for the activity.
    Sec. 10. Authority of local governing boards.--The board of 
directors of any nonprofit organization, receiving funds from 
LSC and chartered under Sate law to provide legal assistance to 
eligible clients, must establish specific priorities for the 
types of matters to which the staff of the nonprofit 
organization shall devote its time. The staff of the 
organization shall not undertake matters other than those 
delineated in the list of the organization's priorities.
    Sec. 11. Regulation of nonpublic resources.--All nonfederal 
funds received by LSC (or its grantees) must be accounted for 
separately from LSC funds. Nonfederal funds (including interest 
on lawyers trust accounts) received by LSC (or its grantees) 
are subject to the same restrictions that apply to Federal 
funds.
    Sec. 12. Certain eviction proceedings.--LSC attorneys may 
not defend a person being evicted by a public housing authority 
for the illegal sale or distribution of a controlled substance.
    Sec. 13. Implementation of competition.--The legislation 
requires LSC to implement a competitive bidding system for LSC 
grants and contracts. The selection criteria shall include an 
understanding of the basic legal needs of eligible clients, the 
reputations of the principals of the applicant, the quality and 
cost effectiveness of the applicant, and a willingness to abide 
by the restrictions placed on the awarded grants and contracts.
    Sec 14. Powers, research and attorneys' fees.--The 
legislation abolishes LSC's regional resource centers, and 
prohibits LSC attorneys from claiming or collecting attorneys' 
fees from nongovernmental parties to litigation initiated by 
the client. If a Federal court or the president of LSC finds 
that an action by a plaintiff, assisted by LSC attorneys, 
violates the standards of rule 11 (of the Federal Rules of 
Civil Procedure), the court of LSC president shall award from 
an LSC fund all reasonable costs and attorneys' fees incurred 
by the defendant in defending the action.
    Any attorneys' fees received by an LSC recipient must be 
transferred to LSC, which shall distribute the fees among its 
grantees for the purpose of providing direct delivery of legal 
assistance to the poor.
    Sec. 15. Abortion.--The legislation prohibits LSC attorneys 
from participating in any litigation with respect to abortion.
    Sec. 16. Class actions.--No LSC attorneys may bring a class 
action suit against the Federal, State, or local government, 
unless the governing body of the grantee expressly approves 
filing such an action and LSC attorneys determine that the 
government entity is not likely to change the policy or 
practice in question.
    Sec. 17. Restrictions on use of funds for legal assistance 
to aliens.--The legislation prohibits LSC attorneys from 
providing legal assistance to any alien, unless the alien has 
been lawfully admitted for permanent residence, married to a 
U.S. citizen and filed for adjustment of status, or granted 
asylum by the Attorney General pursuant to law.
    Sec. 18. Training.--LSC attorneys may not support of 
conduct training programs advocating political or labor 
activities, boycotts, or strikes.
    Sec. 19. Copayments.--LSC shall undertake one or more 
demonstration programs to study the feasibility of using client 
copayments to assist in setting service priorities. Based on 
the results of those demonstration programs, LSC may adopt a 
permanent system of client copayments.
    Sec. 20. Fee-generating cases.--LSC attorneys shall not 
provide legal assistance with respect to any fee-generating 
case, except for representation related to titles II and XVI of 
the Social Security Act.
    Sec. 21. Welfare reform.--LSC attorneys shall not provide 
legal representation for any person or participate in any way 
in litigation involving an effort to reform a State or Federal 
welfare system. However, LSC attorneys may seek specific relief 
on behalf of a client where the relief does not involve an 
effort to amend or challenge existing law.
    Sec. 22. Prisoner litigation.--LSC attorney shall not 
provide legal representation on behalf of any prisoner in a 
Federal, State, or local institution.
    Sec. 23. Appointment of corporation president.--The 
legislation provides that the president of LSC shall serve at 
the pleasure of the President of the United States upon the 
advise and consent of the Senate.
    Sec. 24. Evasion.--The legislation prohibits the use of 
alternative corporations to avoid or evade the provisions of 
the law.
    Sec. 25. Pay for officers and employees of the 
corporation.--The legislation amends the compensation for 
officers and employees of LSC. Such officers and employees 
shall be compensated in an amount not to exceed the rate of 
Level III of the executive schedule specified in section 5314 
of title 5 of the United States Code.
    Sec. 26. Location of principal office.--The principal 
office of LSC shall be in the Washington, DC, metropolitan 
area.
    Sec. 27. Definition.--The legislation amends the definition 
of ``attorney-client privilege'' in the LSC Act to assure that 
Federal auditors may conduct proper oversight of LSC and its 
grantees.
VIII. ADDITIONAL VIEWS OF SENATORS KENNEDY, PELL, DODD, SIMON, HARKIN, 
                        MIKULSKI, AND WELLSTONE

    Because S. 1221 reaffirms the commitment of the Congress to 
provide the poor with access to our Nation's system of justice 
through the Legal Services Corporation, we voted to report out 
the Legal Services Reform Act of 1996. The Federal legal 
services program is a vital part of the system of justice in 
this country and necessary to achieve the Constitution's great 
promise of equal justice under law. As Senator Rudman stated in 
his testimony before this committee: ``Respect for the rule of 
law, and faith in our country's system of justice, cannot exist 
among people who have no meaningful access to our courts.'' On 
system of justice for the rich and a different one for the poor 
is untenable in a democracy.
    Many provisions in S. 1221 are consistent with these 
fundamental premises of the LSC Act and will address perceived 
problems that have arisen in the administration of the program 
or at the local level since the last reauthorization in 1977. 
For example, LSC funds should be treated as Federal funds for 
the purpose of Federal criminal laws designed to outlaw theft 
and fraud. Local control should be strengthened by continuing 
the existing requirement that at least one-half of the 
membership of recipient governing bodies be appointed by the 
State or local bar association where the recipient is located. 
Experimentation with co-payments will help inform us about 
whether this approach improves client accountability. 
Timekeeping on cases and matters may well increased recipient 
accountability and efficiency. There is even some justification 
for insuring that class actions are brought after careful 
review by local program boards. Finally, prohibitions on 
redistricting and abortion will keep the program out of highly 
charged political controversies.
    However, we have grave concerns about several provisions in 
S. 1221. In our view the funding levels authorized in the bill 
are too low to meet the critical need for civil legal services. 
Moreover, we believe it is a serious mistake and possibly 
unconstitutional to restrict the use of non-corporation funds 
provided by other funding sources. Finally, several other 
restrictions regarding the clients that can be represented and 
the types of cases and matters on which assistance can be 
provided are inconsistent with the basic notion that low-income 
persons who cannot afford legal assistance should have equal 
access to our justice system.

                  need for legal services to the poor

    The need for legal services for the poor could not be 
clearer, and the need has never been greater than it is today. 
More than 38,000,000 Americans live in households with incomes 
below the poverty level. During 1995, Legal Services 
Corporation recipients provided legal services to approximately 
1,900,000 clients and closed over 1,700,000 matters. Serving 
these clients directly benefitted nearly 5,000,000 persons, 
most of whom are women and children living in poverty.
    Yet for all the clients served by corporation grantees, 
local programs are able to meet only a fraction of the demand 
for services. A survey of selected Legal Services recipients in 
the spring of 1993 revealed that nearly half of all people who 
actually apply for assistance are turned away due to lack of 
program resources to help them. According to the recent 
American Bar Association Comprehensive Legal Needs Study on the 
legal needs of low and moderate income persons, nearly half of 
low-income household faced situations that were serious enough 
to merit the attention of the civil justice system. However, 
nearly three-fourths of low-income people with legal needs do 
not get help in the civil justice system. As former 
Representative Guy Molinari stated when he testified before the 
House Appropriations Subcommittee 4 years ago in support of a 
budget request of $525,000,000: ``We can argue about the amount 
of unmet need; but I don't think there is any dispute about the 
fact that there is a very substantial amount of people out 
there who are, in fact, in need of civil legal services.''
    In light of the overwhelming needs of legal services on the 
part of low-income Americans and the fact that LSC sustained a 
reduction of over 30 percent in 1996 to a funding level of $278 
million, it is essential that the authorized level for LSC 
exceed $278 million. Federal funding for legal services is at a 
twelve year low, and the Legal Services Corporation was among 
the most hard-hit of all Federal programs. As a result of the 
$278 million funding level, thousands of attorneys and 
paralegals were laid off, hundreds of neighborhood offices were 
closed and hundreds of thousands of clients in desperate need 
of services were turned away. Most of those affected by the 
cuts were women and children with routine, but critically 
important cases who will no longer have access to legal 
services.
    We would hope that the full Congress would authorize ``such 
sums as may be necessary'' in order to give the appropriations 
committees the flexibility they need to adequately fund legal 
services. Without any increases in resources for the next four 
years, the Legal Services Corporation will be faced with a 
profoundly difficult choice: will LSC continue to fund programs 
to provide services throughout the country, albeit at a 
increasingly inadequate level of funding, or will it be forced 
to concentrate its resources in a limited number of locales to 
ensure that at least some communities have access to adequate 
legal services resources?

              the need for the legal services corporation

    The Legal Services Corporation, which has been in operation 
for 21 years, has been the primary vehicle for insuring that 
the poor are included in this nation's legal system. Despite 
substantial controversy and criticism from many quarters, the 
legal services program has enjoyed overwhelming support from 
the public, including the bar, the judiciary and the client 
community. To eliminate the Legal Services Corporation would be 
to bar most low-income Americans from access to the legal 
system.
    It has been suggested that state or local governments and 
the private bar should be responsible for legal services for 
the poor or could pick up the case load of the program. 
However, the experience of recipients indicates that there is 
little likelihood that the majority of States and 
municipalities, already hard-pressed to meet current budgetary 
demands, will take on the additional obligation of providing 
legal services if Federal funding is eliminated. In 1995, State 
and local funding to LSC-funded programs fell overall: small 
increases in State and local grants were offset by a decrease 
in IOLTA funding due to lower interest rates. Although some 
States and localities have begun initiatives to provide funds 
to local programs to help make up for reduced FY 1996 LSC 
grants, preliminary indications are that any increases in State 
and local support will offset only a small part of the cut in 
Federal funding. Moreover, if Congress shifts financial 
responsibility for many social programs to the States, the 
competing claims for limited resources may well result in 
further loss of support for legal services. In any regions of 
the country, especially in rural areas with a high 
concentration of poor people, it is likely that there would be 
little or no publicly-funded legal services available to the 
poor.
    Nor is it realistic to expect that pro bono services from 
private attorneys can replace federally-funded legal services. 
Pro bono services are now at an all-time high, primarily 
because of the efforts of the organized bar, the corporation 
and local programs to involve private attorneys in the delivery 
of legal services. It is estimated that one-sixth of all legal 
services cases were handled by private attorneys in 1995. Every 
effort is being made at the national and local level to 
significantly increase both the number of attorneys 
participating and the level of voluntary services, as well as 
indirect financial support from the private bar. Nevertheless, 
even if the present level of Pro bono services were doubled or 
tripled, they would replace only a fraction of the services now 
being provided by legal services attorneys, which in the 
aggregate meet only a small percentage of the need of the 
increasing population of eligible clients.
    Moreover, pro bono programs typically depend upon legal 
services attorneys for training and support and legal services 
funding for basic intake and referral. Elimination of the 
Corporation and its grantees would thus eliminate the essential 
structure through which most pro bono services are provided. 
Pro bono programs, no longer able to rely upon legal services 
for funding, training and support, and overwhelmed with ongoing 
cases, would find it impossible to take on new cases that in 
the past would have been handled by legal services programs. 
The courts would be faced with large numbers of individuals 
forced to proceed pro se. The result would be serious 
disruption in our judicial system, to say nothing of the 
personal and financial dislocation that would occur in an 
abrupt termination of corporation activities.
    Replacing the funding of local legal services programs 
through LSC with a block grant system, as proposed in a bill 
reported out by the House Judiciary Committee, would be more 
costly and would reduce the efficiency of the system by 
requiring the addition of a new layer of bureaucracy at the 
state level. at the same time, it would eliminate the 
centralized system of accountability now provided by LSC. The 
delivery system funded through LSC already has the advantages 
that would be presented by a block grant system.

                    what legal services programs do

    Much of the controversy about the legal services program 
arises out of the work which is done by local legal services 
programs. Far too often, that work is totally mischaracterized. 
Of the 1,686,313 cases closed by legal services programs in 
1994, only 8 percent were litigated and only one-tenth of one 
percent were class actions. The other matters were handled 
outside the courtroom through counseling, negotiation and other 
means. The representation provided to poor persons was in a 
variety of categories of cases. On a national basis, family 
matters made up 33.2 percent of total closed cases, consisting 
of adoption, custody, divorce, support, parental rights, spouse 
abuse and other family-related matters. Income maintenance and 
housing matters comprised 16 and 22.2 percent, respectively.\1\ 
Consumer matters made up 10.6 percent, consisting of contracts, 
warranties, credit matters, debt collection and sales 
practices, as well as public utilities and energy-related 
issues. Education, juvenile, health, individual rights, and 
employment matters constituted 10.5 percent. Miscellaneous 
matters, such as tort defense, tribal matters, wills, and auto 
licenses, made up the remaining 7.5 percent.
---------------------------------------------------------------------------
    \1\ While legal services programs provide critical representation 
on disputes between individuals, they also ensure that government 
programs for the poor are operated within the rule of law and in a fair 
and equitable manner.
---------------------------------------------------------------------------
    As is clear from these figures, the vast majority of cases 
handled by legal services programs do address the basic legal 
needs of poor people.\2\ These cases often represent matters of 
grave crisis for individual clients and their families, such as 
the loss of a family's home or its only source of income or the 
break-up of the family itself. Left unresolved, such problems 
can cost society far more than the costs of legal services to 
help address them.
---------------------------------------------------------------------------
    \2\ Any objective review of the Legal Services Corporation Act, the 
1977 amendments and the subsequent appropriations act provisions does 
not support the inference that Congress intended the legal services 
program to be limited solely to providing one-on-one, noncontroversial 
``day-to-day'' legal services. (See Testimony of F. Wm. McCalpin before 
the Subcommittee on Administrative Law and Governmental Relations of 
the House Judiciary Committee on March 13, 1991 and Testomony of 
Michael Wallace, former Chair of the LSC Board under President Reagan, 
before the Subcommittee on Commercial and Administrative Law of the 
House Judiciary Committee on July 27, 1995.) The statement of 
Congressional purpose specifically spoke of continuing ``the present 
vital legal services program'' which, under OEO, often challenged the 
way private institutions and government at all levels treated poor 
people. Congress also recognized that legal services attorney should 
work to ``assist in improving opportunities for low-income persons'' 
and ``must have full freedom to protect the best interests of these 
clients in keeping with * * * [professional responsibility] and the 
high standards of the legal profession.'' In keeping with these goals, 
the Act permitted class actions, appeals, administrative rulemaking, 
representation before legislative bodies on behalf of eligible clients 
and the full range of legal services otherwise available to paying 
clients of private attorneys. Congress recognized then as it should now 
that equal justice for poor people demands that legal representation 
not be restricted to conform to narrow partisan or ideological 
considerations.
---------------------------------------------------------------------------
    Obtaining child support from absent parents, for example, 
can prevent single parents and their children from being forced 
to turn to welfare to meet their needs. In 1994, recipients 
handled over 50,000 child support cases. Spousal abuse causes 
not only individual suffering, but enormous societal costs as 
well. In 1994, legal services recipients handled 52,000 cases 
in which individuals sought legal protection from violent 
spouses. Domestic violence was also a factor in a significant 
percent of the 56,326 divorce and separation cases that 
resulted in a curt decision.
    Legal services programs have helped individuals from 
falling into dependency by resolving employment disputes, by 
saving small family farms, by preventing the loss of the car 
that the client needed to drive to work or the equipment needed 
to earn a livelihood. They have helped young people remain in 
school and get access to job training programs. They have 
helped veterans suffering from Agent Orange and post-traumatic 
stress disorder. They have protected vulnerable elderly people 
from consumer fraud. They have provided assistance to victims 
of hurricanes in Florida, floods in the Midwest, earthquakes in 
California and the bombings in Oklahoma City.\3\
---------------------------------------------------------------------------
    \3\ Indeed, as the General Counsel for the Federal Emergency 
Management Agency stated before the Subcommittee on Commercial and 
Administrative Law of the House Judiciary committee on May of 1995: 
``Legal Services organizations play a fundamental role in disaster 
receovery. Indeed, they are an important part of the of the 
comprehensive response and recovery approach that is composed of 
federal, state and local governments and community based 
organizations.''
---------------------------------------------------------------------------

                          controversial cases

    The legal services program was acknowledged by virtually 
all of the witnesses before the committee to be a highly 
effective program. In fact, much of the criticism of legal 
services is the result of the program's success in a number of 
controversial cases. However, that controversy is inherent the 
adversary process; there are always at least two sides in every 
legal dispute, and if equal access to justice is to become a 
reality, the side of the indigents must be permitted an 
unfettered and effective voice.
    In addition, critics not only object to the legal issues 
that programs handle, but to the manner in which non-
controversial issues are addressed. Thus, there is no objection 
to representing an individual in an action to recover a 
security deposit, but is is deemed somehow inappropriate to 
advocate on behalf of a tenants' group to change the landlord-
tenant law of a jurisdiction. We find that the rhetoric that 
colors this debate is ultimately meaningless. What one person 
or one community sees as pressing legal problem may be viewed 
by another as a matter of low priority. A person facing 
eviction clearly has a pressing problem that needs to be 
addressed, but a person who cannot find adequate, affordable 
housing, or who cannot rent an apartment or buy a house because 
of discrimination based on race, sex, or family size also has 
an overwhelming legal need.
    During the hearings before this committee, for example, 
critics have portrayed legal services programs as engaging in 
activities which they claim have put agricultural growers out 
of business, resulted in high level fees for simple matters, 
and engaged in union organizing and client solicitation. Others 
have alleged that legal services seeks to protect drug dealers 
in public housing and prevent their evictions, implying as well 
that legal services is engaged in some kind of systematic 
campaign to preserve drug dealing in public housing.
    What is common to all of these charges are (1) that none of 
these activities was prohibited today by the LSC Act or 
regulations or other law and (2) that in virtually every 
example that critics present, the ``facts'' as they are 
portrayed are wrong or terribly misleading.
    For example, the charges involving migrant farmworkers 
representation have been studied and reviewed by both the 
American Bar Association and the Government Accounting Office. 
The American Bar Association study undertook a detailed 
examination of the complaints made by agricultural employers 
against migrant level services and concluded that there was no 
basis for the charges. (Study of Federally Funded Legal Aid for 
Migrant Farmworkers, American Bar Association Standing 
Committee on Legal Aid and Indigent Defendants (1993).) 
Specifically the study found that there is no evidence of any 
systematic problem migrant legal services providers bringing 
unsubstantiated or frivolous claims against agricultural 
employers and no evidence that legal services attorneys pursued 
unmeritorious claims.
    The Government Accounting Office undertook an exhaustive 
study of migrant farmworker representation by LSC-funded 
programs beginning in 1989 and continuing through 1990. On 
September 24, 1990, GAO issued a lengthy 81-page report which 
concluded that it could find no support for the allegations 
that legal services attorneys used improper methods in 
representing migrant farmworkers. (Legal Services Corporation: 
Grantee Attorneys' Handling of Migrant Farmworker Disputes with 
Growers (GAO/HRD-90-144) September, 1990.)
    Similarly, contrary to the charges, no more than a handful 
of cased involve representation of actual drug dealers by legal 
services advocates. For example, the Legal Aid Society of New 
York City reported in April of 1995 the following figures:

          The Legal Aid Society handles 33,000 cases annually, 
        including 13,000 housing cases. They currently have 
        only 12 pending cases involving drug-related evictions 
        from New York City Housing Authority properties. Of 
        those 12 cases, only one involved alleged drug activity 
        by a Legal Aid client; one additional case involved 
        drug activity in a client's apartment, but not by the 
        client. The other 10 cases involve alleged drug 
        activity by a member of the client's family that 
        occurred in a place other than the client's apartment.

    Legal services programs do not represent drug dealers who 
threaten the safety of public housing tenants. Legal services 
become involved only where there is strong evidence that the 
tenant is personally innocent of any drug-related activity and 
would suffer serious harm if she and her family were evicted. 
In those cases, eviction from public housing would constitute a 
serious miscarriage of justice.\4\
---------------------------------------------------------------------------
    \4\ The Corporation and the Congress have both taking action to 
address whatever problems there are in legal services representation of 
drug-related public housing evictions. Pub. L. 104-134 and a new 
Corporation regulation prohibit representation of any person charged 
with drug dealing in a public housing eviction case. Section 12 
includes an identical provision.
---------------------------------------------------------------------------

                         prohibited activities

    Since the enactments of the Legal Services Corporation Act 
there have been various restrictions on what legal services 
could do. Since 1983, there was been very specific restrictions 
on the use of LSC funds for certain actions. And, effective on 
April 26, 1996, there are very specific restrictions on what 
any LSC recipient can do with any of its funds. Throughout all 
of these 21 years, there is virtually no evidence, and non has 
been provided in the hearings before the Labor and Human 
Resources Committee, that legal services attorneys violated 
restrictions imposed by law and regulation. Recipients have 
lived within the rules.
    Critics claim that legal services engages in large numbers 
of controversial cases and suggests that these are prohibited. 
In fact, very few case types were actually prohibited until 
1996. Virtually all of the cases that are used as illustrations 
of controversy are cases that are legal under the LSC Act and 
regulations. Of the list of ``horror stories'' that came before 
this Committee, non involved cases that were prohibited by the 
law. For example, many critics argued that class actions were 
prohibited, when in fact they were not prohibited until April 
26, 1996. Others express horror that recipients contact 
legislators and serve on regulatory and advisory committees 
which were also not prohibited until 1996. Still others argue 
that recipients represented illegal aliens, not realizing that 
such representation was permitted with non-LSC funds until 
1996.
    Congress can decide what activities to prohibit. When it 
has done so, legal services has stayed within the letter and 
spirit of the law. There is general agreement, for example, 
that legal services should not provide representation in 
representation involving abortion, redistricting and drug-
related evictions; or engage in grassroots lobbying, advocacy 
training or organizing. There is far less agreement, however, 
on (1) whether the non-LSC funds of recipients should be 
restricted; (2) whether legal services should be prohibited 
from taking fee-generating cases even when private attorneys 
are not available to take such cases; (3) whether a legal 
services program attorney should be able to comment on a 
proposed regulation which an agency asks the attorney to review 
or on which the agency seeks comments through a notice of 
proposed rulemaking; (4) whether a legal services attorney can 
represent an eligible client before a legislative body when 
that body is proposing to take action that directly affects 
that client's legal rights or responsibilities; (5) whether 
legal services should represent prisoners or others in civil 
cases; (6) whether legal services lawyers should be able to 
seek attorney's fees; (7) whether legal services should be able 
to represent an individual client adversely affected by a 
welfare reform proposal; and (8) whether the federal legal 
services program should have the capacity to provide training, 
technical assistance, support and information about poverty law 
developments.

                      major concerns with S. 1221

    In addition to the funding level that we believe is totally 
inadequate, we believe that the Senate should modify the bill 
with regard to the following provisions:

1. Use of non-LSC funds

    With limited exceptions, Section 11 imposes the same 
restrictions on non-LSC funds that are imposed on LSC funds. 
The full Senate would be well advised to reconsider this 
decision and remove any restrictions on such non-LSC funds. As 
Senator Rudman stated in testimony before this committee, the 
imposition on restrictions on non-LSC funds ``would be a 
terrible mistake * * * (and) tread into dangerous 
constitutional waters.''
    Already the restrictions on the use of non-LSC funds in the 
FY 1996 appropriations bill, Pub. L. 104-134 have resulted in 
the loss of other sources of funding for recipients, including 
state and local governmental funding. Continuing such a 
restriction in a reauthorization law would put severe 
limitations on the ability of state and local governmental 
agencies, including IOLTA programs, and private donors, 
including United Way agencies and foundations, to ensure that 
legal services they have identified as necessary to meet the 
full range of legal needs of poor people within their 
jurisdictions are available. Moreover, recipients would be 
prohibited from representing a significant number of clients 
who are today represented using private, public and IOLTA 
funds. Such clients include certain categories of legal aliens 
who do not fit within the narrow exceptions in the bill and 
defendants in proceedings that some states characterize as 
criminal, such as paternity or child support contempt actions.
    While Congress should have the authority to determine how 
the funds it appropriates should be used, it should not be 
permitted to impose those determinations on the choices that 
other sovereign governmental entities and private donors wish 
to make with respect to their own funds. Moreover, Congress 
should encourage, rather than discourage, the creation of 
additional public funding sources for civil legal services and 
Federal-State cooperation to ensure the effective and efficient 
use of resources, rather than stimulate wasteful duplication of 
programs if public funders are forced to put their resources 
elsewhere in order to accomplish their purposes. Similarly, 
Congress should encourage private funding sources to provide 
additional resources for civil legal assistance and to 
collaborate with federally funded legal services programs to 
make critically needed services available in an effective and 
efficient way.
    Any concern about fungibility of funds can be addressed by 
strict timekeeping requirements. In fact, the new timekeeping 
requirements will ensure that LSC funds are not used 
inappropriately to supplement or provide overhead for 
restricted activities that Congress has determined are 
inconsistent with the purposes of the LSC Act.

2. Fee-generating cases

    Section 20 of the bill would prohibit recipients from 
providing legal assistance in all fee-generating cases which 
``would reasonably be expected to result in a fee for legal 
services from an award to an eligible party * * *'' if the case 
had been undertaken by a private attorney. The only exception 
is for Social Security and SSI cases. The prohibition would 
apply even if: the fee that was anticipated was too small to 
attract a private attorney; private attorneys in the area do 
not handle the kind of case, regardless of the availability of 
a fee; or there are no private attorneys available in the area 
to handle the case. This is not current law and should not 
become so in the future.
    If legal services recipients are prohibited from handling 
all fee-generating cases, there will be no attorneys who are 
available or willing and able to provide help to many of the 
poor people who need legal assistance. In many States, 
including Oregon, Texas and Florida among others, there are 
general fee-shifting statutes that provide a mechanism for 
attorneys' fees to be awarded in broad categories of civil 
cases, such as domestic relations, landlord tenant or consumer 
cases, or, as in Alaska, in virtually all civil cases. If this 
provision becomes law, legal services programs will be 
prohibited from providing representation to poor people in many 
of the kinds of routine, individual cases that constitute most 
of their case loads and that critics of legal services have 
suggested should be the mainstay of legal services practice. 
Moreover, many cases that involve poor people are nominally 
fee-generating, but in reality private attorneys are unwilling 
to handle the cases because the fees are likely to be too small 
or too speculative for a private attorney to undertake the 
representation. In many places, particularly rural America, 
even though a fee might be available in a particular case, 
there are simply no private attorneys available to handle the 
case.
    The current law permitted fee-generating cases pursuant to 
LSC guidelines has worked very well in practice and has 
permitted legal services programs to handle those potentially 
fee-generating cases that the private bar will not or cannot 
take. This committee has heard no complaints about unfair 
competition from the organized bar or private attorneys 
generally. On the contrary, the private bar has vigorously 
opposed previous proposals to change the fee-generating cases 
provisions.

3. Representation before administrative and legislative bodies

    Section 8 prohibits all lobbying and rulemaking activity. 
We firmly believe that as legislators and administrators revise 
and craft complex laws, regulations and policies that affect 
poor people, they should have the benefit of the knowledge and 
expertise of legal services providers, who are, in many 
instances, the only advocates who can effectively represent the 
views of poor people. During the 1980s, Congress succeeded in 
crafting a set of restrictions on legislative and 
administrative advocacy to correct the alleged abuses of the 
legal services community. Those restrictions have worked 
effectively to ensure that legal services advocates speak for 
their clients and not for themselves when they advocate before 
Congress, state legislatures and administrative agencies. At 
the very least, legal services advocates should be permitted to 
respond to requests of agency officials and elected 
representatives for information about the proposals they are 
considering. Otherwise we who make the laws are cutting 
ourselves off from the best information available about how 
those proposals would affect poor people. In addition, we 
firmly believe that legal services providers should be able to 
advocate before legislative and administrative agencies with 
respect to proposals to provide nonfederal funding for legal 
services for the poor, especially in light of the diminishing 
Federal resources provided under the committee bill.

4. Prohibition on attorneys' fees

    The proposed prohibition in section 14(c) on claiming or 
collecting attorneys' fees from non-governmental parties in 
litigation would eliminate an important source of additional 
funds to support the provision of legal services to the poor 
and would undermine one of the primary purposes of the fee-
shifting statutes, i.e. to punish wrongdoers who have violated 
the rights of persons protected under the statutes. Under the 
bill, private defendants who have willfully violated the rights 
of poor plaintiffs will have much less incentive to settle 
those cases if they know they can evade significant punishment 
for their illegal actions since they are no longer threatened 
with payment of attorneys' fees. It ensures that private 
parties remain largely unaccountable for violations of poor 
people's rights, even though the judiciary, Congress or State 
legislatures have found their actions to be illegal.

5. Representation of prisoners

    Section 22 prohibits all litigation on behalf of prisoners. 
While there may be compelling arguments to be made to prohibit 
representation in cases involving class actions challenging 
prison conditions, a complete ban on individual representation 
in civil cases would not only deny prisoners access to critical 
legal services which they may need, but it would also create 
particular problems in some cases. For example, a lawyer could 
be representing a tenant in an eviction and face a situation 
where the tenant was put in jail for an unrelated offense, such 
as drunk driving. Under this provision the lawyer would have to 
stop representation on the eviction.

6. Welfare reform

    Section 21 seeks to prohibit all representation involving 
welfare reform, excepts for representation of an individual 
seeking specific relief from a welfare agency where such relief 
does not involve a challenge to existing law. We do not believe 
this provision should become permanent law without 
clarification that individual clients can be represented in 
order to protect their statutory or constitutional rights. 
Unless such clarification is made in the language, this 
prohibition will deny poor children and families access to our 
system for resolving disputes and undermine the fundamental 
purpose of the legal services program.

7. No provision for training and support services

    Prior to 1996, the Corporation funded 16 national support 
centers and a support effort in each state, as well as training 
programs, a National Clearinghouse and other support 
activities. These entities are no longer funded. However, 
section 14(b) would eliminate the authority of the corporation 
to fund training, technical assistance, support and the 
provision of information about poverty law developments. This 
proposed change is a mistake. It is critically important that 
LSC have the authority to provide support services. Front-line 
attorneys need expert advice and assistance, experienced 
guidance and timely and current information in a cost-effective 
manner on critical poverty law matters that such attorneys 
confront as they provide advice and representation to their 
clients.

                                   Barbara A. Mikulski.
                                   Christopher J. Dodd.
                                   Paul Wellstone.
                                   Ted Kennedy.
                                   Tom Harkin.
                                   Claiborne Pell.
                                   Paul Simon.
                   ADDITIONAL VIEWS OF SENATOR SIMON

    In spite of the fact that sixty Senators (including a 
majority of the Senate Labor and Human Resources Committee) 
voted to fund the Legal Services Corporation at $340 million 
for FY 1996, S. 1221 authorizes funding of only $278 million 
for fiscal years 1996-2000. To remedy this disparity, I 
intended to offer a floor amendment that would have authorized 
$340 million of LSC funding for FY96, and would have authorized 
``such sums as are necessary'' for fiscal years 1997-2000.
    It does not make sense to tie the appropriators' hands with 
an authorization lower than the funding level that sixty 
Senators voted for during this Congress. As for the ``out 
years,'' we should leave the appropriate level of funding to 
future Congresses, who will be best positioned to fund the 
Legal Services Corporation at levels appropriate to future 
circumstances.
    Procedural concerns aside, $278 million is an insufficient 
appropriation for the Legal Services Corporation. The $278 
million appropriation for the LSC in FY96 already represents a 
30 percent cut in funding from the FY95 level, leaving LSC 
funding at a twelve-year low. Under these cuts, three hundred 
to four hundred local legal service offices will be closed, and 
many of those that remain open will be able to provide only 
very limited services.
    In response to these budget cuts, LSC offices around the 
Nation have been forced to cut staff and services to the bone. 
LSC now projects that it will have provided services to 1.5 
million fewer people in FY96 than it did in FY95. Most of the 
people affected by these cuts will be lower-income individuals 
with routine yet critically important cases.
    When the Legal Service Corporation was established, its 
goal was to provide all low-income Americans with at least 
``minimum access'' to legal services. The sponsors of the 
authorizing legislation defined that goal as requiring one 
lawyer per five thousand low-income people. Today, 
unfortunately, that ratio has fallen to less than one lawyer 
for every ten thousand low-income people.
    It is true that pro bono services by private attorneys have 
expanded in response to the recent LSC budget cuts, but even if 
every private attorney in the United States provided fifty 
hours of pro bono services per year, it would not make up for 
the loss of services and expertise that have been caused by the 
thirty percent reduction in LSC funding during the 104th 
Congress.
    We should not be cutting essential legal services for low-
income individuals when more Americans now live in poverty than 
at any time in the past thirty years.
    In 1971, one supporter said of the Legal Services 
Corporation:

          Here each day the old, the unemployed, the 
        underprivileged and the largely forgotten people of our 
        nation may seek help. Perhaps it is an eviction, a 
        marital conflict, repossession of a car or a 
        misunderstanding over a welfare check--each problem may 
        have a legal solution. These are small claims in the 
        nation's eye, but they loom large in the hearts and 
        lives of poor Americans.

    These words, spoken by President Richard Nixon, remain as 
true today as they were at the time he signed the bipartisan 
legislation that brought the Legal Services Corporation into 
existence. We should not continue to chip away at funding for 
this important program until nothing is left but a demoralized 
remnant. Instead, we should continue the tradition of 
bipartisan support that has distinguished the history of the 
Legal Services Corporation.

                                                        Paul Simon.
                      IX. Changes in Existing Law

    In compliance with rule XXVI paragraph 12 of the Standing 
Rules of the Senate, the following provides a print of the 
statute or the part or section thereof to be amended or 
replaced (existing law proposed to be omitted is enclosed in 
black brackets, new matter is printed in italic, existing law 
in which no change is proposed is shown in roman):
          * * * * * * *

                   LEGAL SERVICES REFORM ACT OF 1995

          * * * * * * *

                     LEGAL SERVICES CORPORATION ACT

          * * * * * * *
    [Sec. 1001. Statement of findings and declaration of 
purpose
    [The Congress finds and declares that--
          [(1) there is a need to provide equal access to the 
        system of justice in our Nation for individuals who 
        seek redress of grievances;
          [(2) there is a need to provide high quality legal 
        assistance to those who would be otherwise unable to 
        afford adequate legal counsel and to continue the 
        present vial legal services program;
          [(3) providing legal assistance to those who face an 
        economic barrier to adequate legal counsel will serve 
        best the ends of justice and assist in improving 
        opportunities for low-income persons consistent with 
        the purposes of this Act;
          [(4) for many of our citizens, the availability of 
        legal services has reaffirmed faith in our government 
        of laws;
          [(5) to preserve its strength, the legal services 
        program must be kept free from the influence of or use 
        by its political pressures; and
          [(6) attorneys providing legal assistance must have 
        full freedom to protect the best interests of their 
        clients in keeping with the Code of Professional 
        Responsibility, the Canons of Ethics, and the high 
        standards of the legal profession.]
    Sec. 1001. The Congress finds the following:
          (1) There is a need to encourage equal access to the 
        system of justice in the United States for individuals 
        seeking redress of grievances.
          (2) There is a need to encourage the provision of 
        high quality legal assistance for those who would 
        otherwise be unable to afford legal counsel.
          (3) Encouraging the provision of legal assistance to 
        those who face an economic barrier to legal counsel 
        will serve the ends of justice consistent with the 
        purposes of the Legal Services Corporation Act.
          (4) It is not the purpose of the Legal Services 
        Corporation Act to meet all the legal needs of all 
        potentially eligible clients, but instead to be a 
        catalyst to encourage the legal profession and others 
        to meet their responsibilities to the poor and to 
        maximize access of the poor to justice.
          (5) For may citizens the availability of legal 
        services has reaffirmed faith in our government of 
        laws.
          (6) To preserve its strength, the legal services 
        program must be made completely free from the influence 
        of political pressures and completely free of lobbying 
        and political activity.
          (7) There are over 2,000 non-profit organizations 
        advocating on behalf of the poor throughout the United 
        States and it is not appropriate for funds regulated 
        under the Legal Services Corporation Act to be expended 
        lobbying for or against positions taken by those 
        groups.
          (8) Attorneys providing legal assistance must protect 
        the best interests of their clients in keeping with the 
        Code of Professional Responsibility, the Canon of 
        Ethics, and the high standards of the legal profession.
          * * * * * * *
    Sec. 1010 Financing
          [(a) Authorization of Appropriations.--There are 
        authorized to be appropriated for the purpose of 
        carrying out the activities of the Corporation, 
        $90,000,000 for fiscal year 1975, $100,000,000 for 
        fiscal year 1976, and such sums as may be necessary for 
        fiscal year 1977. There are authorized to be 
        appropriate for the purpose of carrying out the 
        activities of the Corporation $205,000.000 for the 
        fiscal year 1978, and such sums as may be necessary for 
        each of the two succeeding fiscal years. The first 
        appropriation may be made available to the Corporation 
        at any time after six or more members of the Board have 
        been appointed and qualified. Appropriations for that 
        purpose shall be made for not more than two fiscal 
        years, and shall be paid to the Corporation in annual 
        installments at the beginning of each fiscal year in 
        such amounts as may be specified in Acts of Congress 
        making appropriations.]
          (a) There are authorized to be appropriated for the 
        purposes of carrying out the activities of the 
        Corporation--
                  (1) $278,000,000 for fiscal year 1996,
                  (2) $278,000,000 for fiscal year 1997,
                  (3) $278,000,000 for fiscal year 1998,
                  (4) $278,000,000 for fiscal year 1999, and
                  (5) $278,000,000 for fiscal year 2000.
          * * * * * * *
    Sec. 1007(b)[(1) to provide legal assistance (except in 
accordance with guidelines promulgated by the Corporation) with 
respect to any fee-generating case (which guidelines shall not 
preclude the provision of legal assistance in cases in which a 
client seeks only statutory benefits and appropriate private 
representation is not available):]
    (1) to provide legal assistance with respect to any fee-
generating case, except that this paragraph does not preclude 
representation of otherwise eligible clients in cases in which 
the client seeks benefits under titles II or XVI of the Social 
Security Act;
          * * * * * * *
    [(6) to support or conduct training programs for the 
purpose of advocating particular public policies or encouraging 
political activities, labor or antilabor activities, boycotts, 
picketing, strikes, and demonstrations, as distinguished from 
the dissemination of information about such policies or 
activities, except that this provision shall not be construed 
to prohibit the training of attorneys or paralegal personnel 
necessary to prepare them to provide adequate legal assistance 
to eligible clients;]
    (6) to support or conduct training programs for the purpose 
of advocating particular public policies or encouraging 
political activities, labor or antilabor activities, boycotts, 
picketing, strikes, or demonstrations, including the 
dissemination of information about such policies or activities, 
except that this paragraph shall not be construed to prohibit 
the training of attorneys or paralegal personnel necessary to 
prepare them to provide adequate legal assistance to eligible 
clients, to advise any eligible client as to the nature of the 
legislative process, or to inform any eligible client of the 
client's rights under any statute, order, or regulation;
          * * * * * * *
    [(8) to provide legal assistance with respect to any 
proceeding or litigation which seeks to procure a 
nontherapeutic abortion or to compel any individual or 
institution to perform an abortion, or assist in the 
performance of an abortion, or provide facilities for the 
performance of an abortion, contrary to the religious beliefs 
or moral conviction of such individual or institution;]
    [(9)] (8) to provide legal assistance with respect to any 
proceeding or litigation relating to the desegregation of any 
elementary or secondary school or school system, except that 
nothing in this paragraph shall prohibit the provision of legal 
advice to an eligible client with respect to such client's 
legal rights and responsibilities; [or]
    [(10)] (9) to provide legal assistance with respect to any 
proceeding or litigation arising out of a violation of the 
Military Selective Service Act or of desertion from the Armed 
Forces of the United States, except that legal assistance may 
be provided to an eligible client in a civil action in which 
such client alleges that he was improperly classified prior to 
July 1, 1973, under the Military Selective Service Act or prior 
corresponding law[.]; [or]
    [(11)] (10) to--
          (A) advocate or oppose, or contribute or make 
        available any funds, personnel, or equipment for use in 
        advocating or opposing, any plan or proposal, or
          (B) represent any party or participate in any other 
        way in litigation, that is intended to or has the 
        effect of altering, revising, or reapportioning a 
        legislative, judicial, or elective district at any 
        level of government, including influencing the timing 
        or manner of the taking of a census[.];
    (11) to provide legal representation for any person or 
participate in any other way in litigation, lobbying, or 
rulemaking involving efforts to reform a State or Federal 
welfare system, except that this paragraph does not preclude a 
recipient from representing an individual client who seeking 
specific relief from a welfare agency where such relief does 
not involve an effort to amend or otherwise challenge existing 
law; or
    (12) to provide legal representation in litigation on 
behalf of a local, State, or Federal prisoner.
    For purposes of paragraph (1), the term ``fee-generating 
case'' means any case which if undertaken on behalf of an 
eligible client by an attorney in private practice may 
reasonably be expected to result in a fee for legal services 
from an award to a client from public funds, from the opposing 
party, or from any other source.
          * * * * * * *
    Sec. 1005 (a) Appointment of President; Outside 
Compensation of Officers Prohibited; Terms.--[The Board shall] 
The President, by and with the advice and consent of the 
Senate, shall appoint the president of the Corporation, who 
shall serve at the pleasure of the President who shall be a 
member of the bar of the highest court of a State and shall be 
a non-voting ex officio member of the Board, and such other 
officers [as the board] as the President determines to be 
necessary. No officer of the Corporation may receive any salary 
or other compensation for services from any source other than 
the Corporation during his period of employment by the 
Corporation, except as authorized [by the Board] by the 
President. All officers shall serve at the pleasure of the 
Board.
          * * * * * * *
    (d) Compensation.--Officers and employees of the 
Corporation shall be compensated at rates determined by the 
Board, but not in excess of the rate level [V] III of the 
Executive Schedule specified in section [5316] 5314 of title 5, 
United States Code.
          * * * * * * *
    (h) For purposes of sections 286, 287, 641, 1001, and 1002 
of title 18, United States code, the Corporation shall be 
considered to be a department or agency of the United States 
Government.
    (i) For purposes of sections 3729 through 3733 of title 31, 
United States Code, the term ``United States Government'' shall 
include the Corporation, except that actions that are 
authorized by section 3730(b) of such title to be brought by 
persons may not be brought against the Corporation, any 
recipient, subrecipient, grantee, or contractor of the 
Corporation, or any employee thereof.
    (j) For purposes of section 1516 of title 18, United States 
Code--
          (1) the term ``Federal auditor'' shall include any 
        auditor employed or retained on a contractual basis by 
        the Corporation,
          (2) the term ``contract'' shall include any grant or 
        contract made by the Corporation, and
          (3) the term ``person'', as used in subsection (a) of 
        such section, shall include any grantee or contractor 
        receiving financial assistance under section 
        1006(a)(1).
    (k) Funds provided by the Corporation under section 1006 
shall be deemed to be Federal appropriations when used by a 
contractor, grantee, subcontractor, or subgrantee of the 
Corporation.
    (l) For purposes of section 666 of title 18, United States 
Code, funds provided by the Corporation shall be deemed to be 
benefits under a Federal program involving a grant or contract.
          * * * * * * *
    Sec. 1007 * * *
          * * * * * * *
    (i) Any recipient, and any employee of a recipient, who has 
given in-person unsolicited advice to a nonattorney that such 
nonattorney should obtain counsel or take legal action shall 
not accept employment resulting from that advice, or refer that 
nonattorney to another recipient or employee of a recipient, 
except that--
          (1) an attorney may accept employment by a close 
        friend, relative, former client (if the advice given is 
        germane to the previous employment by the client), or 
        person whom the attorney reasonably believes to be a 
        client because the attorney is currently handling an 
        active legal matter or case for that specific person;
          (2) an attorney may accept employment that results 
        from the attorney's participation in activities 
        designed to educate nonattorneys to recognize legal 
        problems, to make intelligent selection of counsel, or 
        to utilize available legal services if such activities 
        are conducted or sponsored by a qualified legal 
        assistance organization;
          (3) without affecting that attorney's right to accept 
        employment, and attorney may speak publicly or write 
        for publication on legal topics so long as such 
        attorney does not emphasize the attorney's own 
        professional experience or reputation and does not 
        undertake to give individual advice in such speech or 
        publication; and
          (4) if success in asserting rights or defenses of a 
        client in litigation in the nature of class action is 
        dependent upon the joinder of others, an attorney may 
        accept, but shall not seek, employment from those 
        contacted for the purpose of obtaining that joinder.
    (j)(1) No recipient or employee of a recipient may file a 
complaint or otherwise pursue litigation against a defendant 
unless--
          (A) all plaintiffs have been specifically identified, 
        by name, in any complaint filed for purposes of 
        litigations, except to the extent that a court of 
        competent jurisdiction has granted leave to protect the 
        identity of any plaintiff; and
          (B) a statement or statements of facts written in 
        English and, if necessary, in a language which the 
        plaintiffs understand, which enumerate the particular 
        facts known to the plaintiffs on which the complaint is 
        based, have been signed by the plaintiffs (including 
        named plaintiffs in a class action), are kept on file 
        by the recipient, and are made available to any Federal 
        department or agency that is auditing the activities of 
        the Corporation or any recipient, and to any auditor 
        receiving Federal funds to conduct such auditing, 
        including any auditor or monitor of the Corporation.
Other parties shall have access to the statement of facts 
referred to in subparagraph (B) only through the discovery 
process after litigation has begun.
    (2) No recipient or employee of a recipient may engage in 
precomplaint settlement negotiations with a prospective 
defendant unless--
          (A) all plaintiffs have been specifically identified, 
        except to the extent that a court of competent 
        jurisdiction has granted leave to protect the identity 
        of any plaintiff; and
          (B) a statement of statements of facts written in 
        English and, if necessary, in a language which the 
        plaintiffs understand, which enumerate the particular 
        facts known to the plaintiffs on which the complaint 
        will be based if such negotiations fail, have been 
        signed by all plaintiffs (including named plaintiffs in 
        a class action), are kept on file by the recipient, and 
        are made available to all prospective defendants or 
        such defendants' counsel, to any Federal department or 
        agency that is auditing the activities of the 
        Corporation or any such recipient, and to any auditor 
        receiving Federal funds to conduct such auditing, 
        including any auditor or monitor of the Corporation.
    (3)(A) Subject to subparagraph (B), any Federal district 
court of competent jurisdiction, after notice to potential 
parties to litigation referred to in paragraph (1) or to 
negotiations described in paragraph (2) and after an 
opportunity for a hearing, may enjoin the disclosure of the 
identity of any potential plaintiff pending the out-come of 
such litigation or negotiations, upon the establishment of 
reasonable cause to believe that such an injunction is 
necessary to prevent probable, serious harm to such potential 
plaintiff.
    (B) Notwithstanding subparagraph (A), the court shall, in a 
case in which subparagraph (A) applies, order the disclosure of 
the identity of any potential plaintiff to counsel for 
potential defendants upon the condition that counsel for 
potential defendants not disclose the identity of such 
potential plaintiff (other than to investigators or paralegals 
hired by such counsel), unless authorized in writing by such 
potential plaintiff's counsel or the court.
    (C) In a case in which paragraph (1) applies, counsel for 
potential defendants and the recipient or employee counsel of 
the recipient may execute an agreement, in lieu of seeking a 
court order under subparagraph (A), governing disclosure of the 
identity of any potential plaintiff.
    (D) The court may punish as a contempt of court any 
violation of an order of the court under subparagraph (A) or 
(B) or of an agreement under subparagraph (C).
    (4) Any funds received from a defendant by a recipient on 
behalf of a class of eligible clients shall be placed in an 
escrow account until the funds may be paid to such clients. Any 
such funds which are not disbursed to clients within one year 
of the date on which such funds were received shall be returned 
to the defendant.
    (k)(1) No funds made available by or through the 
Corporation may be used for defending a person in a proceeding 
to evict that person from a public housing project if the 
person has been charged with the illegal sale or distribution 
of a controlled substance and if the eviction proceeding is 
brought by a public housing agency because the illegal drug 
activity of that person threatens the health or safety of other 
tenants residing in the public housing project or employees of 
the pubic housing agency.
    (2) As used in this subsection--
          (A) the term ``controlled substance'' has the meaning 
        given that term in section 102 of the Controlled 
        Substances Act (21 U.S.C. 802); and
          (B) the terms ``public housing project'' and ``public 
        housing agency'' have the meanings given those terms in 
        section 3 of the United States Housing Act of 1937 (42 
        U.S.C. 1437a).
    (l)(1) All grants and contracts awarded by the Corporation 
for the provision or support of legal assistance to eligible 
clients under this title shall be awarded under a competitive 
bidding system.
    (2) Rights under sections 1007(a)(9) and 1011 shall not 
apply to the termination or denial of financial assistance 
under this title as a result of the competitive award of any 
grant or contract under paragraph (1), and the expiration of 
any grant or contract under this title as a result of such 
competitive award shall not be treated as a termination or 
denial of refunding under section 1007(a)(9) or 1011.
    (3) For purposes of this subsection, the term ``competitive 
bidding'' means a system established by regulations issued by 
the Corporation which provide for the award of grants and 
contracts on the basis of merit to persons, organizations, and 
entities described in section 1006(a) who apply for such awards 
in competition with others under promulgated criteria. The 
Corporation shall ensure that the system incorporates the 
following:
          (A) The competitive bidding system shall commence no 
        later than one year after the date of enactment of this 
        provision and all previously awarded grants and 
        contracts shall be set aside and subjected to this 
        system within one year thereafter.
          (B) All awards of grants and contracts made under 
        this system shall be subject to periodic review and 
        renewed with the opportunity for others to compete for 
        the award, and in no event shall any award be granted 
        for a period longer than 5 years.
          (C) Timely notice or the submission of applications 
        for awards shall be published in periodicals of local 
        and State bar associations and in at least one daily 
        newspaper of general circulation in the area to be 
        served by the award recipient.
          (D) The selection criteria shall include but not be 
        limited to the demonstration of a full understanding of 
        the basic legal needs of the eligible clients to be 
        served and a demonstration of the capability of serving 
        those needs; the reputations of the principals of the 
        applicant; the quality, feasibility; and cost 
        effectiveness of plans submitted by the applicant for 
        the delivery of legal assistance to the eligible 
        clients to be served; a demonstration of willingness to 
        abide by the restrictions placed on those awarded 
        grants and contracts by the Corporation; and, if an 
        applicant has previously received an award from the 
        Corporation, the experiences of the Corporation with 
        the applicant.
          (E) No previous recipient of an award of a grant or 
        contract may be given any preference.
    (m)(1) The Corporation shall define service areas and funds 
available for each service area shall be on a per capita basis 
pursuant to the number of poor people determined by the Bureau 
of the Census to be within that area. Funds for a service area 
may be distributed by the Corporation to one or more recipients 
as defined in section 1006(a).
    (2) The amount of the grants from the Corporation and of 
the contracts entered into by the Corporation under section 
1006(a)(1) shall be an equal figure per poor person for all 
geographic areas, based on the most recent decennial census of 
population conducted pursuant to section 141 of title 13, 
United States Code, regardless of the level of funding for any 
such geographic area before the enactment of the Legal Services 
Reform Act of 1995.
    (3) Beginning with the fiscal year beginning after the 
results of the most recent decennial census have been reported 
to the President under section 141(b) of title 13, United 
States Code, funding of geographic areas served by recipients 
shall be redetermined, in accordance with paragraph (2), based 
on the per capita poverty population in each such geographic 
area under that decennial census.
    (n) No funds made available to any recipient from any 
source may be used to participate in any litigation with 
respect to abortion.
    (o) No funds made available to any recipient from any 
sources may be expended to provide legal assistance for or on 
behalf of any alien unless the alien is present in the United 
States and is--
          (1) an alien lawfully admitted for permanent 
        residence as defined in section 101(a)(2) of the 
        Immigration and Nationality Act (8 U.S.C. 1101(a)(20));
          (2) an alien who is either married to a United States 
        citizen or is a parent or an unmarried child under the 
        age of 21 years of such a citizen and who has filed an 
        application for adjustment of status to permanent 
        resident under the Immigration and Nationality Act, and 
        such application has not been rejected;
          (3) an alien who is lawfully present in the United 
        States pursuant to an admission under section 207 of 
        the Immigration and Nationality Act (8 U.S.C. 1157, 
        relating to refugee admissions) or who has been granted 
        asylum by the Attorney General under such Act;
          (4) an alien who is lawfully present in the United 
        States as a result of the Attorney General's 
        withholding of deportation pursuant to section 243(h) 
        of the Immigration and Nationality Act (8 U.S.C. 
        1253(h)); or
          (5) an alien to whom section 305 of the Immigration 
        Reform and Control Act of 1986 applies, but only to 
        extent that the legal assistance provided is that 
        described in that section. An alien who is lawfully 
        present in the United States as a result of being 
        granted conditional entry pursuant to section 203(a)(7) 
        of the Immigration and Nationality Act (8 U.S.C. 
        11553(a)(7)) before April 1, 1980, because of 
        persecution or fear of persecution on account of race, 
        religion, or political opinion or because of being 
        uprooted by catastrophic natural calamity shall be 
        deemed to be an alien described in paragraph (3).
    (p) The Corporation shall undertake one or more 
demonstration projects in order to study the feasibility of 
using client copayments to assist in setting the service 
priorities of its programs. Based on those projects and such 
other information as it considers appropriate, the Corporation 
may adopt a permanent system of client copayments for some or 
all of its programs of legal assistance.
          * * * * * * *
    Sec. 1007(a)[(5) insure that no funds made available to 
recipients by the Corporation shall be used at any time, 
directly or indirectly, to influence the issuance, amendment, 
or revocation of any executive order or similar promulgation by 
any Federal, State, or local agency, or to undertake to 
influence the passage or defeat of any legislation by the 
Congress of the United States, or by any State or local 
legislative bodies, or State proposals by initiative petition, 
except where--
          [(A) representation by an employee of a recipient for 
        any eligible client is necessary to the provision of 
        legal advice and representation with respect to such 
        client's legal rights and responsibilities (which shall 
        not be construed to permit an attorney or a recipient 
        employee to solicit a client, in violation of 
        professional responsibilities, for the purpose of 
        making such representation possible); or
          [(B) a governmental agency, legislative body, a 
        committee, or a member thereof--
                  [(i) requests personnel of the recipient to 
                testify, draft, or review measures or to make 
                representations to such agency, body, 
                committee, or member, or
                  [(ii) is considering a measure directly 
                affecting the activities under this title of 
                the recipient or the Corporation.]
    (5) ensure that no funds made available to recipients are 
used at any time, directly or indirectly--
          (A) to influence the issuance, amendment, or 
        revocation of any executive order or similar 
        promulgation by any Federal, State, or local agency, or 
        to undertake to influence the passage or defeat of any 
        legislation by the Congress of the United States, or by 
        any State or local legislative body, or State proposals 
        made by initiative petition or referendum, except to 
        the extent that a governmental agency, a legislative 
        body, a committee, or a member thereof is considering a 
        measure directly affecting the recipient or the 
        Corporation;
          (B) to pay for any publicity or propaganda intended 
        or designed to support or defeat legislation pending 
        before the Congress or State or local legislative 
        bodies or intended or designed to influence any 
        decision by a Federal, State, or local agency;
          (C) to pay for any personal service, advertisement, 
        telegram, telephone communication, letter, printed or 
        written matter, or other device, intended or designed 
        to influence any decision by a Federal, State, or local 
        agency, except when legal assistance is provided by an 
        employee of a recipient to an eligible client on a 
        particular application, claim, or case, which directly 
        involves the client's legal rights or responsibilities 
        and which does not involve the issuance, amendment, or 
        revocation of any agency promulgation described in 
        subparagraph (A);
          (D) to pay for any personal service, advertisement, 
        telegram, telephone communication, letter, printed or 
        written matter, or any other device intended or 
        designed to influence any Member of Congress or any 
        other Federal, State, or local elected official--
                  (i) to favor or oppose any referendum, 
                initiative, constitutional amendment, or any 
                similar procedures of the Congress, any State 
                legislature, any local council, or any similar 
                governing body acting in a legislative 
                capacity,
                  (ii) to favor or oppose an authorization or 
                appropriation directly affecting the authority, 
                function, or funding of the recipient or the 
                Corporation, or
                  (iii) to influence the conduct of oversight 
                proceedings of a recipient or the Corporation; 
                or
          (E) to pay for any personal service, advertisement, 
        telegram, telephone communication, letter, printed or 
        written matter, or any other device intended or 
        designed to influence any Member of Congress or any 
        other Federal, State, or local elected official to 
        favor or oppose any Act, bill, resolution, or similar 
        legislation; and ensure that no funds made available to 
        recipients are used to pay for any administrative or 
        related costs associated with an activity prohibited in 
        subparagraph (A), (B), (C), (D), or (E);
          * * * * * * *
    Sec. 1008(b)(1) Authority to require recordkeeping; access 
to records. The Corporation is authorized to prescribe the 
keeping of records with respect to funds provided by grant or 
contract and shall have access to such records at all 
reasonable times for the purpose of insuring compliance with 
the grant or contract or the terms and conditions upon which 
financial assistance was provided.
    (2) The Corporation shall require each recipient to 
maintain records of time spent on the cases or matters with 
respect to which that recipient is engaged in activities. 
Pursuant to such requirements, each employee of such recipient 
who is an attorney or paralegal shall record, by the name of 
the case or matter, at the time such employee engages in an 
activity regarding such case or matter, the type (as defined by 
the Corporation) of case or matter, the time spent on the 
activity, and the source of funds to be charged for the 
activity.
          * * * * * * *
    Sec. 1007(c)(1) Recipient organizations. In making grants 
or entering into contracts for legal assistance, the 
Corporation shall insure that any recipient organized solely 
for the purpose of providing legal assistance to eligible 
clients is governed by a body at least 60 percent of which 
consists of attorneys who are members of the bar of a State in 
which the legal assistance is to be provided (except that the 
Corporation [(1)] (A) shall, upon application, grant waivers to 
permit a legal services program, supported under section 
222(a)(3) of the Economic Opportunity Act of 1964, which on the 
date of enactment of this title (enacted July 25, 1974) has a 
majority of persons who are not attorneys on its policy-making 
board to continue such a non-attorney majority under the 
provisions of this title, and [(2)] (B) may grant, pursuant to 
regulations issued by the Corporation, such a waiver for 
recipients which, because of the nature of the population they 
serve, are unable to comply with such requirement) and at least 
one-third of which consists of persons who are, when selected, 
eligible clients who may also be representatives of 
associations or organizations of eligible clients. Any such 
attorney, while serving on such board, shall not receive 
compensation from a recipient.
    (2) The board of directors of any nonprofit organization 
that is--
          (A) chartered under the laws of one of the States, a 
        purpose of which is furnishing legal assistance to 
        eligible clients, and
          (B) receiving funds made available by or through the 
        Corporation,
shall set specific priorities pursuant to section 1007(a)(2)(C) 
for the types of matters and cases to which the staff of the 
nonprofit organization shall devote its time and resources. The 
staff of such organization shall not undertake cases or matters 
other than in accordance with the specific priorities set by 
its board of directors, except in emergency situations defined 
by such board. The staff of such organization shall report, to 
the board of directors of the organization on a quarterly basis 
and to the Corporation on an annual basis, all cases undertaken 
other than in accordance with such priorities. The Corporation 
shall promulgate a suggested list of priorities which boards of 
directors may use in setting priorities under the paragraph.
    (3) Funds appropriated for the Corporation may not be used 
by the Corporation in making grants or entering into contracts 
for legal assistance unless the Corporation ensures that the 
recipient is either--
          (A) a private attorney or attorneys,
          (B) State and local governments or substate regional 
        planning and coordination agencies which are composed 
        of substate areas whose governing board is controlled 
        by locally elected officials, or
          (C) a qualified nonprofit organization chartered 
        under the laws of one of the States--
                  (i) a purpose of which is furnishing legal 
                assistance to eligible clients, and
                  (ii) the majority of the board of directors 
                or other governing body of which is comprised 
                of attorneys who are admitted to practice in 
                one of the States and are approved to serve on 
                such board or body by the governing bodies of 
                State, county, or municipal bar associations 
                the membership of which represents a majority 
                of the attorneys practicing law in the locality 
                in which the organization is to provide legal 
                assistance.
The approval described in subparagraph (B)(ii) may be given to 
more than one group of directors.
          * * * * * * *
    Sec. 1010[(c) Non-Federal Funds.--Non-Federal funds 
received by the Corporation, and funds received by any 
recipient from a source other than the Corporation, shall be 
accounted for and reported as receipts and disbursements 
separate and distinct from Federal funds; but any funds so 
received for the provision of legal assistance shall not be 
expended by recipients for any purpose prohibited by this 
title, except that this provision shall not be construed to 
prevent recipients from receiving other public funds or tribal 
funds (including foundation funds benefiting Indians or Indian 
tribes) and expending them in accordance with the purposes for 
which they are provided, or to prevent contracting or making 
other arrangements with private attorneys, private law firms, 
or other State or local entities of attorneys, or with legal 
aid societies having separate public defender programs, for the 
provision of legal assistance to eligible clients under this 
title.]
    (c)(1) Any non-Federal funds received by the Corporation, 
and any funds received by any recipient from any source other 
than the Corporation, shall be accounted for and reported as 
receipts and disbursements separate and distinct from 
Corporation funds. Any funds so received, including funds 
derived from Interest on Lawyers Trust Accounts, may not be 
expended by recipients for any purpose prohibited by this title 
or the Legal Services Reform Act of 1995. The Corporation shall 
not accept any non-Federal funds, and any recipient shall not 
accept funds from any source other than the Corporation, unless 
the Corporation or the recipient, as the case may be, notifies 
in writing the source of such funds that the funds may not be 
expended for any purpose prohibited by this title or the Legal 
Services Reform Act of 1995.
    (2) Paragraph (1) shall not prevent recipients from--
          (A) receiving Indian tribal funds (including funds 
        from private nonprofit organizations for the benefit of 
        Indians or Indian tribes) and expending them in 
        accordance with the specific purposes for which they 
        are provided; or
          (B) using funds received from a source other than the 
        Corporation to provide legal assistance to a client who 
        is not an eligible client if such funds are used for 
        the specific purposes for which such funds were 
        received, except that such funds may not be expended by 
        recipients for any purpose prohibited by this title or 
        the Legal Services Reform Act of 1995 (other than any 
        requirement regarding the eligibility of clients).
          * * * * * * *
    Sec. 1006(a) Powers of Nonprofit Corporation; Additional 
Powers.--To the extend consistent with the provisions of this 
title, the Corporation shall exercise the powers conferred upon 
a nonprofit corporation by the District of Columbia Nonprofit 
Corporation Act (except for section 1005(o) of title 29 of the 
District of Columbia Code). In addition, the Corporation is 
authorized--
          (1)(A) to provide financial assistance to qualified 
        programs furnishing legal assistance to eligible 
        clients, and to make grants to and contracts with--
                  (i) Individuals, partnerships, firms, 
                corporations, and nonprofit organizations, and
                  [(ii) State and local governments (only upon 
                application by an appropriate State or local 
                agency or institution and upon a special 
                determination by the Board that the 
                arrangements to be made by such agency or 
                institution will provide services which will 
                not be provided adequately through 
                nongovernmental arrangements), for the purpose 
                of providing legal assistance to eligible 
                clients under this title, and (B) to make such 
                other grants and contracts as are necessary to 
                carry out the purposes and provisions of this 
                title;]
                  (ii) State and local governments or substate 
                regional planning and coordination agencies 
                which are composed of substate areas whose 
                governing board is controlled by locally 
                elected officials; and
          (2) to accept in the name of the Corporation, and 
        employ or dispose of in furtherance of the purposes of 
        this title, any money or property, real, personal, or 
        mixed, tangible or intangible, received by gift, 
        devise, bequest, or otherwise[; and].
          [(3) to undertake directly, or by grant or contract, 
        the following activities relating to the delivery of 
        legal assistance--
                  [(A) research, except the broad general legal 
                or policy research unrelated to representation 
                of eligible clients may not be undertaken by 
                grant or contract,
                  [(B) training and technical assistance, and
                  [(C) to serve as a clearinghouse for 
                information.]
          * * * * * * *
    [(f) Harassment; Malicious Abuse of Legal Process. If an 
action is commenced by the Corporation or by a recipient and a 
final order is entered in favor of the defendant and against 
the Corporation or a recipient's plaintiff, the court shall, 
upon motion by the defendant and upon a finding by the court 
that the action was commenced or pursued for the sole purpose 
of harassment of the defendant or that the Corporation or a 
recipient's plaintiff maliciously abused legal process, enter 
an order (which shall be appealable before being made final) 
awarding reasonable costs and legal fees incurred by the 
defendant in defense of the action, except when in 
contravention of a State law, a rule of court, or a statute of 
general applicability. Any such costs and fees shall be 
directly paid by the Corporation.]
    (f)(1) A recipient, or any client of such recipient, may 
not claim or collect attorneys' fees from nongovernmental 
parties to litigation initiated by such client with the 
assistance of such recipient.
    (2) The Corporation shall create a fund to pay defendants 
or clients under paragraph (3). In addition to any other 
amounts appropriated to the Corporation, there is authorized to 
be appropriated to such fund for each fiscal year such sums as 
may be necessary.
    (3) If a Federal court has found an action commenced by a 
plaintiff with the assistance of a recipient involves a 
violation of rule 11 of the Federal Rules of Civil Procedure, 
or if the president of the Corporation finds that an action 
commenced by a plaintiff with the assistance of a recipient in 
any court involves a violation of the standards of rule 11, or 
was commended for the purpose of retaliation or harassment, the 
president of the Corporation shall, upon application by the 
defendant, award from the Fund all reasonable costs and 
attorneys' fees incurred by the defendant in defending the 
action.
    (g)(1) The Board within 90 days after the date of the 
enactment of the Legal Services Reform Act of 1995, shall issue 
regulations to provide for the distribution of attorneys' fee 
received by a recipient, in accordance with paragraph (2).
    (2) Such fees shall be transferred to the Corporation and 
the Corporation shall distribute such fees among its grantees 
for the direct delivery of legal assistance, except that, 
subject to approval by the Corporation--
          (A) a recipient shall not be required to transfer 
        fees or other compensation received as a result of a 
        mandated court appointed;
          (B) a recipient may retain reasonable costs 
        customarily allowed in litigation against an 
        unsuccessful party; and
          (C) a recipient may retain the actual cost of 
        bringing the action, including the proportion of the 
        compensation of each attorney involved in the action 
        which is attributable to that action
          * * * * * * *
    Sec. 1006(d)(5)[No] (A) Subject to subparagraph (B), no 
class action suit, class action appeal, or amicus curiae class 
action may be undertaken, directly or through others, by a 
staff attorney, except with the express approval of a project 
director of a recipient in accordance with policies established 
by the governing body of such recipient.
          (B) No recipient or employee of a recipient may bring 
        a class action suit against the Federal Government or 
        any State or local government unless--
                  (i) the governing body of the recipient has 
                expressly approved the filing of such an 
                action;
                  (ii) the class relief which is the subject of 
                such an action is sought for the primary 
                benefit of individuals who are eligible for 
                legal assistance under this title; and
                  (iii) before filing such an action, the 
                project director of the recipient determines 
                that the government entity is not likely to 
                change the policy or practice in question, that 
                the policy or practice will continue to 
                adversely affect eligible clients, that the 
                recipient has given notice of its intention to 
                seek class relief, and that responsible efforts 
                to resolve without litigation the adverse 
                effects of the policy or practice have not been 
                successful or would be adverse to the interest 
                of the clients.
          * * * * * * *
    Sec. 1003(b) Principal Office; Agent for Service of 
Process. The Corporation shall maintain its principal office in 
the [District of Columbia] Washington D.C. metropolitan area 
and shall maintain therein a designated agent to accept service 
of process for the Corporation. Notice to or service upon the 
agent shall be deemed notice to or service upon the 
Corporation.
          * * * * * * *


                                evasion


    Sec. 1013. Any attempt, such as the creation or use of 
``alternative corporations'', to avoid or otherwise evade the 
provisions of this title or the Legal Services Reform Act of 
1995 is prohibited.
    Sec. [1013] 1014 * * *
          * * * * * * *
    Sec. [1014] 1015 * * *
          * * * * * * *