• Advisory Opinion 2022-001 (pdf)

August 7, 2023

Question Presented

Do the LSC rules and regulations permit an LSC grant recipient to provide limited scope representation to an eligible client in the following scenario? The client needs to file an emergency Chapter 13 bankruptcy petition to obtain an automatic stay of collection actions. The recipient would accept the client for representation limited to the emergency filing. The recipient would assign the case to a private attorney through the recipients’ Part 1614 Private Attorney Involvement (PAI) Program. The private attorney would then represent the client in the bankruptcy court for both the emergency filing and the ongoing bankruptcy case. Upon completion of the emergency filing, the recipient would close its PAI case and end the attorney-client relationship. The private attorney would continue to represent the client in the bankruptcy under a fee arrangement through the bankruptcy court. 

Brief Answer

Yes. The LSC rules and regulations permit an LSC grant recipient to accept a client for representation limited to an emergency Chapter 13 bankruptcy filing that will be handled through a private attorney as a Part 1614 Private Attorney Involvement case. LSC requires that any grant recipients’ limited scope representation agreements be consistent with the applicable rules of professional responsibility for attorneys. LSC rules and regulations would not require the recipient to continue to represent the client for the entire bankruptcy case separately from those rules. 

Background

Emergency Chapter 13 Bankruptcies

An LSC grant recipient (grantee) provides services in an area where eligible clients sometimes have need for emergency filing of Chapter 13 bankruptcies. Some of these cases are consistent with the grantee’s priorities and other applicable LSC requirements. These cases may preserve a client’s home or other vital assets. Normally, private attorneys in the area handle Chapter 13 cases through fee arrangements supervised by the bankruptcy court. Nonetheless, most private attorneys are reluctant to accept a last-minute case for an emergency filing when they lack the normal amount of time to assess the client and discuss the fee arrangement. Furthermore, private attorneys are reluctant to provide immediate services for a client who meets the grantee’s financial eligibility criteria due to a lack of significant and immediately available income and assets. 

Those private attorneys will often accept such cases through the grantee’s Part 1614 Private Attorney Involvement (PAI) program. The grantee would accept the client for representation and assign the case to the private attorney. In these cases, only the private attorney would enter an appearance in the bankruptcy court. The grantee might pay for the court costs and a reduced fee to the private attorney to handle the emergency Chapter 13 filing. With that arrangement for the emergency filing, private attorneys are usually willing to accept the professional commitment to represent the client through the remainder of the case, subject to a fee arrangement supervised by the bankruptcy court. Thus, the client no longer has a need for assistance from the grantee because a private attorney can handle it for a fee. In many of these cases, the client’s financial eligibility for services from the grantee is temporary. Often, the client will regain income sources and become financially ineligible well before the completion of the bankruptcy case. 

Considering these circumstances, the grantee has suggested that it would limit its representation to assigning the case to a private attorney through its PAI program for the emergency filing. Thereafter, the private attorney would continue to provide representation under an ordinary fee arrangement subject to the supervision of the bankruptcy court and the applicable rules of professional responsibility.

Limited Scope Representation

To treat the representation as a Part 1614 PAI case, the grantee must accept the client for services, even if the services will be provided by a private attorney working through the grantee’s PAI program. LSC does not have any regulations specifically addressing the scope of services that a grantee agrees to provide to a client itself or through a PAI attorney. Rather, the LSC Act requires that LSC “shall ensure that activities [funded by LSC] are carried out in a manner consistent with attorneys' professional responsibilities.” LSC Act § 1006(b)(3), 42 U.S.C. § 2996e(b)(3). LSC also requires that, when providing extended services, grantees execute written representation agreements with clients “in a form consistent with the applicable rules of professional responsibility and prevailing practices in the grantee's service area.” 45 C.F.R. § 1611.9. Such agreements must have a “statement identifying the legal problem for which representation is sought, and the nature of the legal services to be provided.” Id. Thus, the grantee may limit the scope of the agreement to emergency services in these situations if permitted under local rules of professional responsibility.

Providing representation limited to an emergency filing but not for the remainder of the case would constitute “unbundled” or “limited scope” representation.

Unbundling, or limited scope representation, is an alternative to traditional, full-service representation. Instead of handling every task in a matter from start to finish, the lawyer handles only certain parts and the client remains responsible for the others.

American Bar Association, Unbundling Resource Center, www.americanbar.org (June 20, 2023). The American Bar Association’s Model Rule of Professional Conduct 1.2(c) provides that “A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.” Most states have adopted this language or similar language, and no state explicitly prohibits limited scope representation. Sara Smith and Will Hornsby, Unbundled Legal Services: At the tipping-point?, ABA Standing Committee on the Delivery of Legal Services (April 2018).

LSC Rules and Regulations

LSC has three regulations implicated by this scenario.

1. Part 1609—Fee Generating Cases
2. Part 1611—Financial Eligibility and Retainers
3. Part 1614—Private Attorney Involvement

Part 1609—Fee Generating Cases

LSC seeks to ensure that grantees “do not use scarce legal services resources when private attorneys are available to provide effective representation [while also assisting] eligible clients to obtain appropriate and effective legal assistance.” 45 C.F.R. § 1609.1. To that end, LSC prohibits grantees from using LSC funds for a “fee-generating case” that “reasonably may be expected to result in a fee for legal services from an award to a client” unless specific requirements are met. Id. at § 1609.2 and .3. As a standard restriction, this prohibition also applies to private funds and some funds from other sources. 45 C.F.R. § 1610.4(c) and 45 C.F.R. § 1610.2(d)(2)(v).

One exception applies when “[e]mergency circumstances compel immediate action before referral can be made . . . .” Id. at § 1609.3(b)(3)(ii). In that situation, the grantee must advise the client “that, if appropriate, and consistent with professional responsibility, referral will be attempted at a later time . . . .” Id. Other exceptions apply when the case has been rejected by private attorneys, private attorneys will not consider the case without a referral fee, or the case is of a type of cases that “private attorneys in the area served by the grantee ordinarily do not accept, or do not accept without prepayment of a fee.” Id. at § 1609.3(b)(2). 

These emergency Chapter 13 bankruptcy filings fit precisely in the emergency circumstances provision at § 1609.3(b)(3)(ii). Private attorneys are not available for the immediate need but are likely to provide services in the remainder of the case for a fee.

Part 1611—Financial Eligibility

Part 1611 “sets forth requirements relating to the financial eligibility of individual applicants for legal assistance supported with LSC funds . . . .” 45 C.F.R. §1611.1. The rule also addresses changes in financial eligibility status for clients.

If . . . the [grant] recipient becomes aware that a client has become financially ineligible through a change in circumstances, a recipient shall discontinue representation supported with LSC funds if the change in circumstances is sufficient, and is likely to continue, to enable the client to afford private legal assistance, and discontinuation is not inconsistent with applicable rules of professional responsibility.

45 C.F.R. § 1611.8(a) (emphasis added). The grantee has identified that Chapter 13 bankruptcies often involve clients with short-term financial eligibility. In these situations, clients who are financially eligible at the time of the emergency filing may later become financially ineligible. Furthermore, as with § 1609.3(b)(3)(ii), they may be able to obtain representation through a fee arrangement with a private attorney.

Part 1614—Private Attorney Involvement

LSC requires that grantees “involve private attorneys . . . in the delivery of legal information and legal assistance to eligible clients” through “[d]irect delivery of legal assistance to [grant] recipient clients.” 45 C.F.R. § 1614.1 and .4(a). Part 1614 does not address the scope of direct representation of eligible clients. As with retainers referenced in § 1611.9 and discussed above, those services must be “carried out in a manner consistent with attorneys' professional responsibilities.” LSC Act § 1006(b)(3), 42 U.S.C. § 2996e(b)(3). Part 1614 does not require that the grantee represent a client for the entire duration of the private attorney’s representation of the client for that case. 

Additionally, Part 1614 PAI cases must be ones that “would be permissible if supported with LSC funds.” LSC Case Service Reporting Handbook § 10.1(a) (2017 ed.). 

Analysis

LSC regulations do not prohibit limited scope representation agreements between clients and grantees. Rather, such agreements must conform to the requirements of applicable rules of professional responsibility. As such, if permitted under those rules, and if all other LSC requirements are met, LSC does not prohibit limited scope representation. Notably, in these situations a private attorney would provide the actual representation to the client throughout the bankruptcy case under a fee arrangement. As part of the § 1611.9 representation agreement, the grantee must explicitly address the limited scope of the grantee’s representation. The client should have a clear explanation from the grantee and/or the private attorney about the expected fee arrangements and representation for both the emergency filing and the remainder of the bankruptcy case.

Furthermore, as PAI cases, these cases must meet all requirements for LSC-funded cases, including those involving fee-generating cases (Part 1609) and client financial eligibility (Part 1611). Under the normal circumstances for these cases, Part 1609 would require the grantee to close the case once a private attorney accepts it on a fee basis (as permitted under applicable rules of professional responsibility). Furthermore, the grantee expects that in many of these cases Part 1611 would require that the grantee close the case when the client’s income increases to exceed the grantee’s financial eligibility guidelines and the client has other counsel (again, as permitted under applicable rules of professional responsibility). Thus, the limited scope arrangement furthers the goal of ensuring that the Part 1614 PAI case meets the requirements of Parts 1609 and 1611.

Conclusion

When permitted under applicable rules of professional responsibility, the LSC rules and regulations permit an LSC grant recipient to enter into a limited scope representation agreement with an eligible client for an emergency Chapter 13 bankruptcy filing without committing the grant recipient to continue to represent the client for the remainder of the client’s Chapter 13 bankruptcy. In the situation contemplated, a private attorney would provide the actual representation as a Part 1614 Private Attorney Involvement case. Thereafter, the private attorney would continue to represent the client under a fee arrangement supervised by the bankruptcy court. 

While these limited scope arrangements are permissible, they are not required under these circumstances. Grant recipients may approach these situations differently, especially if they use non-LSC funds that are not subject to Parts 1609 and 1611 and they do not count the case for Part 1614 PAI purposes. Please contact the Office of Legal Affairs with any questions about this opinion.

WILL A. GUNN
Vice President for Legal Affairs and General Counsel

MARK FREEDMAN
Senior Associate General Counsel