Legal Services Reform Act of 1991

Legal Services Reform Act of 1991 - Imposes requirements with respect to funds provided by the Legal Services Corporation. Sets forth prohibitions, with exceptions, on redistricting activities, the solicitation of employment, certain participation in precomplaint settlement negotiations or litigation, lobbying, or the provision of defense assistance in certain drug-related eviction proceedings by fund recipients.

Directs the Corporation to require each recipient to maintain records of time spent on the cases of matters with respect to which that recipient is engaged in activities.

Grants the Board of Directors of nonprofit State legal services organizations which are funded by the Corporation authority to set specific priorities for the types of matters and cases to which their staffs shall devote their time and resources. Prohibits the staff of such organization from undertaking cases or matters other than in accordance with the specific priorities set by its Board, except in emergency situations defined by such Board. Requires the staff to report to the Board on a quarterly basis and to the Corporation on an annual basis on all cases undertaken other than in accordance with such priorities. Directs the Corporation to promulgate a suggested list of priorities which boards of directors may use in setting priorities.

Specifies that funds derived from Interest on Lawyers Trust Accounts (IOLTA) and other non-Corporation funds shall not be expended for any purposes prohibited under this Act.

Requires all grants and contracts awarded by the Corporation to be awarded under a competitive bidding system.

Outlines provisions regarding: (1) termination or denial of funding under such a system; (2) distribution of funds; and (3) approval of attorney members of local boards.

Prohibits fund recipients, or clients of such recipients, from claiming or collecting attorneys' fees from nongovernmental parties to litigation initiated by such clients with the assistance of such recipients. Requires the Corporation to create a fund to pay defendants or clients if a Federal court has found that 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 such action involves a violation of the standards of Rule 11 or was commenced for the purpose of retaliation or harassment. Authorizes appropriations for such fund. Directs such president, upon application by the defendant, to award from the fund all reasonable costs and attorneys' fees incurred by the defendant in defending the action.

Requires the Corporation's Board of Directors, within 90 days, to issue regulations to provide for the distribution of attorneys' fees received by a recipient. Specifies that such fees shall be transferred to the Corporation, which shall distribute such fees among its grantees for the direct delivery of legal assistance, except that, subject to approval by the Corporation, a recipient: (1) shall not be required to transfer fees or other compensation received as a result of a mandated court appointment; (2) may retain reasonable costs customarily allowed in litigation against an unsuccessful party; and (3) may retain the actual cost of bringing the action.

Bars the use of funds made available to any recipient from any source to participate in any litigation with respect to abortion.

Places restrictions on; (1) the bringing of a class action by a recipient, or employee of a recipient, against the Federal Government or any State or local government; and (2) the use of funds made available to a recipient to provide legal assistance for or on behalf of aliens.

Bars the use of funds for the dissemination of information about particular public policies or political activities. Allows the use of such funds to advise eligible clients regarding the nature of the legislative process, or to inform such clients of their rights under any statute, order, or regulation.

Directs the Corporation to undertake one or more demonstration projects to study the feasibility of using client copayments to assist in setting the service priorities of its programs. Authorizes the Corporation to adopt a permanent system of client copayments for some or all of its legal assistance programs.

Prohibits any attempt, such as the creation or use of "alternative corporations," to evade the provisions of this Act.

Increases the maximum compensation (from level V to level III of the Executive Schedule) for officers and employees of the Corporation.

Requires the Corporation's principal office to be in the Washington, D.C. metropolitan area (current law specifies the District of Columbia.)

Limits the definition of "attorney client privilege," for purposes of the Legal Services Corporation Act, to protect only communications made in confidence by a client for the purpose of seeking legal advice (but excludes the disclosure of specified information, except to the extent provided by court order, to any Federal department or agency auditing, or any auditor receiving Federal funds to conduct an audit of, the activities of the Corporation or any recipient.)