BILL ANALYSIS Ó
AB 2878
Page 1
Date of Hearing: April 26, 2016
ASSEMBLY COMMITTEE ON JUDICIARY
Mark Stone, Chair
AB 2878
(Committee on Judiciary) - As Amended April 18, 2016
SUBJECT: STATE BAR DUES: ANNUAL AUTHORIZATION OF MEMBER DUES,
OVERSIGHT AND PUBLIC PROTECTION
KEY ISSUES:
1)SHOULD THE LEGISLATURE AUTHORIZE THE STATE BAR TO assess
MEMBERSHIP dues for active bar members in 2017 AT $390, THE
SAME RATE AS THIS YEAR?
2)SHOULD THE BAR'S ABILITY TO TIE THE HANDS OF FUTURE
LEGISLATURE IN SETTING PROPER DUES, ENACTED IN THE 1950's, be
ELIMINATED?
3)as part of THE LEGISLATURE'S annual oversight OF THE BAR,
CONDUCTED THROUGH THE DUES BILL, AND IN LIGHT OF THE MOST
RECENT and ongoing FINANCIAL AND ADMINISTRATIVE CONCERNS,
should the legislature consider SUBSTANTIAL CHANGES TO bar
GOVERNANCE AND accountability CONSISTENT WITH THE BAR'S
PARAMOUNT DUTY TO PROTECT THE PUBLIC?
SYNOPSIS
AB 2878
Page 2
This bill continues the decades-long tradition of Judiciary
Committee oversight of the Bar via review of the annual dues
authorization bill, as part of general legislative oversight of
agencies within the executive and judicial branches of
government. Last year, in response to troubling audit findings
as well as other problems in state bar governance, the
Legislature required that the State Auditor perform an in-depth
financial audit of the Bar, and that the Bar complete both a
workforce plan for its discipline system and a spending plan to
determine a reasonable amount for its annual dues. These
critically important evaluations are all due to the Legislature
by May 15, 2016. In addition, last year's legislation required
the Bar, as a state agency, to comply with normal government
transparency and accountability laws pursuant to the
Bagley-Keene Open Meeting Act and the California Public Records
Act.
This bill comes to this Committee after yet another year of
extensive and publically reported turmoil involving the Bar,
some of the information likely coming to light by way of the
open government laws applied to the Bar last year. First, the
media reported that the Bar had failed to investigate over 300
complaints about the unauthorized practice of law, some awaiting
assignment to an investigator for years before any action was
taken. According to the Bar, many of those complaints were
filed by immigrants seeking legal assistance with, among other
things, their legal status in this country. It goes without
saying that failure to immediately investigate and, when
appropriate, take action to stop the unauthorized practice of
law puts the public at substantial risk and the longer the
delays are, the more the public is put at risk. The Bar now
asserts that these cases are being assigned to an attorney
immediately upon receipt and the backlog has finally been
addressed, but when this matter was first made public, over 300
cases were still awaiting intake. Had this issue not been made
public, it is unclear whether such swift corrective action would
have been taken. Second, the Bar, without input from or
approval by the Legislature, and apparently without fully
AB 2878
Page 3
following its own newly established procedures, took out a $10
million loan for tenant improvements to its San Francisco
facility and attempted to secure the loan with future member bar
dues payments, which could have tied the hands of future
Legislatures in the setting of dues based on a 1950's era
statute. This apparently only came to light as a result of the
State Auditor's recent audit of the Bar. Other issues of
concern are discussed more fully below.
As now in print, this bill maintains member bar dues for 2017 at
their same level as this year, while awaiting the results of the
workforce and spending plans, as well as the 2016 State Auditor
audit. The bill also appropriately eliminates the 1950's era
statute that potentially allowed the Bar to tie the
Legislature's hands in the future, interfering with its
statutory duty to set member bar dues.
The bill in its current form does not address other broad
governance and oversight issues discussed in more detail in the
analysis, including whether the Board of Trustees, comprised of
a supermajority of active market participants, can legally
regulate attorneys and still avoid antitrust liability. Nor
does it address whether the Bar's primary regulatory and public
protection functions should be de-coupled from its trade
association functions, as some, including a number of current
Bar trustees, have suggested. However, both issues are
discussed in the analysis.
The bill is supported, if amended, by some Bar Board trustees
who argue that the bill should begin the process of de-coupling
the Bar's regulatory functions from its trade association role.
This bill is opposed, unless amended, by the Center for Public
Interest Law which argues that it should address not only the
governance and de-unification issues discussed above, but also a
number of other concerns, including the need for an outside
investigator to help ensure that the Bar better focuses on its
paramount responsibility: protecting the public from harm.
Given the forthcoming audit to be released by the State Auditor
AB 2878
Page 4
and the State Bar's workforce and operational cost spending
plans that are all due in mid-May, it is likely that this bill
will be substantially amended in the near future to address
issues raised and reforms that may be suggested by the Auditor,
the Bar, and the Legislature.
SUMMARY: Reauthorizes attorney license fees at the same level
as the current year. Specifically, this bill:
1)Reauthorizes the State Bar to collect up to $390 for active
membership dues for 2017.
2)Eliminates the ability of the State Bar to prevent future
Legislatures from reducing future membership dues by securing
all or any portion of an obligation of the State Bar on future
dues.
3)Makes various findings concerning events at the State Bar and
states the intent of the Legislature that this bill serve as a
vehicle to implement possible recommendations for
substantially improving the operations, effectiveness and
efficiency of the State Bar, based in part on reports to be
submitted to the Legislature in the coming months.
EXISTING LAW:
1)Requires all attorneys who practice law in California to be
members of the State Bar and establishes the State Bar for the
purpose of regulating the legal profession. Pursuant to the
State Bar Act, requires the annual mandatory membership fee
set by the State Bar's Board of Trustees (Board) to pay for
discipline and other functions to be ratified by the
Legislature. (Business & Professions Code Section 6000 et
seq. Unless stated otherwise, all further statutory
references refer to that code.)
2)Authorizes the State Bar to collect $315 in annual membership
AB 2878
Page 5
fees from active members for a total annual dues bill of $390
for the year 2016. Provides that the other $75 is pursuant to
statutory authorization to assess annually the following fees:
$40 for the Client Security Fund; $25 for the disciplinary
system; and $10 for the Lawyer Assistance Program. (Sections
6140, 6140.55, 6140.6, 6140.9.)
3)Authorizes the State Bar to collect $75 in annual membership
fees from inactive members for a total annual dues bill of
$115. Provides that the other $40 is pursuant to statutory
authorization to assess annually the following fees: $10 for
the Client Security Fund; $25 for the disciplinary system; and
$5 for the Lawyer Assistance Program. (Sections 6141,
6140.55, 6140.6, 6140.9.)
4)Directs $40 of membership dues to legal services purposes
unless a member elects not to support those activities.
(Section 6140.03.)
5)Provides that protection of the public is the highest priority
of the State Bar and its Board in exercising their licensing,
regulatory and disciplinary functions. Whenever the
protection of the public is inconsistent with other interests
sought to be promoted, provides that the protection of the
public shall be paramount. (Section 6001.1.)
6)Creates the Governance in the Public Interest Task Force,
effective February 1, 2013, and requires that the task force
report to the Supreme Court, the Governor and the Assembly and
Senate Judiciary Committees by May 15, 2014, and every three
years thereafter, its recommendations for enhancing public
protection and ensuring that public protection is the State
Bar's highest priority. (The task force has yet to submit its
first report.) (Section 6001.2.)
7)Permits the State Bar, for purpose of carrying into effect and
promoting its objectives (of which public protection is its
highest priority), to sell, lease, exchange, convey, transfer,
assign, encumber, pledge, dispose of any of its real or
AB 2878
Page 6
personal property or any interest therein, including without
limitation all or any portion of its income or revenues from
membership fees paid or payable by members. (Section 6001.)
8)Provides, pursuant to a 1950's statute, that whenever the
Board secures an obligation of the State Bar on all or any
portion of the fees from membership dues the Legislature may
not, until the obligation is repaid in full, reduce membership
dues below the maximum amount in effect when the obligation
was created and provides that this constitutes a covenant to
the holder of the obligation. (Section 6008.5.)
9)Requires the State Bar to annually report on the performance
and condition of its discipline system, including the backlog
of discipline cases that are six months old and case
processing times, as provided. (Section 6086.15.)
10)Requires the State Bar to develop and implement a workforce
plan for its discipline system and conduct a public sector
compensation and benefits study, including a recommendation
for an appropriate backlog goal and an assessment of staffing
needed to achieve that goal. Requires the State Bar to
conduct a thorough analysis of its operating costs and develop
a spending plan to determine a reasonable amount for its
annual dues. Requires that the workforce plan and the
spending plan be submitted to the Legislature by May 15, 2016,
and be implemented by December 31, 2016. (Section 6140.16.)
11)Requires the State Bar's Board to contract with the
California State Auditor to conduct a financial audit of the
State Bar, including an audit of its financial statement,
internal controls and practices, and requires that the audit
be submitted to the Board, the Chief Justice of the California
Supreme Court, and the Assembly and Senate Judiciary
Committees by May 15, 2016. Requires the audit to examine
revenues, expenditures, reserves and fund transfers. (Section
6145 (c).)
AB 2878
Page 7
12)Subjects the State Bar to the Public Records Act, with
specified exceptions. Provides that identifying information
submitted by applicants to the State Bar for admission to
practice law and State Bar admissions records, as specified,
are confidential and may not be disclosed pursuant to any
state law including the Public Records Act. (Sections 6001,
6026.11.)
13)Effective April 1, 2016, subjects the State Bar to the
Bagley-Keene Open Meeting Act, as provided, with exemptions
for the Judicial Nominees Evaluation Commission and the
Committee of Bar Examiners. (Sections 6001 6026.7; Government
Code Section 11121.)
FISCAL EFFECT: As currently in print this bill is keyed
non-fiscal.
COMMENTS: This bill continues the decades-long tradition of
oversight of the Bar by the Assembly and Senate Judiciary
Committees via review of the annual dues authorization bill, as
part of general oversight role of the Legislature over the
agencies in the executive and judicial branches of government.
Last year, in response to significant and troubling audit
findings and other concerns, the Legislature required the State
Auditor to perform an in-depth financial audit of the Bar, due
May 15, 2016. Last year's bar dues bill also required the Bar
to comply with important government transparency and
accountability laws by way of the Bagley-Keene Open Meeting Act
and the California Public Records Act. (SB 387 (Jackson), Chap.
537, Stats. 2015.) This bill comes to this Committee after
another year of extensive and publically reported turmoil
involving the Bar, some of which has come to light because of
new open government laws.
Background on the Bar. Attorneys who wish to practice law in
AB 2878
Page 8
California generally must be admitted and licensed in this State
and must be members of the State Bar. (Cal. Const., Art. VI,
Sec. 9.) The State Bar of California is the largest state bar
in the country. As of March 2016, the State Bar had 186,152
active members and 56,929 inactive members. Total State Bar
membership is listed at 257,788, which includes 2,162 judge
members and 12,544 members who are "not eligible to practice
law."
The Bar is governed by a 19-member board of trustees, which is
made up of 13 active lawyer members (6 lawyers elected by other
licensed attorneys in the state; 5 lawyers appointed by the
Supreme Court; and 2 lawyers appointed by the Legislature) and 6
public (non-lawyer) members (4 public members appointed by the
Governor and 2 public members appointed by the Legislature).
Currently, two public member positions, awaiting appointment by
the Governor, are vacant. By statute, the Bar's highest
priority, as necessary and appropriate, is protection of the
public. (Section 6001.1.)
The Bill Maintains Dues at Current Rates and Eliminates a
Provision That Could Tie the Hands of Future Legislatures and
Reduce Legislative Oversight of the State Bar. At this point,
this bill merely authorizes the State Bar to collect active
membership dues of up to $390 for 2017, the same rate as this
year. The Bar's programs are financed almost exclusively by
annual membership dues paid by attorneys, as well as other fees
paid by applicants who are seeking to practice law. The Bar
also uses its name and membership lists to sell items such as
malpractice insurance and car rentals, and receives payment for
those activities. The Bar currently has complete discretion
over how funds from this latter activity, which amount to
approximately $2 million per year, are used. The Bar's total
revenue for 2016 is $118 million, excluding funds from interest
on lawyer trust accounts that pass-through the State Bar and
fund legal services, with $74.3 million coming from mandatory
dues.
AB 2878
Page 9
As required by last year's Bar dues bill, the Bar is currently
conducting an analysis of its operating costs and developing a
spending plan to determine a proposed amount to report to the
Legislature for its annual dues. The spending plan must be
submitted to the Legislature by May 15, 2016. Once that report
is submitted, along with an audit from the State Auditor on the
Bar's finances that was also mandated in last year's dues bill
and is also due by May 15, 2016, and the Legislature has
thoroughly reviewed both reports, the Bar dues amount in this
bill could either increase or decrease, as the Legislature deems
appropriate, based on the actual needs of the Bar to effectively
and efficiently protect the public.
As discussed in more detail below, the bill also eliminates an
anachronistic 1950's era statute that prohibits future
Legislatures, if the Bar uses any portion of membership dues as
security for an obligation, from reducing membership dues below
the amount in effect when the obligation was created by the Bar,
until the obligation is paid in full. While it is highly
questionable whether this provision is constitutional, it is
clear that it reduces the important oversight role of the
Legislature over the Bar which is needed to ensure that public
protection is and remains the paramount concern of the Bar.
Therefore, this bill rightly deletes that provision.
Bar Report on its Progress This Past Year: The State Bar has
provided a list of its accomplishments over the past year,
including its hiring of its new management team last Fall:
executive director Elizabeth Parker, chief operating officer
Leah Wilson, and general counsel Vanessa Holton. The Bar also
states that it is "well on its way to completing" all of the
recommendations from the State Auditor in the 2015 audit,
discussed in more detail below, including revising its
discipline report to the Legislature, scheduled to be submitted
at the end of this month, to ensure that it is consistent, clear
AB 2878
Page 10
and reliable; improving the quality of the discipline process;
requiring a cost-benefit analysis for all contracts above $2
million; streamlining its organizational structure to more
efficiently use existing staff resources; and beginning the
development of a new case management system.
In an effort to address questionable management and budget
practices, the Bar has reduced its overall budget for 2016 by
6.2 percent and reduced budgets for temporary help, travel and
catering even more. The Bar states that it has eliminated all
business expense accounts and the president's once secret
$30,000 discretionary expense account, something that has been
of substantial concern to this Committee for years. It has also
cancelled numerous contracts with outside counsel, seeking to
bring more of that work in-house. The Bar also states that it
is beginning an effort to use zero-based operational costs for
assessment of fees charged by its Admissions division, as well
as a review of other fees charged. The Bar has also
re-established its Governance in the Public Interest Task Force
and is expected to submit a report to the Board in July of 2016,
although this report was actually due to the Legislature in
2014. Finally, after media reports that the Bar has not
properly addressed unauthorized practice of law complaints,
discussed more fully below, the Bar now states that it is
developing a protocol for handling these cases and has adopted a
referral policy to allow Bar investigators and criminal
prosecutors to simultaneously investigate cases.
Well Reported, Disconcerting and Longstanding Problems at The
Bar Continue to Raise Very Troubling Questions About Public
Protection, Discipline, Governance, Expenditures and Oversight.
The State Bar has been in the news throughout much of the past
year primarily due to troubling management, oversight and
governance problems, as well as questions about whether the Bar
has focused sufficiently on its primary duty, public protection.
AB 2878
Page 11
Bar Has Admitted Ignoring Unlawful Practice of Law Complaints,
Many of Which are From Immigrants, Thus Allowing the Unlawful
Practice of Law to Endanger the Public: The Bar operates an
investigatory and discipline process to protect the public from
unscrupulous attorneys, with possible disciplinary actions
ranging from letters of warning and private reproval, to
disbarment. The Bar's investigatory and regulatory duties
include protecting the public from the unauthorized practice of
law by non-attorneys and attorneys not licensed in this State.
Although public protection is the Bar's highest statutory
priority, the Bar reportedly allowed hundreds of complaints
alleging the unauthorized practice of law to sit idle for months
or even years without taking action. Many of the complaints are
against "notaries," who offer to assist immigrants in securing
legal status or performing other legal work, but whose efforts
can result in denial of protective status or even deportation.
According to media reports, the Bar initially identified 59
complaints of unauthorized practice of law that were
uninvestigated for years, with some complaints dating as far
back as 2007. (Lyle Moran, State Bar admits ignoring dozens of
complaints against people practicing law without a license,
Daily Journal (Jan. 29, 2016).) At the time, the Bar called its
failure to investigate complaints "unacceptable," and blamed a
fired investigator. (Ibid.) The Daily Journal later learned
that the Bar actually had more than 270 additional complaints
alleging unauthorized practice of law that were allowed to sit
idle, awaiting assignment to an investigator. These additional
complaints were reportedly left in a drawer for more than two
months or, in some cases, six months and more. (Lyle Moran,
State Bar let hundreds of complaints against non-attorneys sit
idle, Daily Journal (March 4, 2016).) These cases were
reportedly assigned to an attorney, addressing the backlog, but
when this matter was first made public, over 300 cases were
still awaiting intake. Had this matter not been made public,
likely as the result of a public records request, it is unclear
if and when corrective action would have been taken.
AB 2878
Page 12
It goes without saying that failure to immediately investigate
and, when appropriate, take action to stop the unauthorized
practice of law leaves the public at serious risk. If legal
action is not taken, the unauthorized practice will likely
continue, unnecessarily jeopardizing vulnerable individuals who
are seeking legal assistance. When the failure to investigate
lasts months or even years, the risk increases significantly.
The failure to investigate in a timely manner is even more
disturbing when many of the victims are immigrants, for whom
negative consequences may include deportation. Those harmed,
particularly those who have been deported, may not have the
opportunity for a second chance to obtain actual legal
assistance.
The Bar has acknowledged its mishandling of these complaints and
is seeking to improve its procedures by not only working through
the backlog swiftly, but also bringing together legal service
providers and other stakeholders for a one-day summit next
month, entitled "Strategies for Effective Investigation &
Enforcement: UPL & Immigration Attorney Misconduct." According
to the Bar, the "summit discussion is intended to identify what
is working under the current structure and what is not, and to
generate ideas for improvement." It is hoped that the summit
produces real and immediate improvement in the Bar's handling of
these critically important complaints.
Last Year's State Audit Substantially Faulted the Bar for Not
Consistently Protecting the Public and For Lacking
Accountability: As required by statute, the State Auditor
completes a performance audit (covering one part of the Bar's
functions) of the Bar every two years. The 2015 audit reviewed
the Bar's discipline process; in particular its backlog of
discipline cases, and the Bar's 2012 $75 million purchase and
renovation of a building in Los Angeles. The audit uncovered
significant, troubling decisions made by the Bar in the handling
AB 2878
Page 13
of both matters. (California State Auditor, State Bar of
California: It Has Not Consistently Protected the Public
Through its Attorney Discipline Process and Lacks Accountability
(June 2015).)
Discipline: To operate its discipline system effectively and
maximize public protection, the Bar must minimize its backlog
(cases not processed within six months) in order to prevent
wayward attorneys and non-attorneys from continuing to practice
law in a manner that endangers the public. The Bar is required
to report annually to the Legislature, the Governor, and the
Chief Justice on the discipline process and any backlog.
(Section 6086.15.) Unfortunately, the State Auditor discovered
that the Bar did not fully and consistently report its backlog
or its case processing times to the Legislature or the Governor,
and, when taking steps to reduce the backlog, did not adequately
protect the public. Of particular importance, according to the
Auditor, was the manner in which the Bar reduced its backlog of
discipline cases, which may have caused "significant risk to the
public":
[A]s the State Bar reduced its excessive backlog of
disciplinary cases, the severity of the discipline it imposed
on attorneys who failed to fulfill their professional
responsibilities decreased. In other words, to reduce its
backlog, the State Bar allowed some attorneys whom it
otherwise might have disciplined more severely-or even
disbarred-to continue practicing law, at significant risk to
the public. . . . The chief trial counsel confirmed that she
believes . . . that insufficient quality control was a key
factor that enabled the State Bar to decrease its backlog.
(Id. at 1 (emphasis added).)
As a result of the audit findings, the Legislature, in last
year's dues bill, SB 387 (Jackson), Chap. 537, Stats. 2015,
directed the Bar to develop and implement a workforce plan for
AB 2878
Page 14
its discipline system and to conduct a public sector
compensation and benefits study, including a recommendation for
an appropriate backlog goal and an assessment of staffing needed
to achieve that goal. The workforce plan and the spending plan
are to be submitted to the Legislature by May 15, 2016, and
implemented by December 31, 2016. It is anticipated that this
bill will be amended to address the Bar's discipline system
after those plans are submitted.
Building Purchase: The State Auditor also determined that, when
purchasing a building in Los Angeles in 2012, the Bar did not
perform any cost-benefit analysis to determine if the purchase
was appropriate and warranted before receiving approval from its
Board to purchase the building. The Bar, according to the
Auditor, did not fully inform the Legislature of its plans,
thereby potentially risking public safety by not prioritizing
other areas, such as attorney discipline:
The State Bar of California's ? primary mission is the
protection of the public through its attorney discipline
system. However, the State Bar's financial priorities over
the past six years did not consistently reflect that mission:
Rather than using its financial resources to improve its
attorney discipline system, the State Bar dedicated a
significant portion of its funds to purchase and renovate a
building in Los Angeles in 2012. Although the Legislature
approved $10.3 million for this building, the State Bar
ultimately spent approximately $76.6 million on it.
Facilitating this purchase required the State Bar to transfer
$12 million between its various funds, some of which its Board
of Trustees (board) had set aside for other purposes.
The ultimate responsibility for ensuring that the State Bar
spends funds prudently rests with the board, which should have
ensured that the State Bar's decision to purchase the Los
Angeles building was justified and financially beneficial.
AB 2878
Page 15
However, the State Bar did not fully communicate its
questionable financial decisions regarding this new building
to the board because it never presented its board with
comprehensive cost estimates of purchasing versus leasing a
building. Moreover, only four months before it purchased the
Los Angeles building, the State Bar informed the Legislature
in an annual report that a building would cost $26 million-a
third of the $76.6 million the State Bar ultimately paid. In
addition, the State Bar could offer no evidence that it
informed the Legislature of its final decision to purchase the
Los Angeles building even though state law required it to do
so. As a result, key decision makers and stakeholders lacked
the information necessary to make informed financial decisions
related to the purchase of the Los Angeles building or to
understand its impact on the State Bar's other financial
priorities. (Id. at 43.)
The Auditor thereby found that the decision to purchase the Los
Angles building jeopardized the State Bar's core function to
protect public safety: "Rather than using its financial
resources to improve its attorney discipline system, the State
Bar dedicated a significant portion of its funds to purchase and
renovate a building in Los Angeles in 2012." (Ibid.)
Even more troubling was the fact that the Bar chose to secure
the additional funding for the Los Angeles building, in part,
through a loan that required the Bar to use $4.6 million of its
Public Protection Fund as collateral for the loan. The sole
purpose of the Public Protection Fund, which the Bar itself
established in 2001, was to protect the public in the event of a
financial emergency - and that emergency is generally regarded
as a veto of the Bar's annual dues bill, which has happened
twice in the last 20 years: once in 1997 and most recently in
2009. (SB 1145 (Burton), 1997; SB 641 (Corbett), 2009.)
However, without any notification to its members or the
Legislature, the Bar decided, unilaterally, to tie up over 70
percent of its Public Protection Fund - $4.6 million of the $6.5
AB 2878
Page 16
million fund - for the 15-year life of the loan. The Bar may
not access those Public Protection funds for any reason during
that time, or it will default on the loan for the Los Angeles
building. This completely negates the purpose of the fund -
public protection. If, the Bar Board determined that the Public
Protection Fund is actually not necessary, the Board, in
consultation with the Legislature, could have decided that the
remaining unsecured funds, as well as the $4.5 million that is
securing the Los Angeles building loan after the loan is paid
off, could be used for other purposes, such as improving the
discipline system, reducing the legal services "justice gap" or
refunding unnecessary dues to members.
The use of the Public Protection Fund to secure the loan on the
L.A. building is, according to the State Auditor, part of a
larger pattern in which the Bar transfers money between its
various funds and uses the money on unrelated items. The
Auditor found that, from 2009 through 2012, the Bar made
approximately 50 transfers between funds involving over $64
million. (Id. at 13.) Given the concerns about the Bar's lack
of transparency and accountability, and the resulting potential
risk to public protection, last year's dues bill, SB 387,
directed the Auditor to do an in-depth financial audit of the
Bar, including a review of the Bar's internal controls. As
noted, that report is due by May 15, 2016.
S.F. Building Loan and Restructuring of L.A. Building Loan: In
spite of last year's audit that questioned the cost of the Los
Angeles building and its impact on public protection, and
without waiting for the results of the legislatively-required
discipline workplan due next month (which could show that the
Bar requires significant additional spending to meet its public
protection mandate), the State Bar decided, without input or
approval from the Legislature, to take out a new $10 million
loan for updates and tenant improvements on three floors of its
San Francisco building.
AB 2878
Page 17
In order to use some of the loan as security for repayment, the
Bar, again without consultation with the Legislature, chose to
secure the loan and refinance the original $25 million loan on
the Los Angeles building, discussed above, through a security
interest in future member dues. The loan, secured on future Bar
dues, was entered on March 1, 2016 for a term of ten years.
Before receiving approval from the Board, the Bar requested an
opinion from its staff on the legality of the revenue pledge.
While finding the loan legally permissible, legal staff
appropriately warned the Bar of the following:
Such a pledge, which has the potential to impact the Bar's
regulatory functions, could additionally be deemed
inconsistent with the later adoption of Business & Professions
Code, section 6001.1, which provides that the Bar must place
public protection as its highest priority and additionally
states, "[w]henever the protection of the public is
inconsistent with other interest sought to be promoted, the
protection of the public shall be paramount." . . . [S]uch a
pledge could subject the Bar to criticism on the basis that it
could place funds that govern its core regulatory activities
at what may be deemed to be unnecessary risk.
These risks were not mentioned in the materials presented by the
Bar to its Board when it requested approval for the loan. Nor
was the Board apparently provided with a cost-benefit analysis
that included both a recommended course of action and
alternatives, as the Bar's list of accomplishments states is
required, beginning July, 2015, for all expenditures reasonably
expected to exceed $2 million. Clearly, this loan met that $2
million threshold. Moreover, the decision to proceed with the
loan came less than one year after the State Auditor questioned
the Bar's decision to purchase the Los Angeles building on the
basis that the Bar had not considered whether the resources to
repay the loan might be better spent on improving the Bar's
AB 2878
Page 18
discipline system.
Even more troubling, Business & Professions Code Section 6008.5
provides that whenever the Board secures a Bar obligation with
all or any portion of the fees from membership dues, the
Legislature may not, until the obligation is repaid in full,
reduce membership dues below the maximum amount in effect when
the obligation was created, providing a covenant to the holder
of the obligation. Thus, at least on its face, this statute,
which has been on the books since 1957, appears to provide that,
as a result of the loan, the Legislature cannot lower Bar dues
by even a single penny. The annual legislative setting of the
amount of the Bar's dues is the Legislature's chief mechanism
for oversight of the Bar. Without the ability to annually
establish Bar fees, including the ability to lower fees, the
Legislature would lose a key oversight tool to ensure that the
Bar is properly carrying out its mission and protecting the
public. It appears that this issue was never presented to the
Board when it approved of the loan. Nor was there apparently
any consultation with the Legislature before restricting future
legislative authority.
It is highly unlikely that this statute, the policy merits of
which are questionable, was ever constitutional. A legislature
cannot restrict the powers of a subsequent legislature by
enacting a statute that appears to be nonrepealable. (County
Mobilehome Positive Action Committee v. County of San Diego
(1998) 62 Cal. App. 4th 727, 734.) "An act of one legislature
is not binding upon, and does not tie the hands of future
legislatures [citations omitted]." (Ibid.) This provision may
also run afoul of the constitutional prohibition against
delegation of legislative power, which prevents the Legislature
from, among other things, delegating rate setting ability to
members of the industry that is regulated. (See State Bd. of
Dry Cleaners v. Thrift-D-Lux Cleaners (1953) 40 C.2d 436, 447.)
This statute appears to delegate to the Bar, should it choose to
secure a loan with future dues, the ability to fix the minimum
AB 2878
Page 19
price of future dues for as long of a loan period as the Bar
chooses.
At the request of the chairs of this Committee and the Senate
Judiciary Committee, the Bar and the lender have agreed to
restructure the loan so that it is no longer secured by future
member dues. However, until the loan is repaid in full, the
obligation still exists and still reduces the amount of Bar's
resources available to protect the public. This bill, quite
appropriately, therefore eliminates this anachronistic statute
and, with it, the Bar's ability to lock in a dues rate for
years, even if the Bar has no need for the funding generated by
those dues.
Firing of Executive Director and Ensuing Litigation/Arbitration:
In November 2014, the State Bar terminated its then-executive
director, Joe Dunn. In response to that termination, the
executive director filed suit against the State Bar, alleging
whistleblower status and charging the bar with engaging in
"egregious" fiscal improprieties. Bar officials reportedly
responded with accusations against him, including criticism of
his lavish expense accounts.
After spending months litigating the matter, the court ordered
the parties to arbitrate their dispute, as required in the
executive director's employment contract. The arbitration,
which has apparently been open to the public, included release
of the $359,000 internal investigation of the former executive
director in 2014, which concluded that although "certain other
deficiencies in Dunn's performance would warrant counseling or
reprimand only (such as his inattention to proper allocation of
expenses between mandatory and voluntary fees), Dunn's repeated
failure to provide adequate or truthful information to the Board
plainly provides an adequate basis to terminate his at will
employment." (Mark Helm and Bart Williams, Independent
Investigation for the State Bar of California: Summary of
Findings and Recommendations, p.27-28 (Munger Tolles Report).)
AB 2878
Page 20
Just this month, the arbitrator dismissed all of the former
executive director's claims against the Bar and its Board, its
prior president, and a former attorney to the California Supreme
Court Chief Justice, with leave to amend some of those claims.
Mr. Dunn has until May 1, 2016 to amend those claims.
Additional Firings and Ensuing Litigation: In and around the
time of the firing of the executive director, the Bar also fired
its general counsel, who was hired by the executive director, as
well as the Bar's chief financial officer, and an administrative
specialist, who brought a $15 million wrongful termination suit
against the Bar this past February. At roughly the same time,
the Bar laid off its public information officer. On February
25, 2016, the Public Employment Relations Board issued a
complaint against the Bar for that termination, alleging the Bar
fired the public information officer as retaliation for his
filing a grievance against the organization. This past winter,
the Bar fired its managing director of investigations after he
filed a whistleblower complaint against the Chief Trial Counsel.
While it is difficult to determine what precisely occurred in
each of these cases and whether any of the firings were
justified, the number and frequency of these incidents does
raise concerns about management at the State Bar. And according
to media reports, the State Bar had spent over $530,000 on
attorney's fees for the wrongful termination litigation of its
former executive director and the others (as of February 2016),
of which less than $400,000 was covered by insurance. (Lyle
Moran, State Bar spent $413K investigating Dunn, leak of report,
Daily Journal (Feb. 24, 2016).) It is reasonable to assume that
those figures have risen substantially since then.
Ongoing Concerns About the Chief Trial Counsel, Still Awaiting
Senate Confirmation: The Bar's chief trial counsel, Jayne Kim,
has also been the subject of controversy. She filed an internal
complaint against the former-executive director, which
AB 2878
Page 21
ultimately led to his firing. Last October, her subordinate
employees in the Office of Chief Trial Counsel, members of SEIU,
issued a 76 percent "no confidence" vote in her leadership,
alleging that she misled the Board, grossly mismanaged her
office, and failed to protect the public. Despite that vote,
the Board on December 21, 2016, at the recommendation of current
executive director Elizabeth Parker, voted 14-1 to seek another
term for the chief trial counsel, although Ms. Parker did
promise to address concerns regarding her management style. The
additional term requires Senate approval. The Senate has yet to
hold hearings on her re-appointment. In the meantime, she
continues to serve in the position.
Troubling Expenses Cause Bar to Finally Cut its Travel and
Catering Budget: This Committee has long raised concerns with
the Bar's expenses for travel, business expenses and other
special allowances, when limited dues funds are required by law
to first and foremost support public protection and the
discipline system; non-dues funds could go to support woefully
underfunded legal services programs or potentially to reduce
mandatory bar dues. According to a media report from earlier
this year, likely based on a public records request, the Bar had
a number of questionable expenses and exercised limited
oversight of how Bar members' funds were spent:
In late January 2014, a group of six executives and trustees
from the State Bar of California embarked on a mission to
protect the public from unscrupulous lawyers-by traveling to
El Salvador.
While there, the bar president, the executive director and a
bar employee classified as a public information officer signed
an "accord" with the nation's foreign affairs minister
AB 2878
Page 22
pledging to work together to educate Salvadorans living in
California about available legal resources. The two-page
agreement carried no legal weight; it's unclear if the
American signatories had any authority to sign an
international pact anyway.
Outside the signing ceremony, the trip was unremarkable-except
for the costs. Expenses for hotel rooms, airfare, meals, a
driver's services and cellphone bills submitted to the bar by
just four of the travelers-the only ones readily accessed
through the bar's convoluted accounting system-totaled more
than $6,600.
This international trip was not an isolated occurrence.
Between 2013 and 2014, bar executives led by then-CEO Joe Dunn
and, occasionally, trustees submitted thousands of dollars in
expenses associated with trips to El Salvador, Mexico,
Guatemala, Nicaragua, Peru and Mongolia, according to
documents compiled by The Recorder.
The trips were paid out of bar funds. Just how much the costs
for these trips added up to is difficult to say. The bar does
not code expense reports by foreign trips, so determining who
went where when and for how much requires some guesswork and
manual calculations. For years, the bar refused to make
public such records, arguing that the quasi-judicial agency
was not subject to state sunshine-in-government laws. . . .
Hundreds of pages of bar records reveal numerous expenses and
activities that appear to have a tenuous connection to the
agency's mission of pursuing bad lawyers and protecting the
AB 2878
Page 23
public-the California public, at least. (Cheryl Miller, Joe
Dunn, Bar Officials Spent Freely on Foreign Travel, The
Recorder (Jan. 25, 2016).)
More recently, the Bar asserts that it has begun to reduce
unnecessary spending. The 2016 budget reduces spending on
travel by 29 percent, from $3.4 million to $2.4 million, and on
catering by 24 percent, from $2.1 million to $1.6 million.
These line items were reduced because, according to Chief
Operating Officer Leah Wilson, these "were areas of
"extraordinary costs' for the bar." (Lyle Moran, State bar cuts
annual budget by 6 percent, Daily Journal (Feb. 2, 2016).) It
is worth noting that, prior to seeking a financial audit by the
State Auditor last year, Committee staff had asked the Bar for,
among other things, information on Bar travel outside the
country and was informed (incorrectly, as is now clear) that the
only such trip was to Mongolia.
Legislative Oversight Role: While the above events and reported
claims and allegations may be fully understood, enough is known
about them to trigger legislative and public concern about how
the Bar is governed and overseen, particularly given that public
protection is required to be the Bar's paramount duty.
Nevertheless, at least one member of the Board has remarkably
and ironically questioned whether the Legislature should have
oversight over the Bar. According to media reports, the
Governance in the Public Interest Task Force has asked to be
provided with "any cases in other states touching on the
propriety of a Legislature setting licensing fees for lawyers or
reviewing the appointment of a chief trial counsel." (Lyle
Moran, State Bar panel may review legislative oversight of
agency, Daily Journal (Feb. 29, 2016).) The current Bar
President is reported to have said that the final Governance
Task Force report "could include recommendations pertaining to
lawmakers' oversight of the agency. 'It is an issue,' he said
in an interview." (Ibid.)
AB 2878
Page 24
Given the reported mismanagement by this state agency, it would
certainly appear that greater oversight, and possible reform, of
the State Bar is needed and that a call by some trustees for
less oversight under such circumstances indicates reason to
question whether the Bar can fully carry out its paramount duty
to protect the public.
Can the Bar's Board of Trustees Continue to Oversee Attorneys
When the Vast Majority of Board Members Are Practicing
Attorneys? Under earlier governance reforms enacted by the
Legislature in 2011 in an effort to begin to address significant
concerns about the Bar's governance (SB 163 (Evans), Chap. 417,
Stats. 2011), the State Bar is governed by a Board of Trustees,
made up of 19 members, down from 23 in 2011 (though the Board
President may remain on the Board for one year after his or her
term is completed and be the 20th member, as is the case today),
with a substantial component of attorney members selected by the
Supreme Court. (Section 6010 et seq.) Under that legislation,
due to Bar insistence, the Legislature agreed to allow the Bar
to retain a supermajority majority of lawyer-members, or active
market participants, following assurances from the Bar that the
increased percentage of public members would completely address
prior Board governance problems. Thus, of the current 20
possible members, 14 are lawyer members -- 6 of whom are elected
by bar members in districts across the state -- and 6 are public
members. Currently, there are two vacant public member seats,
both of which are gubernatorial appointees, so the Board is
currently composed of 18 members, 14 of whom are active members
of the State Bar and 4 of whom are public members.
A recent U.S. Supreme Court case, which found that if a state
licensing board has a majority of members who are active market
participants then the board can only invoke antitrust immunity
if it is subject to active state supervision, has raised serious
questions about the Bar's immunity from federal antitrust laws.
In that case, North Carolina State Board of Dental Examiners v.
Federal Trade Commission (2015) 135 S. Ct. 1101, the Supreme
AB 2878
Page 25
Court held, in a 6-3 decision, that the North Carolina Dental
Board (composed of eight members, six of whom were practicing
dentists) did not have state immunity to an antitrust action
brought by the Federal Trade Commission to stop the dental board
from preventing non-dentists from offering teeth whitening
services. The Court held that the dental board, since it was
controlled by "market participants" who pose a risk of
self-dealing, could only invoke state immunity to an antitrust
action if the board is "actively supervised" by state officials.
It is important to note that 75 percent of the North Carolina
dental board members were active dentists, while currently fully
78 percent of the State Bar Board is composed of active Bar
members. Even when all public members are appointed, the Bar's
Board will still be composed of a supermajority of active Bar
members - 68 to 70 percent (depending on whether the Board has
19 or 20 members) active Bar members.
To better understand if the Bar (and hence the State) might be
subject to antitrust liability in its current configuration,
this Committee asked Legislative Counsel for its opinion as to
the risk of liability after the North Carolina State Board of
Dental Examiners decision. Legislative Counsel opined that the
Bar is indeed controlled by active market participants and, if
the Bar is found to be in violation of antitrust laws by not
being actively supervised by state officials, the State would
generally be responsible for defending the Bar and paying any
judgments against the Bar or its employees (including not only
fines and treble damages, but also imprisonment for up to 10
years for individual board members). (Ops. Cal. Legis. Counsel,
No. 1602135, State Bar of California: State-Action Immunity, pp.
5, 13 (April 18, 2016).) What is less clear is what is required
for "active state supervision." Legislative Counsel opines
"that a court would analyze the presence of active supervision
on a case-by-case basis . . . [I]t is our opinion that an
anticompetitive action of the State Bar would be actively
supervised by the state for purposes of state-action immunity if
the California Supreme Court retains strict supervisory powers
and ultimate full authority over the State Bar's actions by
AB 2878
Page 26
laying out specific rules and serving as the ultimate decision
maker." (Id. at 9 (citations omitted).)
Thus, as long as the Bar's Board of Trustees is controlled by
active market participants, as it is today, there will be a
significant risk that the State could be subject to liability
for the Board's actions.
The Center for Public Interest Law (CPIL), which opposes this
bill unless amended, believes that the best course of action is
for the Board to be restructured in order to eliminate active
market participant control: "The simplest way to avoid
antitrust liability (and ensure the interest of the public is
properly considered) in light of North Carolina is to convert
the Board of Trustees' composition to a supermajority of public
members, with the added provision that no vote may be taken
where those voting are not public members in the majority."
(CPIL adds that, at a minimum, the Legislature should eliminate
the six elected positions.) However, if the Board is not
restructured to eliminate the Board's active market participant
supermajority, CPIL writes that the Legislature must establish
true active state supervision, which does not exist today:
The term "active" is critical. It cannot be simply the
presence of a supervening entity. The fact there is a state
Supreme Court at the zenith of the organizational chart does
not provide compliance. . . .
At present, neither the California Supreme Court, nor any
other entity, provides the requisite independent and "active"
supervision for anticompetitive effect as required by North
Carolina. This Legislature should add to this bill the clear
authority of the California Supreme Court to engage in "active
state supervision" of the Bar, and any part of it controlled
by "active market participants" in the profession, as
AB 2878
Page 27
commanded by the U.S. Supreme Court. That authority should
include the power and resources to fashion, in its own manner,
a system for filtering decisions to focus on those with
anticompetitive effect; and, for those, to examine their
substantive anticompetitive effect and alternatives, using
relevant economic, antitrust, and other expertise separate
from practicing attorneys.
Given all of the oversight, governance and management concerns
that continue to be raised about the State Bar, as well as the
possibility of antitrust liability, can the Bar effectively
continue to be both a government regulatory agency and a trade
association? Since its inception, the Bar has worn two hats --
regulatory agency and professional trade association.
California, like 31 other states, including Florida, Idaho,
Louisiana, Michigan, Mississippi and Texas, has a unified bar,
which means that the State Bar is both the regulatory arm of the
state, as well as a mandatory attorney trade association.
Attorneys who wish to practice law in this State must join the
Bar and their dues cover both the regulatory arm and the trade
association. This arrangement is unique among professions
licensed by the State of California. For all other professions,
the government entity regulates the profession and disciplines
wayward practitioners, while a private trade association
provides education and advocacy for members of the profession.
(See for example, physicians, who are licensed and regulated by
the Medical Board of California within the Department of
Consumer Affairs, but who may voluntarily join the California
Medical Association, their trade group, which provides
"legislative, legal, regulatory, economic and social advocacy."
(http://www.cmanet.org/about/).)
Eighteen states, generally including larger states such as
Colorado, Illinois, Massachusetts, Minnesota, New Jersey, New
York, Ohio and Pennsylvania, have non-unified bars. In those
states, attorneys are only required to join the regulatory arm
of the bar and not the trade association. These states have
AB 2878
Page 28
private trade associations, but those associations are not
regulated by the state. Private bar associations are free to
govern themselves as they see fit and are not subject to
government oversight or transparency laws. Dues payments
required by unified bars are, typically, considerably higher
that dues payments required by non-unified bars. According to
data from the State Bar, approximately 52 percent of active,
resident attorneys are members of voluntary trade associations,
although there is a range (Colorado - 84%; Illinois - 47%;
Massachusetts - 25%; Minnesota - 61%; New Jersey - 44%; New York
- 43%; Ohio - 58%; and Pennsylvania - 57%). If California were
to have a voluntary bar and follow the average of the large
states listed above, nearly 100,000 California active members
would potentially join a voluntary bar association.
Governance in the Public Interest Task Force to Consider
De-Coupling: The Bar's Governance in the Public Interest Task
Force, created as part of the legislative reforms of SB 163 in
2011, is required to report to the Supreme Court, the Governor
and the Assembly and Senate Judiciary Committees by May 15,
2014, and every three years thereafter, its recommendations for
enhancing public protection and ensuring that public protection
is the State Bar's highest priority. (Section 6001.2.) The
task force has yet to submit its first report, but is now
reported to be doing so and expected to complete by July of this
year. Among other issues, the task force is considering whether
the Bar should separate into a government entity charged with
regulating attorneys and a private trade association.
Several Bar Trustees, Most Notably two Legislative Appointees,
and at Least One Bar Section Are Publically Calling for
De-Unification or De-Coupling as a Solution to Long-Term,
Structural Problems with the Bar: Three current and one former
Bar Board trustee write to support the annual dues assessment,
but to request "substantial amendments to address systemic
weaknesses in bar governance." These trustees (two of whom are
legislative appointees to the Board) first note that the Bar's
AB 2878
Page 29
current controversies are part of a "long history of cyclical
crisis, reform, neglect, and renewed crisis":
Nearly every Executive Director of the State Bar over the past
few decades has ended his or her service in controversy. Each
is replaced by a new leader, charged to be "a new sheriff in
town." A show of effort at change is made; the attention of
the press, bar and public turn elsewhere; and the Bar slides
back into mismanagement, failure to protect Californians, and
general dysfunction until a new controversy soon restarts the
cycle. This systemic dysfunction derives from the dual
mission of the Bar and its short-term, diffuse, volunteer
leadership.
The trustees go on to note that unlike "every other profession
in our State and unlike an apparent trend in sister states of
comparable size and diversity toward decoupling legal regulatory
and professional organizations, California attorneys have been
granted the privilege of self-regulation." That self-regulation
has resulted in allegations, according to the trustees, that
"the Bar more vigorously prosecutes attorneys with less money
and influence" which have "never been seriously addressed.
These tend to be solo practitioners, small-town lawyers, and
lawyers of color. The Bar can and should assure Californians
that the justice it dispenses is even-handed as well as
efficient."
These trustees state that their years of service reveal the
Board to be "a distracted regulator. It spends much of its
energy on professional association matters such as appointments
of attorneys to positions of prestige, providing continuing
legal education in competition with voluntary bars and
for-profit providers while also regulating those providers,
conducting an annual conference that draws fewer attendees and
requires greater subsidy each year, publishing legal content,
selling insurance, etc. . . . Over the past two years, the
AB 2878
Page 30
Board has spent far more time in closed session addressing
personnel, litigation and real estate issues than it has devoted
in open session to regulation."
The trustees argue that based on antitrust concerns after the
North Carolina case, California should follow several of the
largest states that have separate judicial branch regulation of
attorneys and "thriving voluntary State Bar Associations." They
argue that this will allow a statewide professional association
to advocate more effectively for a well-funded judiciary and for
legal services than "a state agency hemmed in by the most
conservative perspective on what and how it can advocate." They
further argue that Proposition 209's "prohibition on
state-funded affirmative action has hampered the Bar's ability
to advocate for diversity in the profession and for full and
fair access to justice for communities of color."
Their proposal involves a three-year process, led by the Bar,
with input from the Supreme Court and the Governor, to first
study the issue and determine which Bar functions "belong in
government and which can be more effectively performed by a
private entity" and then make recommendations to the Legislature
at the end of 2017 for 2018 restructuring legislation. The
Legislature should explicitly mandate, state the trustees, that
there be no job losses from the separation, especially since the
regulatory functions are currently understaffed, and that there
be a larger role for the Supreme Court. These proponents of
restructure see the end result as creating "a more effective
regulator of legal services to Californians and a more potent
and less costly professional association for lawyers." The
trustee group's proposal is also supported by the Executive
Committee of the Business Law Section of the State Bar.
The California Lawyers Guild, a statewide voluntary bar
association, newly formed by former leaders of the Business Law
Section of the State Bar, also support de-unification:
AB 2878
Page 31
We believe that the attention currently focused on the State
Bar offers all relevant constituencies - and particularly the
Legislature - an opportunity to reflect on and revisit the
manner in which the State Bar and its Sections are organized,
and specifically to conclude that each organization would be
stronger and more focused were they to be separated. . .
.[W]e believe that the continued operation of the Sections
under the umbrella of the State Bar is neither sustainable nor
advisable. The strictures placed on lawyers (who are not
compensated at all) for providing hundreds, often thousands,
of hours giving back to the practice of law are wholly
inappropriate, especially given that the work of these
volunteers has nothing to do with why the State Bar is in
crisis. . . . Given the problems that have festered and grown
over time, we can no longer envision a paradigm in which the
Sections and their Standing Committees are forced to have
their functions degraded by strictures appropriate only for a
governmental agency.
The Center for Public Interest Law likewise supports
de-unification, arguing that the "State Bar must - once and for
all - sever off its trade association functions and engage only
in regulatory agency activities which may be funded with
compulsory Bar dues." CPIL even sets out its recommendations as
to how the Bar's current functions should be divided:
CPIL believes that the following regulatory agency functions
may properly stay with the State Bar (which can continue to be
housed in the judicial branch of state government) and may be
lawfully funded with compulsory licensing fees: (1) licensing
of attorneys; its legal specialization program; (3) adoption
of ethical standards for the legal profession; (4) attorney
discipline; (5) administration of the Client Security Fund;
and (6) access to justice activities, including IOLTA funding
of legal services for the poor and the Commission on Access to
AB 2878
Page 32
Justice. The following "trade association" activities should
be severed off: (1) the sections; (2) lobbying and legislative
activity on issues unrelated to the regulation of the legal
profession and/or improving access to the justice system; (3)
the annual meeting; (4) insurance programs and services; (5)
the regulation of legal referral services; and (6) continuing
legal education. (To the extent continuing legal education
assures competence, particularly if subject to testing in
areas of actual practice, it may also serve a regulatory
function.)
Other Individuals, Sections Disagree: Other individuals and Bar
sections vehemently disagree with separating the Bar. The
Executive Committees of the Family Law and Trusts & Estates
Sections of the State Bar have voted overwhelmingly in support
of the Bar remaining unified. These sections argue that the
geographic and practice diversities of their statewide
organizations provide for the broadest and most objective
possible representation that could well be lost if the sections
become part of a private trade organization, particularly if
over time membership drops. They are concerned that the
well-respected educational materials they prepare and disperse
would end up becoming glossy trade magazines used more for
marketing than educating other professionals and the public on
matters of significant. They believe that remaining part of the
regulatory agency allows them to stay within their purview and
be perceived by the Legislature as unbiased and objective
experts in their respective fields. A trade association, they
argue, would not have the clout that the State Bar has today.
The Executive Director of UC Berkeley School of Law's California
Constitution Center, along with two associates, also oppose any
rush to de-unify the Bar. In an op-ed published in the Daily
Journal these experts first note that the Governance in the
Public Interest Task Force is now looking at this issue and
should be given a chance to complete its study. Second, they
argue that the motivation for quicker action -- the Bar's
AB 2878
Page 33
ongoing crises -- has been negated by the Bar's new leadership
team and an arbitrator's demurrer to all the former's executive
director's claims against the Bar. They are concerned that the
trustees' proposal discussed above, which leaves the regulatory
system in the judicial branch, but suggests that the Governor
and the Legislature appoint more Board trustees than the Supreme
Court, could raise separation of powers issues and could be
unconstitutional. They write that because "the admission and
discipline of attorneys is a core judicial branch power, the
judiciary is the ultimate authority over regulating the practice
of law in California. The core judicial power over officers of
the court is subject to only reasonable legislative regulation.
At some point 'regulation' becomes 'destruction' and
unconstitutionally invades the judiciary's power." (David
Carrillo et al, Why the rush to dissolve the bar?, Daily Journal
(April 13, 2016).) They go on to argue that, rather than
enhancing public protection, de-unification will actually harm
the public:
Returning to the question of motivation, consider this: who
benefits? It is clear who will not benefit: the public.
Proponents of the proposal have justified it by comparing it
favorably to regulatory schemes for other professions and the
bar[s] in other states. There are some superficial
similarities between this profession and others - medicine,
for example. But the law is unique, and the bar's work is
crucial to our government and to society itself. Although
doctors perform an important public service (saving lives),
that is substantively distinct from the public role the bar
plays: maintaining the integrity of the legal system and
ensuring access to justice. For example, the bar has a major
role in vetting judicial candidates. Will the new entity have
the resources to continue operating the Judicial Nominees
Evaluation Commission? And if some other states regulate
their bars differently, so what? California should take pride
in doing things differently - and better. (Id.)
AB 2878
Page 34
While the issue of de-unification has been debated for years, it
is clear that there is a renewed and growing interest in it as a
possible solution to some of the most troubling issues impacting
the Bar today and it warrants further consideration by all
stakeholders.
This Bill Does Not Increase Modest Assistance to Legal Aid
Organizations, Although Much More is Needed to Begin to Close
the "Justice Gap." As this Committee has highlighted for many
years, there has long been a dire need for civil legal services
for poor Californians - especially underserved groups, such as
elderly, disabled, children and people needing assistance with
English. By many measures, California suffers from an
overwhelming "justice gap" between the legal needs of low-income
people and the legal help they receive. It has been estimated
that the cost of closing the gap would amount to $400 million.
Even in the best of times, legal aid providers have been able to
address only a fraction of the demand for help. Because of
insufficient resources, legal services programs can offer
assistance in only a few types of cases; many poor and
moderate-income Californians do not qualify for services; and
most of those who meet the strict eligibility limits and seek
assistance regarding problems for which a legal services office
provides service are nevertheless turned away, simply for lack
of staff. Even those who receive services are frequently
under-served with brief advice and consultation, rather than
full and fair representation.
As this Committee knows well, for over 30 years, interest on
lawyer trust accounts (IOLTA) has been the primary mechanism on
which the State has relied to fund legal aid programs. It seems
likely that when the IOLTA program was instituted in 1981, no
one anticipated that bank interest rates would be virtually
zero, as the federal funds rate has been since the 2009-10 IOLTA
grant cycle. The historic plunge in interest rates continues to
pose an unprecedented challenge to the premise that legal aid
programs can rely on IOLTA funding to help maintain their
AB 2878
Page 35
essential mission. Absent a substantial increase in interest
rates, which may be undesirable in macro-economic terms, it has
become painfully clear that IOLTA alone will never adequately
address the needs of those less fortunate who require legal
assistance.
As this Committee has frequently discussed and sought to
ameliorate, funding for legal aid organizations that provide
essential legal help for extremely impoverished individuals has
been decimated in recent years. The Legislature has for years
worked with the Bar to come up with alternative funding sources,
in the past using non-mandatory dues, but that sunsetted several
years ago diminishing state funding for legal aid even further,
despite significantly greater needs for legal services by those
who cannot afford them, and dramatically lower funding from
other sources. Current law provides an optional legal aid fee
by which members who choose to do so can help defray the cost of
ensuring that legal services are available without regard to
ability to pay market rates, consistently with each lawyer's
professional responsibility, at the rate of $40. These
voluntary contributions make up for some, but by no means all,
of those lost non-mandatory contributions. Unfortunately, this
year's bill does not provide any new funding for legal services
programs.
The Bar's leadership has, in the past, stated its commitment to
this Committee to find other non-mandatory sources of funds as
soon as possible to not just bridge this continuing crisis but
to try finally to overcome it. A resolution adopted by the
State Bar last May details the funding crisis in legal services
and finds that "due to inadequate funding legal services must
turn away eligible clients who are left to navigate complex
legal situations on their own - and risk losing their families,
homes and livelihoods in the process." The resolution ends with
the Bar and its Board supporting "increased stable funding for
legal services through an increased Equal Access Fund [limited
state General Fund support of legal services] and otherwise to
AB 2878
Page 36
provide critically needed legal help to low-income and
vulnerable residents of California." It is hoped that going
forward, and in addition to a vitally needed increase in the
Equal Access Fund itself, the Bar and its Board will be able to
find additional, ongoing funding for legal services from the
Bar's unrestricted sources of funding, funding that today may be
used for discretionary expenses, including travel, catering, the
annual meeting fund and other nonessential and non-public
protection funds, that might be better invested in helping
California's most vulnerable residents who seek legal assistance
to avoid, among other things, domestic violence, unemployment
and homelessness.
ARGUMENTS IN OPPOSITION: CPIL opposes this bill, unless it is
amended to make the changes discussed above regarding
restructuring the Bar. In addition, CPIL proposes the following
changes:
Eliminate the attorney elections that today select six
of the Board trustees, so the trustees are "selected by
public officials, not by professional colleagues."
Subject the Bar to an independent monitor: "It is in
the best interest of the Bar - and the public - to hire an
independent expert (outside of the politics, lawsuits,
union votes, and finger pointing) who can study the
disciplinary system as it exists today, and make
recommendations to strengthen it, make it more efficient,
ensure public protection, and ensure accurate reporting to
the Legislature."
Improve access to justice by implementing or seeking
approval to implement recommendations in the Bar's Civil
Justice Strategies Task Force and develop a statewide law
school loan repayment program for lawyers who serve
underrepresented communities.
AB 2878
Page 37
Fine-tune application of the California Public Records
Act so that law schools can receive notification whether
their students passed or failed the Bar exam.
REGISTERED SUPPORT / OPPOSITION:
Support
Bar Trustee Dennis Mangers (if amended)
Bar Trustee Joanna Mendoza (if amended)
Bar Trustee Glenda Corcoran (if amended)
California Lawyer Guild
Former Bar Trustee Heather Linn Rosing (if amended)
Opposition
Center for Public Interest Law (unless amended)
AB 2878
Page 38
Analysis Prepared by:Leora Gershenzon / JUD. / (916) 319-2334