BILL ANALYSIS Ó
AB 2878
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ASSEMBLY THIRD READING
AB
2878 (Committee on Judiciary)
As Amended May 27, 2016
Majority vote
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+---------------------|
|Judiciary |10-0 |Mark Stone, Wagner, | |
| | |Alejo, Chau, Chiu, | |
| | |Gallagher, | |
| | | | |
| | | | |
| | |Cristina Garcia, | |
| | |Holden, Maienschein, | |
| | |Ting | |
| | | | |
| | | | |
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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.
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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)Eliminates the State Bar's ability to create foundations or
non-profit corporations as a means to raise additional
revenue.
4)Eliminates the six elected State Bar Board of Trustees
members, and reduces the membership of the State Bar Board of
Trustees from 19 members to 13 members. States the intent of
the Legislature that this reduction of members occur through
the expiration of the terms of the elected members who are
serving as of December 31, 2016.
5)Requires that each Board of Trustees member appointed after
December 31, 2016 have demonstrated expertise in at least one
of the following:
a) Public finance;
b) Public administration;
c) Business or financial management;
d) State government, particularly prior regulatory
experience; and
e) Legal ethics.
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6)Eliminates certain State Bar exceptions to the Bagley-Keene
Open Meeting Act, and adds an exception from both the
Bagley-Keene Open Meeting Act and the California Public
Records Act for the State Bar Court. Provides that access to
records of the State Bar Court shall be governed by the laws
applicable to the records of the judiciary.
7)Provides several exceptions to confidentiality of State Bar
admission applications and records, including the names of
applicants who passed the Bar examination.
8)Requires the State Bar to conduct an analysis of the funds
necessary to timely satisfy claims against the Client Security
Fund (CSF), including possible additional efforts to increase
collection from responsible attorneys, a review of other
non-public protection expenditures, including executive
salaries and benefits, that can be redirected to better fund
the CSF, and after exhausting all other options, whether a
dues increase is necessary to ensure timely payment of claims
against the CSF. The report is due to the Legislature by
March 15, 2017.
9)Makes various findings concerning events at the State Bar and
states the intent of the Legislature that this bill serves 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
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set by the State Bar's Board of Trustees (Board) to pay for
discipline and other functions to be ratified by the
Legislature. (Business and 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
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
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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
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,
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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).)
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: None
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's bar dues bill required the State 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), Chapter 537, Statutes of 2015.)
Also 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. That
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audit, The State Bar of California: Its Lack of Transparency
Has Undermined its Communications with Decision Makers and
Stakeholders (May 2016), found that the State Bar's financial
reports "contained errors and lacked transparency;" in the
absence of oversight, the State Bar has made "questionable or
inappropriate financial decisions;" it has failed to take steps
to minimize a years' long backlog in compensating victims of
dishonest lawyers; and it provides executives with
"significantly more generous salaries and benefits than other
executives in comparable positions in state government." (Id.
at 1-3.)
This bill comes to this Committee after yet another year of
extensive and publically reported turmoil involving the State
Bar, some of which has come to light because of new open
government laws. Given the ongoing turmoil at the State Bar and
the Legislature's very strong desire to make this state agency,
once and for all, an effective regulator of attorneys and
protector of the public, the Legislature has two options:
Continue to attempt to micromanage the State Bar through ongoing
studies, reports and ever tightening legislative oversight, or
fundamentally reform the structure of the State Bar so that it
runs much more effectively and efficiently with protection of
the public as its one clear directive.
At this point, this bill authorizes the State Bar to collect
active membership dues of up to $390 for 2017, the same rate as
this year. The State 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 State 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 State Bar currently
has complete discretion over how funds from this latter
activity, which amount to approximately $2 million per year, are
used. The State 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.
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The bill also eliminates an anachronistic 1950's era statute
that prohibits future Legislatures, if the State 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 State 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 State Bar
which is needed to ensure that public protection is and remains
the paramount concern of the State Bar. Therefore, this bill
rightly deletes that provision.
As recently amended, this bill seeks to improve governance of
the State Bar by eliminating the six Board of Trustee elected
member position, reducing the Board from 19 members to 13
members as the terms of existing elected members expire. This
bill also requires that new Board members, appointed after
December 31, 2016, demonstrate oversight in public
administration, financial management or regulatory oversight.
The latest amendments also implement some of the recommendations
of the State Auditor from the most recent audit and make some
minor changes in the transparency laws passed last year.
However, even as recently amended, this bill, does not fully
address critical governance or oversight issues, including
whether the Board of Trustees, which is comprised of a
supermajority of active market participants, can legally
regulate attorneys and still avoid antitrust liability. Nor
does it address whether the State Bar's primary regulatory and
public protection functions should be de-coupled from its
professional association functions, as some, including current
State Bar trustees, have suggested. These additional issues
should be considered along with the State Bar's Governance in
the Public Interest Task Force report, which was due May 15,
2014, and which is supposed to offer its recommendations for
enhancing public protection and ensuring that public protection
is the State Bar's highest priority. It is anticipated that
further, significant amendments are necessary to overcome the
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State Bar's ongoing and long-standing governance and oversight
shortfalls.
Analysis Prepared by:
Leora Gershenzon / JUD. / (916) 319-2334 FN:
0003074