BILL ANALYSIS Ó
SB 387
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Date of Hearing: July 14, 2015
ASSEMBLY COMMITTEE ON JUDICIARY
Mark Stone, Chair
SB
387 (Jackson) - As Introduced February 24, 2015
As Proposed to be Amended
SENATE VOTE: 38-0
SUBJECT: STATE BAR DUES: ANNUAL AUTHORIZATION OF MEMBER DUES
AND AUDIT RESPONSE
KEY ISSUES:
1)SHOULD THE LEGISLATURE AUTHORIZE THE STATE BAR TO assess
MEMBERSHIP dues for active bar members in 2016 AT $390, THE
SAME RATE AS LAST YEAR?
2)as part of ITS annual oversight process, AND IN LIGHT OF THE
MOST RECENT FINDINGS OF CONCERN IN THE LATEST AUDIT OF THE BAR
by the state auditor, should the legislature AND THE BAR
consider additional measures to further strengthen bar
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procedures, accountability openness, AND GOVERNANCE CONSISTENT
WITH THE BAR'S PARAMOUNT DUTY TO PROTECT THE PUBLIC?
SYNOPSIS
This bill, sponsored by the State Bar of California, continues
the long tradition of Judiciary Committee oversight of the Bar
via review of the annual dues authorization bill. The bill
comes to this Committee after yet another year of turmoil
involving the Bar where many troubling issues have arisen in the
press and in an audit released just last month by the State
Auditor. First, in November 2014, the State Bar terminated its
executive director. In response to that termination, the
executive director filed suit against the State Bar, alleging
whistleblower status and charging the bar with "egregious"
fiscal improprieties. The two sides are now in arbitration.
Then, just last month, the State Auditor released her biannual
performance audit of the Bar, reviewing the Bar's discipline
process, specifically its backlog of discipline cases, and the
Bar's recent $75 million purchase and renovation of a building
in Los Angeles, which the Legislature had been told would cost
just one-third of that price: $26 million. The audit uncovered
significant, questionable decisions made by the Bar in the
handling of both matters, the most egregious of which appears to
be the Bar's decision to secure the additional funding for the
building, in part, through a loan that required the Bar to use
$4.6 million of its Public Protection Fund -constituting most of
that fund - as collateral for the loan. The sole purpose of the
Public Protection Fund, according to the Bar, which established
the fund, is to protect the public in the event of a financial
emergency. However, because of the collateralization of those
funds, they will not be available in case of financial emergency
for the next 15 years.
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This bill maintains the bar dues at the same level that is now
in place for 2015. As proposed to be amended, the bill also
implements many of the recommendations from the most recent
audit by the State Auditor, including better defining the
backlog of discipline cases, requiring the Bar to complete a
workforce plan for its discipline system, and requiring the Bar
to develop a reasonable spending plan based on its necessary
operations. As a result of the fiscal concerns discussed above,
the bill, as proposed to be amended, also requires the State
Auditor to complete an in-depth financial review of the Bar,
including its internal controls and relevant practices, as well
as its revenues, expenditures, reserves and fund transfers.
This audit, together with the Bar's discipline workforce plan
and spending plan, is intended to help answer many of the
questions that today remain unanswered and help the Legislature
properly oversee the operations of the Bar in the future.
The bill is opposed by the Center for Public Interest Law,
unless amended to address not only the issues raised by the
latest audit, but also to require the Bar to follow the law,
including compliance with a recent U.S. Supreme Court case
regarding governance structures of state licensing entities
whose governing boards include a majority of active members
licensed by the entity, and implementation of basic transparency
and accountability measures "so that its various stakeholders -
including the Legislature and the public, which the Bar is
mandated to protect as its "paramount" priority - may
meaningfully monitor its regulation of the legal profession."
(Footnote omitted.)
SUMMARY: Reauthorizes attorney license fees at the same level
as the current year and improves transparency and accountability
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of the State Bar. Specifically, this bill:
1)Reauthorizes the State Bar to collect up to $390 for active
membership dues for the year 2016.
2)Clarifies that information contained in the State Bar's Annual
Discipline Report must include all matters affecting public
protection, including specified discipline cases and both
average and median case processing times.
3)Requires the State Bar to develop and implement a workplace
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.
4)Requires the Bar's Board of Trustees (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, 2015. Requires the audit to examine
revenues, expenditures, reserves and fund transfers.
EXISTING LAW:
1)Requires all attorneys who practice law in California to be
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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 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
fees from active members for a total annual dues bill of $390
for the year 2015. 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)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.)
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6)Requires the State Bar to contract with an independent
national or regional public accounting firm to conduct an
annual financial audit of the State Bar, as provided, and
requires that a copy of the audit and the financial statement
be submitted, with 120 days of the close of the fiscal year,
to the Board, the Chief Justice of the California Supreme
Court and the Assembly and Senate Judiciary Committees.
(Section 6145(a).)
7)Requires the State Auditor to conduct a performance audit of
the operations of the State Bar on a biannual basis and
requires a copy of the audit be submitted, with 120 days of
the close of the fiscal year, to the Board, the Chief Justice
of the California Supreme Court and the Assembly and Senate
Judiciary Committees. (Section 6145(b).)
FISCAL EFFECT: As currently in print this bill is keyed
non-fiscal.
COMMENTS: This bill continues the long tradition of Judiciary
Committee oversight of the California State Bar via review of
the annual dues authorization bill. The bill comes to this
Committee after yet another year of turmoil involving the Bar at
a time when many issues that have arisen in the press and in
other documents remain unanswered.
Background on the Bar. Attorneys who wish to practice law in
California generally must be admitted and licensed in this state
and must be a member 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 July 2015, the State Bar had 185,510
active members and 55,074 inactive members, which represents a
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slight annual increase in both active members and inactive
members. Total State Bar membership is listed at 254,511, which
includes 2,142 judge members and 11,784 members who are "not
eligible to practice law." By statute, the Bar's highest
priority is protection of the public. (Section 6001.1.)
California, like 30 other states including Florida, Texas and
Washington, has a unified bar, which means that the State Bar is
both the regulatory arm of the state, as well as an 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. (Compare 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,
including Illinois, New York, Pennsylvania and Massachusetts,
have non-unified bars, where attorneys must only join the
regulatory arm and not the trade association. Dues payments
required by unified bars are, typically, considerably higher
that dues payments required by non-unified bars.
The Bill in Print Largely Confines Measure to Maintaining Bar
Dues at Current Rates. This bill authorizes the State Bar to
collect active membership dues of up to $390 for the year 2016.
The mandatory fee of $390 holds mandatory fees constant at 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 seeking to practice law. The
Bar also uses its name and membership lists to help sell items
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such as malpractice insurance and car rentals, and receives
payment for those activities. The Bar has complete discretion
over how funds from this latter activity, which amount to
approximately $2 million per year, are used.
Well Reported and Very Disconcerting Problems at The Bar in This
Past Year Have Left the Bar Without Permanent Leadership and
Have Raised Questions, Yet Unanswered, About Bar Expenditures,
Oversight and Transparency. In November 2014, the State Bar
terminated its executive director. According to published
reports, the executive director's annual salary at the time of
termination was $259,000. In response to that termination, the
executive director reportedly filed suit against the State Bar,
alleging whistleblower status and charging the bar with
"egregious" fiscal improprieties. Bar officials reportedly
responded with accusations against him, including criticism of
his lavish expense accounts, a trip to Mongolia by him and a
former business partner of his, a reported $5,600 restaurant
bill paid by the State Bar, and a $30,000 secret expense account
gifted to Bar presidents. The Bar also fired its general
counsel, who had recently been hired by the executive director,
as well as the Bar's chief financial officer. Since then, the
court has ordered that the parties arbitrate their dispute, as
required in the executive director's employment contract. It
can only be presumed that the Bar and its former executive
director are doing just that. It is hoped, in the interest of
transparency, that the State Bar adopts policies to ensure
accountability and good government, and that whatever settlement
reached between the parties, including the amount of any Bar
funds used in any possible settlement - whether discretionary or
mandatory - is made public. It is also hoped that the Bar can
resolve all these matters quickly and focus its core function to
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protect the public from errant attorneys. Regardless of any
resolution with the former executive director, these matters
leave a host of unanswered questions about potential Bar
misspending and other possible improprieties.
While many of these reported claims may never be fully brought
into the public light due to ongoing litigation involving the
Bar and its former executive officer and other bar staff, enough
is known already to trigger special legislative and public
concern about how this public agency is being governed and
overseen. Reflecting public concern, the Center for Public
Interest Law (CPIL), the only public interest organization with
a history of overseeing board governance, strongly opposes this
bill in its current form. CPIL asserts that other substantial
reforms are necessary to address a host of stated governance and
process concerns, including either reorganizing the Board to
have a public member supermajority, or creating a state entity
to review, revise, amend or reject any of the Bar's or the
Board's decisions that have a restraint impact; and requiring
the Bar to fully comply with both Bagley-Keene and the Public
Records Act.
Very Recent State Audit Faults the Bar for Not Consistently
Protecting the Public and For Lacking Accountability. As
required by statute, the State Auditor completes a performance
audit of the Bar every two years. (The Bar is also required to
contract with an accounting firm to perform an annual financial
audit, discussed in more detail below, although that audit, to
date, is much more limited.) This year, the State Auditor chose
to review the Bar's discipline process, in particular its
backlog of discipline cases, and the Bar's recent $75 million
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purchase and renovation of a building in Los Angeles. The
audit, released last month, uncovered significant, questionable
decisions made by the Bar in the handling 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).)
Auditor Finds That the Bar Underreported its Backlog and, When
Seeking to Eliminate the Backlog, Made Choices That Did Not Put
Public Protection First. The Bar operates a discipline process
to protect the public from unscrupulous attorneys, with possible
disciplinary actions ranging from letters of warning and private
reprovals to disbarment. To operate effectively and maximize
public protection, the Bar must minimize its backlog (cases not
processed within six months), which otherwise might allow
wayward attorneys to continue to practice law, without review,
for too long. Understanding of the importance of the
disciplinary function and the need to reduce its backlog, 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
the backlog or its case processing times, and, when taking steps
to reduce the backlog, did not protect the public sufficiently.
First, the audit uncovered that the Bar did not fully or
consistently report its backlog or its case processing times.
While getting more accurate in recent years, the Auditor found
that the Bar underreported it backlog significantly in 2009 (the
Bar reported 348 cases, while the backlog was actually 4,276
cases) and, though less so, in 2010 (the Bar reported 4,193
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cases, while the backlog was actually 5,174 cases). (Id. at
27.) The Bar is still underreporting its backlog today, but the
difference is significantly smaller. Additionally, the Bar
changed its metrics for reporting case processing times, without
making that clear, changing from reporting average case
processing times to reporting mean case processing times for 90
percent of its discipline cases. This change resulted in the
Bar underreporting actual case processing times by over 70
percent (the Bar reported case processing time was 263 days last
year, while actual average case processing time discovered by
the Auditor was 450 days). (Id. at 31.)
More importantly, the Auditor determined that in order to reduce
its backlog of discipline cases, the Bar made questionable
choices, causing "significant risk to the public":
However, we found that as 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 the volume and speed in
processing the backlog in 2011 caused the State Bar to
lower the quality of its case settlements, and believed
that insufficient quality control was a key factor that
enabled the State Bar to decrease its backlog. (Id. at 1.)
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To address these concerns, the Auditor made a number of
recommendations to the Bar and the Legislature, and this bill,
as proposed to be amended, implements those recommendations
which require legislative action. In particular, the amendments
require the Bar to fully reports its backlog and list all case
types that need to be reported to help eliminate underreporting.
Second, the amendments also require that the Bar to report both
its average and its median case processing times. This dual
report will ensure that the Legislature is fully informed about
the size and processing times of any backlog. Finally, the
amendments require the Bar to engage in workforce planning for
its discipline system and to conduct a public sector
compensation and benefits study to reassess the staff required
to oversee its discipline program. This should help ensure that
the Bar has the right quality and quantity of staff conducting
its most important mission -- protecting the public from
unscrupulous attorneys.
Purchase of Building in Los Angeles Disclosed Problems with
Transparency, Accountability and Public Protection. In 2012,
the Bar purchased a building in Los Angeles; however, according
to the State Auditor, the Bar did not perform a cost-benefit
analysis to determine if the purchase was appropriate and
warranted before receiving approval from its Board to purchase
the building, did not fully inform the Legislature of its plans,
and potentially risked public safety by doing so and 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
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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. 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
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other financial priorities. (Id. at 43.)
The Auditor 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." (Id.)
Even more troubling, 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, is 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 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.
It appears the Bar, without notice or consultation with the
Legislature, made an unwarranted and unsupported choice by tying
up the bulk of that fund for the next 15 years that jeopardized
its ability to protect the public. Alternatively, the Board may
have determined that the Public Protection Fund is not
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necessary. If that is the case, 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 reducing the "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 has been transferring money
between its various funds and using the money on unrelated
items. The Auditor found that, from 2009 through 2012, the Bar
made 50 transfers between funds involving a total of $64.2
million. (Id. at 13.) While many of these may have been
justified and appropriate, the Legislature may want more
oversight, at least in the foreseeable future, to ensure that
the Bar and its Board are making decisions that are truly in the
public's best interest.
Given the concerns raised by the Auditor about the Bar's lack of
transparency and accountability, and the given the resulting
potential risk to public protection, this bill rightly proposes
to have the Auditor do an in-depth financial audit of the Bar,
including a review of the Bar's internal controls and relevant
practices. The in-depth audit is limited in time - just one
year -in the hope that during that time, the Bar's Board can
improve its own oversight of the Bar and ensure that, once
again, public protection is the Bar's paramount priority. The
Bar has welcomed all of the Auditor's recommendations, and it is
hoped that the Bar will welcome all steps needed to improve
transparency, accountability and public protection.
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Should the Bar, Despite its Historical Judicial Branch Location,
be Subject to Some Additional, but Nonetheless, Important
Consumer Protection, Transparency and Openness Laws? Unlike
other state licensing agencies that operate under the executive
branch of government, the Bar is located within the judicial
branch. ("The State Bar of California is a public corporation."
(Cal. Const. Art IV, Sec. 9).) Even though an important part
of the Bar functions as an administrative arm of the court for
purposes of admission and discipline of attorneys, the Bar has
many other non-court related functions. Thus, the Bar has long
been subject to legislative oversight and direction. For
example, the Business & Professions Code already addresses such
topics as the requirements for attorney admission (Sections
6060-69), the composition and duties of the Committee of Bar
Examiners (Sections 6064.6, 64.7), and the duties and
composition of the State Bar Board of Trustees itself (Sections
6010-33).
Because the Bar is housed within the judicial branch, it has not
yet been subject to some of the state's important consumer
protection and openness laws which seek to ensure the integrity,
transparency, and accountability of state government operations,
such as the Public Records Act and the Public Contract rules.
However there has been a trend towards consistency with key
consumer protection laws; for example, in 2011, SB 163 (Evans),
Chap. 417, Stats. 2011, made the Bar essentially subject to the
terms of the Bagley-Keene Opening Meeting Law (B-K Act) by the
Legislature, see discussion below.
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Whether continuing to exclude the Bar's non-court related
functions from the benefits of such important public protection
and transparency laws make sense today, in light of the
government's increasingly vigorous commitment to transparency
and accountability to the public it serves and troubling
information about the Bar's financial controls and decision
making, as well as the Bar's express public protection duty and
its acknowledgment of the importance of providing maximum
transparency to the public, warrants beneficial review and
consideration by the Bar and the Legislature.
In 2011, the Legislature Directed the Bar to Conform to the
Bagley-Keene Open Meeting Requirements, But the Bar Apparently
Has Not Yet Fully Conformed On Some Key Secrecy Issues: All
licensing boards in the executive branch governing such
professions as physicians and accountants have long been subject
to the B-K Act. 2011's SB 163 (Evans) included significant
reforms of the State Bar's governance. One of those reforms
specifically provided that the board "shall ensure that its open
meeting requirements, as described in [Business & Professions
Code] Section 6026.5, are consistent with, and conform to," the
B-K Act. (Section 6026.7.) Thus, the plain language of current
law requires the Bar board to act to ensure that its open
meetings requirements are "consistent with, and conform to" the
B-K open meetings law.
Since then, CPIL has raised numerous and ongoing concerns to
this Committee about the Bar's asserted failure to comply with
the requirements of the B-K Act in some key respects. CPIL
states emphatically that the clear language of Section 6026.7
contains no exceptions to the B-K Act, and thus on its face
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requires the Bar to comply with all of the B-K Act, not just
those parts of the Act that meet with the Board's approval. In
response to concerns raised by this Committee in 2012 and
ongoing by CPIL about its lack of compliance with B-K, the Bar
engaged in rulemaking, but, according to CPIL's letter of
opposition unless amended to this bill, "three of the four
proposed changes were not only not consistent with Bagley-Keene;
they directly contradict it and are inconsistent with it." CPIL
contends that the Bar ignored their concerns and adopted the
three changes that, in fact, contradict B-K.
While the Bar acknowledges the importance of providing maximum
transparency to the public, CPIL contends that the Bar
erroneously believes that the language and intent of SB 163
allows it broad discretion to depart from the B-K Act in
non-trivial ways -- notwithstanding the statute's use of the
words "shall," "consistent with," and "conform to." CPIL points
to the Board's unsuccessful legislative efforts to eliminate the
B-K Act requirement from SB 163 as further evidence that the
Legislature meant what it expressly stated in SB 163, namely,
that the Bar's open meetings requirements must be "consistent
with, and conform to" the B-K Act. Moreover, CPIL argues that
the Board's prior, unsuccessful effort to secure a letter in the
Senate Journal to limit its obligation under the B-K Act is
additional evidence reinforcing that the plain language of
Section 6026.7 means what it says. To address this, CPIL
requests, among other amendments, that the Bar be required to
comply with B-K, with specific exemptions for the Commission on
Judicial Nominations and the Review Committee of the Commission
on Judicial Nominees.
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Should Bar Administrative Records Be More Accessible To the
Public? The Legislature has broadly supported transparency and
stated, in the California Public Records Act (PRA), that "access
to information concerning the conduct of the people's business
is a fundamental and necessary right of every person in this
state." (Gov't Code Section 6250.) The PRA, however,
explicitly exempts agencies under Article IV of the State
Constitution, thus apparently, although not explicitly,
exempting the Bar. While courts are not subject to the PRA,
judicial records are public records (with exceptions) and the
Legislature has directed the judicial branch to open up its
administrative records as well. (See Gov't Code Section
68106.2, directing the Judicial Council to develop a rule of
court - now Rule 10.500 - to provide public access to the
administrative records of the courts.) However, because of the
Bar's status as a judicial branch entity that is also not a
court, it does not appear to have been included in the broad
statutory public protection mandate for public access to
records.
The California Supreme Court recently determined that the Bar is
subject to the common law right of access to public records,
which allows access to public records "in which there is a
legitimate public interest, if that interest is not outweighed
by other interests." (Sander v. State Bar (2013) 58 Cal.4th
300, 323 [Court found that the Bar must provide access to its
admissions database as long as applicants' privacy can be
protected].) However, the common law right of access is much
more limited than the PRA and thus the Bar has much less public
oversight today than other regulatory and licensing agencies
located in the Executive Branch.
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CPIL states emphatically that the Bar should be made subject to
the PRA, arguing that it has thus far failed to comply with a
request for information that is specifically required today by
statute - Section 6001.4 specifically requires the State Bar
make available, "upon request of a member of the public, the
classification and total annual compensation paid to each of its
employees by name, as well as any and all rules, policies, and
agreements pertaining to the compensation and benefits of any
employees of the State Bar." However, writes CPIL, for "eight
months, a journalist with a California legal newspaper has been
requesting the exact information that section 6001.4 requires
the Bar to disclose. The Bar has entirely failed to respond to
her request at all, much less provide the information she has
requested." It appears that the public's right of access to
public information maintained by the Bar and the Bar's general
transparency and accountability could be improved. Thus,
clarifying the PRA's effect on the State Bar appears to be an
additional and timely issue for possible consideration as part
of the Legislature's oversight process.
Should The Bar Follow Applicable Contracting Rules Under the
Public Contract Code for Greater Public Protection and
Transparency of Operations? The Public Contract Code requires
that contracts for services entered into by state agencies for
$5,000 or more are generally subject to significant control
requirements, including competitive bidding, and review and
approval by the Department of General Services. However, courts
and agencies within the judicial branch are currently
specifically exempt from these requirements. (Public Contract
Code Section 10335.7.) Instead, the Bar has only been required
by the Legislature to use competitive bidding for contracts that
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are over $50,000 in the aggregate or, in the case of information
technology, over $100,000. (Section 6008.6.) There is also
apparently no agency similar to the Department of General
Services, which oversees state contracting, to provide oversight
of the Bar's contracting processes. While there is certainly no
suggestion that the Bar may be inappropriately awarding
contracts or otherwise misusing its resources, this apparent
lack of traditional oversight mechanisms may inadvertently leave
open the risk of potential misuse of member dues. Recent
difficulties in the development of various state automation
systems underscore the need and benefit for all state agencies
to have independent oversight mechanisms and competitive bidding
requirements when it comes to outside contracting, so this may
be an issue for consideration by the Bar and the Legislature.
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
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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
essential mission. Absent a substantial increase in interest
rates, which is certainly 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 was allowed to
sunset 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
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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 recent resolution adopted by
the State Bar on May 9, 2015 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 provide critically needed legal help
to low-income and vulnerable residents of California." It is
hoped that going forward 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 is
used for discretionary expenses, including executive travel and
dining 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.
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Should the Bar's Board of Trustees Continue to Oversee Attorneys
When the Vast Majority of Members Are Practicing Attorneys?
Under recent reforms enacted by the Legislature in an effort to
address earlier and significant concerns about the Bar's
governance (SB 163 (Evans), Chap. 417, Stats. 2011), the State
Bar is governed by its Board of Trustees, which is now made up
of 19 members (though the Board President may remain on the
Board for one year after his or her term is completed and be the
20th member, which current Board President Craig Holden has
elected to do). (Section 6010 et seq.) Among other reforms, SB
163 revised the composition and reduced the size of the Board
from 23 to 19 members over a three-year period, adding for the
first time a substantial component of attorney members selected
by the Supreme Court. That bill also, consistent with other
professional statutes, specified for the first time that the
protection of the public is the highest priority for the Bar and
its Board.
Under the Legislature's 2011 governance reforms, the Board was
still permitted to have a supermajority majority of
lawyer-members following assurances from the Bar that the
increased percentage of public members would address Board
governance problems. Thus, of the current 19 (or 20) board
members, 13 (or 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 three vacant public member seats,
all of them gubernatorial appointees, so the Board is currently
composed of 17 members, 14 of whom are active members of the
State Bar and 3 of whom are public members.
Notwithstanding these prior reforms, CPIL still questions
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whether the Board can adequately govern the Bar and the legal
profession and, most importantly protect the public, given that
the vast majority of the Board (currently 82 percent) are also
active Bar members. In support of this concern, CPIL cites a
very recent U.S. Supreme Court case which found that if a state
licensing board has a majority of members who are active market
participants, the board can only invoke antitrust immunity if it
is subject to active state supervision. In that case, North
Carolina State Board of Dental Examiners v. Federal Trade
Commission (2015) 135 S. Ct. 1101, the Supreme 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 them 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 82 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.
CPIL argues that the only way that the Bar can satisfy the
holding in North Carolina State Board of Dental Examiners,
supra, is to "(1) restructure the Board of Trustees to a
supermajority of public members, with the added provision that
no vote may be taken where those voting are not public members
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in the majority, or (2) create clear state supervision of all
Bar acts and decisions for anticompetitive effect."
ARGUMENTS IN OPPOSITION: CPIL strongly opposes this bill,
unless it is amended to make the changes discussed above,
including either reorganizing the Board to have a public member
supermajority, or creating a state entity to review, revise,
amend or reject any of the Bar's or the Board's decisions that
have a restraint impact; and requiring the Bar to fully comply
with both Bagley-Keene Act and the Public Records Act. In
addition, CPIL seeks a number of other changes to make the Bar
operate in a more transparent and effective, including:
Transfer the Bar's discipline function (the Office of Chief
Trail Counsel, the Office of Investigations, and the Audit and
Review Unit) to the Attorney General's office to avoid any
anti-competitive challenge to the discipline function;
Increase Bar dues to better support the discipline function
and for audits of the discipline unit;
Subject the Bar to the rulemaking provisions of the
Administrative Procedure Act (which would also provide more
state oversight over the Bar);
Create a Chief Operating Officer to oversee all expenditures
and have that person report directly to the executive
director;
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Require that the executive director's expenses be reviewed
directly by the Board;
Better define the discipline backlog, more accurately
reporting on the backlog and on case processing times, and
complying with existing law regarding complex cases;
Require the Bar to webcast all Board and Board standing
committee meetings and to post minutes of those meetings
online.
CPIL believes that all of these changes are necessary to end the
Bar's "practice of secrecy, nontransparency, deliberate evasion
and ignorance of clearly applicable law, and dereliction of
regulatory duties." CPIL adds that such conduct by the Bar "is
not acceptable for any government agency, much less one charged
with regulation of the legal profession and protection of the
public as its 'paramount' priority."
REGISTERED SUPPORT / OPPOSITION:
Support
State Bar of California (sponsor)
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Opposition
Center for Public Interest Law (unless amended)
One individual
Analysis Prepared by:Alison Merrilees and Leora Gershenzon /
JUD. / (916) 319-2334