BILL ANALYSIS                                                                                                                                                                                                    Ó







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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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                                                                    Page  27





           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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                                                                    Page  28








          Opposition


          Center for Public Interest Law (unless amended)


          One individual




          Analysis Prepared by:Alison Merrilees and Leora Gershenzon /  
          JUD. / (916) 319-2334