BILL ANALYSIS Ó SB 846 Page 1 (Without Reference to File) SENATE THIRD READING SB 846 (Anderson) As Amended August 19, 2016 Majority vote SENATE VOTE: Vote not relevant ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Judiciary |8-0 |Mark Stone, Wagner, | | | | |Alejo, Chau, Chiu, | | | | |Cristina Garcia, | | | | |Holden, Maienschein | | | | | | | | | | | | ------------------------------------------------------------------ SUMMARY: Reauthorizes the State Bar to collect up to $390 for active membership dues for 2017 and implements changes to the SB 846 Page 2 governance of the State Bar to maximize the Bar's prioritization of public protection in all of its activities and makes other reforms to the Bar's governance structure. Specifically, this bill: 1)Reauthorizes the State Bar to collect up to $390 for active membership dues for 2017. 2)Defines public protection -- the highest priority of the State Bar -- as the core regulatory functions of the State Bar, in the following order of priority: a) Attorneys must be competent and ethical and comply with all laws and standards of professional conduct; b) Appropriate discipline or legal sanction must be imposed upon attorneys who fail to comply with those standards and non-attorneys who practice law without a license; c) Competent and professional legal services must be equally provided without regard to income; and d) The legal profession must represent the broad diversity of California. 3)Eliminates the six elected State Bar Board of Trustees (Board) members, and reduces the membership of the Board from 19 members to 13 members. States the intent of the Legislature that this reduction of membership number occur through the expiration of the terms of the elected members who are serving as of December 31, 2016. 4)Extends terms of members of the Board from three to four years. SB 846 Page 3 5)Requires those making appointments to the Board after December 31, 2016 to consider appointing members with specified expertise. 6)Provides that the chair and vice chair (previously, the president and vice president) of the Board must be appointed by the Supreme Court instead of elected by the Board. Provides that the term of the chair is two years. Provides that the Board annually selects the treasurer, who is not required to be a board member. 7)Requires that any decision of the Board that the California Supreme Court determines may raise antitrust concerns be reviewed by the Court and is subject to modification, veto, or other appropriate action by the Court. 8)Eliminates the ability of the State Bar to prevent future Legislatures from reducing future membership dues by securing all or any portion of an obligation of the State Bar on future dues. 9)Eliminates the State Bar's ability to create foundations or non-profit corporations as a means to raise additional revenue. 10) Requires Board's approval for contracts for goods or services over $50,000 or information technology (IT) contracts above $100,000. Requires the Board to adopt policies to require its approval for contracts that could impact the State Bar's ability to protect the public. 11) Requires the Attorney General to appoint an SB 846 Page 4 enforcement program monitor, through March 31, 2020, to monitor and evaluate the State Bar's disciplinary system to ensure the Bar is successfully and consistently protecting the public. Sets forth the duties of the enforcement monitor, including developing recommendations and submitting an initial report to the Supreme Court and the Legislature by October 1, 2019, and a final report by March 31, 2020. 12) Sets forth specific requirements for the handling of unlawful practice of law complaints, including specific timeframes for processing those complaints; specified, acceptable resolutions for those complaints; and requiring that those complaints be forwarded to law enforcement. 13) Eliminates certain State Bar exceptions to the Bagley-Keene Open Meeting Act, and adds an exception from both the Bagley-Keene Open Meeting Act and the California Public Records Act for the State Bar Court. Provides that access to records of the State Bar Court shall be governed by the laws applicable to the records of the judiciary. 14) Provides several exceptions to confidentiality of State Bar admission applications and records, including the names of applicants who passed the Bar examination, and makes those exceptions retroactive to January 1, 2016. 15) Requires the State Bar to conduct an analysis of the funds necessary to timely satisfy claims against the Client Security Fund (CSF), including possible additional efforts to increase collection from responsible attorneys, a review of other non-public protection expenditures, including executive salaries and benefits, that can be redirected to better fund the CSF, and after exhausting all other options, whether a dues increase is necessary to ensure timely payment of claims against the CSF. The report is due to the Legislature by SB 846 Page 5 March 15, 2017. 16) Requires that the 2017 performance audit of the State Bar by the State Auditor includes a review of the State Bar's expenses, including executive salaries and benefits, outside contracts and real estate holdings, to determine the appropriate and necessary expenses of the State Bar to protect the public and what an appropriate member dues level should be. Requires that the audit also include a recommendation for determining Section costs, including a notice and opportunity to challenge process for the Sections. Requires the State Auditor to conduct a performance audit, due by June 15, 2018, on changes in the State Bar's expenses and ways for the State Bar to increase operational effectiveness and efficiency. EXISTING LAW: 1)Requires all attorneys who practice law in California to be members of the State Bar and establishes the State Bar for the purpose of regulating the legal profession. Pursuant to the State Bar Act, requires the annual mandatory membership fee set by the Board to pay for discipline and other functions to be ratified by the Legislature. (Business and Professions Code Section 6000 et seq. Unless stated otherwise, all further statutory references refer to that code.) 2)Authorizes the State Bar to collect $315 in annual membership fees from active members for a total annual dues bill of $390 for the year 2016. Provides that the other $75 is pursuant to statutory authorization to assess annually the following fees: $40 for the Client Security Fund; $25 for the disciplinary system; and $10 for the Lawyer Assistance Program. (Sections 6140, 6140.55, 6140.6, 6140.9.) 3)Authorizes the State Bar to collect $75 in annual membership fees from inactive members for a total annual dues bill of SB 846 Page 6 $115. Provides that the other $40 is pursuant to statutory authorization to assess annually the following fees: $10 for the Client Security Fund; $25 for the disciplinary system; and $5 for the Lawyer Assistance Program. (Sections 6141, 6140.55, 6140.6, 6140.9.) 4)Directs $40 of membership dues to legal services purposes unless a member elects not to support those activities. (Section 6140.03.) 5)Provides that protection of the public is the highest priority of the State Bar and its Board in exercising their licensing, regulatory and disciplinary functions. Whenever the protection of the public is inconsistent with other interests sought to be promoted, provides that the protection of the public shall be paramount. (Section 6001.1.) 6)Creates the Governance in the Public Interest Task Force, effective February 1, 2013, and requires that the task force report to the Supreme Court, the Governor and the Assembly and Senate Judiciary Committees by May 15, 2014, and every three years thereafter, its recommendations for enhancing public protection and ensuring that public protection is the State Bar's highest priority. (Section 6001.2.) 7)Permits the State Bar, for purpose of carrying into effect and promoting its objectives (of which public protection is its highest priority), to sell, lease, exchange, convey, transfer, assign, encumber, pledge, dispose of any of its real or personal property or any interest therein, including without limitation all or any portion of its income or revenues from membership fees paid or payable by members. (Section 6001.) 8)Provides, pursuant to a 1950's statute, that whenever the Board secures an obligation of the State Bar on all or any portion of the fees from membership dues the Legislature may not, until the obligation is repaid in full, reduce membership dues below the maximum amount in effect when the obligation was created and provides that this constitutes a covenant to SB 846 Page 7 the holder of the obligation. (Section 6008.5.) 9)Requires the State Bar to annually report on the performance and condition of its discipline system, including the backlog of discipline cases that are six months old, and case processing times, as provided. (Section 6086.15.) 10)Requires the State Bar to develop and implement a workforce plan for its discipline system and conduct a public sector compensation and benefits study, including a recommendation for an appropriate backlog goal and an assessment of staffing needed to achieve that goal. Requires the State Bar to conduct a thorough analysis of its operating costs and develop a spending plan to determine a reasonable amount for its annual dues. Requires that the workforce plan and the spending plan be submitted to the Legislature by May 15, 2016, and be implemented by December 31, 2016. (Section 6140.16.) 11)Requires the State Bar's Board to contract with the California State Auditor to conduct a biannual performance audit of the State Bar. (Section 6145(b).) 12)Subjects the State Bar to the Public Records Act, with specified exceptions. Provides that identifying information submitted by applicants to the State Bar for admission to practice law and State Bar admissions records, as specified, are confidential and may not be disclosed pursuant to any state law including the Public Records Act. (Sections 6001, 6026.11.) 13)Effective April 1, 2016, subjects the State Bar to the Bagley-Keene Open Meeting Act, as provided, with exemptions for the Judicial Nominees Evaluation Commission and the Committee of Bar Examiners. (Sections 6001 6026.7; Government Code Section 11121.) SB 846 Page 8 FISCAL EFFECT: This bill is keyed fiscal by the Legislative Counsel. COMMENTS: This bill, the second State Bar dues reauthorization and oversight bill considered by this Assembly this year, continues the decades-long tradition of oversight of the Bar via review of the annual dues authorization bill, as part of the general oversight role of the Legislature over the agencies in the executive and judicial branches of government. This bill comes before this house after yet another year of turmoil involving the Bar, and after the Senate's Judiciary Committee's unwillingness to adequately address the longstanding governance shortfalls of the Bar, or even, at a bare minimum, to effectively prioritize the true public protection functions of the Bar over its lawyer trade association functions. This past year, there has continued to be extensive and publically reported turmoil involving the Bar, some of the information likely coming to light by way of new transparency laws applied to the Bar last year. First, the media reported that the Bar had failed to investigate over 300 complaints about the unauthorized practice of law, some awaiting assignment to an investigator for years before any action was taken. According to the Bar, many of those complaints were filed by immigrants seeking legal assistance with, among other things, their legal status in this country. It goes without saying that failure to immediately investigate and, when appropriate, take action to stop the unauthorized practice of law puts the public at substantial risk and the longer the delays in investigating them, the more the public is put at risk. The Bar now asserts that these cases are being assigned to an attorney immediately upon receipt and that the backlog has finally been addressed, but when this matter was first made public, over 300 cases were still awaiting intake. Had this issue not been made public, it is unclear when, if ever, such corrective action would have been taken. Second, the Bar, without input from or approval by the Legislature, and apparently without fully following its own SB 846 Page 9 newly established procedures recommended by the State Auditor, took out a $10 million loan for upgrades and tenant improvements for its San Francisco building and attempted to secure the loan with a pledge of future member Bar dues, which could have tied the hands of future Legislatures in the setting of dues based on a 1950's era statute. This apparently only came to light as a result of the State Auditor's most recent audit of the Bar, which was only required by last year's Bar dues legislation. Most recently, it was reported that the Bar, which the Auditor found pays over a dozen of its top executives more than the Governor, hired a public relations (PR) executive who reportedly makes more than the White House Press Secretary and remodeled its executive suite at a cost of $125,000. This bill addresses some, but by no mean all, of the governance and operational problems that plague the Bar by, among other things: 1) Defining public protection to include the Bar's key regulatory functions -- admissions, regulation of attorneys, discipline of attorneys and sanctions for unlawful practice of law - which should help the Bar focus on its key purpose - protecting the public from harm - and appropriately reducing board focus on its trade association activities; 2) continuing reform of the Bar's board by eliminating board members elected by licensed attorneys themselves and reducing the board from a supermajority of practicing attorneys to a majority of practicing attorneys; 3) requiring the board to exercise greater oversight of Bar staff; 4) requiring the Supreme Court to review any anticompetitive decisions made by the board's attorney majority to avoid costly antitrust liability; and 5) directing the Attorney General to appoint a monitor to help improve the Bar's long-standing problems disciplining attorneys and properly protecting the public from the unlicensed practice of law. This bill also maintains member bar dues for 2017 at their same level as this year. This bill, in an effort to reach a compromise that will keep the Bar fully funded in 2017, helps make this state agency a better regulator of attorneys although still not enacting the larger reforms that many believe are urgently needed to truly make the Bar an effective protector of the SB 846 Page 10 public. Analysis Prepared by: Leora Gershenzon / JUD. / (916) 319-2334 FN: 0004920