GOVERNANCE IN THE PUBLIC INTEREST TASK FORCE - APRIL 25, 2016

The State Bar of California’s Task Force on Governance in the Public Interest held its third of five meetings on April 25, 2016. The Task Force received comments from more than a dozen people regarding the pros and cons of the unified bar structure in place since 1927.

Ted Schneyer, professor emeritus at the University of Arizona James E. Rogers College of Law, testified that in his studies of bar governance issues the unified bar structure has long been problematic. The recent U.S. Supreme Court decision in North Carolina Board of Dental Examiners v. Federal Trade Commission has identified potential antitrust issues when active market participants are the decision-makers.

Schneyer said in a unified bar there is confusion about how to view the institution and how it functions. On the one hand the bar is like a voluntary association, or a closed shop, but also thought of as a public agency. Insofar as the latter is relevant, the need for public accountability becomes important. If you think of it as a closed shop, you will want to avoid the minority members being overcome. These various points of view can be inconsistent and can create a problem.

The Dental Examiners decision may be the final straw in this debate. Originally the unified bar made sense. Attorneys had a low rate of participation in the early part of the last century. For example, 19 percent of Alabama lawyers were members of the state bar before it became a unified bar. With the unified bar came more resources and the ability for more ambitious activity. The reaction was that the unified bar had advantages over the voluntary associations. But by the end of World War II, voluntary bars had ‘wised up’ and figured out how to attract members. Thus those that neighbored Wisconsin had very respectable membership rates of 80 percent or more. But that also meant that they could be on the same footing as a unified bar.

There are not great programmatic differences between a unified and voluntary bar, but in a unified bar there were more voices advocating keeping dues low. He said comparisons are difficult to make. In the early- to mid-20th century bars were eager to engage in law reform in a technical way. Clarifying law and to make procedures better, but eventually the interest turned to ‘lobbying’ beyond technical law reform. The unified bars were constrained here and so were limited in what they might seek. In Wisconsin this became a policy of ‘substantial unanimity of members. Although the voluntary bar did not have the same limitations, they were constrained by whether their actions might cause them to lose membership. So in his conclusion, there is no indication that one form is better than the other.

Schneyer said he is dubious that oversight by the Supreme Court is always able to weed out self-interest. The Wisconsin court upheld unified bar, but attached an index of what was regarded as the most significant activities of the bar in the public interest. One of these was promulgation of a minimum fee schedule to help the plight of the lawyers.

In the 1970s there was a push to increase the rule of the public in governance. Predictably this was viewed with consternation, especially in California where there was a perception that Gov. Jerry Brown filled the positions with “liberal democrats.”  There is a history of tension between public members and lawyer members and block voting. The Conference of Delegates was suggested as a body that could take over lobbying and be more aggressive. He cited a colloquy between a former public board member and attorney board member that demonstrated the public member saw it as a regulatory agency and the attorney member saw it as a voluntary organization. There was no way to reconcile the two.

There are always complaints about discipline. The Wisconsin Bar took away the regulatory function and created a new agency in the Court. Separating the two functions does not mean that you need no longer have a mandatory bar.

The phenomenon is global, he said. The United Kingdom separated out the regulatory authority from the representational side. The Law Society continued to have authority over disbarment, but not lesser discipline. Australia and Canada have followed the same approach.

With the Dental Examiners ruling, there are new reasons to have the courts take control. But even court oversight might not satisfy the antitrust concerns if the justices too are seen as active market participants.

Competition has never been a core value of the legal profession. Julius Henry Cohen — to be effective the legal profession needed “brotherhood” and that would be killed by competition. The lack of competition has implications for access.

There is a philosophic/pragmatic debate as to where things will go from here, whether expanding openings for non-legal services providers vs. a continued resistance to opening the market.  Enforcement of UPL has dwindled; a number of state courts create exemptions and that will continue.

He believes it would be better to have an independent regulator. But there are reasons to worry. How many would join a voluntary bar? In California, there are 185k active attorneys who might be members. Wisconsin retained 80 to 85 percent of its members after de-unification. There is limited experience with de-unifying.

Schneyer also addressed the challenges of the bar’s voluntary sections in complying with open meeting rules that were not meant to apply to the type of services the sections provide and having to provide 67 percent of its revenues toward overhead to the State Bar. Is that sustainable? The sections are important, as is the whole realm of lawyer specialization. 

In some countries, the lawyer regulation bodies have taken steps to prevent misconduct rather than dealing with it only ex post facto. This would be desirable. For example, in New South Wales they require a ‘self-assessment’ of systems they have in place when they incorporate and to report to the Commissioner of Legal Services on whether their systems are in compliance. This was not intended to decide discipline, but to cause firms to check themselves and to be thoughtful. It has become increasingly clear that appropriate systems can do as much to prevent misconduct as the character of the lawyers in the firm or their ethical character. The number of grievances was reduced by two-thirds after this self-assessment process. It has not been terribly expensive. This is being done in England and also in Canada (Nova Scotia).  

Second District Court of Appeal Justice Laurie Zelon, who said she was not speaking on behalf of the court, stressed the importance of the State Bar’s access to justice work. She started with the famous Shakespeare quote, “The first thing we do, let’s kill all the lawyers.” Rather than being a jab at lawyers, the quote was meant to recognize that lawyers protect individuals and society. The State Bar has a dual personality: service to the profession and public protection. The first is her focus. We may construe public protection too narrowly: it’s more than admission and discipline. We do more than decide who can practice law.

In Keller v. State Bar of California, which she litigated on behalf of the bar, the U.S. Supreme Court talked about why an integrated bar is important. The states have an interest in improving the profession, which improves the quality of legal representation. Public protection requires stability of membership and resources.

What does the bar do?

  • Distributes $30 million in grants to organizations that provide legal services; the bar works to determine that quality work is done with the money. It also administers the State support through the Equal Access Fund, Justice Gap and other awards. Currently $50 million is being administered. All of this would be at “great risk” if this were not supported, she said.
  • Access to Justice Fund—this is unique, it has a broad representation focus. What has the commission looked at? It established the Equal Access Fund, the first time that California established legal aid; language access; providing assistance in rural areas, administering grants for incubator programs.

Defining public protection must include this work, which relies heavily on the work of the State Bar.

Educating bar members is not in conflict with the goal of public protection. Incubators and dealing with student debt is a part of this, equally dealing with diversity to service the needs of all communities. Doesn’t public protection include those elements, as well?

We have a privileged and protected profession and the State Bar makes sure that the value of service, pro bono etc. are inculcated as part of the understanding of public protection. People who enter the system without a lawyer are disadvantaged. Anything we do to help that is valuable.
Trustee Dennis Mangers pointed out that other states and countries have de-unified systems without problem. Might it be possible to divide the functions surgically and carefully so that there would not be the losses you describe?

Zelon said in New York the dollars came through the court; there the courts have more control over access to justice funds. I am familiar with the Access to Justice movement here and in Canada. There the efforts are a combination of the courts and the law society. In the U.S. the successful commissions rely on strong support from their law associations; the ones that have the most difficulty are those that are creatures of their courts but lack stable funding.
If the decision to de-unify is taken, we owe it to our public is to find stable sources of funding, which is what will be needed for access to justice.

Robert Fellmeth, of the Center for Public Interest Law in San Diego, said his organization has monitored the State Bar and other agencies for 35 years. As a lawyer, he understands the sensitivity of the relationship of the bar to the courts and, therefore, urges court control of the regulatory functions. Other agencies do a great deal more than the State Bar in the access areas; you will get there more effectively as a state agency.

Given the Dental Board decision, and the fact that the board is comprised of a majority of active market participants, “You are a walking antitrust violation.”
Does the bar engage in restraints of trade? Yes. Reasonable restraints are lawful, but there are categories called per se which are as a matter of law are unreasonable. What are they? Price fixing; supply control. Does the Bar engage in supply control? Yes — you refuse to admit more than half of the attorneys who take the bar exam. We want you to do this, but only in a way that is lawful.

The way out of this is state supervision. But active state supervision involves more. Is there anyone outside of the bar and active market participants who looks at and correlates the value of the cutoff score? What does the court do to look at impact? Active supervision is a proactive inquiry into the effective impact of a restraint.

How to create active supervision: create a commission of experts; create a filtering system (some things will restrain trade, others will not). The filtering system will identify those decisions that have momentous impact on restraint of trade (e.g. bar pass system). This will allow you to avoid review of things that don’t matter. Ideally you should suggest that the Court do this. It is fair to ask the court to review what things should be subject to active state supervision.  I like the Mangers proposal, but the same thing will need to be done there, as well.

Bar Monitor proposal—this has been done three times. We always come up with a positive response. As an independent monitor I had access to everything. I was finding out what was going on and you benefit from this. Staff can have the opportunity to critique it first. This is a service. The dues were 8 percent higher when I was the monitor; we have gone down 80 percent today. Why? I think Jayne Kim is very competent; maybe she’s solved this.
He said the audit and review function of dismissed complaints should be in the Attorney General’s Office.

He said he believes that California’s discipline is the best in the country, although it could be improved.

Bridget Gramme, assistant director of administration for CPIL, said there is an inherent conflict of interest in advocating for the public and advocating for the profession. The two must be separated for public protection to be achieved. She thanked the State Bar for putting together a great panel. I think there may be fear of the unknown as to de-unification.

We agree that access to justice is key to core mission; it should remain within the core mission and be subject to mandatory funds. You are in a good position: you can say what should stay in the public protection mission and separate what is/is not included.

Compare the grants that are available for doctors who serve underserved populations; why not create a comparable approach but in a de-unified bar structure? A de-unified bar would allow us to focus.

There has been enough time to consider this: 25 years. It’s not a ‘new’ idea. The time has come; the time is now and you are in a unique position to be able to recommend this to the legislature now.

The sections are important, but can be spun off. Consider the way the CMA works.

On governance, it makes no sense, especially in light of the Dental Board decision, to have elections. At a minimum the board must be appointed by public officials.

Los Angeles City Attorney Mike Feuer, former chairman of the Assembly Judiciary Committee and former executive director of the nonprofit Bet Tzedek Legal services, said the access to justice functions should remain with the bar. Symbolically and intrinsically,  there’s nothing more ‘core’ about being a member of the bar than supporting access to justice. To separate this from the bar would be to convey that this is not what it is to be a lawyer and a bar association. This is corrosive to the views we have as to what it is to be a lawyer and a bar association.

The bar’s role has been key to access. It is concerning to think that some think that being a lawyer is not deeply embedded with these issues. This is not an academic issue.

Paul Kiesel, co-chair of the Open Courts Coalition, talked about the State Bar’s leadership and role in speaking to the legislature and the governor about the importance of adequate court funding. I am concerned that the bar if de-unified will lose its voice. The fact that there is one voice which speaks for everyone is very powerful to ensure adequate funding for our courts. These sorts of discussions are healthy; this helps strengthening an organization going forward. It will be a stronger organization going forward.

Intrinsically there is a great risk to move from where the bar has been over 80 years. If it is not broken, don’t fix it.

Mark Britton, founder and CEO of Avvo Inc., said, I don’t have a dog in the hunt; what I do care is how we act as lawyers and how we act with the communities around us. We consistently hear when we talk about the future of the legal profession is that lawyers are struggling and that there are too many lawyers. This is nonsense. When we talk about this we find that consumers have begun to ignore lawyers; there are also a number of lawyers who don’t like lawyers; the basket I see is the big technology basket. When we look at how technology influences the practice of law or new types of practice (paralegals to process documents; LLT development) there is a large discussion that this may undermine the practice of law ethically and economically.  
At Avvo we have built the largest market place of lawyers and consumers. A hundred million consumers come to Avvo annually and $260,000 U.S. lawyers use this as a marketing place. Go online and ask a question to see what happens. Few people represent the consumer as well as I do — that person who is the bread and butter of most lawyers and how they make a living.

Some may feel that the term “trade association” is pejorative. The issue is if we are not a trade association, how do we really focus on the needs of consumers in California? How much data have you reviewed today about what lawyers want from lawyers? Lawyers say there are  too many lawyers and too little business. But that is all about the bar and lawyers, not the consumers. I do get concerned when a voluntary bar does not have a strong purpose in investigating what the consumer needs. We as lawyers are the worst in understanding what consumers need. Avvo talks to 25,000 consumers each year through product research. They tell us that they don’t know what lawyers do but they do believe that lawyers are expensive.

Among those who make $84,000 or more annually, less than half use lawyers. If you include low-income people, 82 percent are not using lawyers. They may try to represent themselves. Courts are bursting. Legal Zoom is taking a document processing approach and they are trying to put more lawyers in the system, but really what they are doing is helping people resolve their problems without a lawyer. The response is not to go after them for the unauthorized practice of law, but it’s not about you, it’s about them. The only boss is the customer; he can fire everyone. Think about where other tech companies have fired industries (Uber, Netflex) and now they are starting to chop the legal industry. Lawyers are asking what does this mean to us, but what about consumers?

What type of bar, what regulations, does the consumer in California want and need? They are looking for simplicity. But as lawyers we make things complicated.

When people take things into their own hands, they fail to complete their legal tasks because they did not understand that they had anything left to do. They could not accomplish the simplest task. We need to talk to the consumer and find out what they need and then build what they need. It’s not about what lawyers and what they want.

Technology and legal services: what happens when they meet? What are the objectives of a mandatory bar and how does the voluntary bar alter them? Voluntary bars, to make money, tend to be trade associations and to be more interested in the “supply side” of lawyers. You may have to be more aggressive, just a bit, if you are mandatory, not a trade association.

Vanessa Kirker Wright, chair of the Family Law Section of the State Bar, spoke against de-unification. The Family Law Section has adjusted to open meetings rules. Large urban areas will dominate in a split bar. Geographical diversity will not be retained. Membership, money and impact will be lost if we separate.

Another factor is the strong relationship we have forged over the years with the Legislature; we do not want to lose the statewide impact and the ability to hear from family law attorneys all over the state. It was the Family Law Section that began the limited scope representation – breaking down the representation to make it more affordable for clients.

Robert Harris, of the State Bar’s Business Law Section, said Sections exist to educate the public and to improve the practice of law. We focus on small firms where often young lawyers have high debt. The BLS has the greatest variety of practice areas among its 8,000 members. Standing committees have more than 300 members.

The sections are in peril at this point. This is about the survival of the sections:
In bad times, membership goes down. We have major roadblocks:

  • Website content taken down and is essentially non-functional; nothing has happened.
  • Open meetings – I have spent hundreds of hours on compliance. You can’t get anything done outside of a public meeting.
  • Lack of control over staff deployment, time etc. In a voluntary organization you would see more responsiveness
  • Antitrust concerns raised by the North Carolina Dental Board case.

We believe the time is right to explore how the sections might survive. He supports de-unification as long as all the sections are included, that all surpluses be transferred to the new entity, that the bar cooperate in good faith with the transfer, that a dues check off remain, that logos and trademarks still be allowed use by the new entity, that they receive email and contact lists and that the bar provide services for not less than three years. He opposes immediate or rash action.

Liz Neely, executive director of the Nebraska State Bar Association, said the Supreme Court de-unified the bar, taking away $98 of the annual attorney licensing fees to oversee the regulatory aspects such as licensing and bar admissions.

She said the bar lost 25 to 35 percent of dues revenue after de-unification. Government lawyers and inactive lawyers dropped off. They also lost out-of-state inactive practitioners (40 percent). There was a 25 percent loss in section members, but they eventually reached 90 percent because they are now more focused on service.

To survive a voluntary bar must focus inward, not at the courts. They will look at all that they do and how can they better strengthen their members. The courts and legal system will bear the brunt of the cuts.

If you do decide to de-unify — give the effort time and also work to define what you are doing.

Give thought to what is mandatory and not limit to the Nebraska definition. Mandatory uniform bars are organized in different ways. There are things that can be done to strengthen the mandatory bar.

This is an opportunity to re-invent yourselves, but you need to go into it “eyes wide open.”

Charles Crouch, of the newly formed California Lawyers Guild, said he supports de-unification along the lines of the Mangers-Mendoza proposal. The build would cooperatively with the State Bar, the chief justice and others in doing so.

Only the Business Law section members are involved in the guild. It’s there as a “refuge” to help Sections work in ways they otherwise cannot. It’s a “safe harbor” and they have raised private funds to support it. The chief concern is to support the survival of the sections, not to poach or cannibalize.

Jack Osborn, of the Conference of California Bar Associations, talked about the completely independent organization that spun off from the State Bar in 2002. The group is the voice of attorneys in California on improving the law. It has originated 115 laws, and has been more successful than when they were under the State Bar. The Legislature relies on the fact that their recommendations have been vetted statewide.

In 1997, when there was chronic disharmony due to structural tension, they were emblematic of how the State Bar had become too political.
The cost for joining is $35/each for groups; we work with the State Bar and also work with the State Bar Sections. We are the only statewide forum for attorneys to voice their views on the practice of law. This is the reason we exist. All legislation, no matter how mundane, will be political. In advocating before the legislature, as a group of attorneys, it can be seen as self-serving.

Perceptually, advocating a position can be seen as self-serving. Creating a State Bar is full of risks; there is a question as to whether they would survive. Is there a role for a state-wide organization? We believe that there should be an independent role for the voice of attorneys. Membership is now 300; it was 750, but we are vibrant and we are successful. We have more successfully passed laws that benefit the public than any other organization.
I am confident that we can come up with a way to protect the bar but also to create an organization for the voice of attorneys in California.

More minority orgs; and smaller local bar associations which function as local organizations. It is clear that there is so important a role for Sections and that they will survive. They will need to retool, but it can be done.

They created a new organization with a completely new logo, although we are mindful of our history.

Perry Segal, immediate past chair of the Council of State Bar Sections, said the Sections oppose de-unification by 15:1. The sections solve problems. Many of those on the other side are friends. A plan is an idea, but the devil is in the details. Implementation is the issue. We need to study first, then decide. The cart and horse are reversed. Things can and will go wrong if we are not careful. We could kill ourselves, if not done well. My job is to see all sides for the Sections. I would study first, then make a plan. This is conclusion-based planning. Not the way to do this.

We’ve been looking this for months. We concluded that it’s not feasible. We are concerned at the risks. We do see ourselves as part of the regulatory framework. Our charter is to “make better lawyers” and we think that is what we do. We are spending the next nine months to look as how the funding will work, given the higher overhead costs. If we can recover that money, working with Leah Wilson, we won’t have a problem. She has been incredibly forthcoming.

Liz Neely’s comment was relevant here. The voluntary bar had to become more member focused and less focused on the good of public protection and the good functioning of the legal system.

Perry: In almost every case, members are lost. My worst case scenario is losing one-third to one-half of members. That leads to lost revenue. If our focus is public protection, then we have lost something important. We have lost the people we are serving and that’s what we fear we will lose.

Tore Dahlin of Californians for Attorney Regulation Reform, produced documentary, “Scandal at the State Bar.” Quentin Copp and Peter Keene were interviewed, both of whom were instrumental in earlier de-unification efforts. California Lawyer did a survey; two-thirds of those responding said they did not like the State Bar. It was too political and bureaucratic. The most popular form by 2-to-1 majority they opted for the current structure. Then a plebiscite was passed and two-thirds voted to retain the structure.

The plebiscite was barely over and the State Bar was shut down. The fact of a lack of support led to dues veto. Be careful that you don’t err in thinking that there is less support than you think. If the Mangers proposal were to be adopted, would some of the good feel come back?

We advocate moving the State Bar Court. The Futures Commission felt that there was a perception of conflict in having the State Bar Court moved. At the time the chief justice said there was no time to do so. One year later the Bar Court collapsed. It has not functioned well for two subsequent decades. It should move to the Superior Court.

Lenore Albert, said she thinks there is an antitrust violation and that Section 2 of the Sherman Act makes this clear. There is no state action (Goldfarb). The State Bar is in “real trouble.” If we had the State Bar in the Constitution there would be immunity.

The regulatory side of this State Bar is not working. There is intentional lack of prosecutorial attention of defense firm conduct.