Legislature and State Bar at Odds Again

By Larry Doyle

What is the California State Bar? And what is it supposed to be doing?

Right now, the Bar and the Legislature don’t seem to agree on an answer. Which is creating extreme tension as the current legislative session approaches its end.

The State Bar is the agency charged with licensing and regulating the state’s attorneys, and its primary purpose, as set forth in Business and Professions Code section 6001.1, is protecting the public. The Bar has been tasked by the Legislature and the Supreme Court with other things, such as advancing access to legal services and administering a Client Security Fund to reimburse people injured by bad attorneys. However, “(w)henever the protection of the public is inconsistent with other interests sought to be promoted,” the statute says, “the protection of the public shall be paramount.”

There is ample evidence that the Bar has not done a good job of meeting that paramount charge. The California State Auditor, which is required to audit the Bar at least every two years (B&P §6145), and more often if the Legislature wills it, has given the Bar’s attorney discipline process low marks in three of its most recent audits, those of 2022, 2021, and 2015. The 2022 audit, released in April, was titled: “The State Bar of California’s Attorney Discipline Process: Weak Policies Limit Its Ability to Protect the Public From Attorney Misconduct.”

These problems in fulfilling its core mission notwithstanding, the Bar has always seen its role as somewhat broader. With the Legislature’s blessing, the Bar had long been engaged in efforts to increase the availability of legal services to those who can’t afford it. It also has added to its core Mission Promoting Diversity and Inclusion in the Legal profession. But in 2018, the Bar’s Board of Trustees (BOT) was presented with a Legal Market Landscape Report that inspired them to pursue what many saw as a higher calling. The report convinced the BOT that there was a massive shortfall in the availability

Larry Doyle is a veteran of decades of experience with the California Legislature, including 18 years as Chief Legislative Counsel for the California State Bar. He also is a former member of the State Bar’s Committee on Professional Responsibility and Conduct and is currently a staffer for the SCBA. He can be reached at larry.doyle@sacbar.org.

of affordable legal services; so great a shortfall that there was no way it could be met with our existing or foreseeable supply of lawyers. The BOT determined that it was the Bar’s job to address this problem.

The BOT’s first responded by creating a Task Force on Access Through Innovation of Legal Services (ATILS). Well-stocked with non-lawyers and technological innovators, the ATILS task force issued a report in late Summer 2019 recommending some major changes in the practice of law. Mostly the recommendations involved removing or relaxing existing prohibitions against the practice of law by non-lawyers (the Unauthorized Practice of Law, or UPL) to permit trained non-lawyers to provide designated legal services. The report also recommended removing impediments to ownership of law firms and other legal services delivery mechanisms by non-lawyers, including ethical rules (particularly California Rule of Professional Conduct 5.4).

The ATILS report was sent out for public comment and the response was overwhelmingly negative. Roughly 75% of the commenters, mostly lawyers, condemned the task force recommendations as opening floodgates to fraud and financial exploitation of the public. Supporters of the recommenda-

tions dismissed the opposition as a bunch of greedy lawyers trying to protect their bottom line.

In the days when the State Bar governing board was comprised primarily of lawyers elected from geographic districts by other lawyers, the overwhelming negative comment likely would have been the end. But the Legislature recently reorganized the Bar’s governance so that it is now completely appointed, not elected, and has nearly as many non-lawyers (6) as lawyers (7). So the new BOT essentially ignored the negative public comment and proceeded to explore some of the recommendations by creating working groups.

The first of these groups, a California Paraprofessional Working Group (PWG) was charged primarily with addressing the idea of permitting non-lawyers to provide legal services. The second, the Closing the Justice Gap Working Group (CJGWG), was more broadly charged to analyze other possible means to deliver legal services to the people, including non-lawyer ownership of legal service delivery mechanisms. A key element of this would be the creation of a “sandbox,” a running pilot program through which alternative legal service delivery proposals can be tested, theoretically without fear of public harm.

The response from the Legislature was not positive. In December 2021, the chairs of the Senate and Assembly Judiciary Committees, Senator Tom Umberg and Assemblymember Mark Stone, sent a letter to the Bar warning that some of the ideas under consideration, particularly the idea of permitting the ownership of law firms by non-lawyers, would lay waste to ethical standards that require attorneys to place the interest of their clients first, as opposed to corporate fiduciary law that requires stockholder interests be given primacy.

The letter’s admonitions seem to have fallen on deaf ears. Both of the working Groups continued to hold meetings and work towards non-lawyer provision of legal services and ownership of law firms.

On June 15, the same Legislators escalated by amending a bill, AB 2958 by the Assembly Committee on Judiciary that Stone chairs, to effectively bar the Bar from proceeding down its current course – or at least imposing narrow guardrails to restrict what they do. Under the bill, the Bar committees would be required to prioritize protecting individuals from unscrupulous actors above all things, further prioritize increasing access to justice for indigent persons, and not abrogate existing statutory restrictions on the unauthorized practice of law.

More specifically, the bill would bar the committees/working groups from doing anything to change the law that currently prohibits “corporate ownership of law firms and splitting legal fees with nonlawyers, which has historically been banned by common law and statute due to grave concerns that it could undermine consumer protection by creating conflicts of interests that are difficult to overcome and fundamentally infringe on the basic and paramount obligations of attorneys to their clients.” The bill would further bar the Bar from expending “any funds, regardless of the source, on activities that do not meet the requirements of this section.”

The Bar did not like the amendments, of course, with many of the proponents of change accusing the amendment authors of protecting the interests of lawyers, not the public. But the Bar’s options to fight the amendments is constrained by the fact that AB 2958 is also the annual State Bar Fee bill, whose passage is essential to the Bar’s continued existence because it is needed to continue the Bar’s authorization to collect the attorney license fees that support its operations. Failure to enact a Fee Bill, as has happened in the past, at best severely impacts the Bar until follow-up urgency legislation can be enacted, and once resulted in a two-year near shutdown for the Bar. Bottom line: The Bar can’t threaten to kill this bill (even if it could) without risking its own existence.

Instead, the Bar leadership has been trying to convince the Legislature that studying these issues poses no risk to the public, that anything substantive proposed by the working groups would require legislative approval any, and that the working groups should be allowed to continue their efforts. Meanwhile, at least one of the working groups, the CTJG, continued to meet to consider the “sandbox” concept amidst some grumbling by members over the “bullies” in the Legislature.

On August 11, as this article was going to press, AB 2958 was amended again – but not in any way that would seem to please the Bar. Outside of some technical language changes, the main thing the amendments do is require the Bar to report by January 15, 2023 (the bill is an urgency measure and will take effect upon signature, not January 1 like regular bills), on how much the Bar has spent on things related to the creation of a sandbox or the licensing of paraprofessionals. Senate Judiciary Chair Umberg has been quoted as saying Bar leaders “are wrong-headed in their priorities and in my view, they’re misusing funds.”

August 25 is the last day for further amendments to be made to the bill.

Just another day at the junction of State Bar and California Legislature.