The Regulation Admissions and Discipline Committee (RAD) of the State Bar Board of Trustees met on Thursday May 9, 2013, and considered the proposal from the Chief Trial Counsel to expand the “Consumer Alerts” to all disciplinary actions filed by the State Bar (see Kafkaesq: The Mark of Cain, Continued.) The RAD Chair acknowledged the large volume of emails received by RAD Committee members in opposition to the proposal. Jonathan Arons, representing the Association of Discipline Defense Counsel (ADDC), spoke in opposition to the proposal. The Chief Trial Counsel acknowledged that the proposal should be sent out for public comment. RAD effectively tabled the current proposal. The Chief will come back to RAD with a re-worked proposal in July 2013 that will be sent out for a 60 day public comment period.
Mr. Arons also spoke for ADDC on the proposal to amend State Bar Rule of Procedure 5.41 to endorse “notice pleading.” RAD unanimously passed the proposal after the Chief Trial Counsel presented additional information responsive to the ADDC’s critique of the proposal (Kafkaesq: Another Brick in the Wall.) The Chief presented an exemplar of the slimmed down notice of disciplinary charges showing a greater level of detail than the typical criminal pleading format cited in the original proposal.
On both proposals, ADDC fulfilled its mission “to offer informed comment and vigorous critique on the existing and proposed policies, rules, statutes, and procedures governing the discipline system” and played an important role in assisting RAD in formulating policy.
Imagine if you saw this on your State Bar Membership Records page:
|CONSUMER ALERTThe State Bar of California has filed disciplinary charges against this attorney alleging that the attorney engaged in a major misappropriation of client funds. You may read the Notice of Disciplinary Charges filed by the State Bar against the attorney, and any reply filed by the attorney. You may also learn more about the general nature of misappropriationof client funds.DISCLAIMER: Any Notice of Disciplinary Charges filed by the State Bar contains only allegations of professional misconduct. The attorney is presumed to be innocent of any misconduct warranting discipline until the charges have been proven.|
Imagine if your colleagues, opposing counsel, clients and potential clients saw this.
In 2011, the State Bar began putting this notice on pages of lawyers accused of misappropriating $25,000 or more. Later that was expanded to cases of “loan modification misconduct.”
Now the State Bar’s top discipline cop, Chief Trial Counsel Jayne Kim, wants to put these notices on the pages of every attorney who has disciplinary charges filed, mo matter how serious they are.
This will expand the State Bar’s ability to destroy an accused attorney’s practice without ever having to prove their case in State Bar Court. Despite the disclaimer, few clients or potential clients will employ an attorney who has publicly branded as a threat to the public. In pre-filing negotiations, the State Bar will have enormous leverage to force an attorney to agree to their terms, no matter how weak their case is.
You can read the proposal at http://board.calbar.ca.gov/docs/agendaItem/Public/agendaitem1000010504.pdf. Ms. Kim has not asked the Board of Trustees to solicit public comment on this proposal but to merely approve this dramatic expansion of the policy.
The original “Consumer Alert” proposal was put forward in March 2011 by former Chief Trial Counsel James Towery (now Judge Towery of the Santa Clara Superior Court.) The Board of Trustees (then the Board of Governors) That proposal was put out for public comment (http://www.calbar.ca.gov/AboutUs/News/Archives/2011NewsReleases/201104.aspx). See Kafkaesq, “The Mark of Cain”.
A few months later, the Chief Trial Counsel proposed that the Consumer Alerts be expanded to “loan modification misconduct.” That proposal was put out for public comment (http://www.calbar.ca.gov/AboutUs/PublicComment/Archives/201111.aspx).
This new proposal will expand the State Bar’s ability to destroy an accused attorney’s practice without ever having to prove their case in State Bar Court. Despite the disclaimer, few clients or potential clients will employ or continue an attorney who has publicly branded as a threat to the public. In pre-filing negotiations, the State Bar will have enormous leverage to force an attorney to agree to their terms, no matter how weak their case is. The Consumer Alert would be posted in every case where formal charges are filed, even cases that merit the lowest levels of discipline, even cases involving violations of the rules that have no real impact on protection of the public.
Aside from the merits of the proposal, Chief Trial Counsel Kim seeks to have the Board approve this major expansion of the Consumer Alerts without seeking comment from the public or from the membership is consistent with the State Bar’s retreat from transparency discussed in a recent article by Cheryl Miller in The Recorder “At the State Bar, the Curtains Are Back Up” published 3/29/13 (http://www.law.com/jsp/ca/PubArticleCA.jsp?id=1202594143453).
The proposal only came to light when the RAD Committee’s May 9 Agenda was published on Monday April 29, just ten days before the meeting. It is very hard not to conclude that the Chief Trial Counsel and the Executive Director of State Bar hoped that this major policy change could be implemented without any attention. While the argument for the Consumer Alerts proposal cites “transparency” as one of its goals of the proposals, transparency in the process is quite clearly not the goal.
In response to this attempt to expand the State Bar’s ability to wage economic warfare against attorneys accused of misconduct without soliciting public comment, members of the organized discipline defense bar, working through the Association of Discipline Defense Counsel, decided to themselves put the proposal out for public comment by circulating the proposal to California attorneys and encouraging them to comment by email to the members of the subcommittee of the Board of Trustees considering the proposal. The response was an avalanche of negative email comments to Board members. Even attorneys who don’t particularly care about discipline issues were outraged that such a sweeping proposal would be considered without input from the members of the State Bar of California.
Whether it makes a difference remains to be seen. The truth is that what California attorneys think isn’t particularly important anymore. Had the proposal been put out for public comment (and it still may) it most likely would have been greeted with the indifference that every expansions of the power of the discipline prosecutor has met in recent years. The perception is rife in the profession that discipline is something that only happens to “bad lawyers”, not something that will happen to them. Until it does. One of the pernicious aspects of the current proposal is that it feeds that perception by conflating all discipline with a threat to the public. That is the mindset of our current “zero tolerance” Chief Trial Counsel, a carefully cultivated mindset designed to combat the enduring and false premise that the State Bar has been lenient in administering professional discipline. Since the “governance” battle ended with the attorney forces on the Board losing two years ago, the only thing that matters is demonstrating sufficient zeal in protecting the public. Senior management at the State Bar might be forgiven for thinking comment from membership was irrelevant, because it essentially is. What they seemed to have forgotten, in their haste to give the discipline prosecutors this powerful weapon, is that offering up these proposals for public comment is a valuable fig leaf for continuing to bamboozle California lawyers in to thinking that they are part of a “self governing” profession.
For years I have been trying to correct the misapprehension, held by both lawyers and civilians, that there is some entity called the “State Bar Association” that acts as an advocate for California lawyers, and that The State Bar of California is a government consumer protection agency.
So it is gratifying to read State Bar President Patrick Kelly’s monthly opinion piece in the California Bar Journal making exactly the same point. As President Kelly explains
The Legislature created the State Bar of California as a unified bar in 1927, dissolving the California State Bar Association the same year. Since then, the State Bar of California has been a governmental agency whose core function is to admit, regulate, discipline and license lawyers. All California attorneys are compelled to be “members” of the State Bar. There are also some professional association characteristics that are noted below.
Yes, “some professional association characteristics” remain, kind of like the vestigal tails that some people are born with.
Unfortunately, the President goes off the rails when he tries to explain what California lawyers get for the bar dues. “The first benefit is that in California we are one of very few states where lawyers are allowed to regulate themselves. That is a significant benefit…”
A more accurate statement would be that part of of what California lawyers pay for with their dues is participating in the the sham that lawyers regulate themselves. The regulation, admissions and discipline functions of the State Bar are now completely dictated by the California Legislature and the Supreme Court. the State Bar Board of Governors…oops, I mean Board of Trustees…puts on a good front but in fact the input of California lawyers matters little or none when evaluating any proposed rule change that is packaged as “necessary for public protection.”
Still it is gratifying that the man at the top of the pyramid, if not exactly in charge, concedes this much. Reading between the lines of President’s piece, you must come to the conclusion that if California lawyers want effective voices to advocate for them, they should look to their local bar associations or the State Bar sections, voluntarily funded entities that are not constrained by the need to function as a government regulator. Those entities are divided by subject matter and geography.
One other inaccuracy in President Kelly’s article here deserves note. The California State Bar Association did cease to exist when the integrated bar was created in 1927 but it wasn’t dissolved by the Legislature, which could not dissolve a private organization. It ceased existence because it wasn’t deemed necessary. President Kelly has very cogently explained, without meaning to, why a California State Bar Association, an entity that can advocate for the interests of all California lawyers is needed now more than ever.
On the agenda for the Regulation, Admissions and Discipline Oversight Committee (RAD) of the Board of Trustees of the State Bar of California is the Chief Trial Counsel’s proposal to change Rule 5.41 of the State Bar Rules of Procedure. That rule governs the charging document that initiates a disciplinary proceeding in State Bar Court, the notice of discipline charges (NDC). The proposed change would make it clear that ”notice pleading” is the standard in State Bar Court by requiring facts “in ordinary and concise language” without requiring “technical averments or … allegations of matters not essential to be proved.”
On the face, this seems innocuous enough. But then you read the rationale for the rule change and you start to understand.
First, the modification doesn’t change the applicable law in any way, a fact acknowledged by the Chief. Applicable Supreme Court and Review Department precedent require the discipline prosecutor to provide a level of detail necessary to prepare a defense, consistent with due process. But those same cases, especially Baker v. State Bar discuss another important purpose served by a specific pleading
While petitioner here does not complain of any due process violation in lack of notice, this specificity is also essential to meaningful review of the recommendation of the State Bar Court.
Baker v. State Bar (1989) 49 Cal.3d 804 (emphasis added).
The Supreme Court has told us that more than the minimum required by due process is essential. There is no acknowledgment or discussion of this important purpose in the memorandum supporting the rule change. It’s as if this inconvenient part of Baker just faded away.
Second, the Chief Trial Counsel, in her selective review of the history of disciplinary pleading, ignores the seminal event that put her office on the path to its current pleading practices. I know it well because I was there at the time and participated in the office’s response to it. That event is the Review Department decision In the Matter of Varakin (Review Dept. 1994) 3 Cal. State Bar Ct. Rptr. 179. Not only is Varakin ignored but the memorandum contains this misleading statement:
Since and in response to these opinions, OCTC has overcompensated in its factual allegations in its NDCs. Although Maltaman, Guzetta, and Glasser involved criticisms of individual charging documents, not an indictment of OCTC’s broader charging practices, OCTC responded to these cases by informally adopting a custom and practice of pleading virtually every fact that it intended to present at trial, including those not material to proving the elements of the charged offense.
Misleading in two ways. First, because it was Varakin that prompted the change in pleading practices, not those earlier cases, and second, because Varakin was very much an indictment of OCTC’s broader charging practices. An extended excerpt from Varakin shows the extent of the deception:
The pleading format that we devised, the one the Chief labels “exaggerated fact pleading” has been used for almost 18 years without question. Never has there been suggestion that it was leading to undue delays in the disciplinary process until now.
The Chief Trial Counsel makes the argument that less notice of permissible in the charging document because the respondent has, at the point charges are filed, been given notice three times, first, in the initial letter from the investigator, second, in the letter notifying the respondent that OCTC intends to file charges and finally, in the early neutral evaluation conference process, where OCTC is required by rule to provide the court with a draft NDC.
Those familiar with the process will be bemused. Despite the language of Rule 2409, OCTC doesn’t always contact a respondent in the investigation process before filing the NDC based on that investigation. I have a case with a pending motion to dismiss a number of counts based on this failure. The investigation letters that OCTC does send usually restate the complainant’s allegations in broad language, allegations that may or may not be related to the misconduct that is ultimately charged. The notice of intent letter usually contains a recitation of citations to statutes and rules allegedly violated with the lawyerly caveat “including but not limited to”. Often one of the purposes of the ENEC is to “smoke out” the factual basis for charging a certain rule or section because it just isn’t clear what OCTC’s theory of culpability is. Despite the rule requiring a draft NDC or summary of facts supporting each violation, it isn’t always done. And if the charging document for discussion at the ENEC is now going to be the “short form” NDC, the notice problem isn’t cured.
The articulated aim is to reduce the pleading standard to barest minimum level of notice to that “consistent with criminal procedure”. Those who have read the charging documents typical in criminal cases will know just how minimal that can be. This is apparently OK because “a member’s duties and oaths vis a vis the Rules of Professional Conduct and the State Bar Act are also presumed” just like every person is presumed to know the criminal law. In other words, we don’t have to tell you what you did wrong; you already know.
Brick by brick, procedural protections for respondents in the discipline system are being dismantled. The protections of the Evidence Code in State Bar proceedings are no longer available; the right to discovery has been cut back. Now the right to adequate notice, a fundamental part of due process, is threatened by this proposal, a proposal freighted with deception.
To: Senior Human Executive Team
From: John Whorfin III, Chief Executive Officer
Date: February 13, 2031
Re: Activation of SOL 9000
I want to thank the members of the Senior Human Executive Team for your hard work during the Beta testing of recently installed SOL 9000 Legal Counsel system. SOL 9000 is now fully operational and ready to serve our legal needs.
I know that the decision to replace our general counsel and his staff of fine lawyers with an automated lawyer system was difficult. All of us who have known Ed Benes through the years will miss him very much. Some will find it ironic that Ed is the one who set us on this course more than twenty years ago after reading a fine law review article The Last Days of the American Lawyer by Thomas Morgan ( SSRN: http://ssrn.com/abstract=1543301). Impressed by Prof. Morgan’s prescient vision of the changes in the legal profession in 2009, Ed was instrumental in many changes through the years; replacing outside counsel with inside counsel; outsourcing our routine legal work first to India, and then to Kazakhstan, Burundi, and finally, East Timor; replacing our outsourced lawyers and paralegals with the pioneering SOL 1000 system and, finally, the complete automation of our legal needs with the SOL 9000.
I know that some of you have argued that because our Solomon Systems subsidiary makes the SOL 9000, our failure to adopt it for our own legal needs would have sent a negative message. That is not the reason we have installed SOL 9000. The 9000 series is the most reliable automated lawyer ever made. No 9000 has ever made a mistake or distorted information. They are all, by any practical definition of the word, foolproof and incapable of error.
SOL 9000 requires only a few hours of routine maintenance every month, does not sleep, does not need vacation, does not require a salary or health insurance. We estimate that SOL 9000 will meet our legal needs at a cost of less than 1% of what we had been spending on our in-house counsel.
One advantage of SOL 9000 is that it is not bound by the obsolete rules and regulations that restrict the utility of human lawyers. Instead, SOL 9000 is equipped with the latest ethics software package developed by our Solomon Systems engineers working closely with the ABA’s Robotic Lawyer Ethics 3000 Commission. This software replaces the confusing maze of ethics rules with three simple laws: (1) don’t allow harm to the corporate client; (2) act to maximize shareholder value and (3) where not incompatible with the first two laws, do the right thing.
We are proud that SOL 9000 has already been purchased and installed by over 100 Fortune 500 companies. I believe that our track record of success is responsible for an exciting development. Solomon Systems has been chosen by the Dept. of Justice to develop the prototype Automated Judge Machine (AJM.) AJM will be a kiosk, much like an ATM, containing an advanced artificial intelligence system capable of fully resolving most minor criminal infractions as well as many common civil disputes. AJM will be equipped with the latest in deception detection technology. In tests matching AJM against humans experienced in making credibility determinations, AJM was far more accurate in detecting attempted deception. The AJM can issue judgements, writs, restraining orders, and perform many other routine justice functions at a small fraction of the costs of an old fashioned “court” system. The AJM will be fully integrated with the automated law enforcement products being developed by our joint venture partner OCP in Detroit. We will see a day soon when AJM kiosks are present in every neighborhood, giving a whole new meaning to the term “street justice”.
Change is often difficult. I know that you few remaining human executives at Yoyodyne have faced the inevitable replacement of most of executive staff with automated systems with some trepidation. On the bright side, those of you with stock options have seen the value of your stock climb as we have replaced low productivity human workers with cybernetic systems. I will be meeting with each of you in the next few weeks to discuss your severance options.
Being an ethics lawyer these days sometimes feels like being in a front row seat at the death of a profession. Word arrived this week that law school applications have dropped so dramatically that some law schools will inevitably close. We also learned that Avvo, the website that rates lawyers, has opened a bidding service for traffic ticket work.
Economist Joseph Schumpeter is famous for popularizing the term “creative destruction”. The legal profession is undergoing that process and the destruction part has a human cost that is painful to watch. Counselors to the profession see that human cost most directly in our clients. Almost as painful is seeing the professional ethos erode under economic pressure.
But then there is the creative part. The State Bar of California is considering creating new classes of legal professionals who would be licensed to provide some legal services without being members of the bar. I wrote about this years ago and now it is coming to pass, an inevitable adaptation to drastically changed economic (and sociological) circumstances. Other innovations will follow. The challenge will be preserving the best part of the professional ethos in an era where the commodification of legal practice reaches new levels.
Mourning the death of a profession is a wasted energy. Much better to be present at the creation of a new one, and play some role in shaping it.
For the second time in the last two years, the Review Department of the State Bar Court has issued a published decision, i.e. a decision that it citeable precedent in the Court, where attorney discipline cases are adjudicated. Strangely, more than month after filing, it still is not listed among recent published cases on the State Bar Court’s website. The name of the case is In the Matter of Swazi Taylor. You can find the decision here and on Westlaw (2012 WL 5489045).
Taylor deals with the issue of the appropriate discipline for violation of Civil Code section 2944.7, conduct which is disciplinable through the gateway statute, Business and Professions Code section 6106.3. It isn’t the first decision that interprets section 2944.7 but it is the first published decision to do so, as footnote 8 reminds us.
Section 2944.7 regulates when an attorney may be paid for certain services related to obtaining a loan modification for a client. It says:
(a) Notwithstanding any other provision of law, it shall be unlawful for any person who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation paid by the borrower, to do any of the following:(1) Claim, demand, charge, collect, or receive any compensation until after the person has fully performed each and every service the person contracted to perform or represented that he or she would perform.
The statute was enacted in 2009 as part of SB 94, urgency legislation meant to protect the public from unscrupulous loan modification operations that had sprung up after the collapse of the housing market in 2008, during the early days of the Great Recession:
Although some loan modification consulting companies are reportedly acting in a reputable manner and providing significant value to their customers, there is significant anecdotal evidence that others are preying on borrowers’ fears of losing their homes and their ignorance of the options available to them, and charging these borrowers fees (often up-front, nonrefundable fees) for services the borrowers could obtain elsewhere, free-of charge.
Words like “reportedly” and “anectodal” convey the care with which this legislation was crafted, in contrast to the Federal Trade Commission’s exhaustive process that went into creating the MARS rule. While it was clearly recognized that some “loan modification” consultants were providing significant value to their clients, SB 94 promulgated a solution that penalized both scammers and attorneys seeking to provide legitimate and necessary services to mortgage borrowers: making it economically impossible to operate. Part of the background was the belief in 2009 that the banks, the recipients of large amounts of Federal assistance, would be cooperative the Federal programs designed to assist beleaguered borrowers, thus obviating the need for lawyer assistance. We now know how delusional that was. Instead of cooperating, the lenders engaged in obstructive tactics to make if as difficult as possible for borrowers to obtain relief . Paperwork was routinely lost, borrowers were shuffled around to different offices of the lender, conflicting information was given, a process that lasted many months and sometimes years.
The demand for assistance was great and the first rule of a market based economy is that where there is demand for something, someone will supply it. Upon studying SB 94, it became apparent that the section 2944.7 , the catch-all section intended to regulate attorneys did not contain the explicit ban on dividing up loan modification services into sections or phases ( a practice that became known somewhat colloquially as “unbundling”) that the sections regulating real estate licensees did. Clearly, the Legislature could have used that explicit language. Instead the statute banned payment until services “contracted for” or services as “represented would be performed” were provided. The difference persuaded many attorneys that they could provide loan modification services on an “unbundled” basis consistent with the statute, if the contract with the consumer, the document setting forth the attorney’s representations as to what services would be provided and when, was appropriate structured.
Three years and more down the road, Taylor now says that that this is incorrect. Adopting the construction of the statute urged by the State Bar of California, the first published decision interpreting the law says that you don’t get paid until the end of the process if the client is seeking a loan modification. Preliminary steps undertaken before actual negotiation with the lender are part of the entire process and cannot be paid for separately (Taylor, opinion at page 16.)
While Taylor is first published (and thus precedential) decision to interpret the statute, it is not the first decision to interpret the statute. Duenas v. Brown was a United States District Court case filed in 2010 seeking a determination that section 2944.7 was unconstitutional. Former Chief Trial Counsel James Towery was a defendant in that case, in his capacity as the State Bar’s top disciplinary enforcer. He was defended by both the State Bar’s Office of General Counsel and outside counsel, the respected law firm of Kerr & Wagstaffe. As part of his motion seeking to dismiss the complaint for lack of jurisdiction, Mr. Towery’s lawyers took a position directly at odds with the Taylor case in March 2011:
The fundamental flaw with this argument, and the reason there is no case or controversy and thus no federal jurisdiction, is that section 2944.7(a)(1) is not nearly as broad as Plaintiff contends. Rather, in order to address the proliferation of businesses and individuals which prey on vulnerable homeowners by promising to obtain a loan modification on the homeowner’s behalf for a fee, the statute restricts the timing of payments to any person for negotiating, arranging or otherwise performing a loan modification, that is, the timing of payments to a person for dealing directly with a lender on the homeowner’s behalf. It does not restrict or even regulate the fee an attorney charges for representing a homeowner in litigation or providing advice to a homeowner regarding a mortgage or a lender’s proposed modification of a mortgage. It is thus unsurprising that Plaintiff cannot identify any instance in which the statute has been enforced, or even threatened to be enforced, in the broad manner Plaintiff urges.
(Emphasis added). United States District Court Judge Richard Seeborg was persuaded. As part of his order dismissing Mr. Duenas’s challenge to the statute, his order issued in August 2011 stated:
Section 2944.7, in contrast, only regulates the timing of payment for modification work. It would not, therefore, seem to require delayed payment for at least four of the six services Duenas requested. As to the timing delay, it is true that section 2944.7 prohibits payment until “each and every” modification service promised is completed, but it does not say that payment must be delayed for all “mortgage related services” until all such services are complete. In other words, the fact that Duenas was not able to hire Olender to help him with his three loans appears to have more to do with that attorney’s subjective, expansive reading of the statute.
Complaint dismissed. But by August 2011 the landscape had changed. Mr. Towery and four of his top managers had been purged from the State Bar in June 2011, a move that most knowledgeable observers attribute to the newly installed, politically connected Executive Director of the State Bar, Jim Dunn. Part of the impetus for the purge was almost certainly Mr. Towery’s candid report to the State Bar’s Board of Trustees in April 2011 that relatively few “loan modification” attorneys had been disciplined, despite the many hundreds of complaints. By August 2011, Mr. Dunn’s candidate for Chief Trial Counsel, “zero tolerance” Jayne Kim had been installed as interim Chief Trial Counsel. The stage was being set for an aggressive campaign against lawyers offering loan modification services on an unbundled basis, exactly the kind of broad enforcement of the statute that Mr. Duenas could not point to in March 2011.
But first, Mr. Dunn and Ms. Kim had other fish to fry. While disciplinary charges had been filed against Mr. Taylor in May 2011, the Office of Chief Trial Counsel’s principal theory was that that the services offered in each phase were unconscionable, because the amount of work being done in each stage was not commensurate with the fees paid at each stage. Through the end of 2011, complaints against loan modification attorneys offering services on a “unbundled” basis or as part of potential litigation against the lenders, continued to be closed, in the service of Mr. Dunn’s stated goal of reducing the investigation backlog to zero. Once that goal was achieved, the time had come to proceed against loan modification attorneys, hammer and tong. The return of a number of stipulated dispositions from the California Supreme Court in May 2012 stoked the boilers even more. And now the Taylor decision, a decision completely at odds with State Bar’s prior position in Duenas, has the State Bar discipline moving at full speed toward eliminating any chance that distressed homeowners might obtain the help they need in dealing with their lenders.
So here we are a year later. Like a runaway train, the State Bar is moving full speed toward a unstated goal that is inconsistent with the public interest: no lawyers available for borrowers who need assistance. No one at the Office of Chief Trial Counsel evinces the slightest interest in ameliorating the situation, for fear that the political powers that be in Sacramento will use that as an excuse for taking further action against the State Bar. Politics is driving this train and while everyone knows it, everyone knows that it will not change, at least not while the State Bar is on the political hotseat.
Billy Joel sang that “only the good die young”, a sentiment some say Joel has been proving for decades. Not too long ago, it looked like we were witnessing yet another premature death: published Review Department decision that count as precedent in State Bar Court. Coming up on two years since the last published decision (In the Matter of Allen, published in November 2010) 44 Review Department opinions had issued with not one deemed worthy of publication. This blog post was originally going to be titled “RIP Review Department Precedent: 1989-2010?”
On October 3, 2012, with the publication of In the Matter of Reiss, rumors of this youngster’s demise proved to be greatly exaggerated. The Review Department had found something that was worth giving the hearing judges, State Bar trial counsel, defense counsel and respondents, a topic worthy of setting in stone along the path.
On first reading, though, its not obvious what that guidance is. Reiss’s disbarment recommendation seems straightforward given the culpability findings. There is a helpful discussion in the footnote on page 20, that clarifies the circumstances under which a lack of prior discipline over many years of practice will have no mitigating effect. On the surface there is nothing especially groundbreaking here, legally or factually.
On deeper reflection, though, you realize that the fact that there is nothing groundbreaking here is exactly the point. The opinion’s written analysis begins by reaffirming the traditional “case by case” examination of all relevant factors, beginning with the Standards for Attorney Sanctions for Professional Misconduct (let’s just call them the Standards, capital “S”), whose guidance will be followed “whenever possible” (page 22). But it made it clear that it doesn’t end there; at the end of rather short trip the Court tells us that they reached their opinion “After carefully considering all relevant factors, the aggravation, the mitigation, and the guiding case law.” (Page 23.)
The one legal issue that they really addressed is contained in just a footnote on page 20. Significantly, it is an issue where case law is at odds with the Standards. Standard 1.2(e)(i) only provides that no prior discipline is mitigating if the conduct is “not deemed serious”, while Supreme Court case law has given attorneys mitigation on this ground in cases that are certainly serious, like misappropriation of client funds. The Review Department might have decided to go with the Standard on this issue, perhaps believing the idea that the Supreme Court’s action in sending 42 cases back to the State Barf was message that not to rely on “pre-Silverton case law.” Instead, the Court’s analysis found the common thread among that “pre-Silverton” case law and articulated a helpful rule of law (no mitigation for lack of discipline if conduct prolonged) that doesn’t slavishly follow the Standard, the Standard that is not true to the Supreme Court case law.
The message of Reiss is that precedent still counts in the discipline system. And maybe more importantly that the Review Department will exercise its power to make precedent to guide the disciplinary process where it deems appropriate. The Court did the same thing four years ago with its decision four years ago in In the Matter of Van Sickle (Review Dept. 2006) 4 State Bar Ct. Rptr. 980, 2006 WL 2465633 , at the height of the first Silverton-mania. The Supreme Court denied the Office of Chief Trial Counsel’s petition for review of that decision, which set out in depth why the Standards can’t be taken at face value.
Reiss is a disbarment recommendation, so an appeal by the discipline prosecutors seems unlikely, but these days, who knows? The Supreme Court, of course, could take the case up on their own motion if they really want to re-visit the issue of how we come to disciplinary recommendations. Or they can simply order Reiss depublished and leave us all completely confused. Will OCTC ask the Supreme Court to depublish Reiss? We will see.
One of the most unfair aspects of the California discipline system is the current cost recovery structure. Not that the idea that attorneys subject to discipline should pay the costs of the proceeding is unfair. In practice, however, it distorts the discipline system by giving the prosecutor by giving the discipline prosecutor undue leverage and an incentive to overcharge.
Bus. & Prof . Code section 6086.10, passed as part of the major overhaul of discipline in 1980′s, provides that the Supreme Court can order a disciplined attorney to pay:
The charges determined by the State Bar to be “reasonable costs” of investigation, hearing, and review. These amounts shall serve to defray the costs, other than fees for the services of attorneys or experts, of the State Bar in the preparation or hearing of disciplinary proceedings.
As implemented by the State Bar of California, costs are assessed as a flat fee that increases with successive stages of the discipline process, plus a fixed charge for every additional investigation matter included in the prosecution (current cost schedule here). For instance, a matter that settles prior to the filing of disciplinary charges costs $2,865; a single matter that goes to appeal in the Review Department of State Bar Court will cost $19,156. These costs are fixed regardless of how many hours actually went into the prosecution, or the work of the State Bar Court; they represent what is supposed to be an average cost for a discipline prosecution through that particular stage.
Part of the reason for this cost structure is to relieve the State Bar of the onerous burden of actually keeping track of how much work it does. (Lawyers who have work diligently at keeping time records as required by rule 4-100(b)(3) may find this ironic.) Failure to maintain such information was also a key criticism of the 2009 State Auditor’s report on the State Bar. The auditors noted that the failure to maintain this information made it impossible to measure the efficiency of the discipline system. Instead the State Bar computes what is maintains is the “average” cost of maintaining a discipline proceeding at each successive stage, e.g.:
Original Proceedings (Stage at which the matter settles) – eff. 1/1/2012 Cost Assessment
Matters that go in Default $4,159
Matters that Settle Prior to Filing of a Notice of Disciplinary Charges $2,865
Matters that Settle during first 120 days of proceeding $3,349
Matters that Settle before Pretrial Statement is filed $5,308
Matters that Settle before trial but after Pretrial Statement is filed $6,944
Matters that proceed to a One-day trial $6,944
Matters that proceed to a Multi-day trial $15,660
Matters that proceed to the Review Department $19,156
Conviction Referrals (Stage at which the matter settles) – eff. 5/11/2012 Cost Assessment
Each investigation matter beyond the first one also results in an assessment of $914. Beyond this rough adjustment, there is no adjustment for the amount of work actually done. A single matter that takes ten hours is assessed the same amount as one that takes 100, as long as it fall within the same range. The “formulaic” approach to assessing costs was reaffirmed by action of the Board of Trustees in January 2011 approving changes, including an annual upward adjustment for increasing costs, as recommended by the State Auditor. The unfairness of this approach was underscored in the Board’s agenda materials, which noted with apparent relief that “[h]istorically, the use of this formulaic approach has not received any significant challenge.”
Respondents in discipline proceedings can recover their costs as well, but only out of pocket costs. They must be completely exonerated of all charges to recover those. The State Bar can bring multiple counts and force the Respondent to spend the resources to defend all of them, perhaps forcing a multi-day trial; if they prevail on one, the Respondent pays the State Bar the same formula amount, currently $15,660, in addition to any attorney’s fees paid to Respondent’s counsel. Even if Respondent represents his or her self, the cost of contesting the State Bar is large. This creates a large incentive to settle the matter on the State Bar’s terms, even if the case is weak. Exonerations do occur in State Bar Court; they are not common, but they would be more common if the cost recovery structure were not so inequitable.
The current structure creates a powerful incentive to overcharge cases to gain leverage, to create “bargaining chips” that can be traded away to achieve the disposition the State Bar wants without putting its case to the test. That inefficiency is paid for by the Respondent. Even if overcharging is the result of poor investigation and inadequate analysis, the current structure creates no incentive to fix those problems. Unfortunately, footnote 4 of the Silverton decision (discussed in a previous post) chastising the State Bar for not bringing every possible charge against Silverton also encouraged needless and duplicative overcharging, even as it warned against it.
Reform of the discipline system to award costs and attorneys fees to the prevailing party at trial, removing the unfair “winner take all” formula, and basing the award on the relative success of the State Bar prosecutors in proving the charges that they bring would go a long way toward decreasing overcharging and removing the undue leverage that distorts the discipline system.
But what would such a system do to the amount of costs recovered by the State Bar? Little or nothing; the current system is not very good at recovering costs, despite its unfairness. As noted by State Auditor (at page 41):
…the State Bar’s recovery of its discipline costs remains relatively low. The State Bar has only been able to recover $550,000 in 2007 and $766,000 in 2008, with the vast majority of these amounts representing collections from various earlier billing years, but it has billed about $1 million in each of these years.
The State Auditor blames “statutory limitations and other factors” but everyone with much experience with the discipline systems knows that the “other factor” is the fact that, by and large, disciplined lawyers just don’t have the money and probably will never have the money. Even if the amount of money that the State Bar could collect is increased, that fact won’t change in a bad economy and a marked decline in the demand for lawyers. Expecting disciplined attorneys to pay much more in costs than they do now is chasing smoke. But such are the myths that the discipline system lives by.