MCLE Dragnet: Just the Facts Ma’am

The Review Dept. of the State Bar Court has granted the request of the Association of Discipline Defense Counsel and the Association of Southern California Defense Counsel for publication of the Court’s decision in In the Matter of Yee.

Yee is a case that arises out of State Bar’s annual audit of MCLE compliance, a practice that began in 2011.  The respondent in question was part of the first audit after she had affirmed her compliance with the 25 hour MCLE requirement on line on January 31, 2011.  When she was asked to provide proof, she was unable to locate her records. She completed the 25 hours required after the compliance period and paid a late fee.  In response to the State Bar’s investigation regarding her affirmation of compliance, she stated

At the time I made the affirmation, I recalled and believed that I had complied. In reviewing my records, I now believe that I made a mistake.” She explained, “I transitioned to a new job in mid-February 2009 and recall that I took classes prior to starting my new job. . . . I cannot find a record of those classes. [¶] . . . [¶] . . . [I]t is
possible that I may have confused classes that I took to satisfy the prior compliance period with
the current . . . period.” [She] acknowledged that “my records were and are lacking” and accepted
responsibility for her “error in memory and recordkeeping.”

The Office of Chief Trial Counsel argued that the respondent was culpable of intentionally misrepresenting her compliance with MCLE requirements and asked for thirty days of actual suspension.  The Hearing Judge found that she was grossly negligent in making the representation and that this supported a finding of moral turpitude.  Based on the lack of dishonest intent and an extensive showing of mitigation, the Hearing Judge recommended a period of stayed suspension, a downward departure from Standard 2.7.

joe friday

On appeal, the State Bar again argued for thirty days of actual suspension.  Since the first discipline cases were filed in 2012 based on inaccurate affirmation of MCLE compliance, a thirty day actual suspension has consistently been the State Bar position in this cases, regardless of mitigating circumstances, a stance that one discipline defense counsel described at the time as “a meat axe approach.” (Daily Journal subscribers, see DeBenedictis, “Discipline defenders grumble about State Bar’s continuing-education crackdown; State Bar is proposing discipline that doesn’t match offenses, lawyers say” Los Angeles Daily Journal December 12, 2012.    Discipline defense counsel observed that many of the lawyers caught in the MCLE dragnet were older lawyers, near retirement or actually retired, often with limited computer skills

The last point matters because discipline is based on what is necessary to protect the public, not based on a “gotcha” system designed to pick off low hanging fruit.   The state of mind of the actor making the representation is of utmost importance.  The context of information presented digitally is often more difficult to ascertain than information presented on paper to those of us who grew up in the age of paper documents.   Older attorneys often suffer from health problems that affected their ability to concentrate and remember.  None of it seemed to matter to the Office of Chief Trial Counsel.  Dishonesty to the State Bar was a serious matter and must be dealt with harshly.

A State Bar lawyer expressed amazement that lawyers continue to misrepresent their MCLE compliance even after all the publicity surrounding the audits and the harsh discipline imposed.  The response is that lawyers are largely not intentionally misrepresenting compliance, so the hoped for in terrorem effect of the audit does not deter their uninformed behavior, which may or may not be grossly negligent under the circumstances.

The dissent in Yee offers hope on that last issue.  Judge Remke questions whether this respondent’s conduct is so negligent as to be grossly negligent, citing Supreme Court authority that should help us establish some limits to the ever-expanding gross-negligence-as-moral-turpitude concept (see In the Matter of Downey (Review Dept. 2009) 5 Cal. State Bar Ct. Rptr. 151, 155.*) Moreover, she questions why we are even wasting our time with this “disservice to the discipline system” in light of the respondent’s eventual compliance with the MCLE requirements.

The publication of Yee will hopefully induce State Bar prosecutors to take mitigation into account when making settlement offers in these MCLE cases.  There are going to be more of them coming down the line with the most expansive audit in progress now.   At this time, the State Bar Court Hearing Dept. is facing a 20% depletion in manpower with Judge Honn’s move to the Review Dept.  and there will be downtime even if a judge is appointed to that spot soon.  Plenty of opportunity for further disservice to the discipline system.

* Judge Remke’s decision in Downey deferred to the Hearing Dept.’s finding that the respondent’s conduct was grossly negligent when the facts suggested a level of culpability better described as reckless disregard for the truth;  by squeezing it into the “gross negligence as moral turpitude” the decision expands it in directions not contemplated by the decisions cited in her dissent in Yee.



A Cold Place in The Sun

Consider the following chart which presents information from 21 discipline cases tried in State Bar Court where respondents were represented by discipline defense counsel since January 2013:

OCTC Demand                         State Bar Court Trial Result
1 Disbarment                                   6 month actual
2 Disbarment                                   6 month actual
3 Disbarment                                   2 year actual suspension
4 90 day actual suspension         Dismissal
5 90 day actual suspension         Dismissal
6 30 day actual suspension         Stayed suspension
7 Disbarment                                   Public Reproval
8 2 years actual suspension        1 year actual suspension
9 6 months actual suspension     30 days suspension
10 Disbarment                                 2 years actual suspension
11 Disbarment                                 Dismissal
12 2 years actual suspension      6 months actual suspension
13 Disbarment                                 2 years actual suspension
14 1 year actual suspension         90 days actual suspension
15 Disbarment                                 18 months actual suspension
16 90 days actual suspension      30 days actual suspension
17 Disbarment                                  1 year actual suspension
18 6 months actual suspension    Public Reproval
19 30 days actual suspension      Public Reproval
20 Disbarment                                 2 years actual suspension
21 Disbarment                                 90 days actual suspension

This is only a fraction of the cases tried in State Bar Court since January 1, 2013, of course.  Exactly how many cases that might be is difficult to ascertain quickly, in part because the State Bar has not issued its annual report covering the year 2013.  But its enough to see that the Chief Trial Counsel’s claim of a 99% success rate is unfounded.

You might argue that this is evidence that the discipline system is working well.  Charges were brought, the case was vigorously defended by respondent’s counsel, and an independent State Bar Court judge found the Office of Chief Trial Counsel’s position wanting.

But if you talk to the respondent’s counsel who defended these cases, you would hear something else entirely:  that the system is not working well because OCTC is forcing cases to trial that should not be tried, that could be have been settled without trial if OCTC would have taken a reasonable settlement position.

One thing seems indisputable.  If you can afford to take your discipline case to trial with experienced defense counsel there is a reasonable good chance of getting a better result than taking the deal.

Discipline defense counsel will always have a place in the sun, it seems, as long as the discipline system operates like it has for the last few years.  But it is cold comfort;  every discipline trial comes at a cost for the respondent, the State Bar Court and the discipline prosecutor.

Do We Need Advertising Rules?

A startling thought given voice at the recent meeting of the Association of Professional Responsibility Lawyers (APRL) in Boston.  As I understand the concept, in the language most other jurisdictions speak, Model Rules 7.1 – 7.6 are not necessary in light of Model Rule 8.4’s prohibition on dishonesty.  Californians would look to our twin constellations of Rule 1-400 and Bus. & Prof. Code sections 6157 et seq.

Both the Model Rules and California law set forth rather detailed schemes dictating the form and content of attorney advertising.  By comparison, California’s false advertising statute Bus. & Prof. Code section 17500, offers a relatively concise scheme generally applicable to businesses (and expressly inapplicable to lawyers alone under section 17500.1.)  What real function does the rest of the filigree in the lawyers’ codes serve, so the argument goes. The real danger is dishonest or misleading advertising, so we only need a rule against that.

In the discipline world, that has a degree of truth as what we are generally fighting about is whether the advertising is “false, deceptive, or which tends to confuse, deceive, or mislead the public” under Rule 1-400(d)(2), which is roughly comparable to Bus. & Prof. Code section 6157 and Model Rule 7.1.  Most of the rest comes into play in California in the context of advising clients as to what the law requires.

The significance of the question lies less in the answer than in the fact that the question is seriously asked.  Why exactly does section 17500.1 exist and how is the lawyering business really different from any other business? The issuance of the Canadian Bar Association report on the future delivery of legal services casts a light that puts these questions in sharp relief.  Lawyer advertising was, after all, originally approved based on the rationale that it would help expand the availability of legal services and lower the cost (Bates v. State Bar of Arizona (1977) 433 U.S. 350.)  It hasn’t worked out that way.  Now those concerns are imperative to the survival of the legal profession.  Of course, if the CBA approach is followed, we are going to being junking a lot more than the advertising rules.

Some Want Discipline to be Punishment. Who Are They?

Senator Joseph Dunn, Executive Director of the California State Bar, had this to say about the Discipline Standards Task Force in the ABA Journal:

The task force’s efforts could be the first step toward a significant revamping of the attorney misconduct sanctions, says the bar’s executive director, Joseph L. Dunn. “This could lead to a substantial rewrite, a minor rewrite, or even a change in basic philosophical approach,” Dunn says. “For example, many disciplinary rules are based on a rehabilitation model. Some believe that attorney disciplinary standards should move to more of a punishment model. The mission of the task force is to determine whether the disciplinary standards in force adequately protect the public and ensure attorney compliance with the ethical rules.”

No one I know who is knowledgeable about the discipline advocates punishment as a goal of the discipline system. Who is Joe Dunn talking about?


Senator Joseph Dunn

Senator Joseph Dunn


Not the Discipline Standards Task Force.  I have attended both public meetings of the Task Force as a representative of the Association of Discipline Defense Counsel.   I presented the viewpoint of our organization (ADDC Comment re Standards) at the second meeting.  The Task Force has also heard from the Assistant Executive Director Robert Hawley, Chief Trial Counsel, the Office of General Counsel,  a United States Attorney and Federal Public Defender.  The Task Force, ably chaired by Ms. Goodman, engaged in vigorous discussion and a consensus emerged at the second meeting:  no change in the bedrock principle that the purpose of discipline is not punishment but protection of the public; refinement of Standards along the lines of the revision undertaking by the Office of General Counsel last year.

The only mention of the idea that the discipline system be justified in imposing punitive levels of discipline to deter misconduct came from Mr. Hawley at the first meeting of the Task Force, citing a law review article by the late Fred Zacharias, my former colleague on the San Diego County Legal Ethics Committee.   The presentations from my organization and the Office of Chief Trial Counsel were remarkable consistent in our analysis of the relevant law, down to our mutual reliance on key Supreme Court authority, In Re Morse.   The Chief Trial Counsel and the Task Force understand that the State Bar is the administrative arm of the California Supreme Court in matters related to discipline and that the State Bar can’t re-write the jurisprudential bedrock of the discipline system on its own.

It’s a worn out cliche but the Supreme Court is the 800 pound gorilla in the room.  Except it wasn’t in the room.  The Supreme Court’s representative to Discipline Standards Task Force, the protean Beth Jay, did not attend either meeting.  Whether this reflects a lack of interest or an aversion to open meetings is unknown (the ED was kind of enough to warn the Task Force members about the open meeting laws at the first meeting.) To paraphrase my comment to the Task Force, their scope of action is entirely circumscribed by Supreme Court authority.  Unless they signal a change in direction, the State Bar cannot endorse discipline as punishment.

The Legislature of course can write statues that dictate the specific levels of discipline for specific offenses and they have.

Is this where the mysterious people who think discipline should be more punitive dwell?

That Senator Dunn is the Legislature’s man in Sacramento is plain.  But if a punitive discipline system is the agenda that the Senator is advancing, it would be a pleasant surprise he would be open about it and identify the source of his direction.





State Bar Moves Forward on Client Trust Account Audits

The State Bar is moving forward with random audits of attorney client trust accounts.  A presentation to the Regulation Admissions and Discipline Oversight Committee (RAD) Thursday April 17 detailed preliminary steps taken to institute such audits, including determination of the sample population and necessary changes in statutes or rules to authorize such audits and create an enforcement mechanism.  A consultant has been engaged to work on the sample issue and the State Bar Office of General Counsel has been tasked with reviewing the existing law and recommending changes.  It is hoped that the costs of such audits can be reduced by relying on attorney self-reporting through a detailed questionnaire, rather than relying on teams of full-fledged auditors to examine records

The Bar recognizes that it currently does not have the authority to conduct such an audit unless there has been a client complaint (Bus. & Prof. Code section 6091.) There was discussion at RAD about instituting the audits as a voluntary program, in part (OGC) perhaps to determine how serious a problem non-compliance with the client trust account rules is.

Either voluntary or compelled compliance with an audit request raises privilege issues because misappropriation of client funds raises the possibility of criminal prosecution.  An attorney’s statutory duty to cooperate with a State Bar investigation is circumscribed by the availability of Constitutional or statutory privileges (Bus. & Prof. Code section 6068(i).)  Would these Constitutional or statutory privileges be available to the respondent in an audit?  The State Bar is required by statute to furnish evidence of criminal conduct to the prosecuting agencies (Bus. & Prof. Code section  6044.5)(a)) essentially making the State Bar an agent of the prosecutor.  Would a response mandating disclosure of misappropriation be an unreasonable search and seizure under the Fourth Amendment if there is no client complaint?

Californian’s have a Constitutional right to privacy under Article I, section 1 of the state constitution.  That right extends to financial records and specifically to client trust records (Hooser v. State Bar (2000) 84 Cal. App. 4th 997.)  Attorneys also have duty to maintain the confidences of their clients “at every peril to themselves.” (Bus. & Prof. Code section 6068(e).)   Production of an attorney’s client trust account records in the course of a State Bar investigation usually requires extensive redaction of the confidential information concerning other clients.

It is unknown whether these issues are within the purview of the OCC’s review of enabling legislation.

It is to be hoped that the proposal for random client trust account audits, once fully fleshed out, will be subject to the public comment process at the Board of Trustees level.  But another concept discussed at the Board level at its January 2014 meeting, requiring advanced fees in trust, suddenly found itself embedded in AB 1515 without such vetting.

The ongoing transformation of the State Bar has introduced some uncertainty in the process by which lawyers have input into these proposals. It’s probably not too early for California lawyers to make themselves heard informally on the issues raised by random client trust account audits.


UPL and the Lawyer’s Halo of Trust

The Question

At the last panel of the State Bar Ethics Symposium in San Francisco in April 2014, John Steele posed a question to his fellow panelist, Chas Rampathal, General Counsel of Legal Zoom, about what ethical rules presented the biggest obstacles to the provision of alternative legal services.  Unfortunately, time ran out before the question could be fully discussed.

A recent published Review Dept. decision may help fill in the answer.  In the Matter of Huang deals with a highly commoditized form of legal service, representing borrowers in loan modification, and a lawyer’s culpability of aiding the unauthorized practice of law.

The Halo of Trust

Despite our negative image, lawyers are still perceived as professionals who can be trusted.   Non-lawyer legal service providers do not yet share this halo of trust.  Part of the purpose of lawyer discipline proceedings is to maintain that halo and non-lawyers legal service providers lack it because there are no comparable mechanisms to police their behavior.   Because what they do is illegal.  At least sometimes.

In the matter before us the clients engaged the services of respondent. They expected and were entitled to have the services of an attorney in evaluating and settling their personal injury claims. Instead, they got the services of an adjuster and his negotiators, housed in offices bearing respondent’s name, with phones answered in respondent’s name and correspondence and negotiations conducted in respondent’s name, with little or no input from respondent.

In the Matter of Bragg (Review Dept. 1997) 3 Cal. State Bar Ct. Rptr. 615 (1997 WL 215942).  Bragg involved an attorney who entered into a business relationship with a non-attorney “adjuster” to process his pre-litigation personal injury cases.  California Insurance Code section 15007 provides for a “public insurance adjuster [which] includes one who, for compensation, assists an insured in negotiating for or effecting a claim on behalf of an insured.

The Magic of the Lawyer’s Mantle

Bragg’s argument was essentially if the adjuster could do what he does on his own, how can I be culpable of aiding the unauthorized practice of law?  The Review Dept.’s answer was that those activities by a lay person, even if sanctioned by statute, become the unauthorized practice of law when that person is working under the aegis of an attorney.

Strangely, Bragg was not charged by the Office of Chief Trial Counsel (OCTC) with aiding the unauthorized practice of lawin violation of Rule Prof. Conduct 1-300(A). But they also had charged Bragg with acts of moral turpitude in his relationship with Hickman.  The Review Dept. found that Bragg “knew that he was abdicating his responsibilities as an attorney and acted purposefully in allowing Hickman to engage in activities which constituted the practice of law.”  OCTC didn’t spot the 1-300 violation; but Bragg was expected to.

The gravamen of what the Review Dept. articulated is a false advertising argument.  You hired an attorney but you got an adjuster.  You are entitled to individualized legal counsel, even if all you really wanted was the medical bills paid and legal extra cash.  In Richard Susskind‘s terms, you are entitled to (and presumably paying for) the “bespoke” legal services of a lawyer.   But something else comes with those “bespoke” services;  the expectation of an individual relationship of trust.

When a lawyer is involved, the nature of the service changes, transmutes.  It’s now imbued with the intangible, almost mystical, aspect of the lawyer as counselor.  Just as other cases dealing with unauthorized practice of law, there is almost religious qualify ascribed to the attorney-client relationship;  indeed, Benninghoff v Superior Court (2006) 136 Cal.App.4th 61, 68 speaks about what a “defrocked” lawyer may or may not do.

Huang, like Bragg, had an opportunity come his way.  It knocked in the form of the loan modification practice of an attorney who files had been seized by the Orange County DA.  Attached to those 100 files were two non-attorneys, Martinez and Campos, who operated under the name National Mitigation Service (NMS.) Mr. Huang had only been admitted three years when he began working with Martinez and Campos.  He told the Orange County and the State Bar that he would be hiring NMS to “process” the files.

The State Bar apparently did not inquire closely into what Huang’s role would be in that processing.  But just three years later it charged Huang with aiding the unauthorized practice of law.  The hearing judge found that the State Bar did not prove its that charge by clear and convincing evidence.  The Review Dept. seemed incredulous:

Huang created a lay negotiating service that permitted non-lawyers to practice law and elevated profit above the clients’ interests. …. “Although [loan modification] services might lawfully have been performed by . . . brokers, and other laymen, it does not follow that when they are rendered by an attorney, or in his office, they do not involve the practice of law. People call on lawyers for services that might otherwise be obtained from laymen because they expect and are entitled to legal counsel.” By delegating all the work on loan modification cases to nonattorney staff, Huang failed to “competently evaluate the client’s claim and represent the client appropriately.” [citing Bragg] Accordingly, we find he violated rule 1-300(A) in all eight client matters.

Emphasis added.  Huang’s practice had between 500 and 800 clients.  Those familiar with loan modification practice under programs like HAMP will know that it bore little relationship with the type of real time negotiating that lawyers typically engage in, except for occasional instances where a lawyer’s clout will have an impact.  This has changed a little with the enactment with the Homeowners Bill of Rights which has given lawyers a new and expanded potential role in loan modification.   But by and large it is the kind of commoditized legal service that could be more cheaply performed by someone who does not have the legal training of a lawyer.


The Missing Ingredient: Vitamin T

One can see why the Review Dept. granted OCTC’s motion to publish Huang.  It re-states the core selling value of the legal profession that lawyers are offering a highly individualized product:  a special relationship of trust with client.   That kind of personal attention to the client is often lacking when dealing with a highly commoditized high-volume practice such as loan modification.  Many aspects of a commoditized law practice can be more cheaply accomplished by non-lawyers but the lawyer has to be involved, not only in supervising the non-lawyers (who may know more about the subject matter of the practice) but to fulfill the client’s expectation of trust.  That means contact with the client.

Part of the reason that halo rests so heavily on the lawyer’s head is that lack of enforcement mechanisms like professional discipline for non-lawyer legal providers, a consequence of their general prohibition.   The State Bar of California is creeping slowly toward recognizing legal providers who are less credentialed than lawyers but the trend in the short term is to maintain, and indeed strengthen the remedies for non-lawyers delivering legal services.  The State Bar is actively seeking the ability to recover attorneys fees and costs in civil actions against such non-lawyers through former Assembly Bill 852.  A prior almost identical bill was vetoed by Gov. Brown after vocal opposition by the California Association of Legal Document Assistants (CALDA).

To bring the discussion full circle, Legal Zoom has found that the marketplace for commoditized legal services delivered by non-lawyers only went so far under the UPL rules.   So Legal Zoom now offers legal services from attorney licensed in all jurisdictions through its group legal plans.  The web site promises to help consumers “Find An Attorney You Can Trust” and “Build a Long Term Relationship With An Attorney You Can Trust..”



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