Dan Walters, the Sacramento Bee’s longtime political reporter, has a story regarding an some interesting legislative legerdemain exhibited by the State Bar of California.
Last year it sponsored AB 888 (Dickinson), a bill that would have allowed the State Bar to recover a civil penalty of $2,500 in enforcement actions enjoining the unauthorized practice of law (Bus. & Prof. Code section 6125 et seq.) The bill was designated “urgency legislation.” There was pushback from non-attorney providers of legal services; the California Association of Legal Document Assistants (non-attorney legal service providers recognized by Bus. & Prof. Code sections 6400 et seq.) called it “a cleverly designed effort by the Bar to seek additional revenue from non-members of the Bar.” CALDA, with some assistance from Ed Sherman, founder of Nolo Press, lobbied against the bill. The CALDA newsletter described the “perverse incentives” built into the legislation:
The State Bar is already able to seek injunctions to enforce the unauthorized practice of law (UPL).
However, AB 888 allows the State Bar to collect fines against defendants and to take their attorneys’ fees. The bill entices the State Bar into pursuing these UPL claims with two incentivizing mechanisms. These are classic “perverse incentives’ that will turn into funding sources.
Perverse Incentive #1: It provides for a one-way award of attorneys’ fees to the State Bar if it prevails in such a lawsuit (however, even in a completely frivolous, unmeritorious proceeding, a prevailing defendant would not be awarded his or her fees. This means that even if the LDA wins the lawsuit, the LDA would still likely pay tens of thousands of dollars in defense costs with no recourse. Why should the prevailing defendant not be able to recover his or her defense costs?
Perverse Incentive #2: It provides that the State Bar can pursue claims under the Unfair Business Practices law (B&P 17200). This can be thousands and thousands of dollars. Why do the fines go to the State Bar and not to the general fund or to some dedicated consumer protection fund?
Both of these items will create a perverse incentive to pursue claims against LDAs. Essentially, the State Bar will have a financial incentive to pursue these claims whether they are legitimate or not. That puts LDAs at risk, and it limits the options of self-represented individuals.
Those who remember the State Bar ‘s vigorous prosecution of the Trevor Group for 17200 shakedowns of auto repair shops may find their irony neurons stimulated:
“According to bar attorney Jayne Kim, the Trevor lawyers conspired to create a group called Consumer Enforcement Watch, which she called “a shell corporation created solely for the corrupt purpose of making money.” — California Bar Journal August 2003.
AB 888 passed but was vetoed by Gov. Brown (the man who pushed for public members on the Board of Trustees in his first incarnation as Govenor) who stated that “[w]e already have adequate enforcement mechanisms and remedies to stop the unlicensed practice of law through the existing powers of the State Bar or through the authority of the attorney general and local prosecutors to bring civil and criminal actions.”
True enough, but those measures don’t put dollars in the State Bar general fund.
Now here’s the twist. Walters reports that the text of AB 888 suddenly appeared in another bill, AB 852, as amended. And so it does. This resurrection occurred just before the Legislature left for an 11 day recess, bypassing the committee process and leaving, in Walters’s words “opponents scrambling.”
The State Bar is facing a declining revenue base because the absolute numbers of dues paying lawyers will shortly begin to decline due to the retirement of baby boom lawyers and a sharp decline in new lawyers entering the guild. The State Bar is already planning for this, as well as facing the prospect of actually raising other fees, such as the Client Security Fund assessment.I
At the same time, the creative destruction that we are participating in is producing many modern variations of the document preparers so well represented by CALDA, the most notorious being Legal Zoom. Would these new enforcement powers be used against some the non-lawyers seeking to leverage new technology to provide commodfied legal services?
The irresistable force of innovative, disruptive models for the delivery of commodified legal services is encountering the immoveable object of State Bar regulators firmly committed to the values of the 19th century that are the bedrock of the current ethical rules. AB 888/852 may be one of the first sparks struck in this clash.
If the State Bar really wants to get in front of the wave of inevitable change, the guild preservation approach of AB 888/852 is not going be helpful. A better approach might be to re-tool the State Bar to serve as a one shop regulator of all legal service providers, lawyer and non-lawyer, Some interesting steps were taken in direction with the pending legislation that it regulate process servers and the State Bar’s own proposal for limited scope licensing of non-lawyers to provide legal advice in some areas. The State Bar’s own civil justice task force is talking about the necessity for these innovations.
The goal would be to open up the guild, instead of defending it, to better serve the public by increasing access to legal services. Now that would make the slogan chiseled on the State Bar building in Los Angeles (“a judicial branch agency protecting the public”) really mean something.