A REJOINDER TO THE STATE BAR OF ARIZONA CEO.

On March 17, 2016, State Bar of Arizona CEO and Executive Director John Phelps took to the bully pulpit paid for by all members — even those in favor — to lobby against Arizona House Bill 2221. The Bill, which is pending a vote on the Senate floor next week, helps protect the First Amendment rights of Arizona lawyers and increases transparency by subjecting the Bar to an annual independent audit and to public records laws that all other state regulatory bodies must obey.

Here is the rejoinder to the March 17th blast email sent to SBA Members followed by Replies to Mr. Phelps’ contentions, which are in italics.

Fellow Members of the State Bar of Arizona,

CONTENTION: For those of you who may not be following House Bill 2221, it recently passed out of the House of Representatives by one vote, and was passed out of the Senate Government Committee last week. By all indications the bill is headed for a vote by the full Senate in the near future.

REPLY:

Using the mandatory dues of all members, including those in favor, the State Bar of Arizona (SBA) has been lobbying determinedly against HB2221. Nonetheless, the Bill passed out of the House Judiciary Committee, the House Rules Committee and by majority vote out of the Arizona House. HB2221 is in the Arizona Senate. It passed the Senate Government Committee and on Wednesday, it was passed by the Senate Rules Committee. Unlike the SBA, this is a proper exercise of a representative democracy where citizens are allowed to participate equally through their elected representatives in the proposal, development and creation of laws that enable the free and equal practice of their political determination.

CONTENTION: This bill would break apart your existing bar and create a new two-tiered membership.

REPLY:

HB2221 does not create “two-tiered membership.” To practice law in this state, mandatory membership in the SBA singularly remains the requisite precondition. Consequently, HB 2221 does not “break apart your existing bar.” The SBA continues to operate. It is authorized to collect voluntary assessments for lawful activities that do not involve admissions to practice; maintaining attorney records; enforcing ethical rules that govern attorneys; regulating attorney continuing legal education mandates; maintaining trust account records; and preventing the unauthorized practice of law. HB2221 reaffirms the Arizona Supreme Court’s lawyer regulation authority. To support the regulatory functions within its authority, the Arizona Supreme Court may collect a mandatory assessment from each attorney as a condition of practicing law. Please read the Bill.

CONTENTION: For those lawyers who take advantage of one or more of our bar’s services, and wish to continue to do so, this is not a good bill. Those lawyers would have to pay a regulatory, or license fee to the court, as well as a separate voluntary fee to the Bar for other services. Because the cost of these services would no longer be shared by all members, those using the services will likely pay more than they do now. Here are some of the programs that will be affected:

Ethics Hotline
Fastcase
Lawyer Assistance
Trust Account Hotline
Sections
Committees

REPLY:

This is a good bill for a number of reasons. First, bifurcation of dues, or assessments, means the SBA would be obligated to protect the First Amendment rights of Bar members since the SBA would no longer be authorized to fund any activity or expenditure not “germane” to the regulation of the legal profession. Under Keller v. State Bar of Cal., 496 U.S. 1, 14 (1990), a mandatory bar and attendant dues are constitutionally permissible only to the extent the Bar’s activities are “germane” to the allowable purposes identified as regulating the legal profession to improve the quality of legal services.

To quote the Nebraska Supreme Court, which provided the model upon which HB2221 is based, “By limiting the use of mandatory assessments to the arena of regulation of the legal profession, we assure that the Bar Association remains well within the limits of the compelled-speech jurisprudence of the U.S. Supreme Court and avoid embroiling this court and the legal profession in unending quarrels and litigation over the germaneness or an activity in whole or in part, the constitutional adequacy of a particular opt-in or opt-out system, or the appropriateness of a given grievance procedure.” In Re Petition For Rule to Create Vol. State Bar Assn. 286 Neb. 1018, 1035 (2013)

The second reason this is a good bill is because it lowers costs by countering the SBA’s longstanding practice of expending significant amounts of mandatory dues on an array of discretionary functions unrelated to lawyer regulation or to improving the quality of legal services. The result has been unremitting bureaucratic expansion; mission creep; and underutilized programs and services of marginal benefit to the public or to members. Under HB2221, Arizona lawyers would only have to pay for lawyer regulation. The SBA would have authorization only to collect voluntary assessments for non-regulatory programs and services. This means the Bar would have the unheralded free market opportunity to sell its programs and services on their merits to its members. Moreover, based not on speculation but on actual experience, instead of $335 in mandatory dues Nebraska lawyers now pay $98 for lawyer regulation. Nebraska lawyer who see value in the Nebraska Bar Association’s member benefits can sign up to receive an array of programs and services for the annual price of $240. http://www.nebar.com/?page=JoinNSBA

Significantly, the cost of lawyer regulation and all the Nebraska Bar’s programs is considerably less than the $490 SBA members now pay and which increases to $520 on January 1, 2018.

The third reason this is a good bill is because it brings about long-needed transparency to a largely unaccountable regulator that repeatedly fails to provide sufficient explanation of its expenses and activities. Indeed, since the SBA does not provide sufficient detail to members about the uses of their dues, there is every reason to believe that the Bar expends member dues on constitutionally impermissible activities that exceed “regulating the legal profession and improving the quality of legal services.” Should the SBA be delegated any regulatory authority by the state supreme court, it becomes subject to public records laws and to an annual independent audit to ensure all expenditures are done solely in furtherance of regulatory functions.

CONTENTION: Also, if your employer pays your full bar dues now, they might not pay the “voluntary” fee which means you may have to pay out of your pocket to use services or stay connected to issues that affect your practice . . . or even stay connected to your colleagues.

REPLY:

Some two-thirds of SBA members are sole practitioners and small firms. A lower cost to practice and freedom of choice are good news. And frankly, Arizona lawyers having choices is likely what the SBA fears most. Arizona has many special interest and local bar associations and independent listservs that enable lawyers to stay connected to issues that affect their practices and to stay connected with colleagues.

CONTENTION: Some people pushing this bill will tell you that it will lower the amount of money you pay for the right to practice law in Arizona. The reality is that we don’t know exactly how much this new version of the bar will cost. Check out our neighbor Colorado—touted by the proponents of this bill as the model—it costs $325.00 for the license to practice and another $230.00 to join the Colorado Bar Association. For lawyers that choose bar membership, that’s a total of $65.00 more per year than here in Arizona, and the lawyers in Colorado have no say in the license fee amount—it was raised $100 in one year with little or no input from the members of their bar.

REPLY:

The reality is that we don’t need to speculate about costs to practice. In the 18 voluntary bar jurisdictions, lawyers pay an average cost of $210 for regulation. And in more than 3/4th of those states, the combined lawyer regulation assessment and voluntary state association membership dues are still lower than Arizona’s $490.

As for a comparison to Colorado, that information is incorrect. Colorado was never the model for this Bill. But perhaps the SBA’s confusion is understandable since over 5 years ago, it ‘looked to Colorado’ as a model for its current regulatory regime.

As for HB2221, Nebraska is the model — not Colorado. Nebraska is a mandatory bar. Colorado is a pure voluntary bar. When it suits it, the SBA compares apples to oranges. Colorado lawyers don’t have to join their association unless they choose to. The true cost to practice in Colorado is $325.

Having talked to a number of Nebraska lawyers, they much prefer the new system where lawyers pay mandatory assessments for regulation and elect to pay voluntary dues assessments for the worthy services offered by their Bar Association.

CONTENTION: The bill also doesn’t include funding for critical programs for consumers like the Client Protection Fund or Conservatorship Program (which takes over files abandoned by attorneys.)

Now keep in mind, these are my own observations—but, they are grounded in seven years of experience as your executive director, which has included working closely with the other 31 mandatory and 18 voluntary state bars in the U.S. Here are a few other points worth considering, as the Arizona legislature moves closer to creating a Frankensteinian version of the State Bar:

There are significant separation of powers implications raised by this bill. We know legislative counsel have already raised this concern.
No one knows how the bar will operate. There has been little cost analysis by the legislature or the Court. I am especially concerned about the unintended consequences of making such a drastic change.
As much as I respect and care about our members, nothing—and I mean nothing—was considered as part of a special House committee, or the House itself, with respect to the Bar’s role in serving the public. I believe the new bar model would diminish the many programs and activities related to consumer protection and access to justice.

REPLY:

Both under the Bill’s provision concerning “enforcing the ethical rules that govern attorneys” and under the Arizona Supreme Court’s regulatory authority over the practice of law, including the regulation of attorneys in Arizona, the maintenance of the existing Client Protection Fund can and undoubtedly will continue given the express mission to protect and serve the public. As for a Conservatorship Program, that is coincidentally still the subject of a proposed SCR petition. But to the extent it remains a concern, according to the SBA’s 2014 proposed budget, its actual “Conservatorship Costs” from 2011 to 2013 ran considerably under $30,000, which was the amount proposed budgeted for 2014.

With respect to separation of powers, both the Arizona Supreme Court and the Arizona Legislature have a constitutional duty to protect free speech. HB2221 is consistent with the Legislature’s authority to protect constitutional rights and ensure transparency in government while respecting the Arizona Supreme Court’s role in attorney regulation. For more information visit http://workingforabetterbar.org/

As for cost analysis, the Arizona State Senate HB2221 Fact Sheet prepared by Senate Research on March 8, 2016 states: “There is no anticipated fiscal impact to the state General Fund associated with this legislation.” The fact is that in all 50 states, in both voluntary and mandatory jurisdictions, lawyers pay 100% of the cost of lawyer regulation and discipline. HB2221 does not create a burden on taxpayers. The SBA Executive Director has “worked closely” with other state bar associations and for this reason there’s every confidence in his institutional know-how and capacity to effectively implement HB2221 if he has the will to do so.

With respect to the “special House committee,” the SBA’s Executive Director provided testimony at every session. The House Ad Hoc Study Committee took public comment from many public members aggrieved with what they fervently believed to be an egregious lack of public protection under the existing State Bar system. By bringing sunshine to a regulator’s record keeping, HB2221 takes an important first step toward addressing those concerns. And as has been pointed out repeatedly, there is no nexus between a mandatory bar and the delivery of access to justice, consumer protection or lawyer professionalism. In all 18 voluntary bar jurisdictions and in the mandatory jurisdiction of Nebraska, the tenets of professionalism, public service, and access to justice remain strong and vibrant.

CONTENTION: Bottom-line: Ultimately, our terrific team will make whatever changes that come out of this process. If the majority of our colleagues don’t care, then the bill will potentially become law and, once all the litigation has settled, the Bar will be whatever others decide it should be. If we do care, individually or collectively, then I hope you and your colleagues will speak up. If you’re interested in expressing your opinion to your Senator, I’ve copied a link to the legislature’s website below with contact information. If you’re not sure what district you’re in and which Senator to contact, I’ve copied a link that makes it easy.

Legislative districts: http://azredistricting.org/districtlocator/
Senate contact info: http://www.azleg.gov/MemberRoster.asp?Body=S
I, for one, think this is a bad bill . . . but I’m only one voice. Whatever the outcome, I pledge to continue to work hard maintaining our State Bar at a level of excellence you should expect.

Warm Regards,

John Phelps
CEO/Executive Director

REPLY:

Inconsistently, the whiff of goodwill expressed in “our terrific team” will implement “whatever changes that come out of this process” is undercut in the very next sentence by “litigation.” But this is to be expected by SBA leadership and a well-paid executive management team that always places self-interest over member interest and the public interest. Were it different, we would not now be on the verge of hopefully achieving improved First Amendment safeguards; greater public record and accounting transparency; and elective choices that will favorably impact one of the highest cost to practice states in the U.S.

Like the SBA’s CEO/Executive Director, I also urge you to express your opinion to your Senator. Ask your Senator to vote FOR HB2221.

But unlike the CEO’s “only one voice” shouted from the rooftop through an SBA-controlled megaphone, those of us working for a better bar through passage of HB2221 don’t have the same reach to get our message widely disseminated. I ask your help by posting this rejoinder on your local, specialty interest bar listservs and on Facebook and Twitter.

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