Friday, March 4, 2016
LACBA Censors Report Critical of LACBA
The chair of the Los Angeles County Bar Association’s Trust and Estates Section attempted to report, in a section newsletter, on the controversy over a proposed bylaw change that would legitimate a current practice—in violation of the existing bylaw—denying sections a say over their finances. The communication was blocked.
LACBA General Counsel/Chief Administrative Officer Clark Brown explained in an e-mail to the section chair:
“Your request to include your ‘Report by the Chair’ in the February Trusts and Estates newsletter has come to the attention of the officers of LACBA. As you know, LACBA leadership’s actions must be guided by what is in the best interests of LACBA membership and operations as a whole. As with all non-profit corporations, its leadership owes a fiduciary duty to support and advance the health and well-being of the organization….
“LACBA leadership feels this proposed ‘Report by the Chair,’ and your memo to the ‘Section re the Report,’ have qualities that reflect advocacy rather than information, argument rather than explanation, and risks being a divisive influence among the parties currently engaged in an ongoing complex discussion….When institutionalized in a LACBA publication, and presented to members not part of that ongoing discussion, who do not have a context of the broader discussion, the leadership feels this proposed communication is not helpful, but harmful, to the ongoing sensitive discussion among leaders with good-faith differences.
“…The personal viewpoint of the ongoing, important discussion within LACBA described in the Report and memo is neither helpful nor beneficial to LACBA as a whole. Accordingly the leadership feels it is not suitable for inclusion in a LACBA publication.”
The report appears below.
Proposed LACBA By-Law Change and Price Increases
By William L. Winslow
(The writer, a special-needs trust lawyer, is of counsel to the downtown Los Angeles law firm of Gifford, Dearing & Abernathy, LLP. He is a certified specialist in Estate Planning, Trust and Probate Law.)
This year has seen a long-developing dispute between the Los Angeles County Bar Association (“LACBA” or sometimes “LACBA Central”) and some of its practice specialty sections burst into an open and contentious struggle regarding LACBA finances.
Representatives of a majority of the 21 active sections, including our Trusts and Estates Section, Litigation, Real Estate, Family Law, Immigration, Appellate Courts, Corporate Law Departments, Seniors, Antitrust, Entertainment and Intellectual Property, have challenged proposed actions by LACBA, and an interim Council of Sections has been formed chaired by former LACBA President, John Carson.
The flash point is a move by LACBA Central to remove one of its by-laws, (Attachment A, the existing Section 14) under which each section has, or had, a separate account and also some say in how its profits from programming were used. LACBA’s proposed new Section 14 is Attachment B. Attachment C is the counter-proposal of the Council of Sections. LACBA Central leaders seek to eliminate the current by-law, arguing that in practice most of the sections have already (some as far back as 2006) expressly ceded or informally conceded all of their financial autonomy to LACBA Central.
In fact for many years the Trusts and Estates Section and many others have gone along with LACBA’s argument (which apparently was not the whole story) that separate accounts were no longer necessary and were not justified by the expense. I was on our section’s Executive Committee in the early years of this century before the change, when our section achieved results from its programs that put it in the black for several years running. But then LACBA decided that our separate account was to be denominated in “points”, not dollars. Then the points system (actually a sham, I speculate) was also abandoned.
Thereafter, for several years, though it has not been really quantitatively expressed, Trusts and Estates has continued to be profitable – at least, that is what we were given to understand – as were many of the sections; but LACBA Central believes the sections need to be more profitable to support its various missions.
I am told that in fact the Trusts and Estates Section did not expressly acquiesce in the de facto elimination of the separate account system. But in any case, our section’s programs continued to thrive; we made allowances for LACBA’s evident financial needs; but we did so on the implicit understanding that LACBA Central would be fair and not unreasonable about our programming objectives and the pricing that is critical to achieving those objectives.
New Prices Mandate
Without prior consultation with me or other officers of the Trusts and Estates section, in the last quarter of 2015, LACBA decreed that henceforth our formerly free, well-regarded, highly successful Brown Bag lunches would be priced at $50 for section members/$60 for LACBA members, although the venue at the courthouse is available without charge and there is no lunch or brown bag. This lack of consultation apparently was typical for most or all sections: in multiple meetings I have yet to hear an officer of another section state that he or she was asked for advice or comment on LACBA’s new price decree.
The free Brown Bag lunches offered one unit of CLE credit. The issue of what to charge for CLE credits is central to LACBA’s view of appropriate pricing policy. LACBA believes that, given its financial position, it is simply unacceptable to not charge for programs that offer CLE. Our section’s view, shared by several other sections, is that if our section is profitable overall,some easier pricing to our members who must meet CLE requirements, for a barebones lunchtime or evening presentation, is a proper expression of the service which a well-run bar association ought to provide to its members. Many of our members have a hard time making ends meet, and considerable numbers of lawyers young and old are seriously underemployed.
LACBA Financial Problems
The communications regarding the Association’s finances by LACBA Central officers have been somewhat fragmentary, hard to understand, and at times contradictory. The main outlines of the story of Association financial difficulties have emerged, as set forth below.
However, the failure and/or inability and/or unwillingness of LACBA to provide a clear, transparent, and consistent account of (1) the last 10 years’ experience and (2) current circumstances is, by itself, a major cause for concern. LACBA President Paul Kiesel and Senior Vice President and Treasurer Mike Lindsey attempted to begin remedying the very considerable information gap at a “Study Hall” meeting on December 17, 2015. However, Mr. Kiesel emphasized that copies of the slide presentation would not be made available and in essence took the position that the presentation was for section leaders and executive committees only.
Participation by telephone was not possible.
What follows is therefore more amorphous and general in nature than could be wished, but I believe it is generally accurate as far as it goes. Many attendees of the Study Hall took notes. I was able to have one conversation with President-elect Margaret Stevens about two months ago; and I have heard various second-hand reports from other section leaders. I have also been aided in my recollection by Vice Chair Matt McMurtrey’s memory of the information presented at the Study Hall.
Here are some of the salient financial data:
The last time LACBA made a profit (i.e., as a non-profit entity, finished in the black), was 2006. There have been some comments suggesting red ink of $1 million in some years, but the LACBA leadership has moved away from that number.
The situation has improved in the last three years: 2013 was about break-even; 2014 saw a loss of a little over 4% more in expenditures over income; 2015 was expected to be nearly break-even. The annual budget is in the $12-$13 million range.
The Association has about 24,000 members and has been losing members during the last decade. Of these, about half belong to one or more sections. (Note: These numbers evidently should correct my earlier report of 19,000 and 15,000. Ms. Stevens estimated 21,000 members; I am uncertain as to the cause of the discrepancy.) LACBA has 74 paid staff, down from 98 five or six years ago. Payroll is a substantial majority of expenditures by LACBA.
LACBA has renegotiated its lease; the building is just outside the downtown core (just west of 110 Fwy). LACBA has worked hard to replace lost grant funding for projects.
In 2014, according to LACBA, the sections ran a deficit when performance was calculated by adding together (1) direct costs, e.g., payments for hotel meeting spaces, (2) indirect costs for 10 LACBA staff, seven of whom directly support sections, and (3) an allocation of LACBA general and administrative overhead, equal to about one-third of this category of overhead for LACBA as a whole.
Using this method of allocating costs to sections, LACBA concludes that their section programs lose money, though LACBA does not include any credit for LACBA dues or the $35 per Section member dues.
The performance of individual sections has not been disclosed.
LACBA supports several projects. The most important and expensive of these are projects that channel lawyer volunteers’ services to especially needy and deserving groups. Examples of these pro bono legal services projects are Domestic Violence Project, Veterans Project, Immigration Project. These projects do not charge for services, but they receive donations and some grants.
It appears that the sections bear about one-third of LACBA’s general and administrative overhead.
The legal services projects are clearly money-losers if they are allocated overhead elements the way the sections are. The projects have 10 fulltime LACBA employees working for them (similar to the sections), but projects’ staff are paid significantly more.
Setting the projects and sections aside, LACBA does not charge overhead to any group or committee that does not generate revenue.
LACBA officers assert that cost-control measures have been implemented for projects.
Some Council of Section members believe that though LACBA has altruistic motives for supporting the pro bono projects, there are also “vested interests” involved.
LACBA’s officers affirm that LACBA must not and shall not back away from its commitment to access to justice through the pro bono legal services projects.
LACBA has a reserve of a little over $5 million.
One member of the Board of Trustees has suggested that the alleged tug of war over the costs of projects versus the financial performance of the sections is not the leading cause of LACBA’s financial problems.
Comments From Your Chairperson
To some extent I applaud Mr. Kiesel and Mr. Lindsey for their determination to adopt strong measures, as necessary, to right the financial condition of LACBA, considering how long LACBA has suffered from chronic red ink. However, there is an unfortunate shortfall in LACBA’s efforts to obtain the consent of the governed before attempting to impose substantial price increases (which are really like tax increases).
I am very concerned that LACBA Central has adopted an attitude that amounts to this: “LACBA’s mission to promote access to justice is a more important raison d’être for the Association’s existence than the activities of the sections.” In truth the leadership has been saying for many years (sometimes not very candidly) to the members: “You will do the right thing by the persons served by our legal services projects; we have made that decision for you.”
I am very proud of what LACBA has done over the years to increase access to justice, and I very much hope that it can continue to be an important standard-bearer in this sphere. In the late 1980’s I served on the Board of Directors of Public Counsel, the pro bono public law firm jointly found by LACBA and the Beverly Hills Bar Association. (Note: In a cost-cutting measure, LACBA stopped contributing a low six-figure amount each year to Public Counsel.) On the other hand, I am convinced that it is a grave error on the part of LACBA to act in a cavalier, insensitive, or disingenuous way toward the sections, even if only by inadvertence. If the sections’ disaffection with LACBA Central deepens much more, there is a serious risk of aggravating rather than reducing LACBA’s financial difficulties. LACBA must remain relevant to its members, most of whom join not to facilitate pro bono projects but for their own pressing professional needs.
Some section members are starting to talk about forming new organizations or secession.
For Trusts and Estates this would require a mammoth volunteer undertaking, and right now I cannot say that even 10 percent of the requisite organizing effort is presently available. By contrast, the members of the Corporate Law Departments could depart LACBA en masse rather easily: The American Corporate Counsel Association is a turn-key alternative right now. I hear that three other sections are considering dropping out of LACBA. But even if secession of sections is not a grave risk, the possibility that LACBA will be injured by members “voting with their pocketbooks” is very real. Our members have choices, especially among the regional bars (Beverly Hills, San Fernando Valley, Pasadena, etc.). LACBA officers claim that they have studies showing that the price increases they seek are compatible with market conditions, but I would like to see and study these surveys. I don’t believe it. Section leaders think that $95 for a garden-variety lunchtime program is too pricey and will hurt attendance.
There is substantial evidence that LACBA strove to control information as to its financial difficulties in former years, with the aim of gradually appropriating sections’ financial “profits” and reduce a section’s influence on how its revenue was used. The coincidence in time of financial problems and the moves by LACBA against the sections’ financial autonomy is too striking to ignore. Against this record, the sections’ angry reaction to LACBA’s recent attempted decree of large price increases, coupled with its unwillingness to completely disclose financial data, is only to be expected. We are talking about lawyers after all! What is LACBA trying to hide? What confidence should we have in the Association’s ability to run its finances properly? These questions are inescapable. In order for LACBA to flourish, the crises of confidence and credibility within the ranks of the sections must be addressed with candor, respect, and integrity.
Ever since the storm broke in the latter part of 2015, President Kiesel has expressed a conciliatory inclination; but whether he and other LACBA leaders actually accept the need for a major change in course, to redress the sections’ grievances, is uncertain.
I believe that a compromise should be vigorously pursued, starting right away, based on these elements:
A one-year freeze on any initiative to change Section 14.
A substantial rollback in proposed price increases. A searching inquiry into whether the Association is receiving good value from its paid staff.
A substantial restructuring of the LACBA by-laws and practices to restore to the sections significant influence on financial questions of concern to them and more clearly define the scope and priority of LACBA Central’s obligations to LACBA members.
As time goes by, our programming ambitions–very worthwhile activities–are being hindered more than ever before. LACBA has gone too far in making itself the taskmasters for persons who enjoy bar work for the good of the profession. The more time that goes by without a fresh start, the worse the economic consequences will be.
Expenditure of Section Funds. All dues and other funds collected by a Section shall be deposited with the Association to the credit of the Section and may be drawn upon and expended for Section purposes as may be directed by the Executive Committee of the Section, subject to the Section’s obligation to pay an appropriate amount toward the Association’s overhead and meet other financial guidelines set by the Association. Extraordinary expenses shall be subject to prior approval by the Executive Committee of the Association, and in no event shall any amount be expended for a purpose which would jeopardize the tax-exempt status of the Association.
All dues and other funds collected by a Section shall be deposited with the
Council of Sections Proposal
All dues and other
funds collected by a Section shall be deposited with the Association to the
credit of the Section and may be drawn upon and expended for Section purposes
as may be directed by the Executive Committee of the Section, subject to
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