{"id":228,"date":"2007-09-09T14:55:34","date_gmt":"2007-09-09T14:55:34","guid":{"rendered":"http:\/\/www.bluoz.com\/blog\/?p=228"},"modified":"2007-09-09T14:55:34","modified_gmt":"2007-09-09T14:55:34","slug":"public-comment-sought","status":"publish","type":"post","link":"https:\/\/www.bluoz.com\/blog\/2007\/09\/09\/public-comment-sought\/","title":{"rendered":"public comment sought"},"content":{"rendered":"

Tenderloin Housing Clinic just filed a restraining order against one of their own managers potentially affecting a lot of people. Do you think they need regulation?<\/strong><\/em><\/p>\n

Public Comment sought regarding Tenderloin Housing Clinic, at the State Bar of California<\/a> <\/p>\n

Proposed Report Regarding Nonprofit Entity Legal Practice – Frye v. Tenderloin Housing Clinic, Inc. (2006)<\/a> (PDF)<\/p>\n

send public comments here:<\/p>\n

Kate O’Connor kate.oconnor@calbar.ca.gov
\nThe State Bar of California
\nOffice of Legal Services, Access & Fairness Programs
\n180 Howard Street, 10th Floor
\nSan Francisco, CA 94105
\n415-538-2316
\n415-538-2552 Fax<\/p>\n

SUBJECT: Proposed Report Regarding Nonprofit Entity Legal Practice (Frye v. Tenderloin Housing Clinic, Inc. (2006) 38 Cal.4th 23.<\/p>\n

PROPOSAL: In response to the California Supreme Court\u2019s request in Frye v. Tenderloin Housing Clinic, Inc., (2006) 38 Cal.4th 23, 40 Cal.Rptr.3d 221, that the State Bar conduct a study and report back to the Court as to whether regulation of nonprofit legal service providers is warranted, the State Bar has developed a proposed report on this subject.<\/p>\n

This report is not subject to public comment process, but it has been determined that public comment would enhance consideration of the report by the Board of Governors and the Supreme Court. The report will be before the Board for consideration at its November 2007, meeting. It is anticipated that the report will be filed with the Supreme Court by the end of December 2007.<\/p>\n

In order to receive comments and finalize the report for consideration at the Board\u2019s November meeting, the period for public comment has been reduced to 45 days.<\/p>\n

SOURCE: Board Committee on Regulation, Admissions & Discipline<\/p>\n

COMMENT DEADLINE: October 15, 2007<\/p>\n

——————————————some excerpts of note————————————–<\/p>\n

The Court directed the State Bar to determine whether there is evidence of actual client
\nendangerment resulting from law practice in a nonprofit setting and whether any
\ndiscovered harm to clients warrants regulation of the nonprofit entity itself, as opposed
\nto the regulation of the individual attorneys, who remain always subject to State Bar and
\nSupreme Court oversight as individual licensees. To this end, the Court instructed the
\nState Bar to:
\nDetermine whether nonprofits actually imperil client interests [Id., at p.
\n51.]; Determine whether, absent the usual profit motive, a nonprofit
\norganization\u2019s ideological motivation may, nevertheless, pose a risk to
\nclient interests [Id., at p. 51]; Determine if existing Rules of Professional
\nConduct applicable to individual attorneys already afford adequate
\nsafeguards to clients in the nonprofit setting [Id., at pp. 51-52.]; Evaluate
\nthe benefits and detriments of a regulatory structure for nonprofit entities,
\nbalanced against their First Amendment expressive and associational
\nprotections. [Id., at p. 54.]<\/p>\n

————————————————————————————————————–<\/p>\n

The least responsive sector to the study was the consumers of nonprofit legal services.
\n[Appendix 2-3]. Those served by nonprofits often are near the fringe of society, difficult
\nto reach and not likely to respond to official inquiries of this nature. The greatest value
\nof the comment received from this sector is that it generally paralleled the data received
\nelsewhere.<\/p>\n

————————————————————————————————————-<\/p>\n

A concern expressed throughout the survey responses is that nonattorneys in the
\nnonprofit legal service sector engage in the unauthorized practice of law. [Appendix 2-
\n3, Question 4; Appendix 2-4, Questions 5, 8].
\nCalls for more regulation of nonprofits from consumers were based on perceptions that
\nnonprofit entities were not regulated to the extent that many, particularly nonprofit
\ncorporations, actually are, and on concerns that attorneys working for nonprofits not
\nescape their individual professional responsibilities and liabilities simply due to the form
\nthrough which they practice. [Appendix 2-3, Question 14].<\/p>\n

—————————————————————————————————————<\/p>\n

However, the best, most conscientious, professionally committed practitioners are not
\nthose of concern to the State Bar\u2019s attorney discipline system. It is, rather the
\nindividuals and firms that operate on the margins of the profession that create the need
\nfor regulation. Just as with the general population of attorneys and for-profit law
\npractices, the nonprofit world is not immune from marginal and misguided operators.
\nNor can it be said that nonprofit law practices, while endeavoring to do the best, never
\nfall short.<\/p>\n

————————————————————————————————————-<\/p>\n

Survey responses from providers on internal risk management controls varied, although
\nnearly all respondents confirmed their use of case management policies and
\nprocedures, staff supervision and training, conflict of interest compliance systems,
\nstandardized forms and procedures, periodic case reviews and file audits, calendaring
\nand tickler systems. [Appendix 2-2, Questions 5, 6, 9, 10].<\/p>\n

———————————————————————————————————–<\/p>\n

A commenter at the public hearing cited as an example of potential harm to clients from
\nnonprofit law practice, the limited liability nonprofit entities have for noncompliance with
\nthe professional standards governing the attorneys rendering services through the
\nnonprofit entity. It was suggested that a victimized client had no meaningful recourse
\nagainst a nonprofit entity for harm caused the client by noncompliance with professional
\nstandards. [Appendix 2-6, 94:16-24 (only remedy for nonprofit client is to sue entity, no
\nState Bar process available)].<\/p>\n

—————————————————————————————————————<\/p>\n

The remaining ten percent of responders in this category expressed concerns that
\ncompetition for funding can affect decision-making and \u201ctwist\u201d the nonprofit mission
\naway from service and toward funding preservation and maximization. [Appendix 2-2,
\nQuestion 18].<\/p>\n

————————————————————————————————————–<\/p>\n

Even when economic pressures may be limited or absent, pressures to enhance
\nvisibility or political power, to address one constituency over another or advance the
\nstanding of the nonprofit in pursuit of its ideological mission can push toward the
\nmargins of professional standards. [See generally, Brustin, Legal Services Provision
\nThrough Multidisciplinary Practice — Encouraging Holistic Advocacy While Protecting
\nEthical Interests, supra, 73 U.Colo.L.Rev. at p. 824].<\/p>\n

————————————————————————————————————-<\/p>\n

The authorities that were at issue in Frye expressly limited nonprofit law corporations in
\ntheir generation of fee revenues. [See e.g., State Bar Law Corp. Rules, rule IV.A.10.c;
\nCorp. Code \u00a716406(b); 75 Ops.Cal.Atty.Gen92, supra; see also, Frye v. Tenderloin
\nHousing Clinic, Inc., supra, 38 Cal.4th at pp. 34-36, 44-45]. Nevertheless, as noted in
\nFrye, actual practice in California regularly results in fees being awarded to nonprofit
\nentities despite these limitations, creating a judicial exception to the authorities that
\notherwise ban or limit the practice. [Id. at p. 49, n. 10].<\/p>\n

————————————————————————————————————-<\/p>\n

As observed in Frye, nonprofit corporations currently receive more oversight than forprofit
\ncorporations in order to obtain and maintain their nonprofit and favorable tax
\nstatus.
\n. . . [T]he Attorney General is vested with authority to bring actions to
\nchallenge a nonprofit public benefit corporation\u2019s failure to comply with its
\ncharitable mission or corporate charter. ([Corp. Code,] \u00a7\u00a7 5250, 6216;
\nsee also \u00a7\u00a7 5141, 5142). Nonprofit public benefit corporations are
\nrequired to register with the Secretary of State and register annually with
\nthe Attorney General. ([Corp. Code,] \u00a7 6210; Gov. Code, \u00a7\u00a7 12585-
\n12587.) Annual reports must include certain financial transactions,
\nnonprogram expenditures, use of professional fundraisers, receipt of
\ngovernment funds, and certain IRS reporting requirements. (2 Advising
\nCalifornia Nonprofit Corporations (Cont.Ed.Bar 2d ed. 1998) \u00a7 1140, pp.
\n611-612). \u2018Public benefit corporations are subject to examination by the
\nAttorney General at all times to ascertain the extent to which they may
\nhave departed from the purposes for which they were formed or have
\nfailed to comply with [the requirements of the] charitable trusts they have
\nassumed. The Attorney General may institute any proceedings necessary
\nto correct such a departure or noncompliance,\u2019 including proceedings to
\ncompel compliance with statutes governing nonprofit corporations.
\n(1 Advising California Nonprofit Corporations, supra, \u00a7 8.115, pp. 397-
\n398). In addition, public interest law firms seeking to maintain nonprofit
\nstatus for the purpose of compliance with 26 U.S.C. \u00a7 501(c) are subject
\nto oversight by the Internal Revenue Service, both with respect to their
\npublic purpose and the circumstances under which they may accept fees
\nfrom clients or through judicial awards. (Rev.Proc. 92-95, 1992-2 C.B.
\n411.]\u201d<\/p>\n

———————————————————————————————<\/p>\n

Complaints about nonprofit charities are reviewed by the Attorney General’s Charitable
\nTrusts audit staff. If improper actions result in a loss of charitable assets, the Attorney
\nGeneral may sue the directors to recover from them the missing funds. The funds
\nrecovered by the Attorney General are returned to the charity. The Attorney General
\nhas limited staff and financial resources to carry out charitable investigations. Although
\ndisclosure procedures prohibit the Attorney General from discussing pending
\ninvestigations or indicating whether or not any specific action has or will be taken with
\nrespect to a particular organization, the Attorney General seeks to administer the
\nCharitable Trust laws equitably and efficiently. [See, http:\/\/ag.ca.gov\/charities\/faq.php].<\/p>\n

————————————————————————————————-<\/p>\n

The registration\/certification requirement proposed here is directed at the \u201chead of legal
\npractice\u201d within the entity, keeping the focus upon attorney professional standards,
\nwhether the entity be a nonprofit corporation or other nonprofit organization. The
\ndesignated \u201chead of legal practice\u201d in a nonprofit law practice will register with the State
\nBar and certify that the law practice 1) maintains security for claims, if it is a corporation;
\n2) is bound by all professional standards; 3) has policies and procedures in place to
\nassure compliance with professional standards; and 4) dedicates legal fees obtained by
\nthe entity to the legal practice.
\nRegistration provides a \u201csafe harbor\u201d for the nonprofits. Failure to register alone is not a
\ndisciplinary offense either for the \u201chead of practice\u201d or for the entity. Failure to register
\nmerely eliminates the protections the corporate \u201cshield\u201d provides in the corporate setting
\nand removes from nonprofit corporations and other organizations the \u201csafe harbor\u201d
\nallowances on nonattorney governance, fee-sharing and mixing legal services with
\nother services.<\/p>\n

————————————————————————————————————-<\/p>\n

16. There are identifiable risks to the public interest that are unaddressed by existing
\nregulation and which can be addressed by an unburdensome
\ncertification\/registration program directed at the \u201chead of the legal practice\u201d within
\nany entity that provides legal services where there is the potential for nonattorney
\ngovernance, fee-splitting and mixed legal and nonlegal services.<\/p>\n","protected":false},"excerpt":{"rendered":"

Tenderloin Housing Clinic just filed a restraining order against one of their own managers potentially affecting a lot of people. Do you think they need …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[6],"tags":[23],"class_list":["post-228","post","type-post","status-publish","format-standard","hentry","category-6-Tenderloin-Housing-Clinic","tag-tenderloin-housing-clinic"],"_links":{"self":[{"href":"https:\/\/www.bluoz.com\/blog\/wp-json\/wp\/v2\/posts\/228","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bluoz.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bluoz.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bluoz.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bluoz.com\/blog\/wp-json\/wp\/v2\/comments?post=228"}],"version-history":[{"count":0,"href":"https:\/\/www.bluoz.com\/blog\/wp-json\/wp\/v2\/posts\/228\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.bluoz.com\/blog\/wp-json\/wp\/v2\/media?parent=228"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bluoz.com\/blog\/wp-json\/wp\/v2\/categories?post=228"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bluoz.com\/blog\/wp-json\/wp\/v2\/tags?post=228"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}