Working group OKs 12 rules for paraprofessionals

The State Bar’s Paraprofessional Program Working Group voted Monday on the rest of the proposed rules of conduct for the plan that would allow non-lawyers to practice some areas of law.

During Monday’s five-hour meeting, the group discussed and voted on 12 rules, all of which they considered the most controversial. The others were voted on during the group’s July 26 meeting, which was delayed after extended discussion and confusion about why some rules were voted on individually and some were voted on omnibus style.

All of the rules passed. Rule 1.5.1, which concerns fee sharing with attorneys, initially failed in a 5-7 vote. The group then amended the rule to remove a highly debated section that created guidelines for fee sharing between licensed paraprofessionals and attorneys that are not in the same firm.

One of the most debated rules the group considered was whether licensed paraprofessionals should be able to hold minority ownership in a law firm.

That rule, designated as 5.4 in the proposed code of conduct, passed in a 9-5 vote, with three members of the committee absent. The group spent over an hour discussing it, with subcommittee member Amos Hartston saying the intention was to create a multitude of business models.

Committee member Carolin Shining voted no on 5.4, in addition to abstaining from or voting no on all the rules considered in Monday’s meeting.

“The foundation of our profession is the independent professional judgment that we have,” Shining said. “Sharing these things risks our independent professional judgment.”

Steven Fleischman, another committee member opposed to this rule, was concerned about paraprofessionals getting money from a law firm’s practice as a whole.

“As soon as you allow a paraprofessional to have an ownership interest in a law firm, because a law firm and lawyers have unlimited licenses, that means the paraprofessional will be sharing fees in all sorts of areas where they are not allowed to practice under their paraprofessional license,” Fleischman said.

Genie Harrison, owner of the Genie Harrison Law Firm and president of the Consumer Attorneys Association of Los Angeles, is opposed to allowing minority ownership as described in Rule 5.4.

Minority ownership could mean a 49% stake in the firm, or paraprofessionals could have a lot of influence over how the firm practices law if they have an ownership interest, Harrison said. This could have a big impact on small firms, she added.

“A lot of the people on the paraprofessional program working group have never been in private practice as a partner in a law firm, so they don’t understand the dynamics of how a law firm partnership really works and how decision making happens,” Harrison said. “Nor should they.”

“I don’t think any large firms are going to go out and give 49%,” Hartston said during Monday’s meeting, but he did not specifically address this issue at the solo or small firm level.

Toby Rothschild, an ethics attorney who worked on the State Bar’s Rules of Professional Conduct, said he believes the paraprofessional rules were well-adapted from the ones attorneys must follow. However, like Harrison, he said the issue of ownership stakes in law firms would remain controversial.

Rothschild said he believes the rules are better than the “low expectations” many skeptics had for it, but he acknowledged that for some who oppose the program, especially solo practitioners and lawyers who practice in small firms, it won’t make a difference because introducing paraprofessionals would directly compete with their business.

Harrison said she doesn’t think the rules should instill confidence in the program and questioned whether paraprofessionals should be introduced at all.

“What’s happening is that the State Bar is talking about creating a new licensure with potentially thousands of people when already the resources to prosecute attorneys and notarios and paralegals — the ones who are already licensed to do legal services work — are scant for prosecuting those individuals,” Harrison said. “So where is the enforcement really actually going to happen?”

Harrison pointed to the recent collapse of Thomas V. Girardi’s legal practice that resulted from allegations of using client money to pay for personal expenses and the bankruptcy of his once prestigious firm. Critics have said the State Bar didn’t do enough to investigate allegations of Girardi’s wrongdoing.

In a June meeting, the board of trustees acknowledged allegations that it ignored for decades the warning signs of Girardi’s behavior and vowed to make changes to its policies and procedures. However many have expressed doubt that it will make a difference.

Harrison in particular said she believes the paraprofessional program could produce another scandal.

“Literally, under the State Bar’s new proposed scheme, a Bernie Madoff level fraudster could start a legal services firm as a paraprofessional and rob the public blind,” Harrison said. “And then not until the collapse of that Ponzi scheme would the State Bar notice, just like in the Girardi matter, because it can’t even police the attorney licensees it has now.”

Some members of the Paraprofessional Working Group echoed Harrison’s sentiments.

In a discussion of a rule regarding fee sharing between paraprofessionals and attorneys, Fleischman said Girardi not only allegedly stole money from clients’ accounts, he took money from fellow attorneys through fee sharing. Sharon Bashan, a committee member, agreed with Fleischman.

“Just as Tom Girardi defrauded other attorneys, this opens up attorneys to defraud paraprofessionals,” Bashan said.

This rule, designated as 1.5.1 in the proposed code of conduct, could single-handedly sink the program with one controversy, said committee member Stephen Hamilton from the California Lawyers Association.

“This is a lightning rod provision,” Hamilton said. “All you need is one situation like the Girardi case … that could crush the program.”

Rothschild said oversight may not necessarily fall to the State Bar, and ultimately it’s a question either the California Supreme Court or the state legislature will have to answer.

The paraprofessional program still has a ways to go before being implemented. The California Supreme Court and the state Legislature still must approve it. The court has a liaison working with the group, so there are hopefully no surprises, Rothschild said.

“But the legislature is another story. I think groups like the Consumer Attorneys and some of the other folks that are in strong opposition … might well have a greater influence in the legislature than they do in the State Bar,” Rothschild said. “I could see it getting through the whole process and then getting killed, or at least dramatically changed, at that stage.”