MEETING
OF THE
BOARD OF GOVERNORS
OF THE
STATE BAR OF ARIZONA
August 17, 2005
Arizona Bar Center
Phoenix
BOARD MEMBERS PRESENT: Helen Perry Grimwood, President, Phoenix; Jim D. Smith, President-Elect, Yuma; Daniel J. McAuliffe, First Vice President, Phoenix; Edward F. Novak, Phoenix, Second Vice President, Phoenix; Raymond A. Hanna, Secretary-Treasurer, Prescott; Alan P. Bayham, Jr., Phoenix; Bryan B. Chambers, Globe; Richard D. Coffinger, Glendale; Roger H. Contreras, Sierra Vista; Amelia Craig Cramer, Tucson; Stephen M. Dichter, Phoenix; Joseph A. Kanefield, Phoenix; Richard T. Platt, Florence; Steven P. Sherick, Tucson; Jeffrey Willis, Tucson; Ex Officio Members: Charles W. Wirken, Immediate Past President, Phoenix; Public Members: Frank Barriga, Glendale; Bennie R. Click, Munds Park; Jeffrey H. Jacobson, Young Lawyers Division, Tucson; and Alexander B. Jamison, Scottsdale; At-Large Paul W. Ahler, Phoenix; David K. Byers, Phoenix .
BOARD MEMBERS WITH EXCUSED ABSENCES: Whitney Cunningham, Flagstaff; Diane L. Drain, Phoenix; Foster Robberson, Phoenix; Ex Officio Members: Dean Toni Massaro, Tucson; Dean Patricia White, Phoenix; Public Member: Fernando Gonzales, Tucson.
OTHERS PRESENT: Teresa Schmid, Executive Director; Robert B. Van Wyck, Chief Bar Counsel; Nina Benham, Assistant to the Executive Director; Colleen McManus, Senior Director of Human Resources; Matthew Silverman, Senior Director of Communications; Larry McVey, Chief Financial Officer; Carrie Sherman, Director of Executive Projects; John Furlong, General Counsel; Justice Andrew Hurwitz, Phoenix; Mike Baumstark, Court Liaison; Christine Thompson, Director of Government Relations; Ernest Calderón; Brad Vynalek, ABA Delegate; Betty Flores, Resource Center Director.
President Helen Perry Grimwood called the meeting to order at 8:30 a.m. and then the board went into Executive Session from 8:30 to 8:55 a.m.
Open Session: 9:05 a.m. President Grimwood introduced the ABA Delegates that were present and Kristine Fox, President, Arizona Women Lawyers Association. President Grimwood reviewed her attendance at the National Conference of Bar Presidents (NCBP) and the ABA House of Delegates, in place of Jeff Willis, on behalf of the State Bar. The House of Delegates spent two days on governance.
Ernest Calderon, ABA House of Delegates, reported that the focus was primarily on governance at the Annual Meeting in Chicago. Mr. Calderon reviewed other topics including the Independence of the Judiciary.
PRESIDENT’S REPORT
President Grimwood reported on the diversity initiatives in Appointments that she had worked the need to enforce the two-term limit on Committees with a few exceptions such as (MAP and Fee Arbitration). The board discussed at length the history of term limits and came to the conclusion that there is a policy reflecting the two term limits. After lengthy discussion,
Ed Novak moved and Amelia Cramer seconded and the motion passed to have the President bring back for further discussion at a later time after more development and retooling of the basic principles as submitted; Further that he supports the aspirational goals of the President’s current appointments. The motion passed.
President Grimwood reported: on her visit with the Pima County Bar Association; work on Judicial Independence; and her meeting with Chief Justice McGregor and Judge Mundell. President Grimwood was unable to attend the ALPS conference this year, however, Jim Smith was able to and gave a short summary.
President Grimwood discussed that one of the top priorities this year is regarding Judicial Independence and retaining the integrity of the judicial system. The Bar will be developing informational and speaking materials to help lawyers who wish to speak publicly in support of judicial independence/integrity.
AZBARBIO’S
Jenn Moreira, Internet Manager, reviewed the implementation of AzBarBio’s and the utilization of suggestions from board members. Ms. Moreira reported that members now come up randomly and an icon was added for specialties. This service is free to the Board of Governors and she encouraged them all to participate.
EXECUTIVE DIRECTOR’S REPORT
Ms. Schmid introduced Mike Baumstark who was present from the Court in place of Dave Byers. Ms. Schmid reviewed highlights from National Association of Bar Executives (NABE) and National Counsel of Bar Presidents (NCBP). Both Colleen McManus, Sr. Director of Human Resources and Matthew Silverman, Sr. Director of Communications were presenters. Ms. Schmid complimented them on the outstanding job they did and commented on how respected both are in their fields.
Ms. Schmid reviewed the Executive Director’s report. The ABA is completing a survey of LRIS organizations across the country that will give insights into best practices among existing systems. An emerging challenge to LRIS is the emergence of commercial referral services. Ms. Schmid reported on the challenges with generational groups’ issues. Ms. Schmid further reported on the U.S. Senate Finance Committee’s consideration of a proposal for 501(c)(3)’s that could extend to 501(c)(6)’s. The original proposal would regulate the number of board members; set benchmarks for CEO pay, and would include new standards for reporting and disclosure. Ms. Schmid reported that restructuring was reported among several bars that would give formal representation to the sections on the board or other representative bodies, such as separate council or conference of delegates. Additionally, Ms. Schmid reported on the National Center for State Courts participation in a panel with leaders from the Washington State Bar discussing the successful collaborative effort by the Supreme Court and the State Bar to stabilize funding to the state trial courts.
Ms. Schmid reviewed with the board the “Bar Alliance” which is a group of interested bar associations including Arizona, California, Hawaii, New Hampshire, Oregon and the Los Angeles County Bar Association. On June 23, staff received a demonstration of association management software that was developed for the State Bar of Utah. LegalSpan developed the software, which has been the SBA’s provider of web-based CLE registration for several years. There is no adequate bar association management software on the market, and most associations, including the SBA, have relied on proprietary software that requires constant support from in-house or consulting programmers. The new software is now the subject of a discussion among these states, since it promises to be a solution of common interest.
Ms. Schmid reviewed the Diversity Initiatives and the work on institutionalizing means by which to continuously provide data to Bar leadership about the effectiveness of the Board’s diversity policy.
Ms. Schmid discussed the CLE emersion program for a week in Guadalajara, Mexico that will be held in October. The purpose is to have this Spanish emersion course for a week to work with local attorneys to learn about their court structure in a local setting.
Ms. Schmid further reported on the Lawyer Referral Information Service and reviewed her activities as Executive Director over the last month. Ms. Schmid then gave an overview of “On the Horizon” issues which is that portion of her report that is dedicated to giving the Board advance notice of emerging issues that may become significant to the Bar in the future but do not yet require action by the Board.
Ms. Schmid reviewed the new ABA President, Mike Greco’s theme for this year and additionally, his expansion of pro bono activity and encouragement of the formation of access to justice commissions in all states (currently in 26 of them). Joe Kanefield discussed the Bar’s Task Force on Access to Justice, which was passed less than a year ago, and funding issues. Mr. Kanefield suggested that the Court should form an Arizona commission.
Mark Wagner, of Miller, Allen & Co. was introduced and he reported on the latest audit findings of the State Bar. Mr. Wagner stated that this was the third year as auditors for the State Bar and gave their unqualified opinion to the Board.
CHIEF FINANCIAL OFFICER’S REPORT
Larry McVey, Chief Financial Officer of the State Bar, reviewed the June 2005 State Bar of Arizona financial statements. Highlights for the month are: Total income was $18,885 less than budget. However, the Convention revenue budget was overly aggressive resulting in a revenue shortfall of $136,062. If this Convention revenue shortfall were to be excluded then June’s total income would be $117,177 (or 7.8%) over budget. Total expenses were $71,188 less than budget. However, the Convention expense budget was overstated and if the Convention favorable expense variance were to be excluded from June’s total expenses then June’s expenses would be $10,087 (or .8%) over budget. Actual Bar operations surplus of $461,145 was higher than June’s budgeted surplus by $52,303.
June’s personnel costs were under budget by $31,411 excluding the YTD vacation accrual adjustment of $68,687. Sections activities resulted in a loss of $25,132 in June compared to a budgeted loss of $49,193. Building operations produced a book surplus of $9,935 in June compared to a budgeted surplus of $19,870.
If the Convention income shortfall from budget were to be excluded then YTD total income was $278,581 (or 5.1%) above budget. If the Convention favorable variance in expenses were to be excluded then total expenses would be under budget by $327,450 (or 5.9%). The YTD actual Bar operations surplus of $593,571 compares very favorably with the budgeted surplus of $45,408.
Net assets of the Bar at June 30, 2005 are $4,662,380 and exceed the two months operating reserve of $1,600,000, the YTD sections carryover amount of $270,203, the equity in the building of $1,472,850 and the budgeted amount for furniture of $600,000 by $719,327. The revolving line of credit had a balance of $900,000 at June 30, 2005. Current maximum availability under the line of credit is $7,935,250 after the quarterly reduction of $87,250. If all of the unearned dues and fees and current liabilities were drawn on the Line of Credit the LOC balance would be $6.262 million and would be well below the LOC current availability amount.
The Quarterly Supplemental Financial Information report for the Second Quarter of 2005 was reviewed briefly by Mr. McVey. The Quarterly Supplemental Financial Information report contains vendor payment history, capital expenditures, Section Carryover’s and Contract Lists with Renewal Dates as called for in the Procurement Policy Statement adopted in January 2004.
Mr. McVey invited questions on the financial information and encouraged Board members to contact him if they had any questions later.
FINANCE COMMITTEE REPORT
Mr. Ray Hanna reported that Mark Wagner, Partner at Miller, Allen & Co., met with the Finance Committee and reported on the 2004 audit report. Mr. Hanna reported that the Audit Committee will be requesting Miller Allen to submit a proposal for a second 3-year agreement. Upon receipt of the proposal the Audit Committee will make a decision to continue with Miller, Allen & Co. or request proposal from other audit firms.
Mr. Hanna reported that the Finance Committee’s Dues Sub Committee was working diligently in consideration of changing the current structure and reviewed their various scenarios. The Court would require the State Bar’s final proposal at the end of November, 2005 so a decision will need to be made in September. The Court will need the rule change requests in December in order to act upon them at their January 2006 rule meeting.
Mr. Hanna reported that the Finance Committee unanimously approved the recommendation that the 2007 Convention be held in Phoenix, Arizona. This was at the request of the incoming President for 2007. Currently 73% of in-state members reside in Maricopa County, 17% in Pima County and 10% in other areas.
Mr. Hanna reported that the Finance Committee voted to amend the Last Day Requirement vesting rule of the State Bar’s pension plan. The change would provide that employees must be employed on the last day of the quarter to receive that quarter’s pension contribution. Mr. Hanna further reported the Finance Committee approved a policy to reimburse the President for necessary and reasonable out-of-pocket expenses incurred during his or her presidency. The CFO and the Chair of the Finance Committee would approve the expense reimbursement requests submitted by the President prior to payment.
Mr. Hanna reported further that the Finance Committee voted to provide the President with a part-time (.50 FTE) secretary at the Bar’s offices and loan a Bar owned laptop computer to the President during the President's term of office.
Mr. Hanna reported that Milne Scali & Co, the Bar's current insurance broker, had met with Bar staff to start the risk management/loss control review. Bennie Click is Chair of the Risk Management Committee. It is anticipated that Milne Scalie & Co. will present some or all of their findings to the Rick Management Committee before the September Board meeting. The renewal date of the Bar's liability policies is October 2.
Alan Bayham, Jr., Chair of the Ad Hoc Committee on Insurance Disclosure reported the sub-committee was formed to study the Mandatory Insurance Disclosure directive from the Supreme Court. The Arizona Supreme Court says it will adopt the ABA Model Rule for mandatory insurance disclosure for Arizona attorneys and has asked the State Bar for technical guidance in implementation. The Bar is recommending, among other things, that the Court should give Bar members one year before the disclosure rule takes effect so that lawyers will have some time to learn about and adjust to the Court’s new rule. No decision yet from the court.
Ed Novak moved, and Amelia Cramer seconded a motion for the board to adopt the recommendation of the sub-committee and to inform the membership of the Insurance Disclosure Rule which would include information to be posted to the Web as soon as is practical. That initial motion later was withdrawn.
The board discussed the Court’s request. Justice Hurwitz discussed that the Court would be reviewing this matter and will forward an Order in September.
Ed Novak moved, Amelia Cramer seconded the motion for the board to adopt the recommendation of the sub-committee with modifications to add Discipline on the Web as soon as is practical following the January 1, 2007 implementation. Vote 9-9, with Helen Perry Grimwood voting against, motion failed.
After lengthy discussion, Jim Smith moved and Roger Contreras seconded, and the motion passed, to simply forward the Report of the Sub-Committee to the Court.
No decision has been received from the court at this time.
Chas Wirken reported on the ad hoc committee, which was formed to study the 9th Circuit Split Proposal. Mr. Wirken reviewed all the legislative bills currently pending. The board discussed this at length.
Alan Bayham moved, Steve Dichter seconded and the motion passed to send a letter to Senator Kyl stating the Bar’s position to oppose legislation currently pending for a split of the 9th Circuit Court of Appeals, over four abstentions: Jeff Willis, Amelia Cramer, Alex Jamison and Paul Ahler
President Grimwood introduced and congratulated Karin Scherner and presented her with a gift from the Board of Governors for her outstanding accomplishment. Ms. Scherner received the highest score among the 384 applicants for the February 2005 Bar Exam. Ms. Scherner is with Perkins Coie Brown & Bain as an associate in the firms commercial litigation practice group.
Richard Coffinger, reported to the Board on the Security Bypass Policies and changes that have occurred at the Courts.
Nedra Brown, Director for Committee and Sections, reported on the proposed Bylaw Amendments as presented by the Business Law Section.
Ed Novak, Chair reported on the applications received to fill the vacancy of a non-lawyer for the Client Protection Fund Board of Trustees. The Committee recommends Maria Hoffman who most recently served on the Professionalism Task Force to serve as a Client Protection Fund Trustee.
Ed Novak moved, Dave Byers seconded, and the motion carried unanimously to approve the Appointment Committee’s recommendation to approve appointment of Maria Hoffman to serve as Trustee on the Client Protection Fund Board.
Robert Van Wyck, Chief Bar Counsel, reported that the annual report was published, that the discipline department was meeting its goals and that the case aging report was on track.
Jeff Jacobson, Chair reported on the Wills for Heroe’s Program that is in progress from the Young Lawyers Division. Mr. Jacobson reported that the Program had prepared 56 Wills and had 65 attorney hours total donated. Mr. Jacobson reviewed with the Board the locations where these services were performed and the plans for the future events. The Young Lawyers are in need of computers, laptops and printers to be donated and asked for the Board to let others know of their need to assist with the project.
STANDING BOARD COMMITTEE REPORTS
Amicus Curiae – Dan McAuliffe, gave an update of the Amicus Committee and the upcoming oral argument that is scheduled on the Hamm matter. Mr. McAuliffe reported on another matter and the board agreed not to act upon it.
Discipline – no report
Human Resources – Ben Click, Chair, reported that Performance Evaluations for Bar staff have been reinstituted and are just completing the first cycle. Mr. Click stated that funds have been set aside to recognize exceptional performance. Mr. Click further stated that in the Executive Director performance evaluation, the Committee plans to incorporate key indicators for organizational performance.
Long Range Planning Committee – no report
Member Services Committee – no report
Rules Review Committee – Paul Ahler reported on behalf of Foster Robberson, Chair of the Rules Review Committee, on the recommendations of the Rules Committee. The board took the following action:
Steve Dichter moved, Roger Contreras seconded and motion carried unanimously to adopt the recommendations of the Committee and file the proposed Comment with the Court as submitted.
Paul Ahler moved, Bryan Chambers seconded and the motion carried unanimously to adopt the recommendations of the Committee and file the Proposed Comment, as amended, with the Court.
Paul Ahler moved, Steve Dichter seconded and motion carried unanimously to adopt the recommendations of the Committee and file the Proposed Comment with the Court as submitted.
Paul Ahler moved, Richard Coffinger seconded and the motion was unanimous to
request an extension of time in which to return it to the Rules Committee to study this matter further.
Paul Ahler moved, Richard Coffinger seconded and the motion was unanimous to adopt the recommendations of the Committee to file the amended petition as submitted with the Court.
CONSENT AGENDA
President Grimwood asked for a motion to approve the Consent Agenda.
Ray Hanna moved and Joe Kanefield seconded and the motion carried unanimously to approve the Consent Agenda: June and July Minutes; Approval of Resignations of Members in Good Standing; Suspensions: MCLE (Non Compliance with Rule 45, Ariz. R.S. Ct.); Approval of Reinstatements (Ariz. R. Sup. Ct. Rule 32(32)(9) and/or Rule 43 for annual membership dues and trust account compliance).
Arizona Women Lawyers Association – Kristine Fox, President reported on the ABA’s Women Lawyers Summit. Ms. Fox stated the association encourages diversity. They are fostering a mentoring program and are working with other bar associations. Ms. Fox further reported that a Gender Equity Task Force was formed and will have their first meeting the 8th of September. The November 4th Convention will have Martha Akman, Author, as their keynote speaker. Ms. Fox stated that Yavapai is forming and working on sending a delegate to the ABA.
Arizona Foundation for Legal Services & Education – no report at this time
Arizona Judicial Counsel – no report
Federal Bar Association – no report
Roger Contreras moved and Richard Coffinger seconded and motion carried unanimously to adjourn. (2:45 p.m.)
Respectfully submitted,
Raymond A. Hanna
Secretary-Treasurer