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Closing Arguments: Questions remain over state’s Keller dues policies

In a state with a mandatory bar, it’s perhaps inevitable that the dues lawyers must pay to practice law should become a subject of debate from time to time.

Wisconsin has been no stranger to these controversies. In recent years, the state has seen a small group of lawyers regularly raise objections over what are known as Keller dues. These are the part of mandatory bar dues that lawyers can choose to have refunded in order to avoid paying for what might be considered political activities, such as lobbying the state Legislature in favor of specific policies and pieces of legislation. This refund system, seemingly simple enough on its face, is complicated mainly by the fact that it is the State Bar itself which decides what the amount of Keller dues refunds should be.

Recent challenges to the bar’s Keller dues policies –led in large part by the Madison-based lawyer Steve Levine, himself a former bar president – have mostly been about whether the bar has been setting the refund amounts high enough. According to Levine and his fellow critics, lawyers who have chosen to receive Keller refunds have nonetheless gone on to see the bar use their mandatory dues for inappropriate purposes, such as lobbying the state Legislature in favor of pay increases for public defenders, term limits for Supreme Court justices and other policies.

These critics have seen some success. They were quick to object when the bar proposed setting the refund amount at $5.25 for its 2016 fiscal year. Now, after several attempts at getting a higher amount, they have managed to get it up to $9.25 for the 2019 fiscal year.

In other regards, though, the critics have not got their way. Levine recently submitted a petition to the state Supreme Court calling on the bar to operate under two budgets – one laying out expenditures of mandatory bar dues and the other for what essentially would be Keller dues. That petition was rejected by the high court in February.

In this month’s closing arguments column, Jon Kingstad, a real-estate lawyer who helped set the state’s refund policies in the case Kingstad v. State Bar of Wisconsin, contends that recent federal court decisions call into question not only the Wisconsin State Bar’s dues policies, but also the arguments used to justify a mandatory bar in the first place.

In response, Michelle Behnke, a former bar president and adviser to the State Bar’s executive committee on its Keller dues polices, both argues that bar officials take their responsibilities related to mandatory dues very seriously and lays out the painstaking process they use to ensure lawyers are being refunded the correct amounts.

REFRAMING THE ISSUE OF “KELLER DUES REBATES” AND THE INTEGRATED STATE BAR

By Jon Erik Kingstad 

closingargumentskingstadphotoThere has probably been no more contentious an issue dividing the legal profession in Wisconsin than the Integrated State Bar. Although the Wisconsin Supreme Court and the Board of Governors of the State Bar have allowed members to “opt-out” of a small portion of their dues, which the State Bar has identified as for “political or ideological purposes”-i.e., Keller dues rebates”, they have at the same time strengthened their resolve to continue to require membership in the State Bar as a condition of the practice of law. They say that mandatory membership in the State Bar does not impinge upon any associational freedoms of the First Amendment because State Bar dues are incurred for the purpose of “improving the quality of the legal profession.”

This language came out of Keller v. State Bar of California, 496 U.S.1 (1990). In Keller, the U.S. Supreme Court adroitly sidestepped a re-examination of its earlier decision upholding the integrated bar in Lathrop v. Donohue, 367 U.S. 820 (1961)(reflected then in Wis. Stat. § 256.31 and today in Supreme Court Rule 10.01) and, assuming Lathrop had been correctly decided, formulated a new standard for evaluating the narrower issue of mandatory state bar dues. That standard – whether “the challenged expenditures are necessarily or reasonably incurred for the purpose of regulating the legal profession or improving the quality of legal services” – is reflected today in the current Wisconsin Supreme Court Rule SCR 10.03 (b)(5)1 governing “Keller dues rebates.” So far, the State Bar of Wisconsin has successfully turned back challenges by myself and others to the “Keller dues rebates,” which we have contended greatly understate the amounts of the State Bar budget which are used for “legislative lobbying”, and other improper, non-regulatory purposes such as “public image advertising” for lawyers. See e.g. Kingstad v. State Bar of Wisconsin, 622 F.3d 708 (7th Cir. 2010).

Since Keller was decided 28 years ago in 1990, “associational freedoms” under the First Amendment have evolved and been expanded by the United States Supreme Court. In a series of post-Keller decisions, the U.S. Supreme Court has held several compulsory assessment schemes unconstitutional. A new standard formulated in cases such as United States v. United Foods, Inc., 533 U.S. 405, 414 (2001), Harris v. Quinn, 134 S.Ct. 2618, 2639-2640 (2014) and Knox v. SEIU, 132 S.Ct. 2277, 2289 (2012), the Court has held that “in the rare case where a mandatory association can be justified, compulsory fees can be levied only insofar as they are a `necessary incident’ of the `larger regulatory purpose which justified the required association.’” The Court has added that “mandatory associations” may be permissible …only when they serve a “compelling state interes[t] … that cannot be achieved through means significantly less restrictive of associational freedoms.”…

Knox, Harris and United Foods suggest that Keller and Lathrop may no longer be good law. The “compelling state interest” standard was essentially the standard advocated by the dissents of Justice Hugo Black and Justice William O. Douglas in Lathrop. Douglas would have held the Integrated State Bar unconstitutional under an “exceptional” or “compelling state interest” standard to protect First Amendment associational freedoms. These dissents necessarily highlight the absence of any “exceptional” or “compelling state interest” justification for the mandatory bar in Lathrop’s plurality opinion.

If the Wisconsin State Bar is no longer a “rare case where a mandatory association can be justified” by a “compelling state interest”, then it follows that Keller, which assumed the validity of the Lathrop plurality opinion, did not decide whether legislative lobbying to reform the law – “improving the quality of legal services”-was a sufficiently “compelling state interest” in itself to justify compulsory membership in an association and dues. If, therefore, “compulsory fees can be levied only insofar as they are a `necessary incident’ of the `larger regulatory purpose which justified the required association’”, the issue which has been framed in the litigation or arbitration proceedings with the Wisconsin State Bar since Keller needs to be reframed. The issue restated must be: Is there a “compelling state interest” in requiring, as a condition of the practice of law, membership in an association and mandatory dues to lobby for law reforms to which members object? And, if so, can this interest not be achieved through means significantly less restrictive of associational freedoms?

I submit the answer must be “no.” Although state regulation of the legal profession by the Supreme Court or one of its agencies doubtless qualifies as a “compelling state interest which also improves the quality of legal services”, “improving the quality of legal services” is not alone enough a “compelling state interest” to justify impingement of associational freedoms by mandatory association membership or dues. The Wisconsin State Bar is no longer a “state agency” as it was when Lathrop was decided in 1961. It no longer plays any significant role in the primary “regulatory functions” of lawyer ethics, accreditation and licensing by the Office of Lawyer Regulation and Board of Bar Examiners, which were established by the Wisconsin Supreme Court as regulatory agencies or “arms of the Court.” “Improvement of the quality of legal services,” including reform of the law, can be achieved through means less restrictive of associational freedoms; the efforts of individual lawyers with other citizens or together in a voluntary association come to mind.

A compulsory association of lawyers funded by compulsory dues used for nonregulatory purposes, whether they be legislative lobbying to “improve the law” or image advertising for the legal profession, can no longer find support in the First Amendment. Support for the Integrated State Bar in Wisconsin can no longer be found in the decisions of Lathrop and Keller. The only question today is whether the Wisconsin Supreme Court will recognize this on its own and take the final step to make membership in the bar voluntary or will resist until the United States Supreme Court directs that it must.

Jon Erik Kingstad of the Kingstad Law Firm in Minnesota practices law in the areas of real estate and real estate litigation.

BAR TAKES KELLER DUES OBLIGATIONS SERIOUSLY

By Michelle Behnke

closingargumentsbehnkemugshotI was asked to “defend the State Bar’s policy on the Keller dues reduction.”

As I thought about that question, I realized that, fundamentally, this is not the right question. The real question is how well does the State Bar meet its constitutional obligation regarding the assessment of mandatory dues? Dues reduction or “Keller” has been the subject of litigation and discussion in Wisconsin and elsewhere for decades. Even before Keller, however, the State Bar of Wisconsin was calculating amounts attributable to legislative activities and permitting members to withhold or deduct those amounts from the annual dues amount.

However, it was the U.S. Supreme Court’s decision in Keller v. State Bar of California that formally established the requirement that an integrated bar separate germane activities from non-germane activities and give members the ability to withhold the dues associated with those non-germane activities. Keller was modified in 2010 by Kingstad v. State Bar of Wisconsin, which altered the test used to determine what is constitutionally permissible to include in mandatory dues. So the State Bar’s Keller process is not just a State Bar policy. It is the State Bar complying with governing case law.

I have participated in the Keller process as president-elect, president and past president of the State Bar of Wisconsin. A few years after I completed my presidential term I was asked to assist the Executive Committee in the Keller process. I served in this facilitator role for seven years. It is with this background that I will share the thorough process that the State Bar of Wisconsin uses to protect the rights of members that wish to withhold dues for those activities that are not germane to the purposes of the integrated bar.

When the State Bar of Wisconsin was reintegrated in 1992 following the U.S. Supreme Court’s reaffirmation of the constitutionality of a mandatory bar, the State Bar rules were modified to apply the Keller standard. That standard, as modified by Kingstad, applies a test as to whether an activity is “germane” to regulating the legal profession or improving the quality of legal services available to the people of the state of Wisconsin. If the activity satisfies either part of this test, then it is legally permissible to charge to mandatory dues. If not, the cost of the activity is added to the Keller dues reduction amount which is on the dues statement.

The process used by the State Bar is detailed and likely the most stringent process used by any integrated bar association in the country. The process is as follows:

Once the fiscal year is complete and the audit of the financial statements has been finalized, State Bar staff begins by reviewing all of the activities for the completed fiscal year. The State Bar staff receives a list of those activities that have been found to be germane and not germane in previous arbitrations and court decisions. Those activities previously determined to be chargeable are placed in the chargeable category. Those activities previously determined to be nonchargeable are automatically put in the nonchargeable category.

The staff then reviews, sorts and collects the information on all of the other activities carried on in the Bar. A binder (sometimes multiple binders) is put together with copies of the meeting minutes, magazine articles, newsletter articles, website postings and anything else that represents the actual activities that are not clearly in the chargeable or nonchargeable categories. These are the activities that must be evaluated by the Bar’s Executive Committee. Notice of the meeting at which the activity evaluation will be conducted is posted on the State Bar website so any members of the Bar can attend the meeting where these determinations are made. That meeting usually occurs in August or September.

The Executive Committee, with the assistance of the past president-facilitator and more recently legal counsel, reviews all of these materials applying the Kingstad test. If the activity satisfies either part of this test, then it is put into the chargeable category. If the activity does not satisfy either part of the test, it is put in the nonchargeable category. At this stage, no dollars are identified with the activity, but rather the analysis is purely based upon the Kingstad test. Testing blindly (leaving off the financial information) avoids the possibility that the Executive Committee’s decisions could be influenced by the financial effect of categorizing the activity as nonchargeable.

As we review the materials, the focus is always on the applicable test. The analysis includes comparing and contrasting activities to activities that have been found, by courts or arbitrators, to be chargeable or nonchargeable and considering what has historically been done with the activity. Sometimes, even if an activity is thought to be germane, but the determination or vote is close, we employ what we call the “too close to call” rule. That activity is then designated as nonchargeable out of an abundance of caution.

Once all the material is designated chargeable or nonchargeable, the determination meeting is concluded and State Bar staff is next directed to calculate the dues amount attributable to the nonchargeable activity. The financial services staff calculates the Keller amount and presents this to the Executive Committee. The Executive Committee reviews the amount and then takes one final step of presenting the amount to the Board of Governors for approval. In this final step, the Executive Committee rounds up the calculated Keller amount. This year $9.61 was rounded up to $9.95. The rounding is done in an effort to provide another safeguard or cushion to ensure the greatest possible protection of members’ rights.

One final note. The Kingstad test does not include a determination of whether the issue is political in nature. Whether an activity is political or ideological was part of the original Keller test, but was removed by the Kingstad decision because all activities are required to be reviewed for germaneness. Although the political nature of an activity is no longer a primary portion of the evaluation of activities, lobbying the state Legislature and Congress continued to be a point of concern. In response, the State Bar’s Board of Governors recently adopted a policy that designates all expenditures relating to activities which constitute direct lobbying of Congress and the state Legislature as nonchargeable. Although this policy is not required by Keller, Kingstad, or the Wisconsin Supreme Court’s rules, its adoption further exemplifies the Bar’s commitment to ensuring that the First Amendment rights of those who take the annual dues reduction are respected.

So I write not to defend the State Bar’s policy on Keller, because adherence to this process is not a policy but rather it is following the law. No, I write to share my firsthand experience of how hard the State Bar works to “get it right.” Over time, the case law has articulated the rules as they relate to dues in a mandatory bar and the State Bar has taken those rules, adhered to those rules and often surpassed those rules. The State Bar’s latest step is just another example of taking its responsibility and obligation seriously.

Michelle Behnke has practiced law in the Madison area for 30 years, specializing in business, real estate and estate planning.

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