California Bar Exam Statistics

Detailed statistics for the July 2010 California Bar Exam are finally out. The overall pass rate for all takers was 54.8%. The overall pass rate for first-time takers was 67.7%. Out-of-state ABA-approved first-time takers posted a 68.1% pass rate. California ABA-approved first-time takers' pass rate was slightly higher at 75.2%.

The pass rates for first-time takers from top 20 law schools:

Yale -- 100%
Harvard -- 94%
Stanford -- 98%
Columbia -- 93%
Chicago -- 100%
NYU -- 87%
Penn -- 85%
Berkeley -- 91%
Michigan -- 86%
Virginia -- 96%
Cornell -- 67%
Northwestern -- 83%
Duke -- 89%
Georgetown -- 75%
Texas -- 76%
UCLA -- 83%
USC -- 90%
Vanderbilt -- 81%
Wash. U. -- 64%
George Washington -- 85%

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Keep in mind that many of these individual pass rates reflect an overall percentage of a relatively few number of students who actually took the bar. For example, only 17 students from Chicago sat for the bar, compared to 41 for Northwestern.

Meditation (Not Mediation) for Lawyers

Highly recommended from the California Bar Journal.

California Love: L.A. County Faces Erosion of Middle Class

Good news keeps pouring in. . . . LA Times

Next Stop: Poor House

California just can't get a break. From the LA Times:

Less than four months after California leaders stitched together a patchwork budget, a projected deficit of nearly $21 billion already looms over Sacramento, according to a report to be released today by the chief budget analyst.

Yeesh. And unlike the Federal Government, California cannot print money or use quantitative easing to deal with the shortfall. Things are so bad that California is researching ways to declare bankruptcy:

California's finances have been so bad that the governor's finance director, Mike Genest, told a budget forum in Washington last week that back in February he had combed through the U.S. Constitution to research whether California could legally declare bankruptcy -- or revert to some kind of territorial status. (Neither was realistic, he determined.)

California's fiscal implosion may end up being a con law professor's dream. Can a state declare bankruptcy (note: the current bankruptcy code only provides a reorganization option for municipalities, not states)? Can a state revert to a territory? If Californians revolt and install a dictator, would Congress enforce the guarantee clause?

Whatever the answers may be to such heady constitutional questions, the reality is that life in California is going to get a whole lot worse in the very near future.

Gov. Arnold Schwarzenegger signs bill facilitating construction of NFL stadium in San Gabriel Valley

Get ready, Los Angeles football fans! The NFL is coming to town. The LA Times reports that Governor Schwarzenegger has signed a bill "exempt[ing a] proposed 75,000-seat stadium from state environmental laws[, an action] . . . intended to hasten the planning process." Exempting the project from California's environmental law is a considerable step toward its completion. This is because the "environmental law[]" to which this legislation principally provides an exemption is the California Environmental Quality Act ("CEQA"). See Cal. Pub. Res. Code § 21000, et seq.

A Quake in the Golden State

From the LA Times:

Today, a [constitutional] convention moves an important step closer to reality as Repair California -- the coalition spearheaded by the Bay Area Council together with organizations of various philosophies across the state -- files its language for two measures to appear on the November 2010 ballot. Voters will be asked first to amend the Constitution to permit themselves to call a convention, then, second, they'll be asked to actually call it. A convention can work. It can give the constantly evolving state an updated government that better serves its restless people.

It's coming California. There is light at the end of the tunnel. More to follow.

Introducing the "Civil Gideon"

In 1963, the Supreme Court unanimously decided in Gideon v. Wainwright, 372 U.S. 335 (1963) that the Sixth Amendment gives all low-income defendants the right to counsel in criminal cases. A year later, the Court broached the issue of a similar right in civil cases claiming that "laymen cannot be expected to know how to protect their rights when dealing with practiced and carefully counseled adversaries.” See Brotherhood of R.R. Trainmen v. Virginia, 377 U.S. 1, 7 (1964). However, in 1981, it declared that indigent litigants do not have the right to court appointed counsel in cases involving the termination of parental rights. See Lassiter v. Department of Social Services,, 425 U.S. 18 (1981).

In the past decade, the movement towards establishing the right to counsel in civil cases has been gaining traction, and in 2006, the ABA issued a statement showing its support. Well, from the ABA's mouth to Governor Schwarzenegger's ears, and we get the first state law in California mandating legal representation for indigent civil litigants, otherwise known as the "Civil Gideon."

More Bad News for the Golden State

Things have not been going well for California. Despite the State's efforts to balance its budget and reform its tax system, revenue is still declining.

From Bloomberg:

Revenue in the three months ended Sept. 30 was 5.3 percent less than assumed in the $85 billion annual budget, state controller John Chiang reported yesterday. Income tax receipts led the gap, as unemployment reached 12.2 percent in August.

And this is after drastic shock treatment:

The latest figures show that California is facing resurgent fiscal strains brought on by the U.S. recession. Since February, Schwarzenegger and lawmakers have cut $32 billion from spending, raised taxes by $12.5 billion and covered $6 billion more with accounting gimmicks and borrowing. Even with those actions, state budget officials predict an additional $38 billion in deficits in the next three fiscal years combined, including $7.4 billion in the year starting July 1.

Other than Professor Stark's novel proposal, no one seems to have a good solution for what ails California. Meg Whitman, the former CEO of eBay and a candidate for governor, suggests that California should fire 40,000 state employees to help reduce spending. Of course, firing that many politically well-connected people smells a bit of unreality to me.

Alas, without further spending cuts and with a legislature unable to secure public approval for more tax increases, it looks increasingly likely that California will need a constitutional convention to save itself from the poor house.

Stay tuned for an article about what the California constitutional convention would entail and how it would reform the State's budget system. Creating a government from scratch? It's a law student's delight.

How to Fix the Criminal Justice System - Ban Candy

Researchers at Cardiff University in the U.K. discovered an interesting correlation this week: kids who eat a lot of candy are more likely to become criminals in adulthood.

Simon Moore, one of the researchers, explains the results:

Intrigued by this association, Moore turned to the British Cohort Study, a long-term survey of 17,000 people born during a one-week period in April 1970. That study included periodic evaluations of many different aspects of the growing children's lives, such as what they ate, certain health measures and socioeconomic status. Moore plumbed the data for information on kids' diet and their later behavior: at age 10, the children were asked how much candy they consumed, and at age 34, they were questioned about whether they had been convicted of a crime. Moore's analysis suggests a correlation: 69% of people who had been convicted of a violent act by age 34 reported eating candy almost every day as youngsters; 42% of people who had not been arrested for violent behavior reported the same. 'Initially we thought this [effect] was probably due to something else," says Moore. "So we tried to control for parental permissiveness, economic status, whether the kids were urban or rural. But the result remained. We couldn't get rid of it.'

Of course, as well educated (and presumably low candy consuming) individuals, we learned long ago that correlation does not imply causation. Nonetheless, Mr. Moore believes there is a rationale behind the results:

‘The key message is that this study really raises more questions than answers,’ says Moore. One of those questions is whether sweets themselves contain compounds that promote antisocial and aggressive behavior, or whether the excessive eating of sweets represents a lack of discipline in childhood that translates to poor impulse control in adulthood. Moore is leaning toward the latter. It's possible that children who are given sweets too frequently never learn how to delay gratification - that is, they never develop enough patience to wait for things they want, leading to impulsivity in adulthood. It's also possible that children who are poorly behaved from the start tend to get more candy.

So there you have it. Avoid feeding your child a steady diet of Coke, Pop Rocks, and Candy Corn and you may just help solve California’s prison crisis.

I'll be Taxed

Time for me to chime in on the tax reform proposals in the Golden State. California's budget system is broken. The recent patchwork by the legislature failed to fix the fundamental problem in California's revenue system: volatility.

California uses a steeply progressive income tax to generate the bulk of its revenue. In fact, the system is so progressive that:

More than half of California's income tax revenue is paid by those with incomes of $200,000 or more.

That is an awful lot of revenue generated from a very small group of people. That small group ("the Rich") tends to generate their income from volatile investment activities in the form of capital gains (i.e. gains on stocks, bonds, hedge funds, etc.). When asset performance degrades, the Rich tend to take the brunt of the losses and ultimately remit less money to the treasury. Conversely, when assets perform well, the Rich tend to make enormous gains and treasure flows from Sacramento to the rest of the State.

California (and to a similar extent, the federal government) have placed a leveraged bet on the Rich. When their income goes up, the State profits handsomely via capital gains taxes and high marginal rates while sparing the rest of the taxpayers. When the Rich's income declines, however, the leveraged bet collapses (a dollar lost on someone who is taxed at 20% is a bigger hit to the State than a dollar lost on someone who is taxed at 5% or has no capital gains income to tax at all). A downward movement in the Rich's income creates an enormous drop in revenue that devastates the State's finances.

This is exactly what happened this year in California. With the demise of the Rich, so went California's budget.

The proposed solution is a fairly simple one: abandon steeply progressive rates in favor of flatter rates on more types of income (e.g., instead of 20% and 5% income brackets on individuals income, have a 10% flat rate and add a flat tax on businesses). If the State had a broader tax base and a flatter rate, volatility would decline. Of course, the odds of giving the Rich a tax break during a fiscal crisis, particularly in California's notorious Legislature, seem like a snowball's chance in...well...you know.

Perhaps there is a better way. Professor Kirk Stark at UCLA School of Law has come up with a novel suggestion. To reduce volatility, require the State to apportion out capital gains taxes over a period of years. The Professor explains his idea quite elegantly:

But rather than reducing taxes on wealthy investors, why not just unhitch the timing of their tax payments from the boom-bust cycle of the market? This could be done quite simply by giving taxpayers who incur capital gains taxes the option of claiming a "capital gains tax credit" that would be recaptured over the ensuing three years. As an example, let's assume that the amount of the credit is 75 percent of the capital gains taxotherwise owed in the year of the sale. In our example above, Mickey would be entitled to a credit of $1,500 (i.e., $2,000 multiplied by 75 percent) in the year that he sells his Disney stock. His tax liability for the year of the sale would be $500 ($2,000 minus $1,500) rather than the full $2,000. This credit would then be recaptured (i.e., paid back) in three equal installments over the next three years, with the result that Mickey would add $500 to his tax bill for each of the next three years. The bottom line is that a $2,000 tax bill would be paid over a period of four years.

The net effect of this system - i.e., combining an upfront tax credit with a recapture rule - is that capital gains tax revenue would drip into the state in smaller increments rather than surging during the boom years and later drying up completely. It also bears noting that this system offers something of a preference for capital gains, since it operates like an interest- free loan from the state to taxpayers who would otherwise have to pay the capital gains tax upfront all at once.

Tax the rich, reduce revenue volatility, and entice people to invest? I think the Professor is onto something. Perhaps he should run for office.

Update: New Blackbook Legal Contributing Editor

BBLers, we want to introduce a new member of our team: Samuel Greenberg, tax commentator extraordinaire. Sam graduated with high distinction from the University of California, Berekely with a degree in Economics and is currently at the Loyola Law School, Los Angeles, where he is an Articles Editor of the Law Review.

Sam's legal and research interests include economics, tax, and constitutional law. Sam hopes to give BBL readers a some insight from the west coast, and assist us in piecing together the enigma that is California. We are excited to have him on board.

In other news, we are still reviewing applications and anticipate hiring one more contributing blogger. Keep the resumes coming. Cheers!

Pay As You Drive Auto Insurance: Be Afraid, Be Very Afraid

Please welcome the latest invasion of our privacy. It’s called Pay As You Drive (PAYD) auto insurance. The concept is a simple one: a customer’s premium is tailored to his/her driving habits. This includes the number of miles driven, and also often includes the style (i.e. speed and acceleration) and time of driving. Many insurance carriers allow their customers to voluntarily select a PAYD plan. For example, Progressive offers the “My Rate” Program, and the company’s website boasts that “[i]f you’re a safe and/or occasional driver, you could pay less for auto insurance- a lot less!” In return for the discounted auto insurance, however, customers sacrifice their privacy. GPS tracking devices are installed to register customers’ driving habits. Is a better rate on auto insurance really worth sacrificing the constitutionally protected right to privacy?

Although programs like Progressive’s “My Rate” are cause for concern (especially in this harsh economic climate where we’re all trying to save a buck), proposed legislation in California downright scares me. The proposal allows an insurer to offer self-reported estimated mileage plans (“EM”) and/or actual-mileage driven plans (“AMD”). An insurer may exclusively offer AMD plans, and, may, in turn, mandate the installation of GPS tracking devices. Insurance companies understandably wish to attain the most information possible so as to accurately measure a policyholder's risk. But, with increased technology, the question becomes how much is too much? We don’t want insurance companies knowing every detail of our personal life, no matter how helpful it may be for calculating risk.

There are not any direct constitutional issues, as the constitution obviously does not limit private companies and individuals. However, with PAYD, insurers will have access to information such as speed and style of driving (and maybe even location, although supposedly the location of the vehicle will be left out of the data collected), and it is hard to imagine that the government wouldn’t try to get its hands on such information. For example, if the government is prosecuting an individual for vehicular manslaughter, it would likely seek to subpoena the information collected by PAYD insurers--information that would be more readily available than it would generally be.

There are, to be sure, benefits that come along with PAYD auto insurance. At least theoretically, those with PAYD policies will curtail the amount they drive, and, thus, reduce carbon dioxide emissions. However, if the insurance market becomes dominated by AMD plans, our privacy will be seriously jeopardized. Do the potentially lower insurance rates and environmental benefits justify an infringement on our constitutional right to privacy?