Committee Oregon State Bar

Special Meeting of the Board of Governors

June 30, 2000 Lake Oswego

Mission Statement: The mission of the Oregon State Bar is to serve justice by promoting respect for the rule of law, by improving the quality of legal services, and by increasing access to justice.

Open Session Minutes

The meeting was called to order by President Rew on Friday, June 30, 2000 at 9:00 a.m. The open session on Friday was from 9:00 a.m. to 1:10 p.m. All members of the Board of Governors were present with the exception of David Orf; David Hytowitz from 9:00 a.m. to 9:25 a.m.; and Mr. Williamson from 9:00 a.m. to 9:35 am. Staff present, for all or portions of the meeting, were Anastasia Meisner, Legislative Assistant; Sandy Hise, Executive Assistant; Bob Oleson, Public Affairs Director; Kay Pulju, Communications Manager; George Riemer, General Counsel; and Kateri Walsh, Media Relations Coordinator. Also present were PLF directors Tom Peachey (chair), Gary Ackley, Karen Allen, Al Bannon, Bill Martin, Bob Nunn and Ric Weaver. PLF staff present were Tom Cave, Barbara Fishleder, Cindy Hill and Bill Kwitman. Also present were Lisa LeSage, Tom Tongue, Paul Fortnio, Payton Smith and Stephen Hacker.

1.Swearing-In of New BOG Members Bruce Anderson and David Hittle

Mr. Rew swore in new board members Bruce Anderson and David Hittle. They were congratulated with hearty applause.

2.Joint Meeting - Board of Governors and PLF Board of Directors

A.Presentation of report of the PLF Policies and Procedures Task Force

Mr. Rew introduced Payton Smith, PLF Policies and Procedures Task Force Chair. Mr. Smith presented the formal report and recommendations of the task force, describing its charge and study methodology, its members and their respective backgrounds. He felt the intense scrutiny of PLF claims handling procedures by the task force eliminated any pro-PLF bias and the final recommendations were far removed from a 'whitewash.' Task force members, being skilled cross-examiners, put the burden of proof on the PLF to demonstrate it had nothing to hide. The task force met thirteen time from January 11-June 27, 2000. Mr. Smith felt he could not overstate the dedication and hours of study required by task force members, Mr. Rew, Mr. Peachey, the PLF staff, and Mr. Riemer as staff liaison to the task force.

Mr. Smith summarized the task force findings and recommendations provided in the attached report: (1) The overall finding is that PLF claims handling policies and procedures are legal, ethical and professional in every respect. (2) The PLF has operated in a manner that complies with its duties to the public at large as well as the Oregon lawyers it covers. (3) Specific findings and recommendations to improve what is already an excellent program which include (a) changes to the PLF mission statement, (b) formal adoption of a general policy regarding disclosure of PLF involvement in cases, (c)a formal policy regarding requirements for claims handling comparable to what is required under the Oregon Insurance Code, and (d) further strengthening of the PLF's oversight and training procedures for defense counsel and staff regarding novel or difficult claims issues and strategies.

Mr. Smith indicated that while critical comments were received, and each incident was carefully followed up on as much possible, it was felt that none of the incidents revealed a pattern or practice by the PLF that is unethical, improper, or non-professional. Despite wide solicitation by the task force for input from Oregon lawyers, a small number of critical comments were received. While the report will be unlikely to please everyone, the task force felt the results were accurate and factual and is undiluted by anyone's prejudices or dislikes.

Mr. Rew and Mr. Peachey thanked Mr. Smith and the members of the PLF Policies and Procedures Task Force for its hard work and its report and recommendations. Mr. Peachey commented on the hard work of the PLF staff and Mr. Hall.

Mr. Smith and Mr. Fortino were asked various questions by BOG and PLF Board members. A lengthy discussion ensued about the following: (1) Reaction time to adopt new policies. (2) Benefits of the new policies and ongoing PLF audits. (3) What is the PLF's institutional view of itself -- as a private insurance company rather than a public body? Is a shift in this balance needed? (4) PLF's duty is to its covered parties (attorneys) and to let the public know that certain funds are available to pay valid claims. Both the attorneys and the public are well served by the PLF. (5) The asset acquisition strategy was abandoned in 1996 and will not be used in the future. (6)The assessment of Pearce/Woodfield indicates that the role of the PLF was not disclosed to the judge in the manner it should have been. (7)Concerns about PLF's institutional culture were raised as well as conflicts inherent in any organization. How does the decision making body operate within the broad mission of the OSB and the narrower mission of the PLF? (8) Overall PLF has a high concentration of good grades. (9) Legislative history and statutory language depict the PLF has a hybrid organization, not an insurance company. (10) The broad perception of the public was that lawyers had taken advantage of their clients in the Pearce/Woodfield matter, even if it didn't understand the asset acquisition strategy. (11)There is substantial benefit that PLF is part of the bar to ensure that attorneys are responsible and living by a code of ethics.

The discussion included other comments related to governance matters and PLF culture which Mr. Rew explained were outside the charge of the PLF Policies and Procedures Task Force.

Action:Mr. Hytowitz moved, Mr. Williamson seconded, to approve the attached report of the PLF Policies and Procedures Task Force. The motion was approved by the Board of Governors (15-0-1; absent Orf) and the PLF Board of Directors (7-0-2; absent Bjork, Thuemmel).

EXHIBIT, p. 1-63

B.Update on the PLFs Long Range Planning Committee activities

Mr. Peachey presented the recommendations of the PLFs Long Range Planning Committee adopted at the PLF Board meeting on June 23 as shown in the attached exhibit.

Action:Mr. Hytowitz moved, Mr. Williamson seconded, to approve the changes to PLF Policies 1.250, 2.300, 4.150, 4.200(A),(B) and (C), 4.300, and 4.500. The motion was approved by the Board of Governors (15-0-1; absent Orf).

EXHIBIT, p. 64-81

C.Consider recommendations of the PLF Governance & Structure Special Committee, including any OSB bylaw changes

Mr. Harnden presented the report of the PLF Governance & Structure Special Committee which he co-chaired with Mr. Ackley. This joint BOG/PLF committee also included Joyce Cohen, Angel Lopez, Bill Martin, Bob Thuemmel, Ric Weaver and Charlie Williamson The group worked hard in lengthy sessions to reach unanimity on governance issues, facilitated by public body governance consultant Stephen Hacker. Committee members presented highlights of the attached findings -- Encores, Never Agains, Lessons Learned, What's Not Working, and What's Working, and Vision. Conclusions included the need for improved communications between the BOG and BOD to build mutual trust, for oversight boards to avoid being passive by building credibility by taking decisive action, and the existence of good staff organizations with good services and a willingness to work together. Development of the vision was a challenge that was enhanced by input from the public members.

Mr. Harnden reviewed the committee's recommendations outlined in the attached report as follows: (1) Development of Aligned Missions, Goals and Core Values, (2) Communications, and (3) Operational Oversight of the PLF CEO. He highlighted proposals for a joint annual meeting of the BOG and BOD as well as the OSB/PLF staff, to enhance existing orientations for new board members, to appoint three liaisons from each board to attend regular BOG and BOD meetings, and to form a Special Issues Committee to examine novel defense claims strategies and claims in excess of $300,000. The recommendations give direction to delineate staff lines of responsibility and communication, but do not seek for one staff to oversee the other. Confidentiality issues were also addressed regarding responsibility, channels, levels of authority, and proposed bylaw changes.

In regard to the operational oversight of the PLF CEO, Mr. Harnden explained the decision to not alter the hiring process. Direct input will be sought from the BOG in the annual performance evaluation process. This represents a substantial change from the old process. It was decided not to change the bylaws regarding termination of employment.

Mr. Ackley concluded by saying that much of this could have been avoided if the BOG and BOD had had liaisons in place to keep communication lines open. The ensuing discussion included: (1) Questions about the prospective PLF CEOs compensation, severance pay, and employment agreement. (2) The ultimate authority of the BOG to oversee the PLF and the perception of the PLF CEO about to whom he or she would report. (3) Restrictions in place to manage a PLF covered party when demands are made to use specific defense techniques. (4) Why its best for the BOD to retain authority over the PLF CEO and for the BOG to be involved in the annual performance review. (5) The inclusion of BOG and BOD public members in the PLF CEO hiring and performance review process. (6) The perception of the public reading a newspaper article about the BOGs decisions in addressing these PLF issues. (7) Adoption of the report in concept subject to further review to give board members and staff time to read and comment on it. The joint boards were asked to approve the report recognizing that adjustments could be considered in the future.

Action:Mr. Harnden moved, Mr. Ackley seconded, to approve adoption of the attached Report of the Joint OSB/PLF Governance Task Force (AKA: Special Committee on PLF Governance). The motion was approved by the Board of Governors (15-0-1; absent Orf) and the PLF Board of Directors (7-0-2; absent Bjork, Thuemmel).

Action:Mr. Harnden moved, Mr. Williamson seconded, to approve the specific recommendations contained in the attached Report of the Joint OSB/PLF Governance Task Force (AKA: Special Committee on PLF Governance). The motion was approved by the Board of Governors (15-0-1; absent Orf) and the PLF Board of Directors (7-0-2; absent Bjork, Thuemmel).

EXHIBIT, p. 82-97

D.PLF chief executive officer search process

1.Status of the search process

Mr. Nunn reported on the status of the PLF CEO search process and indicated that 5-10 formal responses have been received from the 200 profiles mailed out. According to Roger Pringle, executive search consultant, this is a typical response at this stage. Mr. Pringle and staff will conduct interviews in July for candidates to be reviewed by the search committee. A discussion ensued about demographics of the search and the general profile for the CEO position.

2.Consider an interim PLF CEO

Mr. Peachey reported that he meets weekly with the PLF interim management group and feels it is working effectively. He felt that resolution of the governance issue and the task force process will be a significant benefit to this group. Should the PLF CEO search process encounter a delay, the need for an interim CEO may be revisited.

Mr. Davis commented that the issue is not the capability of the PLF staff, but how the organization establishes and maintains credibility with the members and the public. Mr. Baldwin agreed and felt it would be a full time job for a CEO to focus attention on implementation of the changes the two boards have approved. He also discussed the importance of demonstrating this credibility to the public and to the legislature. Mr. Peachey responded that the staff has the energy to make the interim management process work. Mr. Martin explained that the BOD wants to monitor the process during the short window to hire a new PLF CEO. Mr. Hytowitz felt it would appear to be a shallow attempt at PR and to appoint an interim CEO would also be counter-productive in a two-three month period. The discussion continued with the conclusion to continue with the status quo at this time.

4.Good of the Order (Non-action comments, information and notice of need for possible future board action)

A.Ms. Pulju presented a summary of planned responses to media inquiries regarding resolution of the issues the two boards had just addressed. She asked that an editing committee review the draft over the weekend. Mr. Harnden, Mr. Peachey and Mr. Rew volunteered to do so.

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