Supreme Court Approves Contingent Fee Delegation Of Public Nuisance UCL Actions To Private Attorneys
In County of Santa Clara, et al, v. Superior Court (ARCO), No. S163681 (July 26), a group of public entities are prosecuting a public nuisance action against numerous lead paint manufacturers. The public entities are represented by their own government-paid attorneys and by several private law firms working on a contingency basis. Defendants moved to bar the public entities from compensating their private counsel via contingency fees. The Superior Court, relying on the Supreme Court’s decision in People ex rel. Clancy v. Superior Court (1985) 39 Cal. 3rd 740, agreed, reasoning that public nuisance actions require “absolutely neutral” representation. Contingent fees, the court found, preclude private counsel from having a neutral stake in a public case’s outcome. On petition for writ of mandate by the public entities, the Court of Appeal disagreed. It found that Clancy does not bar all contingent fee arrangements with private counsel, but only those in which the private attorneys appear in place of, rather than with and under the supervision of, government attorneys.
The Supreme Court acknowledged that Clancy arguably supports the bright-line approach of the Superior Court, but found, upon reexamination, that Clancy should be narrowed in recognition of both the wide array of public nuisance actions (and the comparable diversity in the types of interests implicated) and the different means by which prosecutorial duties may be delegated without compromising either the integrity of the prosecution or the public’s confidence in the judicial process. The Court found that because private counsel with contingent fee arrangements have a pecuniary interest in a case’s outcome, that may place them at odds with the public interest. Citing a case from the Rhode Island Supreme Court, State of Rhode Island v. Lead Industries Association, Inc. (R.I. 2008) 951 A. 2nd 428, the Court went on, this conflict does not necessarily mandate disqualification when fundamental constitutional rights and the right to continue operation of an existing business are not implicated by a case. Instead, retention of contingent fee private counsel is permissible if neutral, conflict-free government attorneys retain the power to supervise the litigation. The Court found such agreements must provide that settlement decisions are reserved exclusively to the government’s own attorneys and that such government attorneys can deal directly with opposing counsel. The Court also indicated that complete control must be vested in the government attorneys, including veto power over decisions of private counsel, and that a government attorney must be actively involved in overseeing the litigation.
July 26, 2010
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