TRT, Inc. CLE Blog

 

Private attorneys may be retained by government entities in California to litigate nuisance abatement actions on a contingent fee basis if a government lawyer supervises and controls all critical decision-making in the litigation (Santa Clara County v. Superior Court ((Atlantic Richfield Co.)), Cal., No. S163681, 7/26/10).  Prosecutorial duties in some matters may be delegated to private attorneys who have an arguable stake in the outcome as long as public entity attorneys directly supervise the litigation and retain complete control over the course and conduct of the case, the court explained.  Several California cities and counties filed lawsuits demanding that companies that had manufactured lead based paints reimburse the public entities for the expense of removing lead paint from public buildings.  Most entities were represented by both  government   lawyers  and private firms that were hired under contingent fee agreements -- giving the firms 17 percent of the net recovery.  The defendant companies filed a motion to bar payment of the contingent fees.   They asserted that as a matter of public policy the  government  cannot hire private  lawyers  on a contingent fee basis to litigate a public nuisance claim.  The trial court granted the motion, citing People ex rel. Clancy v. Superior Court, 705 P.2d 347 (Cal. 1985), invalidating a city's contingent fee contract with outside counsel to pursue nuisance abatement actions against adult bookstore owners. The appellate court reversed, however, holding that Clancy does not bar all contingent fee agreements with private counsel in public nuisance abatement actions, only those where private attorneys appear in place of, rather than with and under the supervision of,  government  attorneys.  On appeal, the California Supreme Court agreed that Clancy should not be read as an absolute prohibition against the use of private counsel by public entities to pursue public nuisance claims under contingent fee agreements.  However, such arrangements are valid and enforceable, the court said, so long as there is detailed supervision by  government   lawyers .  Since it was unclear whether all the retention agreements in this case involved the requisite close supervision, the court reversed and remanded so that the public entities could revise the agreements to make it clear that  government  counsel retains final authority to control all critical decisions.  The court conceded that Clancy appeared to support a bright-line rule barring any attorney with a financial stake in the outcome of a case from representing the interests of the public.  The court stated that Clancy needs to be interpreted more narrowly, since the litigation at issue in that case carried the threat of criminal liability, implicated important constitutional concerns, and jeopardized ongoing business activity.  “Accordingly, the absolute prohibition on contingent-fee arrangements imported in Clancy from the context of criminal proceedings is unwarranted,” it said.   Although private  lawyers  pursuing public nuisance actions on behalf of the public are subject to a heightened standard of ethical conduct that requires rigorous neutrality, the court said, this lofty standard is not compromised when contingent fee counsel is brought in to assist  government  attorneys in the prosecution of public nuisance abatement actions.  A contingent fee retention agreement should encompass more than “boilerplate language” on control or supervision, the court said, and must make clear that –
• the public entity attorneys will retain complete control over the course and conduct of the case;
• the  government  attorneys will retain a veto power over any decisions made by outside counsel; and
• a  government  attorney with supervisory authority must be personally involved in overseeing the litigation.