The New Toyota Case

The Orange County Register of March 12 reports that the District Attorney there has hired private counsel on a contingent fee basis to “assist” the prosecutor in bringing an unfair business practices lawsuit seeking civil penalties from Toyota for selling cars with sudden acceleration problems. The action asks for $2500 for each violation of state consumer protection law, plus attorney fees and costs. Since every car Toyota sold with the alleged defect in California represents a potential $2500 violation, this lawsuit carries a potentially huge price tag and correspondingly large contingent fee for the private counsel the DA has hired.

You’d think that because the Orange County DA’s lawsuit is a civil law enforcement action seeking to punish Toyota, the California Supreme Court’s Clancy decision would apply to prohibit the government from using contingent fee counsel. (Clancy prohibited a local prosecutor from using contingent fee counsel to pursue a public nuisance action because “[w]hen a government attorney has a personal interest in the litigation, the neutrality so essential to the system is violated.” (People ex rel. Clancy v. Superior Court (1985) 39 Cal.3d 740 , 746 [Findlaw.com log in required].) My guess, though, is that the DA will say that because he is in “control” of the litigation, and contingent fee counsel are only “assisting” him, the Clancy rule does not apply. A “control” exception to the Clancy rule has thus far been adopted by two intermediate appellate courts in California (in the Santa Clara v. Arco decision, and in the recent Priceline v. City of Anaheim decision).

In Clancy, the contingent fee agreement between the City of Corona and James Clancy provided that the City was only employing Clancy “to assist the City Attorney,” and that every case Clancy undertook “shall be and remain under and subject to the control and direction of said City Attorney, and . . . [contingent fee counsel] shall at all times keep said City Attorney informed of all matters pertaining thereto.” But neither Clancy’s position as a mere “assistant” nor the “control” that the City purportedly exercised over Clancy’s activities prompted the Supreme Court to announce any exception to the bright-line prohibiting the government’s retention of contingent fee counsel to prosecute civil law enforcement actions such as public nuisance and eminent domain.

The first case to recognize the control exception, County of Santa Clara v Superior Court, has been taken over by the Supreme Court, which will decide whether there should be any exception to the Clancy rule. Consequently, the lower appellate court opinion in County of Santa Clara is no longer available for the Orange County DA to cite as support for hiring contingent fee counsel.

The second case to adopt the “control” exception, Priceline.com v City of Anaheim, is still on the books but is the subject of two pending requests (including one prepared by the author of this blog post) for the California Supreme Court to “depublish” Priceline as a citable precedent. The Supreme Court hasn’t ruled on the Priceline “depub” requests yet, but the Court did issue an order indicating it is considering taking up Priceline (by granting review on its own motion), presumably because the issues in Priceline closely track the issues the Supreme Court is going to decide in Santa Clara.

Bottom line: The Orange County DA is taking a calculated risk that he will be able to keep private contingent fee counsel on his new civil penalty consumer law enforcement action against Toyota.