Resisting the Siren Call of Contingency Fee Counsel

As previously reported at this site, the California Supreme Court heard argument on May 5 in County of Santa Clara v. Superior Court, a case that will decide the continued vitality of the rule in People ex rel. Clancy v. Superior Court, 39 Cal.3d 740 (1985),  barring the government from hiring contingent fee counsel to prosecute public nuisance and other similar civil law enforcement actions.  At issue is whether the prohibition in Clancy is subject to an exception when the government exercises adequate control and supervision over contingent fee counsel.

I have previously expressed my views on this issue at this website [e.g., here, here and here], so it should come as no surprise that I am a staunch advocate for the Clancy rule.  Recently, I had an opportunity to summarize my views at a symposium sponsored by the Northwestern Law Judicial Education Program  on the “Expansion  of Liability under Public Nuisance,” held on April 26, 2010:   Here is an adapted version of my remarks at the symposium:

 Imagine that the City Attorney comes before the court and makes the following argument:

“Your Honor, we face a crisis. We believe that certain substances present in the homes and public buildings of our fair City must be removed. Not only can we not afford to pay for that removal, we cannot afford to litigate the public nuisance action that we think must be brought to protect our city. Were we to undertake such litigation on our own, the limited resources of our office would quickly be overwhelmed by the law firm firepower that the defendants would bring to bear. The only way we can address this problem in a fiscally responsible way is if we get help by hiring outside counsel who will level the playing field and enable us to serve the people by pursuing a public nuisance action. And the only way we can afford the skilled outside counsel that this lawsuit demands is to hire counsel on a contingent fee basis, so that our cash-strapped City does not have to incur the enormous out-of-pocket expense of hourly attorney fees, and our contingent fee counsel can instead be compensated out of the monetary recovery in the public nuisance action.

Now, I understand your concerns about hiring contingent fee counsel and I want to assure you that I will be in control of the entire litigation, fully supervising every aspect of contingent fee counsel’s involvement.Contingent fee counsel are hired only to assist me. I’m in charge here.

We need to solve a problem that urgently impacts the welfare of our citizens.’But in these tough economic times, we just need a little help. Thank you.”

How should the courts respond?  I suggest there is only one possible response, and that is to resist the siren call of the cash-strapped government entity for the sake of upholding the bedrock principle of impartial, disinterested law enforcement.

To paraphrase Justice Robert H. Jackson:

“The prosecutor has more control over life, liberty, and reputation than any other person in America.  His discretion is tremendous. . . . While the prosecutor at his best is one of the most beneficent forces in our society, when he acts from  . . . base motives, he is one of the worst.”

When the government brings an action for public nuisance, eminent domain, or other similar claims, the government acts in its sovereign capacity as parens patriae for “the health and well-being—both physical and economic—of its residents in general.”  (Alfred L. Snapp & Son, Inc. v. Puerto Rico, ex rel. Barez (1982) 458 U.S. 592, 607.)  When acting in this sovereign role to protect the general welfare of the citizenry, as district from the government’s proprietary role (see id., at p. 602 [“like other associations and private parties, a state . . . may own land or participate in a business venture . . . [and] may at times need to pursue those interests in court . . .”), the government must be free of any outside influence that risks impairing the neutrality and impartiality essential to the government’s ability to act in the best interest of all citizens. 

In a criminal action, there would be no debate, for we would never allow the prosecutor to employ contingent fee counsel who are paid for each criminal conviction they are able to secure.  And, if the prosecutor himself were to pursue a civil law enforcement action for public nuisance on a contingent fee basis, the response would be swift and certain; no one would tolerate a prosecutor having a financial interest in the outcome of the litigation.

Why, then, should the rules be any different when the prosecutor hires a private attorney as his or her agent to pursue a public law enforcement on the prosecutor’s behalf?  The answer is that the rules should not be different at all.  The California Supreme Court stated this principle emphatically in the Clancy case: 

“[A] lawyer cannot escape the heightened ethical requirements of one who performs governmental functions merely by declaring he is not a public official.  The responsibility follows the job:  if [the private attorney] is performing tasks on behalf of and in the name of the government to which greater standards of neutrality apply, he must adhere to those standards.”  (Clancy, supra, 39 Cal.3d at p. 747.)

The same potential for erosion of the government’s neutrality and impartiality occurs whether a contingent fee is payable to the government or the government’s agent.  Either way, day-to-day litigation decisions—strategy calls, development and evaluation of facts, trial tactics, whether to proceed, whether to settle, whether even to end the litigation—are all necessarily colored by the inescapable fact that counsel hired to litigate the case will not be paid unless there is a substantial monetary recovery.  That profit motive necessarily influences the course of the litigation.  Where a contingent fee is involved, therefore, there is no longer a guarantee that the government’s litigation effort will be guided solely by what is best for the general welfare. 

For what should be obvious reasons, we do not allow the government’s attorney to have a financial interest in the outcome of any litigation.  We cannot relax that rule simply because the attorney responsible for the litigation is an agent for the government hired to augment the government’s legal staff.  If we do, there will always be the risk that decisions concerning government parens patriae litigation will be made in whole or in part for the sake of attorney profit rather than for the public’s benefit.  And that risk in turn will diminish the confidence of the public in the integrity of civil law enforcement actions and thus erode the public trust essential to consent of the governed in our society.

Recently, it has become fashionable for government entities to argue, and for some courts to agree, that the taint of contingent fee counsel’s profit motive can be eliminated by the prosecutor asserting adequate “control” over the litigation.  (E.g., Priceline.com, Inc. v. City of Anaheim, 180 Cal.App.4th 1130, 1144-1145 (2010).)  But no matter how thorough the prosecutor’s control may be, the profit motive of contingent fee counsel cannot help but influence the day-to-day decisions that go into the prosecution of a civil law enforcement action, particularly the large-scale public nuisance actions that have been undertaken in many parts of the country.  And even if the prosecutor’s “control” could in theory eliminate the taint of contingent fee counsel’s financial interest, how could the public or the courts ever know if the “control” was in fact sufficient?  Thus far, from what I have seen, the government entities advocating the control exception, and the courts that have adopted it, have ignored the problem of verification and have instead relied on a government attorney’s assurance that “I’m in control.”  This reluctance to look behind the government’s assurances is not surprising because actual verification of the prosecutor’s “control” would require a wholesale and probably unacceptable intrusion into the attorney-client and attorney work-product privileges.

In the end though, even if the courts were willing and able to take on the burden of supervising the government’s maintenance of control over private contingent fee counsel to ensure that the profit motive did not influence the litigation, no amount of control is ever going to eliminate the potential for the decision-making to be skewed to some degree in favor of earning profit regardless of what is best for the people.  And, just as important, no amount of control will change the appearance to the public that these civil law enforcement actions are influenced by an attorney’s financial stake in the outcome.  The resulting erosion in public trust is too high a price to pay.

Consider the following hypothetical:  Setting aside normal ethics rules, suppose a judicial law clerk had a financial interest in one of the cases assigned to a court for decision, and that law clerk prepared a memo analyzing the case and recommending a disposition.  Would any amount of control exerted by the court prevent that law clerk’s participation in the judicial process from tainting the decision?  Even if the court maintained complete discretion and total control over the outcome of the case, the litigants and the public would have no confidence in the impartiality of the court. 

The same is true of the government acting in its sovereign capacity.  The public must have confidence that actions brought for the general welfare are the result of an impartial process that is at no point affected by the private agenda created by contingent fee counsel’s financial stake in the outcome.

The goal of actions brought by the government in its sovereign capacity is not to win at any cost but to do justice.  This requires absolute impartiality that cannot be achieved unless the government, and its agents, are unaffected by private interests.  Even a risk that a profit motive will influence the discharge of public duties is unacceptable.  The neutrality and impartiality with which the government exercises its sovereign power must be guarded so that there is no potential for that power to be compromised.

Don’t take my word alone.  Listen to the government attorneys themselves.  In their brief before the California Supreme Court in the case now pending before that court on this issue, the California District Attorneys Association had this to say:

“Permitting contingent fee attorneys to represent public law enforcement interests will necessarily and inevitably inject improper personal financial interests into the balancing process required in civil law enforcement cases and will undermine public confidence in the civil law enforcement justice system. . . . The participation of the contingent fee attorneys who have direct, personal, substantial pecuniary interests in a successful outcome of this case creates an actual conflict because of the influence such attorneys possess to steer the course of this litigation in particular directions.  Just as important, that participation also creates an appearance of impropriety due to the lack of transparency which jeopardizes not only the confidence of the defendants that the government attorneys will exercise their discretion in an impartial fashion, but also jeopardizes the confidence of the judiciary and the public at large in such neutrality. . . . Thus it is impossible to understate the importance . . . of maintaining public confidence in the fair and impartial enforcement of key civil law enforcement statutes. . . . [C]ourt approval of contingent fee agreements in civil law enforcement cases giving contingent fee outside counsel direct, personal, and substantial financial stakes in the outcome of commercial cases will greatly undermine public confidence in the fair and equitable use of those statutes with disastrous consequences.”