David Axelrad's blog

On Monday the Supreme Court of California spoke for the first time in 25 years on the rule prohibiting contingency fee counsel from prosecuting public law enforcement claims. In People ex rel. Clancy v. Superior Court, 39 Cal.3d 740 (1985), the court prohibited this practice unequivocally because of the risk that the impartiality and neutrality of the public prosecutor would be compromised by contingency fee counsel’s financial interest in generating the largest possible dollar recovery in the litigation.  Read More »

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.  Read More »

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.  Read More »

There’s been a very interesting development in Priceline.com v City of Anaheim, where the California Court of Appeal approved the City of Anaheim’s use of contingent fee counsel to pursue online travel companies for the City’s transient occupancy tax.  Read More »

Another contingent fee case is working its way through the California appellate courts, Priceline.com Inc. v. City of Anaheim, No. G041338 (Cal. Ct. App. Feb. 27, 2009).  The City of Anaheim hired private contingent fee counsel to enforce a transient occupancy tax against online travel companies (e.g., Priceline, Travelocity, Expedia, Hotels.com.)  Anaheim claims these internet services are proprietors or managing agents of hotels and are therefore subject to the tax.  The superior court allowed contingent fee counsel to proceed in the name of the City on the ground that the California Supreme Court’s prohibition against contingent fee counsel in People ex rel. Clancy v. Superior Court, 39 Cal. 3d 740 (1985) should apply to bar government hiring of outside contingency counsel only in the prosecution of eminent domain and nuisance abatement actions. 

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This website has already taken a look at the California District Attorneys Association amicus curiae brief filed in the public nuisance contingent fee case (Santa Clara v. Superior Court [ARCO et al]) now pending in the California Supreme Court.   Another interesting amicus brief was recently filed by a group of legal ethics professors, headed by the dean of the new U.C. Irvine Law School, Erwin Chemerinsky.

Oddly enough, the legal ethics professors don’t see the need for a bright-line rule against the government hiring contingent fee lawyers to prosecute public nuisance claims like the claims of the government entities in the Santa Clara Lead Paint Litigation.  Instead, the legal ethics professors contend that “the proper standard of neutrality can be maintained in light of the contingency fee agreement  . . . on a case-by-case basis, taking into account the actual relationship between the public entity and its contingent-fee counsel and the type and status of the case at hand. . . .” The brief argues that a categorical ban on using contingent fee lawyers to prosecute public nuisance actions is not required by legal ethics, that such a ban would hobble government efforts to pursue public claims, and that a case-by-case analysis of the relationship between the government and its contingent fee lawyers is all that is needed to safeguard the integrity of public law enforcement actions. The prosecuting attorneys in California, however, disagree.

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In City of San Diego v Kinder Morgan Energy Partners, (2008 WL 3565795, No.08-70678, Aug. 12, 2008), the Ninth Circuit Court of Appeals issued an order last week that the California Supreme Court's decision in People ex rel. Clancy v Superior Court (1985) 705 P.2d 347 [findlaw login required], barring the government from hiring private counsel on a contingent fee basis, applies when the government is acting in its sovereign capacity rather than in the capacity of a private litigant:

"In Clancy, the Supreme Court of California held that a municipality may not hire private counsel on a contingent  fee basis to bring a public nuisance abatement action. . . . There, the municipality was acting solely in its capacity as a sovereign, and its only substantive claim was for public nuisance abatement. Here, however, the City, [is] acting as a property owner and a sovereign . . . . Clancy does not bar the City from hiring private counsel pursuant to a contingent fee agreement to bring its private tort claims, i.e., its claims for trespass and negligence. Additionally, to the extent the City brings its public and private nuisance claims in its capacity as a private property owner - and not in its capacity as a sovereign -  Clancy does not apply."  [Emphasis added.]

A similar distinction has been adopted by a number of courts, as noted elsewhere on nuisancelaw.com, because the valid concern that contingent fee counsel will compromise the neutrality and impartiality of the government prosecution diminishes when the government is acting merely as a private litigant seeking compensation for its own injuries rather than as a law enforcement agency exercising discretion to bring enforcement actions on behalf of the general public, as is the case with public nuisance claims.