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Should State Attorneys General Use Private Law Firms to Pursue Civil Suits? An Appeal to the California Supreme Court Raises This Hot-Button Issue


Tuesday, Aug. 12, 2008

Last month, the California Supreme Court announced that it would hear an appeal from the lead paint industry in the case of County of Santa Clara v. Superior Court. This case has been closely watched by both the plaintiffs’ bar and the defense bar, because the trial judge’s 2006 decision on the relatively narrow technical question that is now up for appeal effectively shut down public nuisance litigation against the lead paint industry in that state.

At this point in time, however, regardless of how the California Supreme Court rules, lead paint litigation, which once had the possibility of turning into the next big variety of mass tort case, like tobacco and asbestos, is probably finished. As I explained in recent columns on this site, such as this one, earlier this year the Rhode Island Supreme Court decisively rejected a public nuisance claim regarding lead paint brought by the state’s attorney general. That decision will likely affect similar litigation around the nation.

There was one part of the decision that could be considered good news for the plaintiffs, however: The court held that Rhode Island law did not bar the state attorney general from using private law firms to bring such suits on behalf of the state in exchange for a contingency fee, to be paid to the firm if the state was victorious.

Whether state attorney generals ought to use private law firms to pursue civil suits is a hot-button issue that touches on litigation beyond lead paint. In this column, I want to discuss the continuing importance of this issue -- specifically in the context of the upcoming California Supreme Court appeal.

Is A Contingency-Fee Arrangement Between an Attorney General and a Private Law Firm Illegal? The Issue in the California Supreme Court Appeal

As in Rhode Island and numerous other states, public health advocates and public interest lawyers in California had been trying to figure out some way to sue the lead paint industry so as to provide funds to clean up lead paint from old homes. Instead of the whole state suing, as occurred in Rhode Island, in California a suit was brought by a group of large cities, including Oakland and Los Angeles. As in Rhode Island, the city attorneys were worried that their budgets were not large enough to produce the kind of state-of-the art lawyering that is required in a big mass tort case. So, as in Rhode Island, the city attorneys farmed the litigation out to certain well-known plaintiffs’ firms that had the expertise and the funds to prosecute the suit properly. The city attorneys offered the firms a contingent fee arrangement: a piece of the recovery if they won, and nothing at all if they lost.

However, the trial judge in the case short-circuited the lawsuit by holding that the contingency fee arrangement violated California law. The cities could pay the law firms by the hour to bring the suit, or they could bring the suit themselves using city lawyers—but no contingency fee could be offered. The plaintiffs’ firms withdrew from the lead paint case pending an appeal of the trial judge’s ruling.

In April of this year, California’s Sixth Appellate Division – an intermediate appellate court -- reversed the trial judge. It held that the precedent upon which the trial court’s decision was based did not prohibit all (but only some) contingency fee contracts with private firms by municipalities in public nuisance cases. And it concluded that the plaintiffs’ firms, could, in theory, renew the litigation. Even with the victory in Rhode Island, the lead paint industry was extremely upset. As in a game of “whack-a-mole,” just when they thought they had taken care of one pesky lawsuit, another had appeared.

So you can imagine the industry’s relief when, late in July, the California Supreme Court vacated the appellate court’s decision and ordered briefing on the question. The problem is, it is not clear what the question raised in the appeal really is.

The Precedent on Cities’ Using Private Law Firms

The trial judge’s decision to bar the contingency fee contracts with the plaintiffs firms was based on a 1985 California Supreme Court decision called People ex rel. Clancy v. Superior Court. Clancy, which was written by the great liberal California Supreme Court Justice Stanley Mosk, is not the sort of decision that one would have expected to be a great favorite of corporate America. The case arose after the city of Corona, California, made a deal with a local lawyer named Clancy. He would be given the task of bringing public nuisance suits on behalf of the city against adult bookstores. For every suit he won, he would receive $60. For every suit he lost, he would receive $30. One of the stores went to court and objected to this arrangement, arguing that it violated basic principles of fairness, public policy, and the rule of law.

The Supreme Court held that the contingency fee arrangement should be struck down. However, Mosk very carefully noted that the court was not saying that a municipality could not have a contingency fee arrangement with a private lawyer in a “typical” civil suit, such as a tort suit arising from damages caused to the city’s property. All the court was saying was that the state could not use such an arrangement in the public nuisance suits being brought by Clancy, which were not plain-vanilla tort suits. Rather, they represented the exercise of the city’s police powers, since the city, in effect, was accusing the book stores (through Clancy) of violating a public right.

Numerous decisions in both state and federal courts had held that when it came to criminal law, the state could not offer a differential reward to the prosecutor. No one would possibly think that a district attorney could be offered a bonus if she was able to procure a conviction in a particular case. Mosk noted that a prosecutor’s interest “in a criminal prosecution is not that [she] shall win a case, but that justice shall be done." Mosk held that the same obligation of neutrality extended to civil cases where a government lawyer could use “his position or the economic power of the government to harass parties or to bring about unjust settlements or results." Plainly, the California Supreme Court thought the adult bookstore cases fell within this category.

The trial judge in the California lead paint case held that, since the cities that had hired the plaintiffs firms were bringing a suit in public nuisance, Clancy applied to bar the contingency-fee arrangement. However, the appellate court was not so sure. It held that, although Clancy was good law, it did not deal with the kind of contingent-fee arrangement present in the lead paint cases. It reasoned that Clancy, in effect, was a substitute for the city of Corona’s prosecutor—he could choose whom to sue and he could, it seemed, exercise all the discretionary powers that a public prosecutor normally held. The lawyers for the plaintiffs’ firms in the California lead paint case, in contrast, lacked that kind of discretion. Therefore, according to the appellate court, as long as the cities controlled the private firms, Clancy was not implicated, and the private-firm contingency-fee arrangement could still be valid.

The Ambiguity as to How the California Supreme Court May Frame the Question Before It

The California Supreme Court will now have a chance to explain what exactly it meant in Clancy. It could follow two possible directions—one narrow and formalistic, and another, which would lead to a review of the assumptions underlying Clancy itself.

First, if the court were to the narrow and formalistic approach, it would simply agree with the trial court that public nuisance litigation is identical to criminal prosecution, and that municipalities cannot “farm out” the state’s prosecutorial power. It would thus rule against the cities.

But it would be a mistake to simply equate public nuisance litigation with criminal prosecution. Mosk was right when he held that citizens subject to the prosecutorial power of the state have a right to strict neutrality. Thus, even if the District Attorney of Los Angeles retained the ultimate power to approve all indictments and plea deals, the D.A. still should not hire local lawyers on a contingency basis to play the state’s role in criminal prosecutions. But can we really say that a public nuisance suit about lead paint is like a criminal prosecution? Or even like a public nuisance suit based on rooting out unpopular, “obscene” publications, such as the suit at issue in Clancy?

Critics of the whole public nuisance campaign against the lead paint industry have been saying for years that the suits are really stealth tort suits. Now, it is very strange to hear the same critics say (when it is convenient for their cause, because it rules out the use of private lawyers) that in fact what is really at stake here is whether a public right has been violated.

The second approach that the California Supreme Court might take to the case would require a reexamination of the very premises of Clancy. Do we really believe that government lawyers are neutral in the context of prosecutions? Of course, prosecutors do not get paid twice as much for each conviction than acquittal, but careers are based on an accumulated record of success—in other words, prosecutors have every incentive not to be neutral, and to promote their own (and the state’s) interest in convictions. The real question, then, is not whether a public nuisance suit is more like a criminal prosecution than it is like a tort suit. Rather, the real question is whether the lack of neutrality which is present in every litigation—whether brought by the state or a private actor—is exacerbated in unacceptable ways by the retention of plaintiffs’ firms.

From the latter perspective, the fact that the plaintiffs’ firms have been offered a contingency fee as payment strikes me as a red herring. The real question, in my opinion, is whether the presence of these contingency-fee firms will somehow make it more likely that there will be a miscarriage of justice, than if the suits were brought by ambitious government lawyers on a salary, or by hourly-rate private firms hoping for repeat business.

I don’t know the answer to this question, but before we assume that there is something inherently wrong with the contracts at issue in the California lead paint litigation, the lead paint industry will have to provide more of a reason to bar the contracts than the simple fact that they don’t like being sued.

Anthony J. Sebok, a FindLaw columnist, is a Professor at Benjamin N. Cardozo School of Law in New York City. His other columns on tort issues may be found in the archive of his columns on this site.

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