By declining certiorari, the United States Supreme Court let stand a decision from the California Supreme Court allowing public entities to employ contingency fee-paid attorneys to prosecute certain public nuisance cases where the threat of criminal punishment is not present and where the public entities’ attorneys retain control and supervision of the case. 

In County of Santa Clara, Cal. v. Superior Court, 235 P.3d 21 (Cal. 2010), cert. denied sub nom. Atlantic Richfield Co. v. County of Santa Clara, Cal.,  No. 10-546, 2011 WL 55820 (U.S. Jan. 10, 2010) (renamed for parties on appeal), various California counties and cities pursued a public nuisance lawsuit against manufacturers of lead paint.  The trial court granted a motion by the manufacturers to bar payment of contingency fees to private attorneys who were co-counsel to the government attorneys on the case because prior case law identified public nuisance cases as requiring absolute neutrality of counsel representing the government, something a contingency fee undercuts.  In particular, the manufacturers argued that the private attorneys’ contingency fee arrangement prevented their neutrality, akin to the prohibition of paying prosecuting attorneys a contingency fee basis for the number of prosecutions they obtain rather than fulfilling their obligation as lawyers for the government to see that justice is done. 

The California Supreme Court noted that there was no dispute that a public entity could hire an attorney on a contingency fee basis to prosecute an ordinary case like collections.  But, it noted that there was a broad spectrum of public nuisance cases that could implicate both civil and criminal liability.  The Court found that the action here, to abate lead paint which had been banned since 1978, was not substantially similar to the fundamental rights at stake in a criminal prosecution.  The case would not result in an injunction to prevent the manufacturers from continuing their current business operations; no ongoing business activities would be enjoined; and no credible threat of criminal liability existed since the statute of limitations for prosecution had run years ago.  In essence, the Court found “there is no indication that the contingent-fee arrangements in the present case have created the danger of government overreaching or economic coercion.” 

Nevertheless, the Court mandated that certain minimum requirements exist in retention agreements between the public entities and private attorneys “to ensure that critical government authority is not improperly delegated to an attorney possessing a pecuniary interest in the case.”  This included adopting guidelines set by the Supreme Court of Rhode Island. 

The California Supreme Court held that to make sure its requirements would be objectively verifiable both by defendants and the court without the need for engaging in discovery that might intrude upon the attorney-client privilege or attorney work product protections, retention agreements between public entities and private attorneys must state the following:

1. decisions regarding settlement are reserved exclusively to the discretion of the public entity’s attorneys;
2. any defendant in the litigation may contact the lead government attorney without having to confer with contingency-fee counsel;
3. public entity attorneys must retain complete control over the course and conduct of the case; 
4. public entity attorneys must retain veto power over any decisions made by outside counsel; and 
5. the public entity attorney with supervision authority over the case must be personally involved in overseeing the litigation. 

For more information about challenging public nuisance lawsuits, please contact Bill Wagner or any member of Taft’s environmental practice group.