County of Santa Clara v. Superior Court

In County of Santa Clara v. Superior Court (2010) 50 Cal.4th 35, plaintiffs-petitioners were 10 public municipalities prosecuting a public nuisance action against a number of lead-paint manufacturers. The public municipalities were: County of Santa Clara (Santa Clara), County of San Mateo (San Mateo), County of Monterey (Monterey), County of Solano (Solano), County of Los Angeles, County of Alameda (Alameda), City and County of San Francisco (San Francisco), City of Oakland (Oakland), City of Los Angeles, and City of San Diego (San Diego). (Santa Clara, supra, 50 Cal.4th at p. 44, fn. 1.) The court again discussed specific terms of several of the fee agreements, but in describing how the court came to review the agreements, noted only that "defendants attached to their motion a number of fee agreements between the public entities and their private counsel, and the public entities filed opposition to which they attached their fee agreements and declarations of their government attorneys and private counsel." (Id. at p. 44.) The court described the terms of the agreements and declarations: "other than $ 150,000 that would be forwarded by Santa Clara to cover initial costs, private counsel would incur all further costs and would not receive any legal fees unless the action were successful. If the action succeeded, private counsel would be entitled to recover any unreimbursed costs from the 'recovery' and a fee of 17 percent of the 'net recovery.'" (Santa Clara, supra, 50 Cal.4th at p. 45.) The court further described the economic terms, quoting various agreements' definitions of "recovery." (Id. at p. 46.) The court also noted that "some of the contingent-fee agreements in the present case specify the respective authority of both private counsel and public counsel to control the conduct of the pending litigation." (Santa Clara, supra, 50 Cal.4th at p. 45.) The court went on to describe in more detail those provisions, quoting specific language from various agreements. (Ibid.) In fact, only seven of the 10 public entities submitted their fee agreements for review. (Id. at pp. 45-46, fns. 3&5.) Santa Clara, Solano, Alameda, Oakland, Monterey, San Mateo, and San Diego hired Cotchett, Pitre & McCarthy (Cotchett) as outside counsel on a contingency fee basis. (Santa Clara, supra, 50 Cal.4th at p. 45, fn. 3.) Of those seven entities, six provided fee agreements to the court for review (San Mateo did not). (Id. at p. 46, fn. 5.) Cotchett also provided a declaration that its public entity clients' government counsel "'have maintained and continue to maintain complete control over all aspects of the litigation'" and "'all decision making authority and responsibility.'" (Id. at p. 45, fn. 3.) San Francisco hired three different outside counsel entities and provided its fee agreement for review. (Santa Clara, supra, 50 Cal.4th at p. 46, fn. 5.) Those three outside counsel entities also provided declarations asserting circumstances of control over the litigation substantially similar to the Cotchett declaration. (Id. at p. 45, fn. 3.) The Supreme Court discussed in detail its reasoning in People ex rel Clancy v. Superior Court (1985) and explained, "our decision in Clancy , was guided, in large part, by the circumstance that the public-nuisance action pursued by the city implicated interests akin to those inherent in a criminal prosecution. In light of this similarity, we found it appropriate to invoke directly the disqualification rules applicable to criminal prosecutors-rules that categorically bar contingent-fee agreements in all instances." (Santa Clara, supra, 50 Cal.4th at p. 51.) The court distinguished the circumstances of Clancy from those of Santa Clara, summarizing, "the public-nuisance action in the present case, by contrast, involves a qualitatively different set of interests-interests that are not substantially similar to the fundamental rights at stake in a criminal prosecution. We find this distinguishing circumstance to be dispositive." (Id. at p. 55.) The court described the different interests: "The challenged conduct (the production and distribution of lead paint) has been illegal since 1978. Accordingly, whatever the outcome of the litigation, no ongoing business activity will be enjoined. Nor will the case prevent defendants from exercising any First Amendment right or any other liberty interest. Although liability may be based in part on prior commercial speech, the remedy will not involve enjoining current or future speech. Finally, because the challenged conduct has long since ceased, the statute of limitations on any criminal prosecution has run and there is neither a threat nor a possibility of criminal liability being imposed upon defendants." (Ibid.) Furthermore, "this case will result, at most, in defendants' having to expend resources to abate the lead-paint nuisance they allegedly created, either by paying into a fund dedicated to that abatement purpose or by undertaking the abatement themselves. The expenditure of resources to abate a hazardous substance affecting the environment is the type of remedy one might find in an ordinary civil case and does not threaten the continued operation of an existing business." (Id. at pp. 55-56.) The court concluded,"because-in contrast to the situation in Clancy-neither a liberty interest nor the right of an existing business to continued operation is threatened by the present prosecution, this case is closer on the spectrum to an ordinary civil case than it is to a criminal prosecution. The role played in the current setting both by the government attorneys and by the private attorneys differs significantly from that played by the private attorney in Clancy. Accordingly, the absolute prohibition on contingent-fee arrangements imported in Clancy from the context of criminal proceedings is unwarranted in the circumstances of the present civil public-nuisance action." (Id. at p. 56, ) The Santa Clara court thus narrowed its holding in Clancy to permit contingency fee agreements in certain public nuisance actions. The court, however, acknowledged that attorneys prosecuting public nuisance actions on behalf of the government are subject to "a heightened standard of neutrality." (Santa Clara, supra, 50 Cal.4th at p. 57.) Consequently, the court set forth "minimum requirements for a retention agreement between a public entity and private counsel adequate to ensure that critical governmental authority is not improperly delegated to an attorney possessing a personal pecuniary interest in the case." (Id. at p. 64.) Required provisions ensure "neutral, conflict-free government attorneys retain the power to control and supervise the litigation." (Id. at p. 58.) Thus, fee agreements must specify that neutral government attorneys, rather than private counsel, have ultimate authority to make "critical discretionary decisions," (id. at p. 61), including "decisions regarding settlement of the case." (Id. at p. 63.) Other provisions must provide that defendants can contact the lead government attorney directly (ibid.), that government attorneys "retain complete control over the course and conduct of the case," (id. at p. 64) and "retain a veto power over any decisions made by outside counsel," (ibid.) and that "a government attorney with supervisory authority must be personally involved in overseeing the litigation." (Ibid.)