County of Santa Clara v. Super. Ct.

Filed 7/26/10



IN THE SUPREME COURT OF CALIFORNIA



COUNTY OF SANTA CLARA et al.,

Petitioners,

S163681

v.

Ct.App. 6

THE SUPERIOR COURT OF SANTA

No. H031540

CLARA COUNTY,

Santa Clara County

Respondent;

Super. Ct. No. CV 788657

ATLANTIC RICHFIELD COMPANY

et al.,

Real Parties in Interest.



A group of public entities composed of various California counties and cities

(collectively referred to as the public entities) are prosecuting a public-nuisance action

against numerous businesses that manufactured lead paint (collectively referred to as

defendants). The public entities are represented both by their own government attorneys

and by several private law firms. The private law firms are retained by the public entities

on a contingent-fee basis. After summary judgment was granted in favor of defendants

on various tort causes of action initially advanced by the public entities, the complaint

eventually was amended to leave the public-nuisance action as the sole claim, and

abatement as the sole remedy.

1

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Defendants moved to bar the public entities from compensating their privately

retained counsel by means of contingent fees. The superior court, relying upon this

court?s decision in People ex rel. Clancy v. Superior Court (1985) 39 Cal.3d 740

(Clancy), ordered the public entities barred from compensating their private counsel by

means of any contingent-fee agreement, reasoning that under Clancy, all attorneys

prosecuting public-nuisance actions must be ?absolutely neutral.? The superior court

concluded that Clancy therefore precluded any arrangement in which private counsel has

a financial stake in the outcome of a case brought on behalf of the public. On petition of

the public entities seeking a writ of mandate, the Court of Appeal held that Clancy does

not bar all contingent-fee agreements with private counsel in public-nuisance abatement

actions, but only those in which private attorneys appear in place of, rather than with and

under the supervision of, government attorneys.

We must decide whether the Court of Appeal correctly construed our opinion in

Clancy, or if that case instead broadly prohibits all contingent-fee agreements between

public entities and private counsel in any public-nuisance action prosecuted on behalf of

the public. Clancy arguably supports defendants? position favoring a bright-line rule

barring any attorney with a financial interest in the outcome of a case from representing

the interests of the public in a public-nuisance abatement action. As set forth below,

however, a reexamination of our opinion in Clancy suggests that our decision in that case

should be narrowed, in recognition of both (1) the wide array of public-nuisance actions

(and the corresponding diversity in the types of interests implicated by various

prosecutions), and (2) the different means by which prosecutorial duties may be

delegated to private attorneys without compromising either the integrity of the

prosecution or the public?s faith in the judicial process.

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I

The procedural history of this case is not in dispute. The public entities? claims

against defendants originally included causes of action for fraud, strict liability,

negligence, unfair business practices, and public nuisance.1 (County of Santa Clara v.

Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 300 (Santa Clara).) The superior

court granted defendants? motion for summary judgment on all causes of action. The

Court of Appeal reversed the superior court?s judgment of dismissal and ordered the

lower court to reinstate the public-nuisance, negligence, strict liability, and fraud causes

of action. (Id. at p. 333.) Thereafter, the public entities filed a fourth amended complaint

that alleged a single cause of action, for public nuisance, and sought only abatement.

Throughout this litigation, the public entities have been represented both by their

government counsel and by private counsel.

Upon remand following Santa Clara, supra, 137 Cal. App. 4th 292, defendants

filed a ?motion to bar payment of contingent fees to private attorneys,? asserting that ?the

government cannot retain a private attorney on a contingent fee basis to litigate a public

nuisance claim.? Defendants sought ?an order that precludes plaintiffs from retaining

outside counsel under any agreement in which payment of fees and costs is contingent on

the outcome of the litigation.?


1

The plaintiffs in this case are 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)


As a result of corporate acquisition and merger, the names of the defendants in the

action below are Atlantic Richfield Company, Millennium Inorganic Chemicals, Inc.,
Millennium Holdings LLC, American Cyanamid Company, ConAgra Grocery Products
Company, E.I. du Pont de Nemours and Company, NL Industries, Inc., Sherwin-Williams
Company, The O?Brien Corporation, and Does Nos. 1-50, inclusive.

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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. The fee agreements and declarations disclose that the public entities and

private counsel agreed that, 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.?

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. The fee agreements between private counsel and San Francisco, Santa Clara,

Alameda, Monterey, and San Diego explicitly provide that the public entities?

government counsel ?retain final authority over all aspects of the Litigation.?2 Private

counsel for those five public entities submitted declarations confirming that their clients?

government counsel retain ?complete control? over the litigation.3 The two remaining


2

Four of these five public entities submitted declarations of government counsel

stating that they had ?retained and continue[d] to retain complete control of the
litigation,? were ?actively involved in and direct[ed] all decisions related to the
litigation,? and have ?direct oversight over the work of outside counsel.? San Francisco?s
submission declared that ?[t]he San Francisco City Attorney?s Office has in fact retained
control over all significant decisions? in this case.

3

Private counsel Cotchett, Pitre & McCarthy submitted a declaration in which it

stated it had been retained by Santa Clara, Solano, Alameda, Oakland, Monterey, San
Mateo, and San Diego. This law firm asserted that these public entities? government
counsel ?have maintained and continue to maintain complete control over all aspects of
the litigation? and ?all decision making authority and responsibility.? Private counsel
Thornton & Naumes, private counsel Motley, Rice, and private counsel Mary E.
Alexander submitted declarations asserting that they had been retained by San Francisco
to assist in this litigation, and that San Francisco?s city attorney ?has retained complete

(Footnote continued on next page)

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fee agreements contained in the record ? those involving Solano and Oakland ? purport

to grant private counsel ?absolute discretion in the decision of who to sue and who not to

sue, if anyone, and what theories to plead and what evidence to present.? During

proceedings in the trial court, Oakland disclaimed this fee agreement and asserted that its

government counsel had retained ?complete control? of the litigation and intended to

revise the agreement to reflect this circumstance.4 Solano?s private counsel asserts that

its public counsel have ?maintained and continue[s] to maintain complete control over all

aspects of the litigation? and ?all decision making authority and responsibility.? The

record before us does not contain the fee agreements between the three other public-

entity petitioners and their respective private counsel.5

The various fee agreements provide different definitions of ?recovery.? Some of

the agreements define the term ?recovery? as ?moneys other than civil penalties,?

whereas others define this term as the ?amount recovered, by way of judgment,

settlement, or other resolution.? Some of the agreements include the phrase ?both


(Footnote continued from previous page)

control over this litigation? and has ?exercised full decision-making authority and
responsibility.?

4

Oakland submitted a declaration by one of its deputy city attorneys stating that

?Notwithstanding any documents suggesting the contrary, the Office of the City Attorney
has retained complete control over the prosecution of the public nuisance cause of action
in this case as it relates to the interests of the People of the City of Oakland.? Oakland
asserted it was ?in the process of revising? its fee agreement ?so that it reflects the reality
of the relationship? between Oakland and its private counsel.

5

Seven separate fee agreements between the various public entities and their private

counsel were before the lower courts and are part of the record before this court. These
fee agreements are between private counsel and Santa Clara, Monterey, San Francisco,
Solano, Oakland, Alameda, and San Diego. The record does not contain the fee
agreements between private counsel and San Mateo, County of Los Angeles, and City of
Los Angeles, respectively, although these three entities are and remain plaintiffs in the
underlying case and petitioners here.

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monetary and non-monetary? in their definitions of ?recovery.? The San Diego

agreement defines ?net recovery? as ?the payment of money, stock, and/or . . . the value

of the abatement remedy after the deduction of the costs paid or to be paid.? The Santa

Clara fee agreement provides that, ?[i]n the event that the Litigation is resolved by

settlement under terms involving the provision of goods, services or any other ?in-kind?

payment, the Santa Clara County Counsel agrees to seek, as part of any such settlement, a

mutually agreeable monetary settlement of attorneys? fees and expenses.?

In April 2007, the superior court heard defendants? motion ?to bar payment? as

well as the public entities? motion for leave to file a fourth amended complaint. The

court granted the public entities? motion and ordered that the pleading be filed within 30

days.

Although some preliminary issues were raised concerning the ripeness of

defendants? motion, the superior court resolved the motion on its merits. The court

rejected the public entities? claim that Clancy, supra, 39 Cal.3d 740, was distinguishable,

concluding instead that under Clancy, ?outside counsel must be precluded from operating

under a contingent fee agreement, regardless of the government attorneys? and outside

attorneys? well-meaning intentions to have all decisions in this litigation made by the

government attorneys.? The court granted defendants? motion and entered an order

?preclud[ing] Plaintiffs from retaining outside counsel under any agreement in which the

payment of fees and costs is contingent on the outcome of the litigation . . . .? But the

court allowed the public entities ?30 days to file with the court new fee agreements? or

?declarations detailing the fee arrangements with outside counsel.?

The public entities sought a writ of mandate in the Court of Appeal. After issuing

an order to show cause, the appellate court ultimately set aside the superior court?s ruling

and issued a writ commanding the lower court to (1) set aside its order granting

defendants? motion, and (2) enter a new order denying defendants? motion. Although

acknowledging that Clancy purported to bar the participation of private counsel on a

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contingent-fee basis in public-nuisance abatement lawsuits brought in the name of a

public entity, the Court of Appeal held that the rule set forth in Clancy is not categorical

and does not bar the fee agreements made in the present case, because those agreements

specified that the government attorneys would maintain full control over the litigation.

The appellate court, briefly noting that the suit being prosecuted did not seek to impose

criminal liability or infringe upon fundamental constitutional rights, reasoned that the

circumstance that the private attorneys are being supervised by public lawyers vitiates

any concern regarding the neutrality of outside counsel. We granted defendants? petition

for review.

II

A

We begin our inquiry with this court?s decision in Clancy. In that case, the City of

Corona (Corona) hired James Clancy, a private attorney, to bring nuisance abatement

actions against a business (the Book Store), which sold adult materials. (Clancy, supra,

39 Cal.3d at p. 743.) The hiring of Clancy followed several attempts by Corona to

terminate the operations of this establishment. Specifically, several months after the

Book Store opened, Corona adopted two ordinances that purported to regulate adult

bookstores, one defining ?sex oriented material? and the other restricting the sale of such

material to certain zones in Corona. (Ibid.) After the owner of the Book Store, Helen

Ebel, filed an action in federal court, the United States Court of Appeals for the Ninth

Circuit ultimately held both ordinances to be unconstitutional. (Ebel v. City of Corona

(9th Cir. 1985) 767 F.2d 635.)

Corona subsequently retained the services of Clancy to abate nuisances under the

authority of a new ordinance, proposed on the same day Clancy was hired and seemingly

targeted specifically at the Book Store. (Clancy, supra, 39 Cal.3d at p. 743.) The

ordinance defined a public nuisance as ? ?[a]ny and every place of business in the City

. . . in which obscene publications constitute all of the stock in trade, or a principal part

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thereof . . . .? ? (Ibid.) The employment contract between Corona and Clancy, who was

an independent contractor rather than an employee (id. at p. 747), provided that he was to

be paid $60 per hour for his work in bringing public-nuisance actions, except that he

would be paid only $30 per hour for his work in any public-nuisance action in which

Corona did not prevail or in which Corona prevailed but did not recover attorney fees.

(Id. at p. 745.)

Two weeks after the public-nuisance ordinance was enacted, Corona passed a

resolution declaring the Book Store to be a public nuisance and revoking its business

license. Thereafter, Corona and Clancy (as the city?s ? ?special attorney? ?) filed a

complaint against Ebel, her son Thomas Ebel, another individual, and the Book Store,

seeking abatement of a public nuisance, declaratory judgment, and an injunction.

(Clancy, supra, 39 Cal.3d at p. 744.)6 The Ebels unsuccessfully attempted to disqualify

Clancy as the attorney for Corona. (Clancy, at p. 744.) The Ebels then sought writ relief,

contending it was ?improper for an attorney representing the government to have a

financial stake in the outcome of an action to abate a public nuisance,? and asserting that

?a government attorney prosecuting such actions must be neutral, as must an attorney

prosecuting a criminal case.? (Id. at p. 745.) This court generally agreed, finding the

arrangement between Corona and Clancy ?inappropriate under the circumstances.? (Id.

at p. 743.)

We observe as a threshold matter that our decision to disqualify Clancy from

representing Corona in the public-nuisance action was founded not upon any specific

statutory provision or rule governing the conduct of attorneys, but rather upon the courts?


6

During proceedings instituted to quash a subpoena issued after the filing of the

lawsuit, the court allowed Corona to amend its complaint to substitute the term ?City
Attorney of Corona? as Clancy?s title. (Clancy, supra, 39 Cal.3d at p. 744.) Clancy
appeared in the action in place of, and with no supervision by, Corona?s city attorney.

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general authority ?to disqualify counsel when necessary in the furtherance of justice.?

(Clancy, supra, 39 Cal.3d at p. 745.) Invoking that authority, this court stated that it

?may order that Clancy be dismissed from the case if we find the contingent fee

arrangement prejudices the Ebels.? (Ibid.)

We concluded that for purposes of evaluating the propriety of a contingent-fee

agreement between a public entity and a private attorney, the neutrality rules applicable

to criminal prosecutors were equally applicable to government attorneys prosecuting

certain civil cases. (Clancy, supra, 39 Cal.3d at pp. 746-747.) Accordingly, our decision

set forth the responsibilities associated with the prosecution of a criminal case, noting that

a prosecutor does not represent merely an ordinary party to a controversy, but instead is

the representative of a ? ? ?sovereignty whose obligation to govern impartially is as

compelling as its obligation to govern at all; and whose interest, therefore, in a criminal

prosecution is not that it shall win a case, but that justice shall be done.? ? ? (Clancy,

supra, 39 Cal.3d at p. 746; see People v. Superior Court (1977) 19 Cal.3d 255, 266

(Greer).) We noted that a prosecutor?s duty of neutrality stems from two fundamental

aspects of his or her employment. As a representative of the government, a prosecutor

must act with the impartiality required of those who govern. Moreover, because a

prosecutor has as a resource the vast power of the government, he or she must refrain

from abusing that power by failing to act evenhandedly. (Clancy, supra, 39 Cal.3d at

p. 746.) With these principles in mind, we declared that not only is a government

lawyer?s neutrality ?essential to a fair outcome for the litigants in the case in which he is

involved, it is essential to the proper function of the judicial process as a whole.? (Ibid.)

Recognizing that a city attorney is a public official, we noted that ?the rigorous

ethical duties imposed on a criminal prosecutor also apply to government lawyers

generally.? (Clancy, supra, 39 Cal.3d at p. 748.) Thus, pursuant to the American Bar

Association?s then Model Code of Professional Responsibility, a lawyer who is a public

officer ? ?should not engage in activities in which his personal or professional interests

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are or foreseeably may be in conflict with his official duties.? ? (Clancy, supra, 39 Cal.3d

at p. 747, quoting former ABA Model Code Prof. Responsibility, EC 8-8.) ? ?[An]

attorney holding public office should avoid all conduct which might lead the layman to

conclude that the attorney is utilizing his public position to further his professional

success or personal interests.? ? (Clancy, supra, 30 Cal.3d at p. 747, quoting ABA Com.

on Prof. Ethics, opn. No. 192 (1939).) Notably, we held that because public lawyers

handling noncriminal matters are subject to the same ethical conflict-of-interest rules

applicable to public prosecutors, ?there is a class of civil actions that demands the

representative of the government to be absolutely neutral. This requirement precludes the

use in such cases of a contingent fee arrangement.? (Clancy, supra, 39 Cal.3d at p. 748.)

We further held that public-nuisance abatement actions belong to the class of civil

cases in which counsel representing the government must be absolutely neutral. (Clancy,

supra, 39 Cal.3d at p. 749.) We came to this conclusion by analogizing a public-nuisance

abatement action to an eminent domain action ? a type of proceeding in which we

already had concluded that government attorneys must be unaffected by personal interest.

(Id. at p. 748, citing City of Los Angeles v. Decker (1977) 18 Cal.3d 860, 871.)

We explained: ?[T]he abatement of a public nuisance involves a balancing of

interests. On the one hand is the interest of the people in ridding their city of an

obnoxious or dangerous condition; on the other hand is the interest of the landowner in

using his property as he wishes. And when an establishment such as an adult bookstore

is the subject of the abatement action, something more is added to the balance: not only

does the landowner have a First Amendment interest in selling protected material, but the

public has a First Amendment interest in having such material available for purchase.

Thus, as with an eminent domain action, the abatement of a public nuisance involves a

delicate weighing of values. Any financial arrangement that would tempt the government

attorney to tip the scale cannot be tolerated.? (Clancy, supra, 39 Cal.3d at p. 749.)

Moreover, ?[a] suit to abate a public nuisance can trigger a criminal prosecution of the

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owner of the property. This connection between the civil and criminal aspects of public

nuisance law further supports the need for a neutral prosecuting attorney.? (Ibid.)

We concluded that James Clancy ? although he was an independent contractor

and not an employee of the City of Corona ? nonetheless was subject to the same

neutrality guidelines applicable to Corona?s public lawyers, because ?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

Clancy 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.)

Finally, we held that because Clancy?s hourly rate would double in the event

Corona were successful in the litigation against the Ebels and the Book Store, it was

evident that Clancy had an interest extraneous to his official function in the actions he

was prosecuting on behalf of Corona. Accordingly, ?the contingent fee arrangement

between the City and Clancy is antithetical to the standard of neutrality that an attorney

representing the government must meet when prosecuting a public nuisance abatement

action. In the interests of justice, therefore, we must order Clancy disqualified from

representing the City in the pending abatement action.? (Clancy, supra, 39 Cal.3d at

p. 750.) We expressly noted that Corona was not precluded from rehiring Clancy to

represent it on other terms. (Id. at p. 750, fn. 5.)

Importantly, we also noted that ?[n]othing we say herein should be construed as

preventing the government, under appropriate circumstances, from engaging private

counsel. Certainly there are cases in which a government may hire an attorney on a

contingent fee to try a civil case.? (Clancy, supra, 39 Cal.3d at p. 748.) As an example

of such a permissible instance of representation, we cited Denio v. City of Huntington

Beach (1943) 22 Cal.2d 580, a case in which we had approved a contingent-fee

arrangement between the City of Huntington Beach and a law firm hired to represent it in

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all matters relating to protection of the city?s oil rights. Thus, we recognized that

contingent-fee arrangements in ordinary civil cases generally are permitted. (Clancy,

supra, 39 Cal.3d at p. 748.)

B

As is evident from the preceding discussion, our decision in Clancy, supra, 39

Cal.3d 740, was guided, in large part, by the circumstance that the public-nuisance action

pursued by Corona 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. As we observed in Clancy, contingent-fee ?contracts for

criminal prosecutors have been recognized to be unethical and potentially

unconstitutional, but there is virtually no law on the subject.? (Clancy, supra, 39 Cal.3d

at p. 748.) Nonetheless, we noted it is generally accepted that any type of arrangement

conditioning a public prosecutor?s remuneration upon the outcome of a case is widely

condemned. (Ibid., citing ABA Stds. for Criminal Justice, Prosecution Function, com. to

former Std. 2.3(e) [? ?it is clear that [case-by-case] fee systems of remuneration for

prosecuting attorneys raise serious ethical and perhaps constitutional problems, are totally

unacceptable under modern conditions, and should be abolished promptly? ?].)

Accordingly, although there are virtually no cases considering the propriety of

compensation of public prosecutors pursuant to a contingent-fee arrangement, it would

appear that under most, if not all, circumstances, such a method of compensation would

be categorically barred. This is so because giving a public prosecutor a direct pecuniary

interest in the outcome of a case that he or she is prosecuting ?would render it unlikely

that the defendant would receive a fair trial.? (Pen. Code, ? 1424, subd. (a)(1); see Greer,

supra, 19 Cal.3d at p. 266 [explaining that disqualification was required in order to

protect the defendant?s fundamental due process right not to be deprived of liberty

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without a fair trial, and to enforce the prosecutor?s obligation ?to respect this

mandate?].)7

Our opinion in Clancy recognized that the interests invoked in that case were akin

to the vital interests implicated in a criminal prosecution, and thus invocation of the

disqualification rules applicable to criminal prosecutors was justified. And if those rules

are found to be equally applicable in the case now before us, disqualification of the

private attorneys hired to assist the public entities similarly would be required.

As explained below, however, to the extent our decision in Clancy suggested that

public-nuisance prosecutions always invoke the same constitutional and institutional

interests present in a criminal case, our analysis was unnecessarily broad and failed to

take into account the wide spectrum of cases that fall within the public-nuisance rubric.

In the present case, both the types of remedies sought and the types of interests

implicated differ significantly from those involved in Clancy and, accordingly, invocation

of the strict rules requiring the automatic disqualification of criminal prosecutors is

unwarranted.

The broad spectrum of public-nuisance law may implicate both civil and criminal

liability.8 Indeed, public-nuisance actions vary widely, as evidenced by Penal Code

7

It also seems beyond dispute that due process would not allow for a criminal

prosecutor to employ private cocounsel pursuant to a contingent-fee arrangement that
conditioned the private attorney?s compensation on the outcome of the criminal
prosecution. (See State of Rhode Island v. Lead Industries Assn., Inc. (R.I. 2008) 951
A.2d 428, 475, fn. 48 (State of Rhode Island) [explicitly refraining from allowing
contingent-fee arrangement in the criminal context, because the court was ?unable to
envision a criminal case where contingent fees would ever be appropriate ? even if they
were not explicitly barred, as is the case in this jurisdiction?]; cf. People v. Eubanks
(1996) 14 Cal.4th 580, 596, 598 [finding cognizable conflict of interest because of the
circumstance that the corporate crime victim paid the ? ?substantial? ? debts and expenses
incurred by the district attorney investigating the case, and that such payment evidenced a
? ?reasonable possibility? the prosecutor might not exercise his discretionary functions in
an evenhanded manner?].)

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section 370, which broadly defines a public nuisance as ?[a]nything which is injurious to

health, or is indecent, or offensive to the senses, or an obstruction to the free use of

property, so as to interfere with the comfortable enjoyment of life or property by an entire

community or neighborhood, or by any considerable number of persons, or unlawfully

obstructs the free passage or use, in the customary manner, of any navigable lake, or

river, bay, stream, canal, or basin, or any public park, square, street or highway . . . .?9

Although in Clancy we spoke generally of a ?balancing of interests? and a

?delicate weighing of values? (Clancy, supra, 39 Cal.3d at p. 749), our concerns

regarding neutrality, fairness, and a possible abuse of the judicial process by an interested

party appear to have been highly influenced by the circumstances of the case then before

us ? a long-running attempt by the City of Corona to shut down a single adult bookstore.

As set forth above, when Corona?s first attempts at legislating the bookstore out of

business were ruled unconstitutional, it hired a private attorney with a personal and


(Footnote continued from previous page)

8

As explained by the authors of a recent law review article, public-nuisance law

over the course of its development has become increasingly more civil in nature than
criminal. The precepts of public-nuisance law migrated to colonial America from the
English common law virtually unchanged, and at that time were primarily criminal.
(Faulk and Gray, Alchemy in the Courtroom? The Transmutation of Public Nuisance
Litigation (2007) 2007 Mich. St. L.Rev. 941, 951 (Faulk and Gray).) Eventually,
however, violation of public-nuisance law came to be considered as a tort, and its
criminal enforcement was invoked much less frequently. As state legislators began to
enact statutes prohibiting particular conduct and setting specific criminal penalties for
such conduct, there was little need for the broad and somewhat vague crime of nuisance.
(Ibid.; Rest.2d Torts, ? 821B, com. c, p. 88.)

9

From its earliest incarnation in the common law, public-nuisance law proscribed

an ?interference with the interests of the community at large ? interests that were
recognized as rights of the general public entitled to protection.? (Rest.2d Torts ? 821B,
com. b, p. 88; see also Faulk and Gray, supra, 2007 Mich. St. L.Rev. at p. 951; Gifford,
Public Nuisance as a Mass Products Liability Tort (2003) 71 U. Cin. L.Rev. 741, 790-
791, 794.)

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pecuniary interest in the case to file a nuisance action against the bookstore pursuant to a

newly enacted ordinance that clearly was intended to specifically target that business.

The history of Corona?s efforts to shut down the bookstore revealed a profound

imbalance between the institutional power and resources of the government and the

limited means and influence of the defendants ? whose vital property rights were

threatened. Under California law, the continued operation of an established, lawful

business is subject to heightened protections. (See Goat Hill Tavern v. City of Costa

Mesa (1992) 6 Cal.App.4th 1519, 1529 [continued operation of 35-year business that was

making recent substantial improvements was recognized as a vested right]; Livingston

Rock, Etc. Co. v. County of L.A. (1954) 43 Cal.2d 121, 127 [noting that businesses

generally cannot be immediately terminated due to nonconformance with rezoning

ordinances, because of the “hardship and doubtful constitutionality? of such

discontinuance].)? It was in this factual setting that we noted that the abatement of a

public nuisance involves a ?balancing of interests. On the one hand is the interest of the

people in ridding their city of an obnoxious or dangerous condition; on the other hand is

the interest of the landowner in using his property as he wishes.? (Clancy, supra, 39

Cal.3d at p. 749.)

The case also implicated both the defendants? and the public?s constitutional free-

speech rights. As we recognized in Clancy, the operation of the adult bookstore involved

speech that arguably was protected in part, and thus curtailment of the right to

disseminate the books in question could significantly infringe upon the Ebels? liberty

interest in free speech. Again, our focus upon the critical ?balancing of interests? was

guided by the circumstance that Corona was attempting to abate a public nuisance created

by an adult bookstore ? thus adding something more ?to the balance: not only does the

landowner have a First Amendment interest in selling protected material, but the public

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has a First Amendment interest in having such material available for purchase.? (Clancy,

supra, 39 Cal.3d at p. 749.)10

It is evident that the nature of the particular nuisance action involved in Clancy

was an important factor in leading us to conclude the rules governing the disqualification

of criminal prosecutors properly should be invoked to disqualify James Clancy.11 The

direct application of those rules was warranted because the public-nuisance abatement

action at issue implicated important constitutional concerns, threatened ongoing business

activity, and carried the threat of criminal liability. In light of these interests, the case

10

Moreover, we also found it significant that ?[a] suit to abate a public nuisance can

trigger a criminal prosecution of the owner of the property. This connection between the
civil and criminal aspects of public nuisance law further supports the need for a neutral
prosecuting attorney.? (Clancy, supra, 39 Cal.3d at p. 749.)


As we explained, public-nuisance ?actions are brought in the name of the People

by the district attorney or city attorney. (Code Civ. Proc., ? 731.) A person who
maintains or commits a public nuisance is guilty of a misdemeanor. (Pen. Code, ? 372.)
?A public or common nuisance . . . is a species of catch-all criminal offense, consisting of
an interference with the rights of the community at large . . . . As in the case of other
crimes, the normal remedy is in the hands of the state.? ? (Clancy, supra, 39 Cal.3d at
p. 749, fn. omitted, quoting Prosser and Keeton, The Law of Torts (5th ed. 1984) p. 618.)

11

The disqualification of public prosecutors is governed by Penal Code section

1424, which provides that a motion to recuse a prosecutor ?may not be granted unless the
evidence shows that a conflict of interest exists that would render it unlikely that the
defendant would receive a fair trial.? (Pen. Code, ? 1424, subd. (a)(1); see Haraguchi v.
Superior Court (2008) 43 Cal.4th 706, 711 (Haraguchi) [noting that Pen. Code, ? 1424
? ?articulates a two-part test: ?(i) is there a conflict of interest?; and (ii) is the conflict so
severe as to disqualify the district attorney from acting?? ? ?].)


Although Penal Code section 1424 does not, by its terms, govern the conduct of

civil government attorneys, we held in Clancy that certain government attorneys ?
because of the nature of the action they are prosecuting ? must, like a criminal
prosecutor, be free of any conflict of interest that might compromise a fair trial for the
defendant. Although we did not invoke section 1424 in Clancy and instead analyzed the
case under principles of neutrality ? by considering whether an attorney?s extraneous
interest in a case would prejudice a defendant ? the rule we applied unquestionably was
derived from, and was substantially similar to, the conflict-of-interest rule applicable to
criminal prosecutors. (See Haraguchi, supra, 43 Cal.4th at p. 711.)

16

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required the same ?balancing of interests? and ?delicate weighing of values? on the part

of the government?s attorney prosecuting the case as would be required in a criminal

prosecution. Because of this strong correlation, the disqualification of a private attorney

with a pecuniary interest in the outcome of the case was mandated.

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. As set forth above, neutrality is a critical concern in criminal prosecutions

because of the important constitutional liberty interests at stake. On the other hand, in

ordinary civil cases, we do not require neutrality when the government acts as an

ordinary party to a controversy, simply enforcing its own contract and property rights

against individuals and entities that allegedly have infringed upon those interests. Indeed,

as discussed above, we specifically observed in Clancy that the government was not

precluded from engaging private counsel on a contingent-fee basis in an ordinary civil

case. Thus, for example, public entities may employ private counsel on such a basis to

litigate a tort action involving damage to government property, or to prosecute other

actions in which the governmental entity?s interests in the litigation are those of an

ordinary party, rather than those of the public. (Clancy, supra, 39 Cal.3d at p. 748.)

The present case falls between these two extremes on the spectrum of neutrality

required of a government attorney. The present matter is not an ?ordinary? civil case in

that the public entities? attorneys are appearing as representatives of the public and not as

counsel for the government acting as an ordinary party in a civil controversy. A public-

nuisance abatement action must be prosecuted by a governmental entity and may not be

initiated by a private party unless the nuisance is personally injurious to that private

party. (Civ. Code, ? 3493 [?A private person may maintain an action for a public

nuisance, if it is specially injurious to himself, but not otherwise?]; id., ? 3494 [?[a]

public nuisance may be abated by any public body or officer authorized thereto by

17

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law?].) There can be no question, therefore, that the present case is being prosecuted on

behalf of the public, and that accordingly the concerns we identified in Clancy as being

inherent in a public prosecution are, indeed, implicated in the case now before us.

Yet, neither are the interests affected in this case similar in character to those

invoked by a criminal prosecution or the nuisance action in Clancy. Although the

remedy for the successful prosecution of the present case is unclear, we can confidently

deduce what the remedy will not be. This case will not result in an injunction that

prevents the defendants from continuing their current business operations. 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.

The adjudication of this action will involve at least some balancing of interests,

such as the social utility of defendants? product against the harm it has caused, and may

implicate the free-speech rights exercised by defendants when they marketed their

products and petitioned the government to oppose regulations. Nevertheless, that

balancing process and those constitutional rights involve only past acts ? not ongoing

marketing, petitioning, or property/business interests. Instead, the trial court will be

asked to determine whether defendants should be held liable for creating a nuisance and,

if so, how the nuisance should be abated. 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

18

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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.

Of course, because this is a public-nuisance action, and the public entities are not

merely pursuing abatement on government property but on private property located

within their jurisdictions, defendants? potential exposure may be very substantial. The

possibility of such a substantial judgment, however, does not affect the type of

fundamental rights implicated in criminal prosecutions or in Clancy, supra, 39 Cal.3d

740. There is no indication that the contingent-fee arrangements in the present case have

created a danger of governmental overreaching or economic coercion. Defendants are

large corporations with access to abundant monetary and legal resources. Accordingly,

the concern we expressed in Clancy about the misuse of governmental resources against

an outmatched individual defendant is not implicated in the present case.

Thus, 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.12


12

Nor is the applicable standard that which governs the disqualification of judges

and other adjudicators. It is well established that the disqualification rules applicable to
adjudicators are more stringent than those that govern the conduct of prosecutors and
other government attorneys. (People v. Freeman (2010) 47 Cal.4th 993, 996 [holding
that for purposes of judicial disqualification, the constitutional standard is whether
? ? ?the probability of actual bias on the part of the judge or decisionmaker . . . is too
high to be constitutionally tolerable? ? ? (citing Caperton v. A.T. Massey Coal Co., Inc.
(2009) ___U.S. ___ [129 S.Ct. 2252]; Code Civ. Proc. ? 170.1 [setting forth statutory

(Footnote continued on next page)

19

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C

Nevertheless, as set forth above, because the public-nuisance abatement action is

being prosecuted on behalf of the public, the attorneys prosecuting this action, although

not subject to the same stringent conflict-of-interest rules governing the conduct of

criminal prosecutors or adjudicators, are subject to a heightened standard of ethical

conduct applicable to public officials acting in the name of the public ? standards that

would not be invoked in an ordinary civil case.

The underlying principle that guided our decision in Clancy was that a civil

attorney acting on behalf of a public entity, in prosecuting a civil case such as a public-

nuisance abatement action, is entrusted with the unique power of the government and

therefore must refrain from abusing that power by failing to act in an evenhanded

manner. (Clancy, supra, 39 Cal.3d at p. 749; see also Greer, supra, 19 Cal.3d at p. 267

[a prosecuting attorney ? ? ?is the representative of the public in whom is lodged a

discretion which is not to be controlled by the courts, or by an interested individual? ? ?

(italics omitted)]; City of Los Angeles v. Decker, supra, 18 Cal.3d at p. 871 [a

? ?government lawyer in a civil action . . . should not use his position or the economic

power of the government to harass parties or to bring about unjust settlements or

results? ?].) Indeed, it is a bedrock principle that a government attorney prosecuting a

public action on behalf of the government must not be motivated solely by a desire to win

a case, but instead owes a duty to the public to ensure that justice will be done. (Greer,

supra, 19 Cal.3d at p. 267.)

(Footnote continued from previous page)

grounds for disqualification of judges]; Marshall v. Jerrico, Inc. (1980) 446 U.S. 238,
243 [noting that ?the strict requirements of Tumey [v. Ohio (1927)] 273 U.S. 510 and
Ward [v. Village of Monroeville (1972) 409 U.S. 57] are not applicable to the
determinations of the assistant regional administrator, whose functions resemble those of
a prosecutor more closely than those of a judge?].)

20

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These principles of heightened neutrality remain valid and necessary in the context

of the situation presented by the case before us. A fair prosecution and outcome in a

proceeding brought in the name of the public is a matter of vital concern both for

defendants and for the public, whose interests are represented by the government and to

whom a duty is owed to ensure that the judicial process remains fair and untainted by an

improper motivation on the part of attorneys representing the government. Accordingly,

to ensure that an attorney representing the government acts evenhandedly and does not

abuse the unique power entrusted in him or her in that capacity ? and that public

confidence in the integrity of the judicial system is not thereby undermined ? a

heightened standard of neutrality is required for attorneys prosecuting public-nuisance

cases on behalf of the government.

We must determine whether this heightened standard of neutrality is compromised

by the hiring of contingent-fee counsel to assist government attorneys in the prosecution

of a public-nuisance abatement action of the type involved in the present proceedings.

For the reasons that follow, we conclude that this standard is not compromised. Because

private counsel who are remunerated on a contingent-fee basis have a direct pecuniary

interest in the outcome of the case, they have a conflict of interest that potentially places

their personal interests at odds with the interests of the public and of defendants in

ensuring that a public prosecution is pursued in a manner that serves the public, rather

than serving a private interest. This conflict, however, does not necessarily mandate

disqualification in public-nuisance cases when fundamental constitutional rights and the

right to continue operation of an existing business are not implicated. Instead, retention

of private counsel on a contingent-fee basis is permissible in such cases if neutral,

conflict-free government attorneys retain the power to control and supervise the

litigation. As explained below, because public counsel are themselves neutral, and

because these neutral attorneys retain control over critical discretionary decisions

involved in the litigation, the heightened standard of neutrality is maintained and the

21

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integrity of the government?s position is safeguarded. Thus, in a case where the

government?s action poses no threat to fundamental constitutional interests and does not

threaten the continued operation of an ongoing business, concerns about neutrality are

assuaged if the litigation is controlled by neutral attorneys, even if some of the attorneys

involved in the case in a subsidiary role have a conflict of interest that might ? if present

in a public attorney ? mandate disqualification.

This reasoning recently was embraced by the Supreme Court of Rhode Island,

which approved the state attorney general?s employment of private counsel on a

contingent-fee basis to prosecute public-nuisance abatement actions against lead paint

manufacturers ? a case identical in all material respects to the underlying action here.

(State of Rhode Island, supra, 951 A.2d 428.) That court considered the propriety of the

contingent-fee agreements in light of the state attorney general?s status as a public

servant, and his attendant responsibility to seek justice rather than prevail at all costs. (Id.

at p. 472.) The state high court noted that the attorney general was bound by the ethical

standards governing the conduct of public prosecutors. (Ibid.) Ultimately, citing the

underlying decision of the Court of Appeal in the present case, the court in State of Rhode

Island concluded that ?there is nothing unconstitutional or illegal or inappropriate in a

contractual relationship whereby the Attorney General hires outside attorneys on a

contingent fee basis to assist in the litigation of certain non-criminal matters. Indeed, it is

our view that the ability of the Attorney General to enter into such contractual

relationships may well, in some circumstances, lead to results that will be beneficial to

society ? results which otherwise might not have been attainable. However, due to the

special duty of attorneys general to ?seek justice? and their wide discretion with respect to

same, such contractual relationships must be accompanied by exacting limitations . . . .

[I]t is our view that the Attorney General is not precluded from engaging private counsel

pursuant to a contingent fee agreement in order to assist in certain civil litigation, so long

as the Office of Attorney General retains absolute and total control over all critical

22

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decision-making in any case in which such agreements have been entered into.? (State of

Rhode Island, at p. 475, original italics, boldface and fns. omitted.)

We generally agree with the Supreme Court of Rhode Island and the Court of

Appeal in the present case that there is a critical distinction between an employment

arrangement that fully delegates governmental authority to a private party possessing a

personal interest in the case, and an arrangement specifying that private counsel remain

subject to the supervision and control of government attorneys. Private counsel serving

in a subordinate role do not supplant a public entity?s government attorneys, who have no

personal or pecuniary interest in a case and therefore remain free of a conflict of interest

that might require disqualification. Accordingly, in a case in which private counsel are

subject to the supervision and control of government attorneys, the discretionary

decisions vital to an impartial prosecution are made by neutral attorneys and the

prosecution may proceed with the assistance of private counsel, even though the latter

have a pecuniary interest in the case.

It is true that the public attorneys? decisionmaking conceivably could be

influenced by their professional reliance upon the private attorneys? expertise and a

concomitant sense of obligation to those attorneys to ensure that they receive payment for

their many hours of work on the case. This circumstance may fairly be viewed as being

somewhat akin to having a personal interest in the case. Nevertheless, this is not the type

of personal conflict of interest that requires disqualification of the public attorneys. As

this court has stated: ? ? ?[A]lmost any fee arrangement between attorney and client may

give rise to a conflict . . . The contingent fee contract so common in civil litigation

creates a ?conflict? when either the attorney or the client needs a quick settlement while

the other?s interest would be better served by pressing on in the hope of a greater

recovery. The variants of this kind of ?conflict? are infinite. Fortunately most attorneys

23

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serve their clients honorably despite the opportunity to profit by neglecting or betraying

the client?s interest.? ? ? (People v. Doolin (2009) 45 Cal.4th 390, 416.)13


13

In furtherance of their contention that the retention of private counsel on a

contingent-fee basis is impermissible in public-nuisance-abatement actions because such
financial arrangements create a sense of obligation toward private counsel on the part of
public counsel, defendants and their amici cite to our discussion of the obligation
incurred by a criminal prosecutor toward the victim who provided substantial financial
assistance to the district attorney?s office in People v. Eubanks, supra, 14 Cal.4th 580, in
which we held that the financial arrangement resulted in a disqualifying conflict of
interest on behalf of the public prosecutor. (Id. at p. 596.) This reliance upon Eubanks is
misplaced.


As a threshold matter, as we explained above, public-nuisance-abatement actions

that do not implicate fundamental constitutional rights or threaten the operation of an
existing business do not invoke the same concerns regarding neutrality as those present in
a criminal prosecution, and therefore attorneys pursuing such claims are not subject to the
strict disqualification rules applicable to criminal prosecutors that we invoked to
disqualify the public attorneys in Eubanks. Moreover, even under the disqualification
standard applied in Eubanks, the retention of private counsel on a contingent-fee basis in
public-nuisance actions is distinguishable from the financial arrangement we found
impermissible in that case. In Eubanks, supra, we reasoned that because criminal
defendants have ?no right to expect that crimes should go unpunished for lack of public
funds,? the mere fact that the victim?s financial assistance enables the prosecutor to
proceed further or more quickly ?would not, by itself, constitute unfair treatment.? (14
Cal.4th at p. 599.) Instead, a disabling conflict is established ?in this factual context[]
only by a showing that the private financial contributions are of a nature and magnitude
likely to put the prosecutor’s discretionary decisionmaking within the influence or control
of an interested party.? (Ibid; see also Hambarian v. Superior Court (2002) 27 Cal.4th
826, 836 [recusal is not required simply because victim pays for expense the district
attorney?s office otherwise would have incurred].) Applying that reasoning to the
retention of contingent-fee counsel by public entities pursuing public-nuisance-abatement
actions, it is evident that individuals and business entities that create public nuisances
similarly have no right to expect that abatement actions will not be brought ?for lack of
public funds.? Thus, the mere circumstance that contingent-fee counsel enable public
attorneys to prosecute the case does not, by itself, constitute unfair treatment.


Nor are the financial contributions of private counsel of a nature or magnitude

likely to put the public attorneys? discretionary decisionmaking within the influence or
control of an interested party. Unlike the financial assistance provided by the victim in
Eubanks ? a party with a strong personal interest in the outcome of the case and an
expectation that the provision of financial assistance would incentivize the public

(Footnote continued on next page)

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As recognized by the American Bar Association, attorneys are expected to resolve

conflicts between their personal interests and their ethical and professional

responsibilities ?through the exercise of sensitive professionalism and moral judgment.?

(ABA Model Rules Prof. Conduct, Preamble, par. 9.) In other words, attorneys are

presumed to comport themselves with ethical integrity and to abide by all rules of

professional conduct. In light of the supervisory role played by government counsel in

the litigation ? and their inherent duty to serve the public?s interest in any type of

prosecution pursued on behalf of the public ? we presume that government attorneys

will honor their obligation to place the interests of their client above the personal,

pecuniary interest of the subordinate private counsel they have hired.


(Footnote continued from previous page)

attorneys to pursue the victim?s desired outcome even if justice demanded a contrary
course of action ? the financial assistance in a public-nuisance case pursued with the
assistance of contingent-fee counsel is provided by a group of sophisticated legal experts
who have calculated the financial risk against the possible reward, and who are charged
with the knowledge that public counsel?s obligation to place justice above their desire to
win a case may result in governmental decisions that do not maximize monetary recovery
for the private attorneys.


This factual distinction is especially important in light of the specific contractual

provisions we discuss supra. As we explain below, to ensure that the heightened
standard of neutrality is maintained in the prosecution of a public-nuisance-abatement
action, contingent-fee agreements between public entities and private counsel must
contain specific provisions delineating the proper division of responsibility between the
public and private attorneys. Specifically, those contractual provisions must provide
explicitly that all critical discretionary decisions will be made by public attorneys ?
most notably, any decision regarding the ultimate disposition of the case. These
contractual provisions reinforce the principle that the financial assistance provided by
contingent-fee counsel is conditioned on the understanding that public counsel will retain
full control over the litigation and, in exercising that control, must and will place their
duty to serve the public interest in ensuring a fair and just proceeding above their sense of
any obligation to maximize a monetary recovery for the private attorneys.

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As we have explained above, in the type of public-nuisance abatement action

being prosecuted in the present case, disqualification of counsel need not be governed by

the stringent disqualification rules applicable to criminal prosecutors. Nevertheless, the

role of the prosecutor provides useful guidance concerning the type of discretionary

decisions that must remain with neutral government attorneys to ensure that the litigation

is conducted in a conflict-free manner. A public prosecutor ?has broad discretion over

the entire course of the criminal proceedings, from the investigation and gathering of

evidence, through the decisions of whom to charge and what charges to bring, to the

numerous choices at trial to accept, oppose, or challenge judicial rulings.? (Hambarian,

supra, 27 Cal.4th at p. 840.) In Greer, we emphasized that it is ?because the prosecutor

enjoys such broad discretion that the public he serves and those he accuses may

justifiably demand that he perform his functions with the highest degree of integrity and

impartiality, and with the appearance thereof.? (Greer, supra, 19 Cal.3d at pp. 266-267.)

Accordingly, ?the advantage of public prosecution is lost if those exercising the

discretionary duties of the district attorney are subject to conflicting personal interests

which might tend to compromise their impartiality.? (Id. at p. 267; see also Hambarian,

supra, 27 Cal.4th at p. 841 [holding that proper test for a disqualifying conflict of interest

under Pen. Code section ? 1424 is whether ?the prosecutor?s discretionary

decisionmaking has been placed within the influence or control of an interested party?].)

A prosecutor?s authority to make critical discretionary decisions in criminal cases

is vital to ensuring the neutrality we require of attorneys entrusted with that position.

This is so because such discretionary decisions provide the greatest opportunity to abuse

the judicial process by placing personal gain above the interests of the public in a fair and

just prosecution and outcome. For the same reason, in the context of public-nuisance

abatement proceedings, critical discretionary decisions similarly may not be delegated to

private counsel possessing an interest in the case, but instead must be made by neutral

government attorneys.

26

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Accordingly, although the principles of heightened neutrality do not categorically

bar the retention of contingent-fee counsel to assist public entities in the prosecution of

public-nuisance abatement actions, those principles do mandate that all critical

discretionary decisions ultimately must be made by the public entities? government

attorneys rather than by private counsel ? in other words, neutral government attorneys

must retain and exercise the requisite control and supervision over both the conduct of

private attorneys and the overall prosecution of the case. Such control of the litigation by

neutral attorneys provides a safeguard against the possibility that private attorneys

unilaterally will engage in inappropriate prosecutorial strategy and tactics geared to

maximize their monetary reward. Accordingly, when public entities have retained the

requisite authority in appropriate civil actions to control the litigation and to make all

critical discretionary decisions, the impartiality required of government attorneys

prosecuting the case on behalf of the public has been maintained.

Defendants assert that even if the control of private counsel by government

attorneys is viable in theory, it fails in application because private counsel in such cases

are hired based upon their expertise and experience, and therefore always will assume a

primary and controlling role in guiding the course of the litigation, rendering illusory the

notion of government ?control?. To the extent defendants assert that no contractual

provision delegating the division of responsibility will or can be adhered to, we decline to

assume that private counsel intentionally or negligently will violate the terms of their

retention agreements by acting independently and without consultation with the public-

entity attorneys or that public attorneys will delegate their fundamental obligations.14


14

We also decline the suggestion of defendants and their amici curiae to view all

contingent-fee agreements as inherently suspect because of an alleged ?appearance of
impropriety? created by such arrangements. Contingent-fee arrangements are deeply
entrenched as a legitimate and sometimes prudent method of delegating risk in the
context of civil litigation, and in the absence of evidence of wrongdoing or unethical

(Footnote continued on next page)

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Defendants also contend that the concept of ?control? is unworkable as a standard

to govern future cases, because it will be difficult (if not impossible) for a trial court to

monitor whether government counsel for a public entity is adequately fulfilling his or her

supervisory role and controlling all important aspects of the litigation, including

procedural tactics, the gathering and presentation of evidence, the consideration and

resolution of settlement negotiations, and other discretionary matters. Defendants assert

that short of egregious actions on the part of private counsel or the supervising

government attorney, violations of the ?control? exception would be difficult to detect.15

These practical concerns do not require the barring of contingent-fee arrangements

in all public prosecutions. Instead, to ensure that public attorneys exercise real rather

than illusory control over contingent-fee counsel, retainer agreements providing for

contingent-fee retention should encompass more than boilerplate language regarding

?control? or ?supervision,? by identifying certain critical matters regarding the litigation

that contingent-fee counsel must present to government attorneys for decision. The

requisite specific provisions, described below, are not comprehensive panaceas and may

not all operate perfectly in the context of every contingent-fee situation, but each of them

will assist parties and the court in assessing whether private counsel are abusing their

prosecutorial office. Moreover, adherence to these provisions is subject to objective


(Footnote continued from previous page)

conduct we decline to impugn this means of compensating counsel in the context of civil
litigation.

15

In the present case, the evidence of the public entities? control consists of the fee

arrangements as well as the declarations submitted by the public entities and their private
attorneys. (See ante, pp. 4-6, and fns. 2, 3 & 4.) Defendants assert in their briefing that
they further attempted to obtain discovery regarding the actual control being exercised by
the public entities, but that those entities refused to disclose any such additional
documents, citing the attorney-client privilege.

28

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verification both by defendants and by the court without the need for engaging in

discovery that might intrude upon the attorney-client privilege or attorney work product

protections.

In a case such as the present one, in which any remedy will be primarily monetary

in nature, the authority to settle the case involves a paramount discretionary decision and

is an important factor in ensuring that defendants? constitutional right to a fair trial is not

compromised by overzealous actions of an attorney with a pecuniary stake in the

outcome. Accordingly, retention agreements between public entities and private counsel

must specifically provide that decisions regarding settlement of the case are reserved

exclusively to the discretion of the public entity?s own attorneys. Similarly, such

agreements must specify that any defendant that is the subject of such litigation may

contact the lead government attorneys directly, without having to confer with contingent-

fee counsel. (Cf. ABA Formal Ethics Opn. No. 06-443 (Aug. 5, 2006) [?Model Rule of

Professional Conduct 4.2 generally does not prohibit a lawyer who represents a client in a

matter involving an organization from communicating with the organization?s inside

counsel about the subject of the representation without obtaining the prior consent of the

entity?s outside counsel?].)16


16

The primacy of the discretionary authority to settle a case recently was invoked by

a federal court in Ohio that considered Sherwin-Williams Company?s challenge, on
unspecified unconstitutional grounds, to the contingent-fee agreements between three
Ohio cities and private counsel in a lead paint public-nuisance abatement action very
similar to the underlying action in the present case. (Sherwin-Williams Co. v. City of
Columbus (S.D. Ohio, July 18, 2007, No. C2-06-829) 2007 U.S. Dist. Lexis 51945 [2007
WL 2079774].) The court originally had barred the private attorneys from providing
legal representation, because ?the contingency fee agreements between private counsel
and the three cities were unconstitutional insofar as the agreements reposed an
impermissible degree of public authority upon retained counsel, who have a financial
incentive not necessarily consistent with the interests of the public body.? (2007 U.S.
Dist. Lexis 51945 at pp. *3-*4.) In a subsequent ruling, the court approved the two
contingent-fee agreements that had been amended to expressly vest in the city attorney

(Footnote continued on next page)

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Additionally, we adopt, in slightly modified form, the specific guidelines set forth

by the Supreme Court of Rhode Island in State of Rhode Island, supra, 951 A.2d at page

477, footnote 52. Specifically, contingent-fee agreements between public entities and

private counsel must provide: (1) that the public-entity attorneys will retain complete

control over the course and conduct of the case; (2) that government attorneys retain a

veto power over any decisions made by outside counsel; and (3) that a government

attorney with supervisory authority must be personally involved in overseeing the

litigation.

These specific provisions are not exhaustive. The unique circumstances of each

prosecution may require a different set of guidelines for effective supervision and control

of the case, and public entities may find it useful to specify other discretionary decisions

that will remain vested in government attorneys. Nevertheless, the aforementioned

provisions comprise the 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.

III

In the present case, five of the seven contingent-fee agreements between the public

entities and private counsel contained in the record provide that the public entities?


(Footnote continued from previous page)

?control over the litigation and the sole authority to authorize any settlement of any claim
or complaint.? (Id. at p. *6.) The third agreement, however, still was deficient, because
it provided that neither private counsel nor the city could settle or dismiss the case
without the consent of the other. (Id. at p. *10.) The court stated that it had made it
?abundantly clear? in its previous ruling that a contingent-fee agreement ?between a
municipality and private counsel in a public nuisance action which purports to vest in
private counsel authority to prevent a settlement or dismissal of a suit is
unconstitutional.? (Ibid.)

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government counsel ?retain final authority over all aspects of the Litigation.?17

Declarations of public counsel for these five public entities confirm that these individuals

?retained and continue to retain complete control of the litigation,? have been ?actively

involved in and direct all decisions related to the litigation,? and have ?direct oversight

over the work of outside counsel.? Private counsel submitted declarations confirming

that the government counsel for the five public entities retain ?complete control? over the

litigation.18 The references in these agreements to ?final authority over all aspects of the

litigation? fairly can be read to mandate that the government attorneys will supervise the

work of the private attorneys, and will retain authority to control all critical

decisionmaking in the case. The declarations establish that such general control and

supervision have been exercised and are, in fact, being exercised.

Nevertheless, although five of the 10 fee agreements between the respective public

entities and private counsel contain language specifying that control and supervision will

be retained by the government attorneys, none of the ten fee agreements in the present

case contain the other specific provisions regarding retention of control and division of

responsibility that we conclude are required to safeguard against abuse of the judicial

process. Accordingly, because the seven agreements that are in the record are deficient

under the standard we set forth above, and because we cannot assess the sufficiency of


17

These five agreements are those of San Francisco, Santa Clara, Alameda,

Monterey, and San Diego.

18

As noted above, Oakland and Solano County have submitted declarations of their

public counsel asserting that government attorneys retain full ?control? over all aspects of
the litigation. Nonetheless, those two entities? fee agreements in the record do not reflect
this arrangement, make no provision for the retention of ?final authority over all aspects?
of the litigation, and do not otherwise specify that the private attorneys are subject to the
supervision of public counsel. As noted above, the fee agreements for the County of Los
Angeles, the City of Los Angeles, and San Mateo are not contained in the record before
us.

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the three remaining agreements that are not contained in the record, we reverse the

judgment rendered by the Court of Appeal and remand the matter for further proceedings

consistent with this opinion. Assuming the public entities contemplate pursuing this

litigation assisted by private counsel on a contingent-fee basis, we conclude they may do

so after revising the respective retention agreements to conform with the requirements set

forth in this opinion.



















GEORGE, C. J.



WE CONCUR:



KENNARD, J.

CHIN, J.

MORENO, J.

RICHMAN, J.*


* Associate Justice, Court of Appeal, First Appellate District, Division Two, assigned by the

Chief Justice pursuant to article VI, section 6 of the California Constitution.

32

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CONCURRING OPINION BY WERDEGAR, J.




I concur in the judgment insofar as it vacates the superior court?s order barring the

plaintiff public entities from paying their private counsel under contingent fee

agreements.

Although I do not agree with every aspect of the majority?s reasoning, I do agree

this court spoke too broadly in 1985 when it prohibited contingent fee agreements in all

public nuisance cases. (See People ex rel. Clancy v. Superior Court (1985) 39 Cal.3d

740, 748-750 (Clancy).) As the majority explains, public nuisance cases comprise a wide

range of factual situations, some of which do not necessarily entail a conflict of interest

between public-entity plaintiffs and private attorneys retained under contingent fee

agreements. To limit Clancy is thus appropriate, as the majority concludes.

In this case, however, at least a possible conflict of interest arises from the

combination of two circumstances: The public entities assert they cannot afford to pay

private counsel other than a contingent fee, and some of the fee agreements at issue give

private counsel a share of the value of any abatement ordered by the court. Given the

hypothetical choice between an abatement order of great public value and a less valuable

cash settlement,1 both the public and the private attorneys have an incentive to advocate

the less valuable cash settlement, as it provides funds from which private counsel can be

1

The government cannot recover damages in public nuisance cases. (People ex rel.

Van De Kamp v. American Art Enterprises, Inc. (1983) 33 Cal.3d 328, 333, fn. 11.)

1

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paid without an appropriation of public money representing the private attorneys? share

of the value of abatement. Certainly this incentive does not amount to a personal conflict

of interest requiring the public attorneys? recusal, as the majority explains (maj. opn.,

ante, at p. 23), but it does lead me to question whether public attorneys under all

foreseeable circumstances will be able to exercise the independent supervisory judgment

the majority concludes is essential if private counsel are to be retained under contingent

fee agreements. Here, however, the parties? briefing on the subject of possible remedies

is so vague, any such conflict is merely speculative.

In concurring in the judgment, I am also influenced by the concern that to grant

defendants? motion might encourage parties in future cases to bring belated motions

seeking to interfere with their opposing parties? attorney-client relationships for tactical

reasons. Although plaintiffs commenced this action in 2000, and although defendants do

not assert they learned of the contingent fee agreements only recently,2 defendants did

not challenge those agreements until 2007, after losing pretrial dispositive motions on

appeal.3 (See County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th

292.) In ruling on a motion to disqualify counsel, the court may properly consider the

possibility that the motion is a tactical device (People ex rel. Dept. of Corporations v.

SpeeDee Oil Change Systems (1999) 20 Cal.4th 1135, 1145; Comden v. Superior Court

(1978) 20 Cal.3d 906, 915) and deny the motion when unreasonable delay has caused


2

Plaintiff City and County of San Francisco?s contingent fee agreement, for

example, has been public knowledge since 2001, when the Board of Supervisors
authorized the City Attorney to enter into it. (S.F. Res. No. 190-01, as amended Feb. 13,
2001.)

3

I recognize that until 2007 the complaint included additional causes of action that

did not implicate contingent fee concerns, but this would not have precluded an earlier
motion to prohibit contingent fee arrangements with respect to the public nuisance cause
of action.

2

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great prejudice (In re Complex Asbestos Litigation (1991) 232 Cal.App.3d 572, 599-600;

River West, Inc. v. Nickel (1987) 188 Cal.App.3d 1297, 1313). To grant defendants?

motion in this case could as a practical matter force plaintiffs to abandon their lawsuit

after nearly a decade of pretrial litigation and discovery. While defendants have asked

the court not to disqualify plaintiffs? counsel but instead simply to bar plaintiffs from

compensating counsel on a contingent basis, the only authority for defendants? motion is

the body of law concerning disqualification. Because there is evidence indicating that an

order prohibiting contingent fees would as a practical matter preclude private counsel?s

participation ? in effect disqualifying them ? the rule requiring timely presentation of

the motion would logically apply.

WERDEGAR, J.

I CONCUR:

RIVERA, J.*



*

Associate Justice, Court of Appeal, First Appellate District, Division Four,

assigned by the Chief Justice pursuant to article VI, section 6 of the California
Constitution.

3

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See last page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion County of Santa Clara v. Superior Court
__________________________________________________________________________________

Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 161 Cal.App.4th 1140
Rehearing Granted
__________________________________________________________________________________

Opinion No. S163681
Date Filed: July 26, 2010
__________________________________________________________________________________

Court: Superior
County: Santa Clara
Judge: Jack Komar
__________________________________________________________________________________

Attorneys for Appellant:

Ann Miller Ravel and Miguel M?rquez, County Counsel (Santa Clara), Cheryl A. Stevens, Aryn P. Harris, Winifred
Botha, Orry Korb, Tamara Lange and Anne O. Decker, Deputy County Counsel; Dennis J. Herrera, City Attorney
(San Francisco), Owen J. Clements, Chief of Special Litigation, Danny Chou and Erin Bernstein, Deputy City
Attorneys; Michael J. Aguirre and Jan Goldsmith, City Attorneys (San Diego), Sim von Kalinowski, Chief Deputy
City Attorney, Daniel F. Bamberg, Deputy City Attorney; Richard E. Winnie, County Counsel (Alameda), Raymond
L. MacKay and Andrea L. Weddle, Deputy County Counsel; Dennis Bunting, County Counsel (Solano); Thomas F.
Casey III and Michael P. Murphy, County Counsel (San Mateo), Brenda Carlson, Chief Deputy County Counsel,
Rebecca M. Archer, Deputy County Counsel; Raymond G. Fortner, Jr., and Andrea Sheridan Ordin, County Counsel
(Los Angeles), Donovan M. Main, Richard K. Mason and Robert E. Ragland, Deputy County Counsel; Rockard J.
Delgadillo, City Attorney (Los Angeles), Jeffrey B. Isaacs, Chief of Criminal and Special Litigation, Patricia Bilgin
and Elise Ruden, Deputy City Attorneys; John A. Russo, City Attorney (Oakland), Christopher Kee, Deputy City
Attorney; Charles J. McKee, County Counsel (Monterey), William M. Litt, Deputy County Counsel; Cotchett, Pitre
& McCarthy, Frank M. Pitre, Nancy L. Fineman, Ara Jabagchourian, Douglas Y. Park; Thornton & Naumes,
Michael P. Thornton, Neil T. Leifer; Motley Rice, Fidelma Fitzpatrick, Aileen Sprague; Mary Alexander &
Associates, Mary Alexander and Jennifer L. Fiore for Petitioners.

Arthur H. Bryant and Victoria W. Ni for Public Justice, P.C., as Amicus Curiae on behalf of Petitioners.

Genevieve M. Allaire Johnson, Special Assistant Attorney General; Hagens Berman Sobol Shapiro and Jeff D.
Friedman for State of Rhode Island as Amicus Curiae on behalf of Petitioners.

Jennifer B. Henning for California State Association of Counties and League of California Cities as Amici Curiae on
behalf of Petitioners.

Waters Kraus & Paul, Ingrid M. Evans, David L. Cheng; Waters Kraus, Charles S. Siegel and Loren Jacobson for
Healthy Children Organizing Project, Western Center on Law and Poverty, The Inner City Law Center, Public
Advocates, Inc., Public Health Institute, Law Foundation of Silicon Valley, California Conference of Local Health
Officers, Prevention Institute, Alliance for Healthy Homes, American Academy of Pediatrics, California Center for
Public Health Advocacy, Equal Justice Society and Worksafe Law Center as Amici Curiae on behalf of Petitioners.

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Page 2 ? S163681 ? counsel continued

Attorneys for Appellant:

Rosen, Bien & Galvan, Sanford Jay Rosen, Kenneth W. Walczak, Elizabeth H. Eng; Law Offices of Richard M.
Pearl and Richard M. Pearl for Legal Ethics Professors Erwin Chemerinsky, Stephen Gillers, Nathaniel E.
Gozansky, Matthew I. Hall, Carol M. Langford, Deborah L. Rhode, Mark L. Tuft and W. Bradley Wendel as Amici
Curiae on behalf of Petitioners.

Gardere Wynne Sewell, Richard O. Faulk, John S. Gray; Steptoe & Johnson and Jay E. Smith for Public Nuisance
Fairness Coalition, American Chemistry Council, Property Casualty Insurers Association of America and National
Association of Manufacturers as Amici Curiae on behalf of Petitioners.

Sher Leff and Victor M. Sher for Association of California Water Agencies as Amicus Curiae on behalf of
Petitioners.

__________________________________________________________________________________

Attorneys for Respondent:

No appearance for Respondent.

__________________________________________________________________________________

Attorneys for Real Party in Interest:

Arnold & Porter, Ronald C. Redcay, Sean Morris, Eric May, Shane W. Tsend, John R. Lawless, Kristen L. Roberts,
Philip H. Curtis and William H. Voth for Real Party in Interest Atlantic Richfield Company.

Horvitz & Levy, David M. Axelrad and Lisa Perrochet for Real Party in Interest Millennium Inorganic Chemicals
Inc.

Orrick, Herrington & Sutcliffe, Richard W. Mark, Elyse D. Echtman; Filice Brown Eassa & McLeod, Peter A.
Strotz, William E. Steimle and Daniel J. Nichols for Real Party in Interest American Cyanamid Company.

Greve, Clifford, Wengel & Paras, Lawrence A. Wengel, Bradley W. Kragel; Ruby & Schofield, Law Office of Allen
Ruby, Allen J. Ruby, Glen W. Schofield; McGrath, North, Mullin & Kratz, James P. Fitzgerald and James J. Frost
for Real Party in Interest ConAgra Grocery Products Company.

McGuire Woods, Steven R. Williams, Collin J. Hite; Glynn & Finley, Clement L. Glynn and Patricia L. Bonheyo
Real Party in Interest E.I. du Pont de Nemours and Company.

Halleland, Lewis, Nilan & Johnson, Michael T. Nilan; Ropers, Majeski, Kohn & Bentley and James C. Hyde for
Real Party in Interest Millennium Holdings LLP.

Crowley, Barrett & Karaba, Paul F. Markoff; Robinson & Wood and Archie S. Robinson for Real Party in Interest
The O?Brien Corporation.

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Page 3 ? S163681 ? counsel continued

Attorneys for Real Party in Interest:

Timothy Hardy; McManis, Faulkner & Morgan, McManis Faulkner, James H. McManis, William W. Faulkner,
Matthew Schechter; Bartlit, Beck, Herman, Palenchar & Scott and Donald T. Scott for Real Party in Interest NL
Industries, Inc.

Jones Day, John W. Edwards II, Elwood Lui, Brian J. O?Neill, Frederick D. Friedman, Paul M. Pohl, Charles H.
Moellenberg, Jr., and Leon F. DeJulius, Jr., for Real Party in Interest The Sherwin-Williams Company.

Elizabeth Milito; Carlton DiSante & Freudenberger and Nancy G. Berner for National Federation of Independent
Business Small Business Legal Center as Amicus Curiae on behalf of Real Party in Interest Atlantic Richfield
Company.

Shook, Hardy & Bacon, Kevin Underhill, Victor E. Schwartz, Cary Silverman; Natinal Chamber Litigation Center,
Inc., Robin S. Conrad, Amar Sarwal; and Sherman Joyce for Chamber of Commerce of the United States of
America and the American Tort Reform Association as Amici Curiae on behalf of Real Party in Interest Atlantic
Richfield Company.

Latham & Watkins and Paul N. Singarella for Orange County Business Council as Amicus Curiae on behalf of Real
Party in Interest Atlantic Richfield Company.

Thomas J. Graves; Spriggs & Hollingsworth, Eric G. Lasker and Marc S. Mayerson for National Paint & Coatings
Association, Inc., as Amicus Curiae on behalf of Real Parties in Interest.

Fred J. Hiestand for The Civil Justice Association of California as Amicus Curiae on behalf of Real Parties in
Interest.

Ronald D. Rotunda; Akin Gump Strauss Hauer & Feld, Rex S. Heinke and Jessica M. Weisel for National
Organization of African Americans in Housing as Amicus Curiae on behalf of Real Parties in Interest.

Maureen Martin for The Heartland Institute as Amicus Curiae on behalf of Real Parties in Interest.

Hugh F. Young, Jr.; Dechert, James M. Beck; Drinker Biddle & Reath and Alan J. Lazarus for The Product Liability
Advisory Council, Inc., as Amicus Curiae on behalf of Real Parties in Interest.

W. Scott Thorpe for California District Attorneys Association as Amicus Curiae.

Coughlin Stoia Geller Rudman & Robbins, Timothy G. Blood, Pamela M. Parker; Eugene G. Iredale; Law Offices
of Arthur F. Tait III & Associates, Arthur F. Tait III; Sullivan, Hill, Lewin, Rez & Engel, Brian L. Burchett; Wingert
Grebing Brubaker & Goodwin, Charles R. Grebing, Eric R. Deitz; Michael Fremont Law Office and Michael J.
Fremont for C.L. Trustees, Patricia Yates, Christine Stankus, Jerrold Cook, Richard Yells, Mark L. Glickman,
Heather Buys and Christine Ballon as Amici Curiae.

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Counsel who argued in Supreme Court (not intended for publication with opinion):

Owen J. Clements
Chief of Special Litigation
1390 Market Street, 7th Floor
San Francisco, CA 94102
(415) 554-3944

Philip H. Curtis
Arnold & Porter
399 Park Avenue
New York, New York 10022
(212) 715-1000

Elwood Lui
Jones Day
555 South Flower Street, 50th Floor
Los Angeles, CA 90071
(213) 489-3939

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