Several things stand out in yesterday's opinion in County of Santa Clara v. Superior Court (Atlantic Richfield Co.), ___ Cal.App.4th ___ (Apr. 8, 2008) (Sixth Appellate District) ("Santa Clara").
As an initial matter, the Court of Appeal explained that under People ex rel. Clancy v. Superior Court, 39 Cal.3d 740 (1985) ("Clancy"), there is a "class of civil cases in which the government's representative must be absolutely neutral. ... [O]rdinary civil cases brought by the government do not fall within this class of cases, and therefore contingent fee arrangments in ordinary civil cases are permitted." Slip op. at 7 (citing Clancy, 39 Cal.3d at 748) (footnote omitted) (emphasis added). Both Clancy and Santa Clara were public nuisance abatement actions. Under Clancy, public nuisance abatement actions "fall within the class of civil cases in which the government's representative must be absolutely neutral" because they entail discretionary decisionmaking involving "'a delicate weighing of values' and 'balancing of interests.'" Id. at 7 (quoting Clancy, 39 Cal.3d at 748).
The Santa Clara opinion does not go on to address whether other types of cases (such as UCL public prosecutor actions) constitute "ordinary civil cases" in which contingent fee arrangments are permitted under Clancy, or whether they fall within that "class of civil cases" in which the prosecutor must have "absolute neutrality." As will be seen, it may not matter, because the Santa Clara Court holds that even in cases demanding "absolute neutrality," contingency-fee agreements are still permissible so long as they do not purport to delegate the public entities' discretionary decision-making power to private attorneys with a financial stake.
The Court in Santa Clara held that contingency fee agreements with private lawyers can be appropriate even in cases (such as public nuisance abatement cases) in which "absolute neutrality" is required. The public entities established through declarations "that their private counsel serve in a subordinate role in which private counsel merely assist in-house counsel and lack any authority to control the litigation." Id. at 10. Under such circumstances, the principle of "absolute neutrality" is not undermined:
[W]here private counsel are merely assisting government attorneys in the litigation of a public nuisance abatement action and are explicitly serving in a subordinate role, in which private counsel lack any decision-making authority or control, private counsel are not themselves acting “in the name of the government” and have no role in the “balancing of interests” that triggers the absolute neutrality requirement. Private counsel serving in such a subordinate role do not supplant the public entities’ in-house attorneys, who must be absolutely neutral, and are not in a position where their interest in maximizing their contingent fee can influence the balancing of interests or any of the other decisions that are made exclusively by the public entities’ in-house attorneys. Because Clancy’s holding is limited to the facts that were before the California Supreme Court in Clancy, a private attorney serving as the sole representative of the government in a public nuisance abatement action and completely controlling the litigation, Clancy does not justify the superior court’s order barring the public entities from compensating, by means of a contingent fee agreement, their private counsel, who are merely assisting in-house counsel and lack any control over the litigation.
Id. at 11-12 (emphasis in original) (footnote omitted). "[T]here is a critical distinction between a private attorney who supplants the public entity's 'duly authorized counsel' and a private attorney who serves only in a subordinate role as 'co-counsel' to the public entity's in-house counsel." Id. at 14 (citing Sedelbauer v. State, 455 N.E.2d 1159 (Ind. App. 1983)) (emphasis in original).
The Court of Appeal reversed the trial court's contrary order as a matter of law, with no other directions:
Clancy itself does not bar the public entities from engaging private counsel under a contingent fee arrangement to assist in this litigation, so long as the public entities’ in house counsel retain control over all decision-making. The record before us contains absolutely no evidence that private counsel have ever engaged in any conduct that invaded the sphere of control exercised by the public entities’ in-house counsel. No authority supports barring private counsel from assisting the public entities under a contingent fee arrangement in this litigation. Therefore, the superior court’s order is unjustified, and we will direct the court to set it aside.
Id. at 16 (footnote omitted). During the oral argument, much time was spent discussing whether the trial court should make factual findings at the end of the case about whether the public entities' in-house counsel did, in fact, exercise appropriate discretionary control throughout the litigation. The opinion does not require any such findings or any further action by the trial court at all, absent a renewed motion by the defense: "No doubt the companies will seek disqualification of the public entities’ private attorneys if they acquire evidence that the private attorneys are improperly exercising control over this action." Id. at 16 n.11.
Justice Bamattre-Manoukian filed a concurring opinion in which she agreed with the result but expressed the view that courts must engage in a broader consideration of the factual circumstances surrounding the specific contingency-fee agreements. Slip op., concurrence at 7, 11-15. "[T]he propriety of a contingency fee agreement in a public nuisance action must be evaluated by caferul consideration of the many important factors in each case, including the factual circumstances, the terms of the contingency fee agreement, and the conduct of plaintiff's counsel ...." Id. at 14. The concurrence concludes by "respectfully invit[ing] the California Supreme Court to review this issue and to provide guidance ot the courts and public entities in this important and developing area of the law." Id. at 15.
I would be very surprised if a petition for review were not filed. Copies of many of the appellate briefs from the case are available at this link.