New decision approves contingency-fee relationships between public prosecutors and private lawyers: Priceline.com, Inc. v. City of Anaheim

I've been closely following the County of Santa Clara case now pending at the Supreme Court, which involves whether public agencies may appropriately hire private attorneys to represent them on a contingency-fee basis.  (See my public prosecutor category page for posts on the Santa Clara case.)  Yesterday, the Court of Appeal (Fourth Appellate District, Division Three) issued a new opinion holding that they may in most cases. 

In Priceline.com, Inc. v. City of Anaheim, ___ Cal.App.4th ___ (Jan. 6, 2010), the Court of Appeal closely considered the Supreme Court's Clancy decision (People ex rel. Clancy v. Superior Court, 39 Cal.3d 740 (1985)) (also central to the County of Santa Clara case), and approved a contingency-fee arrangement between the City of Anaheim and private lawyers in a case to recover unpaid city tax assessments. The opinion has this to say about Clancy:

First, Clancy does not bar the use of contingency fee lawyers in all civil litigation. This limitation is shown by Clancy’s: (1) concession that “[c]ertainly 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); (2) its statement that the duty of absolute neutrality applies only to “a class of civil actions,” not to all civil actions (ibid.); and (3) its comparison of public nuisance actions with eminent domain actions, which involve “‘“a sober inquiry into values,”’” “a balancing of interests” and “a delicate weighing of values” (id. at p. 749).

Second, even in that class of actions where Clancy otherwise applies, it does not bar contingency fee lawyers from assisting government lawyers as cocounsel. This limitation is shown by: (1) the starting point of Clancy’s analysis — the focus on a criminal prosecutor’s “considerable discretionary power to decide what crimes are to be charged and how they are to be prosecuted” (Clancy, supra, 39 Cal.3d at p. 746); (2) the reminder that the prosecutor’s discretionary functions continue past the filing decision and into the trial tactics (id. at p. 749, fn. 4); and (3) the footnote distinguishing the Sedelbauer case on the ground the “private attorney . . . appeared ‘not in place of the State’s duly authorized counsel.’” (Clancy, at p. 749, fn. 3.) When contingency fee lawyers assist government lawyers as cocounsel, the “considerable discretionary power” that Clancy seeks to protect remains vested in the government lawyers. The government lawyers check the contingency fee lawyer’s financial interests.

Slip op. at 14-15.  In other words, so long as the public prosecutors exercise appropriate discretionary and supervisory controls, the contingency-fee arrangement will be proper.  The opinion goes on to approve the specific contingency-fee relationship in the case before it (id. at 17-20), concluding:

In 24 years, no California appellate court has extended Clancy’s reach to civil actions generally — or to any action other than one for public nuisance. No sound reason exists why Clancy would bar government lawyers from receiving assistance from contingency fee lawyers as cocounsel in this case.

Id. at 20 (footnote omitted). 

The opinion concludes with an interesting "Final Thought" on some of the assumptions that may underlie arguments against participation of contingency-fee counsel in public prosecutor actions: 

Although we have shaped our analysis to conform to Clancy and the parties’ arguments, we are troubled by the notion that lawyers are more apt to treat defendants unfairly if they are paid pursuant to a contingency fee agreement, rather than an hourly fee agreement. Clancy identifies the contingency fee lawyers’ financial interest in the outcome of a case as a factor that may interfere with the duty of neutrality. But it is just as easily argued that a contingency fee lawyer is less likely to pursue meritless litigation, whereas an hourly fee lawyer may have a financial motivation to continue prosecuting litigation discovered to lack merit. In short, we question the unstated assumption upon which Clancy is based. But we are constrained to analyze this case under the rationale stated therein. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455.)

Id. at 23.