Should contingency be permitted in lawsuits filed by government entities?
Without it, government entities argue, access to the court is limited. Moreover, without the assistance of private counsel, it's difficult if not impossible to manage the litigation the way it could and should be. After all, government lacks the manpower and resources that the defendants usually have. The playing field is not level. Defendants could have a distinct advantage.
With contingency, the private sector and their defense attorneys contend, neutrality on the part of the government is compromised. After all, the private counsel hired on contingency has financial incentives to not only win the case but push for the largest awards. That seemed to be exactly the situation in the landmark Rhode Island lead paint public nuisance litigation. The two state attorneys general argued the case twice with the assistance of private counsel Motley Rice on a contingency basis. The abatement plan submitted by that plaintiff totaled more than a billion dollars. Some perceived that as wildly excessive.
Among the courts allowing contingency has been the RI Supreme Court. In a ruling last July in which it overturned the verdict against the defendants, it gave contingency the nod. Here is that opinion Download Statev.LeadIndustriesAssoc.,Inc. A Court in Pennsylvania also permitted contingency in a government case.
Currently, the California SC is reviewing the use of contingency in the lead paint public nuisance lawsuit filed by Santa Clara County. The trial court rejected contingency, primarily based on the application of the 1985 CA SC "Clancy" ruling that such an arrangement violates neutrality. However, the Appeals Court overturned that decision. It decided that as long as the government entity retains "control" of the litigation use of contingency is legitimate. The opinion, particularly the concurring part, was passionate. Here is that ruling Download H031540.
The CA SC review is at the point of both sides's submitting briefs. One of the defendants Sherwin-Williams is represented by Jones Day Law Firm. A Jones Day partner Charles "Chuck" H. Moellenberg recently spoke with the Heartland Institute about this seminal issue in class-action litigation. Clearly, if contingency is given the green light, state attorneys general will have the resources to increase the number of lawsuits they file and can even bring to trial. The stakes are high.
In his interview with Heartland Institute attorney and fellow Maureen Martin, Moellenberg made these key points:
- In its "Clancy" decision, the CA SC stated that "government attorneys have to be absolutely neutral. There should be nothing tempting them to tip the scale, because their responsibility is to see that justice is done, not to win the case." When private counsel is used on contingency a financial incentive is introduced. That can and often does compromise neutrality.
- Contingency fee agreements are prohibited in many areas of the law. They include criminal cases, eminent domain actions, divorce actions, when the purpose of the retention is to obtain a government contract, or to lobby the government.
- Because of the financial incentive, the private counsel frequently proposes remedies that can be impractical and downright illegal.
- Given the tangled web litigation is, it is practically impossible for the government entity to maintain full "control" over private counsel. Too many large and small decisions need to be made along the way and in the real time of the courtroom trial. "Outside counsel are not simply puppets who can be orchestrated in their every move by the city and county attorneys."
- Too often, since it is impossible to "control" outside counsel, there will be a violation of attorney-client privilege.
- There are constitutional issues embedded in the particular CA contingency matter. For example, the way the lawsuit is configured, the rights of property owners are ignored. There's more. "This lawsuit [Santa Clara] takes away any notice to the owners because they're not parties to the lawsuit. The property owners can find themselves in a situation where their properties have been adjudicated to be a public nuisance. It could affect their ability to get insurance; it could affect their ability to sell their properties."
Here is the entire interview between Chuck Moellenberg and Maureen Martin. Moellenberg was part of the Jones Day legal team who represented Sherwin-Williams during the nine years of public nuisance litigation in RI.
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