Court upholds contingency fees

JULY 27, 2010


The California Supreme Court released a controversial decision Monday in County of Santa Clara v. Superior Court (Atlanta Richfield Co.) that may worsen the state’s already dismal lawsuit climate for businesses.

The court ruled that municipalities can hire contingency fee attorneys to handle lawsuits, including public nuisance lawsuits.  A percentage of a contingency fee attorney’s payment is contingent on the  success of the case, meaning a municipality risks less if the attorney is not successful.  If the attorney wins or settles the case, he gets a bonus.

Chief Justice Ronald George acknowledged that attorneys’ financial interests might impede justice. “They have a direct conflict of interest that potentially places their personal interests at odds with the interests of the public and of the defendants in ensuring that a public prosecution is pursued in a manner that serves the public, rather than serving a private interest,” wrote George in the decision.

But he did not go so far as to ban the practice in cases where “constitutional rights and the right to continue operation of an existing business” are not at stake.

“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,” George wrote.

Those who support the decision argued that public law offices do not have the resources, time or expertise necessary to take on time-consuming and complex public nuisance fees, nor do they have the money to hire expensive private attorneys. Contingency fee attorneys provide an alternative for city and county attorneys to defend the public interest.

Critics claim that contingency fee attorneys work against the public interest by filing spurious suits against companies in an effort to get them to settle.  Businesses do not have the luxury of hiring contingency fee attorneys.

The California Chamber of Commerce’s Institute for Legal Reform criticized the ruling, concerned about its effects on a worsening business climate.

“The California Supreme Court’s decision to allow government entities to partner with private lawyers in contingency fee lawsuits will not only result in more litigation, but will further burden the state’s ability to create jobs and emerge from its worst economic situation since the Great Depression,” said Lisa A. Rickard, president of the Institute for Legal Reform, in a press release.

The lawsuit was originally spurred when several California municipalities sued a handful of large paint companies for public nuisance, because the companies had manufactured paint that contained lead, before lead was outlawed as a paint ingredient in 1978.   The paint companies in question argued that by paying attorneys more for successful action than unsuccessful action, it “incentivized” them to win even at the cost of justice.

“Today’s ruling upends the fundamental legal principle that no attorney wielding the government’s police power may have a financial interest in the outcome,” said Philip Curtis, counsel for the defendants.  “The scales of justice should not be tipped for a profit motive.”

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  1. John Seiler
    John Seiler 28 July, 2010, 21:52

    George’s blather is just legalistic gibberish. He’ll be gone soon. Good riddance.

    He’s also an economic idiot, as are those municipalities who pursued this case. They’re just chasing businesses out of California, lowering the tax base for themselves.

    George was appointed by Pete Wilson, who’s a big influence on Meg Whitman.

    It just keeps getting worse in this state.

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