U.S. SC mulling Calif. contingency fee suit

John O'Brien Dec. 28, 2010, 11:19am


WASHINGTON (Legal Newsline) - The U.S. Supreme Court is deciding whether to hear the appeal of a paint company upset that it has been sued by private lawyers representing public entities.

Atlantic Richfield is appealing a California Supreme Court decision that allowed several California counties and cities to retain private attorneys on a contingency fee for a lawsuit. The lawsuit alleges the company created a public nuisance when it manufactured lead paint before its federal ban.

Atlantic Richfield asked the U.S. Supreme Court to hear its appeal in October. No decision has been made.

The company claims public entities shouldn't have their litigation steered by lawyers who have a financial interest in the outcome of the case. The California Supreme Court sided against it in July.

Chief Justice Ronald George wrote that a "heightened" standard of neutrality is not compromised by the contingent fee agreement.

"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," George wrote.

"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."

Seven California counties and four cities (San Francisco, Los Angeles, San Diego and Oakland) sued eight paint companies, including Sherwin-Williams and Atlantic Richfield in 2000, claiming the companies created a public nuisance when they made lead-based paint before it was outlawed in 1978.

The California Supreme Court accepted the case in July 2008. The suit has been put on hold while the two sides argue if the plaintiffs' 17-percent contingent fee agreement with private counsel should be allowed to stand.

The companies, which also include DuPont and NL Industries, said that the neutrality issue had already been decided in California by a 1985 decision.

The case involved the City of Corona hiring a private attorney to bring public nuisance cases against alleged violators of a city ordinance. The attorney was paid more for successful than actions than unsuccessful ones.

Initially, the companies' argument was successful, but an appellate court reversed the lower court decision and encouraged the Supreme Court to take a look at the issue.

The opinion draws a difference between the paint suit and the Corona suit. The Corona suit was more of a criminal prosecution, George wrote. Private attorneys in civil cases need not be held to the "more stringent disqualification rules applicable to criminal prosecutors."

Philip Curtis, counsel for the Atlantic Richfield Company, was not happy with the California Supreme Court ruling.

"We respectfully but strongly disagree with the Court's decision. Today's ruling upends the fundamental legal principle that no attorney wielding the government's police power should have a financial interest in the outcome," Curtis said.

"The scales of justice should not be tipped by a profit motive. The delegation of state police power to financially self-interested counsel is troubling and violates due process."

From Legal Newsline: Reach John O'Brien by e-mail at jobrienwv@gmail.com.

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