Arguments set for contingency fee dispute in California

SAN FRANCISCO (Legal Newsline) - The California Supreme Court has scheduled oral arguments in a group of paint companies' challenge of the contingency fee contracts entered into by the lawyers and governments suing it.

On May 5, the justices will question lawyers for both sides as to why they should overturn an appeals court decision that permitted the contingency fee agreements. A trial court ruling said they were invalid.

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.

It has been a lengthy process setting a date for arguments. The Supreme Court accepted the case in July 2008.

Since then, 16 amicus briefs have been filed with the court.

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 say attorneys representing a government agency should be motivated by justice, not money. A similar argument is being made before the Pennsylvania Supreme Court in a case involving Janssen Pharmaceutica and Gov. Ed Rendell.

The companies, which also include DuPont and NL Industries, say that the neutrality issue has already been decided in California by a 1985 decision known as Clancy.

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.

"I recognize... that the issue of the circumstances under which public entities may properly retain private counsel under contingency fee agreements to assist in the litigation of public nuisance abatement actions is of great public significance," wrote Justice Patricia Bamattre-Manoukian, of the Sixth District Court of Appeals.

"For this reason, I would respectfully invite the California Supreme Court to review this issue and to provide guidance to the courts and public entities in this important and developing area of the law."

Public nuisance suits against paint companies have failed around the country, including in Rhode Island.

In that case, the justices unanimously overturned a verdict against a group of paint companies and also addressed the contingency fee argument.

The Rhode Island justices wrote that they would have affirmed state Attorney General Patrick Lynch's right to hire outside counsel on a contingency fee, provided Lynch was the one in control of the decision-making.

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