SAN DIEGO (Legal Newsline) - A California appeals refused to boot contingency-fee lawyers from a lawsuit by the City of San Diego against Experian, rejecting the company’s argument the private lawyers violated the public prosecutor’s duty of neutrality by working for a share of any money they won in the case.
The Fourth Appellate District Court, Division Three, also rejected Experian’s claim the contingency-fee arrangement violated California’s Unfair Competition Law by illegally steering legal fees away from the San Diego treasury.
In blessing San Diego’s contingency-fee arrangement, the appeals court relied upon the California Supreme Court’s 2010 decision County of Santa Clara v. Superior Court, which allowed the county to pay private lawyers a percentage of the winnings in its lawsuit against lead-paint manufacturers. In that decision, the state’s high court loosened restrictions it had previously placed on the use of contingency-fee lawyers in government public-nuisance lawsuits, saying the practice was acceptable if government lawyers oversaw the litigation and approved all major decisions.
In this case, San Diego sued Experian over privacy lapses that occurred when a predecessor company, Court Ventures Inc., sold personal information on 3 million consumers to SG Investigators, a company that turned out to be owned by a Vietnamese hacker who sold the data to identity thieves. The city sued Experian, CVI and others, using three law firms that previously had filed a civil class action against the same defendants. San Diego sued under the UCL, seeking statutory penalties of $2,500 per violation.
Experian moved in 2021 to disqualify the law firms -- Blood Hurst & O’Reardon, LLP, Barnow and Associates, P.C., and the Coffman Law Firm – saying the contingency-fee agreements giving them 25% of any winnings violated the duty of neutrality. The company also cited the language of the UCL, which says civil penalties must be paid directly to the city treasurer and spent on “the enforcement of consumer protection laws.”
The trial court rejected the disqualification motion, and the appeals court upheld the decision. As the California Supreme Court ruled in the lead-paint case, the appeals court said the use of contingency-fee lawyers in civil lawsuits doesn’t threaten any fundamental liberty interests even if some of the attorneys had conflicts of interest that would disqualify them from a criminal prosecution.
The fact the city will eventually pay a quarter of whatever it wins to private lawyers doesn’t violate the UCL either, the appeals court ruled. The money will flow first to the city, and only then will it pay its lawyers as part of the process of enforcing the law, the court concluded.