Rent-a-Cop

People ex rel City of San Diego v. Experian Data Corp., No. G060360 (D4d3 Apr. 26, 2022)

Some Plaintiff lawyers sued a credit rating agency and some related companies in federal court under the Fair Credit Reporting Act for selling the private data of 400,000 Californians to an outfit that turned out to be a front for a Vietnamese hacker. The case was dismissed on standing grounds. So the lawyers recruited the City Attorney of San Diego to bring a UCL litigation alleging basically the same facts. The City hired the Firms (three of them) under a 25% contingency fee deal. The terms of the retainer say that the City keeps ultimate control over the litigation, any settlement, etc. The Court goes out of its way to explain that the City Attorney took an active role in the litigation, e.g., it wrote key briefs and took depositions.

Upon learning of the contingency setup, Defendants moved to DQ the Firms, arguing that the contingency violated a prosecutor’s duty of neutrality. The trial court denied the motion and Defendants took a writ.

The Court of Appeal denies relief. The rules on contingencies and prosecutors are pretty settled. In a criminal case, they are per se barred. In a civil case, they are permitted, provided that (1) the case isn’t too criminal-ish so that the per se rule applies; (2) the actual government lawyers maintain full control over the litigation. 

On the first point, there are a pair of Supreme Court cases, twenty-five years apart, that explain the distinction. See County of Santa Clara v. Superior Court, 50 Cal.4th 35, 49 (2010); People ex rel. Clancy v. Superior Court, 39 Cal.3d 740 (1985). Clancy said a contingency was improper when the prosecution was a nuisance abatement action designed to shut down adult bookstores. Because the goal was to put people out of business, it was too much like a criminal action to permit a contingency. On the other hand, in Santa Clara, a nuisance case against the manufacturers of lead paint, the remedy was penalties and potential cleanup costs, but an injunction shutting down the businesses was not on the table. There, the Court found that, so long as the government lawyers maintained ultimate and operation control, a contingency is ok.

As the Court of Appeal sees it, this case is more like Santa Clara than Clancy. So a contingency fee is just fine.

The arrangement also doesn’t violate Business and Professions Code § 17206, which requires civil penalties to be used exclusively “for the enforcement of consumer protection laws.” As the Court sees it, paying lawyers a contingency fee to prosecute UCL civil penalty cases is for the enforcement of consumer protection laws.

Writ denied.

I don’t have any truck with the Court of Appeal’s legal analysis here. The case is more like Santa Clara. 

The issue I have, however, is that this kind of arrangement stinks of corruption. If the government lawyers are actually in control of the litigation, why are they giving a quarter of the recovery away to private lawyers? And why do they need three law firms?

My hunch here (and it is merely my surmise) is that there are a couple of things are going on at once: 

(1) Plaintiff lawyers are serving up prepackaged litigation to certain public prosecutoral agencies headed by elected officials—generally DAs and City Attorneys—holding it out as an easy buck. The agencies get most of the penalties. The plaintiff attorneys avoid the kind of standing rules that apply in regular civil litigation. (Aided by the Supreme Court’s 2020 decision in the Abbott Labs case, which says that any prosecutor who can enforce the UCL can sue and obtain penalties for violations statewide.) Plus they can obtain penalties that are only available in government-brought cases and take a contingency on them.

(2) The contingency fee avoids any out-of-pocket expenditure of public money, which gets around procurement rules that generally apply to government agencies. I would venture that there is zero chance that these legal arrangements are competitively bid.

(3) Some elected prosecutors’ campaign chests benefit from the benevolent largesse of said members the plaintiff bar. 

I don’t, as a matter of principle, take issue with the government occasionally hiring private lawyers to handle litigation. But there is a lot of money sloshing around in these private lawyer UCL penalty cases, and a lot of opportunity for graft. There’s certainly an appearance of it, at least. 

Plus, UCL civil penalty actions are rife with the potential for abuse. The penalty they afford is up to $2,500 per violation. But the courts steadfastly refuse to come to any fixed definition of what a “violation” is. It is ultimately in the eye of the trial judge. So plaintiffs have every reason to define violation broadly, such that they can claim that thousands or even hundreds of thousands of “violations” happen in any case. See this recent opinion for how it works.  

Even if the court doesn’t eventually buy it, being subject to a potential penalty in the billions of dollars that won’t get resolved until the court issues a post-trial statement of decision is a lot of pressure to bear. Delegating that kind of thing to contingency fee Plaintiff lawyers (even if the prosecutor needs to approve) is a lot of coercive power to put in the hands of a private actor with strong financial incentives. 

A legislative fix is needed. Don’t hold your breath.