The State’s Retention of Outside Counsel on Contingency to Prosecute Environmental Laws: Two Common Objections.
By Andrew Thornton, Staff Contributor
Perhaps most famously in the 1990’s litigation against Big Tobacco, state and local governments retain outside counsel on contingency to prosecute cases in the government’s name. (For example, in the tobacco litigation, counsel earned $14 billion, or 6 percent, of the $246 billion settlement.)
The advantages of hiring outside counsel are obvious. Because outside counsel front all the costs of litigation, they undertake the risk of losing. It also frees government lawyers to work on other matters. Finally, outside counsel offers the expertise and deep bench required to match well-funded corporate defense teams.
First, government lawyers have a duty of neutrality which private lawyers don’t. Courts look to the type of enforcement when considering how important it is that outside counsel be, in the Supreme Court of California’s words, “absolutely neutral.” The neutrality argument also implicates ethical rules on contingent fees. Rule 1.5(d)(2) forbids criminal-defense lawyers from charging a contingent fee for fear it will taint the lawyer’s advice Although there’s a dearth of case law about private prosecutors paid on contingency, presumably the rule would apply to them all the more than to defense lawyers.
Imagining a continuum, neutrality is critical at one end (when the government enforces the criminal law) but irrelevant at the other (when the government is like any other civil litigant). Civil enforcement of environmental law lies somewhere in the middle. In County of Santa Clara, the Supreme Court of California didn’t require outside counsel’s absolute neutrality because the case would neither force the defendant lead-paint manufacturers to abandon their business; implicate any liberty interest, including freedom of speech; nor lead to a collateral criminal prosecution, as the statute of limitations had run.
In reviewing objections on this ground, the Supreme Courts of California and Rhode Island recommend that contingent-fee contracts with outside counsel ensure neutrality by explicitly giving the agency control over the course of the litigation, the power to veto decisions made by outside counsel, and the power to appoint an agency lawyer to personally oversee outside counsel.
Second, defendants object that agencies may improperly use litigation to avoid asking the legislature for appropriations. This arises in at least three cases: if the attorney general wants to litigate a case but doesn’t want to risk the funds (paying her own lawyers or paying outside counsel by the hour), doesn’t believe the legislature will appropriate them if asked, or simply wants the damages award to supplement their budget.
Under either theory, the practice arguably violates separation of powers because the contingent fee hasn’t been appropriated by the legislature; courts have split, however, on this argument’s viability. The Supreme Court of Louisiana held the state attorney general couldn’t retain outside lawyers on contingency to enforce the state’s environmental laws in light of a statute requiring “that all recoveries in cases involving environmental legislation must be paid into the state treasury.” The Supreme Court of Rhode Island, on the other hand, rejected a similar argument as “overly myopic” in a lead-paint case and reasoned that the outside counsel retained on contingency “ha[d] an equitable lien on any recovered damages in accordance with the term of the fee agreement.”
As the outcomes in Louisiana and Rhode Island show, this argument’s success depends on state statutory and case law. An interest group, the American Legislative Exchange Council, offers a statutory fix that would avoid the outcome in Louisiana: a model Private Attorney Retention Sunshine Act that ten states have adopted. Under this law, any contract whose fee is expected to exceed $100,000 is subject to competitive bidding, and the legislature must be allowed to review any contract whose fee is expected to exceed $1 million. Outside counsel must track their hours and expenses and their ultimate fee is capped at $1,000 per hour.
 Carson R. Griffis, Should States Ban Contingency Fee Agreements Between Attorneys General and Private Attorneys?, 20 Prof. Law., no. 3, 2010, at 22, 22; Leah Godesky, Note, State Attorneys General and Contingency Fee Arrangements: An Affront to the Neutrality Doctrine?, 42 Colum. J.L. & Soc. Probs. 587, 588–89 (2009), http://www.columbia.edu/cu/jlsp/pdf/Summer2009/04Godesky.42.4.pdf. For background, see, for example, David B. Wilkins, Rethinking the Public-Private Distinction in Legal Ethics: The Case of “Substitute” Attorneys General, 2010 Mich. St. L. Rev. 423, 428–34, http://ssrn.com/abstract=1789124.
 Note, supra note 1, at 588. But see also Julie E. Steiner, The Illegality of Contingency-Fee Arrangements When Prosecuting Public Natural Resource Damage Claims and the Need for Legislative Reform, 32 Wm. & Mary Envtl. L. & Pol’y Rev. 169, 194–201 (2007), http://ssrn.com/abstract=1012125 (objecting to tobacco analogy).
 Note, supra note 1, at 588; Bruce L. Simon & William J. Newsom, The “Pro” Side—The Collaboration Between Public Entities and Private Counsel: Prosecuting Cases that Otherwise Might Not Be Brought, Competition: J. Antirust & Unfair Competition L. Sec. St. B. Cal., Fall 2010, at 7.
 Brian Israel has catalogued states’ use of outside counsel in natural-resource-damages litigation. See Brian D. Israel, A State-by-State Guide to NRD Programs in All 50 States (2015), http://www.arnoldporter.com/resources/documents/NRD%20State-by-State%20Guide1.pdf, reprinted in Environmental Law Practice Guide § 32B.12 (Michael B. Gerrard ed.), LexisNexis (updated Aug. 2015).
 Julie E. Steiner, Should “Substitute” Private Attorneys General Enforce Public Environmental Actions? Balancing the Costs and Benefits of the Contingency Fee Environmental Special Counsel Arrangement, 51 Santa Clara L. Rev. 853, 854 & nn.3–6 (2011), http://ssrn.com/abstract=1971390.
 Richard O. Faulk & John S. Gray, Alchemy in the Courtroom? The Transmutation of Public Nuisance Litigation, 2007 Mich. St. L. Rev. 941, 972–73; Note, supra note 1; William L. Stern & Nicholas A. Roethlisberger, The “Con” Side—Outsourcing Justice: the California Supreme Court’s Decision in County of Santa Clara v. Superior Court (Atlantic Richfield), Competition: J. Antirust & Unfair Competition L. Sec. St. B. Cal., Fall 2010, at 2, 4.
 People ex rel. Clancy v. Super. Ct., 705 P.2d 347, 352–53 (Cal. 1985) (public-nuisance-abatement suit targeting town’s sole adult bookstore required a neutral prosecutor).
 Annotated Model Rules Of Professional Conduct r. 1.5 (Ellen J. Bennett eds., 7th ed. 2011), Westlaw ABA-AMRPC 1.5 (“A fee based upon acquittal creates a conflict of interest because it may tempt a defense lawyer to push for trial rather than a plea bargain, or to forego mitigating evidence if it could lead to conviction of a lesser-included offense.”).
 See County of Santa Clara v. Super. Ct., 235 P.3d 21, 31 (Cal. 2010) (noting dearth of case law but concluding that “it would appear that under most, if not all, circumstances, [giving a public prosecutor a direct pecuniary interest in the outcome of a case that he or she is prosecuting] would be categorically barred”).
 Id. at 33–34; supra notes 8–9.
 County of Santa Clara, 235 P.3d at 34–35.
 Id. at 34; cf. Clancy, 705 P.2d at 352–53 (“A suit to abate a public nuisance can trigger a criminal prosecution of the owner of the property. This connection between the civil and criminal aspects of public nuisance law further supports the need for a neutral prosecuting attorney.”).
 County of Santa Clara, 235 P.3d at 40 (citing State v. Lead Indus. Ass’n, 951 A.2d 428, 477 & n.52 (R.I. 2008)); see also 7A C.J.S. Attorney & Client § 467 & nn.17–19, Westlaw (database updated July 2015) (citing County of Santa Clara, supra).
 Martin H. Redish, Private Contingent Fee Lawyers and Public Power: Constitutional and Political Implications, 18 Sup. Ct. Econ. Rev. 77, 82–83 (2010) (citing David A. Dana, Public Interest and Private Lawyers: Toward a Normative Evaluation of Parens Patriae Litigation by Contigency Fee, 51 DePaul L. Rev. 315, 319 (2002), http://via.library.depaul.edu/cgi/viewcontent.cgi?article=1548&context=law-review).
 Dana, supra note 14, at 319–20; Faulk & Gray, supra note 6, at 974 (agencies’ primary goal pecuniary “so that they can continue providing or perhaps even expand services that the public needs and that they may be obliged to provide”).
 Meredith v. Ieyoub, 96-1110, p. 8 (La. 9/9/97); 700 So. 2d 478, 482.
 Lead Indus. Ass’n, 951 A.2d at 478 (emphasis omitted).
 Private Attorney Retention Sunshine Act, Am. Legis. Exchange Council (Jan. 28, 2013), http://www.alec.org/model-legislation/private-attorney-retention-sunshine-act.
 State Contracts with Private Attorneys: A Call for Sunshine, Am. Legis. Exchange Council, http://www.alec.org/initiatives/sunshine-in-state-attorney-contracts (last visited Oct. 14, 2015).
 Private Attorney Retention Sunshine Act, supra note 18, §§ 2(A), 3–5.
 Id. § 6.