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May 16, 2011 | Law Alert

Orange County Water District v. The Arnold Engineering Company

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The Fourth District would not disqualify a law firm representing a public entity under a contingency fee agreement because the action was not brought on the public’s behalf, but in the entity’s own name to recover compensatory damages.

The Orange County Water District incurred costs to investigate contamination in groundwater aquifers.  It retained Miller, Axline & Sawyer on a contingency fee basis to recover the investigation and remediation costs.  Defendants moved to disqualify the Miller Firm based on the contingency fee arguing that precedent prohibited a public entity from paying a private attorney to prosecute an action on behalf of the public.  The trial court denied the motion, finding there was no prohibition because the Water district did not pursue the action on behalf of the public, but on its own behalf for its own damages.

The Court of Appeal noted there is a class of civil actions that demand the representatives of the government be absolutely neutral, precluding contingent fee agreements.

However, the California Supreme Court has held that while neutrality is a critical concern in criminal prosecutions because of the important liberty interests at stake, courts do not require neutrality when the government acts as an ordinary party to a controversy enforcing its own contract and property rights.

Attorneys prosecuting public actions on behalf of the government are subject to a heightened standard of ethical conduct and owe a duty to the public to ensure justice will be done.  In furtherance of that objective, courts will examine whether contingency fee arrangements in public actions compromise the standard of neutrality.

The Water District did not bring the action on the public’s behalf to abate a public nuisance.  It brought the action in its own name to recover compensatory damages it suffered from the groundwater contamination.  Thus, the Miller Firm was not held to the same ethical standard as attorneys enforcing a public right and could represent the Water District on a contingency fee.

Comment:  The Court struck a balance between ethical concerns and the ability of public agencies to recover damages without the burden of hourly fees.

Practice Area: Lawyers & Judges Defense Group
Attorney: John B. Sullivan

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