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C.A. Approves Private Lawyers Representing City in UCL Suit on Contingency-Fee Basis
By a MetNews Staff Writer
There’s no need to disqualify three law firms that have been engaged by the City of San Diego to pursue, on a contingency-fee basis, an action under the Unfair Competition Law, Div. Three of the Fourth District Court of Appeal has declared.
The action, filed in 2018, is against Experian Data Corp., a credit reporting company, and others based on a failure to alert the more than 400,000 Californians—as required by the Customer Records Act—that their personal information had been obtained by a Vietnamese hacker named and sold to identity thieves and others who used the information for unlawful purposes. The Unfair Competition Law (“UCL”) provides for civil penalties up to $2,500 per violation, creating a potential recovery of millions of dollars, with one-fourth going to the attorneys.
In light of the need for impartiality on the part of prosecutors, “compensation of government counsel by contingency fee is prohibited in most if not all circumstances,” retired Court of Appeal Justice Laurie D. Zelon, who is sitting on assignment, wrote.
Experian’s Contention
That principle, Experian argued, precludes the city’s representation by private firms. Although the California Supreme Court in its 2010 opinion in County of Santa Clara v. Superior Court found representation of a governmental entity under a contingency-fee contract to be permissible in a nuisance action, Experian contended that the civil penalties being sought in the current action are akin to criminal penalties.
“Experian’s focus on penalties is inapt, however,” Zelon said, explaining:
“As in Santa Clara…, the UCL litigation ‘poses no threat’ to Experian’s constitutional interests or to its ongoing business operations. For this reason, and because they predate Santa Clara, the authorities Experian cites are distinguishable.”
Statutory Provision
Experian also maintained that the arrangement violates Business & Professions Code §17206(f) which provides:
“If the action is brought by a city attorney of a city and county, the entire amount of the penalty collected shall be paid to the treasurer of the city and county in which the judgment was entered for the exclusive use by the city attorney for the enforcement of consumer protection laws.”
Zelon responded:
“[T]he agreements provide that after the penalties or other payments are received by the City, an amount necessary to cover the payment to the Private Firms will be placed in a special account. Thus, the penalties will be received by the City. Further, payment to the Private Finns is for the purpose of enforcing the consumer protection laws, and therefore does not violate section 17206. Experian cites no authority that the funds must be used only for future enforcement of the consumer protection laws.”
The case is People ex rel. City of San Diego v. Experian Data, 2022 S.O.S. 1760.
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