Law Office Management
Jun. 2, 2008
Dangerous Liasons
Litigation seeking removal of lead paint from local buildings is still making news, but not as an environmental story. Lead paint companies and the tort reform lobby are opposing recent public nuisance abatement actions on grounds that public agencies hired contingency-fee counsel to help them.
The lead-tainted scare-of-the-day focuses on Chinese-made metal toys and charm bracelets given away with children's sneakers. But there's another lead-contamination controversy, still alive and still toxic, that is so 20th century. It involves lead paint, long-delayed remediation by the paint companies, and a point of law: whether public entities can hire contingency-fee lawyers to help pursue the defendants.
In California, the epicenter of the controversy is the Santa Clara County counsel's office in San Jose. After eight years of litigation against the lead paint industry, its public nuisance abatement action-joined by nine other counties, cities, and school districts-was reinstated in early April by an appellate court (County of Santa Clara v. Superior Court of Santa Clara, 2008 Cal. App. LEXIS 498).
The decision was "incredibly significant, not just for our case but for cities and counties statewide," says Ann M. Ravel, Santa Clara County counsel. When she first filed suit in March 2000, Ravel says, she had no way of knowing what she was getting into. "We never anticipated that the companies would be so opposed to our hiring outside counsel," she says.
Authorization for Ravel to file a class action was not given lightly. California's lead paint remediation dispute goes back to 1991, when the Legislature enacted by simple majority the Childhood Lead Poisoning Prevention Act (Health & Saf. Code § 105275). The act provides for evaluation, screening, and medically necessary follow-up services for children who are deemed potential victims of lead poisoning-all supported by "fees" assessed primarily on lead paint manufacturers. The paint companies objected, suing the state on grounds that the "fees" were actually taxes that must by law be enacted by a two-thirds majority of the Legislature. They won a motion for summary judgment, which was upheld on appeal. But in 1997 the state Supreme Court unanimously reversed, concluding that the act imposed bona fide regulatory fees, not taxes (Sinclair Paint Co. v. State Bd. of Equalization, 15 Cal. 4th 866 (1997)).
The paint companies responded politically. They qualified for the ballot Proposition 37, a proposed constitutional amendment that would subject fees imposed "for the purpose of studying or monitoring the impact of a particular activity or product, or addressing adverse impacts associated with an activity or product, to the same supermajority required to enact state and local taxes." But in November 2000 a narrow majority of voters rejected the measure.
By then the national battle over lead paint had become really interesting. In 1999 plaintiffs attorneys from Motley Rice-a major player in the successful multistate tobacco litigation of the 1990s-persuaded the attorney general of Rhode Island to bring a public nuisance abatement action against lead paint companies. The presence of lead paint in Rhode Island homes and buildings was the alleged public nuisance. The constitutionality of the state's contingency-fee arrangement is currently under review by the Supreme Court of Rhode Island.
Attorneys in California took notice of Rhode Island's novel use of public nuisance law. In March 2000 officials in Oakland and San Francisco joined Santa Clara County's Ravel in a public nuisance abatement action filed against Atlantic Richfield Co., eight paint companies, and the Lead Industries Association. Other government entities came aboard later in the proceedings. From the beginning, the coalition partnered with contingency-fee firms that included Motley Rice; Cotchett, Pitre & McCarthy; Mary Alexander & Associates; and Thornton & Naumes.
The paint companies argued that the statute of limitations had run-and that, in any case, under California law, public entities are precluded from retaining contingency-fee counsel in public nuisance abatement actions. They cited a state Supreme Court case placing such actions within a special class of cases that requires absolute neutrality by government attorneys-a standard that contingency-fee counsel would not meet (People ex rel. Clancy v. Superior Court, 39 Cal. 3d 740 (1985)).
In 2007 the trial court granted the companies' motion. But this year a unanimous panel of the Sixth Appellate District reversed, finding no authority to support a blanket prohibition of private counsel so long as government attorneys maintain complete control over all aspects of the litigation. "This was a landmark decision with far-reaching implications for consumer protection in the state," says Mary Alexander, one of the plaintiffs counsel assisting in the case.
Of course, the California and Rhode Island contingency-fee counsel cases aren't occurring in a vacuum. Long before the plea agreements of Bill Lerach, Mel Weiss, and Dickie Scruggs this winter, the national tort reform lobby had plaintiffs attorneys in its crosshairs. The potential cost to defendants posed by the lead paint cases made contractual agreements between public agencies and contingency-fee counsel anathema, leading to campaigns beginning in the late 1990s by the American Legislative Exchange Council (ALEC), the American Tort Reform Association, and the U.S. Chamber Institute for Legal Reform (ILR).
Since 1998 ALEC has been promoting the Private Attorney Retention Sunshine Act, which would require any state agency hiring outside legal services to hold open and competitive bidding, and to submit any contract for more than $1 million to a legislative hearing. The appropriate committee could then hold public hearings on the proposed contract-and recommend changes to it-before its adoption.
State attorneys general have been targeted as the potential sponsors of contingency-fee arrangements. In March 2007 California Attorney General Jerry Brown issued a statement "clarifying" his office's position on transparency in contracting with private attorneys. Two months later President George W. Bush signed an executive order prohibiting all federal agencies from entering into contingency-fee agreements for legal or expert-witness services. And last October the U.S. Chamber ILR issued its "State Attorney General Code of Conduct," which recommended best practices for initiating and conducting state litigation.
Among the Chamber's recommendations: "An AG should not enter into a contract with an attorney to pursue litigation on behalf of the state where compensation is contingent on the result of the case or the amount of the state's recovery if the case involves the exercise of the state's sovereign police power."
ILR spokesperson Larry Akey says, "We are concerned with the hiring of contingency-fee counsel at all levels of government. Contingency-fee counsel have inherent conflicts of interest." He describes as "cautious" the reaction of state attorneys general to the code. "It's fair to say that some see this as an attempt to restrict how they do their jobs," Akey says. "Some see it as outside the scope of what the ILR ought to be doing."
Though the lead paint companies haven't publicly responded to the latest ruling in the Santa Clara litigation, an appeal to the state Supreme Court is expected. "The court of appeal fails to recognize the reality of how decision making is actually done between government and contingency-fee counsel," says Brian Anderson, a partner in the Washington, D.C., office of O'Melveny & Myers who develops defense responses to attorney general lawsuits. "Contingency-fee counsel often come up with the legal theory, draft the complaint, and run the case on a day-to-day basis. These actions look more like strike suits that seek to litigate matters more appropriate to regulatory agencies."
That's not the reality Ravel sees. "Typically, we're working with private counsel in eight to ten cases at any given time," she says. "I've got about 56 attorneys in the office, but 20 of those are in child dependency, plus finance and land use. I have litigators, but not many of them. Our biggest concern in the lead paint litigation will be in discovery-there are 40 of them [defense counsel] and far fewer of us, and I can't gear up as they can. I just hope we can reach trial in my lifetime, because it's so important to remediate the harm done in this community."
Alexandra Brown
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