Funded with billion-dollar contingent fees from the late 1990s tobacco litigation, lawyers have been attacking companies that sold lead-based paint 50 to 100 years ago. These cases allege what was legal then is now a “public nuisance.” Such cases have failed in Illinois, Missouri, New Jersey, Rhode Island, and before a Wisconsin jury.
A contingent fee public nuisance case is still pending in California. It was brought against Sherwin-Williams and other companies by 11 counties and cities.
In 1985 the California Supreme Court barred governments from hiring contingent fee lawyers to bring public nuisance cases, because their personal financial stake violates “the neutrality so essential to the system.” In the pending case, the California Supreme Court has agreed to hear the defendants’ motion to disqualify the governments’ contingent fee lawyers.
One of Sherwin-Williams’ lawyers, Charles H. Moellenberg of Jones Day, recently discussed with Maureen Martin, The Heartland Institute’s senior fellow for legal affairs, why Sherwin-Williams believes contingent fees should not be allowed in cases like this one.
Maureen Martin: What’s the problem with contingent fee lawyers in public nuisance cases?
Charles Moellenberg: The California Supreme Court in Clancy said government attorneys have to be absolutely neutral. There should be nothing tempting them to tip the scale, because their responsibility is to see that justice is done, not to win the case. That [is contradicted by the use of] outside counsel on a contingency fee, who have a financial stake in the outcome.
We’re not asking for anything that unusual. Many areas of the law prohibit contingency fee agreements. You can’t have them in criminal cases, eminent domain actions, divorce actions, when the purpose of the retention is to obtain a government contract, or to lobby the government.
The contingency fee lawyers in the public nuisance cases obviously want the most expensive, most expansive remedy imaginable as the way to get the most money for themselves. So they come up with programs that are just impractical and unlawful.
Martin: What do you mean by “impractical and unlawful?”
Moellenberg: All of the regulations in place at both the federal and state levels put the responsibility on the property owners to maintain their properties, including any deteriorated lead paint. That makes sense from a public health perspective because the property owners are the only ones in a position today to prevent lead hazards from risking the health of children. The regulations also say that intact, well-maintained lead paint is not a hazard.
But the contingent fee lawyers want to remove all lead paint in all buildings everywhere [in California]. That is exactly the opposite of federal and state regulations, which permit intact, well-maintained lead paint to stay in place. When the contingency fee lawyers take over, they ignore these laws and programs.
Martin: The Court of Appeal said the contingent fee agreements here were permissible because government lawyers “control” the litigation. Does this distinguish those agreements?
Moellenberg: The “control” solution proposed by the Court of Appeal is simply not practical. Judge Komar, the trial judge in the California case, thought it out very very well, and he is the person who would have the responsibility of trying to police the decision-making control of the cities and counties. He said he couldn’t do it. There are too many decisions that take place, too much activity between the city and county attorneys and their outside counsel that he would never know about or not be privy to.
Judge Komar [also] mentioned—this is a real concern—the problem of attorney-client privilege getting in the way.
Outside counsel are not simply puppets who can be orchestrated in their every move by the city and county attorneys. We also know that, as the city and county attorneys have said, they’ve hired the outside attorneys for their expertise, their experience, and their resources. That means that city and county attorneys are going to rely on the outside attorneys for strategy input [and even] basic information about the case.
And in our view there will be—as Clancy pointed out—kind of a sense of obligation that would arise with the city and county attorneys to go along with the recommendations of the outside counsel. It makes it very difficult for the city and county attorneys to walk away from the lawsuit.
Martin: Aren’t there constitutional problems with this whole case?
Moellenberg: The odd thing we now face in California is the companies don’t own any of these properties. The companies have no right to enter the properties to inspect or abate. Under California laws, the owners have the responsibility to prevent lead hazards, [and] if lead hazards arise, the owner has the responsibility to abate them.
This lawsuit takes away any notice to the owners because they’re not parties to the lawsuit. The property owners can find themselves in a situation where their properties have been adjudicated to be a public nuisance. It could affect their ability to get insurance; it could affect their ability to sell their properties.
Also, it’s a crime to maintain a public nuisance. Property owners could be sitting in a situation where they could be accused of a crime where they’ve had no opportunity—no right—to argue that there is no lead hazard, no public nuisance on their properties in the first place.
It’s really shocking the way public officials allow, through these public nuisance lawsuits, the contingent fee lawyers to take charge and ignore the constitutional rights of the property owners, not to mention the companies.