The Ninth Circuit Court of Appeals recently held that an agreement between a district attorney and private law firms to litigate actions in the name of the district attorney based on a contingency fee agreement does not violate due process.

The decision came after Eric Heryford, District Attorney for Trinity County, California, filed a suit against American Bankers Management Company and other corporations alleging the corporations violated California’s Unfair Competition Law (“UCL”) by allegedly enrolling customers in services without obtaining explicit customer approval.  The complaint listed as counsel for the state both the district attorney and attorneys from two law firms – Baron & Budd PC and Carter Wolden Curtis, LLP.  The attorneys from the law firms were listed as “Special Assistant District Attorneys” and had been retained by Heryford on a contingency fee basis.  Under the contingency agreement between Heryford and the law firms, the firms would assist with the investigation, research, filing, and prosecution of the suit against the defendants, but Heryford would retain sole and final authority over all aspects of litigation, including the sole authority to decide if the suit should be initiated or settled.

American Bankers subsequently filed an action alleging that the arrangement with the law firms was improper because it gave the firms a financial incentive to seek as much in civil penalties as possible, and that the arrangement between the DA and the firms violated American Bankers’ due process rights.

Judges Sharon Gleason, Michelle Friedland, and Richard Clifton of the Ninth Circuit Court of Appeals disagreed with American Bankers.  Citing United States ex. Rel v. Boeing Co., the Court found that the financial incentive to the firms was no different than the financial incentive provided to individual citizens who assist the government in bringing suits under the False Claims Act, and the Court had previously held that suits brought under the act by individuals does not violate due process.

The Court stated that “nothing meaningfully distinguishes the Law Firms’ pursuit of civil penalties under the UCL from private (citizens’) pursuit of civil penalties under the qui tam provisions of the False Claims Act.”

The UCL suit against American Bankers is still pending.