SACRAMENTO - Three major banking institutions accused of
deceptively marketing credit card services are now asking a
California federal judge to disqualify counsel, saying the district attorney who sued them has illegally hired private firms to handle the cases.
Trinity County District Attorney
Eric Heryford's suits against Citigroup, Discover and First Premiere Bank claim the institutions deceived California customers into paying for
extra products, failed to disclose terms and conditions of those products,
failed to properly handle cancellation requests, and continued to charge
customers despite knowing the customers did not “meaningfully consent” to
purchasing the products.
Lawyers for the banks are now pushing for a
federal judge to disqualify the private law firms of Baron & Budd PC,
Carter Wolden Curtis LLP and Golomb & Honic PC. According to the banks,
these firms were hired illegally by Heryford to act as lead counsel.
Citigroup, Discover and First Premiere Bank
submitted filings in the United States District Court Eastern District of
California arguing that the private firms were “fully managing the
litigation,” thereby violating California state law.
The banks cite California Government Code
section 11042, which deals with the issue of government entities hiring private
attorneys. “No state agency, commissioner, or officer shall employ any legal
counsel other than the Attorney General or one of his assistance or deputies,
in any matter in which the agency, commissioner, or officer is interested, or
is a party as the result of office or official duties,” the code states.
The exception to this rule is express permission
from the state’s Attorney General to hire outside help. The Northern California Record reached out
to Attorney General Kamala Harris’ office to inquire if Heryford had permission to bring on the three firms. Spokeswoman Brenda Gonzales refused to answer, stating the office could not provide legal analysis.
The issue of hiring private attorneys to help
with county cases has been hotly contested, making its way to the California
Supreme Court in the case of People ex rel. Clancy v Superior Court of Riverside
County in 1985. The court found cases involving government entities demand “the
representative of the government to be absolutely neutral.” The court held that hiring private attorneys on a contingency basis was contrary to neutrality.
The California Supreme Court revisited the issue
in 2010 with Santa
Clara v. Superior Court of Santa Clara County. In Santa Clara, the court
enumerated a three-part rule for lawyers operating on contingency with the
government: government attorneys were to retain control over the case,
government attorneys have a veto over decisions made by private counsel and
that government attorneys must be involved in overseeing the case.
offices often operate on shoestring budgets, especially small ones like the
District Attorney’s office in Trinity County. Without outside help, many large
cases would not get filed, according to federal court expert and UC
Davis Law professor Carlton Larson.
County is a small county, and these types of cases require thousands of hours
of legal work,” Larson told the Northern
California Record. “And a lot of up front money to make the case go
forward, so it’s quite hard if you don’t have outside counsel.”
of hiring of private firms often cite the potential for large contingency awards as an inherent conflict of interest.
suppose there’s some risk that the firms would stress large settlements over
the public interest," Larson said. "On the other hand, if they get paid by the hour, the
county just can’t afford that upfront cost. If that’s a
requirement the suit’s just never going to happen.”
faced and lost a similar battle last year. In July 2015, the company was
ordered by the Consumer Financial Protection Bureau to repay customers $700
million for deceptive credit card marketing.
they’re trying to do here is basically make this state case go away by not
letting the county use private attorneys to prosecute it,” Larson said.
Discover nor Citigroup could comment on pending litigation, though Citi did
offer a statement on the $700 million they are currently repaying.
“Customer remediation has been underway since 2013, and Citi will
continue to notify and refund affected customers,” the statement read. “Affected
customers will automatically receive a statement credit or check and those no
longer with Citi who are eligible will be mailed a check.”
The Northern California Record also reached out to Heryford about this case. He did not respond.