Filed 4/26/22

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

THE PEOPLE ex rel. CITY OF SAN 

DIEGO,

 Plaintiff and Respondent,

v.

EXPERIAN DATA CORP.,

 Defendant and Appellant.

 G060360

 (Super. Ct. No. 30-2019-01047183)

 O P I N I O N

Appeal from an order of the Superior Court of Orange County, Linda S. 

Marks, Judge. Affirmed.

Jones Day, Nathaniel P. Garrett, Richard J. Grabowski, John A. Vogt, 

Edward S. Chang and Ryan D. Ball for Defendant and Appellant.

Mara W. Elliott, City Attorney, Mark Ankcorn and Kevin King, Deputy 

City Attorneys; Blood Hurst & O’Reardon, Timothy G. Blood and Paula R. Brown for 

Plaintiff and Respondent.

* * *
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INTRODUCTION

The City of San Diego (the City) sued Experian Data Corp. (Experian) on 

behalf of the People of the State of California for violating the Unfair Competition Law 

(Bus. & Prof. Code, § 17200 et seq.) (UCL). The City hired three private law firms to 

represent it in the litigation against Experian on a contingency fee basis. The trial court 

denied Experian’s motion to disqualify the private law firms; we affirm.

The contingency fee arrangements between the City and the private law 

firms in a UCL action filed by the City’s attorneys do not violate the prosecutor’s duty of 

neutrality and therefore do not require disqualification. Further, the agreements to pay 

the private law firms from any penalties recovered from Experian do not violate Business 

and Professions Code section 17206’s requirement that all funds recovered in a UCL 

action be paid to the City’s treasurer. 

FACTUAL AND PROCEDURAL HISTORY

U.S. Infosearch.com (USI) is an Ohio-based company that sells data, 

including social security numbers and other personal data, to licensed investigators, 

government agencies, and legal industry professionals. Court Ventures, Inc. (CVI) was a 

California-based corporation that aggregated consumer information from publicly 

available databases and sold that data. In April 2010, USI and CVI entered into a datasharing agreement under which the consumer information they had each collected would 

be aggregated and made available to customers through appcheckdata.com, a web portal 

owned by CVI. 

In March 2012, Experian purchased the business, assets, and liabilities of 

CVI, including its data services, customer contracts, and the appcheckdata.com website.

SG Investigators, purportedly a private investigation firm based in 

Singapore, was a customer of USI/CVI and then of Experian. Through 

appcheckdata.com, SG Investigators and its customers conducted more than three million 
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queries, obtaining personal information of more than 400,000 California residents. In 

November 2012, Experian learned that SG Investigators was a front for a Vietnamese 

hacker named Hieu Minh Ngo who was reselling the data to identity thieves and others

using it for nonlegal purposes. Ngo was later arrested, pleaded guilty, and was sentenced 

to 13 years in prison.

In July 2015, a federal lawsuit was filed on behalf of those whose personal 

data was sold to Ngo, Patton v. Experian Data Corp. (C.D.Cal., case No. 8:15-cv-01142-

JVS-PLA) (the Patton litigation). Three law firms—Blood Hurst & O’Reardon, LLP, 

Barnow and Associates, P.C., and the Coffman Law Firm (collectively the Private 

Firms)—represented the plaintiff class in the Patton litigation. The Patton litigation 

plaintiffs asserted claims against Experian, CVI, and USI for intentional and negligent 

violation of the Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.) and for violation of 

the UCL. The complaint was later amended to add a claim for injunctive relief under the 

Customer Records Act. (Civ. Code, § 1798.82.) The district court dismissed the 

California plaintiffs from the Patton litigation for failure to state a claim, as they could 

not allege they were customers of Experian.

The City then filed a UCL complaint in the California Superior Court 

against Experian, CVI, and USI on behalf of the People of the State of California (the 

UCL litigation). The UCL litigation alleges that Experian violated the UCL by failing to 

provide notice to victims of the Ngo hack, in violation of the Customer Records Act. The 

complaint demands civil penalties in the amount of up to $2,500 per violation (Bus. & 

Prof. Code, § 17206, subd. (a)), with additional penalties for violations against senior 

citizens and the disabled (id., § 17206.2, subd. (a)(1)). The complaint also seeks to force 

Experian to provide notice of the data breach to all its victims.

The City hired the Private Firms on a contingency fee basis to provide legal 

representation in the UCL litigation. According to the parties’ agreement, the Private 

Firms report to and work under the direction and control of the City Attorney. If the 
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Private Firms are successful in obtaining and collecting penalties from Experian in the 

UCL litigation, they are entitled to receive 25 percent of the gross recovery; the other 75 

percent remains in the City’s treasury to be used for enforcement of consumer protection 

laws. Under no circumstance is the City obligated to pay the Private Firms out of any 

monies other than those recovered and collected from Experian.

From the outset, the City Attorney actively litigated the case; drafted

pleadings, motions, and briefs; formulated written discovery requests and responses;

participated in hearings and depositions; participated in meet and confer discussions; and 

oversaw all litigation strategy. The City Attorney has maintained complete control over 

the prosecution of the UCL litigation and has had the final say in all material litigation 

decisions.

In February 2021, almost three years after the UCL litigation was filed, 

Experian moved to disqualify the Private Firms on two grounds. First, Experian argued 

that the Private Firms’ contingency fee arrangement, in a case seeking civil penalties, 

violated the public prosecutor’s duty of neutrality, and thus the fee agreement was per se 

grounds for disqualification. Second, Experian argued the Private Firms’ contingency fee 

agreement violated the UCL’s plain language, which provides that any civil penalties 

collected “shall be paid to the treasurer of the City of San Diego” (Bus. & Prof. Code,

§ 17206, subd. (c)(3)(B)) and used exclusively “for the enforcement of consumer 

protection laws” (id., § 17206, subd. (c)(4)).

The trial court denied Experian’s motion in May 2021. The court found

that the City was permitted to retain private counsel on a contingency fee basis to litigate 

an action for civil penalties under the UCL without violating the duty of neutrality. The 

court also found that while the Private Firms’ agreement “could violate [Business and 

Professions Code] section 17206’s requirement of where the penalty funds recovered are 

deposited,” this was not a basis to disqualify counsel. 
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Experian filed a notice of appeal from the trial court’s disqualification order 

on June 14, 2021.

DISCUSSION

I. Standard of Review

“‘“Generally, a trial court’s decision on a disqualification motion is 

reviewed for abuse of discretion.”’ [Citation.] Under this standard, the trial court’s legal 

conclusions are reviewed de novo, but its factual findings are reviewed only for the 

existence of substantial evidence supporting them, and its ‘“application of the law to the 

facts is reversible only if arbitrary and capricious.”’” (Doe v. Yim (2020) 55 

Cal.App.5th 573, 581 [quoting In re Charlisse C. (2008) 45 Cal.4th 145, 159].)

II. The Contingency Agreement Does Not Violate the Duty of Neutrality.

A criminal prosecutor has a duty of neutrality because he or she must “act 

with the impartiality required of those who govern,” and because “he or she must refrain 

from abusing [the vast power of the government] by failing to act evenhandedly.” 

(County of Santa Clara v. Superior Court (2010) 50 Cal.4th 35, 49 (Santa Clara).) 

Therefore, compensation of government counsel by contingency fee is prohibited in most 

if not all circumstances. (Id. at p. 51.) Whether contingency fee agreements with private 

attorneys are also prohibited in public nuisance prosecutions depends on the type of 

remedy sought and the types of interests implicated by the case. (Id. at p. 52.)

In Santa Clara, supra, 50 Cal.4th at page 43, the county was represented by 

both its government counsel and private counsel in a public nuisance action brought 

against lead paint manufacturers. The paint manufacturers sought to disqualify the 

private counsel who had been retained on a contingency fee basis. (Ibid.) The 

contingency fee agreements provided that private counsel would recover unreimbursed 

costs and a percentage of the “net recovery” as their fees. (Id. at pp. 44-45.) The 
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remedies might include civil penalties and the expenditure of funds to clean up the 

nuisance the defendants had created, but would not involve an injunction shutting down 

the defendants’ business. (Id. at pp. 55-56.) Further, no liberty interests were involved. 

(Ibid.) The court therefore determined the contingency fee agreements between the 

county and the private attorneys were permissible. “[I]n a case where the government’s 

action poses no threat to fundamental constitutional interests and does not threaten the 

continued operation of an ongoing business, concerns about neutrality are assuaged if the 

litigation is controlled by neutral attorneys, even if some of the attorneys involved in the 

case in a subsidiary role have a conflict of interest that might—if present in a public 

attorney—mandate disqualification.” (Id. at p. 58.)

The court noted, however, that “a heightened standard of neutrality is 

required for attorneys prosecuting public-nuisance cases on behalf of the government.” 

(Santa Clara, supra, 50 Cal.4th at p. 57.) The court identified the following provisions 

that must be included in a contingency fee agreement to ensure that this heightened 

standard of neutrality is met: (1) “decisions regarding settlement of the case are reserved 

exclusively to the discretion of the public entity’s own attorneys”; (2) “any defendant that 

is the subject of such litigation may contact the lead government attorneys directly, 

without having to confer with contingent-fee counsel”; (3) “the public-entity attorneys 

will retain complete control over the course and conduct of the case”; (4) “government 

attorneys retain a veto power over any decisions made by outside counsel”; and 

(5) “a government attorney with supervisory authority must be personally involved in 

overseeing the litigation.” (Id. at pp. 63-64.)

The contingency fee agreements between the City and the Private Firms 

contain each of the specific provisions identified in Santa Clara. 

Santa Clara, supra, reexamined and narrowed the holding of People ex rel. 

Clancy v. Superior Court (1985) 39 Cal.3d 740 (Clancy), on which Experian relies. In

Clancy, the city of Corona hired a private attorney to pursue abatement proceedings 
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against adult bookstores in the city as public nuisances. (Id. at p. 743.) The agreement 

between the city and the private attorney provided for an hourly rate, which would be 

decreased by half if the attorney lost the case or if the city did not recover attorney fees 

from the bookstore owner. (Id. at p. 745.) The California Supreme Court held the 

contingency fee agreement in that case was prohibited because it was “antithetical to the 

standard of neutrality that an attorney representing the government must meet when 

prosecuting a public nuisance abatement action.” (Id. at p. 750.) The court noted that 

contingency fee arrangements between a city and a private attorney were not 

categorically prohibited: “Nothing we say herein should be construed as preventing the 

government, under appropriate circumstances, from engaging private counsel. Certainly 

there are cases in which a government may hire an attorney on a contingent fee to try a 

civil case. [Citation.] But just as certainly there is a class of civil actions that demands 

the representative of the government to be absolutely neutral. This requirement precludes 

the use in such cases of a contingent fee arrangement.” (Id. at p. 748.)

In Santa Clara, the California Supreme Court noted that the public 

nuisance abatement action in Clancy was more like a criminal prosecution because the 

intent of the abatement proceeding was to shut down the defendant’s business, the case 

involved a heavy balancing of interests between the property owner’s right to use his land 

and the public’s interest in eliminating an obnoxious or dangerous condition, and there 

were free speech interests at issue in the regulation of a book store, albeit one specializing 

in obscene material. (Santa Clara, supra, 50 Cal.4th at p. 53.) By contrast, the public 

nuisance action in Santa Clara did not seek to put the defendant out of business, nor did 

it implicate any First Amendment rights or other liberty interests, and there was no threat 

of later criminal liability. (Id. at p. 55.) Further, the case posed no threat of “the misuse 

of governmental resources against an outmatched individual defendant” because the 

defendants were “large corporations with access to abundant monetary and legal 

resources.” (Id. at p. 56.)
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Despite the fact the contingency fee agreements between the City and the 

Private Firms meet the standards set forth in Santa Clara, Experian argues that the

contingency fee arrangement in the matter was categorically prohibited because the civil 

penalties sought were the same as or substantially similar to criminal sanctions. 

Experian’s focus on penalties is inapt, however. As in Santa Clara, supra, 50 Cal.4th at 

page 58, 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.

In State of California v. Altus Finance (2005) 36 Cal.4th 1284, 1308, the 

California Supreme Court was asked by the Ninth Circuit to address two questions of law 

concerning the ability of the Attorney General to pursue civil remedies under the 

California False Claims Act and the UCL. For these purposes, the court held there was no 

difference in a UCL action “between the Attorney General’s seeking criminal penalties or 

civil penalties.” The use of private counsel was not at issue, nor was it addressed. (See 

Kinsman v. Unocal Corp. (2005) 37 Cal.4th 659, 680 [cases are not authority for 

propositions not considered therein].)

In People of State of Cal. v. Steelcase Inc. (C.D.Cal. 1992) 792 F.Supp. 84, 

86, the court noted that civil penalties in a UCL case “are not damages recovered for the 

benefit of private parties; they are more akin to a criminal enforcement action and are 

brought in the public interest.” The issue before the court was whether diversity 

jurisdiction existed in a matter where the State was the real party in interest; the question 

of who could represent the State was, again, not at issue. 

Finally, Experian cites to an amicus curiae brief filed in Gamestop, Inc. v. 

Superior Court (2018) 26 Cal.App.5th 502, in which the Attorney General argued that 

UCL enforcement actions are closely related to and resemble criminal prosecutions. The 

issue in that appeal was the applicability of Code of Civil Procedure section 394, 

regarding the transfer of a case where a city or county is the plaintiff; the Attorney 
9

General argued that because a district attorney pursues a UCL action on behalf of the 

People of the State of California, transfer was not permissible. (Gamestop, Inc. v. 

Superior Court, supra, at p. 512.)

More apt to the issue before us is American Bankers Management 

Company v. Heryford (9th Cir. 2018) 885 F.3d 629, 631, in which the Ninth Circuit held 

that the Trinity County District Attorney’s retention of private counsel to pursue civil 

penalties under the UCL did not violate due process. The contingency fee agreement 

between the Trinity County District Attorney and private counsel was similar to the 

agreement here, with private counsel receiving a percentage of the civil penalties they 

recovered in the UCL action and no recovery if they were unsuccessful. (Id. at p. 632.) 

In a case of first impression, the court compared the situation of a private firm retained by 

a government attorney to pursue civil penalties under the UCL to that of private relators 

bringing a qui tam action to recover civil penalties under the federal False Claims Act. 

(American Bankers Management Company v. Heryford, supra, at p. 635, citing U. S. ex 

rel. Kelly v. Boeing Co. (9th Cir. 1993) 9 F.3d 743, 759-760 [contingent monetary 

rewards in qui tam case do not violate due process].) 

Similarly, in People v. Superior Court (Kaufman) (1974) 12 Cal.3d 421, the 

California Supreme Court held that the trial court may grant immunity to a real party in 

interest to testify in a UCL case in which penalties were being sought. Although a 

penalty in a UCL case “is unquestionably intended as a deterrent against future 

misconduct and does constitute a severe punitive exaction by the state,” it is not a 

criminal penalty, does not lead to the stigma of a criminal conviction, and is not imposed 

as an alternative to the loss of personal liberty. (Id. at p. 431; see People v. E.W.A.P., Inc. 

(1980) 106 Cal.App.3d 315, 321 [assessment of civil damages under Bus. & Prof. Code, 

§ 17206 is not a penal sanction; due process does not require proof beyond a reasonable 

doubt or trial by jury]; People v. Witzerman (1972) 29 Cal.App.3d 169, 177 [“It is true 

that a civil penalty is identical in its purpose and monetary effect to a fine. Both are 
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punitive exactions by the government from a person for misconduct imposed to deter 

such misconduct in the future. But a fine ordinarily carries with its a criminal stigma and 

much more frequently than not is an alternative punishment to involuntary confinement 

of the person of the defendant. In other words, in the usual criminal proceeding a 

defendant faces the peril of the loss of his liberty as well as that of his property”].)

We conclude that the contingency fee agreements between the City and the 

Private Firms do not violate the duty of neutrality and do not require disqualification of 

the Private Firms.

III. The Contingency Agreements Do Not Violate the UCL.

All funds collected as penalties for violation of the UCL “shall be paid to 

the treasurer of the City of San Diego” (Bus. & Prof. Code, § 17206, subd. (c)(3)(B)) and 

shall be used exclusively “for the enforcement of consumer protection laws” (id.,

§ 17206, subd. (c)(4)).

The contingency fee agreements between the City and the Private Firms 

provide, in relevant part: “6.7 Reserve for Litigation Fees and Expenses. The City and 

Law Firm both acknowledge that in the course of the Litigation, the adverse parties may 

be obligated to pay an amount of the damages, interest, or penalties to the City. The City 

agrees that, upon receipt of any such funds, the City shall reserve an amount necessary to 

cover all fees and Costs as provided for in this Agreement (the ‘Reserve Amount’). The 

City further agrees that the Reserve Amount shall be immediately deposited in a special 

account (the ‘Fee & Cost Reserve Account’). At no time will the City be entitled to 

withdraw or disburse funds from the Fee & Cost Reserve Account for any purpose other 

than to pay Law Firm pursuant to this Agreement without the prior express written 

consent of Law Firm.” (Boldface omitted.) 

Experian argues that the contingency fee agreements violate Business and 

Professions Code section 17206 because “[a]ny and all civil penalties recovered in this 
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case will not be deposited in the City treasurer’s account.” To the contrary, the 

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 

Firms 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 trial court noted that even if the fee arrangement violated Business and 

Professions Code section 17206, it would not necessarily mandate disqualification of the 

Private Firms. “‘Since the purpose of a disqualification order must be prophylactic, not 

punitive, the significant question is whether there exists a genuine likelihood that the 

status or misconduct of the attorney in question will affect the outcome of the 

proceedings before the court.’” (Hetos Investments, Ltd. v. Kurtin (2003) 110 

Cal.App.4th 36, 48.) 

Experian attempts to establish an effect on the outcome of the proceedings

due to the release of defendant USI for what Experian describes as a “pittance” of 

$50,000. As noted ante, the terms of the contingency fee agreements retain in the City 

the right to make all major litigation decisions, specifically including the right to settle 

the case. Therefore, if USI was dismissed from the UCL litigation in exchange for a 

small settlement fee, that decision was made by the City, not the Private Firms; Experian 

fails to offer any evidence to the contrary. 

The City explained its reasoning behind settling with USI in its opposition 

to Experian’s motion to contest approval of the settlement, where it noted: (1) its claims 

for civil penalties would not be subject to joint liability; (2) the case against USI was 

weaker than the case against other defendants; (3) USI had dissolved and its owner had 

died; and (4) USI’s insurance carrier had threatened to pull coverage. 
12

The City provided a reasonable explanation for its decision to settle with 

USI for the stated sum, and the trial court denied Experian’s motion to contest the good 

faith settlement. Experian cannot establish that the contingency fee agreements affected 

the outcome of the case.

Experian also argues that the Private Firms have violated California Rules 

of Professional Conduct, rule 1.5(a), by “mak[ing] an agreement for . . . [an] illegal fee.” 

As explained ante, the contingency fee arrangement is permissible.

Experian has failed to establish the contingency fee agreements violate 

Business and Professions Code section 17206. The trial court did not err in denying the 

motion to disqualify the Private Firms.

DISPOSITION

The order is affirmed. Respondent to recover its costs on appeal.

ZELON, J.*

WE CONCUR:

MOORE, ACTING P. J.

GOETHALS, J.

*Retired Justice of the Court of Appeal, Second Appellate District, assigned by the Chief 

Justice pursuant to article VI, section 6 of the California Constitution.