American Bankers Management Co. v. Heryford

190 F. Supp. 3d 947, 2016 U.S. Dist. LEXIS 72911, 2016 WL 3126273
CourtDistrict Court, E.D. California
DecidedJune 3, 2016
DocketNo. 2:16-cv-00312-KJM-KJN
StatusPublished
Cited by2 cases

This text of 190 F. Supp. 3d 947 (American Bankers Management Co. v. Heryford) is published on Counsel Stack Legal Research, covering District Court, E.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
American Bankers Management Co. v. Heryford, 190 F. Supp. 3d 947, 2016 U.S. Dist. LEXIS 72911, 2016 WL 3126273 (E.D. Cal. 2016).

Opinion

' ORDER

' Kimberly Mueller, UNITED STATES DISTRICT JUDGE

This case challenges the constitutionality of contingency-fee agreements between private counsel and county district attorneys who. bring cases against corporate defendants. Plaintiff American Bankers Management Company, Inc. (“plaintiff” or “ABMC”), filed this action, alleging one such agreement infringes on its Four[949]*949teenth Amendment due process right to a neutral and impartial trial. First Amended Compl. (FAC), ECF No. 12. Defendant Eric Heryford, the District Attorney (DA) of Trinity County, California, filed a motion to dismiss ABMC’s claim. Mot., ECF No. 21. The court held a hearing on April 22, 2016, at which Brian Perryman appeared for ABMC and Roland Tellis appeared for DA Heryford. ECF No. 32.

For reasons explained below, the court GRANTS defendant’s motion to dismiss, with leave to amend.

I. FACTUAL ALLEGATIONS

A. Separate UCL Suit

On September 4, 2015, DA Heryford filed suit on behalf of the People of the State of California against several corporations, including ABMC, alleging violations of the “fraudulent,” “unlawful,” and “unfair” prongs of California’s Unfair Competition Law (UCL), Bus. & Prof. Code § 17200 et seq. (the UCL Suit). FAC ¶4. The UCL Suit was first filed in Trinity County Superior Court, then later dismissed and refiled in this court on March 4, 2016. Id. ¶¶ 5-6. In the refiled suit, DA Heryford alleges the corporations deceptively marketed and. sold “ancillary products” in connection with Discover-issued credit cards. Id. ¶ 7. For this alleged conduct, DA Heryford has demanded injunc-tive and declaratory relief, restitution, civil penalties, attorneys’ fees and costs, and prejudgment interest. Id. This suit is stiil pending. See Heryford v. Discover Financial Services, et al, No. 16-468 (E.D. Cal. filed March 4, 2016).

B. Contingency-Fee Agreement

Prior to filing suit, DA Heryford executed a contingency-fee agreement with the law firms of Baron & Budd, P.C., Carter Wolden Curtis, LLP, and Golomb & Hon-ik, P.C. (“Barron & Budd” or “law firms”), for the purpose of assisting with the UCL Suit. Id. '¶ 21. In the agreement, DA Hery-ford and the law firms agreed that if there were a recovery as a result of the UCL Suit, “the-Law Firms’ w[ould] be paid a contingency fee of 30% pf the Net Recovery.” Id. 22. The parties also agreed that the law.firms.would be “Independent Contractors” with “the authority and responsibility to control and direct the performance and details of the work and services required under this Agreement,” subject to the DA’s .“general right” to “inspect work in progress to determine whether, in the DA’s opinion, the services are being performed by the [l]aw [fjirms in compliance with th[e] Agreement.” Id. ¶ 23. The law firms were not “by reason of this Agreement, agents or employees of Trinity County for any purpose.” Id.

C.District Attorney’s Public Statements

DA Heryford made statements to the public regarding his work with Barron & Budd on the UCL Suit. During an October 20, 2015 meeting of the Trinity County Board of Supervisors, Heryford emphasized that he and his office would not be materially involved in the UCL Suit’s management, which could yield great financial rewards for Trinity County; the DA characterized the arrangement as having “a lot of upside with not a lot of downside.” Id. ¶24, As a result of the agreement, DA Heryford explained the UCL Suit would not constitute “additional work” for him and his staff. Id. ¶ 25, Although DA Hery-ford said he would “have. final say on where [ ] cases go and how they proceed,” Barron & Budd was responsible for “handl[lingj the litigation part.” Id. ¶25. DA Heryford also spoke to a local newspaper a week later, saying because of the contingency-fee agreement, prosecution of the UCL Suit would not “interfere” with his caseload, and the suit would not cost [950]*950Trinity County or his office any money because Baron & Budd was handling it. Id. ¶ 26.

D. Barron & Budd’s Statements

Baron & Budd, one of the law ferns retained through the contingency-fee agreement, publishes a statement on its website regarding its role generally in government enforcement suits:

An important benefit of this unique and close relationship is that it minimizes the burden of litigation on the employees and staff of Public Entities. Bolstered by our superior team members and resources, we are able to perform most of the day-to-day litigation tasks, thus helping you stay focused on your important work, free from the demands of litigation. It is our intention to do whatever is required — from the mundane gathering and copying of documents to , the complex work of full briefings, oral arguments, and trial. Our focus is fully managing the litigation so that you, the Public Entity, can carry on the critical business of representing your community without distractions.

Id. ¶27. ABMC alleges this statement showed the law ferns’ desire to minimize DA Heryford’s role in the UCL Suit. Id.

E. Procedural History and Claims Raised in this Case

ABMC filed the complaint in this case on February 16, 2016. ECF No. 1. On March 7, 2016, ABMC filed a first amended complaint (FAC), on which this action is now proceeding. ECF No. 12. On March 26, 2016, the DA moved to dismiss ABMC’s complaint. Mot. ABMC filed an opposition, Opp’n, ECF No. 25, and DA Heryford replied, Reply, ECF No. 30, ABMC also filed a motion for summary judgment, which is currently pending, ECF • No. 13. Additionally, the United States Chamber of Commerce and the Pharmaceutical Research and Manufacturers of America filed a motion for leave to file a brief as Amici Curiae in support of ABMC’s motion for summary judgment. ECF No. 18. For reasons explained below, the court DENIES ABMC’s summary judgment motion and Amici’s motion as MOOT.

In the first amended complaint, ABMC alleges the contingency-fee agreement, which gives Barron & Budd a financial stake in the outcome of the UCL Suit, infringes on its Fourteenth Amendment due process right to an impartial trial. FAC ¶59. ABMC seeks (1) a declaration that DA Heryford violated its due process right; (2) an injunction barring DA Hery-ford from retaining counsel under the contingency-fee agreement; and (3) costs of suit and attorneys’ fees. Id. ¶¶ 69(a) — (d). DA Heryford moves to dismiss, arguing (1) ABMC lacks standing to bring the' suit; and alternatively (2) ABMC does not allege facts sufficient to state a claim upon which relief can be granted. See generally Mot. ABMC opposes the motion, arguing (1) it has standing; and (2) it has alleged facts sufficient to overcome the motion to dismiss.' See generally Opp’n. In the reply, DA Heryford reiterates his original arguments while addressing ABMC’s opposition. Reply at 4-12.

II. LEGAL STANDARD

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure

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190 F. Supp. 3d 947, 2016 U.S. Dist. LEXIS 72911, 2016 WL 3126273, Counsel Stack Legal Research, https://law.counselstack.com/opinion/american-bankers-management-co-v-heryford-caed-2016.