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MARK J. CONNOT (10010) KEVIN M. SUTEHALL (9437) JOHN H. GUTKE (10062) FOX ROTHSCHILD LLP 3800 Howard Hughes Parkway, Suite 500 Las Vegas, Nevada 89169 Telephone: 702-262-6899 Facsimile: 702-597-5503 mconnot@foxrothschild.com ksutehall@foxrothschild.com jgutke@foxrothschild.com

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA Case No.

LENDER PROCESSING SERVICES, INC., a 11 Delaware corporation, 12 13 14 v. Plaintiff,

COMPLAINT FOR DUE PROCESS VIOLATIONS, DECLARATORY RELIEF, AND INJUNCTIVE RELIEF

CATHERINE CORTEZ MASTO, in her 15 official capacity as Attorney General of the State of Nevada. 16 Defendant. 17 18 19 20 21 22 23 1. INTRODUCTION This is an action by Plaintiff Lender Processing Services, Inc. (Plaintiff) against LENDER PROCESSING SERVICES, INC., by and through its undersigned attorneys, states and alleges as follows:

24 Defendant Catherine Cortez Masto, in her official capacity as Attorney General for the State of 25 Nevada (Attorney General), to obtain a judgment declaring that the Attorney General has 26 violated Plaintiffs constitutional rights and Nevada law through her hiring of private, outside, 27 28 and out-of-state counsel, the law firm of Cohen Milstein Sellers & Toll PLLC (Cohen
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Milstein), to act in the place of the Attorney General to conduct a state investigation of, and

2 litigation against, Plaintiff under Chapter 598 of the Nevada Revised Statutes, the Nevada 3 Deceptive Practices Act (the Act). The investigation and litigation have been conducted 4 5 6 violations found by Cohen Milstein acting in the place of the Attorney General. By illegally 7 deputizing Cohen Milstein and permitting them to stand in her shoes and exercise the States 8 sovereign power, not only for the States purposes, but also for Cohen Milsteins own, private 9 benefit and ends, the Attorney General has violated Plaintiffs constitutional rights and Nevada 10 11 12 2. As one commentator has noted: Because, unlike private litigants, the state wields law. pursuant to a contingency fee agreement providing for payments based solely on alleged

13 potentially dominating power over private society, those exercising the state's legal power are 14 obligated by democratic and constitutional principles, as well as the dictates of legal ethics, to 15 assess and pursue the public interest without direct concern for personal or private gain. When 16 private contingent fee attorneys are vested with authority to vindicate the interests of the state 17 through litigation, with their compensation determined solely on the basis of the ultimate amount 18 19 of damages recovered, society is presented with an ominous mixture of public power and private 20 motivation, effectively leaving us with the worst of all possible worlds. Fundamental ethical 21 22 arrangement. 23 24 Constitutional and Political Implications, 18 Sup. Ct. Econ. Rev. 77, 77-78 (2010) (emphasis Martin H. Redish, Private Contingent Fee Lawyers and Public Power: principles, as well as constitutional dictates limiting state power, are threatened by such an

25 original). 26 27 \\\ 28
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PARTIES Plaintiff Lender Processing Services, Inc. is a Delaware corporation with its

principal place of business at 601 Riverside Avenue, Jacksonville, Florida. Catherine Cortez Masto is the Nevada Attorney General, an elected position in the

6 State of Nevada, and is responsible for enforcement of certain provisions of the Nevada criminal 7 code as well as certain civil statutes. 8 9 10 11 U.S.C. 1983, and this Court has federal question jurisdiction over this action pursuant to 5. JURISDICTION AND VENUE This action arises under the Constitution and laws of the United States and 42

12 Article III of the Constitution and 28 U.S.C. 1331. 13 14 15 Amendment of the United States Constitution. 16 17 7. Venue is proper in this Court under 28 U.S.C. 1391(b) and because a substantial 6. Plaintiffs right to immediate judicial review of the Attorney Generals conduct is

based on the federal Declaratory Judgment Act, 28 U.S.C. 2201 et seq., and the Fourteenth

18 part of the events or omissions giving rise to the claims alleged herein occurred in the District of 19 Nevada. 20 21 22 8. On November 15, 2010, the Attorney General served a subpoena on Plaintiff 23 pursuant to her powers under NRS 598.0963(4), which gives the Attorney General authority to 24 issue subpoenas and conduct investigations when she has cause to believe the Act has been 25 violated. Under the Act, the Attorney General may pursue civil or criminal penalties. 26 27 28
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FACTUAL BACKGROUND

9.

While the initial subpoena was signed by Ernest Figueroa, a Chief Deputy

Attorney General, Plaintiff was almost immediately contacted by lawyers from Cohen Milstein

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with respect to the pending subpoena. From the outset, Cohen Milstein and the Attorney General

2 gave the impression that Cohen Milstein had the legal and statutory authority to represent the 3 State of Nevada. 4 5 6 General and Cohen Milstein that Cohen Milstein had the legal and statutory authority to 7 represent the State of Nevada and would be bound by the same operational and confidentiality 8 restrictions as the Attorney General in the context of the investigation. 9 10 11 12 productions containing approximately 900,000 pages of documents, factual responses and 11. Based on that reliance, Plaintiff responded to Cohen Milsteins requests for 10. Plaintiff relied on the affirmations and representations by both the Attorney

documents relating to the Nevada Attorney Generals investigation with fifteen (15) separate

13 customized exhibits, and allowed Cohen Milstein to conduct interviews of Plaintiffs employees 14 over the course of the next year. 15 16 17 18 effect and demanding that witnesses comply by providing information and testimony. Upon 12. During the course of the investigation, Cohen Milstein served subpoenas in

multiple jurisdictions outside Nevada, representing they were judicial orders of full force and

19 information and belief, Cohen Milstein never properly obtained commissions to serve out-of20 state subpoenas or otherwise obtained the required court authority in the various jurisdictions to 21 22 13. 23 24 counsel, correspondence which included an electronic copy of a Complaint it had filed against On December 16, 2011, the Attorney Generals office sent, via email to Plaintiffs compel compliance with said subpoenas.

25 Plaintiff and other affiliated entities, on December 15, 2011 (the Attorney Generals 26 Complaint), Nevada Eighth Judicial Court case no. A653289. Lawyers from Cohen Milstein 27 28
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were copied on this correspondence from the Attorney Generals office, and Plaintiff was

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instructed to contact Cohen Milstein should it have any questions about the Attorney Generals

2 Complaint. 3 4 5 6 15. Upon information and belief, Cohen Milstein conducted the underlying 7 investigation forming the basis for the Attorney Generals Complaint. 8 16. Upon information and belief, Cohen Milstein reviewed the approximately 14. The Attorney Generals Complaint contains one cause of action for alleged

violations of the Act, and seeks civil penalties, costs and other declaratory and injunctive relief.

9 900,000 pages of documents, factual responses, and customized exhibits, and formed the 10 11 12 17. Upon information and belief, Cohen Milstein drafted the Attorney Generals conclusions that became the basis for the Attorney Generals Complaint.

13 Complaint. 14 18. Conspicuously absent from the Attorney Generals Complaint, however, was any

15 reference to Cohen Milstein as counsel of record despite repeated representations that Cohen 16 Milstein was co-counsel/outside counsel for the Attorney General in this matter. 17 19. Plaintiffs counsel had previously requested of the Attorney General and her 18 19 deputies an explanation of the legal authority for Cohen Milstein to act on behalf of the Attorney 20 General in this matter. To date, the Attorney General has not formally provided such an 21 22 exist. 23 24 20. Plaintiff has also learned that the Attorney General entered into a contingency fee explanation. Plaintiff is informed and now believes that such legal authority does not actually

25 agreement with Cohen Milstein whereby Cohen Milstein would receive a specific percentage of 26 any amount recovered from Plaintiff. 27 28
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COHEN MILSTEIN AND ITS CONTRACT WITH THE ATTORNEY GENERAL 21. According to its website, the Cohen Milstein law firm is a pioneer in plaintiff

3 class action lawsuits based in Washington, DC. 4 5 6 counsel pursuant to a Contingency Fee Professional Services Agreement dated October 29, 7 2009 (Contingency Fee Agreement). A copy of the Contingency Fee Agreement is attached 8 hereto as Exhibit 1. 9 10 11 12 Id. Upon information and belief, Cohen Milsteins investigation of Plaintiff and the Attorney 23. The Contingency Fee Agreement relates to Cohen Milstein providing legal 22. The Attorney General hired the Cohen Milstein law firm as private, outside

services to the Attorney General relating to what it refers to in summary as Lending Practices.

13 Generals Complaint against Plaintiff is one of numerous investigations/actions in which the 14 Attorney General has illicitly deputized Cohen Milstein to act on her behalf. 15 16 17 18 pertains to liability, damages, civil penalties, injunctive relief and/or restitution/disgorgement of 24. The scope of representation provision in the Contingency Fee Agreement broadly

authorizes Cohen Milstein to take appropriate legal steps to prosecute the Litigation as it

19 profits and to participate in any settlement negotiations. Id. at 1. 20 21 22 decisions with Cohen Milstein, including which defendants to name, what claims to allege, 23 24 whether to opt out of any class certified in any federal court, retention of experts, and 25. The Contingency Fee Agreement purports to grant the Attorney General final

decision making authority, but requires the Attorney General to discuss all major litigation

25 whether to proceed to trial. Id. at 1.1. 26 27 28

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26.

The Contingency Fee Agreement provides that Cohen Milstein, standing in the

place of the Attorney General, will be paid on a contingent basis if there are fees and penalties

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obtained from Plaintiff through prosecution of alleged violations of the Act. The Contingency

2 Fee Agreement states that if there is recovery and collection of damages or monetary penalties, 3 Cohen Milstein will receive between 10 and 15 percent of the proceeds for costs and expenses, 4 5 6 27. The Contingency Fee Agreement provides that in the event there is recovery and 7 the fee agreement is found to be invalid, both Cohen Milstein and the Attorney General each are 8 entitled to the fair market value of their legal services expended on behalf of the State and that 9 the Attorney general will use its best efforts to support any application for judicial approval for 10 11 12 28. Article 4, section 19 of the Nevada Constitution provides as follows Manner of No money shall be drawn from the treasury but in consequence such fees made pursuant to this paragraph. Id. at 3.4. including attorneys fees. Id. at 3.3.

13 drawing money from treasury. 14 of appropriations made by law. 15 16 17 18 19 29.

The Contingency Fee Agreement prioritizes Cohen Milsteins recovery of its

advanced costs over recovery by the State, providing that Cohen Milstein be reimbursed for advanced costs before the State receives anything. Id. at 3.5.2. 30. The Contingency Fee Agreement provides that in the event the litigation is

20 resolved by a settlement for injunctive relief only or for a provision of goods, services or other 21 22 market value of their legal services expended on behalf of the State. Id. at 3.5.4. In fact, the 23 24 Contingency Fee Agreement provides that in such an event, the State agrees not to settle the in kind or non-monetary payment, Cohen Milstein will receive costs and hourly fees at fair

25 case unless the defendants agree to pay said amount. Id. Therefore, while 1.1 of the 26 Contingency Fee Agreement purports to grant the Attorney General with blanket authority to 27 28
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settle disputes falling within the purview of the Agreement, 3.5.4 prohibits the Attorney

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General from settling disputes with defendants under non-monetary terms unless the defendants

2 agree to pay all of Cohen Milsteins hourly fees, effectively limiting the Attorney Generals 3 authority to enter into resolutions in the public interest. 4 5 6 General for Nevada in order to conduct the investigation, and now assist in the litigation, against 7 Plaintiff. On June 26, 2012, the State, by and through CATHERINE CORTEZ MASTO, 8 Attorney General filed its Motion to Associate Counsel on Order Shortening Time, seeking to 9 have a Cohen Milstein lawyer, Betsy Alexandra Miller, Esq. admitted to act as counsel of record 10 11 12 13 14 32. THE ATTORNEY GENERALS CONTRACT WITH COHEN MILSTEIN VIOLATES PLAINTIFFS CONSTITUTIONAL RIGHTS As a public official and the chief law enforcement officer for the State of Nevada, in the Attorney Generals lawsuit against Plaintiff. 31. Lawyers at Cohen Milstein were improperly deputized as Special Attorneys

15 and in accordance with the relevant provisions of state and federal law, the Attorney General has 16 a responsibility to see that justice is done for all, including persons like Plaintiff, that have been 17 targeted with an investigation, and now litigation. In litigating actions to recover civil penalties, 18 19 the Attorney General is obligated to serve the public interest, which may, in some cases, call for 20 limiting the scope of the action or abandoning the action altogether rather than seeking to 21 22 33. 23 24 Plaintiff to Cohen Milstein pursuant to the Contingency Fee Agreement, the Attorney General, By ceding and out-sourcing authority for the investigation of and litigation against maximize the amount of civil penalties.

25 acting under color of state law, has caused a personal financial interest to be injected into the 26 targeting of Plaintiff in this matter and created a powerful incentive for Cohen Milstein to focus 27 28
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single-mindedly on maximizing the amount of monetary penalties recovered from Plaintiff,

2 rather than focusing on the public interest the Attorney General is charged with serving. 3 4 5 6 like the Attorney General, is supposed to prevent. The pernicious consequences of the 7 Contingency Fee Agreement are further exacerbated by the lack of public accountability of 8 Cohen Milstein. 9 10 11 12 fundamental fairness to Plaintiff embodied in the Due Process Clause of the Fourteenth 35. Under these circumstances, the Attorney Generals actions under color of state 34. The Contingency Fee Agreement, therefore, creates a biasing influence which,

among other things, substantially increases the risk of overzealous litigation that a public lawyer,

law and hiring of Cohen Milstein pursuant to the Contingency Fee Agreement offend the right of

13 Amendment to the United States Constitution. 14 15 16 17 18 19 20 21 22 23 General: No officer, commissioner or appointee of the Executive Department of the Government of the State of Nevada shall employ any attorney at law or counselor at law to represent the State of Nevada within the State, or to be compensated by state funds, directly or indirectly, as an attorney acting within the State for the State of Nevada or any agency in the Executive Department thereof unless the Attorney General and the deputies of the Attorney General are disqualified to act in such manner or unless an act of the Legislature specifically authorizes the employment of the other attorneys or counselors at law. NEVADA LAW PROHIBITS THE CONTINGENCY FEE AGREEMENT 36. Because of the Attorney Generals responsibility to serve the public interest,

Nevada law places a strict limitation on the use of private, outside counsel by the Attorney

24 NRS 228.110(2). 25 26 37. NRS 228.110(3) further provides that [a]ll claims for legal services rendered in

27 violation of this section shall be void. 28

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38.

The Contingency Fee Agreement cites several provisions within NRS Chapter

2 228, but conspicuously lacks any reference to NRS 228.110. 3 4 5 6 7 40. 41. The Attorney General has not been disqualified from participating in this matter. The Nevada Legislature has not specifically authorized the hiring of Cohen 39. The Attorney General is an officer within the Executive Department of the

Government of the State of Nevada.

8 Milstein. 9 10 11 12 43. NRS 41.03435 is found within the Chapter section entitled Liability of and 42. Upon information and belief, the Attorney General is relying upon NRS 41.03435

and/or NRS 228.330 as authority to hire Cohen Milstein.

13 Actions Against this State, its Agencies and Political Subdivisions. (Emphasis added). 14 44. In addition to the section title, numerous provisions within NRS 41.03435 make it

15 clear that this statute authorizes the retention of private, outside counsel only to defend actions 16 brought against the State. See, e.g., NRS 41.0339 (circumstances under which official attorney 17 to provide defense); NRS 41.0341 (time for filing responsive pleading); NRS 41.03415 18 19 (determination by official attorney whether or not to tender defense); NRS 41.0347 (liability of 20 State or political subdivision for failure to provide defense). 21 22 Plaintiff does not involve an action against the State, the Attorney General lacks authority to 23 24 25 engage private, outside counsel under NRS 41.03435. 46. Even if NRS 41.03435 authorized the Attorney General to hire private, outside 45. Because the Attorney Generals investigation of, and now litigation against,

26 counsel, which it does not, this statute does not permit the Attorney General to hire private, 27 28
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outside counsel on a contingency fee basis.

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47.

NRS 41.03435 provides that [t]he Attorney General may employ special counsel

2 whose compensation must be fixed by the Attorney General, subject to the approval of the State 3 Board of Examiners, if the Attorney General determines at any time prior to trial that it is 4 5 6 rendered by the Attorney General or a deputy attorney general. Compensation for special 7 counsel must be paid out of the reserve for statutory contingency account. (Emphasis 8 added). 9 10 11 12 provides that Cohen Milstein will be paid from amounts the Attorney General recovers, not the 48. The Contingency Fee Agreement lacks any reference to Cohen Milstein being impracticable, uneconomical or could constitute a conflict of interest for the legal service to be

paid out of the Reserve for Statutory Contingency Account, and its contingent recovery scheme

13 Reserve for Statutory Contingency Account. The Contingency Fee Agreement establishes a 14 scheme whereby Cohen Millsteins compensation is not fixed as required by NRS 41.03435 15 and is instead variable and dependent on other events and/or occurrences, most notably the 16 amount of the Attorney Generals recovery. 17 49. NRS 228.330 provides statutory authority for the Consumer Advocate appointed 18 19 by the Attorney General to employ staff, lease office space, purchase office equipment, and take 20 other administrative actions necessary for its consumer advocate function in accordance with the 21 22 50. 23 24 retain private, outside counsel or transfer the Consumer Advocates statutory powers to private, NRS 228.330 does not allow the Attorney General or Consumer Advocate to Attorney Generals personnel policies and practices.

25 outside counsel. 26 27 28
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51.

Because the Attorney General and/or Consumer Advocates retention of Cohen

Milstein is to act as private, outside counsel for the investigation, and now litigation, against

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Plaintiff, not assist the Consumer Advocate with the administrative functions of its office, the

2 employment of Cohen Milstein is not authorized by NRS 228.330. 3 4 5 6 provides that all fees, civil penalties and any other money collected under the Act must be 7 deposited in the State General Fund and may only be used to offset the costs of administering 8 and enforcing the provisions of the Act. (Emphasis added). 9 10 11 12 paid out of any recovery from prosecutions under the Act which the Legislature requires be 53. Because the Nevada Legislature has required that private, outside counsel be 52. The Contingency Fee Agreement apparently assumes that the Attorney General

may pay a contingency fee out of any settlement or civil penalties. However, NRS 598.0975

compensated out of the Reserve for Statutory Contingency Account, such counsel cannot be

13 deposited in the State General Fund. 14 54. Therefore, the Act and Nevada law specifically prohibit the Contingency Fee

15 Agreement between the Attorney General and Cohen Milstein. 16 FIRST CAUSE OF ACTION 17 (Due Process Violations) 18 19 20 21 22 paragraphs 1 through 54 of this Complaint as if set forth fully herein. 56. This claim is brought pursuant to and in accordance with the Declaratory 55. Plaintiff realleges and incorporates by reference the allegations contained in

23 Judgment Act, 28 U.S.C. 2201 et seq., seeking a declaration of the rights and other legal 24 relations of the parties. An actual controversy exists between Plaintiff and the Attorney General 25 26 27 28
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concerning their respective rights and duties pertaining to the investigation, and now litigation, currently pending in Nevada.

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57.

Constitutional due process prohibits state and federal government attorneys from

2 having a financial interest in the outcome of the cases which they litigate because their duties and 3 ethical obligations are inherently in conflict with having a personal, financial interest in the 4 5 6 investigation and/or litigation, or allow such control to be invaded, by private counsel retained on 7 a contingent fee basis, both of which, upon information and belief, have occurred as described 8 herein. The Attorney Generals conduct as alleged herein is a violation of Plaintiffs rights under 9 the Due Process Clause of the Fourteenth Amendment of the United States Constitution. 10 11 12 1983 because the improper and unauthorized hiring of Cohen Milstein, which thereby effectively 58. The Attorney Generals conduct also violates Plaintiffs rights under 42 U.S.C. outcome of any given case. This is particularly true when attorneys general cede control of an

13 cedes controls over the litigation against Plaintiff to a financially-interested private third party, 14 results in a deprivation of Plaintiffs property, in the form of monetary penalties, without due 15 process of law, including, but not limited to, a fair and ethical investigation and litigation before 16 an impartial tribunal. 17 59. As a direct and proximate result of the Attorney Generals actions, coercive 18 19 powers have been delegated to private lawyers having a clear, direct and substantial financial 20 stake in the outcome in the Attorney Generals Complaint, a penal in nature enforcement action 21 22 60. 23 24 prosecutorial fairness of the action against Plaintiff has been compromised, thereby violating Consequently, as a result of the Attorney Generals aforementioned conduct, the that must be pursued in the public interest or not at all.

25 Plaintiffs right to due process under the Fourteenth Amendment of the United States 26 Constitution and 42 U.S.C. 1983. 27 28
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61.

These violations of Plaintiffs rights have caused actual and irreparable harm, and

2 will continue to do so until this Court grants the requested relief. 3 4 5 6 7 Plaintiffs constitutional due process rights. 63. The harm to Plaintiff will be immediate and irreparable if private, outside counsel 62. Injunctive relief is appropriate where government conduct results in repeated

patterns of constitutional violations. The Contingency Fee Agreement incentivizes violations of

8 is permitted to stand in the Attorney Generals shoes and exercise the States sovereign power, 9 not only for the States purposes, but also for those attorneys own, private ends. 10 11 12 13 Fourteenth Amendment due process rights. 65. The Attorney Generals hiring of Cohen Milstein on a contingent fee basis 64. There are no adequate legal remedies to prevent the violation of Plaintiffs

14 irreparably injures Plaintiff because the Act provides for both civil and criminal penalties, and 15 the Contingency Fee Agreement incentivizes Cohen Milstein to seek the highest monetary 16 amount, regardless of the merits underlying any allegations. 17 SECOND CAUSE OF ACTION 18 19 20 21 66. Plaintiff realleges and incorporates by reference the allegations contained in 22 paragraphs 1 through 65 of this Complaint as if set forth fully herein. 23 67. This claim is brought pursuant to and in accordance with the Declaratory (Declaratory Judgment Regarding Violation of NRS 228.110)

24 Judgment Act, 28 U.S.C. 2201 et seq., seeking a declaration of the rights and other legal 25 26 27 concerning their respective rights and duties pertaining to the hiring of Cohen Milstein in 28 violation of Nevada law.
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relations of the parties. An actual controversy exists between Plaintiff and the Attorney General

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68.

NRS 228.110 places a strict limitation on the Attorney Generals ability to hire

2 private, outside counsel to carry out the duties of the Attorney General. Thus, without an express 3 provision allowing the Attorney General to hire private, outside counsel, only the Attorney 4 5 6 7 seq. 69. Beyond the limitations of NRS 228.110, nothing contained in the Act, NRS General and her employees may investigate and litigate matters pursuant to NRS 598.0903 et

8 598.0903 et seq., authorizes the Attorney General to hire private, outside counsel, nor does it 9 authorize the Attorney General to do so on a contingency basis. 10 11 12 Milstein violates Nevada law and has resulted in violations of Plaintiffs Fourteenth Amendment 70. The Contingency Fee Agreement between the Attorney General and Cohen

13 right to due process. 14 71. Plaintiff has unsuccessfully attempted to resolve these issues in a non-litigation

15 context with the Attorney General, and has no adequate remedy under state law. 16 72. Plaintiff desires a judicial determination and declaration of Plaintiffs and the 17 Attorney Generals respective rights and duties, specifically, that the Attorney Generals hiring 18 19 of the law firm Cohen Milstein, under the circumstances set forth herein, violates Nevada law 20 and results in a violation of Plaintiffs due process rights under the Fourteenth Amendment of the 21 22 23 24 WHEREFORE, Plaintiff respectfully requests that the Court enter judgment in its favor 25 26 27 28
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United States Constitution and 42 U.S.C. 1983. PRAYER FOR RELIEF

and against the Attorney General granting the following relief: 1. A declaration that the Attorney General has violated Plaintiffs constitutional

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1 2 3 4 5 6 7 8 3. 2.

rights to due process by employing Cohen Milstein to conduct state investigations and to provide legal advice and support on a contingency fee basis; A declaration that the Attorney General has violated Nevada law and exceeded her statutory authority in hiring Cohen Milstein to conduct a state investigation and to provide legal advice and support; An order enjoining the Attorney General from employing Cohen Milstein in violation of Plaintiffs constitutional due process rights;

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4. 5.

Plaintiffs costs incurred in bringing this action; and; Such other and further relief as the Court deems just and proper.

DATED this 27th day of June, 2012.

FOX ROTHSCHILD, LLP /s/ Mark J. Connot _________________________________ MARK J. CONNOT (10010) KEVIN M. SUTEHALL (9437) JOHN H. GUTKE (10062) 3800 Howard Hughes Pkwy., Ste. 500 Las Vegas, NV 89169 Attorneys for Plaintiff

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