The Tribune Editorial Board had an informal debate Friday about the story that Phoenix and the developer of CityNorth on Loop 101 want nearly $690,000 in legal fees from the Goldwater Institute. Goldwater, on the behalf of five small business owners, had sued to stop Phoenix from paying $97 million in subsidies for the $2 billion shopping/office center. But a Maricopa Superior Court judge has sided with Phoenix, saying the subsidy is legal. What follows is a summary of my argument about the legal fee issue, and Editorial Page Editor Bob Satnan responds.

Updated: Clint Bolick, the litigation director of the Goldwater Institute, reacted to our little debate and I’ve added his thoughts at the end.

Le Templar:

This request for legal fees is outrageous and clearly intended to punish the Goldwater Institute for daring to challenge Phoenix’s legal authority to award this crazy subsidy. Along with the developer’s own legal experts, Phoenix used an outside team of lawyers to fight this case, which naturally charged top dollar. While not poor, the Goldwater Institute doesn’t have near the resources of a major American city like Phoenix and shouldn’t be threatened with destitution for exercising its right to ask a judge to intervene on an issue that many other people, including the Tribune Editorial Board, have criticized. Governments should be able to recover legal fees from private citizens only when a lawsuit is blatantly frivolous. Granting these legal fees would send a chilling message that other people shouldn’t challenge government actions, even when it seems obvious such action is illegal or unconstitutional.

Bob Satnan:

When a municipality is sued, the damages don’t come from those who made the decision that sparked the suit; they come from taxpayers. In this case, a judge ruled that Phoenix officials did nothing wrong in relation to the CityNorth deal. The fact that the city recruited experts from outside the municipal legal department doesn’t matter; Phoenix sought the best people to argue the city’s case. And they argued it successfully.Requiring plaintiffs to repay reasonable municipal legal fees only sends a “chilling message” to those whose arguments aren’t strong enough to win. Governments are magnets for lawsuits because they are seen as cash cows – even though that cash comes from taxpayers and is intended to be used for the people’s business. When a municipality is exonerated on its day in court, the people deserve to be reimbursed. If an argument has merit, stand strong and seek justice. If not, be prepared to repay the people.

Clint Bolick:

Thanks to Bob and Le for a thoughtful exchange on attorneys’ fees. There are some people who make a living suing other people and/or government agencies, hoping to make a living off settlements, and I have no sympathy for them. But public interest law, as I see it, is quite different. Generally, we exist to take on cases based on principle, where no one has a sufficient financial stake in the outcome or sufficient resources to litigate. A classic case is eminent domain abuse. In most instances, the people whose land was taken could not afford to hire lawyers to argue whether the taking was for a public use — rather, they paid their attorneys fees from the compensation. Were it not for IJ taking the case, Randy Bailey would have lost his shop, because he could not have taken on the case on his own. So too the taxpayers who are challenging CityNorth could not possibly have the resources to challenge it either in the legislature or the courts without us.

IJ lost the opening round in the Bailey case, just as Goldwater lost the opening round in the CityNorth case.  AZ is odd in that attorney fees are litigated at each level, rather than waiting for a final decision. That raises another relevant aspect of public interest law — typically, the cases are taken to change jurisprudence. In the cases that Goldwater selects, that is because jurisprudence has strayed from the original intent of the Constitution. Governments then keep pushing the bounds of power, as with eminent domain and retail subsidies, which will continue to erode constitutional guarantees unless someone stops them. Usually, the only entity that can push back is a public interest law firm — but more often than not, it will lose in the trial court, because the trial court must operate within the bounds of existing jurisprudence. In many instances, even losing cases shed useful sunshine on abuses of government power that are rectified through democratic processes — but only with the leverage of a lawsuit.

For those reasons, a straight-out loser-pays system would utterly destroy the ability of public interest firms to protect individual rights and restore constitutional boundaries to government power. The CityNorth case raises very important issues under the AZ Constitution. For only ten months of legal work on a single case, the fees sought by the City and the developer far exceed our entire litigation budget for an entire year. Given those economics, challenges of government power would almost never be filed if the public interest firm routinely has to pay if it loses.I hope these observations are useful. As always, we’re grateful to the Tribune for its steadfast support of freedom.