A California court of appeals today held that a city may hire private counsel to collect taxes on a contingent fee basis without violating state law. 

The case involved Anaheim's efforts to recoup tax payments from travel services, including Travelocity, Expedia, Priceline, and Orbitz.  The city alleged that the travel services short-paid its local transient occupancy tax.  Instead of basing their payments on the price they charged customers for a hotel stay, they used the wholesale price they paid the hotels for the room nights.

Anaheim retained three firms on a contingent fee basis.  Travelocity, et al., objected to the arrangement, arguing that it violated their right to "neutrality" from the government and denied it due process.

The trial court denied the request for a writ of mandate.  The Fourth Appellate District panel affirmed.  Priceline.com Inc. v. City of Anaheim, No. G041338 (Cal. App. Jan. 7, 2010).

Kimberley Kralowec at The UCL Practitioner has a good write up of the case and relates it to another one pending before the California Supreme Court.  See also this.