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Utah Taxpayers Shouldering Cost of ‘Child Protective Registry’ Legal Battle
Posted On 30 Apr 2007
SALT LAKE CITY, UT — When Unspam Technologies – the private company behind Utah’s “Child Protection Registry” (CPR) service – pitched its anti-porn-spam solution to state lawmakers, advocates of the registry predicted that it would prove to be a moneymaker for the state, as Utah stood to take in a cut of the revenue generated by the CPR.In a nutshell, the CPR requires companies that market age-restricted products and/or materials that are “harmful to minors” to submit their email lists to Unspam, which then scrubs the lists against the CPR’s database of email addresses accessible to minors. Each company that submits such a list must pay a half-cent for each address on their list, with Unspam taking 80-percent and the state the remainder.
Back when lawmakers were debating the CPR, according to the The Salt Lake Tribune, Utah’s Division of Consumer Protection projected that it would have reaped between $3 million and $6 million by now – more than enough to offset the $58,000 in annual prosecutorial fees and full-time, $75,000 per year Department of Commerce estimated in the CPR legislation.
So, how have those projections held up in the now nearly two years since the CPR was enacted by the state of Utah?
As of March of this year, according to the Tribune, the Division of Consumer Protection has collected a total of just $187,224 from the CPR, making the state’s cut $37,445.
Adding to the CPR’s woes are the highly predictable legal challenges the bill now faces, including a lawsuit filed by the Free Speech Coalition (FSC) and others who represent companies marketing materials potentially subject to Utah’s CPR law.
In August of 2006, the state hired private attorney Brent Hatch (son of U.S. Senator Orrin Hatch), who had represented Unspam in the past, to defend the state and Unspam against the FSC lawsuit.
Hatch’s contract reportedly is capped at $200,000, approximately half of which has been paid thus far, according to Utah Attorney General Mark Shurtleff.
According to the Tribune<.i>, Unspam President Matthew Prince said that Hatch’s fees were imposing too heavy a burden on Unspam, and could have effectively shut the company down, if the company had been required to continue to pay the bills on their own.
Noting that Hatch has been responsible for many of the legal arguments that have prevailed (thus far) in the case, Prince argues that what is good for Unspam is good for the state.
“If we shut down, that means the entire [CPR] program shuts down,” Prince said, according to the Tribune. “We went to the state and said, ‘We just can’t keep doing this.’”
Prince says he was surprised to learn that a private vendor can be sued alongside of the state, and alleges that the FSC named Unspam hoping to put the company out of business and thereby render the CPR law moot. According to Prince, Unspam paid about $70,000 to Hatch before concluding that it could pay no more.
“I’m happy we subsidized that cost to the extent we did,” Prince said, reiterating his contention that Hatch’s defense of the company has benefited the state, as well.
Hatch concurs with Prince, and asserts that the cost of defending the law should fall to the state and not to Unspam.
“It’s like you need your engine rebuilt and all you can afford is a tuneup,” said Hatch about the litigation, and Unspam’s inability to afford his fee.
Shurtleff said he’s pleased to have Hatch’s assistance with the case, but his office did not request that Hatch be hired; Shurtleff said that legislative leaders told him “this is what the Legislature wants,” and agreed to supplement the Attorney General’s budget to absorb the costs of defending the law.
Saying that he doesn’t like to hire outside attorneys due to the high cost, Shurtleff said that he insisted that a ceiling of $200,000 be set on Hatch’s contract. The contract, signed in August, pays for both Hatch and an associate attorney, who charge $395 and $225 an hour, respectively. Hatch agreed to give the state a 15-percent discount – which still leaves his fee at three times what state attorneys make, according to the Tribune.
Shurtleff said that neither he nor his staff could recall another case in which the state paid to defend a private company, much less pick up the tab from a private company’s attorney.
Assistant Attorney General Jim Soper said that just because nobody can recall it, that doesn’t mean that a state has never stepped up to absorb a private company’s legal costs before, and added that defending a private entity’s interests could make sense in some cases, when that private company’s interests and the interests of the state overlap.
“If the company was unable to defend itself and there were adverse consequences to the state, then there might be a sound, underlying reason for us to handle it,” said Soper, according to the Tribune.
Soper said that it is more common for contractors and vendors working on behalf of the state to indemnify the state – and some contend that during the lead up to the crafting of the CPR legislation, Unspam did imply it would handle any prospective legal problems the law faced.
Shurtleff, and Utah Commerce Director Francine Giani both recall a meeting in 2004 during legislative debates over the bill that would establish the CPR at which Pat Shea, an attorney who represented Unspam at the time, promised to “represent the state for free” in any litigation arising from the creation of the CPR.
Shea says that he never promised to represent the state in court, and that his offer extended only to negotiations and discussions with the CPR’s critics, adding that his work for Unspam was limited and primarily pro bono.
Shea added, however, that Prince did give him options in the company, if it should ever be taken public.
Senate President John Valentine, who was also present at the meeting, told the Tribune that he didn’t take Shea’s offer of pro bono representation seriously, terming it an “off-hand remark,” and “not a written guarantee.”
Valentine’s recollection of how Hatch came to be hired also differs from Shurtleff’s account. Valentine maintains that it was Shurtleff’s idea to retain Hatch, and says the Attorney General came to him and to House Speaker Greg Curtis with the request, and argued that his own office did not have the necessary expertise for the case.
Valentine said that in retrospect, given the way the costs have played out, he’s not sure hiring Hatch was the right decision.
“At the time I was trying to protect children from pornography and be responsive to the needs of the attorney general,” said Valentine, according to the Tribune. “I might think differently in hindsight.”
