It's not necessarily a conflict of interest, as the trial court had held below. Decision here. (Santa Clara County v. Superior Court) Story, behind reg wall, here, with key graf:
"Private counsel serving in such a subordinate role," Sixth District Court of Appeal Justice Nathan Mihara wrote, "do not supplant the public entities' in-house attorneys, who must be absolutely neutral, and are not in a position where their interest in maximizing their contingent fee can influence the balancing of interests or any of the other decisions that are made exclusively by the public entities' in-house attorneys."