The private justice industry needs more oversight, the California chief justice said after a Times report last week on the role of staff judges in alleged fraud of clients out of millions of dollars in settlement funds by Los Angeles attorney Tom Girardi.
Chief Justice Tani Cantil-Sakauye called the revelations about the behavior of the retired justices, including a former state Supreme Court justice, “shocking” in a statement to The Times, admitting: “There are no proper safeguards regarding this.” business of private judgment.”
For decades, Girardi paid reputable private judges up to $1,500 an hour to help him manage mass tort cases involving thousands of clients. The Times described how Girardi traded in the names of these ex-lawyers to ward off questions about missing money and how, in some cases, they contributed to his misappropriation of client funds.
In a settlement in which a former appellate judge was paid $500,000 for overseeing the distribution of funds, Girardi managed to divert millions of dollars from a settlement account for questionable purposes. A downtown jeweler received $750,000 to buy diamond earrings for Girardi’s wife, Erika, who was known from “The Real Housewives of Beverly Hills,” according to court documents.
Retired lawyers who act as arbitrators and mediators occupy an increasingly important and powerful place in the legal system, but their work mostly takes place behind closed doors and is rarely scrutinized by outsiders. Seated judges report to the State Commission on Judicial Performance, but private judges are not subject to regulation by any particular government agency.
The State Bar of California theoretically has jurisdiction over private judges who retain their attorney’s licenses, but the agency admitted Monday it was aware of “no previous investigations” against them. “There appears to be no overarching regulatory framework for private judgment or mediation,” the agency said in a statement.
Cantil-Sakauye, the chief justice, lamented the “multiple harassment of the injured” in the Girardi case. She offered no specific action to protect the public, but suggested that the Sacramento legislature should take the initiative.
“I believe the legislature is the right authority to regulate the behavior of the mediators,” said Cantil-Sakauye, who announced last month that she plans to retire after her term ends in January.
Some in Sacramento say they are ready to act.
“If I’m reelected, there will be hearings and there will be legislation,” said State Senator Tom Umberg (D-Orange), chairman of the Senate Judiciary Committee.
He described the findings to The Times as “stomach turns” and said: “I’m quite aware that something needs to be done.” Among the legislative measures, Umberg has raised the possibility of mandatory disclosure of past relationships by an arbitrator or mediator.
Girardi has repeatedly engaged the high-priced services of retired attorneys associated with Irvine-based JAMS, the country’s largest private mediation and arbitration firm. They included John K. Trotter Jr., co-founder and former chairman of JAMS, a retired California appellate judge, and former state Supreme Court Justice Edward A. Panelli.
The Times detailed Panelli’s role in a $17 million deal Girardi secured for older women who claimed a drug caused them to develop cancer during menopause. In 2014, when some of the women suspected Girardi had failed to pay them all amounts due, his company blamed Panelli, saying the retired judge ordered them to “withhold” $1 million. The allegation was false, but the lawyer failed to inform clients or the trial court and fought a subpoena for months before finally being forced to testify under oath. Only then did Panelli reveal that Girardi was lying.
Trotter, the former judge-turned-JAMS executive, also worked on settlements in which clients accused Girardi of stealing money. In a $66 million deal with the maker of the diabetes drug Rezulin in 2005, Trotter was appointed a “special arbitrator,” overseeing the distribution of money to clients, as well as to Girardi and other attorneys on the case. In the years that followed, more than $15 million went to Girardi’s jeweler for the diamond earrings and his company for alleged expenses. Experts reviewing financial records for The Times said the pattern of payouts pointed to fraud.
Both Panelli and Trotter declined interview requests about their dealings with Girardi. In statements, they said they had limited roles that they performed ethically. When asked to address the Chief Justice’s comments, JAMS (formerly known as Judicial Arbitration and Mediation Services) reiterated a previously issued statement that its roster of former judges “are expected to uphold the ethical standards to which they are sworn under oath to have”.
Outgoing Assembly Judiciary Committee Chairman Mark Stone (D-Scotts Valley) agreed that the private judges’ handling of Girardi was evidence of an unresolved issue.
“The fact that you have judges with longstanding relationships with an attorney like Tom Girardi, and doing things for his benefit and for their own personal benefit – there is no structure in place at this time to hold anyone accountable in these circumstances,” Stone said.
Stone, who is retiring this year, said he was skeptical of a legislative solution to the problem, having opposed previous legislative proposals to provide more transparency and public safeguards for the arbitration industry. Those measures, he said, have been vigorously challenged by companies and business groups who prefer the system that allows them to settle disputes in camera, adding: “I’m not sure these ethical mistakes drive them that bad.” disturb.”
“These are very, very difficult bills to get through the legislature because those who could benefit from the way arbitration works oppose us at every turn, to the detriment of consumers,” Stone said.
A longtime critic of the private judges’ industry, former dean of the Santa Clara University School of Law Gerald F. Uelmen, said it seemed reasonable to regulate the private judges’ industry, but proponents should expect strong opposition from sitting judges, some of whom are privates See judging – with its comfortable salaries – as a pension.
“After years of work… for a barely decent salary, they get kind of rich in retirement, and they like it,” Uelmen said. “A lot of them are eager to retire and move into this richer realm – so I think some of the opposition will come from judges who want to do it and see it as a just reward for all their years of hard work.”
https://www.latimes.com/california/story/2022-08-09/chief-justice-calls-for-new-regulation-of-private-judging-in-light-of-girardi-scandal California chief justice calls for oversight of private judges