Courts

Pushing Private Judging Out Of The Shadows?

There’s no question that some of these private judges will be wiping off reputational mud based on what’s been revealed in the Girardi investigation.

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Thomas Girardi

There’s a new twist to the Tom Girardi story. This latest installment draws into Girardi’s web of lies the world of private judging. The front-page headline of Sunday’s Los Angeles Times was “Tom Girardi’s epic corruption and a shrouded legal specialty.” Every lawyer who engages in ADR, whether as counsel for a party or as a neutral, should read this cautionary tale. Written by the two Times reporters who broke the original Girardi story a while ago that set the legal community atwitter, this story has Girardi driving the bus over several JAMS private judges.

An apt description for private judging, “a shrouded legal specialty.” Cloaked in more secrecy than Harry Potter’s invisibility cloak, private judging has grown exponentially since its explosive development in the 1980s. Retired justices and judges, as well as attorneys, are hired to resolve cases, function as discovery referees, and, among other things, parcel out settlement funds due to plaintiffs often from mass tort settlements. There’s little, if any, accountability for how decisions are made, how funds are distributed, and how much plaintiffs’ attorneys receive in fees as their portions of recoveries.

The bankruptcy of Girardi’s law firm, Girardi Keese, is now starting to blow at the doors of this “shrouded legal specialty.” It’s not pretty, especially for the retired judges that Girardi hired to oversee settlement disbursements. And although it’s unlikely that any of them had actual knowledge about Girardi’s gigantic Ponzi schemes, there’s no question that some of them will be wiping off reputational mud based on what’s been revealed, and the fact that some of them may have been too cozy with Girardi personally. While Girardi may have dementia now, he certainly didn’t when he was stealing from clients for decades.

One JAMS retired appellate justice, John K. Trotter Jr., was appointed to oversee the proper distribution of $66 million in a diabetes drug settlement. However, Girardi repeatedly diverted settlement funds, including, but not limited to, the purchase of a ginormous pair of diamond earrings for his wife, Erika Jayne, one of the wives on the reality TV show, “The Real Housewives of Beverly Hills.” Girardi wrote checks on this account ostensibly for “costs,” but really, how often are costs in round numbers, such as $1,000,000? You tell me. Sometimes he would write multiple checks for seven figures in the same week. Over the succeeding years, Girardi siphoned off more than $15 million for supposed “expenses.”

Girardi had no hesitation in throwing Trotter under the bus when it served his purposes. Here was a retired justice who had a stellar career while on the bench, who was one of the pioneers in the field of dispute resolution, being blamed for Girardi’s misdeeds. Does the old saw “You lie down with dogs; you get up with fleas” apply here? Girardi had palsy-walsy relationships with retired and current judicial officers, which many people in the legal community knew, but kept quiet.

Now the Chief Justice of the California Supreme Court Tani Cantil-Sakauye has weighed in. She is retiring and will not stand for another 12-year term in November; however, she had some choice words about the conduct reported in the LA Times story.

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The chief justice said the revelations about the private judges who worked for Girardi were “shocking.” She acknowledged that “there are not enough safeguards regarding the business of private judging.” No argument there.

What’s just as shocking is how previously well-regarded private judges could be caught up in Girardi’s frauds. Another JAMS retired justice, who had sat on the California Supreme Court, Edward Panelli, was involved in distributing settlement funds for elderly women who alleged they got cancer from a menopause drug. The plaintiffs believed that Girardi had not paid them all they were entitled to from the settlement. Girardi threw Panelli under the bus and said that he had ordered a “hold back” of a million dollars Although Girardi lied about that, Panelli did not tell either the trial court or the clients until forced to testify under subpoena that Girardi had lied about the “hold back.” Not a pretty picture and a blot on the reputation of this retired Supreme Court justice.

So, now what? Cantil-Sakauye suggested that the Legislature take a good hard look at this sorry mess. Private judges are lawyers, once again state bar licensees, and given the antipathy that the Legislature has for the bar, this area might be ripe for some sort of regulation.

But what really gave me pause were comments by the former dean of the Santa Clara University Law School in the second LA Times article. And I quote:

“A longtime critic of the private judging industry, former Santa Clara University School of Law Dean Gerald F. Uelmen, said it seems reasonable to regulate the private judging industry, but advocates should expect strong opposition from sitting judges, some of whom see private judging — with its cushy salaries — as a retirement plan. After years of working … for just barely reasonable compensation (emphasis mine) when they retire, they kind of strike it rich, and they like it,” said Uelmen. “A lot of them are eager to retire and move on to that richer realm — so I think part of the opposition will be from judges who want to do it and see it as a just reward for all their years of hard work.” Hard work? Isn’t that what judges and lawyers are paid to do?

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“Just barely reasonable compensation”? Wait, what? Another example of the elitist attitude that permeates our profession. Judicial salaries, pensions, benefits — we should all be so lucky — and then the cherry on top is the money that they rake in from private judging. There oughta be a law.

old lady lawyer elderly woman grandmother grandma laptop computerJill Switzer has been an active member of the State Bar of California for over 40 years. She remembers practicing law in a kinder, gentler time. She’s had a diverse legal career, including stints as a deputy district attorney, a solo practice, and several senior in-house gigs. She now mediates full-time, which gives her the opportunity to see dinosaurs, millennials, and those in-between interact — it’s not always civil. You can reach her by email at [email protected].

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