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Private Courts Come to Order : Judge Makes a Case for Alternative Way to Seek Justice

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Times Staff Writer

It is the second-largest judicial body in the state, yet none of its judges are elected or appointed, and neither government regulation nor public scrutiny has a place in its courtrooms.

With about 70 retired Superior Court and state Court of Appeal judges working for it part time, the Judicial Arbitration and Mediation Service in Santa Ana has become the model for turning some of the chores of public entities over to private companies.

Less than a year after John K. Trotter Jr. stepped down as presiding judge of the 4th District Court of Appeal to join JAMS, the company has emerged as a statewide force, with retired judges hearing cases in Santa Ana, Los Angeles, San Diego, Santa Barbara, San Francisco and Sacramento. Only the Los Angeles County Superior Court system has more judges.

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Trotter left his $93,272-a-year court post in September to join a reorganized JAMS, a firm started in 1979 by H. Warren Knight, his longtime friend and a former Orange County Superior Court judge.

With capital raised privately from 15 investors, Trotter and Knight embarked on an ambitious plan to take the private judging concept statewide within a year and to eventually operate in six Western states. They also have plans to take their company public some day.

Altering the plan slightly, they now hope to start opening offices next year in such major metropolitan areas as Dallas, Houston, Chicago and Atlanta, where civil litigation typically is backed up.

Trotter recently spoke with Times staff writer James S. Granelli about a private judging system that offers civil litigants the opportunity of resolving their cases outside of the courtroom.

Q. What are the advantages of private judging?

A. It’s cost-effective and it saves time.

Q. In what ways?

A. It costs less to resolve a case in our system than in Superior Court. And you can do it in six months as opposed to five years, or we can do it in three months as opposed to three years.

Q. How do charges in the private judging arena compare with costs in the public court system?

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A. If you want to have a jury trial in a civil case in Superior Court, for example, the litigants pay for that. They pay for a jury. They pay for the court reporter in Orange County Superior Court after the second day. It costs about $150, give or take $10, to file a complaint in the Superior Court. All of those are user fees, none of which exist in the private system. The only cost in the private system is the hourly charge of the judge. Because the parties are paying that cost, it becomes much more efficient. They manage their time much more effectively. Cases go much more expeditiously. And since they can be heard in a relatively short time, say three months from the time you want it to be heard, you save an enormous amount of money in attorney fees.

Q. How much does a private judge charge typically?

A. We charge $125 per hour to each side, or a total of $250 per hour if it’s a two-sided case. If it’s a case with more than two sides, the charge goes down per side on a sliding scale, depending on length and complexity of the case. The aggregate fee may go up in a multiparty case, but the fee per side goes down.

Q. Can you have a jury in a private judicial setting?

A. You can, but we discourage it. Our concept is that we’re an alternative to the court system. If you want to have a trial, a jury trial, you should go to the court system. If you want to resolve the matter in an alternative method, that’s what we’re all about. We have done private jury trials, but we discourage them.

Q. How much time do you save in the private judging system?

A. Well, it all depends on the parties and when they call us. If they call us right after the incident occurs, they can have it resolved in three months. If they wait until they’ve been in the Superior Court and they want to come out of the Superior Court, it’ll be three months from that time. So it’s up to them. They can save as much time as they’re comfortable with. We can set the matter, I don’t care what the matter is, within a 90-day period and have it resolved. More and more, people are calling us before they file a lawsuit.

Q. So companies in a dispute don’t have to file a lawsuit to appear before you?

A. No. We hear a significant number of matters that have not yet matured into a suit, and they come to us to prevent that from happening.

Q. Do you handle it as mediation or a full-blown trial?

A. As mediation usually. They can get a full trial if they want it. But what they come to us for is to avoid that. So why would you come to us to have exactly what you’re trying to avoid? They come to us to say, “Judge, we know you’ve been on the bench for 20 years (and) you’ve seen a lot of this. What do you think of my case? Do you think I’m going win it or lose it? Give me your opinion.” And the byproduct of that opinion is that a case is resolved.

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Q. Give me some examples of the difference in time saved between a court trial and a trial before private judges.

A. We’re talking about two different time periods. We’re talking about the amount of time it takes to get to the hearing, and then the amount of time the hearing takes. Let’s talk about the first one: How long does it take to get there. In Orange County Superior Court, if you filed a complaint tomorrow, you would not be in trial for more than three years. Conversely, if you called us tomorrow and said, “I’m filing my complaint, I want you to resolve it, and I have the consent of the other side,” we could resolve it in 90 days. Now, suppose that the trial in the Superior Court is estimated to last 30 days. In other words, we think that because of the complexities of this litigation, it’s going to take 30 days to try it. It would take 10 days in our private system to try it.

Q. Regardless of the complexity of the case?

A. Absolutely. I just finished trying a case that involved the chairman of National Lumber Co. and the construction of three separate National Lumber stores and two private homes. At issue was whether the general contractor had put correct roofs on stores and had agreed to build the homes at a fixed price. I was appointed by the court as a judge pro tem, and the trial lasted 12 court days. We had 15 expert witnesses and more than 3,000 exhibits entered. It would have lasted 45 days or more in the public court system. In another case, which is still going on, we have to rent the grand ballroom of the Bonaventure Hotel in Los Angeles to hold settlement talks because there are 73 separate law firms representing defendants and 1,500 plaintiffs. The lawsuit involves allegations that houses in a development are slipping onto the Pasadena Freeway as a result of various alleged defects in their planning and construction. And I was just appointed a special master of a lawsuit involving 4,500 plaintiffs who claim their health was affected by toxicity of the Stringfellow dump in Riverside County.

Q. Procedurally, private judging can offer litigants things that courts can’t. You can do what the parties wish in terms of trying a case.

A. That’s exactly right. We don’t have any rules. The parties make the rules. If a case comes to us in a certain format, certain rules come with that. But if the parties come to us voluntarily--they’re not mandated by any contract or they’re not sent to us by the court system--then they make up their own rules. If a case is filed in Superior Court, it’s a court of record and there must be a record made. In our system, that doesn’t have to be so. In our system, the parties can have a single judge, they can have three judges. They can have two judges, they can have five judges. They can agree not to be bound by the rules of evidence or to be bound by the rules of evidence. Or to be bound by some of the rules of evidence but not all of them. They can agree to try their case from 9 in the morning until 10 in the morning or from 8 in the morning until 6 at night. Whatever they want to do, they’re in complete control of the rules of their hearings.

Q. Can you give some examples?

A. Yes. For example, we had a contract case not too long ago where the parties agreed to have it tried before three judges. They picked one of our panel members, who was an appellate court justice, and two others who had been trial court judges. They agreed that they would take two weeks each to put on their case. The only difference was that the other side was not allowed to object to any of the evidence that was presented by one side. Then there was some rebuttal and final arguments. The case was over in a little more than a month. It had been estimated to last one year in Superior Court.

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Q. Was there an appeal from that case?

A. No. It was a binding hearing.

Q. How often are decisions of private judges appealed?

A. Not very often at all. Most of the matters we hear in an adjudicatory function are binding by stipulation of the parties.

Q. So, private judges not only are getting cases out of the system, but by deciding them, they generally remove them from the appellate process.

A. That’s right. They keep them out of the system. Yes, we afford a double benefit. We can prevent a case from going into the system by resolving it before it matures to a case. Or we can take a case out of the system and resolve it. That reduces the line that everyone else has to wait in to get their case heard in the court system. And we encourage binding resolutions because that means that it’s over with finality. There’s no appeal.

Q. The crush of civil cases in the civil court system has, in effect, spawned this trend toward private judging. If that didn’t exist, if the courts could handle litigation, would there still be any need for private judging?

A. I think so. The courts can handle it now. You have to remember that they are under a mandate to handle your case, so the courts can handle it. It all depends on what you perceive to be “handle it.” Is waiting six years to get to trial sufficient? In some communities, they wait three years. Is that sufficient? So it all depends on the local culture, what you get used to. There is no question that even in an area where they are “up to date” and there’s no backlog, whatever that means, it is still cheaper to resolve your case without the necessity of going to trial.

Q. What kinds of cases can private judges hear?

A. We can hear almost any and all civil cases. We don’t hear criminal cases. We don’t hear domestic cases that involve child custody disputes because you need the power of the court to monitor those. But (we do hear) almost all types and kinds of civil disputes between individuals or between corporations or between individuals and corporations. We hear everything from personal injury cases to where you think that some professional person didn’t take care of you properly--whether it be doctor, lawyer, accountant, stockbroker. We hear the complaint that a neighbor’s hedges are too high and the deed restrictions say they can’t be that high, that a house was painted and the painters did a terrible job, that a car was taken in for repairs but it wasn’t fixed. Whatever the civil problem is, we’ve heard that case.

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Q. But by and large, is it going to be the businesses--the business plaintiff, the business defendant--that are using you because they’re the only ones who could really afford up-front fees?

A. That’s not true yet because a great majority of the cases we hear are personal injury cases. And you have to remember that one of the criticisms that’s been levied against this or any private judging group and against the American Arbitration Assn. is that it’s justice for the rich. That’s absurd. It’s cheaper to come to us than not to come to us. And let me give you the example. Say you’re injured on the freeway. You want to sue the driver who hit you because it’s his fault. You’ve got $10,000 worth of medical bills and you’re out of work and you don’t have any money. Now you go to a lawyer. That lawyer’s going to take that case on a contingency fee. You don’t pay the lawyer anything until the case is over. So you’re not going to pay anything whether you’re in the court system or in our system. The lawyer will forward, or front, all the money. And if you can settle the case quicker, you’re better served. So the plaintiffs--the injured parties--come to our service all the time, even though they don’t have any money, even though they’re indigent.

Q. The lawyers then are paying for the hourly rate, and they get reimbursed in any settlement.

A. Absolutely. It becomes one of the costs. Just like they pay the jury fees in a court trial, just like they pay for the cost of the depositions, they pay for this cost.

Q. Does that mean that business litigation--the contract cases and other disputes between companies--is not a big part of private judging?

A. It’s very prevalent, and it’s becoming more and more so. One of the reasons that right now we do more personal injury work is because all of that personal injury work is congregated in the hands of insurance companies. And insurance companies are much easier to reach to market our services--to let them know that we’re available. The business community is much more diverse. It’s much more difficult to get the word out that this service is available, so we rely on lawyers. But lawyers sometimes have a conflict in their own minds. They know that by coming to our service, the case is going to be resolved more quickly, which means they get less in fees.

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Q. When should a business litigant avoid private judges?

A. I really can’t think of a situation unless it’s a case that they absolutely do not want to dispose of. If a business, for whatever reason, wants to trade on the time delays attendant to the court system, then they wouldn’t be well advised to come to us. Or if a particular business or manufacturer or producer of a product feels absolutely that there’s nothing wrong with what they’ve done--they’re absolutely certain that they’re going to win their case and they don’t care how much it costs them to do it--then there’s no need to come to us.

Q. What about “life-or-death” situations such as mergers and acquisitions. Do those cases present issues that judges in courtrooms should decide?

A. Well, I don’t know. The Irvine Co. shareholder suit is being tried by a private judge in Michigan. The parties wanted to get a date certain and they wanted to go to trial. So lawyers with any significant piece of litigation are well advised to explore the possibility of an alternative resolution with a private judge.

Q. If you were confronted with a suit that raises state or federal constitutional issues, is that something that a private judge ought to handle?

A. No, it shouldn’t come to a private judge. Anything that is of a constitutional magnitude should not come out of the court system. Those are not appropriate for a private sector. We should only be handling private disputes that don’t involve public interest concerns. But 99% of all civil lawsuits have no constitutional magnitude to them whatsoever.

Q. Proceedings generally are private. Are there any provisions in the law for opening up private judging in any way?

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A. Not that I know of. Private judging, or alternative dispute resolution, is no more than the resolution of the dispute between two individuals or two corporations or a corporation and individual. The public has no interest in that and no concern for it. The reason that the press is allowed to inquire into those matters is because the forum that’s chosen for the resolution of those disputes is a public forum--the courthouse. The taxpayers support it. But if two businessmen decide to settle a case without filing a lawsuit, does the press have any right to know what that is? I don’t think so. If two neighbors decide to settle their dispute over the property line without filing a lawsuit, is there a public interest in that? I don’t think so. And that’s the same thing we offer. We offer the ability to resolve that dispute without using a public forum.

Q. If you’re resolving disputes, especially those that have been reduced to lawsuits and have been filed, where is the accountability for your own activities if there is no public scrutiny or accountability for what you do?

A. Well, the marketplace will take care of that. If our judges do something that’s inappropriate, those people are never going to come back. It’s a totally voluntary system. We do have quality control on our system. We do screen our panel members. We do continue to watch what they do, to have some oversight. But there is no accountability in the sense that there is no governmental agency that oversees what we do--except for situations where we act as an arm of the court system. It’s a market-driven system. If it doesn’t work, the marketplace will tell us.

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