There’s a new twist in Tom Girardi’s story. This last part draws the world of private refereeing into Girardi’s web of lies. The first page header Sunday’s Los Angeles Times had “Tom Girardi’s epic corruption and hidden legal specialty.” Every lawyer who participates in ADR, either as an advocate or as a neutral person, should read this warning. In this story, written by the two Times reporters who distributed Girardi’s original story a while back that baffled the legal community, Girardi drives the bus over several private JAMS judges.
An apt description for private litigation, a “hidden legal specialty.” Shrouded in more mystery than Harry Potter’s invisibility cloak, private judging has grown exponentially since booming in the 1980s. Judges and retired judges, as well as attorneys, are hired to decide cases, act as referees and, among other things, distribute funds belonging to plaintiffs, often as a result of massive settlements. There is little or no accountability for how decisions are made, how funds are distributed, and how much plaintiffs’ attorneys receive in fees as part of the recovery.
The bankruptcy of Girardi’s law firm, Girardi Keysey, is now beginning to knock on the door of this “hidden legal specialty.” That’s unattractive, especially for the retired judges Girardi hired to oversee the settlement payments. And while it’s unlikely that any of them actually knew about Girardi’s giant Ponzi schemes, there’s no doubt that some of them will be wiping the dirt from their reputations based on what has been revealed and the fact that some of them may have were too cozy with Girardi personally. While Girardi may have dementia now, he certainly didn’t have dementia when he was stealing from customers for decades.
A retired JAMS appellate judge, John C. Trotter Jr., was appointed to oversee the proper distribution of $66 million in the diabetes drug settlement. However, Girardi repeatedly diverted the funds to the settlements, including but not limited to buying a giant pair of diamond earrings for his wife Erica Jane, one of the wives on the reality show The Real Housewives of Beverly Hills. Girardi wrote checks to this account ostensibly for “expenses”, but really, how often are expenses in round numbers like $1,000,000? You tell me. Sometimes he would write several seven-figure checks in a single week. In the years that followed, Girardi shelled out more than $15 million in alleged “expenses.”
Girardi didn’t hesitate to throw Trotter under the bus when it served his purpose. It was a retired judge with a stellar career on the bench who was one of the pioneers of dispute resolution who was accused of Girardi’s crimes. Or the old saw “You lie with dogs; do you get up with fleas” apply here? Girardi had a paralyzing relationship with retired and current court employees, something many in the legal community knew but kept quiet about.
Now California Supreme Court Chief Justice Tanya Cantil-Sakawe has weighed in. She is retiring and will not run for another 12-year term in November; however, she had a few choice words the behavior is reported in an LA Times story.
The chief justice said the revelations about private judges working for Girardi were “shocking”. She admitted that “there is a lack of safeguards in relation to the business of private arbitration”. There are no arguments here.
What is just as shocking is how previously respected private judges could be involved in Girardi’s shenanigans. Another retired JAMS judge who sat on the California Supreme Court, Edward Panelli, was involved in distributing funds to repay elderly women who claimed they developed cancer from menopausal medications. The plaintiffs believed that Girardi did not pay them everything they were entitled to under the agreement. Girardi threw Panelli under the bus and said he ordered the million dollars “withheld.” Although Girardi lied about it, Panelli did not tell the court or the clients until he was subpoenaed to testify that Girardi had lied about the “restraint.” An ugly picture and stain on the reputation of this retired Supreme Court judge.
And what now? Cantil-Sakave suggested that the legislature take a hard look at this deplorable mess. Private judges are lawyers, again state bar licenses, and given the legislature’s antipathy toward the bar, the field may be ripe for some regulation.
But what really gave me pause were the comments of the former dean of the Santa Clara University School of Law in the second LA Times article. And I quote:
“A longtime critic of the private-trial industry, former Santa Clara University School of Law Dean Gerald F. Wellman, said it seems reasonable to regulate the private-trial industry, but lawyers should expect strong opposition from sitting judges, some of whom see private-trial — with their easy earnings – like a pension plan. After many years of work … for barely reasonable compensation (emphasis mine) when they retire, they kind of get rich, and they like it,” Wellmen said. “A lot of them want to retire and go into a richer field – so I think some of the opposition will come from judges who want to do that and see it as a fair reward for all their years of hard work.” Hard work? Isn’t that what judges and lawyers are paid for?
“Just reasonable compensation”? Wait, what? Another example of the elitist attitude that pervades our profession. Judges’ salaries, pensions, allowances – we should all be lucky – and the icing on the cake is the money they rake in from private refereeing. There must be a law.
Jill Switzer has been an active member of the California State Bar for over 40 years. She remembers practicing law in better, gentler times. She has had a varied legal career, including work as a deputy district attorney, a solo practice, and several senior clerkship gigs. She now mediates full-time, which gives her the chance to see interactions between dinosaurs, millennials and everyone in between—it’s not always civilized. You can contact her by email at firstname.lastname@example.org.