Friday, January 11, 2008

Is JAMS Fair?

January 11, 2008

More and more disputes are being resolved through private arbitration rather than litigation in a court. Courts are run by the government. The judges are public employees. They draw a fixed salary, and they take whatever cases are filed. The filing fees in court are minimal. On the other hand, the courts can be overcrowded, overworked and slow, although that is not true of the Los Angeles County Superior Court where I practice law. I do not mean to imply that the LASC is short of cases. In fact, it is busy, but, on the whole, cases get resolved promptly.

If the parties to a dispute agree, their dispute can be resolved by a private arbitrator, who is selected and paid by the parties, rather than by a court operated by the State. This agreement to arbitrate a dispute can be made in advance, for example in an agreement between a patient and a doctor to arbitrate any malpractice claim, should one arise in the future. Alternatively, the agreement to arbitrate can be made after the dispute has already arisen.

Courts favor arbitration for one obvious reason: it lightens the courts' burden. If a private arbitrator resolves a case, the court does not have to. The State saves money, and the individual judges have less work to do. The State Legislature loves arbitration, for the same reason. Therefore, courts send cases to arbitration whenever there is a basis to do so. Moreover, once an arbitrator had made a decision, the courts almost never set those awards aside. The fact that the arbitrator made an obvious mistake of fact or law is not a basis for a court to vacate an arbitrator's award. There is no "appeal," as there is from a judgment entered by a judge.

The increase in the number of arbitrations has resulted in an increase in the number of arbitrators. Many, although by no means all, of the arbitrators are retired judges. (In fact, some arbitrators are not even lawyers).

I have come to oppose the growth of arbitration, for two main reasons. First, some arbitrators take advantage of the fact that there is no appeal from an arbitration award. They do what they please, without regard to the facts or the law, knowing that the courts will almost certainly overlook their "errors" and affirm their awards as judgments.

Perhaps more importantly, many arbitrators are biased. For example, some health care providers, such as Kaiser, force their patients to sign arbitration agreements in advance as a condition of providing care. Imagine that you are an arbitrator who handles the resulting medical malpractice arbitrations between Kaiser and patients. If you rule against Kaiser, you run the risk of never being selected again by Kaiser to arbitrate another case. If you rule against the patient, that patient might never agree to use you again, but that hardly matters. The bottom line is that arbitration can favor the repeat customer -- the big company vs. the consumer.

Of course, that is not true of all, or even most, arbitrators. Take, for example, ADR Services. ADR provides the services of retired Judges, both as mediators and as arbitrators. I have never found any of the professionals from ADR to be biased, although admittedly I have used them more as mediators than as arbitrators.

I am deeply concerned, however, about JAMS, another company that provides the services of retired judges, who act as mediators and arbitrators. I recently had a terrible experience with JAMS, and specifically with retired judge G. Keith Wisot. I practice in a small firm, one that cannot provide any meaningful amount of business to JAMS. On the other side of the case is a large firm, which can. Judge Wisot made rulings that can only be described as bizarre. Well, that is not quite true. They can also be described as acts outside his jurisdiction and most likely a violation of my clients' Procedural Due Process Rights. In fact, that is how the Los Angeles County Superior Court described Judge Wisot's actions in finding that his award is defective and must, at a minimum, be corrected. As mentioned above, it takes quite a bit to get a court to take a second look at an arbitrator's award.

I cannot explain Judge Wisot's behavior in a satisfactory way. He is not a stupid man, and he did not simply make an honest mistake. He has no past history with me, nor with my clients. I doubt that he is taking bribes, at least not as that word is normally used. What I believe is that he ruled in favor of the big firm, knowing that, if he continues to do so, he will continue to get business from them. That is the only explanation I can come up with, although I admit it is just conjecture on my part, and I cannot prove it.

I do have one other piece of evidence: Judge Wisot's outrageous billing rate. JAMS bills his time at between $600 and $1,000 per hour, and sometimes at even higher rates. By way of comparison, there are 42 retired Judges and Justices (a higher position than a Judge in our system) on the ADR Southern California Panel. That panel includes several highly sought after individuals, such as Judge Alan Haber, Judge Enrique Romero and Justice John Zebrowski. Yet, not one of those jurists charges even $600 per hour. Judge Wisot's lowest rate -- as charged by JAMS -- is higher than every one of ADR's 42 jurists.

Moreover, Judge Wisot has no meaningful reputation. I can safely say that because, in my 18 years as litigator in Los Angeles, I cannot remember a single time when any attorney suggested Judge Wisot for anything, nor have I heard anyone curse him. By way of contrast, I have repeatedly had other attorneys suggest Judge Romero, especially for settlement purposes. I only vaguely remember Judge Wisot when he was on the bench, many years ago. Since becoming involved in the cases before him, I have asked several other attorneys for their opinions. If they remember him at all, their opinions are uniformly neutral: no one particularly likes or dislikes him.

I believe that JAMS and its overpaid mediocre group of retired judges has a cozy relationship with big law firms. The big firms agree to over pay for the services, and in return JAMS rules in their favor. I doubt very much that there is an express agreement along those lines, but my limited experience seems to suggest that is the case. I would welcome a detailed survey of the success rate of big firms in cases tried by JAMS versus cases tried in open court, and subject to review. In the meantime, I will continue to use ADR Services, and avoid JAMS.


wayne said...

Do any of the large law firms have any interest in these arbitration businesses?

Kevin said...

I'm guessing any study would be hamstrung by the private nature of the rulings. Off the top of my head, the way to get this done would be state legislation requiring JAMS and comparable businesses to make (anonymized) data available to researchers -- with fields either naming law firms or including rough info about size of firm.