JAMS is a private arbitration firm based out of Irvine, California. John Trotter helped to start the company, and today he remains one of the principals and a profit-earning shareholder. Trotter and other JAMS private judges have been accused of corruption for allegedly helping attorneys commit fraud and steal millions of dollars from clients. The absence of government regulation of the private arbitration industry has made it possible for unethical lawyers to take advantage of their clients and for big companies to abuse the arbitration system.
For more information about the corruption allegations against the JAMS private judges, keep reading this blog.
No Government Regulation of JAMS Private Judges
JAMS typically uses retired judges to serve as arbitrators and mediators in legal disputes, including business conflicts, contract disputes, intellectual property claims, personal injury claims, and civil rights actions. The former judges who administer cases are known as “JAMS Neutrals,” which is ironic because they are often anything but neutral.
A major problem with the JAMS private arbitration system is that the cases are decided behind closed doors and with little or no scrutiny. For instance, private judges are not subject to regulation by any government agency. The State Bar of California highlighted the issue by declaring in a statement that there is “no overarching regulatory framework for private judging or mediation.” California Supreme Court Chief Justice Tani Cantil Sakauye recently noted that there needs to be greater government oversight of the private judging industry so that litigants are protected.
JAMS Founder John Trotter Accused of Helping Disgraced Lawyer Swindle Clients
John K. Trotter was a retired California Appellate Justice with an unimpeachable record. Trotter began his legal career as a plaintiffs’ attorney in Orange County, and then moved on to the L.A. County Superior Court bench and later to the California Appellate Court bench. He eventually helped to start JAMS. At one point, the National Law Journal called Trotter “the most influential attorney” for Alternative Dispute Resolution (ADR) in the entire United States. Now, there are numerous questions being asked about Trotter’s role with JAMS, including whether he helped others use the private arbitration system to defraud participants.
John Trotter & Tom Girardi
John Trotter and JAMS have come under scrutiny in recent years for conflicts of interest in cases involving regular JAMS clients. In one extreme example, JAMS allegedly helped California attorney Tom Girardi steal millions from his clients. During his illustrious legal career, Girardi earned a reputation as a dogged defender of people who had been victimized by large corporations. In litigation involving aerospace company Lockheed Martin, he represented hundreds of workers who had contracted cancer and other illnesses on the job. After securing a massive settlement on behalf of his clients, Girardi enlisted multiple JAMS judges to fairly distribute the funds. The judges were tasked with determining exactly how much money each worker would get based on their specific injuries.
John Trotter served as the “special referee” who oversaw the distribution of settlement money to Girardi’s clients in another major case against a drug company that sold the diabetes medication Rezulin. The plaintiff alleged that the medication caused cancer, liver failure, and other maladies. After helping to secure a $66-million settlement, Girardi used JAMS mediator Trotter to oversee the distribution of funds. Instead of distributing the funds to the victims, however, Girardi diverted the money to his personal accounts. Moreover, while this fraud was happening, Trotter and JAMS did nothing to stop it.
In addition to having the final say on how funds were distributed in Girardi’s lawsuit settlements, Trotter also oversaw a $13-billion trust meant for the victims of Northern California wildfires. Any withdrawals from the settlement fund were supposed to reimburse the attorneys for legal costs related to the case, not for personal expenses. This is where it became apparent that Girardi’s relationship with JAMS judge Trotter was problematic. While Trotter approved millions of dollars in withdrawals for Girardi, he approved just $600,000 in withdrawals by another law firm that worked on the case. Moreover, this wasn’t the only time that a JAMS private judge has been accused of showing favoritism to one party over another.
JAMS Judge Jack Tenner Allegedly Signed False Documents to Defraud Litigants
One of the JAMS judges in the Lockheed Martin case was Jack Tenner, a respected jurist who spent a decade serving on the Los Angeles County Superior Court bench. As an attorney, Tenner had fought against racial discrimination in the city. While serving as a mediator in the Lockheed litigation, Tenner allegedly helped Tom Girardi cheat clients by signing false documents on L.A. County Superior Court letterhead. Those documents directed Comerica Bank to release millions of dollars to Girardi. Later, when Girardi came under fire from clients who questioned what he was doing with their money, Tenner explicitly supported the attorney. In a letter to the plaintiffs, Tenner said that he had personally approved all settlements and legal fees.
JAMS Judge Edward Panelli Accused of Corruption
Another JAMS judge accused of corruption is Edward A. Panelli, a retired California Supreme Court Justice. Panelli socialized with Tom Girardi even as he worked on JAMS cases for the dishonest lawyer. Panelli was chosen by Girardi to oversee the settlement distribution in a high-profile case involving a menopause drug called Prempro that allegedly caused cancer in elderly women. When many of the plaintiffs started asking questions about why they had yet to receive their portion of the $17 million settlement, Girardi said that he withheld the funds because of an order issued by Panelli. Girardi then refused to turn over financial records, as was required under California law.
Girardi’s claim that Panelli was forcing him to withhold funds from the cancer survivors turned out to be a lie. In fact, Panelli had no legal authority over the case because no court had ever appointed him to oversee the settlement. Moreover, Panelli had only spent around 20 hours working on the case. (For which JAMS billed the law firm $78,000, with another $50,000 payment being made directly to Panelli. This amounted to a $5,000 per hour pay rate.) To make matters worse, Panelli – even in his limited capacity – never instructed Girardi to hold back the money. A California magistrate judge later evaluated Panelli’s actions and concluded that the JAMS judge was culpable in the fraud because he had “rubber-stamped” all of the unlawful payouts to Girardi.
In the Prempro case, Girardi even tried to use Panelli to stop a lawsuit filed by the plaintiffs. When the clients sued Girardi, he argued that the case should be transferred from federal court to a private arbitration with Panelli making the final ruling. Not only did Girardi fight back against subpoenas and court orders, but so too did JAMS. After Girardi’s clients filed lawsuits to ensure transparency and so that they could finally get their settlement funds, JAMS spent months pushing back in court.
Other JAMS Judges, Arbitrators, and Mediators Allegedly Helped Tom Girardi Steal Settlement Funds
John Trotter, Jack Tenner, and Edward Panelli were not the only JAMS judges accused of helping Tom Girardi scam his clients. One former judge allegedly signed a fake court order that allowed Girardi to secure $3.5 million from a settlement fund meant for workers of Lockheed Martin who had been poisoned at the company’s Burbank facility. Another former state Supreme Court justice employed by JAMS allegedly assisted Girardi as he stole more than $1 million from cancer survivors.
Contact the California Arbitration Lawyers at Tauler Smith LLP
Tauler Smith LLP is a law firm with experience handling legal disputes that require mediation and arbitration in California, Texas, and New York. Our experienced arbitration lawyers also represent small business owners in class action lawsuits against JAMS. If your case is being administered by JAMS, it is very important that you contact one of our attorneys immediately. Call us or send an email.