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Corrupt JAMS Judges

JAMS Private Judges Accused of Corruption

Corrupt JAMS Judges

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.

Tom Girardi & JAMS Defraud Clients

How Tom Girardi Used JAMS to Defraud Clients

Tom Girardi & JAMS Defraud Clients

Tom Girardi has been accused of using JAMS to defraud clients. Girardi was a highly respected California attorney who spent decades representing plaintiffs in class action lawsuits against corporations. JAMS, previously known as Judicial Arbitration and Mediation Services, is the largest private mediation and arbitration company in the world with more than 400 former judges and legal professionals serving as arbitrators and mediators in California, Texas, New York, and other states. JAMS has come under intense scrutiny from arbitration lawyers and others in the legal community as several of the company’s judges were accused of unethical conduct and corruption.

To learn more about the fraud allegations against Tom Girardi and the JAMS private judges, keep reading this blog.

Tom Girardi Used to Be a Respected California Attorney

Tom Girardi’s abuse of the private judging system lasted decades and affected thousands of clients. Earlier in his legal career, Girardi was one of the lawyers responsible for the case that later inspired the acclaimed movie Erin Brockovich. As an attorney for residents of Hinkley who got cancer from local drinking water, Girardi helped to secure a $333-million settlement.

Girardi’s law firm eventually collapsed as more and more evidence came to light that he had swindled his clients out of millions of dollars. In 2022, Girardi lost his license to practice law in California and his law firm filed for bankruptcy.

Tom Girardi Stole Money from Clients

When a corporation gets sued in a contract dispute, employment claim, consumer action, or some other type of legal dispute, they often rely on JAMS to make sure that the case is handled behind closed doors with an arbitrator or mediator instead of a judge. Additionally, it is not uncommon for retired judges with JAMS to be asked to administer large settlements in mass tort cases. In Girardi’s cases, the JAMS judges failed to notice and/or take action when Girardi stole millions from the parties. This is just one of several instances of JAMS private judges with a huge conflict of interest in the cases they oversee.

A forensic accountant who examined law firm finances determined that Girardi was using his clients’ settlements “like a slush fund.” An audit of Girardi’s financial accounts reportedly showed that he had stolen money from his clients and given it to companies and individuals who had no connection to any of his cases. Even when Girardi claimed that the money was spent on “expert witnesses,” the withdrawals were suspicious. For example, one withdrawal of $450,000 for an expert witness in a case against Lockheed Martin was “confidentially” approved by a JAMS judge.

Erika Jayne

At the time of his deceit involving JAMS, Tom Girardi was married to Erika Jayne, who is best known as one of the stars of the reality show “The Real Housewives of Beverly Hills.” According to one federal judge, Girardi committed multiple crimes when he used his clients’ settlement funds to cover personal expenses for himself and his wife. For example, Bankruptcy Court records indicated that Girardi gave $750,000 to M.M. Jewelers for the purchase of a pair of diamond earrings for his reality TV star wife. He did this shortly after gaining access to the settlement funds, and he reportedly classified the purchase as a case expense. A federal bankruptcy judge, Barry Russell, later said that Girardi’s use of client money to buy expensive jewelry “clearly was a crime” along the lines of theft or embezzlement.

At other times, Girardi took from his clients’ settlement funds to pay himself. Records showed that he would often write several million-dollar checks to his firm in the same week. In one case, Girardi withdrew more than $15 million. Girardi claimed that this money was for his “costs” of representing the plaintiffs, but the amounts and pattern of the withdrawals from the settlement suggested that it was fraud.

JAMS Private Judges Accused of Helping Tom Girardi Cheat Clients

Tom Girardi was able to get away with his deceit because he used private judges affiliated with JAMS. The JAMS private judges have wide latitude and wield substantial power in legal disputes precisely because there is basically zero government oversight of the private arbitration industry. California Supreme Court Chief Justice Tani Cantil-Sakauye reacted to the revelations about Girardi’s conduct by calling it “shocking.” Cantil-Sakauye commented further on JAMS by observing that there are currently not enough safeguards  to ensure that private judges remain fair and impartial. For instance, the retired judges are not subject to supervision by the Commission on Judicial Performance (CJP), an independent California agency tasked with investigating complaints of judicial misconduct.

Many of the JAMS private judges had impeccable reputations prior to joining the arbitration company, which allowed Tom Girardi to establish credibility even as he misappropriated money from his clients. He later used the perceived reputations of the “JAMS Neutrals” to deflect questions about his misconduct. When Girardi’s clients began to suspect that something was amiss with their settlement funds, Girardi actually referenced the private judges’ impressive credentials to justify his unethical actions. According to a Los Angeles Times investigation of Girardi’s fraud, the JAMS arbitrators “occupy a secretive corner of the legal world.” The private arbitration industry is almost entirely unregulated, which exposes parties to significant risks.

JAMS Profited from Tom Girardi’s Lawsuits

Private arbitration is a lucrative industry, and there can be plenty of financial incentives for the JAMS judges, arbitrators, and mediators to rule a certain way. In the aftermath of the revelations about the massive scale of Tom Girardi’s fraud and theft, many questions have been raised about whether the legal system has enough safeguards to protect litigants against predatory attorneys and unethical arbitrators when the JAMS Alternative Dispute Resolution (ADR) service is used. That’s because there can be a conflict of interest for JAMS arbitrators and mediators. This was especially true in Girardi’s cases, which involved Girardi paying the JAMS private judges up to $1,500 an hour.

In one of Girardi’s biggest lawsuits, he represented patients who claimed that a large drug company’s diabetes medication, Rezulin, had caused serious health problems, including liver failure. That case resulted in a $66 million settlement on behalf of the plaintiffs, many of whom desperately needed the money to cover their medical expenses. Girardi convinced the victims to allow a JAMS mediator to oversee the settlement and to supposedly ensure that the funds were distributed in the right amounts and to the right individuals. For this service, JAMS received a $500,000 cut of the proceeds.

What Did JAMS Judges Do to Earn Their Fees?

JAMS also received a $500,000 fee for handling the Lockheed Martin settlement that Girardi secured, an enormous figure that was kept secret from clients. When a bankruptcy court requested a full accounting of exactly what John Trotter and the other JAMS judges had done to earn that fee, the arbitration company refused to provide invoices.

Girardi eventually filed for bankruptcy, which has made it even more difficult for those he had deceived and stolen from to get the money they were owed. Incredibly, one of the companies participating in the bankruptcy proceedings is JAMS, which requested a sum of nearly $10,000 for “an unpaid bill.”

Conflicts of Interest When JAMS Oversees Legal Disputes

In addition to the obvious conflict of interest that exists anytime a company pays a JAMS judge to arbitrate a dispute or oversee a settlement, there were other less obvious conflicts with Tom Girardi. For instance, Girardi reportedly arranged for several JAMS judges to go on a Mediterranean cruise after they ruled in his cases. Although Edward Panelli later claimed that his attendance at the event did not affect his “impartiality as a jurist or neutral,” his actions as a JAMS private judge suggested otherwise.

Carousel Lawsuit

In one high-profile case, Girardi represented 1,500 residents of Carousel, a housing development located just outside Los Angeles. The clients were suing an oil company and a real estate developer allegedly responsible for polluted soil that caused widespread cancer and other health issues. After reaching a settlement with the defendants, Girardi specifically requested that JAMS and John Trotter serve as special master to determine how the funds should be divided among the plaintiffs.

After more than two years, many of the clients still had not been paid. When one of the clients requested information about Girardi’s accounting practices, Girardi once again placed the blame on Trotter and JAMS. When that same client sued Girardi, the attorney insisted that the lawsuit be moved from a courtroom into private arbitration. As usual, Girardi wanted the arbitration handled by JAMS. The perception was likely that a JAMS private judge would show favoritism and rule in Girardi’s favor.

Contact the California Arbitration Lawyers at Tauler Smith LLP

Are you one of the parties in an arbitration being administered by JAMS? Is your case being overseen by a JAMS private judge? The California and Texas arbitration lawyers at Tauler Smith LLP can help you. Our legal team represents small business owners and individuals in arbitration, mediation, and other types of alternative dispute resolution. We also handle settlement negotiations. Call or email us to schedule a free consultation.