Arbitration/22/dp1st/mark2nd

By ELIZABETH HAYES

Staff Reporter

The case of Jeffrey Katzenberg vs. Walt Disney Co. is expected to get underway this week in a proceeding that will look a little different than your everyday court battle over $250 million.

By mutual agreement, the two sides will make their arguments before a retired judge in the law offices of Katzenberg’s attorneys as part of a proceeding known as trial by referee.

After all the attorneys have had their say, the referee will decide whether Katzenberg, a co-founder of DreamWorks SKG, should receive $250 million from Disney, or 2 percent of the profits from films and television shows he spearheaded during his 10-year tenure as Disney studio chairman.

The decision will then be submitted to an active Superior Court judge, who is likely to give it his stamp of approval.

Legal observers say handling such high-stakes cases through various forms of alternative dispute resolution (known as ADR) has become increasingly common. Last year alone, the American Arbitration Association and Center for Mediation helped provide retired judges and otherwise administered 2,000 cases.

And uncounted other proceedings were arranged through private firms without the help of the organization. “It’s been on the rise a number of years,” said Kelvin Chin, regional vice president of the association.

These private trials are increasing, first and foremost, because of massive court congestion. “It’s a quick way to get a dispute resolved. It can be taken out (of court) early before discovery and wind up costing less,” said retired L.A. Superior Court Judge Richard Harris, who is a mediator and arbitrator with JAMS/Endispute, a leading private provider of alternative dispute resolution.

Lawyers say the approach gives them more flexibility in scheduling because they can go to trial sooner and not risk delays caused by the busy schedules of judges.

But critics of arbitration point out that it can deprive people of their day in court and a chance to pursue a formal appeal. In addition, traditional rules of evidence don’t always apply, and discovery can be limited.

Alternative dispute resolution comes in a number of different flavors, all of which are more informal than a court trial. Along with trial by referee, parties in a dispute can choose mediation, which involves an impartial third party who makes a non-binding recommendation, or arbitration often before a retired judge which is binding.

Both sides normally split the $300 hourly fee for the judge, attorneys or others who hear the cases. They are normally staged in private and kept confidential.

The Katzenberg case has its own twists.

A preliminary settlement was reached months ago under which Disney agreed to pay Katzenberg an unspecified sum. A second phase of the case to determine the amount was originally set to be heard behind closed doors.

But earlier this month, an L.A. Superior Court judge granted a request by several news organizations to open the proceedings to the public.

Lawyers around town agree that alternative dispute resolution seems more common than ever.

“I would certainly think mediation of cases and controversies has grown exponentially,” said Ken Gibbs, an attorney specializing in construction disputes with Gibbs Giden Locher & Turner who handles two to three mediated or arbitrated cases a week.

“When you get great issues of principle, that’s difficult to mediate and come up with a compromise,” Gibbs said. “But (it’s another thing) when you’re dealing with money and why a construction project overran.”

Harris expects that in the next 20 years, the volume of cases in ADR will approach the number handled by courts. As a judge in Santa Monica for 14 years, he tried to send as many cases as possible to arbitration to free up court time for other legal disputes.

“The more cases that are removed (from the docket), the more people who can go to court,” he said.

He especially encourages mediation or arbitration in high-stakes malpractice and product-liability cases. “In those cases, I tell people if you don’t want to settle, go ahead and gamble,” he said.

Arbitration also has been favored in construction, entertainment and employment cases, in which specialized expertise is required. It’s also frequently used in cases pitting patients against hospitals.

A study by the Dispute Avoidance and Resolution Task Force determined the average cost of a litigating a construction case is $52,000, while mediating such a case averages $2,500. “It’s a realization there are better ways than the traditional way,” Gibbs said.

George Calkins, a member of the state Public Works Arbitration Panel, said another advantage of arbitration is that awards are not all-or-nothing.

“Arbitration is more flexible. You can break the dispute down in a number of claims,” said Calkins, a partner at Cox, Castle & Nicholson LLP in Century City.

For example, in a dispute between contractors and the state over work on the Century (105) Freeway, he found in favor of each side on various aspects of the case.