After announcing his retirement last fall, Los Angeles Superior Court Judge Haley Fromholz was bombarded with calls, mostly from lawyers who wished him well.
Also reaching out to the judge were executives at local alternative dispute resolution companies. They were trying to recruit him for a gig as a "neutral." A "neutral" is the legal industry term for a mediator or arbitrator who can earn hundreds of thousands of dollars a year.
"There were several alternative dispute resolution companies that wanted to have conversations with me," said Fromholz, who recently joined one such firm.
After a period of frenzied growth in the private dispute resolution industry, fierce competition among Southern California companies has erupted because snagging big names has become more important.
"These people know when you have reached your maximum retirement benefits and all of a sudden you start getting calls and they want to take you out to lunch to discuss your future," said James Albracht, a former Los Angeles County Superior Court Judge who joined ADR Services Inc. when he left the bench five years ago.
The companies are currently competing over Los Angeles Superior Court Judge Dzintra Janavs, probably best known for being reappointed to the bench in 2006 after losing her seat to the owner of a bagel shop. Janavs announced her retirement last month. She has declined to discuss her future plans. It is not certain she will become a neutral.
"We don't like to admit it, but we are all vying for the same judges," said Amy Newman, president of Los Angeles-based Alternative Resolution Centers, which employs more than 30 former judges. Newman declined to comment on her company's efforts to recruit Janavs.
Lucie Barron, president of Century City-based ADR acknowledged: "We fight over them like crazy."
Neutrals handle a gamut of matters normally settled in civil court, from complex cases with multiple parties and millions of dollars at stake to common disputes over real estate transactions, insurance disputes and employment issues.
The alternative dispute resolution business has boomed in recent years as mandatory arbitration clauses have become almost ubiquitous in American workplaces because businesses believe it is much faster and cheaper to settle disputes outside of court. Also, parties seeking a relatively quick resolution to their dispute find it worthwhile to pay a neutral in order to avoid the delay of backlogged courts.
As a result, there's been a scramble to hire judges. Not all arbitrators and mediators have served on the bench, but executives at local dispute-resolution companies said former judges with recognizable names are easier to market.
"You want to get the people with the best reputations, and in Los Angeles that is judges," said Barron, whose privately held company has more than 40 retired judgers on its roster. "This is not the case in San Diego or San Francisco, but in Los Angeles, most clients prefer judges."
Jay Welsh, executive vice president and general counsel at Irvine-based Jams, which has an office in L.A., agreed.
"It is a regional preference," he said. "Not everywhere in the United States are judges the preferred mediators, but in California the marketplace reflects the history in this area of alternative dispute resolution being started by former judges."
While most company executives and former judges were hesitant to admit it, money plays a major factor in the recruiting process.
"They will dangle some pretty large figures in front of you," Albracht said. "They will say you could make up to $700,000 a year, if not more."
While that kind of money is only earned by the most productive neutrals, it is not difficult to see how those salaries are reached.
Fromholz charges $3,000 for a half day and $5,000 for a full day. He describes these as "standard rates" for neutral services. Therefore, if a neutral were to work full time every weekday except for vacations and holidays, he could bill about $1.2 million a year.
The salary can be attractive to Los Angeles County judges. According to a 2004 report by the National Center for State Courts, California trial judges earn an average annual salary of $143,000. And it's especially attractive to judges who have qualified for the maximum retirement benefit of 75 percent of their salary.
"This creates an enormous temptation to leave the bench," Albracht said.
Judges are not the only ones who are attracted to the sector. Alternative Resolution Services announced last week that former Los Angeles Mayor James Hahn would join the firm as a neutral.
In addition to ADR Services, Alternative Resolution Centers and Jams, the other dominant players in the local market for mediation and arbitration services are American Arbitration Association and Santa Ana-based Judicate West.
Fromholz, who declined to name the companies he met with, was especially sought after because of his experience with complex civil litigation, such as the sexual abuse lawsuits against Southern California archdioceses.
He ultimately joined Jams, where he started last week, because "it has a very high reputation and I have a number of close friends who are on the Jams panel."
Jams employs more than 200 neutrals throughout the country, with the largest concentration of them in Southern California. The company's local roster includes a number of prominent former judges such as Lourdes Baird and Dickran Tevrizian.
Jams requires its neutrals to provide their services exclusively through the company. The company is run almost as a co-operative by the neutrals, who each receive a single share after meeting specific requirements.
The company is a market leader in Southern California and reportedly generates annual revenues of $105 million. Welsh would neither confirm nor deny that figure.
ADR Services, Judicate West and Alternative Resolution Centers are privately held companies. Executives at these companies declined to disclose revenue figures.
Barron at ADR Services said the market has matured somewhat over the past two years. While four and five years ago she was experiencing revenue growth of 30 to 40 percent, it has slowed to around 12 percent.
This drop in growth may partly explain the competition for well-known judges, who are easier to market.
ADR Services and some of the other companies allow neutrals to provide their services through other companies, but when recruiting retiring judges even these companies encourage exclusivity by promising additional marketing efforts.
"If you go exclusive," Albracht said, "They will do advertising. If you say I don't want to be exclusive they will process your matters and take a cut but they won't promote you."
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