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California judges freaked out 10 months ago when a state appeal court issued a ruling that threatened their participation in arbitration and mediation cases. Even state legislators felt their pain and overwhelmingly backed a bill — signed into law by Gov. Arnold Schwarzenegger in September — that had the express purpose of eliminating the offending opinion. Now, however, everybody involved in the case, which has been taken up by the state Supreme Court, has muddied the waters again by interpreting the amendment in three different ways. The petitioner — Hartford Casualty Insurance — and the respondents — C3 Entertainment Inc., Knuckleheads Inc. and Earl Benjamin — each claim the new legislation resolves all issues in their favor. But the California Judges Association, participating as amicus curiae, contends that there is still one loophole that could haunt judges. “The amendment addresses several of the questions presented in this appeal,” Elwood Lui, a Jones Day partner who represents the CJA, told the court in an Oct. 19 letter. “But there remains an important issue that warrants the court’s review — whether the existence of grounds for disqualification automatically extinguishes the authority of a judge who in good faith fails to recuse himself.” Now the Supreme Court, which requested the parties’ views on the amendment, will decide who’s right or wrong. Judges’ worries began in December when Los Angeles’ 2nd District Court of Appeal ruled that jurists could be disqualified from arbitration and mediation cases if they had even remotely discussed employment with companies that provide alternative dispute resolution. The court also held that judges’ past decisions could be voided. The case reached the appeal court after Los Angeles County Superior Court Judge Aurelio Munoz refused to vacate fellow Judge Jon Mayeda’s order denying summary judgment in a breach-of-contract case. Mayeda had recused himself from subsequent decisions — including a motion for a neutral referee — after disclosing that he had been contacted by several ADR providers concerning employment in the two prior years. The appeal court said Munoz erred by not vacating Mayeda’s order. “The fact is that Hartford challenged the order denying its summary adjudication motion as having been made by a disqualified judge,” Justice Orville Armstrong wrote. “Thus, whether void or voidable, the order must be vacated in this case.” Justices Paul Turner and Richard Mosk concurred. Thomas Hollenhorst, a justice on Riverside’s 4th District and past chairman of the CJA’s ethics committee, said earlier this year that the ruling had the potential of “knocking a lot of seasoned judges off the calendars” and invalidating many rulings. At the CJA’s urging, the Supreme Court took the case in March. At the same time, the association and the state’s Judicial Council pursued a legislative amendment to the state’s Code of Civil Procedure that would clarify the grounds for disqualifying judges in civil matters. The amendment, which became effective Sept. 22, says judges cannot be disqualified from ADR cases if they have rejected unsolicited offers of employment from ADR providers or if there is only the mere potential they could be appointed as a neutral arbitrator. A week after the bill became law, the Supreme Court asked the key participants in Hartford Casualty Insurance v. Superior Court (C3 Entertainment), S131554, to explain the legislation’s impact on the case. Attorneys for the two opposing parties couldn’t be reached for comment, but in letters to the court they quickly claimed victory for their clients. Drew Pomerance, a partner at Woodland Hills’ Roxborough, Pomerance & Nye who represents the respondents, argued that the amendment “makes clear” that the 2nd District’s ruling was wrong and moots all issues. “The amended language now requires that there must actually be discussions and negotiations that are intended to lead to employment,” he wrote in an Oct. 4 letter. “A mere response to unsolicited statements about prospective employment which simply results in the judge politely declining the offer does not constitute participation in ‘discussions.’” Dean Herman, a partner in L.A.’s Michelman & Robinson who represents Hartford Casualty, came to a different conclusion, arguing that the amendment resulted in only limited revisions and seems to confirm that as soon as circumstances requiring disqualification are apparent, the judge’s orders and rulings are also vacated. “The Legislature could have amended [state statutes] to preclude a court from vacating a disqualified judge’s rulings under any circumstances,” he wrote in an Oct. 20 letter, “or to require a separate showing of good cause in addition to the existence of the good cause embroiled in the disqualification statute. The Legislature did not do so.” Herman contends that the appeal court ruling should stand, and that Mayeda’s order should be vacated. The CJA stands firmly in the middle, arguing that the case should go forward so the state Supreme Court can take a closer look at the issue of good cause. “Under the court of appeal’s interpretation, the judge’s orders must be vacated even if there is no good cause — that is, even if the judge’s impartiality in entering the order could not have been affected by the grounds for disqualification,” Lui wrote. “The court of appeal’s rule,” he added, “is contrary to the statute, is unfair to litigants, encourages gamesmanship by parties dissatisfied with a particular ruling and undermines public confidence in the judicial system by creating the misimpression of abuse of authority by judges.” In a telephone interview last week, Lui chuckled at the opposite views expressed by Pomerance and Herman. “They both say the change in the statute benefits them,” he said. “That cannot be the case. They both can’t be right.”

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