CPR INSTITUTE c ADR COUNSEL I N BOX NO.11 MAY2002

Private Judging by Consent BY KATHLEEN M. SCANLON A N D SUMlT BISARYA

Private judging by consent offers an alternative dis- pute resolution process that possesses a unique mix- ture of private control and judicial authority. The parties stipulate to present the matter to a private judge and the court consents to such a referral. Similar to arbi- tration, private judging by consent allows the parties to exercise greater control over the timing of the reso- lution and to select the adjudicator who will issue a binding decision. However, unlike arbitration, the de- cision from private judging typically possesses all of the attributes of a judicial judgment, including tradi- tional rights of appeal.

Private judging by consent is governed in some juris- dictions by state statute, including in California, Indi- ana, New York, Ohio, Rhode Island, South Dakota, Texas and Washington. See, e.g., Cal. Code Civ. Proc.1 638 (2001); Burns Ind. Code Ann. $8 33-13-15-1-33-13-

ORC Ann. 2701.10 (Anderson 2002); R.I. Gen. Laws $5 9-15-1 & 2 (2001); S.D. Codified Laws $5 15-13-1; 15- 20-6 (2001); Tex. Civ. Prac. & Rem. Code ’$$ 151.001- 013 (2002); Rev. Code Wash. (ARCW) $8 4.48.010-130 (2002); Scott H. Blackman & Rebecca M. McNeill, “Alternative Dispute Resolution in Commercial Intel- lectual Property Disputes,” 47 Am. U. L.Rev. 1709,

15-9 (2001); N.Y. CLS CPLR $$ 4317 & 4319 (2002);

‘7’5J n* 35 (‘9g8)* Moreover, Rule 53 of the Federal Rules of Civil Proce- dure provides for references to masters, which in some instances can be a form of private judging. Specifi- cally, Rule 53 provides that “[iln actions to be tried by a jury, reference shall be made only when the issues are complicated in actions to be tried without a jury, save in matters of account and of difficult computations of damages, a reference shall be made only upon a show- ing that some exceptional condition requires it.” How- ever, a magistrate judge may be designated to serve as a special master without regard to these restrictions upon the consent of the parties. Moreover, when the parties stipulate that a master’s finding of fact shall be final, “only questions of law arising upon the report shall thereafter be considered.”

Private judging without party consent also can occur under certain circumstances. See, e.g., Cal. Code Civ. Proc. 5 639 (2001); N.Y. CLS CPLR $ 4001 (2002); S.D. Codified Laws $15-13-2 (2001); Rev. Code Wash. (ARCW) $4.48.020 (2002). However, private judging

Scanlon is a CPR vice president and is editor ofthe ADR Counsel In Box. Bisarya is a CPR intern and is attending Columbia Law School in New York.

under such circumstances possesses certain restric- tions and procedures not applicable to that by con- sent. The focus of this ADR Counsel In Box is on private judging by consent.

FEATURES OF PRIVATE JUDGING BY CONSENT . Pursuant to the parties’ stipulation, the trial court re- fers a pending action to “private judge” (e.g., referee, master) for a hearing and determination. Some stat- utes permit referral even if a suit has not been filed.

With the parties’ consent, a court can direct a referee to try any or all issues in the action. Some statutes, however, limit the type of issues that can be referred. See, e.g., Burns Ind. Code Ann. $ ’$ 33-13-15-2 (2001)(is- sues must be based exclusively in contract, tort, or a combination). . Generally, parties select who will serve as their pri- vate judge, subject to approval by the court and some- times limited to selection from a pre-approved panel designated by the court.

+ The private judge possesses the powers of a sitting judge, except some statutes exempt contempt powers. See, e.g., Bums Ind. Code Ann. 4 $ 33-13-15-4 b) (2001).

+ The hearing before the private judge generally is conducted in the same manner as it would occur be- fore a court under the rules of evidence applicable to judicial proceedings. Some statutes permit parties to waive in whole or in part the rules of pleading, prac- tice, procedure, and evidence that are applied in a court proceeding. (See, e.g, Rev. Code Wash. (ARCW) ’$ 4.48.0Go (2002)). . Some statutes provide that the time and place set for the trial by the private judge be publicly posted and open to the public. (See, e.g., Burns Ind. Code Ann. $ 5 33-13-15- 7 (2001); Rev. Code Wash. (ARCW) 5 4.48.130 (2002)). . The private judge generally prepares a reasoned de- cision, which becomes the decision of the court. . Unlike an arbitral award, traditional appellate nghts typi- cally are preserved. (State statutes vary as to whether a pri- vate judge’s iin+ are examined at the trial court level or are subject instead to appeal in the usual way)

Fees for private judges are paid by the parties and allocated between them as they determine. Fees may be set by a statutory formula or negotiated depending on the particular jurisdiction.

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CONSIDERING ITS USE Similar to arbitration, private judging has been used to resolve a wide range of commercial disputes, in- cluding complicated patent disputes. See Scott H. Blackman & Rebecca M. McNeill, "Alternative Dispute Resolution in Commercial Intellectual Property Dis- putes," 47 Am. U. L.Rev. 1709, 171s (1998). Actions that involve matters of account or difficult computa- tion of damages also may be particularly suited to pri- vate judging. The broader appeal rights associated with a private judge's decision may be a desirable feature for parties who are seeking a process similar to arbi- tration in some respects-selection of their adjudica- tor and greater control over the timing of the resolution-yet with an outcome that is not as final as an arbitral award.

STATUTORY EXAMPLES OF PRIVATE JUDGING CA L IFO R N IA 5 638. Appointment of referee on agreement of parties

A referee may be appointed upon the agreement of the parties filed with the clerk, or judge, or entered in the minutes, or upon the motion of a party to a written con- tract or lease that provides that any controversy arising therefrom shall be heard by a referee if the court finds a reference agreement exists between the parties:

(a) To hear and determine any or all of the issues in an action or proceeding, whether of fact or of law, and to report a statement of decision.

(b) To ascertain a fact necessary to enable the court to determine an action or proceeding.

(c) In any matter in which a referee is appointed pur- suant to this section, a copy of the order shall be for- warded to the office of the presiding judge. . . . Cal. Code Civ. Proc. Gj8 (2001). See Sy First Family Ltd Parhership v. Cbeung, 70 Cal. App. 4" 1334.83 Cal. Rptr. 340 (4'h Dist. 1999).

Sample Stipulation and Order of Reference: [Title of Court and Cause]

It is hereby stipulated by the parties hereto, through their undersigned counsel, that trial by jury be waived as to [insert] herein; that said [insert issue or cause] be referred to [insert name] as referee to hear, try, and determine [said issue or all issues in this case whether of law or fact] and to report a statement of decision thereon; and that an order to this effect may be en- tered accordingly without further notice.

Dated: [insert]

Attorney for Plaintiff:

Attorney for Defendant:

It is so ordered.

Dated: ~ Judge:

INDIANA $3y13-15-2. Qualification of judge-Ebble cases

(b) A person may act as a judge of a case under this chapter only if:

(I) All parties to the action file a written petition with the executive director of the division of state court administration consenting to the case being heard by a private judge, and naming the person who they wish to have as a private judge; (2) The case is one over which the court in which the former judge served would have had subject matter and monetary jurisdiction; (3) The case is found exclusively on contract, tort, or a combination of contract and tort; and (4) The case is one in which a utility, as defined in IC 8-1-2-1, is not a party.

. . .

$ 33-13-15-3. Registration of former judges- Procedure for appointment of private judge

(c) The regular or presiding judge ofthe court in which the action is filed shall appoint the private judge to hear the action if the written petition of the parties to the action and the written consent of the private judge to hear the action is presented to the regular presiding judge:

(I) Contemporaneously with the fling of the action; or (2) After the action has been filed.

. . .

$3)-1y1p4. Procedures in matters heard by a private judge-Application of trial rules-Appeals

(a) All trials conducted by a private judge shall be con- ducted without a jury. (b) A person who serves as private judge has, for each case that he hears, the same powers as the judge of a circuit court in relation to court procedure, deciding the outcome ofthe case, attendance ofwitnesses, pun- ishment of contempts, enforcement of orders, admin- istering of oaths, and giving of all necessary certificates for the authentication of the record and proceedings. (c) All proceedings in an action heard by a private judge shall be of record, which shall be fled with the clerk of the circuit court in the county of proper venue under the Indiana Rules of Trial Procedure and made available to the public in the same manner as circuit court records. (d) The Indiana Rules of Trial Procedure apply for all actions brought before a private judge, and an appeal from an action or judgment of a private judge may be taken in the same manner as an appeal from the cir- cuit court of the county where the case is filed.

I3p-13-1p7. Place of proceedings-Notice (a) A case heard by a private judge may be beard

(I) At any time; and (2) At any place in Indiana;

that is mutually agreeable to all parties and the judge.

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(b) There shall be posted in the office of the clerk of the circuit court of the county in which the case is fled, in a place accessible to the public, a notice of the date, time and place of any proceeding which could result in a judgment. . . . Bums Ind. Code Ann. $ $3pxyiy1-33-13-15-9 (2001). See also Burns Ind. ADR Rule G (2001).

NEW Y O R K 8 4317 When reference to determine may be used (a) Upon consent of the parties. The parties may stipu- late that any issue shall be determined by a referee. Upon fling of the stipulation with the clerk, the clerk shall forthwith enter an order referring the issue for trial to the referee named therein. Where the stipulation does not name a referee, the court shall designate a referee. Leave of court and designation by it of the referee is required for references in matrimonial actions; actions against a corporation to obtain a dissolution, to appoint a receiver of its property, or to distribute its property, unless such action is brought by the attorney-general; or actions where a defendant is an infant. . . . 8 4319 Decision A decision of a referee shall comply with the require- ments for a decision by the court and shall stand as the decision of a court. Unless otherwise specified in the order of reference, the referee shall file his deci- sion within thirty days after the cause or matter is fi- nally submitted. If it is not filed within the required time, upon the motion of a party before it is filed, the court may grant a new trial and, in that event, the ref- eree shall not be entitled to any fees. N.Y. CLS CPLR $5 4317 & 4319 (zooz).

OHIO 8 2701.10 Registration of retired judges; referral ofcivil action or submission of issue or question.

(B)(I) The parties to any civil action or proceeding. . . unanimously may choose to have the action or pro- ceeding in its entirety referred for adjudication, or to have any specific issue or question of fact or law in the action or proceeding submitted for determination, to a judge of their choosing who has registered with the clerk of that court. . . . (C) Upon the entry of an order of referral or submis- sion . . . , the retired judge to whom the referral or submission is made, relative to the action or proceed- ing referred or the issue or question submitted, shall have all of the powers, duties, and authority of an ac- tive judge of the court in which the action or proceed- ing is pending. . . . (D) A retired judge to whom a referral is made under this section shall try all of the issues in the action or proceeding, shall prepare relevant findings of fact and conclusions of law, and shall enter a judgment in the action or proceeding in the same manner as if he were an active judge of the court. A retired judge to whom a submission is made under this section shall try the

specific issue or question submitted, shall prepare rel- evant findings offact or conclusions oflaw, shall make a determination on the issue or question submitted, and shall file the findings, conclusions, and determi- nation with the clerk of the court in which the action or proceeding is pending. Any judgment entered, and any finding of fact, conclusion of law, or determina- tion of an issue or question made, by a retired judge in accordance with this section shall have the same force and effect as if it had been entered or made by an active judge of the court, and any appeal from the judg- ment, finding, conclusion, or determination shall be made as if the judgment had been entered, or the find- ing, conclusion, or determination had been made, by an active judge of the court. . . . ORC Ann. 2701.10 (Anderson zooz). See also OH Gov. Jud. R. VI (Anderson 2002) (Rule VI. Reference of Civil Action Pursuant to Section 2701.10 of the Revised Code).

RHODE ISLAND $9-15-1. Reference by agreement of parties Any court may permit the parties in any civil action pending therein to enter into a rule of court to refer the action to the decision of one or more referees, to be agreed on by the parties, and also to refer in the same rule any other actions, causes of action, or suits that may exist between them, either jointly or sever- ally, generally or specially.

8 g-15-2. Reference without action or suit brought Though no action or suit is brought or pending, as pro- vided in $9-15-1, the district court may permit any per- sons or corporations who have any cause or causes of action not following the course of equity and the supe- rior court may permit any persons or corporations who have any cause or causes of action, existing between them, to enter into a rule of court to refer the cause or causes of action to the decision ofone or more referees, as provided in 5 9-15-1, either jointly or severally, gener- ally or specially; provided, that no rule entered into in the district court under the provisions of this chapter shall be made for any claim or claims which exceed in amount the sum of five thousand dollars ($5,000).

R.I. Gen. Laws 5 $ 9-15-1 & 2 (2001).

TEXAS 5 151.001. Referral by Agreement On agreement of the parties, in civil or family law matters, the judge in whose court the case is filed may order referral of the case as provided by this chapter and shall stay proceedings in his court pending the outcome of the trial. Any or all of the issues in the cases, whether an issue of fact or law, may be referred.

J 151.002 Motion for Referral Each party to the action must file in the court in which the case is filed a motion that:

(5) states the name of the special judge, the fact that the special judge has agreed to hear the case, and the

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fee that the judge is to receive as agreed by the parties.

5 IsI.oog. Procedure Rules and statutes relating to procedure and evidence in district court apply to a trial under this chapter.

8 151.006. Powers of Special Judge (a) A special judge shall conduct the trial in the same manner as a court trying an issue without a jury. (b) While serving as a special judge, the judge has the powers of a district court judge except that he may not hold a person in contempt of court unless the person is a witness before him.

$ I$I.oII. Special Judge’s Verdict The special judge’s verdict must comply with the re- quirements for a verdict by the court. The verdict stands as a verdict of the district court. Unless otherwise speci- fied in an order of referral, the special judge shall sub- mit the verdict not later than the Goth day after the day the trial adjourns.

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... $ 151.013. Right t0 The right to appeal is preserved. An appeal is from the order of the district court as provided by the Texas Rules of Civil Procedure. Tex. Civ. Prac. & Rem. Code 0 $ ISLOOX-0x3 (2002).

WASH IN CTO N $ 4.48.010 Reference by consent-Right to jury trial--Referee m a y not preside-Parties’ written consent constitutes waiver of right The court shall order all or any of the issues in a civd action, whether fact or law, or both, referred to a ref- eree upon the written consent of the parties which is filed with the clerk. Any party shall have the right in an action at law, upon an issue of fact, to demand a trial by jury. No referee appointed under this chapter may preside over a jury trial. The written consent of the parties constitutes a waiver of the right of trial by any jury having the right. . . . 5 4.48.0Go. Trial procedure-Powers of referee- Referee to provide clerical personnel (I) Subject to the limitations and directions prescribed in the order of reference, the trial conducted by a ref- eree shall be conducted in the same manner as a trial by the court. Unless waived in whole or in part, the referee shall apply the rules of pleading, practice, pro- cedure, and evidence used in the superior courts of this state. The referee shall have the same power to grant adjournments, administer oaths, preserve order, punish all violations thereof upon such trial, compel the attendance of witnesses, and to punish them for nonattendance or refusal to be sworn or testify, as is possessed by the court.

(2) A referee appointed under RCW 4.48.010 shall provide clerical personnel necessary for the conduct of the proceeding, including a court reporter.

. . . $4.48.110. Referee’s proposed report4pies- O b e o n s , &.--Request for hearing-Final report- Additional items to be fled-Exception-Copies

(I) Within twenty days after the conclusion of a trial before a referee appointed under RCW 4.48.010, un- less a later time is agreed to by the parties, the referee shall mail to each party of copy of the referee’s pro- posed written report. The proposed report shall con- tain findings of fact and conclusions of law by the referee and the judgment of the referee.

(z)[Provisions for objections and modification by the parties.]

(3) Upon completion of the final written report, the referee shall file with the clerk of the superior court [final written report and other items].

$ 4.48.120. Termination of referral-Judgment- Review of referee’s decision

(I) Upon receipt by the clerk of the court of the final written report filed under R C W ~ . ~ ~ . I I O , the referral of the action shall terminate and the presiding judge of the superior court shall order the judgment con- tained in the report entered as the judgment of the court in the action. . . . (2) The decision of a referee entered as provided in this section may be reviewed in the same manner as if the decision was made by the court.

$4.48.130 Notice of trial before referee

(I) If an action is to be tried by a referee appointed under RCW 4.48.010, at least five days before the date set for the trial the referee shall advise the clerk of the court of the time and place set for the trial. The clerk shall post in a conspicuous place in the courthouse [a notice with such information].

( 2 ) A person interested in attending a trial before a referee appointed under RCW 4.84.010 is entitled to do so as in a trial in a civil action in superior court. Upon request by any person, the referee shall give the person notice of the time and place set for the trial. Rev. Code. Wash. (ARCW) $4.48.010-1jo (2002). See also Wash. King. Super. Ct. LR 53.1 (2002) (Referees).

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Private judging by consent offers another choice for counsel and their clients to consider when seeking alternatives to litigation. It is an ADR option with which counsel should be well-versed, particularly when advising a client on available binding ADR pro- cesses other than arbitration. Research within the relevant jurisdiction needs to be conducted to iden- tify whether the private judging by consent option exists. Knowledge about this binding ADR process increases counsel’s ability to effectively advise and represent their clients. H

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