21 November 2008

The Arbitration Industry is Hopelessly Corrupt

Normally, this is the sort of crap I don't give a damn about, specifically Dov Charney, CEO of American Apparrel, and his raft of sexual harassment lawsuits, but the machinations of this specific case show just how unbelievably corrupt this system is.

You see, Mr. Charney settled with one of his victims, and part of the agreement was that in addition to the money and a non disclosure agreement, that they enter into a "special" arbitration:
Los Angeles' 2nd District Court of Appeal revealed in an unpublished ruling Oct. 28 that attorneys for Charney, CEO of American Apparel Inc., a public company known for its racy ads, had conspired with lawyers for former sales manager Mary Nelson. Both sides had agreed, the ruling says, to enter into an arbitration whose outcome was preordained to favor Charney, and agreed to a press release stating that Charney "never sexualized, propositioned or made any sexual advances of any nature whatsoever toward Mary Nelson." Nelson, in turn, would get $1.3 million if she kept the settlement secret, according to the ruling.

The 2nd District, in an opinion authored by Justice Paul Turner, said that settlement -- which never went through -- would have raised "considerations of illegality, injustice and fraud." The court also held that the purpose of the proposed press release "was to mislead journalists and the public."
Of course this raises the obvious question:
The attempted under-the-table agreement raised some questions about whether JAMS Inc. arbitrator Daniel Weinstein -- a retired San Francisco Superior Court judge and co-founder of the 20-year-old JAMS -- had gone along with the ruse.
The answer is that it would have been impossible for him not to have known, of course, because of the precedent that they wanted used:
The appellate decision lays out the sham arbitration of the settlement. It stipulated that the arbitrator would absolve Charney of the sexual harassment claims based solely on his consideration of a California case, Lyle v. Warner Brothers Television Productions.

In that case, the California Supreme Court in 2006 reversed a lower court's finding that a writer's assistant on the television show Friends did not come up with enough evidence for a "hostile work environment claim" by contending that the writer used sexually explicit language during the writing of the show.
Any arbitrator, particularly one who is a retired Superior Court Judge, would look at the filings and think that one side was deliberately throwing the case. At that point, they would be required by legal ethics to notify the bar.


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