Justice delayed has become justice denied for the Capital Region’s business community.

As this year’s $350 million cut to the state judicial budget trickles down to courtrooms across California, businesses, in particular, are finding themselves shut out from justice as rising fees and delays bump them out of the courtroom.

2011 was the third year in a row the judicial branch sustained significant cuts — about $600 million in total — and more slashing is expected. From small-claims courts to traditional lawsuits, businesses will need to carve out legal strategies to navigate costly courthouse delays for settlements, mediation and arbitration and balance the merits of their cases with the heaping costs of a drawn-out process.

“Just to get something filed is going to be a difficult and laborious process, and it’s going to be a long time,” says William Kershaw, a class action attorney with Kershaw, Cutter & Ratinoff in Sacramento. “It’s going to be tough.”

Kershaw sits on a civil courts advisory committee that in recent years has offered suggestions to Sacramento Superior Court on how to handle the effects of budget cuts.

Filing fees will likely go up yet again due to balance cuts — a controversial move because it prices people out of the court system — but services would likely be slashed otherwise.

“Currently, we do small claims, and we do that five days a week,” says Judge Laurie Earl, the incoming presiding judge for Sacramento Superior Court. “It may be that we reduce our small-claims calendars to one day a week or one day a month.”

Earl says Sacramento County Superior Court has about $18 million in reserves to help defray some of the cuts, but she needs that money to last over the next three years.

“If we would use all that in the first year, we would be broke,” she says. “We are really looking at kind of a three-year plan.”

The wheels of justice typically move slowly, but getting a courtroom for a civil case nowadays is tantamount to a true test of lawyers’ patience. Criminal cases always come before civil cases, making civil case scheduling unpredictable, a problem exacerbated by the city’s chronic judiciary shortage.

Sacramento Superior Court lacks about 50 judges, Earl says, so space was a priority even before this year’s $350 million in cuts to the statewide system. Already, it might take four to six months to file basic paperwork.

Janlynn Fleener, a real estate attorney with Downey Brand in Sacramento, paints a picture in which it easily takes far more than a year to reach trial. She describes a nightmare scenario wherein, after months of waiting, a trial might be bumped because of a pressing criminal matter.

“We can go to court on Monday and be told, ‘We don’t have a courtroom. Come back in three or four months,’” she says.

All these predicaments add costs — costs associated with paperwork delays and costs associated with paying someone to wait in line all day to file a routine motion. Couriers charge more because their jobs take longer; attorneys might spend hours preparing for trial only to have the date rescheduled.

“The reality is that litigation is extremely expensive,” Fleener says. “It’s more expensive now.”

The cuts will play out in all areas of the law — family, criminal, traffic and so on — but experts say businesses will likely feel the biggest brunt.

“They don’t have a lot of room because criminal cases per statute get the highest priority,” says J. Clark Kelso, a professor in the University of the Pacific McGeorge School of Law.

In the pecking order of legal priorities, Kelso says large class-action suits likely will continue to find courtroom space because of their potential broad scope and impact. Traffic court, cut by some courthouses, will remain in play because fines and fees generate state revenue. Family law — divorces, marriage, child welfare and custody — cannot be mediated. The remaining small claims and business-to-business civil suits are first targets for cuts.

“How is this going to affect small businesses in California? What would it mean to close small-claims court? What happens then?” Kelso says. “The options, frankly, for the trial courts at this point are very, very limited. Over the past four or five years … the courts have looked at every corner for savings.”

To navigate cuts, businesses first have to evaluate whether they have a case and the cash to warrant courthouse delays of at least 18 months. If it’s not worth that kind of time and money, they can choose not to pursue litigation or to go outside the courtroom for justice. This may be as simple as having both sides work out a settlement or turning to the private sector.

To this end, Daniel Yamshon, a Sacramento-based mediator and arbitrator focused on commercial real estate and construction law, says he expects business to pick up in the coming months. He sees cases that wouldn’t normally go to mediation — say, personal injury or product liability claims — suddenly take that route because attorneys and clients simply can’t afford to wait for due process and closure.

“Without the access to courtrooms, lawyers will have to turn to some alternative if they can’t negotiate a settlement between themselves,” Yamshon says. “Their primary duty is to serve their clients, and clients are going to be really unhappy with not getting access to the courtroom.”
 

“When you can’t get your dispute resolved in the public forum, it will ultimately cause a loss of credibility to the public legal system.”

Michael Belote, lobbyist, California Advocates Inc.

 Yamshon says the overall costs of arbitration — an informal court process with winners, losers and enforceable awards — tend to be lower than court proceedings; mediation, where no one is forced to settle and both parties can guide the settlement, is nominally more expensive. Either way, cases also tend to move along much more efficiently.

A number of attorneys, however, view mediation or arbitration as options only available to wealthier clients. “If sufficiently serious, they are going to have to seek … retired judges,” says Kershaw, the class-action attorney. “Frankly, only the upper economically tiered businesses would be able to afford this.”

Those alternatives might present a solution to a business community cut from the judicial process, but they are costly and do nothing to create an environment in which business can operate smoothly and efficiently. Instead, the cuts and litigation quandaries inject more uncertainty into an already dubious economy.

“What business needs as much as anything is reliability,” says Michael Belote, a lobbyist with California Advocates Inc., whose clients include the California Judges Association and California Defense Counsel. “What I think we lose — and I don’t want to make it sound like I am wrapping myself in the flag — but we have a constitutional right to a civil jury in California that we have counted on for 150 years.

“When you can’t get your dispute resolved in the public forum, it will ultimately cause a loss of credibility to the public legal system,” he says. “We have had a smoothly functioning judicial branch for civil disputes, and if that doesn’t exist, I think it’s a real diminution of democracy.”

The future of California’s court system may lie in the present.

Facing a $1.75 million deficit this current fiscal year, Placer County Superior Court announced 12 days of court closures between November and June, saving about $500,000. San Joaquin County Superior Court announced 46 layoffs in September. It also has closed its Tracy branch and one courtroom in Lodi in a bid to address its $1 million deficit.

Judge Robin Appel, presiding in the San Joaquin County Superior Court, says if further significant cuts occur, there simply won’t be a civil system in the county. Instead, civil cases will only be filed to preserve their statutes of limitations, “but we won’t be able to hear those cases until who-knows-when,” Appel says. “It is so bizarre to even think about that. We don’t even know what to say in response to what we will do. To think an entire community will literally be denied access to justice is not OK.”

As matters stand now, San Joaquin County Superior Court — which the Administrative Office of the Courts ranks as the most underfunded court in the state — still provides maybe four hours a week of small-claims litigation if time allows. Civil cases have massive delays, and the courtroom takes months to process judgments.

The current state of affairs points to a new normal in California courts. While the judiciary once worked toward having civil cases in trial within 18 months, the outlook now is rapidly shifting to five years, says Belote, the lobbyist with California Advocates.

The reality is that cases may need to be settled on the courthouse steps. “I think that probably the legal community is going to have to step up in more creative ways as we go forward about how to provide access to justice,” says Kershaw, the class-action attorney.

Small-claims cases may need to move from the courthouse to community mediators, and business executives are going to have to think long and hard about the costs of delays in the public system before making their case.

“There are limited choices, and none of them are good,” says Kelso, the McGeorge professor, describing how courthouses must handle the budget cuts. “Every choice they make, without question, will reduce public actions to the court and will delay certain types of cases.” For business, this is a costly new reality for the bottom line.