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For the purpose of the show, she is not a judge but an arbitrator. Arbitration is a informal process in which both parties empower the arbitrator to make a decision. Arbitrators do not have to be a judge, they can be a (trained) private party hired to make a decision. Arbitration does not have to be conducted in a courtroom, it can be processed privately. They hear all the relevant information and then make a decision which is final and cannot be pursued elsewhere unless the arbitrator dismisses the lawsuit without prejudice
Everything I have read and heard about her show is that it is not staged or scripted. The producers scan court filings for random cases that might be entertaining. Out of a fund, both parties and witness if any are accommodated with air fare, hotel room and transportation to and from the taping. Both parties sign a waiver, agreeing to the arbitration.
They are paid each for their appearance on the show between 100 to about 205 dollars depending on how many days the show is being taped which is usually 2 to 3 days. Monetary awards are paid by the producer.