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Dedicate state court judges to hear just business cases, and commercial litigants who had preferred federal venues will flock back to these specialized courts. At least that’s the experience of the states that have gone that route. But not all states are so inclined. The returning litigants had migrated to federal courts to get more cost-effective and predictable results, according to commercial litigators. That was bad business for states that wanted to create a welcoming environment for their commercial and technology sectors. The idea behind business courts is to develop a pool of judges who have the skills, expertise and desire to hear commercial cases, which are often complex. In a system that took root in New York state a decade ago, a commercial division judge both manages and hears an entire case. An example of what this has meant to litigants in New York County: Since 1992 — just before its pilot program began — the disposition rate for contract disputes has been cut from 648 days to 364 days, while the courts’ caseloads have increased substantially. States that felt or feared the whoosh of litigants teeming into New York’s commercial division, when they could, filled the vacuum with their own business-dedicated courts in hopes of keeping and attracting businesses. Another started up in Orlando, Fla., in Orange County, this January, the first in that state. Eleven states have business divisions or commercial programs within one or more of their trial court districts, according to a soon-to-be-published study sponsored by the University of Maryland School of Law and the Business and Corporate Litigation Committee of the American Bar Association’s Section of Business Law. “There is no question that one of the reasons these courts have been set up is to attract business — it’s become very competitive,” said Mitchell Bach, co-author of the study, “A Brief History of the Creation and Jurisdiction of Business Courts in the Last Decade.” “Even states that have programs are improving them because of the competition,” said Bach, of Philadelphia’s Eckert Seamans Cherin & Mellott. The size and shape of the threshold for access to these courts varies throughout the country and often within a state. In New York, the jurisdictional minimum varies from as high as $125,000 in New York County to as low as $25,000 in Albany County. But the state is still tinkering with the issue of what kind of cases qualify for its business courts; the guidelines vary from county to county. New York County is in the midst of a three-month pilot program that suspends rules that allowed judges some discretion in accepting cases based on their interpretation of the county’s commercial division guidelines. The jurisdictional minimum was also suspended. Cook County, Ill.’s Commercial Calendar, Philadelphia’s Commerce Case Program and Orlando’s Business Court are a close fit with the broad New York jurisdictional model, the study said. Philadelphia Bar Association Chancellor Gabriel L.I. Bevilacqua, a commercial litigator at Philadelphia’s Saul Ewing, worries that the experimental case management program could disappear overnight. “My goal is to make this experimental program an institution just like the other court divisions here in Philadelphia,” Bevilacqua said. “In order to do that we need legislative action . . . even if we don’t add any judges.” He champions the courts’ abilities. “They understand business and corporation law. They’ve dealt with it repeatedly. They understand complex commercial litigation . . . .A real key is the bench and bar partnership in which lawyers from our business litigation section apply to the supervising judge to serve as judges pro tem — discovery masters who refine issues and settle cases, an exceptionally effective way to handle the pretrial disputes which are inevitable.” COMPLEX LITIGATION While most of these courts have a preference for complexity, some require it. In North Carolina, cases are recommended to, and approved by, the chief justice of its supreme court before they are assigned to a business court. That determination is based on a case’s complexity, novelty, broad implications and subject-matter jurisdiction. Complexity is also required in Maryland and Massachusetts. In Massachusetts, a presumptive list of the kind of cases that fits its guidelines includes intellectual property, trade secrets, governance and internal affairs of corporations, partnerships and joint ventures, investment banking, brokerage firm matters, and mutual and money market funds. Robert Kerwin of Boston’s Tarlow, Breed, Hart, Murphy & Rodgers is a big fan of the state’s business courts. “The judges are the equals of any sitting federal judge [and] the court helps us get access and get results,” Kerwin asserted. “We don’t have to wait for a judge to finish his criminal docket before he hears my summary judgment motion.” CONCERN OF CRITICS Critics express concern that these specialized courts cater to the business community at the expense of other litigants. But Robert Haig of New York’s Kelley Drye & Warren — arguably the pied piper of business courts in this country and beyond — said that giving these cases to judges who have the expertise to manage them makes the entire court system more efficient. “Fundamentally, it’s just a reassignment of existing cases so that judges who are interested in business cases and who are good at resolving them get the cases,” said Haig, an adviser to 12 states and six countries when they considered establishing business courts. “It isn’t necessary to spend any money to create a business court.” And they don’t necessarily drain the court system of the best judges, said Haig, who has co-chaired New York’s Commercial Courts Task Force since its inception in 1995. “Good business judges are not necessarily the best judges in some abstract sense,” Haig said. “Instead they are judges who are interested in the special characteristics of business cases, which are document, motion and witness intensive. Not all judges want cases like that.” But the California legal community thought otherwise. Richard Aldrich, an associate justice of California’s Second District Court of Appeal, chaired a Judicial Council task force in 1998. Its mission was to determine the advisability and feasibility of establishing a business court. “We found that such a specialty court omitted a significant portion of the public and the bar,” Aldrich said. “For example, the tort bar was opposed to the concept because it might divert the best and the brightest to the business mold and then they wouldn’t be available for other kinds of cases.” The task force surveyed legislative leaders, attorneys in all specialties, judges and groups that frequently used the courts. Many found the concept of dedicated commercial courts elitist. “The only place we found support was within the business community,” he said. “So I came up with the idea of a complex litigation court, which was focused and had the resources to efficiently handle complex litigation and satisfy the needs of all these constituencies. There was broad support for it.” Aldrich then chaired the California complex litigation pilot program in 2000. These pilot courts eventually became permanent. They bear a remarkable resemblance to business courts, but are both more extensive and more limited. Types of cases included in its guidelines are antitrust and trade and securities litigation, but also included are environmental and toxic torts, mass torts and class actions. The rule defines a complex case as “an action that requires exceptional judicial management to avoid placing unnecessary burdens on the court or the litigants.” Some of the factors that determine whether the case falls within the courts’ purview are whether it is likely to involve numerous pretrial motions, difficult or novel legal issues, management of a large number of witnesses or a substantial amount of documentary evidence. Arizona and Connecticut have followed the California model, according to Haig. NEW JERSEY’S WAY New Jersey officials and judges don’t claim that the state has a business court. What they do have is a pilot program, in effect since 1997. In New Jersey’s two largest counties — Essex and Bergen — the program requires attorneys, when filing their initial pleadings, to determine whether their cases are both commercial and complex. Those cases are assigned to the commercial track where one judge is assigned to each county. That judge sees the case through to its conclusion. But these judges also have other kinds of cases on their calendars. In the rest of the state, complex commercial cases are managed and heard by a single judge, but the cases are randomly assigned. Less complex commercial cases are heard on the regular docket. In 17 of New Jersey’s 21 counties, in all commercial transaction cases, the parties are required to attend a three-hour mediation within 90 days of filing. There is no fee. “Thirty seven percent settle at the close of mediation with little or no discovery,” said Michelle Perone, chief of New Jersey’s civil court programs, although the parties sometimes pay mediators for additional hours. “The parties have pragmatic concerns and want to move on-discovery is more about getting attorneys up to speed.” Delaware, though, is the father of specialty courts with its 2-century-old and renowned Court of Chancery. Until 2003 it was solely a court of equity that heard corporate disputes, as well as other matters. That year its jurisdiction was expanded to allow it to handle technology disputes greater than $1 million and to mediate other business disputes when $1 million or more was at stake, if the parties consented to its jurisdiction. Other states that have a version of a business court are Nevada and Rhode Island. Michigan and Georgia may soon follow suit. Getting these courts started is never easy, even though legislation has rarely been required. Haig suggests that states take a minimalist approach, at first. “Just reassign a judge or two who have an interest and an aptitude to hear complex business cases,” he said. “And see how it works.” Delaware’s Chancery Court has a long history of carefully crafted published opinions. Following its example, many business courts are publishing their opinions so that litigators can better predict how these trial courts will rule in the future on case management and substantive issues. The use of alternative dispute resolution is encouraged in business courts and in hybrid courts. In Philadelphia and New York, the mediators are volunteers. “Though alternative dispute resolution and state of the art technology are essential parts of most of these courts,” said Bach, who is chair of the business courts subcommittee of the ABA’s business and corporate litigation committee of the Business Law Section. “It’s the quality of the judges that sets these courts apart — their expertise, fairness and expeditiousness.” Leonard Post is a reporter with The National Law Journal , a Recorder affiliate based in New York City.

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