The Court That’s All Business

Among the courts called upon to oversee the intricate business legal landscape of New York City, the Commercial Division of the Supreme Court of the State of New York for the County of New York is certainly the busiest.

New York City is one of the world’s leading centers for business, finance, technology, media, publishing and the arts. Consistent with New York’s leadership in these areas is a well-developed body of commercial law and courts that have the sophistication to adjudicate the inevitable disputes that often arise from complex business relationships.

Among the courts called upon to oversee the intricate business legal landscape of New York City, the Commercial Division of the Supreme Court of the State of New York for the County of New York, which is located in the borough of Manhattan, is certainly the busiest. While not the only court to adjudicate complex business disputes, the Commercial Division presides over an overwhelming majority of the commercial cases filed in the courts located in New York County. Unlike its federal counterpart — the U.S. District Court for the Southern District of New York — access to the Commercial Division is not restricted by stringent federal jurisdictional requirements, which, more often than not, cannot be met in most garden variety, albeit complex, commercial disputes. Moreover, while the federal court’s jurisdiction includes both civil and criminal matters, the Commercial Division is strictly a commercial court that presides over all types of business disputes ranging from breach of contract, business torts, partnership disputes and unfair competition claims to corporate governance issues, commercial insurance coverage disputes, shareholder derivative actions, commercial financing disputes, and so on.

OVERCOMING STATE-COURT BIAS

Yet, it is commonplace for many business litigants to avoid or attempt to avoid having their cases adjudicated in the Commercial Division or, in their words, “state court.” When asked why, the most common response of business litigants is that they do not want their case “stuck” in state court. While this view mostly comes from business litigants from outside of New York not familiar with the Commercial Division, it is also shared, surprisingly, by some very sophisticated business entities that are located in New York City.

This bias against state court has some justification when viewed in a historical context. The New York state court enjoyed a great tradition of leadership in the development and shaping of commercial law in the United States, which began with Chancellor James Kent and Alexander Hamilton, and continued through the first half of the 20th century when New York courts, led by esteemed jurists such as Chief Judge Benjamin Cardozo, were involved in issuing important and far-reaching decisions on business and corporate law that shaped commercial law in New York and beyond.

THE CHANGING LEGAL LANDSCAPE

Over time, however, New York’s dominance in commercial law faded. State-court dockets shifted away from commercial cases toward those that needed increased and often immediate attention as society’s needs changed. Commercial cases eventually took a back seat to personal injury cases, landlord-tenant cases, and family law and criminal matters. As a result, commercial cases would often be ignored for months, even years, without any real court oversight or action aimed at moving the case forward to ultimate resolution. Cases were often assigned to multiple judges at different times throughout the life of a case, resulting in a lack of judicial familiarity with a case. Consequently,
New York state court was no longer perceived as a sophisticated and experienced court when it came to commercial litigation.

By the 1980s, commercial litigators and their clients were looking elsewhere to have their cases heard, trying to get their cases into federal court, or going to the courts of Delaware (which already had a highly regarded specialized commercial court) when appropriate, or turning to arbitration. The negative perception of the state court did not go unnoticed by the court’s justices.

In January 1993, state Supreme Court justices were assigned administratively, on an experimental
basis, in New York County to hear commercial cases exclusively. That experiment was an immediate
success in terms of efficiency and the quality and consistency of the ultimate disposition of the commercial cases. While an overwhelming number
of lawyers viewed this experiment favorably, many lawyers still maintained their preference
to litigate their commercial cases elsewhere.

A PERMANENT COMMERCIAL COURT

In February 1995, the then-Chief Judge of the State of New York, the Honorable Judith S. Kaye, established a task force of jurists, lawyers, bar associations and business leaders to build
upon the experiment started in 1993 and create a permanent commercial court. In November 1995, the Commercial Division was created. In addition to providing a forum with commercial-law
expertise, the Commercial Division brought with it aggressive case management, an alternate dispute resolution (ADR) program, and new technology. Throughout its existence, the Commercial Division has experimented with and implemented ways to expedite and improve litigation, such as electronic filing of court papers, electronic access to court decisions, and electronic case management.

Today, the Commercial Division is made up of nine justices — experienced members of the New York State Supreme Court assigned to the Commercial Division for indefinite terms. Cases are accepted in accordance with written published standards. Among the categories of eligible cases are commercial contract disputes, cases involving commercial finance or commercial banking transactions, claims of commercial misrepresentation or unfair competition, matters arising out of commercial property transactions, major insurance matters, and Uniform Commercial Code cases.

Cases seeking monetary damages must have more than $100,000 at issue, a threshold met by most, if not all, complex commercial cases. Through the Commercial Division, the state court in New York County has regained and now continues the great New York tradition of leadership in the development of commercial law. Most importantly, it has provided a fair and efficient forum for the resolution of complex commercial disputes.

A RETURN TO THE GLORY DAYS

Quicker dispositions and increased confidence in the system have helped the Commercial Division restore the New York court’s role as a leader in developing and shaping commercial law.

In 1992, breach of contract cases filed in New York County had taken an average of 648 days — more than 18 months — from filing to disposition. By 1998, the time had been reduced to 412 days. Further, in 1998, 58 percent of those cases referred to the Commercial Division’s ADR program had been settled. By 2006, 80 percent of contract cases in the Commercial Division were resolved in 340 days or less, and the ADR program continues to result in settlement for a majority of cases referred to the program.

The Commercial Division has returned the New York court to its role as a leader in developing and shaping commercial law, once again issuing important and far-reaching decisions covering the gamut of commercial law. These decisions provide a valuable resource, guiding lawyers, their clients and judges in New York and beyond.

CONFIDENCE IN THE COURT

While praise for the Commercial Division has been uniformly high throughout the legal, business and political communities, the highest compliment is no doubt the level of confidence that commercial litigators and their clients have in the court. This confidence is illustrated by the number of important cases that are brought before the Commercial Division every day, including:

  • American International Group (AIG) sued private insurance agencies run by its former chief executive, Maurice Greenberg.

  • Chris-Craft Industries brought an action to block the acquisition of CBS Corp. by Viacom Inc.

  • Citigroup sued Wells Fargo & Co., Wachovia Corp. and the directors of both companies arising from Wells Fargo’s planned takeover of Wachovia Corp.

  • Dan Rather’s lawsuit for fraud, breach of fiduciary duty and breach of contract against CBS.
Share via
Copy link
Powered by Social Snap