New York State has always been a commercial hub, but until the 1990s the litigation needs of businesses were not being met because dockets were overloaded and judges, without specialized experience in commercial issues, did not always invest the time and research necessary for complex commercial cases.
In 1995, New York created the Commercial Division, a business court for commercial litigation in the state trial courts. The Commercial Division began in New York and Monroe Counties, but now has 25 judges across 10 jurisdictions statewide. The Commercial Division located in Erie County hears cases from the eight Western New York counties that comprise the Eighth Judicial District. Similarly, the Monroe County Commercial Division has expanded to hear cases from eight counties comprising the Seventh Judicial District. In addition to Erie, Monroe, and New York Counties, the remaining Commercial Division parts are located in the Counties of Onondaga, Albany, Kings, Queens, Nassau, Suffolk and Westchester.
The goals of New York’s Commercial Division courts are to reduce expenses and promote efficiency and consistency in the disposition of commercial cases, while at the same time developing the relevant judicial expertise. The Commercial Division is truly a “business court” where the judges are dedicated to hearing commercial cases only.
Once a lawsuit has been filed, any party can request assignment to the Commercial Division for the following types of cases, so long as the monetary threshold is met:
Breach of contract, fraud, unfair competition, non-compete covenants and trade secrets
Commercial banking controversies and lender liability
Shareholder derivative, corporate governance and dissolution disputes
Environmental and commercial insurance coverage disputes
Transactions involving commercial real property
Real property tax assessment challenges where the value of the property is in excess of $1,000,000
Transactions governed by the Uniform Commercial Code
The monetary threshold ranges from $25,000 in Onondaga County, Albany County and the Seventh Judicial District (Rochester and surrounding counties) to $150,000 in New York County.
The monetary threshold in the Eighth Judicial District, including Erie and Niagara Counties, is $50,000. However, certain matters are expressly excluded from the Commercial Division regardless of whether they meet the monetary threshold amount: suits collecting professional fees; cases seeking declaratory judgment regarding insurance coverage for personal injury or property damage; residential real estate disputes; proceedings to enforce judgments (regardless of the nature of the underlying proceedings); first-party insurance claims and actions by insurers to collect premiums or rescind non-commercial policies; and attorney malpractice actions unless they arise out of a commercial matter.
The Commercial Division justices typically have greater expertise than their counterparts in non-commercial parts in the complex issues that arise in commercial cases, as well as in areas such as electronic discovery disputes that are increasingly prevalent in business litigation. Moreover, the Commercial Division justices and their staff take a “hands on” approach to their cases, conducting preliminary conferences early in each case to establish discovery and motion deadlines and to target a trial date.
While the Commercial Division operates pursuant to statewide uniform rules of procedure, there are some differences among counties and judicial districts. For example, counsel appearing in New York County’s Commercial Division must electronically file all papers in the action. At present, electronic filing remains voluntary in other counties and districts. Additionally, some Commercial Division justices have individual rules of practice that supplement the uniform rules of procedure, and may differ from justice to justice, such as whether oral argument on motions is required.
Another unique feature of the Commercial Division among the state trial courts is that its rules expressly require early assessment of electronic discovery issues. Specifically, at the preliminary conference, counsel must be sufficiently familiar with their clients’ computer systems so that they can competently discuss all electronic discovery issues that may arise in the case. These rules permit counsel to bring a client representative or outside expert “to assist in such discussions.” It is therefore imperative that commercial clients and counsel assess the clients’ computer systems, mobile devices, data access and retention issues early in the litigation.¹
At any stage of a case, a Commercial Division justice may refer the matter to mediation or for a settlement conference before a neutral third-party, a staff attorney or the judge him/herself. Such independent analysis of the strengths and weaknesses of a case and push for early resolution can be particularly useful in commercial disputes where the litigation costs, including electronic discovery costs, can be significant.
A newly-created Task Force on Commercial Litigation in the 21st Century will look for ways to further improve the speed and efficiency of commercial case resolution going forward. The Task Force is slated to consider proposed legislation to appoint seasoned commercial litigators as new judges, increasing referrals to alternate dispute resolution and establishing protocols to control electronic discovery costs.
Overall, the Commercial Division has reduced the time necessary to resolve commercial disputes and improved the quality of decision making in commercial cases. Because of this success, New York’s Commercial Division has served as a model for other jurisdictions, across the United States and internationally, that are interested in creating business courts.
If you seek more information about the Commercial Division, please contact Patricia A. Mancabelli, Associate in the Phillips Lytle Business & Commercial Litigation practice, at (716) 504-5777 or firstname.lastname@example.org. Phillips Lytle attorneys Joseph B. Schmit and Richard T. Tucker were contributing authors to this article.