Matters Column

Specialized ‘business courts’ arrive in Michigan

February 15, 2013
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Find me one executive or business owner who likes litigation. Unfortunately, your search might be as painstaking as a lawsuit. Lawsuits take a long time. They cost a lot. And who knows how they will turn out?

To keep up with the Joneses, Gov. Rick Snyder recently signed legislation requiring "business courts" to be established in all circuits with three or more circuit judges. About 25 states have enacted legislation establishing similar courts, and no state that started a similar program has abandoned it.

Proponents believe that the new law will help Michigan attract new businesses and keep old businesses. The innovative business courts show that Michigan is willing to adapt to the needs of businesses.

The new law is patterned after the Kent County Business Court pilot program. The Act — House Bill No. 5128 — took effect Jan. 1 of this year.

Businesses like planned results, which is typically not what they can expect in litigation. In this regard, the Act seeks to improve consistency in decisions involving business issues. 

By assigning judges to regularly handle business cases, it is intended that the business court judges will develop expertise in business issues. Additionally, the business court will publish its written opinions on a website, which should improve predictability through consistency of opinions. 

Furthermore, business decisions are often centered around costs, which are often a pitfall in litigation. Another purpose of the Act is to reduce the cost of litigation. The manner in which the court is likely to treat particular issues (such as discovery disputes, preliminary injunctions, or summary disposition motions) might become more consistent and predictable. 

This predictability of result may help reduce motion practice and could increase the likelihood of settlement because lawyers and parties to litigation may become more certain of outcomes without the necessity of court appearances.

Finally, the court will utilize electronic communications to reduce costs by integrating audio, video and Internet conferencing for hearings and proceedings.

The Michigan Act has a fairly expansive definition of the types of cases that fall within the business court docket. Cases are to be assigned to the business court if the damages at issue exceed $25,000 and the action includes a business or commercial dispute, including where a counterclaim, cross-claim, third-party claim, or amendment includes a business or commercial dispute. A case will be subject to the business court's jurisdiction even if it involves a mix of commercial and non-commercial claims.

However, expressly excluded from the business docket are personal injury cases, family law matters, probate matters, proceedings to enforce judgments, landlord–tenant matters, foreclosures of residential property, no-fault cases, insurance coverage disputes involving a consumer, employment discrimination claims and worker's comp claims.

Smaller circuits, upon deciding to do so, also can create business courts. The circuit court's administrative order establishing procedures for the business court can provide that one or more probate or district judges within the circuit may exercise the power and jurisdiction of the business court. It remains to be seen whether any courts will choose to designate a probate or district judge as their business court judge.

At least 17 counties will be affected by the Act, including Kent, Kalamazoo, Berrien, Muskegon, Ottawa, Calhoun, Mecosta and Osceola County. These business courts will have to meet standards set by the Supreme Court administrative office for e-filing, telephone/video conferencing and early alternative dispute resolution.

Business courts are expected to flourish just as probate and family courts have flourished. Probate and family courts work on the premise that judges are more effective and efficient, and outcomes are more predictable, when judges develop expertise in a specific area of law. Michigan hopes to see the same success with business courts.

Even though enactment of the law presumably means Kent County's pilot program has been a success, the pilot program was not perfect.

For example, Kent County will need to alter the categories of cases that are subject to the business court's jurisdiction. Similarly, Oakland County's pilot program required damages of at least $500,000 for a commercial dispute to fall within its business court's jurisdiction, which is also subject to conform to the new law.

Will any businesses like litigation now? No — but at least they might save some time and money, and also have a better idea of what they are facing.

Kyle Konwinski is an associate in the Trial Group in the law firm of Varnum LLP.              

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