New York’s Commercial Division: The Premier Forum for the Resolution of International Business Disputes
5.7.2020
This article is part of New York Law: A View From the Bench, a special section in the May issue of the NYSBA Journal edited by Court of Appeals Associate Judge Michael J. Garcia. Read Judge Garcia’s introduction to the section here.
As recently noted by Chief Judge DiFiore, New York is “the preeminent commercial center in the United States,”1 and the Commercial Division of the Supreme Court of the State of New York provides an unparalleled forum for the resolution of international commercial disputes. Members of the global business community regularly designate New York as the forum for resolving their disputes and select New York law as the governing law in their contracts in order to bring predictability and certainty to their commercial arrangements. From the view of the Commercial Division bench, it is easy to see why New York is such a compelling venue for the international business community.
The Commercial Division Is Highly Experienced in Dealing with Foreign Litigants
New York’s courts are open to foreign commercial actors entering into international transactions. New York General Obligations Law § 5-1402 permits any party – including non-U.S. persons – to bring an action in New York courts where the parties have entered into an agreement that: (i) selects New York law to govern the contract; (ii) selects New York courts as the forum for the resolution of their dispute, or otherwise consents to the jurisdiction of the New York courts; and (iii) involves an amount in excess of $50,000 U.S. dollars. So long as these requirements are satisfied, the parties and their transaction need not have any other connection to New York.
To be assigned to the Commercial Division, a case must meet certain threshold requirements. For instance, the amount in controversy must meet a specified monetary threshold, ranging from $50,000 in Albany County to $500,000 in New York County. In addition, the Commercial Division has authority to adjudicate disputes concerning specified subject matters, including breach of contract or fiduciary duty, fraud, misrepresentation, business tort, statutory and/or common law claims arising out of business dealings, business transactions involving commercial banks and other financial institutions, internal affairs of business organizations, commercial insurance coverage, environmental insurance coverage, dissolution of business entities, and applications to stay or compel arbitration or to affirm or disaffirm arbitration awards, among others.
Accordingly, a merger agreement between a Chinese company and a Brazilian company could be subject to New York law – and resolved in the Commercial Division – even if neither party has any New York operations, and the transaction otherwise does not concern New York, provided that the parties clearly express their consent to the Commercial Division as the forum for resolution of any disputes concerning their transaction. Appendix C of the Commercial Division Rules includes sample “choice of forum” clauses that parties can insert into their contracts to clearly express their consent to the jurisdiction of the Commercial Division.
Foreign businesses entering into international transactions may not think to designate a U.S. jurisdiction in their agreements, but selecting the Commercial Division as the designated forum in an agreement between two non-U.S. parties provides a neutral forum for the resolution of any disputes that arise. Ensuring neutrality, especially in the context of high-profile international disputes, is especially important, and a neutral third-country adjudicator brings greater legitimacy and certainty to the outcome.
Justices of the Commercial Division Are Dedicated Commercial Specialists
International business actors are assured that Justices of the Commercial Division will treat their matters with precision and utmost professionalism. Justices of the Commercial Division are sophisticated and experienced jurists with deep experience handling complex commercial disputes. These justices maintain a specialized docket, dedicated exclusively to business disputes. Since these justices focus on commercial matters – without a general caseload including, for example, criminal or family law matters – they can devote their full attention to understanding the intricacies of complex agreements and transactions, and keeping up to date on the latest legal developments impacting business relations. Due to the specialized nature of the Commercial Division, its judges can foresee issues before they happen and can even suggest proactive approaches to litigants. Commercial Division judges are globally minded and comfortable tackling foreign business and foreign law matters.
The Commercial Division Rules Maximize Efficiency and Ensure Prompt Resolution
The preamble to the Commercial Division Rules states that “[f]rom its inception, the Commercial Division has had as its primary goal the cost-effective, predictable and fair adjudication of complex commercial cases.” That mission remains true today, and the dedicated procedural rules for the Commercial Division, located at 22 N.Y.C.R.R. § 202.70, are engineered to ensure the most efficient, prompt, and fair adjudication of the most complex disputes, including those of an international nature. Certain aspects of the Commercial Division Rules may be particularly attractive to foreign parties who select the Commercial Division as the designated forum in international transaction documents.
Rule 9(a), for example, provides for an accelerated adjudication process by which a case may be ready for trial in nine months, if not less. Parties may consent to accelerated adjudication by using express language in their contract, including the model language set forth in Rule 9(a). When a matter proceeds in the accelerated adjudication process, all pre-trial proceedings (i.e., discovery, pre-trial motions, and mediation) will be completed within nine months from the date that the initial Request for Judicial Intervention is filed.
The Commercial Division Rules are focused on providing for a reasonable and measured discovery process to ensure quick and cost-effective litigation. Foreign parties, especially from civil law jurisdictions, may be under a misapprehension that U.S.-style discovery is unduly lengthy and costly. The Commercial Division Rules address this concern. Rule 11-d, for instance, sets limitations on depositions. Unless otherwise stipulated by the parties or ordered by the court, depositions taken by plaintiffs, defendants, and any third-party defendants, are limited to 10, and each deposition is capped at seven hours per deponent. In addition, Rule 11-a limits interrogatories to 25, and Rule 11-b requires parties to meet and confer regarding the scope of privilege review, expressing a clear preference for categorical privilege designations rather than a document-by-document approach. In the event a requesting party will not agree to a categorical approach to privilege logs, the court may allocate related costs to the requesting party. The Commercial Division Rules on discovery thereby maximize the fact-finding aspects of discovery while minimizing time demands and expense.
If a matter before the Commercial Division proceeds to trial, Rule 26 permits the judge to limit the trial length. At least 10 days prior to trial, the parties to the litigation will provide to the presiding justice an estimated trial length. In necessary circumstances, the court may extend the total number of trial hours, but the parties will generally be held to the estimates they provide to the court. Enabling the justices of the Commercial Division to limit the length of trials ensures an efficient adjudication of the ultimate liability issues before a judge or jury. In non-jury trials or in evidentiary hearings, Rule 32-a permits the judge to require that direct testimony of a party’s witnesses be submitted in affidavit form. Permitting written testimony may be especially convenient to foreign litigants and may streamline the time spent providing testimony in a foreign proceeding.
Dozens of foreign countries have sent delegations to New York to visit and learn about the success of the Commercial Division. It proudly serves as a model for specialized commercial courts globally.
New York Law Upholds Intent and Promotes Predictability in International Transactions
New York provide a stable and reliable body of law for business contracts, and especially for international transactions. New York case law on contracts and commercial relations has a rare breadth and depth on a wide variety of specialized fields, ranging from mergers and acquisitions to insurance coverage, and from real estate transactions to international arbitration. New York case law covers virtually every type of business transaction.
It is a well-established principle of New York commercial law that courts will take a text-based approach to interpreting contracts. Judges applying New York law focus on the intent of the parties as expressed by the words they select in their agreements. New York is thus considered a “strict enforcement” jurisdiction, which provides stability to business parties. New York law also recognizes a covenant of good faith and fair dealings in contracts, and courts guard against abusive or dishonest conduct that violates the contract. In light of the foregoing, selecting New York law to govern international transactions ensures that the words of the parties’ contract are honored and that any disputes will be resolved predictably.
The Commercial Division is Technologically Equipped for Overseas Litigants to Monitor Proceedings
The Commercial Division operates a signature Courtroom 2000 technology platform, which includes the latest technology to facilitate efficient resolution of disputes and enable lawyers to communicate closely with their clients. Key aspects of the Courtroom 2000 platform include real-time court reporting capabilities that enable voice-to-text transcription of electronic transcripts that can easily be distributed to foreign clients. Overseas parties can therefore be kept apprised of court proceedings in the Commercial Division without having to attend in person. Additionally, Courtroom 2000 includes personal computer docking stations for counsel, enabling all parties to communicate with their clients and colleagues while proceedings are ongoing and have real-time access to research and resources. The Commercial Division is currently considering a new amendment to its Rules that would enable counsel to participate in certain court proceedings remotely via videoconferencing. Videoconferencing would further reduce the costs associated with court attendance and increase the speed with which proceedings can be held.
The Commercial Division Advisory Council Provides Regular Feedback from Businesses
The Commercial Division benefits from a dedicated Advisory Council, appointed by the Chief Judge of the State of New York. The Council advises the judiciary on how to make the Commercial Division the most attractive forum in the world for the resolution of complex commercial disputes. The Council is composed of current and former members of the judiciary, in-house counsel from some of the world’s leading companies, and respected members of the New York commercial bar. The Council provides regular recommendations to enhance the Commercial Division and make it even more responsive to the needs of the global business community. Despite achieving renown as a preeminent forum for parties to resolve complex disputes, the Commercial Division remains in a constant quest for self-improvement.
Barry R. Ostrager is a justice of the New York State Supreme Court assigned to the Commercial Division. This article could not have been written without the work of the Commercial Division Advisory Council, from which the author borrowed liberally.
1. 159 MP Corp. v Redbridge Bedford, LLC, 33 N.Y.3d 353, 359 (2019).
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