Do business courts really mean business? Many nonbusiness cases are being transferred to courts that were created to streamline disputes between companies. This trend weakens consumer protection.

Business courts are quietly emerging as the newest variety of tort "reform." Some states have established these courts to handle business-versus-business disputes, arguing that using specialized dockets will ease overcrowded court schedules and create a consistent, predictable body of business case law.

That might be true if these courts were strictly limited in their scope. But increasingly, business courts are hearing nonbusiness disputes--usually those brought against businesses by individuals. These include environmental litigation, products liability cases, and consumer class actions.

Some legislatures have given business (or "commercial") courts broad jurisdiction because they view them as having the resources and expertise to administer complex cases--whether they're business-related or not. Other states seem intent on creating one judicial body to establish case law on any issue that might affect business interests. The former reason for assigning nonbusiness cases to business courts may be misguided; the latter has the potential to seriously undermine consumer rights.

In many states, courts or legislatures have interpreted "business" cases expansively and allowed business courts to administer any dispute that "may have implications for business and industry beyond the conflicts of the parties to the litigation." (1) Such lawsuits have included

* consumer class actions against financial institutions

* products liability class actions against manufacturers

* construction defect cases brought by homeowners

* litigation filed by employees against employers

* lawsuits alleging environmental contamination, brought by individuals against oil companies.

The problem is that most states created business courts to benefit or attract businesses--not to benefit consumers or communities. For instance, the North Carolina Business Court was specifically formed "to assure that North Carolina offers a legal environment which provides the flexibility and support to allow businesses to operate successfully in [North Carolina] and which will attract [businesses] to locate and incorporate in North Carolina." (2)

In fairness, a recent report released by a commission studying the future of the North Carolina court clarified that "as with any tribunal, the business court applies the law uniformly and without regard to the identity or legal status of the parties." (3) But the same report also said, "Although it is impossible to quantify the new businesses attracted to this state by the creation of the business court, the available information is encouraging. For example, in 2001, Site Selection magazine chose North Carolina as the state with the best business climate in America." (4)

Is it appropriate that the body created to attract businesses is the same one assigned to adjudicate claims against businesses? This arrangement is dangerously ill-conceived and diminishes the public's confidence in the judiciary.

A national trend

At least 11 states--Florida, Georgia, Illinois, Maryland, Massachusetts, Nevada, New Jersey, New York, North Carolina, Pennsylvania, and Rhode Island--have specialized courts, or divisions, that handle complex commercial cases. (5) Other states have studied the concept, with varying results. In California, Court of Appeals Justice Richard Aldrich, who chaired a task force looking into such courts, noted that "the only place we found support [for business courts] was within the business community." (6) California instead designed a "complex litigation court," as did Arizona and Connecticut. But overall, the national trend is toward business courts. (7)

These courts tend to fall into one of three categories.

* The first type is best represented by Delaware's Court of Chancery, which was the first business court and remains the most notable. It is a court of equity that hears about 500 business cases a year but does not hear either business or nonbusiness cases that involve monetary damages. (8)

* The second category is the model used in New York, where the business court hears all cases within a defined dollar amount or within a broad business subject area. These would include antitrust matters, corporate governance issues, and ordinary contract disputes. (9)

* The best example of the third category is the North Carolina court, which hears complex disputes that "may carry the potential for a broadly instructive effect with respect to business." (10)

Business courts also vary significantly in terms of resource allocation. From 1996 to 2005, North Carolina had only one business court judge; it now has three. The New York Commercial Court began with five judges in one county and now has 20 to 25 across the state. (11) Florida has two business court judges in the Orlando division alone.

There are other differences among the business courts. Some jurisdictions have expressly limited the purview of their business courts, while others have not. Some states require business court judges to render detailed decisions.

North Carolina's business court

A leading expert on business courts has described the North Carolina Business Court as a "real gem," and many business leaders consider it a "national model of how specialty courts should operate." (12) Established in 1996, North Carolina's was one of the first business courts in the nation and presents an instructive example of both the advantages of business courts and the concerns associated with them.

Unlike cases in the federal and many state court systems, civil cases in North Carolina are assigned to a general rotation. Specifically, when a case is filed, it is not assigned to a single judge. Many different judges will hear motions, resolve issues, and preside at various stages of one case. In routine litigation, the involvement of many judges may pose no problem. But in complex, protracted lawsuits, it is usually better to have one judge preside over the case from start to finish.

In 1988, North Carolina attempted to address this concern by adopting a rule that permitted certain cases to be designated "exceptional civil cases" and assigned to a single judge. (13) Among other factors, courts consider "the number and diverse interests of the parties" and "the amount and nature of anticipated pretrial discovery and motions" when designating a case "exceptional." (14)

The two parties agree on a suitable judge and request that he or she be appointed to the case. The rule is widely used for a variety of lawsuits, including those involving issues of environmental, products liability, professional negligence, and insurance law.

One result of this rule is that it gives judges the skills and expertise to handle many types of complex cases. Given such a pool of well-qualified judges, there should be no need to assign complex nonbusiness cases to the business court. But while some "exceptional" cases remain in the civil courts, many others end up in the business court.

Originally, state law left the term "complex business case" undefined to promote flexibility, but recent legislation defines many lawsuits as "mandatory business cases." These are cases concerning obvious business matters such as corporate governance, dissolution, mergers and acquisitions, proxy and tender offer disputes, antitrust law, intellectual property, and technology disputes. (15) These cases automatically go to the business court.

But the business court still interprets nonmandatory "business cases" broadly (and ambiguously) as those where "the outcome will have implications for business and industry beyond the conflicts of the parties to the litigation." (16) This sweeping standard could encompass almost any complex civil dispute in which a business is a party. For example, a statute of repose in a products liability case may well have "implications ... beyond the conflicts of the parties." So might decisions concerning the enforceability of an arbitration provision against a consumer, or the interpretation of a homeowner's insurance policy.

In fact, most cases in which a business is a party could have far-reaching effects. In recent years, a large number of nonbusiness cases have been assigned to the North Carolina Business Court--often over the objections of plaintiff lawyers. In 2004, for example, several oil company defendants moved to have an environmental contamination case moved there. The assignment was granted despite the plaintiffs' objections. (17)

The same thing happened in a consumer class action against a major bank. (18) Consumer cases against product manufacturers, insurance companies, and other corporate interests all have also been assigned to the business court. (19)

Nor is this trend unique to North Carolina. One expert on the topic observes that most business courts hear "at least some type of consumer class actions." (20) He elaborates:

   Consumer class actions of a commercial nature
   are included within the business
   courts' respective jurisdictions by express
   court rules in Orlando, New York County
   and some seven other counties in New York
   state, Philadelphia, and Rhode Island. Also,
   Chicago's business court will hear consumer
   fraud claims, and the Massachusetts
   business court will hear complex consumer
   commercial claims, which is also likely the
   case in Maryland. (21)

While it is possible to defend the inclusion of derivative actions within the scope of a business court's domain, it is much more difficult to articulate why consumer class actions should be assigned there. Cases brought by citizens are not about business governance; they challenge the conduct of business. There is a big difference.

Is it proper or just for a court to hear a consumer class action against a bank if the court's stated goal is to "allow businesses to operate successfully" and to "attract [businesses] to locate and incorporate" in the state? Simply stated, the answer is no: Business courts should not handle nonbusiness cases--that is, suits by consumers, employees, and other aggrieved individual plaintiffs.

Mounting a challenge

If you're in a state that has a business court, you can challenge assignment of a case to it. You should oppose the transfer at the earliest opportunity, on the grounds that the purpose of a business court is to resolve cases between businesses, not between businesses and individuals.

Take the position that these courts can competently manage true business disputes, but not consumer disputes. In some jurisdictions, you can argue that business courts were designed to develop a body of business case law--not products liability, environmental, or employment law. If applicable, you might also seek assignment to a single judge--one who is not on the business court. This is another way of keeping your case out of business court.

In North Carolina, such arguments often prevail. Last year, defendants in several "payday loan" class actions moved to have litigation transferred to the business court. The plaintiffs opposed the assignment, and the trial court agreed. (22) In another consumer class action, a large insurance company defendant asked for a business court assignment. Acknowledging the merit of the arguments noted above, the trial judge refused. (23) In each case, the court designated the litigation "exceptional" and assigned it to a single judge.

Another avenue that plaintiff lawyers can take is to persuade state-court rulemakers to create a rule that would balance the interests of the litigants. Here we might take a leaf from the federal court rules on diversity of citizenship, which allow litigants who are not residents of a state to move their case to federal court.

The rulemakers could craft a rule allowing any noncorporate party (usually, individuals or classes) to decline a motion to remove the case to business court. In that way, any case--even one that does involve business--could remain in the regular state courts, where citizens have historically had the right to litigate. If, on the other hand, the noncorporate party wanted to move to the business court, he or she could approve the corporate litigant's request for a removal.

Another approach: to require, in every case, the consent of both litigants before a case could transfer to the business court. Under either of these rules, noncorporate litigants would keep control over their cases, helping to level the playing field where they are up against corporate might.

State trial lawyer organizations can play a role, seeking either legislation or judicial modification of rules that could be construed to permit business courts to hear nonbusiness cases. Nevada judicial rules have explicitly excluded from business court review products liability actions, wrongful termination lawsuits, and other claims by consumers against businesses. (24) This year, the North Carolina General Assembly may consider proposals to restrict the scope of its business court to true business-against-business cases.

In states where business courts are being considered, trial lawyers and likeminded consumer advocates should try to ensure that similar limitations are part of the deal--or insist that the legislature consider alternatives to business courts. A program like California's is a good example: It addresses the special needs of complex cases without creating a business court by assigning such cases to a separate, complex-litigation calendar.

Trial lawyers also should vigorously resist the creation of "business judgeships" at the appellate level. The Commission on the Future of the North Carolina Business Court supported establishing special "business panels" for the court of appeals. (25) The measure was not adopted.

To be effective, business courts need not have carte blanche to hear all cases that "may have implications for business and industry beyond the conflicts of the parties," as they do in North Carolina. For example, the success of the Delaware Court of Chancery, often cited as the progenitor of all business courts, has been widely acclaimed. (26) Many observers have identified the court as the reason the state leads the nation in business incorporations. And the Delaware court has never entertained nonbusiness disputes for money damages. Since its scope is not explicitly restricted to business--only cases--or, for that matter, any other cases its role as an equity court removes from its jurisdiction nonbusiness cases that seek money damages.

How can the victims of business misconduct get a fair hearing in a judicial forum whose stated role is to help companies succeed? It is a contradiction to put consumer-protection cases on business-friendly dockets. Trial lawyers should insist that the scope of business courts be strictly limited and should fight the transfer of their nonbusiness cases to these courts. In short, business courts should get back to business.

Notes

(1.) N.C. BUSINESS CT., ABOUT THE NORTH CAROLINA BUSINESS COURT: DEFINITION OF A COMPLEX BUSINESS CASE, available at www.ncbusinesscourt.net/New/ aboutcourt/(last visited Apr. 24, 2006).

(2.) N.C. SUPER & DIST. CT. R. 2.2 cmt. See also Mitchell Bach & Lee Applebaum, A History of the Creation and Jurisdiction of Business Courts in the Last Decade, 60 BUS. L. 166 (2004).

(3.) CHIEF JUSTICE'S COMM'N ON THE FUTURE OF THE N.C. BUSINESS CT., FINAL REPORT & RECOMMENDATION 6, n.1 (2004) (hereinafter CHIEF JUSTICE'S COMM'N). See also Ertel Berry, Lawyers Debate Keeping Consumer Actions on Docket, N.C. LAW. WKLY., Jan. 17, 2005, at 1.

(4.) CHIEF JUSTICE'S COMM'N, supra note 3, at 5.

(5.) Michael Dayton, Trend: Specialty Business Courts on the Rise, N.C. LAW. WKLY., Mar. 22, 2004, at 4.

(6.) Id.

(7.) Id.

(8.) North Carolina pointed to the Delaware court as a model, aiming to "make its court system as responsive and predictable as the Delaware Chancery Court in dealing with complex corporate issues." N.C. BUSINESS CT., ABOUT THE NORTH CAROLINA BUSINESS COURT: HISTORY OF THE COURT, available at www.ncbusinesscourt.net/New/aboutcourt/ (last visited Apr. 24, 2006).

(9.) Dayton, supra note 5, at 5.

(10.) Id.

(11.) Michael Dayton, Tennille Reflects on Role of State Business Court, N.C. LAW. WKLY., Mar. 22, 2004, at 4.

(12.) Michael Dayton, Business Court Commission Looking at Expansion, N.C. LAW. WKLY., Mar. 22, 2004, at 1.

(13.) N.C. SUPER. & DIST. CT. R. 2.1.

(14.) Id.

(15.) N.C. GEN. STAT. [section] 7A-45.4 (2005)

(16.) N.C. BUSINESS CT., supra note 1.

(17.) Adams v BP Prods. N. Am., Inc., No. 03-CVS-912 (N.C., Bus. Ct. filed Dec. 31, 2003).

(18.) Pittsv. Am. Sec. Ins., No. 96-CVS-658 (N.C., Bus. Ct. Mar. 27, 2006).

(19.) Coker v. DaimlerChrysler Corp., No. 01-CVS-1264 (N.C., Bus. Ct. Jan 5, 2004); Gaynoe v. First Union Direct Bank, No. 97-CVS-16536 (N.C., Bus. Ct. filed Sept. 15, 2000); Ruff v. Parex, Inc., No. 96-CVS-0059 (N.C., Bus. Ct. filed Jan. 6, 1996).

(20.) Berry, supra note 3.

(21.) Id.

(22.) Kucan v. Advance Am., No. 04-CVS-2680 (N.C., New Hanover County Super Ct. filed July 27, 2004).

(23.) Stevens v. Mut. of Omaha Ins. Co., No. 04-CVS-2615 (N.C., Johnston County Super. Ct. filed Sept. 13, 2004).

(24.) EIGHTH JUDICIAL DISTRICT CT., CLARK COUNTY NEV., RULES OF PRACTICE FOR THE EIGHTH JUDICIAL DISTRICT COURT OF THE STATE OF NEVADA, available at www.co.clark.nv.us/district-court/EDCR.pdf (last visited April 24, 2006).

(25.) CHIEF JUSTICE'S COMM'N, supra note 3, at 14.

(26.) See N.C. BUSINESS CT., supra note 1.

GARY W. JACKSON practices law in Charlotte, North Carolina.