Business Court in Arizona? Maybe!

June 15, 2014

On May 8, 2014, the Arizona Supreme Court issued an order establishing the Business Court Advisory Committee. The order direct the Advisory Committee to investigate establishing a division of the Superior Court—our trial court—to handle business disputes. The Arizona Republic ran Arizona Panel to Study Idea for Business Courts a few days later, and it provides a decent overview.

One of the great challenges for a business litigator involves deciding whether to arbitrate and, if not, whether a jury should be involved. In many instances these choices are made when a contract or other business agreement gets signed.

Arbitration is often a default choice, too often because it carries positive connotations and courts don’t. In fact, in many cases arbitration costs more, in part because the parties are paying the “judge” or “judges.” Cases where the contract provides for using the American Arbitration Association are especially expensive, for its fees are high. (Check A Funny Thing Happened on the Way to Arbitration and Arbitration. Mediation. Settlement Conference. Huh? Both provide more details about arbitration.)

Assuming arbitration has not been selected in advance—if it has, and at least one party wants to arbitrate, the agreement will almost surely be enforced—litigants must decide whether to have a jury or not. The U.S. Constitution provides for a right to a jury; thus, if any party requests a jury in timely fashion, a jury will decide the case.

Generally, I like to let the judge decide the case. In theory, at least, a judge will be better able to understand business concepts and get to the right result. Jurors are rarely happy to be in the courtroom; while, in theory, that can advantage one side or the other, too often that part of the analysis is a crapshoot. Finally, trying cases to a judge, as opposed to a jury, saves money. Jury trials take longer, and time is money in my world.

So what about business courts? The notion of a judge who devotes all of his or her time to business offers positive and negative features. In theory, arbitration represents an attempt to have a person with expertise get to a result with a minimum of process and expense. Not so much, has been my experience, but another try, where we’re not paying for the judge’s time, seems appealing. The process seems even more appealing if the judge who gets assigned to the business court has a business background and some wisdom.

On the other hand, and contrary to Chief Justice John Roberts’ claim that judges are umpires who just call balls and strikes, having one judge can limit options. You may know the judge’s proclivities and perspectives, but if they don’t match up well for your side, you may have a problem.

My other concern relates to the criteria for a business court. I assume this court will not exist to handle “run of the mill” disputes over money. On the other hand, while other states use business courts to handle substantial disputes, plenty of mid-range cases—they may involve several issues and hundreds of thousands of dollars; too much money to talk away from, but amounts that can get swallowed up quickly in an arbitration or traditional litigation model—need some extra attention.

The Arizona Supreme Court has taken a very positive step forward by forming the Advisory Committee. The devil will be in the details, as always, and the concept may never get adopted. Regardless, I’m delighted to see smart people looking at what is often an “under the radar” problem.



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