Ready or Not: The Business Courts and ADR

Michigan’s experiment with Specialized Business Courts is slated to be fully up and running by July 1, 2013.  These courts will have a significant impact upon the practices of litigators and all business counselors.  Specialty Business Courts present litigants, in-house and outside business counsel with significant new options and strategic considerations.  Leverage the potential of the Business Courts to maximize the benefits to your clients.  

On April 3 and 16, 2013, the Michigan Supreme Court appointed twenty Circuit Court Judges to the “Specialized Business Docket” in seventeen Circuit Courts (two business judges were appointed in the 6th Judicial Circuit Court and three in the 3rd Judicial Circuit).   Ready or not, all counsel will be confronted with how best to prepare for and utilize these Specialized Business Courts. 

Preliminarily, this preparation will focus on two upcoming milestones:  as of May 1, 2013, each Specialized Business Court must submit a local administrative order to the Supreme Court for approval; and each Specialized Business Court must be prepared to receive and process disputes as of July 1, 2013.

As demonstrated by the local administrative orders already adopted in Macomb, Oakland and Kent Counties, these orders will require careful scrutiny.  Under the local administrative orders in these counties, the scope of disputes entertained by each Business Court vary and encompass far more than just standard business to business disputes.   

• Business governance/internal affairs, including shareholder derivative and oppression suits (mandatory in Macomb and Kent Counties and, if estimated damages exceed $500,000, mandatory in Oakland County);
• Antitrust law (mandatory in Macomb and Kent Counties and, if estimated damages exceed $500,000, mandatory in Oakland County);
• Malpractice claims brought by businesses against attorneys, accountants, architects, or other nonmedical professionals (mandatory in Kent County and permissive in Macomb County); and,
• Employment law matters, including employer/employee non-competition, non-disclosure, and non-solicitation agreements, and wrongful termination (mandatory in Kent County and permissive in Macomb County).

This listing is merely illustrative and not exhaustive, and it will be incumbent upon the practitioner to determine how each county determines the scope of disputes that will be within the permissive and mandatory jurisdiction of their Business Courts.  Preliminary guidelines issued by the State Court Administrative Office suggest the counties will have significant leeway in this determination. 

Counsel will now need to address which of the potential Business Courts would be most beneficial.  To guide this assessment, counsel will also have available the decisions of the Business Courts that will be posted on line.  Judge Foster in Macomb County and Judge Yates in Kent County have already posted a number of decisions they have issued in their capacity as the Business Court judges in those counties.  Another key feature of the Business Courts will be the significantly enhanced reliance on ADR techniques.  For example, the Macomb, Kent and Oakland County Circuit local administrative orders all provide for the mandatory early exchange of certain designated categories of information and, within 28 days of these disclosures, the filing of a joint pretrial statement that sets forth the “proposed settlement discussions and current status; existence of arbitration and mediation agreements, if any; ADR possibilities considered and proposed; and barriers to resolution financial and otherwise.”  The emphasis on early ADR was certainly no accident.  The Michigan Supreme Court on February 6, 2013, promulgated Standards for the Business Courts that emphasized the importance of ADR as a case management technique:

“Courts shall establish specific case management practices for business court matters.  These practices…will typically include provisions relating to …alternative dispute resolution (with an emphasis on mediation scheduled early in the proceeding)…

Similarly, the Michigan Supreme Court Administrative Office recommended each Circuit Court set forth “how the business court will utilize early alternative dispute resolution.”

There are a number of trends practitioners might anticipate (and potentially encourage and shape):

• The Business Courts will almost certainly develop more protocols for the early and mandatory exchange of information that must be produced before any conference;
• The Business Courts may well stage discovery – that minimal discovery which is necessary to have a meaningful early ADR event and only then permit greater discovery should the ADR event prove unsuccessful;
• The Business Courts will require the parties to pursue early ADR activities and there will likely be far less reliance on traditional “case evaluation”;
• The Business Courts will explore multiple, progressive and varied ADR techniques throughout the life of the case (and before discovery cuts off) that may include expert neutral evaluation, mediation, hot tubbing, summary non-binding jury trials, etc.

Many opposing counsel will need to communicate in different ways prior to the filing of the complaint.  For example:

• Whether the parties will stipulate to the permissive jurisdiction of a particular Business Court;
• Whether to agree on the voluntary early exchange of information (including truncated depositions) that may be in addition to that envisioned by local court rules;
• The terms of a protective order that will be filed concurrent with the complaint (protective orders previously entered by the Business Court will be available on line for guidance);
• Whether to enter into an agreement to mediate before the filing of the complaint.

In addition, counsel will now need to consider the jurisdiction of the Business Courts when drafting contracts including what strategic dispute resolution techniques to include in those contracts.

The role of the Business Courts may become akin to “Dispute Resolution Advisors” (see previous article) and to effectively counsel their clients and the courts, practitioners must be attuned to the entire gamete of ADR tools available – while mediation is a very powerful ADR technique there are far more ADR tools available for the litigator’s tool box. 

The Business Courts will require all counsel to adapt and will present new opportunities to better serve their clients.   

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 Facts:

• 20 Business Court Judges have been appointed in 17 Circuit Courts
• Each County Business Court has been requested to submit a proposed Local Court Rule for approval on May 1, 2013
• It is anticipated all Business Courts will all be up and running by July 1, 2013 (Macomb and Kent Counties have already accepted cases)