North Carolina Business Court Expansion (November 1, 2006)

Thanks to recent legislation by the North Carolina General Assembly, businesses involved in certain, complex cases now have greater access to a business court created specifically for handling business disputes.  The North Carolina Business Court, which was created in 1995 and located exclusively in Greensboro, has now expanded to Raleigh and Charlotte, making it more convenient to litigate business disputes.  North Carolina General Statutes Section 7A-45.4 (effective January 1, 2006) along with Revised Local Rules (effective July 31, 2006) provides a roadmap for the automatic assignment of an action to the Business Court under certain circumstances.  Listed below is a brief synopsis and highlights of the new rules governing the Business Court.

Traditional Route

Prior to the enactment of the new rules, in order for a case to be heard before the Business Court, a party was required to proceed under Rule 2.1 of the General Rules of Practice for the Superior and District Courts.  This rule required a party to make a motion before the senior resident superior court judge or the chief district court judge to recommend to the Chief Justice that a case be designated as a complex business case.  Factors considered by the court in determining whether to make such a designation included:  (1) the number and diverse interests of the parties; (2) the amount and nature of anticipated pretrial discovery and motions; (3) whether the parties voluntarily agree to waive venue for hearing pretrial motions; (4) the complexity of the evidentiary matters and legal issues involved; (5) whether it will promote the efficient administration of justice; and (6) such other matters as the Chief Justice shall deem appropriate. 

Cases Eligible to be Litigated Before the Business Court under the New Rules

Cases eligible to be designated to the Business Court under the new set of rules include actions that involve material issues related to:

• The law governing corporations, except charitable and religious organizations qualified under N.C.G.S. § 55A-1-40(4) on the grounds of religious purpose, partnerships, limited liability companies, and limited liability partnerships, including issues concerning governance, involuntary dissolution of a corporation, mergers and acquisitions, breach of duty of directors, election or removal of directors, enforcement or interpretation of shareholder agreements, and derivative actions;

• Securities law, including proxy disputes and tender offer disputes;

• Antitrust law, except claims based solely on unfair competition under N.C.G.S. § 75-1.1;

• State trademark or unfair competition law, except claims based solely on unfair competition under N.C.G.S. § 75-1.1;

• Intellectual property law, including software licensing disputes;

• The internet, electronic commerce, and biotechnology.

In short, if a case involves any of the above-mentioned areas of law, the case is automatically eligible for designation to the Business Court. 

Designation by a Party

The designation process is a fairly straightforward three-step process:  (1) any party can designate a civil action as a mandatory complex business case by simply submitting a “Notice of Designation” in the Superior Court in which the action has been filed; (2) the Notice of Designation must be simultaneously served on opposing counsel and on the special Superior Court Judge for complex business cases; and (3) a copy of the notice must also be e-mailed or faxed to the Chief Justice of the Supreme Court for approval of the designation and assignment to a specific Business Court Judge.

Contents of the Notice of Designation

A party must have a good faith basis for filing a Notice of Designation.  Additionally, the party seeking the designation must state the grounds in which the case is eligible to be litigated before the Business Court.   The party seeking the designation should also provide the court with information regarding:  (1) the amount in issue; (2) the novelty of the issues; (3) the degree to which the interest of justice will be advanced by adjudication of the action under the Business Court’s rules; and (4) any other reason why the case should be litigated in Business Court. 

Timing for Notice of Designation

If the plaintiff or third-party plaintiff wishes to have a case designated as a mandatory business case, the plaintiff or third-party plaintiff must file the Notice of Designation at the same time as the filing of the complaint or third-party complaint.

If the defendant or other party desires to have a case designated as a complex business case, that party must file the Notice of Designation within 30 days of receipt of service of the pleading seeking relief.

Opposition to Notice of Designation

Although the procedure to have a case designated as a mandatory business case is rather simple, the statute allows a party to challenge the designation.  Within thirty days after service of the Notice of Designation, any other party may file and serve an opposition to the designation of the action as a mandatory business case.  In the event that a party files an opposition, all other parties have fifteen days to file a response to the opposition.  The Business Court Judge then determines whether the case should be designated as a mandatory complex business case.  If a party disagrees with that decision of a Business Court Judge, that party may appeal directly to the Chief Justice of the Supreme Court.

Additionally, if the complex business case status or designation is revoked or denied, the case will be treated as an ordinary civil case unless the case is designated as an exceptional civil case or a discretionary complex business case pursuant to Rule 2.1 of the General Rules of Practice for the Superior and District Courts (i.e., the traditional route).  So, for example, if a party misses the deadline for filing the Notice of Designation, that party can still petition to have the case designated, but must utilize the traditional route discussed above. 

Preference for Electronic Filling

Although not required, parties are strongly encouraged to use the Business Court’s Electronic filing and service system to effect transmittal, filing, and service of papers.

No Jurisdictional Limit or a Threshold Dollar Amount

There is no requirement that the damages in a business court case reach a certain value or amount in order to invoke the jurisdiction of the business court.

Mediation

Cases are generally sent to mediation at a time the court believes that the parties have sufficient information about the case to make mediation meaningful. 

Jury Selection

The court follows the standard Superior Court rules and practices in jury selection.

Motions

Once a case is transferred to the Business Court, it is transferred for all purposes and all motions must be filed with the Business Court.

Witness Testimony by Video Conference

When all parties consent, the court will permit testimony by video conference.  However, in the event that parties do not consent, the court will decide in each individual case whether the circumstances permit and warrant testimony by video conference.

Current Judges

In the same legislation passing rules governing the designation of mandatory complex business cases, the General Assembly also passed legislation giving the Chief Justice the authority to designate additional business court judges.  Accordingly, our state now has three business court judges:  Judge Ben Tennille (Greensboro), Judge Albert Diaz (Charlotte), and Judge John Jolly (Raleigh).

Conclusion

The new law and rules governing the Business Court will be very beneficial to attorneys and their individual and business clients.  The Business Court judges currently sitting have extensive experience in commercial and business litigation matters.  Having one judge assigned to a particular case will allow that judge to become familiar with every aspect of the case from start to finish and will improve case management.  Additionally, the litigants will be able to take advantage of the many technological resources the Court has available.  The expansion of the Business Court will streamline the litigation of complex business cases which can be very cost-effective for clients in the long-run. 

For more information on this topic or other Business Litigation issues please contact David Dreifus at ddreifus@poynerspruill.com or 919.783.2817.