Courting Business: Iowa Civil Justice Task Force Recommends Specialized Business Courts

On March 14 the Iowa Civil Justice Task Force (“Task Force”) released recommendations for reforming the state’s civil justice system, including a recommendation to implement specialized “business courts” in Iowa.

The business court concept is not new. According to the Task Force’s report, twenty states already have some kind of specialty business court, while another three states are in the process of introducing a specialized docket for business cases.

Before Iowa can launch its own business court system, however, two important issues must be addressed. The first is the scope of the court’s jurisdiction.  What kinds of cases will the business court hear?  The second issue involves judges.  How will the judges be chosen, and what rules will those judges use? 

Scope of the Court’s Jurisdiction
Different states have taken different approaches to business court jurisdiction. Some states, like North Carolina, limit the business court’s jurisdiction to “complex cases.” North Carolina defines complexity by the specific subject matter at issue: complex cases are ones involving corporations, securities, antitrust matters, state trademark disputes, unfair competition claims, intellectual property rights, the internet, or tax disputes. N.C. Gen. Stat. § 7A-45.4(a) (2012).  New York’s approach is similar to North Carolina’s, but also requires a specific dollar amount in controversy to trigger business court jurisdiction. N.Y. Comp. Codes R. & Regs. tit. 22, § 202.70(a) (2012).  Maryland, on the other hand, permits judges to exercise discretion, within a framework, in determining whether a case should be on the busines court docket.  Maryland judges consider factors such as the nature of the relief sought, the number of diverse parties, the novelty of the issues, and the degree to which business or technology issues predominate. Md. R. Cts. J & Attys. Rule 16-205 (2012).

The Iowa Civil Justice Task Force recommends an approach similar to North Carolina’s, with certain subject matter areas that would presumptively lead to business court jurisdiction, and without a minimum dollar amount that would determine a case’s qualification for the business docket.  A case falling into one of the categories listed below would presumptively be included in business court jurisdiction, although the Task Force points out that other states’ experience with business courts has made clear that flexibility will be key to the docket’s success.  In addition, the Task Force recommendations provide that certain cases not meeting the following criteria could opt in to the business docket.

1. Cases seeking remedies of more than $50,000 in compensatory damages;
2. Cases seeking preliminary injunctive or declaratory relief;
3. Disputes arising out of technology, software, biotechnology, and intellectual property licensing agreements;
4. Cases that relate to the internal affairs of businesses including the rights or obligations between or among shareholders, partners, and members;
5. Actions claiming breach of contract, fraud, misrepresentation, or statutory violations between businesses arising out of business transactions and relationships;
6. Shareholder derivative and commercial class actions;
7. Actions arising out of commercial bank transactions;
8. Commercial real property disputes;
9. Trade secrets;
10. Antitrust matters;
11. Securities litigation;
12. Breaches of business contracts;
13. Business torts between business entities or individuals as to their business or investment activities relating to contracts, transactions, or relationships between them.

The Task Force also recommends that the following types of cases be presumptively excluded from business court jurisdiction:

1. Personal injury or wrongful death matters;
2. Medical malpractice matters;
3. Residential landlord/tenant matters;
4. Professional fee disputes;
5. Professional malpractice claims, other than those brought with the rendering of professional services to a business enterprise;
6. Employee/employer disputes;
7. Administrative agency, tax, zoning, and other appeals;
8. Criminal matters;
9. Proceedings to enforce judgments of any type;
10. Residential foreclosure actions.

Judges and Court Rules
Iowa’s business court, as envisioned by the Task Force, would consist of one to three current district court judges. All judges would be invited to apply. The Iowa Supreme Court would select the judges for the pilot program after consulting with the chief judges in all of Iowa’s judicial districts.

Once the district court judges are selected, those judges would then have the authority to draft special rules for the new court. Task Force members anticipate that in drafting these rules, the business court judges will consult with attorneys who routinely represent clients in business matters.

It seems likely that many of the Task Force’s other recommendations would also be implemented in the specialty business courts. Some of these recommendations include assigning one judge to a single case for the entire duration of a litigation matter, strictly enforcing discovery deadlines through fines, and adopting initial disclosure requirements similar to Rule 26 in federal court.

Conclusion
These specialized courts should be of great interest to Iowa business owners – including community bankers, since commercial bank transactions would presumptively be included within business court jurisdiction. Litigation regarding securities and business contracts would also be steered toward the business docket.  If Iowa – like other states before it – is successful in creating a streamlined docket with expert judges who are able to issue consistent rulings, this may provide the state’s entrepreneurs an added measure of reliability when making business decisions.

- John E. Lande