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Effective May 1, 2013, the three judges of the Iowa business specialty court are now available to hear a range of business disputes.  Created in December, 2012, the Iowa Business Specialty Court Pilot Project is a three-year experiment establishing a specialty business court dedicated exclusively to hearing business cases.  The Iowa Supreme Court has named three district court judges to preside over cases assigned to the business specialty court: the Honorable Judge Michael D. Huppert (Fifth Judicial District), the Honorable Judge Annette J. Scieszinski (Eighth Judicial District), and the Honorable Judge John D. Telleen (Seventh Judicial District).  Whether the specialty court will be the "league of our own" longed for by many Iowa businesses (and their counsel) to provide quicker and less-expensive resolution of their disputes remains to be seen, but some initial observations may inform the final judgment. 

Threshold Criteria.  The specialty court will only accept cases that satisfy each of the following conditions:

 

 

  1. Dispute type.  The dispute must fall within one or more  of the following categories: 
    • technology licensing agreements, including software and biotechnology, or from any intellectual property right licensing agreement, including patents rights;
    • internal affairs of a business (whether a corporation, limited liability company, general partnership, limited liability partnership, sole proprietorship, professional association, real estate investment trust or joint venture), including the rights and obligations between or among participants, liability or indemnity of participants, officers, directors, managers, trustees or partners, whether among themselves or to the business;
    • breach of contract, fraud, misrepresentation, or statutory violations between businesses arising from transactions or relationships;
    • shareholder derivative or commercial class actions;
    • commercial bank transactions;
    • trade secrets, antitrust, or securities-related actions;
    • commercial property disputes other than residential landlord-tenant disputes and foreclosures;
    • business tort claims between or among business entities or individuals regarding business or investment activities relating to contracts, transactions, or relationships between or among them.

The list is expansive, encompassing most disputes that businesses may encounter irrespective of industry.  At the same time, notably absent are employment law and product liability.  It remains to be seen how broadly the court will apply the above categories – whether, for example, a non-owner employee is a business "participant" and whether employment discrimination claims will qualify as cases arising from the "internal affairs of a business", or whether a consumer product liability claim constitutes a business tort claim "between or among business entities or individuals"— and whether the specialty court or the Iowa Supreme Court will provide the legal community with further guidance, through supervisory orders or by publishing case decisions addressing these issues.  It is encouraging to note that, while the business specialty court website is currently under construction, it includes a page dedicated to rulings and opinions.

 

  1. Amount in controversy.  The minimum amount in controversy in the dispute must equal or exceed $200,000 in compensatory damages (punitive damage claims do not count toward the total).  Compensatory damages are those damages awarded by a court to place the injured party in the same position it would have been in had the wrong not occurred.  It remains to be seen whether, when, and to what extent the court will consider attorney fee claims as compensatory damages for the purpose of calculating the amount in controversy.  The best guess at this early date is that the specialty court will apply established legal doctrines (the collateral litigation exception, for one example) and consider the nature of the particular fee claim (whether it arise from a statutory basis, and how the statute characterizes the fee award, or whether it arises from a contractual agreement, and the parties' understanding regarding the nature of the fee award) to determine whether fee claims are compensatory damage claims on a case-by-case basis.  Given the American rule that each party ordinarily bears its own fees, however, the majority of businesses will have to look to traditional compensatory damages to meet the amount in controversy.Alternatively, the dispute may qualify if it is of the appropriate type (discussed above) and if the primary relief the plaintiff seeks is injunctive or declaratory (i.e., a nonmonetary ruling on the performative rights and obligations of the parties).  It remains to be seen how the court will determine what the primary relief sought in a case is, particularly in cases including main claims, counterclaims or cross-claims for both damages and for injunctive or declaratory relief.

Case Submission.  The specialty court is a voluntary, opt-in project.  Businesses may transfer their eligible disputes to the business specialty court by joint consent of all the parties.  The Supreme Court has provided a joint consent to assignment form, available on the business specialty court's website.  Based upon the form and the court's Memorandum of Operation (also available on the website), businesses will need to file their disputes with the district court first, and then submit the case for transfer to the business specialty court docket (to be heard in the same county where the case was originally filed).  Court administration will assign cases to one of the three business specialty court judges.  This suggests one major advantage of the specialty court: the assignment of a single judge to your case, instead of the rotation currently available in district court.   Any party may subsequently petition to have the case transferred back to district court. 

Court Procedure.  The business specialty court will apply standard Iowa court rules, including rules of procedure and evidence.  With presiding judge approval, however, parties may streamline pretrial procedures and discovery to expedite resolution of disputes.  In this regard, the business specialty court promises businesses the same benefit promised by alternative dispute resolution.  This is the key advantage promised by the pilot project, and may entice businesses to consider participating in the pilot program.

The Takeaway.  The pilot project is a welcome experiment and could not be timelier. The wheels of justice turn slowly, even in the best of times.  Iowa's judicial system has not been immune from the recent budget stresses suffered by state government more widely.  Litigants are advised to anticipate waiting 12-18 months from filing until trial in the state district courts, only to have their cases routinely "bumped" another several months on the eve of trial to facilitate the court's criminal docket.  For those one-to-two years of litigation, parties are largely subject to the burden and expense of broad, one-size-fits-all discovery rules, and a revolving door of judges with no particular connection to or knowledge of your case.  For businesses willing to participate in the pilot project, the business specialty court promises an assigned judge who will become intimately knowledgeable about your case, the opportunity to streamline discovery and other pretrial procedures to minimize cost and maximize efficiency, and the possibility of earlier, more certain trial dates.  Whether these promises pan out remains to be seen, but businesses facing litigation in the next three years are advised to consult with legal counsel about whether participating in this groundbreaking project is right for them.

 

Categories: Business Law

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