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About the Court

How a Case is Assigned to the Business Court

All cases are assigned to the Business Court by the Chief Justice of the North Carolina Supreme Court. Click here to read the Memorandum to Senior Resident Superior Court Judges from  Chief Justice Lake containing his “Guidelines for Assignment of Cases to the North Carolina Business Court”. It is a useful document which explains the policies the Chief Justice follows. You are not required to waive a jury trial in order to have a case assigned and the case will be tried in the county in which it is filed.

Under Rule 2.1, the Chief Justice may designate any case [or group of cases] as complex business. The Rule provides that a senior resident superior court judge, chief district court judge, or presiding superior court judge may ex mero motu, or on motion of a party, recommend to the Chief Justice that a case or cases be designated as complex business. Thus, the procedure for initial designation as complex business does not differ from the procedure for having cases designated as exceptional. Cases may be assigned over the objection of one or all of the parties.  However, once a case is designated as complex business, it is automatically assigned to a Special Superior Court Judge for Complex Business Cases. In this respect the procedure differs from previous practice for exceptional cases in that heretofore the parties had generally agreed upon a superior court judge to hear the case as exceptional and secured his or her prior agreement to handle the case. That flexibility is not available with the complex business designation. Also, the Special Superior Court Judge for Complex Business Cases must write an opinion on final disposition of the case. Once a case is designated as complex business, it stays with the business court for all purposes, including trial.

The process for appeals from a decision of the Special Superior Court Judge for Complex Business Cases does not differ from appeals from other superior court orders and judgments.

Definition of a Complex Business Case

The Supreme Court purposefully chose not to define the term "complex business case" in Rule 2.1. It believed the absence of a definition would allow litigants to seek designation with respect to any business issue that they believed required special judicial expertise in business matters. It also provided the court with the flexibility to respond to requests that might not have been anticipated when the rule was amended.

Both the Commission and the Supreme Court contemplated that cases involving significant issues under certain chapters of the North Carolina General Statutes would be designated as complex business. Those chapters include:

Chapter 55 Business Corporation Act
Chapter 55B Professional Corporations
Chapter 57C Limited Liability Companies
Chapter 59 Partnerships
Chapter 78A Securities Act
Chapter 78B Tender Offer Disclosure Act
Chapter 78C Investment Advisors Act

One of the key factors in assessing whether or not a case should be designated as complex business is whether the outcome will have implications for business and industry beyond the conflicts of the parties to the litigation. If a written decision on disposition of the case would provide predictability for others in the same business or industry in making their business decisions, the case will more likely be considered for designation.

There are also other procedural indicators of complex business cases. Such cases may be time sensitive, paper intensive or laden with discovery disputes.  They may have complex legal and evidentiary issues, multiple parties and jurisdictions, and have a significant impact on the parties' business, whether it be from a monetary or a corporate governance standpoint.

Benefits

Case Management. One of the key benefits to designation of a case or cases as complex business is the assignment of the litigation to one judge for handling of all pretrial matters, including motions and discovery. Since the judge who handled pretrial motions will also try the case, the possibility of conflicting decisions on substantive and evidentiary matters is greatly reduced. The most significant improvement in the management of complex business cases should occur at the pretrial stage.

North Carolina's Constitution requires that its superior court judges rotate within a district. While this rotation has numerous salutary effects, it can have debilitating effects in complex business cases. It often results in the parties having to reeducate a new judge on every motion. Different judges hear different stages of the litigation, and the potential for conflicting rulings exists. Judge shopping is not unknown. It is difficult to get motions which need prompt attention calendared for hearing. Civil matters sometimes lose their priority to criminal cases on both the motion and trial calendars. Since terms of superior court generally last only one to two weeks, it is often difficult to find a judge who can take four to five weeks to try a complicated business case. Judges who do accept exceptional cases under Rule 2.1 still have to fit those cases into their existing rotation.

Many of the case management difficulties cited above will be eliminated by assigning complex business cases to one judge who is not in a rotation, but handles only civil cases and controls the calendaring of the cases on his or her docket.

Case management by one judge will also provide more effective use of mediation and other alternative dispute resolution tools. Having greater knowledge and understanding of the case can result in better choices in the timing and method of ADR in each case. It can also facilitate the use of expert neutrals.

Similarly, case management can result in more certainty in the setting of cases for trial and a shorter wait for a trial date. Since most cases still settle just before trial, shortening the pretrial phase and getting the case on the trial calendar can result in a more efficient and less costly disposition of cases.

Speed and flexibility, In many complex business cases, particularly those involving change in ownership or corporate governance issues, preliminary injunctive relief is a critical issue. Often decisions need to be rendered before specific times such as shareholder meetings. Having a judge available to hear such cases on short notice is a significant benefit to the parties. In many cases a business simply needs an answer to an issue so it can make a decision and move on with the operation of the company.  The speed and flexibility provided by the establishment of a business court helps to meet those needs.

Specialization. Because the Business Court judges will hear only complex business cases, they will develop proficiency in handling both the substantive law and the case management issues that arise in complex cases.  Much like the Delaware Chancery Court, the judges will acquire the level of expertise in dealing with complex cases that come with specialization, which in turn will lead to greater efficiency and predictability.

Predictability. The creation of a larger body of case law by requiring opinions at the trial court level should result in greater predictability for business and the bar.

The Difference Between Complex Business Cases under Rule 2. 1 and Summary Procedures for Significant Commercial Disputes under Rule 23.1

At the same time it amended Rule 2.1 and added Rule 2.2 to the General Rules of Practice, the Supreme Court also added new Rule 23.1 to the Rules of Practice. The rules exist separate and apart from each other. They should not be read together. Summary Procedures can be used outside the Business Court and a case can be designated complex business without invocation of summary procedures.

The Commission on Business Laws and the Economy recommended that the State establish a summary procedure through which North Carolina citizens and business entities could more efficiently resolve significant commercial disputes. The Commission recommended that the availability of such a summary procedure be limited to civil actions in Superior Court where: 1) at least $500,000 is in controversy, 2) at least one party is a North Carolina citizen or corporation, and 3) all parties consent to the summary proceeding. As a part of the consent the parties agree to waive punitive damages and a jury trial. It is an alternative procedure used only with the consent of all parties.

Rule 23.1 provides in pertinent part:

(a) The senior resident superior court judge of any superior court district, or a presiding judge unless prohibited by local rule may, upon joint motion or consent of all parties, order Summary Procedures for A Significant Commercial Dispute ("Summary Procedures") in any case within the subject matter jurisdiction of the superior court that does not include a claim for personal, physical or mental injury where 1) the amount in controversy exceeds $500,000, 2) at least one party is a North Carolina citizen, corporation or business entity (or a subsidiary of such corporation or business entity) or has its principal place of business in North Carolina; and 3) all parties agree to forego any claim of punitive damages and waive the right to a jury trial. The motion or consent for summary procedures must be filed with the court on or before the time the answer or other responsive pleading is due.

Once Summary Procedures are invoked, significant restrictions apply to filing times, pleadings allowed, motions allowed, discovery and trial. It is an alternative fast track that can result in a trial on briefs and affidavits if the parties so choose.

Similar procedures have been in place and available for use in Delaware for many years and have yet to be utilized.

Important Points

1. Read and understand the difference between Rule 2.1 and Rule 23.1. Do not combine or confuse the two.  There is no dollar amount in controversy threshold for a case to be assigned to the Business Court, and the parties do not have to waive a jury trial.

2. The case will be tried in the county in which it is filed.

3. Continue to work through your senior resident superior court judge and consult with the Administrative Office of the Courts.

4. Consider making your motion in the alternative. If the case is not complex business you may still want Rule 2.1 treatment. The case simply might go to another judge other than the business court judge.

5. Consider use of the designation for pretrial only. Remember Rule 2.1(e) provides that the Chief Justice may enter such orders as are appropriate for pretrial, trial and other disposition of exceptional and complex business cases.

6. Before asking for the designation be sure you and your client have considered: 1) an early case management order, 2) an early trial date, 3) client attendance at pretrial motions, 4) timely use of neutrals to help with settlement, 5) possible change of venue for pretrial purposes, and 6) a written opinion on disposition of the case.

7. In supporting or opposing designation as a complex business case, consider all the complexity factors: the statutes which will require interpretation in connection with the case, and whether or not a written opinion in the case will assist business and industry managers and their counsel in making business decisions in the future or whether the holding in the case will be limited to the parties or the particular facts at issue.

8. The parties do not have to agree on assignment.  A Superior Court Judge may recommend assignment over the objection of a party or on his or her own motion.  The Business Court does not decide which cases are assigned, and his or her caseload is not a consideration in the process.

History of the Court

The North Carolina Commission on Business Laws and the Economy (the "Commission") was established by Governor Hunt in April 1994 and charged with recommending "any needed changes in existing statutes and regulations which affect the operation of businesses in North Carolina."

With particular focus given to Chapter 55 of the North Carolina General Statutes, the Commission was to recommend any needed new statutes, rules, and regulations designed to assure that North Carolina offers a legal environment providing the flexibility and support to allow businesses to operate successfully in this state and to attract businesses to locate and incorporate here.

In January of 1995, the Commission issued a report recommending, among other things, that North Carolina establish a business court. In doing so, the Commission noted the high esteem in which the Delaware court system was held by the business community. While many states, including North Carolina, had amended their business laws to be more consistent with the Model Corporation Act, none had taken steps to make its court system as responsive and predictable as the Delaware Chancery Court in dealing with complex corporate issues .

To meet those specifications, the Commission recommended that the North Carolina Supreme Court amend Rule 2.1 to allow the Chief Justice to designate certain cases as complex business cases, and adopt Rule 2.2 to allow the Chief Justice to designate one or more special superior court judges to hear those special cases. Any judge so designated would be known as a Special Superior Court Judge for Complex Business Cases and would be required to write opinions in designated cases. The Commission recommended that the Governor appoint at least one expert in corporate law to be designated by the Chief Justice to hear complex business cases.

In the fall of 1995, the legislature appropriated the funds for an additional special superior court judge for a five year term. The Supreme Court amended Rule 2.1 of the General Rules of Practice for the Superior and District Courts to adopt the recommendation of the Commission and added Rule 2.2 to provide for designation of Special Superior Court Judge for Complex Business Cases. In January of 1996, Governor Hunt appointed Ben F. Tennille as a Special Superior Court Judge and Chief Justice Mitchell designated him as North Carolina's first Special Superior Court Judge for Complex Business Cases.  He was reappointed for a five year term in October 2001

Judge Tennille graduated from the University of North Carolina School of Law with honors in 1971. He was a member of the North Carolina Law Review and Order of the Coif. He was in private law practice from 1971 until 1985 with a major North Carolina law firm, gaining experience in both business law and litigation.  In 1985 he joined the in house legal department of a Fortune 500 company as Associate General Counsel and Assistant Secretary and managed the litigation for that company for eight years. He served that company in a business capacity for two years, specializing in human resources, and attended executive education programs at the University of North Carolina and the University of Michigan business schools. He brings to the bench a broad background in business law and litigation.

Summary

In creating a business court, North Carolina has joined other states in recognizing the need for specialization in complex business litigation. The American Bar Association has recommended that all states adopt some form of business court. The great burden placed upon state and federal judges by increasing criminal caseloads, combined with a growing need for fast answers in complex business disputes in today’s rapidly moving commercial environment, make such courts a necessity for business and industry. North Carolina is taking a leading role in development of the business court concept and plans to expand this concept in the future.

 

The North Carolina Business Court
 200 South Elm Street   Suite 200
 Greensboro, North Carolina 27401
Telephone 336.334.5252  Facsimile 336.334.5162
E-Mail info@ncbusinesscourt.net