Credit documents in lending transactions commonly contain a choice of forum provision setting forth the agreement of the parties to submit to the jurisdiction of the New York state courts and federal courts sitting in the County, City and State of New York.
Effective as of July 1, 2017, the Uniform Rules for the Supreme and County Courts in the State of New York (the “Rules”) were amended to permit contracting parties to expressly consent to the specific designation of the Commercial Division of the New York Supreme Court (the “Commercial Division”) as the exclusive or co-exclusive forum with the federal courts in New York state (subject to the jurisdictional and procedural requirements for assignment of a matter to the Commercial Division, as set forth in the Rules prior to this amendment). The Rules, as amended, provide sample clauses relating to forum selection in order to offer contracting parties model language by which to express their selection of the Commercial Division as a forum for resolution of contractual disputes.
Lenders may wish to expressly designate the Commercial Division as a forum in order to streamline the process of having their contractual disputes heard in the Commercial Division rather than in New York state courts generally; judges assigned to the Commercial Division are generally well-versed in commercial law and so are likely to be more familiar with the relevant issues than are judges hearing matters placed on the general calendars in New York state courts, and cases in the Commercial Division are likely to be handled more expeditiously than in New York state courts generally.
The below sample forum selection provisions were appended to the Rules:
For Exclusive Jurisdiction of the Commercial Division:
THE PARTIES AGREE TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COMMERCIAL DIVISION, NEW YORK STATE SUPREME COURT, WHICH SHALL HEAR ANY DISPUTE, CLAIM OR CONTROVERSY ARISING IN CONNECTION WITH OR RELATING TO THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO THE VALIDITY, BREACH, ENFORCEMENT OR TERMINATION THEREOF.
For Exclusive Jurisdiction of either the Commercial Division or the Federal Courts in New York State:
THE PARTIES AGREE TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COMMERCIAL DIVISION, NEW YORK STATE SUPREME COURT, OR THE FEDERAL COURTS IN NEW YORK STATE, WHICH SHALL HEAR ANY DISPUTE, CLAIM OR CONTROVERSY ARISING IN CONNECTION WITH OR RELATING TO THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO THE VALIDITY, BREACH, ENFORCEMENT OR TERMINATION THEREOF.
The failure to expressly designate the Commercial Division as a forum does not immediately preclude contracting parties from obtaining relief in the Commercial Division because (1) within 90 days of service of a complaint, any party may file a Request for Judicial Intervention to request that the case be assigned to the Commercial Division; or (2) within 10 days of receipt of a Request for Judicial Intervention resulting in an assignment of a case to a non-Commercial Division, a party may apply by letter application for transfer of the case to the Commercial Division; or (3) a non-Commercial Division judge may request a transfer of a case meeting the jurisdictional requirements for Commercial Division assignment sua sponte.
Procedural requirements for assignment of a case to the Commercial Division include filing of a Request for Judicial Intervention and attaching a Commercial Division addendum certifying that the case meets the jurisdictional requirements for Commercial Division assignment.
Most large commercial loans would meet the jurisdictional requirements for a hearing in the Commercial Division. The requirements consist of meeting (1) monetary thresholds (exclusive of punitive damages, interests, costs, disbursements and counsel fees) established by each county or district, with a maximum threshold being $500,000 in New York County; and (2) subject matter requirements, including transactions governed by the Uniform Commercial Code, and business transactions involving or arising out of dealings with commercial banks and other financial institutions.
Expressly designating the Commercial Division as the exclusive or co-exclusive forum in credit documents will eliminate the possibility that a debtor will utilize the choice of forum for delay or other reasons.