Beginning June 2, 2014, parties can contractually provide for “accelerated adjudication” in the Commercial Division of the New York State Supreme Court. As adopted, Rule 9 of the Rules of Practice for the Commercial Division (Rule) provides a hybrid option for commercial cases in excess of $500,000 (excluding class actions) that falls between arbitration and full-blown litigation. To expedite litigation the Rule waives certain existing rights. As a result, it is essential that parties to a contract understand the effect of designating matters for accelerated adjudication.
The parties must agree to accelerated adjudication in writing, either in the contract or by stipulation. The Rule suggests the following language for a forum selection clause that opts into the fast-track alternative:
Subject to the requirements for a case to be heard in the Commercial Division, the parties agree to submit to the exclusive jurisdiction of the Commercial Division, New York State Supreme Court, and to the application of the Court’s accelerated procedures, in connection with any dispute, claim or controversy arising out of or relating to this agreement, or the breach, termination, enforcement or validity thereof.
A case designated for accelerated adjudication must be trial-ready nine months after a Request for Judicial Intervention is filed (usually on the filing of the first motion in a case). To achieve the expedited time table, the parties forfeit their rights to:
- Objections for lack of personal jurisdiction
- Claims that the court is an inconvenient forum
- A jury trial
- Punitive and exemplary damages
- Appeal from a nonfinal judgment
Moreover, the Rule significantly limits discovery, one of the most significant litigation expenses, absent agreement by the parties. The parties are limited to seven interrogatories and five requests to admit. Document productions are “restricted in terms of time frame, subject matter and persons or entities to which the request pertains.” If a request for electronic discovery is disproportionate to the amount in dispute, the court can either deny the request or grant it, but if granted, the requesting party pays the production costs. Each side is entitled to seven depositions that can be conducted by electronic video device, with each limited to seven hours.
Whether or not to include a New York forum selection clause that accelerates litigation depends on several factors that should be considered carefully. In general, if the judges enforce the limitations, it is likely to be a less expensive option than full-blown litigation and, unlike arbitration, allows parties a meaningful appeal from a final judgment. Nevertheless, the determination must be assessed on a case-by-case basis, depending on the likelihood of whether the contracting party would be a plaintiff or a defendant (thus balancing the desirability of punitive damages, right to a jury trial, limited discovery, faster determination, etc.) and the type of litigation anticipated.
Because parties don’t generally know in advance which matters will arise that will fall within a contractual clause, they might take a wait-and-see attitude with the expectation that they can always stipulate to the accelerated framework. However, because a stipulation would only be put in place after the parties’ interests have diverged, there is a significant risk that it will be difficult to reach agreement. Parties should, therefore, assess whether they are likely to benefit from such a clause at the time the contract is entered, considering all of the factors discussed above.