Effective June 2, 2014, Rule 9 of section 202.70(g) of the Uniform Rules for the Supreme and County Courts (Rules of Practice for the Commercial Division) became New York’s latest rule evolution aimed at greater efficiency. The Commercial Division (the branch designated in New York for resolving commercial disputes) is known for its large docket – thousands of complex commercial cases, many with a life span measured in years. Unsurprisingly, the Commercial Division rules are conceived and revised from time to time, with efficient dispute resolution as the primary aim.
Rule 9, Accelerated Adjudication Actions, contemplates that parties may consent in writing to resolve a commercial dispute in accordance with preapproved accelerated adjudication procedures. The new rule provides a model choice-of-forum provision to be included in contracts for the purpose of invoking these procedures in the event a dispute arises. Hence, parties may contractually avail themselves of these accelerated procedures prior to the existence of any dispute, much like a mandatory arbitration clause but without the messy and time-consuming squabble over compelling arbitration that usually accompanies such a process.
In lieu of “boilerplate” forum-selection clauses, Rule 9 offers language that allows parties to avail themselves of these pre-dispute efficiencies:
“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.”
Naturally, whether such a contractual clause is desirable for a particular business hinges on an analysis of the accelerated procedures and the particular needs of the parties.
Rule 9 Efficiencies
Applicable to all actions in the Commercial Division, except to class actions, Rule 9 would seem to curtail significantly those litigation events that often result in a lengthy and costly process. Potential defendants and plaintiffs would agree to irrevocably waive any objections based on lack of personal jurisdiction or the doctrine of forum non conveniens, the right to trial by jury, the right to recover punitive or exemplary damages, and the right to any interlocutory appeal.
Costly discovery would be limited to no more than seven interrogatories, five requests to admit, and seven depositions per side (each limited to seven hours in length). Document discovery would be limited to those documents “relevant to a claim or defense in the action,” restricted in terms of time, subject matter and persons or entities “to which the requests pertain.” These discovery limitations, however, may be amended post-dispute provided both parties agree.
Discovery of electronically stored information (ESI) is similarly truncated for efficiency. Rule 9 contemplates that the production of ESI shall be made in a searchable format that is usable by the party receiving production and that the description of custodians from whom ESI may be collected shall be “narrowly tailored” to include only those individuals whose ESI may reasonably be expected to contain evidence that is material to the dispute. Significantly, Rule 9 also explicitly provides for cost-shifting when a party makes “disproportionate” ESI requests. Terms of art such as “narrowly tailored” and “disproportionate” would seem to be fertile areas of dispute for litigants, but starting with the premise of limited discovery is a significant shift from the broad latitude New York courts typically allow.
Finally, and arguably most significantly, the time allotted for all of the above is limited to nine months after filing of the Request for Judicial Intervention (RJI), which is typically – but not always – filed with the commencement of litigation. Parties are expected to be “trial ready” within nine months, which necessarily means the completion of pre-trial events, including mediation, discovery (including expert discovery if necessary) and dispositive motions. Of course, judges will retain control of the scheduling of any trial pursuant to the dictates of their calendar, but the time frame to be trial ready is far shorter than the typical time a Commercial Division matter usually takes. Judicial enforcement of this limitation will be one area worth watching.
Besides truncating the litigation process, Rule 9 is interesting in that it provides a starting point for contracting parties to agree to a streamlined litigation process prior to the existence of any dispute. Of course, the model contractual language provided for in the rule can be amended at the contract negotiation stage if the parties so chose, but it offers a beneficial reference point for these historically difficult negotiations.
Contracting parties should give significant consideration to the waiver of the interlocutory appeal. Parties are agreeing – before the scope and nature of the dispute arises – to a single opportunity to move for dismissal, a single opportunity to move for summary judgment, as well as a single opportunity with respect to any motions concerning discovery, restraining orders or anything else that does not result in a final disposition on the merits of the dispute. The interpretation of this waiver provision is another aspect that will be closely observed as the case law on this point develops.
On balance, the Commercial Division’s Rule 9 language would seem to be attractive to potential defendants and plaintiffs. Expansive discovery is limited and often-frivolous motion practice and punitive damage claims are limited if not avoided altogether for the sake of efficiency, which translates to a degree of cost certainty for parties. This degree of certainty, however, must be weighed against that which is irrevocably waived; namely, the right to appellate review of the denial of a motion to dismiss or of summary judgment. Nonetheless, the benefits would seem to outweigh the risks for those businesses that typically opt for New York as their choice of forum with respect to contractual disputes.