Joining nearly two dozen sister states across the country that already have established specialized business courts, Indiana’s Commercial Courts last week began accepting cases that will be subject to new rules designed to help resolve complex business disputes more efficiently and with greater consistency.
The Commercial Courts were established earlier this year by the Indiana Supreme Court to enhance the accuracy and predictability of decisions in business disputes. One judge each in Allen, Elkhart, Vanderburgh, Floyd, Lake and Marion counties has been designated to hear commercial cases subject to a set of interim rules and a soon-to-be-released Commercial Courts Handbook. The Commercial Courts officially began accepting cases on June 1, 2016.
A case is eligible for assignment to the Commercial Court docket if the “gravamen of the case” relates to the formation, governance, dissolution or liquidation of a business entity; the rights and obligations between or among owners, shareholders, officers, directors, managers, trustees, partners, members of a business entity, and the business entity itself; a trade secret, non-disclosure, non-compete or employment agreements involving a business entity; the rights, obligations, liability or indemnity owed to or from the business entity; or disputes between business entities or individuals relating to contracts, transactions or relationships between or among them. A Commercial Court judge, in her discretion, also may accept jurisdiction of a matter which does not fall within one of these categories as long as the case fits “within the general intended purpose of the Commercial Court Docket[.]”
The voluntary nature of submitting a dispute to the jurisdiction of a Commercial Court is the hallmark of the new rules. A case can be placed on the Commercial Court docket at any time with the consent of all parties, not just at the time the action is commenced. Thus, if a case is not initially eligible for assignment to the Commercial Court but subsequently becomes eligible as a result of a cross-claim, counterclaim, third-party complaint or an amendment to the pleadings, the dispute can be assigned at that time. If a case is otherwise eligible for assignment to a Commercial Court, a party may designate it as a Commercial Court Docket Case by filing an Identifying Notice. If an opposing party does not consent to proceeding in the Commercial Court, however, that party can unilaterally block the move by filing a timely Notice of Refusal to Consent to Commercial Court Docket, or Refusal Notice. Even after a case is formally assigned to the Commercial Court, the dispute can still be reassigned to a non-Commercial Division Court. For example, if a new party appears after the case is “permanently” assigned to a Commercial Court, whether as a result of a cross-claim, counterclaim, third-party complaint or amendment to the pleadings, the assignment automatically becomes “provisional” and subject to the new party’s right to file a Refusal Notice. If no timely Refusal Notice is filed, the case will proceed in the Commercial Court. If the new party files a timely Refusal Notice, the case will be reassigned to a non-Commercial Court.
The new rules also place considerable emphasis on the use of Commercial Court Masters to facilitate the efficient resolution of the business disputes assigned to the Commercial Courts. The rules provide that a judge may assign a Commercial Court Master if all parties consent to the assignment and agree to assume the related costs. Those eligible to serve as Commercial Court Masters include “without limitation an attorney, a senior judge, or a non-attorney . . . who has special skills or training appropriate to undertake” the assigned task, which could range from the management of extensive discovery to the resolution of complex accounting issues.
Judge Heather Welch, who sits in Marion County and has been designated to hear business disputes, expects that one of the most significant benefits of the Commercial Courts will be the gradual development of a universe of reported decisions on issues that frequently arise in commercial cases. Given the current paucity of such case law, she said, the Indiana courts typically resolve those issues by referring to federal cases or the decisions of other state courts. This approach, she said, results in a lack of predictability that businesses require in operating their businesses and managing their litigation risks. Judge Welch said that a body of detailed decisions by the Indiana Commercial Courts on these recurring issues will enable businesses to make more informed decisions not just on litigation strategy but also in dealing with recurring issues affecting their business operations in a way that may help avoid litigation in the first place.
Since the early 1990s, a growing number of states have introduced specialized business courts in an attempt to provide a venue in which complex commercial disputes can be adjudicated more efficiently and effectively. Indiana is now the twenty-third state to do so. The project will be assessed annually during an initial three-year pilot phase. It is widely expected to become a permanent fixture of Indiana’s judiciary at the end of the three-year term. Some $250,000 has been allocated to the Commercial Courts to cover the salary of law clerks who will provide the additional research and writing capabilities necessary to tackle the novel and complex legal issues that arise in business disputes.