Loan documents often contain both a choice of governing law and a choice of forum for resolution of most disputes. The Uniform Rules for New York Supreme and County Courts (“Rules”) have been amended, effective July 1, 2017, to provide more predictability as to the specific forum that will hear a dispute venued in New York.
Loan documents, designating a forum in New York, will generally contain an agreement to the exclusive jurisdiction of State and Federal courts sitting in certain counties, or all, of New York state. Historically, cases brought in New York state court were subject to assignment to any division of the courts within the contractually agreed region. The amended Rules now honor the parties’ specific designation of the Commercial Division of the New York Supreme Court as the exclusive forum or co-exclusive forum with the Federal courts, provided that certain procedural steps are followed at the outset of litigation. The Commercial Division is designed to move cases more quickly than they would be heard on dockets crowded with other types of cases, and to provide a Judge whose role is dedicated to resolving commercial disputes.
Lenders should consider updating loan documents, that contain a choice of forum in New York, to include a consent to the exclusive jurisdiction of the Commercial Division, or co-exclusive jurisdiction of the Commercial Division with the Federal courts, assuming the jurisdictional dollar amounts are satisfied. Jurisdictional amounts, depending upon the location within New York, range from $50,000 to $500,000.