January 12, 2006
Corporate Law Courts
Posted by Christine Hurt

Courtesy of the WSJ Blog:  Fulton County (Atlanta) has created a new court designed to hear corporate law disputes.  I had not heard this news, but upon hearing it, my first reaction was "why doesn't this happen everywhere?"  In BA, we always talk about the popularity of Delaware as a state of incorporation because of various factors, including the fact that the judges in Delaware are experts in corporate law.  In the Fulton County system, both parties have to agree to move the case into the courts, and apparently some litigants don't want a speedier or more expert system; they are satisfied using the slowness and the ambiguity of state trial courts to their settlement advantage.  That's a shame.  The article does not say whether the corporate law court utilizes juries or if all voluntary trials are bench trials.

Surely subject-matter courts are a more efficient way to resolve disputes than litigation in all-purpose civil courts.  We already have experience with family courts, juvenile courts, tax courts, and others, so I would think the evidence would be there.  In Texas, the highest court in the land is split into a criminal court and a civil court.  Again, I only wonder why there aren't more experiments with subject-matter courts.

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Comments (4)

1. Posted by Fred Tung on January 13, 2006 @ 7:22 | Permalink

Hi Christine:

I felt compelled to comment, since this development is apparently occurring in my own backyard, and I had no idea . . . Guess I should read the AJC more.

One problem with subject matter courts may be that the volume of cases of any given type may vary, so that staffing specialized courts would be tricky. Assuming, say, business courts take only business cases, and X courts take only X cases, there may be periods when X courts are very busy while business courts are not. And given the political difficulties with reducing public employment, it would be difficult to ramp up or ramp down in response to caseload.

That being said, specialized courts have of course developed in a number of areas. Family law courts come to mind. In addition, there are of course ways to organize specialization in less rigid ways, but the less focused are the courts, the less they capture the benefits of specialization.

Kahan & Kamar discuss the dearth business courts in one of their recent articles. They do a good job of describing the lack of political incentives to establish such courts.

2. Posted by Scott Moss on January 13, 2006 @ 7:46 | Permalink

One problem with specialized courts: tunnel vision and overzealousness. Posner complains that the Federal Circuit, seeing patent cases as its "mission," has become too zealous in protecting patents. This phenomenon -- folks given a specific subject matter "mission" decide that their mission (e.g., protecting patents) is hugely important, outweighing other values (e.g., robust competition in science and engineering) -- is perhaps analogous to the critcism of special prosecutors that was leveled by Scalia in the 80s (when Reagan faced one), then by Democrats in the 90s (defending Clinton), and by Republicans now (against Fitzgerald).

I concede that I don't know enough about the prospect of "corporate courts" to know how much reason there is to fear this tunnel vision problem there.

3. Posted by smh on January 13, 2006 @ 8:39 | Permalink

First, I don't think there is enough corporate law disputes to make it finacially justifiable in most states. If you exclude contract issues, my guess is that most states don't have a real need for expert forums in true corporate law matters (e.g., takeover litigation). Second, it seems more efficient for corporations to incorporate in what they perceive to be desirable jurisdictions for resolving legal actions (i.e., Delaware or New York) than for states to create speciality courts. Of course, Delaware or NY corporations may not always get venue in their respective states of incorporation (the Cox Communications case filed in GA comes to mind), but corporations can manage this somewhat by using choice of law and forum selection clauses in third-party contracts.

With all that being said, specialty business courts probably make sense for states trying to attract charter business.

4. Posted by Joan heminway on January 18, 2006 @ 9:01 | Permalink

Hey, Christine. Massachusetts has had a limited jurisdiction business litigation session in its Superior Court since 2000. After two years of operation, the venue of the court was expanded, due to (as I recall) the success of the court in efficiently disposing of claims. You may want to check it out . . . .

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