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10 Minutes With: Muhammad Faridi and Benjamin Jackson, Patterson Belknap Webb & Tyler LLP

New York Commercial Division as an Alternative to Arbitration

When seeking a discreet and efficient way to resolve a thorny business or financial dispute, many parties opt for private arbitration. But private arbitration carries several potential downsides. Aside from the often considerable cost of the arbitrator, there’s the lack of a right to appeal, potential limits on discovery, the need to negotiate evidentiary rules and standards with your adversary ahead of time, and typically an inability to seek discovery from non-parties, just to name a few. Many parties would prefer a streamlined, efficient process with clear, pre-defined rules to the ad hoc approach taken by many arbitrators and private judges.

In recent years, New York State’s Commercial Division, a state-level court that specializes in sophisticated business disputes, has become an attractive alternative to private arbitration. It now offers many tools for resolving business disputes in an efficient and timely manner. For instance, the Commercial Division now offers an accelerated adjudication procedure that allows parties to agree to have their dispute heard on an expedited basis. The procedure places limits on pre-trial exchange of documentary evidence and depositions (known in the U.S. as discovery), challenges based on personal jurisdiction and forum non conveniens, appeals to a higher court before a final judgment, and the parties’ right to a jury trial. Additionally, the Commercial Division offers the parties confidentiality protections as well as specialized rules for e-discovery, including rules regarding cost-shifting to prevent undue burdens.

For a case to qualify for the Commercial Division, it must generally meet an applicable monetary threshold, which differs based on the county in which the action is filed. In New York County (Manhattan), the threshold is US$500,000. However, the threshold does not apply to cases seeking equitable or declaratory relief, shareholder derivative actions, commercial class actions, cases seeking dissolution of a business entity, and certain cases relating to arbitration agreements.

In sum, the New York Commercial Division has become an attractive forum for parties seeking efficient resolutions to business disputes under clear pre-defined rules. Parties who enter into significant commercial agreements might do well to consider whether a jurisdiction and venue clause specifying the New York Commercial Division might be preferable to an arbitration clause.

With special thanks to Muhammad U. Faridi and Benjamin F. Jackson of Patterson Belknap Webb & Tyler LLP for contributing to The Offshore Litigation Blog.

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