Legislature eyes business law overhaul
The Connecticut General Assembly is considering creating a specialized docket for complex business and securities cases ”“ a move opposed by the Connecticut judiciary.
The bill also would streamline the legal hurdles for businesses domiciling in Connecticut, including through mergers and acquisitions, with the goal of having companies choose to undertake mergers here rather than in jurisdictions like Delaware deemed easier to complete such transactions. A new Connecticut law would be based on the Model Entity Transactions Act developed by the American Bar Association and the National Conference of Commissioners on Uniform State Laws.
“Businesses ”¦ might view Connecticut as a state that afford(s) the flexibility for them to transact (commerce) according to their business needs,” said James Spallone, deputy secretary of state, testifying on the bill in Hartford. “That could attract new business to our state, and we all know we could use that these days.
“Connecticut businesses are often forced to redomesticate to Delaware or other states in order to accomplish conversions and interest exchanges,” Spallone added, without providing examples.
“This may be driving businesses out of Connecticut as well.”
Separately, the bill would require Connecticut”™s chief court administrator to establish a docket focused on complex business and securities cases, and assign one or more judges with expertise in such cases to try cases.
“The current patchwork authority of the Connecticut statutes, while a worthy attempt to close gaps, is confusing, disorganized and not complete,” said Mark Sklarz, an attorney with Day Pitney L.L.C. in New Haven and a member of the Connecticut Bar Association, which supports the bill.
For 15 years, Connecticut has had a complex litigation docket that has become the de facto home of complex business cases, according to an official in the judicial branch”™s external affairs office in testifying against a specialized corporate and securities litigation docket.
“The judicial branch is not in favor of legislative mandates to establish specialized dockets and courts, since these mandates impinge on our ability to make the best use of our resources,” said Deborah Fuller, director of legislative affairs in the judicial branch”™s external affairs office, in testimony on the bill. “We need to retain the ability to be flexible in determining how best to meet the demands on our courts. Legislative proposals for such specialized dockets are usually advanced by the parties who would benefit from the particular docket they are advocating for.”
Connecticut is one of multiple states where the terms business court, complex litigation and commercial docket have become blurred, according to Deborah Saunders, a senior analyst at the National Center for State Courts in Williamsburg, Va.
Still, the recent trend is heading mostly in the direction of reserved dockets for business cases. Since 2007, nine states have established business courts on a pilot or statewide scale; the University of Maryland School of Law tracks 17 states that have such courts today, not including a few states like New Jersey and Wisconsin that have laws authorizing the formation and operations of business courts, but which are largely inactive.
Going against the tide, in 2009 Rhode Island suspended its own business court calendar in one county after a case backlog accumulated.
If Connecticut”™s current complex litigation system allows court administrators to assign cases to reduce the chances of a heavy backlog of cases, critics say it does not create a core cadre of judges with deep experience in business cases.
That issue has arisen in neighboring Massachusetts, which has operated a business litigation docket in Suffolk County since 2000 that has handled some of the state”™s most complex cases. After the state Legislature decided to initiate a six-month judicial rotation for the court, the move brought protests from the judge who initially organized the court and ran it for seven years.
Massachusetts was the only Northeast state to crack the top 10 on a 2010 ranking of the balance of state business litigation systems. Conducted by Harris Interactive and sponsored by the U.S. Chamber Institute for Legal Reform, nearly 1,500 attorneys placed Connecticut 24th, a slot behind New York (which has featured a commercial docket since 1993) and well in front of New Jersey”™s 32nd rank.
In Connecticut, more than 80 attorneys responded to the survey; the state placed in the middle of the pack for most of the subcategories under which states were assessed. In the area of judge”™s competence ”“ a key element for consideration given the bill before the Connecticut General Assembly ”“ Connecticut scored highest on the poll at 11th, with Massachusetts sixth and New York 21st.
Scoring highest on the poll, of course, was Delaware whose Court of Chancery is recognized as the nation”™s leading trial court addressing issues of corporate law, according to the University of Maryland School of Law, which tracks states with complex business litigation dockets.
Delaware”™s Superior Court also hears a large number of cases regarding commercial and corporate disputes because so many businesses are incorporated in Delaware.
In considering business courts, states have mulled other options, University of Maryland researchers found ”“ Minnesota created a “reduced costs” docket that speeds up the court process in an effort to eliminate cases that end up costing more to litigate than the amounts in dispute. And in 2003, Michigan lawmakers approved plans for a “cyber court” that would create “virtual courts” online, but never provided accompanying funding to make the court a reality.