It surprises some folks in Iowa to learn that Delaware is the preferred legal home of many Iowa businesses. For example, Principal Financial Group, one of two Fortune 500 companies headquartered in Iowa, is incorporated under Delaware law. According to Vice Chancellor Donald Parsons, a judge on Delaware’s Court of Chancery who recently taught a weeklong class at the Iowa College of Law, Delaware has more corporations, limited liability companies, and partnerships (more than 1.1 million total) than people (just over 925,000). One reason for Delaware’s dominance in business law is the Court of Chancery, a specialized court that has been hearing business cases for more than two centuries.
Business cases can present unique difficulties. They often involve intensive discovery, mountains of documents, and an array of natural persons and entities as parties. For businesspeople that operate in volatile markets and organize their efforts around quarterly reports, the prospect of lengthy litigation is especially undesirable. As a result, when courts develop a reputation for handling business cases quickly and efficiently, businesspeople take notice.
Iowa is among a growing number of states working to find solutions to the special challenges business cases present. In May 2013 the state launched the Iowa Business Specialty Court Pilot Project, a three-year program “to move complex business litigation through the court system more expeditiously with lower costs for litigants and the court system.” The State Court Administration prepared and released its initial evaluation of the project last year, finding that the court had a “successful start.”
The business court offers a pair of important advantages over Iowa’s conventional district courts. First, the three business court judges handle business disputes more frequently, which contributes to a fluency in the law surrounding business conflicts. “Civil litigation makes up 10% or less of most district court judges’ workload, and most of those cases are auto accident, premises liability, and medical malpractice cases, rather than business cases,” said Judge John Telleen, one of the business court judges.
He compared the business court judges to baseball players: just as a hitter improves with more at-bats, the judges develop an expertise in business disputes by handling them more often. In addition to handling business disputes more often, the business court judges have also received specialized training in business and commercial disputes.
The second advantage is that the business court follows a “one case-one judge” policy that allows a judge and the litigants to begin working together immediately and until the resolution of the matter. This is in contrast to many Iowa district courts, where different judges may handle the various pre-trial motions and hearings in a case and the trial judge may be a different judge than any who were involved with pre-trial matters.
Jason O’Rourke, a partner at Lane & Waterman in Davenport, noted, for example that while cases in Polk County follow the one case-one judge policy, cases in Scott County do not. O’Rourke, who recently represented a client in a complex, multi-party defective construction suit that was transferred to the business court, explained that a case can receive more attention when the same judge is involved in all phases of a proceeding. The judge’s familiarity with a case and knowledge of business law also helps the case run smoothly.
Judge Telleen agreed and noted that with one judge being assigned to each case “the parties do not have to re-educate the Judge every time they come to court.” It also allows judges to begin managing the case early in the process and gives parties more reliable access to the judge in the case, both of which help keep the case moving, he explained.
Generally speaking, cases are eligible for the business court if they involve damages claims of at least $200,000 in one of nine categories. The categories include disputes involving technology licensing agreements, commercial real estate, and contract breaches arising out of business transactions. So far the court has accepted 14 cases.
“A specialized business court can add tremendous value for judges, lawyers, and businesspeople. The challenge in most states is finding the resources to create, operate, and sustain it,” explained Prof. Joseph Yockey.
Unlike Delaware’s business court, which exists independently of the other state trial courts in Delaware, Iowa’s business court is type of division within Iowa’s district court system. The three judges who preside over the business court were existing district court judges. The judges have a business court docket in addition to a docket of their regular district court matters. In the first year of the program, business court cases accounted for 5%–12% of each judge’s workload. “Our business court is definitely open for more business,” Judge Telleen quipped.
Given the success of the program, the review recommended, “additional effort. . . to actively promote the business court among attorneys who may not be aware of the business court option.” The report also encouraged judges “to review the dockets in their districts and, where appropriate, recommend assignment of suitable cases to the business court docket.”
Click here to read the State Court Administration’s complete report.
--Jay Stirling | January 28 , 2015