LegalEdge: Selecting Your Forum: Arbitration, Business Court, Trial Court?
With rising jury verdicts and increasing demands for predictability, businesses are aggressively exploring tools to maximize outcome certainty. This need is particularly present in complex civil litigation actions. One helpful, but often underutilized, tool are forum selection clauses. This column explores the benefits of forum selection clauses and the considerations for the best forum.
1. Choice of Favorable Jurisdiction: Complex civil litigation cases often involve intricate legal and factual issues that require specialized knowledge and expertise. This complexity enhances the importance of ensuring a jurisdiction with familiarity with complex commercial matters is chosen. A forum selection clause allows a party to choose a jurisdiction that is familiar with a particular dispute type.
2. Consistency and Predictability: Complex civil litigation cases often span multiple jurisdictions, creating the potential for inconsistent legal outcomes. A well-drafted forum selection clause allows parties to select a single jurisdiction for all disputes, ensuring consistency in the application of laws, legal precedents and the interpretation of complex contractual provisions.
Parties can also select venues with robust jurisprudence, allowing them to examine case precedent to determine how courts have ruled on similar facts. This predictability fosters confidence among parties, as they can anticipate how their case is likely to be handled and resolved, reducing uncertainty and mitigating risks.
3. Convenience and Efficiency: Complex business litigation often involves extensive discovery, multiple parties and voluminous documents. By designating a specific jurisdiction through a forum selection clause, parties can minimize the logistical challenges and inconvenience associated with litigating in unfamiliar or geographically distant courts. Proximity to relevant witnesses, documents and evidence can expedite the litigation process, reduce costs and enhance the efficiency of proceedings.
Four different core forums exist. Each of these forums have unique benefits and detriments that differ depending on a case’s facts and circumstances.
1. Court: In court, parties have access to extensive discovery procedures, allowing for the collection of evidence, including witness testimony and relevant documentation. Court decisions are reviewed by appellate courts that create a body of case law and legal precedent that can be used as guidance. Because parties do not have to pay for an arbitrator, court can be more cost effective, especially in lower exposure matters. While beneficial in some respects, cases in court can take years for a final resolution, arguably have the most uncertain outcome because of jury trials and, for high-profile matters, are very public because all filings are publicly accessible.
2. Arbitration: Arbitration proceedings are often more streamlined and less formal than court litigation, allowing for more cost-effective and quicker resolution of disputes. Parties can choose arbitrators with expertise in the subject matter of the dispute, enhancing the chances that the decision-maker is versed in the complexities of the specific industry or legal issues involved. This expertise can lead to well-informed and specialized decisions. Cases in arbitration, though, have more limited discovery, require the parties to pay for the arbitrator’s time (adding expenses that court does not have), and have final decisions that are subject to limited grounds for appeal.
3. Business Court: Business courts are dedicated to handling commercial disputes, providing litigates with judges with expertise in business law and a deeper understanding of complex business transactions. These specialized courts often employ streamlined procedures and case management techniques to efficiently handle business litigation matters. There may be a fee that does not exist in a standard court, but it will not be as costly as splitting the hourly rate of an arbitrator. Most business courts, including Georgia’s business court, have more limited jurisdiction and may not be available to all litigates.
4. Mediation: Some forum selection clauses require the parties to mediate a dispute before either party can take additional legal action. Mediation, if successful, is typically the most cost-effective method to resolve a dispute early on. Unfortunately, early mediations can often not be successful as both parties need to fetter out the strengths and weaknesses of their cases before being able to objectively value a case. Early mediation can serve as a healthy means to learn about the case and attempt to resolve the dispute before significant costs are incurred.
Both corporate attorneys and litigators have an interest in ensuring their client’s disputes are decided in the most preferential forum. Consideration should be given to the most appropriate forum and this forum should be selected in a forum selection clause, which ultimately have a big impact.
Jake Evans is a shareholder at Greenberg Traurig who practices complex business litigation and is the former Chairman of Georgia’s State Ethics Commission.
Jake’s Tuesday Legal Tips
