Business Professionals.jpgOn September 11, 2012, Michigan took one step closer to implementing a court system specializing in handling business and commercial cases.

Specifically, the Michigan Senate Judiciary Committee unanimously approved legislation that would create a business court system that would exclusively determine disputes if all or part of the claim included a business or commercial dispute where the amount in controversy exceeded $25,000.

Business disputes would further include: 

  • An action in which all of the parties are business enterprises.
  • An action in which at least one of the parties is a business enterprise and the other parties are its or their present or former owners, managers, shareholders, members, directors, officers, agents, employees, suppliers, or competitors, and the claims arise out of those relationships.

According to a well-respected business lawyer, Doug Toering, who has been closely following the legislation, there are likely to be minor amendments added to the bill to address procedural issues (i.e., the mechanics for moving cases in or out of the business court if a claim is added or dismissed in a multiple claim lawsuit), which will need to be approved by the full Michigan Senate and then signed into law by Gov. Snyder before it will go into affect. 

Michigan Business Courts and Employment Related Lawsuits. 

With respect to employment claims, the proposed legislation specifically excludes from its coverage the following:

  • Employment discrimination claims;
  • Civil rights claims, including actions brought under Michigan’s  Elliott-Larsen Civil Rights Act and the Persons with Disabilities Civil Rights Act; and 
  • Wrongful discharge claims, except for actions involving corporate officers or directors.

But not everything arising in the employee/employer relationship would be excluded from the coverage of Michigan’s proposed business court. Claims arising out of noncompete or trade secret misappropriation claims would likely fall under the business court’s jurisdiction, even though such claims commonly arise in the context of the employment relationship.  

Benefits of a Michigan Business Court System. 

In theory, business courts make a lot of sense for Michigan businesses. Consider these three benefits: 

  • First, it is anticipated that the creation of a business court will have only a minor fiscal impact because the court would be run by current judges who would be assigned to the business court.
  • Second, the proposed Michigan business court system would assign business and commercial cases to specific judges who are experienced in business and commercial law issues and statutes specific to such claims, e.g., the Uniform Commercial Code, noncompete agreements, compliance with corporate or limited liability company statutes, as well as issues unique to such business entities, e.g., governance, powers, duties, and management. 
  • Third, by having judges specifically assigned to deal exclusively with business and commercial claims, business court judges would presumably continue to develop that judge’s expertise and insight into such issues, leading to more consistent and well-reasoned business decisions. 

Judicial Campaign Donations, Business Courts and Public Perception.

One concern, however, is the perceived influence money may have in determining business disputes. By limiting the number of judges who hear business disputes, an unintended consequence is that it is easier for donors to funnel money in the form of campaign contributions who are likely to regularly appear before these judges.

For both the public and those businesses that lack the financial resources to make matching contributions there is the risk of eroding the public trust and diminishing the value of the judicial process when it comes to business disputes. 

Take for example billionaire Matty Moroun and his very public and very expensive efforts to win the legal and public opinion battle to prevent the building of a second bridge from Metro Detroit to Canada in order to protect his current monopoly. In this regard, the Detroit Free Press recently reported that Matty Moroun, his wife, his son, and his son’s wife, gave the maximum amount of money allowed under Michigan law in June to the re-election campaigns of Republican-nominated justices. Additionally, several employees of one of Mr. Moroun’s company gave over half of the maximum amount allowed under Michigan law.

For those not familar with what is at stake for Mr. Moroun’s bridge empire, it is worth your time to read a great write up from Businessweek: Matty Moroun: Detroit’s Border Baron, which estimated that tolls from the bridge owned by Mr. Moroun’s company takes in approximately $156,000 per day. 

The issue of money and judicial integrity made major headlines in 2009, when the U.S. Supreme Court heard Caperton v. Massey. That case specifically addressed the issue of the role money played in a judicial election. This case arose out of a West Virginia trial where Hugh Caperton won a $50 million jury verdict against Massey Coal.

Massey appealed that verdict to the West Virginia Supreme Court. While the case was pending to be heard by this court Massey, through its CEO Don Blankenship, gave a $3 million campaign contribution in support of Brent Benjamin in his race for state Supreme Court Justice. Benjamin won the race, and refused to recuse himself from the Caperton case where he ended up casting the deciding vote in a 3-2 ruling to overturn the $50 million verdict against Massey. 

The US Supreme Court agreed 5-4, sending the case back to the West Virginia Supreme Court,and forcing Justice Benjamin to recuse himself from the case.

In both instances, there is the danger that the erosion of public trust – whether by individuals or companies – in the judiciary is significant. And those concerns may be magnified where you are whittling down the number of potential judges who are likely to hear your business case. 

Closing Thoughts on Michigan Business Courts

Does money actually influence a judicial decision? Without answering the question, the U.S. Supreme Court in the Capperton v. Massey decision reasoned that where a judge received $3 million in campaign contributions, “the probability of actual bias on the part of the judge or decision maker is too high to be constitutionally tolerable” and, as such due process required that judge to recuse himself.  

Going back to the question about money and influence, my personal belief – based on experience and a genuine belief in the principles of the rule of law, is mostly no. But the answer, however, matters less than what the public and those who are affected by such decisions believe to have taken place in any particular case. And that belief can be easily persuaded where headlines report high-powered billionaires or corporations flood a smaller field of business court judges with campaign contributions. 

For more information about this post, including how noncompete lawsuits and trade secret misappropriation claims will likely be affected by the creation of business courts, contact Jason Shinn.