Do Jurisdiction Clauses Matter To NY Companies? More Than You Can Imagine...
Practical insights from powerhouse attorney, author and speaker Bradley Bailyn.
When you have a case to evaluate, you need to consider 3 things. To what extent is the law on your side, how are the parties going to present themselves to a jury, and how well will the judge and jury understand your case?
UNDERSTANDING YOUR CASE
If you're the Plaintiff, you have the burden to prove your case. So you need a judge and jury that get where you're coming from. If you're the defendant, you want a judge and jury that have no idea why this case is even in court.
Personal injury lawyers always want to bring their case in the Bronx, or maybe Brooklyn. Long Island is not so good. Jurors in the Bronx really identify with the underdog, jurors in Nassau county, not as much. If you're suing the President, you want to do it in California, or maybe New York. Texas should not be your first choice.
I was having a meeting with someone recently who was developing an environmentally friendly product and the jurisdiction clause came up. This is an issue because if the product doesn't meet the highest standards for environmental responsibility, it won't be accepted by the people who need to accept it. If you try to make that argument to a judge in West Virginia that the entire product is worthless and defective because 2% of it is not biodegradable, the judge might just laugh in your face and the West Virginia law will be on his side. In New York or California, it's a more understandable and there is more likely to be relevant laws and cases to help you.
The reason that so many major companies are headquartered in Delaware or New York is that those jurisdictions have laws that are favorable for corporations, and sophisticated judges who understand the issues before them and issue better rulings for the facts before them.
How do judges get their position? It depends on what court it is - they can be hired, elected or appointed. But typically, they have to run for office. If they're elected, they have to be nominated by a political party. If they're appointed, they get appointed by a politician. Once you grasp the fact that your judge is either a Democrat or a Republican, you also need to consider their geographic location. An Alabama Democrat is going to have a different viewpoint than a California Democrat. And judges in urban areas are typically wealthier than judges in rural areas, and judges on higher courts are typically wealthier than lower court judges.
THE LAW OF THE JURISDICTION
The next issue is the law. You need to figure out if you are more likely to sue or be sued, and for what. See what are the laws that would apply to your case specifically, as well as generally such as statutes of limitations. It's not just the state, but also the county. Some counties are a lot friendlier to Plaintiffs or Defendants than other counties within the same state, and sometimes municipalities have their own laws which can be relevant.
What court has jurisdiction also matters to the extent of the local rules. For example, some courts will allow telephone appearances, some will not. Some will allow a business to be represented by any officer of the company, some will require that they are represented by an attorney. Certain localities are a lot friendlier to certain kinds of cases than others. If you are in New York, you really want your case heard in New York unless there is a good reason why not. In New York you can find an affordable lawyer because there are just so many lawyers. Lawyers in Delaware are very, very expensive. If you get sued in small claims court in Los Angeles, you'll need to hire some LA lawyer you have no connection to and you may not be able to testify by phone, so that may force you to settle. It goes the other way too so try to pick your jurisdiction carefully.
A possible compromise is that jurisdiction shall lie in the defendant's location. But that depends if you are more likely to be sued, or be suing. All else being equal, it is always an advantage to put jurisdiction as far from the other guy as possible. You should also keep in mind that jurisdiction can lie in one place while the law of another place is applied.
One other interesting thing that comes up is arbitration. Arbitration is better when you need to protect secrets or you are the one who is more likely to be sued, because it is a faster, simpler process. Arbitration allows for telephone appearances too. What you have to keep in mind about arbitration is that filing a commercial case is expensive and much of the time the other side defaults, leaving you to pay $2,000 or so in fees and then you need to spend more money trying to collect on the judgment. So unless it's a big case, you could end up not filing it just because it's too expensive to arbitrate. Arbitration is very popular with large corporations that arbitrate all the time because they can strip consumers of a lot of rights which they would have before a judge.
Bradley Bailyn is a New York debtor/creditor attorney representing clients in commercial litigation, bankruptcy and out-of-court financial negotiations. Call 646-326-9971 for a no-cost consultation on your case.