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New Rule on Accelerated Adjudication Procedures in New York State Courts

May 23, 2014

New York has recently adopted a new Rule of Practice for the Commercial Division (22 NYCRR §202.70(g)) (Rule 9) relating to the use of “accelerated adjudication procedures,” which will take effect on June 2, 2014.

The new Rule 9 allows the parties to any commercial dispute exceeding $500,000 to resolve their dispute more expeditiously and cost effectively by including in their contract specific accelerated adjudication procedure language:

“Subject to the requirements for a case to be heard in the Commercial Division, the parties agree to submit to the exclusive jurisdiction of the Commercial Division, New York State Supreme Court and to the application of the Court’s accelerated procedures, in connection with any dispute, claim or controversy arising out of or relating to this agreement, or the breach, termination, enforcement or validity thereof.”

The parties may also agree to accelerated adjudication procedures by filing a stipulation with the court once a dispute has arisen.

Unless otherwise modified by the contracting parties, Rule 9 provides for: 1) trial by judge instead of jury; 2) significant limitations on discovery; 3) waiver of punitive and exemplary damages; 4) that the case be ready for trial within nine months of a request for judicial intervention; and 5) waiver of interlocutory appeals and of objections based on lack of personal jurisdiction or forum non conveniens.

Rule 9 was designed “to provide the parties with an alternative to arbitration while still guarantying important procedural protection, such as the right to appeal the final judgment” noted Hon. James M. Catterson, former Justice of the Appellate Division, First Department. In addition, it should also encourage contracting parties to choose New York law as the governing law and New York courts as a timely and cost-effective “forum” to resolve their disputes. 

According to the Task Force on Commercial Litigation in the 21st Century, which developed Rule 9, many proposals were evaluated to limit discovery and streamline the process while still providing certainty, including the extensive Addendum Preliminary Conference Order currently used by Justice Charles E. Ramos, New York County Supreme Court. Justice Ramos’ Addendum was closely modeled on the Economic Litigation Agreement (ELA), issued by CPR Institute [publisher of Alternatives] in 2010 to provide the parties to a commercial dispute with a cost-effective alternative to binding arbitration.  A means of containing civil litigation costs, an ELA is a hybrid of civil litigation and arbitration, where parties agree to use finite, defined and proportional discovery procedures in lieu of conventional discovery. Companies can incorporate the model agreement by reference into contracts with partners, suppliers and other B2B customers at the start of a business relationship. Colloquially known as a "litigation prenup," the model ELA includes a mandatory pre-litigation dispute resolution section, as well as fee-shifting in discovery disputes decided by an ELA arbitrator.

It is interesting that courts are now adopting rules and procedures inspired by a CPR model intended for use in commercial contracts.

- Lia Iannetti, CPR Institute