Media Center

Strictly business: Could a Commerce Court make Pennsylvania a corporate magnet?

February 17, 2016

by Debra Fourlas

Nearly two-thirds of Fortune 500 businesses are incorporated in Delaware. More than 1 million businesses and half of all publicly traded U.S. companies are registered in Delaware.

What is the tiny state’s appeal?

Analysts point to Delaware’s specialized court – known as the Court of Chancery, hearkening back to its old English Norman roots – as one of its leading lures for business. It is an enticement Pennsylvania would be wise to emulate, provided it does so thoughtfully.

Widely respected, Delaware’s Court of Chancery is dedicated solely to handling complex business litigation. Its five judges and specialized dockets offer timely disposition of commercial disputes involving businesses, including internal disputes over the management and control of business entities, which are often highly time-sensitive.

Since its founding in 1792, the court has handled shareholder lawsuits, disputes between corporate board members, challenges to mergers and acquisitions, and other civil commercial matters. Each decision is explained in a written opinion, furnishing a vast body of case law that aids litigants in predicting how a dispute is likely to be resolved. The Delaware court has settled the largest corporate law disputes in U.S. history, and Delaware cases are considered the bible of corporate law in every law school in America.

Delaware’s emergence as the coveted home to so many corporate headquarters demonstrates that a state can attract businesses by creating a specialized, efficient business-oriented legal process. Today, its chancery court plays a starring role in Delaware’s marketing campaign to businesses.

More than 40 other court programs in 22 states have been created since the late 1980s. North Carolina, for example, established a business court in 1995. Like that in Delaware, the North Carolina court is specialized, efficient, and well-staffed. Cases are advanced quickly, sometimes in a matter of days.

Philadelphia and Pittsburgh have already developed sophisticated systems dedicated to commercial disputes in their Courts of Common Pleas. Now, Pennsylvania may be on track to join the numerous other jurisdictions that have followed Delaware’s lead.

Last October, the Pennsylvania House of Representatives approved HB 323, sponsored by Rep. Seth Grove (R-York) to establish a commerce court throughout the Commonwealth. The bill would allow the Superior Court and the Courts of Common Pleas to create specialized courts to hear complex business-related cases. The legislation would launch a pilot appellate-level program in the Superior Court. Under the bill’s provisions, two of the Superior Court’s 15 elected judges and three senior judges would have jurisdiction over commercial cases. Sen. Stewart Greenleaf (R-Montgomery), who chairs the Senate Judiciary Committee, has introduced legislation (SB 1043) that would create an independent court for complex business litigation.

Pennsylvania municipalities have long recognized that specialization in the judiciary may reap far-reaching rewards. In recent years, many counties have established veterans’ courts, mental health courts, and drug and alcohol courts. Dealing with highly complicated issues such as addiction, mental illness, and post-traumatic stress disorder, these courts have reduced rates of incarceration and recidivism and saved taxpayer dollars as a result.

As the business arena becomes increasingly multifaceted and globalized, competitive businesses need to have confidence that their sensitive, high-stakes cases will move quickly and efficiently through the legal system.

A commerce court in Pennsylvania could be a powerful magnet in the Commonwealth’s overall plan to attract businesses. In 1988, Pennsylvania undertook a sweeping overhaul of its business corporation law in an effort to lure new businesses, but without a specialized business court, a critical piece of the plan is missing.

For a commerce court system to succeed, however, proper funding and staffing will be critical. At the appellate level alone, our Superior Court is shockingly overburdened, with each judge authoring more than 300 decisions every year. Due in part to the massive workload, many decisions are unpublished and nonprecedential. Such decisions do not support the development of a large and comprehensive body of commercial case law. Simply diverting and reallocating the caseload among the existing judges and staff would do little to ease workloads, encourage an increase in the number of precedential commercial appellate opinions, or improve the movement of commercial appeals through the judicial system.

Until Pennsylvania enacts legislation to establish a statewide commerce court, our companies and citizens will continue to be left behind in the competition for business and jobs.

Debra P. Fourlas is co-chair of the Appellate & Post Trial Practice and is part of the Litigation Practice groups at McNees Wallace & Nurick LLC.