It's All Business

North Carolina's business court has been in exis­tence since 1995, but it recently got quite the facelift. On Aug. 6, Gov. Pat McCrory signed into law an act aimed at modernizing and streamlining the state's specialized business court. Proponents believe these changes will make the state more business-friendly by establishing clear precedents and definitive case law.

Business courts are specialized courts that hear only designated business cases. They currently exist in varying forms in 20 states, with Delaware's Court of Chancery being the longest-running and most prestigious.

But the makeup of business courts differs greatly from state to state in several respects. For instance, North Carolina and Delaware have specialized business courts, while some other states only have business divi­sions within their existing general courts; some business courts are statewide and some are limited to metro areas, such as Pittsburgh and Chicago; and the criteria for qual­ifying for business court is different in every location. Despite this wide variety, each state with a business court system generally creates it with the goal of improv­ing efficiency and predictability in business litigation.

The new North Carolina law was spearheaded by Republican state senators Tamara Barringer and Bob Rucho, who told the Charlotte News & Observer in June that their goal was to enhance the existing court and "make the state more attractive to businesses, including out-of-state companies looking to relocate."

One of the ways that North Carolina hopes the law will help it to compete is through new rules on holding company reorganizations — that is, when a new cor­poration becomes the sole shareholder of an existing corporation through a merger. In a page taken from Delaware's playbook, an entirely new section was added that permits holding companies to reorganize without shareholder approval as long as certain requirements are met. Once the merger is complete, the shareholders will maintain the same rights in the new holding company.

Other sections in the law deal directly with the oper­ation of the business court. Business court appeals will now go directly to the state Supreme Court, rather than through the Court of Appeals. The law also creates a category of mandatory complex business cases that are required to be tried in business court: Cases valued at more than $5 million involving corporate law, intellectual property law, and certain other areas fall under this desig­nation, as do business contract disputes worth more than $1 million when all parties consent to the designation.

While the law does not create any new judgeships, the 2014 Appropriations Act does call for two new business court judges in 2015, bringing the total to five.

The updated law applies only to cases brought to the court after Oct. 1, 2014, and most provisions of the new law went into effect on this date.