Choosing between Federal and State Court for Business Litigation

All attorneys and many potential litigants are aware that venue can have a major impact on the process and outcome of a case. Clearly, whether a case is successful or unsuccessful depends to a large degree on its merits; but, the location where a case is litigated and tried can also have an influence as well.

What’s more, venue can have an impact beyond the outcome of a case. Depending on the situation, certain venues can prove to be much more costly in terms of time and money for litigants. For these reasons, venue selection between federal and state courts is a highly important issue when it comes to business litigation. 

Jurisdiction in Federal vs. State Forums 

 

One of the first things readers should know when it comes to venue selection is the fact that venues are only available under certain conditions. In order to have the option between federal and state courts, both courts must have jurisdiction over the case. This means that the courts must have subject matter jurisdiction and personal jurisdiction. If these two forms of jurisdiction are absent, then the case cannot be heard.

At the federal level, subject matter jurisdiction exists in two general situations.  The first arises when the case involves federal issues, such as claims involving the U.S. Constitution or federal statutes, and cases in which the United States is a party. The second instance, and the more common scenario involving business litigation cases, arises when the litigants reside in different states and the dispute involves an amount exceeding $75,000. 

 

Requirements for Personal Jurisdiction in Federal Court

Personal jurisdiction at the federal level is determined specifically by 28 U.S.C. § 1391. As this section lays out, a federal district has jurisdiction over a defendant if the defendant physically resides in that district, or is a resident of the state in which the district is located; or, a federal district in which a substantial part of the incidents which gave rise to the claim took place, or a significant portion of the property under dispute is physically located.

Expectedly, a defendant may be able to challenge personal jurisdiction, depending on the specifics of the case. Potential plaintiffs should be aware that there is a test to settle such challenges. 

 

Expectedly, a defendant may be able to challenge personal jurisdiction,
depending on the specifics of the case.

 

Consider the Dockets of the State and Federal Courts

If litigants have a choice between federal or state forums, one of the considerations which must be taken into account is the pace of the court’s docket.  State courts and federal courts have different numbers of judges, different case loads, and different pre-trial deadline guidelines. 

If you prefer a speedier resolution, you’re going to need to research and determine which venue will enable you to pursue your claim faster. Generally speaking, federal courts are more formal and rigid with time frames and cases in federal court move faster than Florida state courts.   

 

Venue Selection Clauses are Presumptively Valid 

 

More and more, businesses are utilizing “forum selection clauses” in contracts which can predetermine venue in the event of a dispute. In nearly all cases except those which include “extraordinary circumstances,” venue selection clauses are binding on the parties. This of course hinges on whether personal jurisdiction and subject matter jurisdiction are in fact satisfied. If jurisdiction is met, then the preselected forum will be given great deference.

 

Potential litigants also need to be aware of this point.  

 

Strategy & Convenience

 

Two other concerns which should be kept in mind during the selection process are strategy and convenience.

As attorneys know very well, different court venues may adjudicate issues quite differently.  For example, federal courts are much more likely to grant a meritorious summary judgment motion whereas a state court judge may be more reluctant to grant summary judgment and be more inclined to allow the parties their day in court.  These differences must be a major part of a litigant’s strategy in forum selection.

In addition to this concern, another concern is simple convenience. The location of the parties and witnesses, counsel’s experience with the potential venues, and other convenience factors should be evaluated in forum selection.   

 

Contact The Frazer Firm for More Information 

 

If your business is facing the prospect of initiating litigation for a business dispute, it is imperative that you consult with business litigation counsel with extensive experience in both federal and state courts. 

Selecting the most advantageous venue in which to bring your business litigation action is the first of many strategic decisions we can help you and your company with.
To learn more and to schedule a consultation with our business litigation attorneys,

contact The Frazer Firm today.