Tuesday, November 29, 2016

Competition Claims: Federal versus State Courts

This post largely is inspired by a YouTube video I watched recently by Jonathan Pollard, who discusses the importance of litigating trade secrets in federal court - particularly if you're a defendant.

Jonathan's 15-minute discussion is a great way for clients - particularly individuals - to understand some of the procedural aspects of litigation. Often times, it is the procedure where disputes like this are decided. And unfortunately, in the world of litigation, procedure tends to be opaque and something we as lawyers merely gloss over.

Having litigated non-compete and trade secret claims for nearly 20 years, I can say with a fair amount of certainty that my work has been split equally in state and federal court. I suspect that the enactment of the Defend Trade Secrets Act last year will slowly start to tilt that equation towards federal litigation.

Here are the biggest differences I have noticed over the years between litigating competition claims in federal versus state courts:

  1. Attention to the Merits. The quality of judges in the federal system is - on the main - higher than in state court. This is a pretty uncontroversial generalization to make. Many state court judges are terrific, and some of the best judges I've ever appeared before are products of the state court system. Apart from that, however, state court judges have a higher case load than their federal counterparts. Many state court judges in Illinois have nearly 1,000 cases assigned to them. By contrast, the average number of cases filed per judgeship in federal court is 412. Many judicial districts vary in terms of the time from filing to disposition. But on average, it is fair to say that a federal court judge has fewer assigned cases to her docket than does a state court judge. Therefore, they can devote more attention to fewer cases.
  2. Help. Federal judges also have a staff of law clerks, which Jonathan describes in his video. This is an enormous benefit to litigants in emergency injunction proceedings. Quite honestly, even the most astute well-intentioned state court judge isn't going to have the time or resources to evaluate a TRO or preliminary injunction submission with the kind of attention it probably deserves. This certainly is the case with disputes in highly-technical fields or which require analysis of electronic evidence.
  3. Hearings. Part of the reason state court judges seem so busy is that they spend more time on routine hearings, status calls, and motions in court. This clogs up the available time for review of documents in chambers, legal research, and thoughtful analysis of contested cases. State judges have no one to draft written orders or opinions, and very rarely do so even on contested dispositive motions. For that reason, too, status court judges are generally much more reliant on oral argument and on in-court presentations by the litigants. In federal court, even contested preliminary injunctions may be resolved solely on the papers rather than on in-court live witness testimony. This, mind you, is not necessarily a benefit of federal court proceedings, though it certainly reduces cost. Often a strong case can come alive in a courtroom and appear more milquetoast solely when considered on the written submissions.
  4. Presumptions. The best point Jonathan makes in his video is that many state court judges start with a firm presumption that the plaintiff is correct. One of the reasons this is the case is that state courts are filled with rather form-oriented and even mundane disputes (often with pro se litigants on the other side) where the merits are not contested. Examples are collection disputes, evictions, and mortgage foreclosures. For judges who handle those calls, it's understandable to have a pro-plaintiff bent when the plaintiff is almost invariably the winner. Non-compete and trade secret cases are not susceptible to easy handicapping, and if anything, the merits may tip in favor of the defense.
  5. Scheduling. Federal courts operate with a set of procedural rules that are clear, demanding, and inflexible. The rules require early conferencing and discussion of proposed case management, and courts enter scheduling orders that can be changed only on good cause. State courts are notorious for continuances and delays, although that trend seems to be changing. In Illinois, most practitioners ignore our nominal case management rule (sort of a hybrid between Federal Rules of Civil Procedure 16 and 26). Judges seem not to care too much about it.
  6. Cost. Because of the demands in federal court (such as for pre-trial orders and expert witness disclosures), many view federal litigation as more expensive. My experience is precisely the opposite. I think the clear nature of the procedural rules, combined with judges' reluctance to blindly continue cases and fewer mundane court appearances, creates a construct in which attorneys can and should litigate disputes more efficiently. Federal courts also have magistrate judges before whom parties to a civil case can consent to have the case heard. 
  7. Fee-Shifting. Federal court tends to work better because the defense has greater opportunities for fee-shifting. State court judges are elected officials and face retention every six years. They invariably are the product of local bar associations and simply are loathe to ruffle feathers and sanction intransigent litigants. Federal court judges are appointed for life and have no allegiance to counsel. The Federal Rules of Civil Procedure also contain a number of different mechanisms that make fee-shifting appropriate, particularly when parties are unreasonable in serving or responding to discovery. This deterrent effect tends to reduce litigation cost because parties and counsel simply do not want to expose themselves to fee-shifting - even for discrete discovery dust-ups. In state court, sanctions are handed out so infrequently that delay and distraction seem to be the norm. When a party faces a disparity of litigation resources, this can be crippling.
Is there a clear-cut solution to where a plaintiff or defendant would rather litigate? It would seem to lean pretty strongly towards federal court. But as Jonathan notes, it's particularly crucial for defendants. 

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