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Business-killing cuts to state court systems

November 2, 2012 Leave a comment Go to comments

Across the United States, “business uses the courts far more than anyone else,” explained Frank B. Cross, a professor of business law at the University of Texas at Austin. And among those cases, “the vast majority is business-to-business.” Most common among these, Cross said, are breach of contract and fraud cases that involve any product or service — office equipment, software, the work of an accountant — that doesn’t live up to the contract’s promise. Another frequent problem comes when one company misses one or more payments to another. If the unpaid firm doesn’t have ready access to courts, Cross said, that firm’s financial stability is put at risk. “A working court system is absolutely essential to business,” he concluded.

“A working court system is absolutely essential to business.” — Frank B. Cross, business law professor at the University of Texas at Austin

Due to increasingly severe budget cuts, more and more state court systems have become dysfunctional in the last few years. According to data from the National Center for State Courts (NCSC), a nonprofit research, consulting, and advocacy group, 42 state legislatures reduced their state court budgets between 2008 and 2011. A variety of cutbacks ensued — including staff layoffs, reductions in courthouse hours, and pay cuts for courthouse personnel — and many state judicial systems have consequently slowed down (see visualization on next page). The NCSC’s data show that since 2008, 29 states have seen an increase in case backlogs, and 15 states have experienced an increase in the time it takes for cases to go from filing through resolution.

“Let’s say I’m in a business-to-business dispute over intellectual property,” Joseph Dunn, former California senator and current executive director of the State Bar of California, explained. If the case drags on for years as opposed to months, even if the aggrieved business is otherwise healthy and eventually wins, “No investor is willing to put money down.” The pendancy of litigation can make a company seem like an unwise bet. “Banks and investors looking for a good return will avoid this kind of risk,” Dunn said. He explained that in California, before the cuts, a typical intellectual property dispute would have taken 12 months to resolve. “Now it’s three to five years,” he said. These longer wait times “have become deadly to the business community.”

via Business-killing cuts to state court systems.

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