Nevada takes pride in being a business-friendly state, but when it comes to legal disputes involving business entities, the state is lagging. Litigation for local firms can take years and despite the favorable conditions to welcome new businesses, it can be a huge deterrent. A new proposal in the 83rd legislative session is targeting this gap. Assembly Joint Resolution 8 (AJR 8) proposes to amend Nevada Constitution for the establishment of a business court.
A business court is a court division within a state’s judicial system that specializes in handling complex commercial litigation, such as shareholder conflicts, intellectual property issues, contract disputes, and more. In states without a business court, disputes of this nature fall into the general court system and could take months or years to resolve. Creating a separate business court for the Silver State could send a clear message to entrepreneurs and consumers nationwide – Nevada is committed to protecting your rights efficiently. During the hearing of the proposal on March 3rd, Assemblymember Joe Dalia and UNLV Boyd School of Law professor Benjamin Edwards explained to the legislators how the proposed appointed business court would function.
Comprised of at least three judges who would be appointed for a six-year term by the Governor, the Nevada business court would ensure that commercial litigation is handled by the best professionals, because corporate law is niche. The court is also expected to require minimal state investment, as most of its revenue would be from fees related to the processing of cases.
While the proposal is attractive, amending the Nevada Constitution takes time. First, AJR 8 needs to pass through both the current and the 2027 legislative sessions. If it is approved in two consecutive legislative sessions, the measure will then arrive on the ballots of Nevadans for the 2028 elections. Nevada voters then must approve the referendum at the ballot before it can take effect.
Why now?
Nevada has always been a favorable state for incorporation. A long-time competitor and leader in corporate formation is Delaware. That state’s advantages include a favorable business climate and a chancery court that acts similarly to the proposed Nevada business court. Speedy resolution of disputes has made Delaware a go-to for startups and corporations. But businesses have started seeking better bases. After the Delaware chancery court recently invalidated Elon Musk’s Tesla pay package, the chancery court’s tradition of deferring to the rights of corporate directors to enter contracts they deem reasonable was weakened. Firms now rightly believe the court is becoming too active in shareholder matters and less deferential to those charged with corporate governance. This quickly translated into action by affected businesses and the phenomenon became popularized as DExit. Companies like TripAdvisor and DropBox left Delaware for Nevada. So, with an emerging market preference for Nevada, AJR 8 signals Nevada is committed to attracting these businesses to a place of domicile. Texas is yet another state that has been taking advantage of this opportunity and established business courts in September of 2024. With appointed judges serving six-year terms instead of the two-year terms of Texas, Nevada’s proposal is aiming to position our state in a more favorable light.
What are some concerns?
Critics worry that AJR 8 would mean unequal access to justice with corporations and businesses getting separate treatment, while ordinary citizens and workers stay in the overburdened judicial system. Many would prefer the establishment of a statewide housing court or consumer protection court. Furthermore, some legislators expressed concerns about the judges being appointed rather than elected. While this is a measure to ensure that the judges have the utmost skills and knowledge in corporate law, it was met with resistance.
One thing is clear: as the business landscape grows more sophisticated, so must our legal infrastructure. Business courts aren’t just about corporations; they’re about making Nevada the preferred destination for the world’s largest businesses.
