Business and Civil Litigation in New Jersey

Most New Jersey business disputes, from an unpaid invoice to a falling-out between LLC members, are heard in the Superior Court: the Law Division when the main goal is money, and the Chancery Division when you need a court order such as an injunction. A breach of contract claim generally must be filed within six years. Before any of that, the contract itself, and how quickly you preserve your records, often shape the case more than anything else.

Which New Jersey court hears a business dispute?

The Superior Court is New Jersey's main trial court, and business cases are divided by the kind of relief sought:

• Law Division, Civil Part. Claims for money damages, such as breach of contract, unpaid invoices, fraud and other business torts.
• Law Division, Special Civil Part. A faster, simpler track for claims of up to $20,000. Many collection cases are filed here.
• Chancery Division, General Equity. Cases that ask a judge to order someone to do or stop doing something: injunctions, specific performance of a contract, enforcing non-competes, and partnership and shareholder disputes. There is no jury in General Equity.
• Complex Business Litigation Program. Qualifying commercial cases can be assigned to judges designated to handle complex business matters, with active case management.

Cases are generally filed in the county where a party is located or where the dispute arose. Morris County cases are heard at the courthouse in Morristown and Sussex County cases in Newton. Some disputes belong in federal court instead, depending on the parties and the claims. Check the contract, too: a forum-selection or arbitration clause may decide where the case goes.

How long do you have to bring a business claim?

A claim for breach of contract is generally subject to a six-year statute of limitations under N.J.S.A. 2A:14-1. Other claims run on different clocks:

• Contracts for the sale of goods can have a shorter period under the Uniform Commercial Code.
• Some contracts shorten the time to sue, and courts often enforce reasonable limits.
• Many contracts require written notice of a breach and a chance to cure it before you can sue.

Deadlines can turn on when a breach occurred or was discovered, so get advice early rather than counting on the full six years.

What happens when business partners or LLC members fall out?

Disputes among owners are some of the hardest to resolve, because the people involved still share a company. New Jersey law gives owners of closely held businesses specific tools:

• Shareholders in a closely held corporation can ask the court for relief from oppression under N.J.S.A. 14A:12-7, for example when those in control act illegally, fraudulently or oppressively toward a minority owner. Remedies can include a court-ordered buyout.
• LLC members are governed by the Revised Uniform Limited Liability Company Act, N.J.S.A. 42:2C-1 et seq., which addresses a member's dissociation from the company and, in limited circumstances, judicial dissolution.

The operating agreement or shareholders' agreement is usually the starting point. Buy-sell provisions, valuation formulas and dispute-resolution clauses can resolve a deadlock without litigation, or set the rules if litigation comes.

Can a non-compete or non-solicitation agreement be enforced?

Often, but only as far as it is reasonable. New Jersey courts generally enforce a restrictive covenant when it protects a legitimate business interest, such as customer relationships or confidential information, without imposing undue hardship on the person bound by it or harming the public. A court may narrow an overbroad restriction rather than throw it out entirely.

These cases usually start in the Chancery Division and move fast. A business seeking to enforce a covenant may ask for temporary restraints within days of learning about a breach. If you are on the other side, a former employee or seller of a business, the time to get advice is before you start the new venture.

How do you collect an unpaid invoice?

Collections usually follow a predictable path:

1. A written demand that states the amount owed, attaches the invoices and sets a deadline. Many disputes end here.
2. Negotiation or mediation, if the debtor disputes the amount or needs a payment plan.
3. A lawsuit, often in the Special Civil Part for smaller balances.
4. Collecting on the judgment. A judgment is not the same as payment. Post-judgment tools such as bank levies and wage executions may be needed to recover the money.

An owner's personal guaranty, security interests and late-fee provisions in your credit application or contract can all affect what you can recover and from whom.

What should you do first when a dispute starts?

• Preserve everything. Put a litigation hold in place for emails, texts, invoices and files, and stop any routine deletion.
• Read the contract closely, especially clauses on notice and cure, fee-shifting, forum selection, arbitration and limits on damages.
• Keep communications measured. Assume emails to the other side will be read by a judge.
• Consider alternatives. A demand letter, negotiation, mediation or arbitration may resolve the dispute faster and for less than a full lawsuit.
• Notify your insurer if you are being sued; some business policies cover defense costs.

If you have a related commercial lease or property issue, our real estate practice handles those matters.

Talking to a lawyer about your situation

A business dispute is easier to manage when you understand your options before positions harden. A lawyer can read your contract, assess the claims and defenses, and tell you whether a demand letter, mediation or a lawsuit makes sense. You can read more about how the firm advises businesses on our corporate law overview.

Gray Law Group's office is in Jefferson, Morris County, and the firm serves businesses in Morris, Sussex, Warren and Passaic counties and throughout northern New Jersey. The first consultation is free. Call 973-240-7313 or send us a message.