Georgia lawmakers give businesses a boost in court battles

“Our involvement in the bill really was motivated by trying to make our legal environment pretty much just as competitive as our tax environment,” she told The Atlanta Journal-Constitution. “It was one of the chamber’s top priorities this year, and we are very happy that it passed.”

Another new state law set to assist companies in court is House Bill 1247, which does away with a practice adopted by many judges to defer to a state agency’s interpretation of the relevant laws and rules in a dispute over an agency decision. Jaimie Cavanaugh, senior state policy counsel at the Pacific Legal Foundation, said Georgia joins around half the states in the country in making this change.

“The standard was really high to try and get the court to overturn an agency decision,” she said. “I think it’s really important to kind of level the playing field here, so that businesses, when they are in some kind of unfair situation, get to see a judge who’s neutral.”

The changes follow Gov. Brian Kemp’s 2025 overhaul of certain litigation rules aimed at curbing so-called “nuclear verdicts” in personal injury cases and bringing down insurance costs.

Kemp told the AJC the new laws are part of an effort to retain Georgia’s 12-year title as the top state for business, adding that HB 1185 brings corporate governance “into the 21st century.”

“We’re never content to rest on our laurels,” he said. “With our partners in the General Assembly, both measures I signed this year will give job creators, investors and employees alike the confidence to choose Georgia as the best place to do business,” he said.

Opposition to HB 1185 came from some lawmakers who argued in part that it went too far in limiting shareholders’ ability to inspect company books and records. Others aired concerns about the bill forcing small companies into a specialized business court system, prompting opt-out provisions.

Advocates said the bill strikes a good balance in shielding corporations and their leaders from frivolous claims about internal company affairs while ensuring legitimate claims are handled swiftly with expert care.

“Officers are making dozens and dozens of decisions every day on behalf of a corporation,” said Andy Sumner, an Alston & Bird partner who defends companies and their directors in such disputes. “There’s got to be some type of protection there, otherwise every decision you make could be the subject of a lawsuit from a single shareholder who can file a class action on behalf of all shareholders.”

Expanding the docket

Georgia was already increasing its competitiveness as a state for companies to incorporate in when it started creating a statewide business court eight years ago.

Companies value predictability in shareholder litigation and other internal disputes that can be one of the most expensive parts of operating a business. It’s why so many incorporate in Delaware, where the Court of Chancery has long been the premier venue for these legal battles.

Credit: Jason Getz/AJC

Credit: Jason Getz/AJC

The Georgia State-wide Business Court opened in 2020 within the Nathan Deal Judicial Center in downtown Atlanta, offering fast-tracked expert handling of complex company cases. But it was underused because of a rule requiring feuding parties to agree to that forum, because of initial concerns about small companies in far-flung parts of the state being dragged into the court against their will.

As of March 31, the court had received 140 cases and held three jury trials since its inception.

In recent years, other states, including Texas, created their own business courts and passed corporate reforms to lure companies away from Delaware, which in turn amended some of its rules to placate management in response.

Credit: Elijah Nouvelage

Credit: Elijah Nouvelage

“We fell behind, largely as a result of an unwillingness to compromise,” said Walt Davis, the founding judge of Georgia’s business court, adding much of the opposition to the court was fear of the unknown.

Davis left the bench in late 2022 to return to Jones Day, where he co-leads the firm’s securities litigation and SEC enforcement practice. He has represented clients involved in the establishment of business courts in several states and said HB 1185 puts Georgia on par with Delaware, Texas and Nevada as a company-preferred resolution venue.

“Georgia took a very balanced approach in areas where it can be very expensive for public and private companies to have to deal with frivolous claims, but they preserved intentionally the ability of those same constituencies to bring claims with merit,” he told the AJC.

Under the new law, the business court has exclusive jurisdiction over certain corporate cases while remaining an optional venue for other disputes involving smaller entities, such as family-owned businesses.

That compromise meant the bill received “much lighter treatment,” said state Sen. Blake Tillery, who supported the final version.

“Since its inception, the Legislature has been clear and taken steps to ensure the statewide business court should be used for business disputes only, modeled from the Chancery Court in Delaware, and not as a forum where big businesses could drag small businesses to Atlanta to shop judges,” he told the AJC.

Park said there was less opposition than anticipated to the law change, which incorporated feedback from businesses of all sizes as well as attorneys and legislators. She said the business court’s new ability to take more cases is a “great economic development tool.”

“We want those companies that are now considering leaving Delaware to see Georgia as a great choice for them to come,” she said.

Sumner said his clients who know about the new law are enthused and excited to have more access to the business court. He told the AJC the court’s specialized and uniform handling of cases and its published opinions provide a road map to litigants otherwise at the mercy of county judges who tend to have less experience with complex corporate matters and are more inconsistent in their rulings.

“That increases predictability, it promotes consistency in the law, and you just have a much better understanding of what you’re dealing with,” he said.

Leveling the playing field in regulatory disputes

Predictability is also a benefit of the Georgia Bureaucratic Deference Elimination Act, said Cavanaugh, who has pushed for an end to the judicial deference doctrine nationwide.

Under that practice, scuttled federally in 2024 by the U.S. Supreme Court, judges have deferred to a government agency’s interpretation of laws, regulations and policies in cases over agency decisions. It’s put companies subject to government rules and regulations on the back foot when challenging those decisions.

Cavanaugh said Georgia’s new law helps to ensure the state’s executive branch doesn’t exceed its authority by determining the results of court disputes. She said more states are expected to similarly get rid of the deference doctrine, either through law changes or legal precedent.

“We’re not saying that the agency doesn’t get to make its arguments, or that the court can’t accept those arguments,” she told the AJC. “It can hear them and decide that those are still compelling. It could still rule for the agency. The only thing that it shall not do is, right off the bat, give a little extra weight to the agency’s argument.”

Cases in which this issue has played out in Georgia courts in recent years include attempts by healthcare providers to open new treatment facilities, for which they require approval by the Georgia Department of Community Health.

The agency’s decisions about whether to grant certificates of need for new facilities are often challenged in court, either by healthcare providers denied approval or their competitors afraid of being outdone.

Cavanaugh said under the deference doctrine, judges essentially cede authority to an agency’s interpretation of its actions, which is “really troubling for businesses.”

“I think if you ask any everyday American, they think that when they go to court, they’re getting a neutral decision-maker,” she said. “So, telling people, ‘No, actually the courts had to place their thumb on the scale for the side of government’ is really shocking for people, and does obviously hurt businesses all the time.”

Proponents of the doctrine have argued that government agency officials are often better qualified to decide regulatory matters than judges.

In Georgia, judges previously deferred to an agency’s legal interpretation of a rule they considered to be ambiguous. Under the new law, they “shall not defer to a state agency’s determination or interpretation” of the state’s laws and regulations.