Canadian businesses regularly performing work or sending products into the United States have increased growth opportunities as a result. But doing business in the U.S. also comes with litigation risks, as the bar to commencing litigation in America is less costly than in Canada.
Hodgson Russ LLP, an American law firm with offices bridging the border between the U.S. and Canada in Buffalo, New York, and Toronto, routinely advises Canadians about such legal risks. In our Toronto office, we exclusively practice in U.S. courts, but several are admitted to practice in Ontario. This means that our lawyers keenly understand the interests of Canadian businesses and the litigation differences between the two countries.
Read on to ensure you’re aware of key considerations that exist when litigating in the U.S., including:
- the potential costs and risks associated with American courts;
- procedural differences between Canadian and American courts; and,
- various stages of the American litigation process.
Before the First Move: Pre-Litigation Considerations
In America, generally, each party bears their own legal costs as opposed to the Canadian system, where a court may require the losing party to pay the other side’s legal fees and costs. The Canadian ‘cost-based’ system arguably leads to fewer speculative or frivolous claims.
The two countries share a number of similarities in legal systems as both are derived from the English common law. But procedurally differences abound:
- Statute of Limitations
- This describes the time limit for parties to bring a claim. For example, for contract-based claims, American jurisdictions often allow for 4-6 years to bring a claim, while they currently have a basic limitation period for all civil actions of two years.
- Discovery
- Third-party discovery is allowed in America, which may lead to voluminous document requests and depositions. Canada does not permit third-party discovery without court permission.
- Court Backlog
- The COVID-19 pandemic created delays in both countries. This backlog continues to create significant issues in Ontario, especially in the Toronto region. American courts generally hear or determine motions more quickly than their Canadian counterparts, with certain cases going to trial within one to two years. Many American states have business courts expressly created to help expedite complex commercial disputes.
Differences in Courts
The U.S. system leaves room for diversity in jurisdiction, often called ‘forum shopping.’ Canada’s federal courts have a narrower jurisdiction than U.S. federal courts, which may hear cases involving federal legal questions or cases with parties from multiple states that involve disputes under a state’s laws.
Additionally, depositions in the U.S. are much broader than the Canadian equivalent, examinations for discovery, and their contributing factors include:
- the right to depose multiple witnesses for a party. Generally, in Canada, you may examine one representative for each party;
- discovery involving individuals or a company with pertinent information who are not party to the litigation; and,
- a broader reach for subpoenas requiring attendance at a deposition.
Thus, American judges frequently hear a myriad of discovery disputes that may never emerge in a Canadian lawsuit.
The Price of Justice: Differences in Costs and How to Minimize Costs
Regardless of jurisdiction, businesses can employ numerous strategies to minimize litigation costs. Such cost control options include:
- arbitrating discovery disputes or including arbitration-only provisions in contracts;
- conducting case management with an associate judge or magistrate; or,
- permitting magistrate judges to oversee and try federal civil disputes.
Two Systems, Two Styles: Trial Differences
Jury trials are common in the U.S., as American individuals and businesses have a constitutional right to a jury trial for civil or criminal legal matters. In Canada, such a right only exists for criminal issues.
Other distinctions exist in courtroom procedure. Examples include:
- American judges use gavels, Canadian judges do not;
- American lawyers may approach a testifying witness after receiving permission from the court; and,
- American lawyers do not wear robes, bow to the judge, nor do we refer to opposing counsel as ‘friends.’
The Final Chapter: Post-trial
Punitive damages are limited in Canada, making extremely large damages awards a rarity. The same is not true in the United States, where damage awards for tort claims are significantly larger than in Canada.
After a trial, a judgment must be enforced if the losing party does not appeal or pay the ordered amount. This is a separate judicial process with additional expenses. In the U.S., such a process is relatively streamlined with strict procedural requirements.
Conclusion
In cross-border litigation, Canadian businesses operating in the U.S. must navigate key procedural and cost-related differences that significantly impact legal strategy and outcomes. Understanding the nuances of American litigation, from broader discovery rules to jury trials and punitive damages, is essential to mitigating risk and effectively managing expenses. Hodgson Russ uses its cross-border experience to help Canadian companies prepare for and respond to legal challenges in the U.S. market.
