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Pre-Dispute Jury Trial Waivers Are Unenforceable, Says California High Court

  • August 8, 2005

The California Supreme Court has ruled that a contractual agreement to waive the right to a jury trial, entered into prior to any dispute between the contracting parties, is unenforceable under the California Constitution and Section 631 of the California Code of Civil Procedure (the Code). [Grafton Partners L.P. v. Superior Court, Cal. Sup. Ct. No. S123344 (August 4, 2005)]. While the Code prescribes six means by which parties to a civil suit may waive their jury trial right, a pre-dispute agreement is not one of the authorized methods.   This ruling expressly disapproves the decision in Trizec Properties, Inc. v. Superior Court, 229 Cal.App.3d 1616 (1991), where a California Court of Appeal enforced such a pre-dispute waiver. 

Background

In March 1999, the parties entered into an agreement for audit services. The pact contained a provision providing that neither party would "demand a trial by jury in any action, proceeding or counterclaim arising out of or relating to" the accounting firm's services to the partnership or fees payable under the agreement. The partnership later claimed that the firm was negligent in performing its services and filed a complaint including a demand for a jury trial. The California trial court, relying upon the jury trial waiver contained in the agreement, granted the firm's request to strike the jury demand.

In reversing the trial court, the Court of Appeal for the First Appellate District concluded that a pre-dispute waiver of a jury trial is not authorized by Code Section 631, and that only those waivers authorized by statute are enforceable under the California Constitution.

Waiver Effective Only as Provided by Law

Affirming the Court of Appeal's decision, the California Supreme Court reiterated that a jury may be waived in civil cases only as provided in the statute—in this case Code Section 631(d). That provision restricts jury waivers to where the parties fail to:

- appear at trial;

- demand a jury trial within a specified period after the case is set for trial; or

- timely pay required jury fees

Section 631(d) also permits waiver of jury trial:

- in cases where there has been oral consent to the waiver in open court or

- written consent is filed with the court clerk.

These means for waiving a jury trial apply only to "persons who are already parties to a pending action…." Pre-litigation waivers, therefore, are not enforceable because, according to the Supreme Court, they "must occur subsequent to the initiation of a civil lawsuit."

The accounting firm attempted to counter the court's reasoning by noting that arbitration agreements also constitute a waiver of the right to jury trial but nonetheless have been approved as alternative forums to resolve disputes. The high court noted, in response, that "unlike pre-dispute jury waivers, pre-dispute arbitration agreements are specifically authorized by statute."

Contrary Court of Appeal Decision

The Supreme Court noted that the only other Court of Appeal to have considered the question whether pre-dispute jury trial waivers are enforceable concluded that, although Section 631 does not authorize such waivers, they are permissible without statutory authorization [Trizec Properties, Inc. v. Superior Court, 229 Cal.App.3d 1616 (1991)]. The Trizec court reasoned that nothing in the applicable constitutional provision prohibits such waivers, which the court likened to the arbitration clauses found in many contracts. But the Supreme Court disapproved Trizec "to the extent … [it] holds that the right to jury trial may be waived in a manner that is without statutory authorization …."

A Call for Reform

Justice Chin, in a separate opinion, said he "reluctantly" concurred with the majority opinion. He said it is out of step with the authority in other state and federal jurisdictions, most of which have permitted pre-dispute jury waivers (a point the majority conceded). Chin noted that the Legislature "has prescribed methods by which a party may impliedly waive, i.e., forfeit, the right to a jury trial by failing to undertake certain actions, such as depositing necessary fees." He agreed with the accounting firm's argument that it "makes little sense to authorize such forfeitures, and yet categorically prohibit knowing and voluntary jury trial waivers simply because they are made before any dispute arises." Chin urged the California Legislature to revise the law to permit the enforceability of pre-dispute jury waivers.

What Employers Should Do

The Grafton case affects employers who may have inserted pre-dispute jury waivers in employment agreements, employee handbooks, offer letters, or other personnel documents.  Arbitration agreements sometimes include jury waivers as "fall back" provisions in case the arbitration agreement is ruled unenforceable.  Employers should review all such personnel documents to determine whether they need to be revised as a result of this important decision. 

 

©2005 Jackson Lewis P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome.

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