08.11.2005

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Updates

In a decision that broadens the right to a jury trial for parties in California, the California Supreme Court recently held that California courts cannot enforce predispute waivers of the right to a jury trial . The case, Grafton Partners L.P. v. Superior Court, No. S123344 (Cal. Aug. 4, 2005), applies retrospectively to all existing contracts governed by California law and will significantly affect dispute resolution efforts by parties to such contracts. The Court reached its ruling even after acknowledging that its holding contradicted the law in a majority of state and federal jurisdictions.

This Update summarizes the key elements of the Court's decision and offers practical guidance.

Right to Jury Trial May Only Be Waived to the Extent the Legislature Specifically Permits

The Court reached its result based on a strict interpretation of the California Constitution, which identifies jury trials as an "inviolate right" and, according to the Court, permits a jury trial waiver only when the California Legislature specifically permits. In other words, the Court declared that parties to a contract cannot agree before litigation arises to waive their right to have any disputes heard by a jury.

The Court reviewed the language in the California Constitution, as originally adopted in 1849, which provided that a trial by jury may be waived in civil cases in the manner to be "prescribed by law," language substantially similar to the Constitution's present "as prescribed by statute" language. Relying on an earlier decision that limited the Court's ability to "prescribe by law" and efforts to modify the California Constitution, the Court concluded that the constitutional history reinforced the holding that the right to a civil jury trial may be waived only as the California Legislature prescribes. In other words, the Court held that a court lacks the power to create nonstatutory waivers of the right to a jury trial, even if that means not enforcing a contractual agreement.

Existing Statute Permits Jury Trial Waivers Post-Dispute or in Connection With Arbitration Provisions

The Court also reviewed the statute that governs jury trial waivers, specifically the California Code of Civil Procedure section 631. The Court concluded that the statute permits jury trial waivers only after a lawsuit has been filed, not before. The Court also distinguished contractual arbitration provisions that mandate arbitration. These, the Court explained, waive an entire package of trial rights, including jury trials, pursuant to express statutory authority. The Court concluded that, unlike the comprehensive scheme enacted by the Legislature in connection with arbitration provisions, the Legislature has not enacted legislation that authorizes parties to waive only the right to a jury trial. "[I]t is for the Legislature, not this court, to determine whether, and under what circumstances, a predispute waiver of jury trial will be enforceable in this state."

The Court's Decision Has Retrospective Effect

The Court concluded its opinion by giving its holding retrospective effect, thereby invalidating all existing predispute jury waiver provisions. The Court explained that doing so "will not deny any party a substantial right or his or her day in court," but will simply deny to those who might have relied on predispute jury waivers a benefit that they never had the right to obtain.

 While the full impact of the Court's decision remains to be seen, the case will alter the dynamics between parties who entered contracts containing jury trial waivers. For example, consumers who waived their right to a jury trial before any litigation arose, even those who did so knowingly and willingly, can now have their claims heard by a jury. The number of jury trials will likely increase, and, just as importantly, the negotiating strength of certain parties may be enhanced in any potential contractual dispute.

The California Legislature, which has the power to allow predispute contractual waivers of a jury trial right, may well be called to act to address this decision. Pending any such legislative action, however, all parties who believed they had entered into binding jury trial waivers should be mindful that the landscape has changed.

Practical Tips

Invoke Jurisdiction of Federal Courts or Other State Courts. Parties who have the right to invoke the jurisdiction of federal courts or bring proceedings in other state courts may wish to consider doing so. Federal Courts will enforce such provisions as will courts of many other states.

Take Steps to Make Predispute Jury Trial Waivers Enforceable. Parties may also take a number of preemptive steps to ensure that a predispute jury trial waiver is enforced. For instance, predispute jury trial waivers may still be enforceable if the contract contains a choice of law clause that properly invokes the law of one of the many states that recognize predispute jury trial waivers, such as Alabama, Connecticut, Missouri, Nevada, Rhode Island, Texas, and others.

Consider Alternative Dispute Settlement Methods. As an alternative, parties entering into contracts governed by California law who wish to avoid a jury trial should consider including arbitration provisions or other dispute resolution procedures.


 

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