For years, contracting parties in California have thought they could avoid the uncertainty and expense of a jury trial by agreeing in advance that any lawsuit between them would be decided by a judge, sitting without a jury. This view was based in part on a 1991 intermediate appellate decision (Trizec Properties, inc. v. Superior Court) which upheld a pre-dispute contractual jury waiver, at least where the waiver was "clearly apparent in the contract." Last Friday, however, the California Supreme Court disapproved Trizec and held that California law does not permit pre-dispute jury waivers. See Grafton Partners, L.P. v PriceWaterHouseCoopers L.L.P., 05 C.D.O.S 6887 (August 5, 2005).
In Grafton, PriceWaterhouseCoopers (PWC) was hired to audit the books of two Grafton partnerships. PWC’s engagement letter provided that, in the event that differences concerning PWC’s services or fees could not be resolved by mutual agreement, the parties "agree not to demand a trial by jury in any action, proceeding or counterclaim arising out of or relating to [PWC’s] services and fees for this engagement."
Three years later, Grafton sued PWC for negligence and other claims arising from PWC’s alleged failure to disclose fraudulent business practices that had been discovered during an audit. The trial court struck Grafton’s demand for a jury trial, but the Court of Appeal reversed. The California Supreme Court unanimously upheld the Court of Appeal decision, holding that pre-dispute jury waivers are invalid. The Court also applied its decision retrospectively, i.e., to pending cases where a party seeks to rely on a predispute waiver.
The Court relied on California’s constitutional mandate that jury waivers in civil cases must be "as prescribed by statute." Looking to the applicable statute (Code of Civil Procedure § 631), the Court found that the Legislature has authorized waivers only in certain specific instances: by failing to appear at trial or announce that a jury was required, by oral consent in open court, by failing to pay jury fees, or by written consent filed with the court. All of these provisions, however, apply only to written jury waivers entered into after a lawsuit is filed.
The Court made clear that its decision does not prevent parties from agreeing in advance to arbitrate their disputes, reasoning that the Legislature had enacted a comprehensive scheme authorizing predispute arbitration agreements. Likewise, the Court ruled that parties are free to agree in advance to a "judicial reference," where a judicial referee is appointed to determine some or all of the issues in a case.
The Landscape after Grafton
Parties whose contracts include jury waivers should review those contracts and weigh the importance of avoiding a jury trial. If avoiding a jury is paramount, parties should consider revising their contracts to provide for arbitration or judicial reference.
The content of this article is intended to provide a general guide
to the subject matter. Specialist advice should be sought about your
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The increasing focus on enforcement of the US Foreign Corrupt Practices Act (FCPA), Canadian Corruption of Foreign Public Officials Act and UK Bribery Act, as well as similar anti-corruption laws around the globe, has made conducting pre-acquisition anti-corruption due diligence an essential element of any cross-border merger or acquisition, especially if the target does business in a jurisdiction where local officials may expect to be compensated for simply doing their job.
The cost of insider trading just got more expensive for those who get caught. In a February 18, 2014 decision by the U.S. Court of Appeals for the Second Circuit, a split appeals court panel found that an individual held liable for civil insider trading while working at an investment fund can ..
The United States Solicitor General has recommended that the Supreme Court deny certiorari in United States ex rel. Nathan v. Takeda Pharmaceuticals N.A. Inc., et al. (No. 12-1349), a False Claims Act ("FCA") case involving the question whether a relator must identify specific false claims submitted for payment in order to plead fraud with sufficient particularity under Federal Rule of Civil Procedure 9(b).
The increased globalization of the private investment industry
has given rise to an enhanced focus by U.S. prosecutors and
regulators on rooting out corrupt business activities in private
equity firms and hedge funds.
In Kaley v. United States, the U.S. Supreme Court held that criminal defendants are not entitled to challenge an asset freeze by relitigating a grand jury's determination that probable cause exists to believe they committed the crimes charged.