For those of you who are contracting with parties in California, we wanted to remind you that you cannot use a contractual jury trial waiver provision to waive the right to a jury trial in California. Indeed, a recent decision by a California appellate court suggests that including a jury trial waiver provision while contracting in California could even void a (non-California) forum selection clause and require you to litigate in California. It appears that the prudent approach to contracting in California requires removing jury trial waiver provisions from contracts.
Just this past Halloween, on October 31, 2019, a defendant received an unpleasant shock as a result of disregarding this rule. In Handoush v. Lease Finance Group, LLC, 2019 Cal. App. LEXIS 1078 (Oct. 31, 2019) [link], a plaintiff successfully invalidated a defendant's forum selection, and thereby reversed an order dismissing a California lawsuit, because the contract at issue purported to waive the Plaintiff's statutory right to a jury trial under California law. Lease Finance Group, LLC had obtained a dismissal of Handoush's claims before the trial court based on a contractual forum selection clause specifying New York courts that included a jury trial waiver. But Handoush appealed, and the First District Court of Appeal reversed and remanded because enforcing the jury trial waiver would "substantially diminish the rights of California residents in a way that violates our state's public policy." Handoush, 2019 Cal. App. LEXIS 1078 at *5 (internal citations omitted).
The Handoush decision expands a plaintiff's right to seek a jury trial in California. California law has been growing increasingly hostile to contractual jury trial waiver provisions. Prior to this decision, it appeared that, so long as a contract specified both a non-California forum and non-California governing law, a contractual jury trial waiver might be enforceable.
In January 2017, the First District Court of Appeal had ruled that contractual jury trial waivers cannot be enforced in California courts. Rincon EV Realty LLC v. CP III Rincon Towers, Inc., 8 Cal. App. 5th 1, 11-18 (2017) [link]. The Rincon decision showed that parties could not contractually waive the right to a jury trial in a California court – not even by designating that non-California law should govern any disputes between them. Id. Specifically, in Rincon, the First District held that "California has a fundamental policy concerning contractual waivers of the right to jury trial" and that maintaining this policy is a "paramount interest" whenever the dispute is litigated in a California court. Id. Note, however, as the First District did in Rincon, that "[w]ere the venue changed . . . to New York . . . the jury trial right the parties enjoy in [California] courts would not travel with them." Id. at 18. The decision in Handoush, however, clarifies that even attempting to exclude a California forum is insufficient.
Indeed, it appears that a contractual jury trial waiver provision might give a plaintiff greater rights to litigating in California than might otherwise exist. In the absence of the jury trial waiver provision, the forum selection clause might have been enforceable. As a practical matter, the Rincon and Handoush decisions, read together, mean that attempting to effect a jury trial waiver against a California resident might be the best way to guarantee a jury trial in California. So, for the time being, if you are presented with a California contract containing a jury trial waiver provision, you should consider striking that provision if you wish to avoid a jury trial in California.
We note that, as we would expect, the Handoush decision has been appealed. Stay tuned to see what the California Supreme Court does with this decision.
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