Pre-litigation Contractual Waivers of the Right to a Jury Trial Are Unenforceable Under Georgia Law - E. Michelle Robinson

• Publication year: 1995

Pre-Litigation Contractual Waivers of the Right to a Jury Trial Are Unenforceable Under Georgia Law

In a recent decision, Bank South v. Howard,¹ the Georgia Supreme Court held pre-litigation contractual waivers of the right to a jury trial are unenforceable in Georgia.² This decision is particularly interesting in light of two factors: (1) of the jurisdictions considering this issue, Georgia is the only one to hold such waivers unenforceable; and (2) contractual arbitration agreements, which essentially waive the right to a jury trial, are enforceable in Georgia. In Bank South v. Howard, Bank South filed suit against Howard to recover over two million dollars gander 1985 and 1988 guaranties.³ Howard raised several defenses and also counter-claimed against Bank South for fraud and violation of the Georgia RICO Act. The 1988 guaranty contained an express provision waiving the right to a jury trial in any action on the guaranty. Despite the waiver clause, Howard demanded a jury trial. The trial court denied his demand. Howard appealed, arguing that the jury trial waiver provision was void because the guaranty was fraudulently induced, and because the waiver did not specifically apply to his counter-claim against Bank South.⁴ The Georgia Court of Appeals reversed the trial court's decision, holding the provision in the guaranty waiving the right to a jury trial unenforceable against Howard.⁵ The court of appeals stated that Georgia's Civil Practice Act,⁶ which requires a jury trial except when a party by written stipulation consents to a non-jury trial, implies the waiver must be knowing and voluntary.⁷ The court of appeals held Howard could not have knowingly and voluntarily waived his right to a jury trial when he signed the guaranty, because he was not then aware of the basis and circumstances surrounding a future claim on the guaranty.⁸ Bank South appealed. The Greorgia Supreme Court granted certiorari to decide whether a pre-litigation contractual waiver of the right to a jury trial is enforceable under the laws of Georgia.⁹ The supreme court held that since such waivers are not provided for by Georgia's Constitution or Code, they are unenforceable in cases tried under the laws of Georgia.¹⁰ In Georgia, pre-litigation contractual waivers of the right to a jury trial are unenforceable.¹¹

The Constitution of Georgia provides: "The right to trial by jury shall remain inviolate, except that the court shall render judgment without the verdict of a jury in all civil cases where no issuable defense is filed and where a jury is not demanded in writing by either party."¹² The phrase "shall remain inviolate" refers to the right to a jury trial as it existed at common law at the time of incorporation of this provision into Georgia's Constitution. Thus, the right to a jury trial, as it existed in England, should be inviolate or unaltered.¹³ This right is also codified in Georgia's Civil Practice Act¹⁴ which states: "The right of trial by jury as declared by the Constitution of the state or as given by a statute of the state shall be preserved to the parties inviolate."¹⁵ However, this right may be waived expressly or impliedly.¹⁶ Parties or their attorneys can waive the right to a jury trial "by written stipulation filed with the court, or by an oral stipulation made in open court and entered in the record."¹⁷ Voluntary participation in a non-jury trial results in an implied waiver of the right. ¹⁸ In Raintree Farms, Inc. v. Stripping

Center, Ltd.,¹⁹ a local court rule provided a party who fails to file a demand for a jury trial by the last business day before docket call is presumed to have waived the right to a jury trial.²⁰ The court of appeals held the local rule was void to the extent it conflicted with the express waiver requirement in the Civil Practice Act, O.C.G.A. section 9-11-39.²¹ The local rule conflicted with the Civil Practice Act because it required a pretrial demand for jury trial, whereas the Civil Practice Act provides for a jury trial as a matter of right unless the parties consent to a non-jury trial.²² Consent to a non-jury trial must be by express stipulation or by voluntary participation in a bench trial.²³ In Manderson & Associates, Inc. v. Gore²⁴ the court of appeals upheld a jury trial waiver provision contained in an employment and stock transfer agreement²⁵ However, the court did so under the laws of Alabama, since the agreement also contained an Alabama choice of law provision.²⁶ The court stated that in Georgia "waiver of jury trials is statutorily recognized, although carefully controlled, under the laws of this state."²⁷

The Georgia Supreme Court based its decision in Bank South v. Howard on the Georgia Constitution, article I, section 1, paragraph 11 and on O.C.G.A. section 9-ll-39(a).28 The court determined that the terms of the Constitution and of the statute clearly envision the pendency of litigation at the time of the waiver.²⁹ The Constitution explicitly provides two circumstances in which the right may be waived: when no issuable defense is filed and when the parties fail to demand a jury trial.³⁰ The statute provides for waiver by express stipulation, either written or oral.³¹ In support of its decision, the supreme court analogized the waiver of a jury trial to a confession of judgment:³² both involve giving up valuable rights, and both are governed by statutes which, by their terms, contemplate the pendency of litigation.³³ As to both acts, the court of appeals has held foreign judgments based on pre-litigation contractual provisions are not contrary to the public policy or laws of Georgia.³⁴ However, waiver of a jury trial and confession of judgment differ in that the Georgia Supreme Court has held a confession of judgment must arise after litigation is initiated to be enforceable, while it has been silent concerning pre-litigation jury trial waivers.³⁵ The supreme court stated that the same rule should apply to jury trial waivers, due to the importance of the rights involved and the likelihood of abuse which exists in both situations.³⁶ This decision seemingly conflicts with Georgia cases upholding the enforcement of contractual arbitration provisions³⁷ .However, the supreme court explicitly reserved this issue for the General Assembly to reconcile.³⁸ The court stated that the General Assembly has expressly approved arbitration contractual provisions by repealing the common-law arbitration and construction contract arbitration statutes, and by enacting the Georgia Arbitration Code.³⁹ In the absence of similar legislative action allowing contractual provisions for waivers of jury trial or confessions of judgment, the court declined to hold otherwise.⁴⁰ Thus, unless and until the General Assembly enacts legislation allowing contractual waivers of the right to a jury trial, the Georgia courts will continue to hold such provisions unenforceable under the laws of Georgia. In her dissenting opinion, Justice Sears-Collins found an ambiguity created by the silence of the Georgia Constitution, article I, section 1, paragraph 11 and O.C.G.A. section 9-11-39, since the provisions do not provide that their methods of waiver are exclusive.⁴¹ Justice Sears-Collins believes this ambiguity should be resolved by upholding the right to contract for such waivers.⁴² In support. Justice Sears-Collins emphasized the parties' freedom to contract as to any terms and any subject matter.⁴³ The court of appeals has held any "impairment of the [right to contract] must be specifically expressed or necessarily implied by the legislature in a statutory prohibition and not left to speculation."⁴⁴ Since neither Article I, section 1, paragraph 11 nor section 9-11-39 explicitly or implicitly impairs the right to contract for pre-litigation jury trial waivers, they should not be construed to impair that right.⁴⁵ The dissent also found the majority's analogy of confession of judgment and waiver of jury trial inappropriate, since...