A Tale of Two Waivers: Waiver of the Jury Waiver Defense Under the Federal Rules of Civil Procedure

• Publication year: 2021

87 Nebraska L. Rev. 675. A Tale of Two Waivers: Waiver of the Jury Waiver Defense Under the Federal Rules of Civil Procedure

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A Tale of Two Waivers: Waiver of the Jury Waiver Defense Under the Federal Rules of Civil Procedure

Jarod S. Gonzalez(fn*)

TABLE OF CONTENTS

I. Introduction ...................................................... 676
II. Contractual Jury Waivers ......................................... 678
A. The Jury Waiver Explosion ..................................... 678
B. Enforceability of Jury Waivers ................................ 681
III. Demanding a Jury Trial and Striking a Jury Demand
Under the Federal Rules of Civil Procedure ...................... 683
A. The Jury Trial Demand and Motion for Jury Trial .............. 683
B. The Motion to Strike a Jury Demand ........................... 688
IV. Waiver of the Jury Waiver Defense Under the Federal
Rules of Civil Procedure ......................................... 690
A. Flaws in the Current Law ...................................... 690
B. Limiting Rule 39 to its Text .................................. 693
C. A Different Procedural Approach to the Jury Waiver
Defense ....................................................... 695
1. The Jury Waiver Defense as an Affirmative
Defense Under Rule 8(c).................................... 696
2. The Affirmative Defense Effect ............................. 703
3. An Altered Outcome ......................................... 709
V. Conclusion ........................................................ 711

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I. INTRODUCTION

We live in a brave new world. Over the past forty years, pre-dispute jury trial waivers in commercial and employment contracts have become commonplace.(fn1) The insertion of these clauses into leasing and lending agreements by financial institutions has been going on for many years.(fn2) The insertion of such clauses in employment agreements is a more recent trend.(fn3) Regardless of the context, the reasons for jury waivers abound: juries are less predictable than judges;(fn4) juries favor the "little guy" over the "big guy;"(fn5) juries are more likely than judges to award high damages awards;(fn6) trying a case to a jury is time-consuming and inconvenient;(fn7) and jury waivers are preferable to mandatory arbitration clauses because arbitration proceedings are becoming increasingly expensive.(fn8)

In federal court civil cases, the Seventh Amendment to the United States Constitution protects the right to trial by jury in civil actions that existed at common law.(fn9) If the Seventh Amendment right does not apply to a particular civil action or its applicability is unclear, a federal statute may nonetheless provide a jury trial right.(fn10) In spite of the constitutional dimension of the jury trial right in civil actions, this right, like other constitutional rights, may be waived by prior

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written agreement of the parties.(fn11) Commentators have written many articles regarding whether pre-dispute jury waivers should be enforceable, the appropriate federal standard for determining the validity of a contractual jury waiver, which party has the burden of proving an enforceable waiver, and other related issues.(fn12) Litigators on both sides of the bar have spent countless hours arguing over whether pre-dispute jury waivers are enforceable as a matter of law, and, if so, whether the particular waiver at issue in their case is enforceable under the law despite unequal bargaining power between the parties or lack of conspicuousness of the waiver provision itself.(fn13) Judges have authored numerous opinions on these subjects.(fn14) Very little has been written, however, on the procedure for raising the jury trial waiver defense in federal court.(fn15) Most federal courts faced with the issue of the deadline for raising the jury waiver defense have been content to cite the general rule that the deadline to move to strike a jury demand is the eve of trial.(fn16)

The procedure for asserting the jury waiver defense in federal district court should not be overlooked. Given the increasing number of jury waiver provisions that apply to commercial and employment ar

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rangements, one would expect an increasing number of cases in which a jury trial waiver defense may be asserted. Fair procedural requirements that are consistent with the Federal Rules of Civil Procedure need to be developed in this area in a manner that is different from the most recent judicial decisions. It may surprise some that, according to case law, this defense may be raised on the eve of trial or even during a jury trial and still be timely and ultimately successful.(fn17) Indeed, as the courts are interpreting the Federal Rules of Civil Procedure, waiver of the jury trial waiver defense through inaction during the litigation process seems to be nearly impossible.(fn18)

The thesis of this Article is that the Federal Rules of Civil Procedure, most specifically Rule 8(c), should be interpreted to require the jury waiver defense to be pled early on in the pretrial stage of litigation. The failure to plead the defense risks waiver. Part II of this Article expands upon the legal issues previously raised regarding the enforceability of a pre-dispute contractual jury waiver. Part III summarizes the basic rules regarding demanding a jury trial and defending against that demand under the Federal Rules of Civil Procedure. Part IV presents and explains the novel argument regarding the early deadline for raising the jury waiver defense under the Federal Rules, and establishes legal principles for determining whether the assertion of an untimely jury waiver defense waives the defense. Part V makes some final remarks.

II. CONTRACTUAL JURY WAIVERS

A. The Jury Waiver Explosion

Jury waivers in commercial agreements have been ubiquitous for many years.(fn19) Jury waivers in employment agreements are a twenty-first century trend.(fn20) Prior to the passage of the 1991 Civil Rights Act, judges, not juries, acted as fact-finders in many employment discrimination cases because the courts had generally interpreted Title VII to not guarantee a jury-trial right.(fn21) The 1991 Civil Rights Act

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changed the law and guaranteed the right to jury in Title VII cases involving compensatory or punitive damages.(fn22) Not surprisingly, after federal law changed to provide the right to a jury trial in Title VII cases, the victory rate at trial for employees in employment discrimination cases increased.(fn23) Employment discrimination plaintiffs tended to do better in front of juries than they had done in front of federal judges in terms of liability and higher damages awards.(fn24) Moreover, the settlement value calculation of an employment discrimination case bound for a jury trial became quite different than the prior calculation of a case bound for a bench trial. Employers tended to pay higher settlements to plaintiffs who had overcome a summary-judgment motion and were destined to try their case to a jury because of the threat--whether real or perceived--of the runaway jury.(fn25)

This changing dynamic in the early 1990s spurred employers to develop alternatives to trying employment discrimination cases to juries. Many employers turned to mandatory arbitration in the 1990s as a way to avoid the vagaries of the judicial system.(fn26) Under mandatory arbitration programs, private arbitrators, some of whom possess an expertise in employment law, become the judges of the law and facts.(fn27) From the employer's perspective, arbitration avoided the perceived problems of the judicial system.(fn28)

Over the past several years, however, some of the employers who initially adopted mandatory arbitration programs as a dispute resolution technique, to reduce litigation expenses and manage risk, have

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found that such programs are not all they are cracked up to be. Arbitration is becoming increasingly expensive and almost all of the rising costs are borne by the employer, as opposed to the employee.(fn29) Lowering the cost and risk to employees of bringing claims leads to more claims.(fn30) Arbitration procedures are becoming more "judicialized" in terms of procedural rights like discovery and application of evidentiary protections.(fn31) The "judicialization" of arbitration proceedings leads to greater litigation expense, which defeats one of the benefits of arbitration.(fn32) Furthermore, some employers are finding that the runaway arbitrator is out there as well.(fn33) Only with arbitration, as opposed to public justice, there is typically no appellate remedy;(fn34) the employer is simply stuck with the large award.(fn35) Finally, arbitration has proven to be controversial in that many employees believe that such a system is inherently tilted in the employer's favor because of the "repeat player" phenomenon, and therefore can really never be made fair.(fn36)

All of this hand-wringing and disappointment over arbitration has led some employers to turn to jury waivers as the new alternative dispute resolution system. As one commentator advocated from the employer's perspective, the courts are fine; the problem is with juries.(fn37)

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B. Enforceability of Jury Waivers

The jury-trial right in federal civil court cases is guaranteed by the Seventh Amendment to the United States Constitution.(fn38) The United States Supreme Court has interpreted the Seventh Amendment to guarantee a jury trial in suits in which legal rights, as opposed to equitable rights, are asserted.(fn39) The Seventh Amendment applies to common-law causes of action and certain statutory causes of action.(fn40) Statutes may provide a right to jury trial either implicitly or explicitly.(fn41) If congressional intent to imply the right to a jury trial does not exist, the Seventh Amendment question must be addressed.(fn42) A historical test...