Does Your Contract Have a Jury Trial Waiver?

8/4/2005
Client Alert

Millions of contracts throughout the United States contain clauses through which the contracting parties agree to waive their right to jury trial in the event of a dispute.  Until now, these clauses were enforceable everywhere except Georgia.  We can now add California to that list.

Holding

In Grafton Partners L.P. v. Superior Court, ___ Cal. 4th ___ (Aug. 4, 2005), a unanimous Supreme Court held that a party to litigation may waive its right to jury trial in only the six ways that are enumerated in Code of Civil Procedure § 631.  According to Chief Justice George, writing for the Court, not on that list is waiver by a predispute contractual agreement.  These clauses are flat-out prohibited in California. 

The Grafton holding is sweeping and admits no exceptions.  Thus, even if a clause in a particular case is not unconscionable, it is still unenforceable.  Likewise, a jury trial waiver between two sophisticated commercial businesses acting on advice of silk-stockinged lawyers will fail just as surely as one embedded in the most lopsided and oppressive agreement imaginable.  Neither is enforceable. 

Judicial Activism? 

The Grafton Court rejected every argument advanced in favor of such clauses.  Thus, the fact that the parties agreed by contract on their own private method for dispute resolution doesn’t matter, nor does it count that bench trials may be more efficient.  Equally irrelevant is the fact that the vast majority of states and federal courts (including several federal Circuit Courts) have honored such clauses, including federal courts sitting in California.  It’s not our problem, said the Court; it’s the Legislature’s. 

Retrospective Application

This new rule applies to all contracts as of the date of the decision, including contracts entered into prior to August 4, 2005.  It doesn’t matter that parties may have relied since 1991 on a California appellate court decision that had upheld jury trial waivers.

What Grafton Means

Grafton can’t be fixed by drafting.  Which means that no matter what your contract says, every contractual dispute in California will get resolved by a jury trial if either side asks for one.

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