California has a strong public policy favoring trial by jury, and since the California Supreme Court’s 2005 decision in Grafton Partners, L.P. v. Superior Court, 116 P. 3d 479 (2005), contractual pre-dispute jury trial waivers have been held invalid in cases in California state courts unless otherwise expressly authorized by statute. California and federal law treat such waivers differently; under federal law, pre-dispute jury trial waivers are generally permitted as long as the parties waived their rights “knowingly and voluntarily.”
However, in a decision filed on April 16, 2015, a panel of the US Court of Appeals for the Ninth Circuit held that in actions based on California law, but tried in federal court by reason of diversity, state law must be applied and advance jury trial waivers will not be enforced. In re County of Orange, No. 14-72343 (9th Cir. April 16, 2015). This opinion resolves a split among federal district courts in California on whether state or federal law governs the validity of a pre-dispute jury trial waiver.
The Ninth Circuit concluded that federalism principles require federal courts sitting in diversity to import, as a federal rule, state law governing jury waivers where state law is more protective of the Seventh Amendment jury trial right than federal law. The court reasoned that the federal “knowing and voluntary” standard does not necessarily conflict with California’s Grafton Partnersrule invalidating pre-dispute jury trial waivers “because the federal standard is a constitutional minimum courts use to protect litigants’ Seventh Amendment right to trial by jury.”
While acknowledging that a number of Circuit Courts of Appeal – namely the First, Second, Third, Fourth, Sixth, Seventh, and Tenth Circuits – have reached a different result and upheld advance jury trial waivers, the Ninth Circuit distinguished those decisions by noting that the laws of the states within those judicial circuits is less protective of a party’s right to trial by jury than California law. The Ninth Circuit explained that under California (and also Georgia) law, a party to a contract cannot waive its right to a jury trial before a dispute arises, and any contract provision seeking to effect such a waiver is unenforceable unless expressly authorized by statute.
The Ninth Circuit panel deciding the In re County of Orange acknowledged that it was facing “an issue of first impression” and that it was “not presented with an easy question.” Armed with these statements from the panel, it is possible that the Ninth Circuit will grant full en banc review of the question, and that the full court may reach the opposite result. For now, though, parties wishing to avoid jury trials in California may wish to consider entering into agreements to arbitrate their disputes (since the Grafton Partners decision found that the jury trial waiver implicit in an agreement to arbitrate is expressly allowed by California statute and therefore valid and enforceable).