Arbitration Pushback Sees Companies Returning to Jury Waivers
The Bottom Line
The popular thinking behind jury waivers is that they decrease costs, increase a narrower read of contract obligations and speed up litigation. Where a dispute has formalized and legal actions are proceeding, do not delay in seeking to enforce a jury waiver or demand that the other side complies with the contract’s terms.
Many companies are returning to the use of jury waivers as a way to manage the risk present in jury trials. A jury waiver is a contract term by which the parties agree to waive the right to have a trial decided by a jury. Instead, the parties will ask a judge to decide any dispute. But how did we get here?
Pushback against arbitration
Over the past 30-plus years, the corporate world has relied on arbitration agreements to avoid the uncertainties of a jury. The thought was that a panel of arbitrators might be a more reliable factfinder. Companies often find themselves uneasy when legal liability rests in the hands of people of varying backgrounds, styles and opinions.
But there is a developing pushback against arbitration as a means to avoid jury decisions. For example, recent amendments to the Federal Arbitration Act expressly prohibit employers from compelling arbitration of sexual assault or sexual harassment claims. States have begun to view arbitration as less desirable, especially concerning consumer transactions. In response, many companies simply require jury waivers rather than trying to stay current with the bounds of permissible arbitration regulations.
Jury waiver basics
The popular thinking is that including a jury waiver decreases costs, increases a narrower read of contract obligations, and speeds up litigation. These waivers are found in purchase and distribution agreements, supply contracts and project service agreements. Employment agreements that waive jury trials are also gaining popularity due to recent legislative activity. In the case of mergers and acquisitions, jury waivers have been standard terms for decades.
While contract terms, jury waivers require more formality than most provisions. This extra protection is needed because the Seventh Amendment of the Bill of Rights guarantees a jury trial in civil cases seeking monetary damages—like a standard breach of contract case. Moreover, certain states have rules that prohibit jury waivers altogether. In large part, however, civil jury trial waivers have been preserved throughout the country and the waiver will be enforced where it was knowingly and willfully made.
Creating a waiver
Jury waivers should be drafted in plain and simple terms to ensure that all parties fully understand them. Exact disclosure of the scope of the waiver and what it means are needed. The waiver language should be mutual, so there is evidence that the clause applies equally to both sides. Also, include language in the contract that requires any party contesting the waiver’s validity to bear the burden of proof that it is improper.
To help establish that the waiver was willful, the entire clause should be bolded to stand apart from other fine-print terms. And while not a requirement, an initialing by the parties at the term will help a later court establish that both parties saw the term and knew what they were doing at the time of signing.
Even the best jury waiver can be limited if its scope is not properly thought out beforehand. Depending on the nature of the agreement or work to be performed, a jury waiver’s application is limited to those signing the contract. If other concerned parties are not signatories to the jury waiver, its utility may be lost because they do not have to accept it.
Jury waivers can also benefit from additional, separate clauses in the contract. For example, because states treat jury waivers differently, where a state allows waivers, enforcing the clause is best supported by other contractual terms that specify the application of a state’s law and require all disputes to be resolved in that state. This helps avoid the situation where one party to a contract is located in a state that is less rigid in enforcement or moves out of state while the contract is pending.
Finally, use it. Where a dispute has formalized and legal actions are proceeding, do not delay in seeking to enforce the jury waiver or demand that the other side complies with the contract’s terms. Enforcement of a waiver can be questioned when an action has gone forward without either party confirming the contract terms. And if a jury is empaneled, it is too late to seek an application or try to overturn a jury’s decision on appeal. The investment made in drafting jury waivers can only be realized through their timely use.