California Supreme Court Holds All Contractual Jury Waivers Unenforceable

August 4, 2005Article
Greenberg Glusker Client Alert

On August 4, 2005, the California Supreme Court held that pre-dispute contractual waivers of jury trial are unenforceable as a matter of law.  In summary, the court in Grafton Partners, L.P. v. Superior Court of Alameda (PriceWaterhouseCoopers L.L.P.) held as follows:  (1) the California constitution provides that a person's right to jury trial may be waived only by statute, (2) the statute dealing with waivers of jury trial lists only six means of waiving a jury trial and (3) a pre-dispute, contractual waiver is not one of the six means listed in that statute.  The court overruled the holding in Trizec Properties, Inc. v. Superior Court (1991) 229 Cal.App.3d 1616, which had found such waivers enforceable.  At least until the California state legislature amends the statute to allow pre-dispute waivers, a provision in a contract calling for a jury waiver is unenforceable.  Whether the legislature will do anything to allow pre-dispute jury waivers is open to debate.

The Grafton court distinguished jury waivers from agreements to arbitrate, which remain fully enforceable.  Consideration should therefore be given as to whether parties should add an arbitration provision to their contracts.

However, except in rare circumstance, an arbitration award is non-appealable.  Prior to the Grafton ruling, a contract including a jury waiver provided for the use of the court system, minus a jury -- and the parties preserved the right to appeal the court's decision.  The decision whether to include an arbitration provision may come down to whether the parties prefer to have their disputes decided by an experienced arbitrator such as a retired judge, with no right to appeal the arbitrator's ruling, or preserve the right to appeal by foregoing arbitration and having the dispute decided by a jury, which is likely to be less sophisticated.

A still-valid, third option is a pre-dispute judicial reference provision.  A judicial reference is a statutorily authorized procedure in which the court appoints a “judicial referee” to determine the dispute.  Because the proceeding is an adjunct to the court system, the right to appeal is preserved.  The court in Grafton implicitly affirmed the ability of contracting parties to agree to a judicial reference dispute resolution procedure, referring to the Legislature’s amendment of the judicial reference statute in 1982 to authorize such a procedure “upon the motion of a party to a contract or lease that provides that any controversy arising therefrom shall be heard by a referee.”

A judicial reference is for all practical purposes a jury waiver.  California Rule of Court 244 prohibits the use of court facilities or personnel in judicial references absent an order from the presiding judge -- and it is very unlikely that a presiding judge would allow a judicial reference proceeding to siphon jurors away from the court system.  As a result, substituting a judicial reference provision in place of a jury waiver should be effective to avoid a jury trial while preserving one’s right to appeal.