Daniel Lund III | Phelps Dunbar
“The Seventh Amendment guarantees the right to a trial by jury for a legal claim in a civil action.” So, isn’t the law, well, the law?
Well, perhaps.
Some axioms to remember in contracting are that parties are typically able to agree in a contract to anything that is lawful, and that all such lawful agreements essentially become the “law” between the parties. It is on these principles that courts issue jurisprudence which becomes binding on future litigants – for example, concerning waiver of any right to trial by jury.
Hence, when a second-tier subcontractor on a federal project sought a jury for a lawsuit it had against a general contractor’s sureties, the sub was successfully rebuffed by the sureties based upon a waiver to trial by jury contained in the relevant subcontract. The court noted various matters to be considered in connection with the generally enforceable jury waiver – including the conspicuousness of the waiver (and, therefore, whether the subcontractor “knowingly” agreed to the waiver), as well as the relative bargaining power of the parties to the agreement (here, the sub was self-proclaimed to be a “leader in the construction contracting field”) – and affirmed the legality of the waiver.
Undeterred, the subcontractor urged that the jury waiver lacked any provision stating that the waiver applied to any litigation where the subcontractor and its upstream subcontractor were not direct adverse litigants. The trial court wrote: “That is true. But there is no language limiting the waiver to litigation between those two parties either. The language there is extends the waiver to ‘any suit’ by one of the parties against a surety of the general contractor. No other language imposes the limits [the second-tier subcontractor] describes. This case is clearly within the scope of the waiver.”
In its penultimate salvo, the subcontractor argued that the sureties had no standing to enforce the jury waiver, as the sureties were not parties to the incident subcontract: “‘Absent some recognized exception,’ only the parties to a contract may exercise the rights it creates.” In its discussion of this issue, the court noted that all parties focused (in the court’s point of view, unnecessarily) on the issue of whether the sureties could enforce the waiver in the manner sureties might enforce their principal’s defenses, a theory on which the court punted, notwithstanding significant deliberation on the topic.
Instead, however, the court found the sureties to be third-party beneficiaries of the jury waiver. In response, the subcontractor argued that the Miller Act prohibited as a matter of public policy the waiver of a right to trial by jury. The court disagreed: “The text of the statute makes no mention of a jury trial. … [Earlier] cases suggest that the Miller Act prevents a surety from invoking an advance waiver of liability. But a jury waiver does not limit the surety’s liability. … It only limits the procedure by which the plaintiff may establish that liability.”
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