PNC Bank, National Association v. Cedar Creek of East Alabama LLC et al
Filing
44
MEMORANDUM OPINION AND ORDER GRANTING 40 MOTION for Reconsideration and Renewed Motion To Strike Jury Demand. The Jury demand made by Defendants in their 13 Answer is HEREBY STRICKEN. Signed by Judge Virginia Emerson Hopkins on 6/13/2016. (JLC)
FILED
2016 Jun-13 PM 03:04
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
PNC BANK, NATIONAL
ASSOCIATION,
Plaintiff,
v.
CEDAR CREEK OF EAST
ALABAMA, L.L.C. and LEE D.
ROBERSON,
Defendants.
)
)
)
)
)
) Case No.: 2:15-CV-349-VEH
)
)
)
)
)
)
MEMORANDUM OPINION AND ORDER
I.
Introduction and Procedural Background
Plaintiff PNC Bank, National Association (“PNC”)1 initiated this contract
dispute against Defendants Cedar Creek of East Alabama, L.L.C. (“Cedar Creek”),
Lee D. Roberson (“Mr. Roberson”), and Scott D. McNay (“Mr. McNay”) on February
26, 2015. (Doc. 1).2 Mr. McNay was dismissed from this lawsuit without prejudice
on July 2, 2015, due to his filing of a Chapter 7 bankruptcy petition in the United
States Bankruptcy Court for the Middle District of Alabama. (Docs. 16, 18). Thus,
1
PNC indicates in its complaint (Doc. 1 at 1) that it is the successor to RBC Bank (USA),
who in turn is the successor to First American Bank.
2
The page references to Doc. 1 correspond with the court’s CM/ECF numbering system.
PNC’s case remains pending against Cedar Creek and Mr. Roberson only.
Because of jurisdictional concerns and other issues, on March 16, 2016, the
court denied without prejudice PNC’s Motion for Summary Judgment (Doc. 20) (the
“Rule 56 Motion”) and Motion To Strike Jury Demand (the “Strike Motion”).3 (Doc.
32 at 18). The court also ordered PNC to show cause why its case should not be
dismissed for lack of standing. Id.
PNC filed its Response to March 16, 2016 Order To Show Cause and Motion
To Reconsider (Doc. 35) (the “Response”) and a related affidavit (Doc. 36) on March
22, 2016. In its Response, PNC satisfactorily established its rightful standing as the
successor in holding under the collection of commercial lending and guaranty
agreements and also sought reconsideration of the court’s denial of its Rule 56
Motion only. The court granted PNC’s reconsideration request on April 7, 2016, and
entered summary judgment in favor of PNC as to Defendants’ contractual liability.
(Doc. 39 at 14). In light of Defendants’ still pending jury demand, the court gave PNC
until May 30, 2016, to work out a consent judgment with Defendants or, in the
absence of such a submission, to appear at a pretrial conference (that would be set by
separate order) so that PNC’s damages could be scheduled for a jury trial. Id.
Now pending before the court is PNC’s second Motion To Reconsider and
3
The court alternatively termed PNC’s Strike Motion as moot. (Doc. 32 at 18).
2
Renewed Motion To Strike Jury Demand (Doc. 40) (the “Renewed Motion”) filed on
May 5, 2016. The Renewed Motion seeks, once again, to enforce jury waivers agreed
to by Defendants and to “grant such other and further relief as the Court deems just
and proper.” (Doc. 40 at 16). Neither Cedar Creek nor Mr. Roberson has opposed
PNC’s Renewed Motion.
Based upon PNC’s more developed arguments contained in its Renewed
Motion and, in the absence of any opposition from Defendants, the Renewed Motion
is GRANTED and the jury demand made by Defendants in their answer (Doc. 13 at
6) is, upon reconsideration, HEREBY STRICKEN.
II.
Standard on Defendants’ Failure To Oppose PNC’s Renewed Motion
Defendants’ failure to file any opposition to PNC’s Renewed Motion does not
automatically mean that PNC’s jury-related relief will be granted. Instead, in
evaluating the merits of the Renewed Motion, this court adopts the same standard that
it has often used in the analogous situation of a non-moving party who fails to oppose
a motion to dismiss:
As noted, Churchill and Howard elected not to be heard in
response to BB & T’s Amended Motion to Dismiss. Notwithstanding
that omission, BB & T (as Rule 12(b)(6) movant) bears the initial
burden of demonstrating that it is entitled to dismissal of the
counterclaims. Churchill’s and Howard’s lack of response to the Rule
12(b)(6) Motion does not trigger the kneejerk granting of such Motion
on an abandonment theory. See Gailes v. Marengo County Sheriff’s
3
Dep’t, 2013 WL 81227, *5 (S.D. Ala. Jan. 4, 2013) (“the Court will not
treat a claim as abandoned merely because the plaintiff has not defended
it in opposition to a motion to dismiss”). Rather, it remains BB & T’s
burden as movant to establish its entitlement to relief under Rule
12(b)(6). In light of these circumstances, the Court scrutinizes BB & T’s
Motion to Dismiss in accordance with the following legal standard: “the
Court will review the merits of the [movant]’s position and, if it is
clearly incorrect or inadequate to satisfy the [movant]’s initial burden,
will deny the motion despite the [nonmovant]’s failure to respond. If,
however, the [movant]’s presentation is adequate to satisfy its initial
burden, the Court will not deny the motion based on arguments the
[nonmovant] could have made but by silence elected not to raise.” Id.
Branch Banking and Trust Co. v. Howard, No. 12–0175–WS–N, 2013 WL 172903,
at *1 (S.D. Ala. Jan. 16, 2013) (footnotes omitted).
III.
Analysis
PNC relies upon various provisions containing jury waiver language in support
of its Renewed Motion. The court discusses them below.
A.
Jury Waiver Provisions Relating to Cedar Creek
The first jury waiver provision that PNC points to is a mutual one within the
Loan A Promissory Note dated June 15, 2007, between PNC and Cedar Creek:
JURY WAIVER Lender and Borrower hereby waive the right to
any jury trial in any action, proceeding, or counterclaim brought by
either Lender or Borrower against the other[.]
(Doc. 36-2 at 11).4 Loan B Promissory Note dated June 15, 2007, contains the same
4
All page references to Doc. 36-2 correspond with the court’s CM/ECF numbering system.
4
mutually enforceable waiver language. (Doc. 36-3 at 9).5
Further, the Amended and Restated Note dated December 19, 2008, has a jury
waiver provision that states in bold and capitalized letters:
TO THE EXTENT PERMITTED BY LAW MAKER
HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY
ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY
RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT
ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST
WITH REGARD TO THIS NOTE OR THE OTHER LOAN
DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER
ACTION ARISING IN CONNECTION THEREWITH
INCLUDING, BUT NOT LIMITED TO THOSE RELATING TO
(A) ALLEGATIONS THAT A PARTNERSHIP EXISTS
BETWEEN PAYEE AND MAKER; (B) USURY OR PENALTIES
OR DAMAGES THEREFOR; (C) ALLEGATIONS OF
UNCONSCIONABLE ACTS, DECEPTIVE TRADE PRACTICE,
LACK OF GOOD FAITH OR FAIR DEALING, LACK OF
COMMERCIAL REASONABLENESS, OR SPECIAL
RELATIONSHIPS (SUCH AS FIDUCIARY, TRUST OR
CONFIDENTIAL RELATIONSHIP); (D) ALLEGATIONS OF
DOMINION, CONTROL, ALTER EGO, INFLUENCE,
INTERFERENCE OR NEGLIGENCE; (E) ALLEGATIONS OF
TORTIOUS INTERFERENCE WITH PRESENT OR
PROSPECTIVE BUSINESS RELATIONSHIPS OR OF
ANTITRUST; OR (F) SLANDER, LIBEL OR DAMAGE TO
REPUTATION. THIS WAIVER OF RIGHT TO TRIAL BY JURY
IS GIVEN KNOWINGLY AND VOLUNTARILY BY MAKER,
AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO
A TRIAL BY JURY WOULD OTHERWISE ACCRUE. PAYEE IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS
PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE
5
All page references to Doc. 36-3 correspond with the court’s CM/ECF numbering system.
5
EVIDENCE OF THIS WAIVER BY MAKER.
(Doc. 36-2 at 22).
Similarly, § 15.2 of the A&D Loan Agreement includes a descriptive heading
and explains with emphasis:
Waiver of Right to Trial by Jury. TO THE EXTENT
PERMITTED BY LAW BORROWER HEREBY AGREES NOT
TO ELECT A TRIAL BY JURY ON ANY ISSUE TRIABLE OF
RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT
SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THIS AGREEMENT, THE SECURITY INSTRUMENT, OR ANY
OTHER LOAN DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION HEREWITH OR THEREWITH THIS WAIVER
OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY BORROWER, AND AFTER
CONSULTATION WITH AN ATTORNEY SELECTED BY
BORROWER, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO
WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE LENDER IS HEREBY AUTHORIZED
TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING
AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY
BORROWER.
(Doc. 36-4 at 17).6 This section of the A&D Agreement further reflects that Mr.
Roberson and Mr. McNay both initialed it on behalf of Cedar Creek. Id.
6
All page references to Doc. 36-4 correspond with the court’s CM/ECF numbering system.
6
B.
Jury Waiver Provisions Relating to Mr. Roberson
Documents applicable to Mr. Roberson’s status as a guarantor of PNC’s
commercial loans to Cedar Creek also include jury waiver provisions. For example,
at the very end of § 12 of the Guaranty Agreement dated July 14, 2004, Mr. Roberson
“waive(s) the right to a trial by jury in any action based on or pertaining to this
guaranty.” (Doc. 36-7 at 3).7 Identical waiver language is incorporated into the
Guaranty Agreements dated September 22, 2004. (Doc. 36-7 at 5, 7).
The two Guaranty Agreements dated June 15, 2007, have mutually enforceable
and more conspicuous waiver provisions that explain in bold:
Waive Jury Lender and Guarantor hereby waive the right to any
jury trial in any action, proceeding, or counterclaim brought by
either Lender or Guarantor against the other[.]
(Doc. 36-7 at 9, 12).
C.
The Jury Waiver Provisions Are Enforceable against Both
Defendants under the Circumstances of this Particular Case.
“[T]he right to a jury trial in the federal courts is to be determined as a matter
of federal law in diversity as well as other actions.” See Simler v. Conner, 372 U.S.
221, 222, 83 S. Ct. 609, 610, 9 L. Ed. 2d 691 (1963); see also Phillips v. Kaplus, 764
F.2d 807, 812 (11th Cir. 1985) (“[T]he right to a jury trial in the federal court is to be
7
All page references to Doc. 36-7 correspond with the court’s CM/ECF numbering system.
7
determined as a matter of federal law.”).
“A party may validly waive its Seventh Amendment right to a jury trial so long
as the waiver is knowing and voluntary.” Bakrac, Inc. v. Villager Franchise Sys., Inc.,
164 F. App’x 820, 823 (11th Cir. 2006) (citing Brookhart v. Janis, 384 U.S. 1, 4-5,
86 S. Ct. 1245, 1246-47, 16 L. Ed. 2d 314 (1966)); see also Brookhart, 384 U.S. at
4, 86 S. Ct. at 1247 (“There is a presumption against the waiver of constitutional
rights, and for a waiver to be effective it must be clearly established that there was
“‘an intentional relinquishment or abandonment of a known right or privilege.’”
(citation omitted) (quoting Johnson v. Zerbst, 304 U.S. 458, 464, 58 S. Ct. 1019,
1023, 82 L. Ed. 1461 (1938))); cf. also Glasser v. United States, 315 U.S. 60, 70, 62
S. Ct. 457, 465, 86 L. Ed. 680 (1942), superceded by rule on other grounds as
recognized in Bourjaily v. United States, 483 U.S. 171, 172, 107 S. Ct. 2775, 2777,
97 L. Ed. 2d 144 (1987) (“To preserve the protection of the Bill of Rights for
hard-pressed defendants, we indulge every reasonable presumption against the waiver
of fundamental rights.” (citing Aetna Ins. Co. v. Kennedy, 301 U.S. 389, 57 S. Ct.
809, 812, 81 L. Ed. 1177 (1937))).
As this court previously pointed out when it denied PNC’s first efforts to strike
Defendants’ jury demand:
Further complicating this apparently still open question within the
8
Eleventh Circuit is that the “[t]he circuits are split as to which party has
the burden of proving whether a contractual jury trial waiver, such as the
one here, was knowing and voluntary.” Bakrac, 164 F. App’x at 823 n.1
(citing Pierce v. Atchison Topeka & Santa Fe Ry. Co., 110 F.3d 431, 435
n.4 (7th Cir. 1997)); compare Leasing Serv. Corp. v. Crane, 804 F.2d
828, 833 (4th Cir. 1986) (“Where waiver is claimed under a contract
executed before litigation is contemplated, we agree with those courts
that have held that the party seeking enforcement of the waiver must
prove that consent was both voluntary and informed.”), and Nat’l Equip.
Rental, Ltd. v. Hendrix, 565 F.2d 255, 258 (2d Cir. 1977) (providing that
“the Seventh Amendment right to a jury is fundamental and that its
protection can only be relinquished knowingly and intentionally” and
further that party seeking to enforce that relinquishment against another
must overcome “a presumption [that] exists against its waiver” (citing
Kennedy, 301 U.S. at 393, 57 S. Ct. at 812), with K.M.C. Co. v. Irving
Trust Co., 757 F.2d 752, 758 (6th Cir. 1985) (“[I]n the context of an
express contractual waiver the objecting party should have the burden
of demonstrating that its consent to the provisions was not knowing and
voluntary.”).
On this record, however, the court does not delve any further into
the validity vel non of the jury waiver provisions identified by PNC as
pivotal to its Strike Motion. Instead and consistent with the court’s
analysis above, because PNC has not established its status as the
successor in interest to the Loan Agreement or those obligations
undertaken by Mr. Roberson as a Guarantor of the Loan Agreement, it
lacks standing to enforce the waiver provisions for its benefit.
Accordingly, PNC’s Strike Motion is DENIED WITHOUT
PREJUDICE, or alternatively is TERMED as MOOT.
(Doc. 32 at 17-18 (footnote omitted)).
Now this court must delve further into the open question of enforcing
contractual jury trial waivers within the Eleventh Circuit. Following the Sixth
Circuit’s approach in Irving, the court easily concludes that the express jury trial
9
waivers are enforceable under that authority because neither Defendant has offered
anything to show that its or his consent to the waiver was not done knowingly or
voluntarily. Thus, in the absence of Defendants’ carrying their burden as the objecting
parties, Defendants’ jury demand is due to be stricken in light of the unchallenged
jury waiver provisions.
The court would reach the same conclusion if it followed those circuits who
have placed the burden to show that the opposing party’s consent was both knowing
and voluntary on the party seeking to enforce the waiver provision. Specifically, the
court finds that, on this record, PNC has satisfied that standard. When evaluating
whether a party has met this burden the Bakrac unpublished panel, relying upon the
Fourth Circuit’s opinion in Leasing Service Corp. v. Crane, 804 F.2d 828, 833 (4th
Cir. 1986), indicated that “courts consider the conspicuousness of the waiver
provision, the parties’ relative bargaining power, the sophistication of the party
challenging the waiver, and whether the terms of the contract were negotiable.”8
Bakrac, 164 F. App’x at 824.
8
To the extent that it is appropriate for this court to consider whether Alabama law would
enforce these jury waiver provisions (Doc. 40 at 8 n.3), the factors to apply are comparable to what
Bakrac describes. More specifically, the Supreme Court of Alabama has “articulated three factors
to consider in evaluating whether to enforce a contractual waiver of the right to trial by jury: (1)
whether the waiver is buried deep in a long contract; (2) whether the bargaining power of the parties
is equal; and (3) whether the waiver was intelligently and knowingly made.” Ex parte BancorpSouth
Bank, 109 So. 3d 163, 166 (Ala. 2012).
10
In particular, PNC has shown that Cedar Creek and Mr. Roberson executed
multiple loan and/or guaranty documents that included jury trial waivers. While some
of those provisions were drafted more conspicuously than others, the repeated
inclusion of a jury trial waiver as part of the contracts presented, for the most part,9
in a non-buried format means that PNC has shown that Cedar Creek and Mr.
Roberson knowingly consented to that requirement. (Doc. 40 at 11). See, e.g.,
Oglesbee v. IndyMac Fin. Servs., Inc., 675 F. Supp. 2d 1155, 1158 (S.D. Fla. 2009)
(“The waiver is not buried in the middle of a lengthy paragraph without distinction,
but is set off as its own paragraph and conspicuously labeled ‘Jury Trial Waiver.’”).•
Concerning bargaining power, the court agrees with PNC that this case does
not appear to be one in which “there was a gross disparity in bargaining position.”
Oglesbee, 675 F. Supp. 2d at 1158. “A gross disparity in bargaining power only exists
when a party is forced to accept the terms of an agreement as written; the party is
unable to simply walk away if the terms are unacceptable.” Id. Here, PNC has not
offered any evidence about the ability of Cedar Creek and Mr. Roberson “to walk
away” from the commercial agreements. However, certain documentary evidence
facially shows the lack of PNC’s lopsided bargaining position over Defendants
9
The jury waiver provisions agreed to by Mr. Roberson in 2004 could be considered buried
language, but the later ones in 2007 are transparently drafted.
11
concerning the issue of jury trials–several of the jury waiver provisions were mutually
enforceable. This mutuality signifies equality in bargaining power, rather than an
extreme unfair advantage for the benefit of PNC. Thus, in the absence of uniform
one-sidedness over this potentially unacceptable contractual term, the court finds that
the bargaining power factor favors enforcing the jury trial waivers.
Concerning the third factor–Defendants’ sophistication and ability to
understand the nature of the provisions–PNC has indicated that, on information and
belief, Mr. Roberson “is a cardiac and thoracic surgeon and the president and sole
owner of East Alabama Cardiac & Thoracic Surgery, P.C.” (Doc. 40 at 13). PNC
further logically suggests that, “[a]s a heart surgeon and a small business owner, [Mr.]
Roberson clearly has whatever necessary education and level of sophistication that
could be required to understand the effect of the Jury Waivers [to the extent that any
of them are worded in an ambiguous manner].” (Doc. 40 at 13). Neither Mr. Roberson
nor Cedar Creek (who both are still represented by counsel) has disputed these
representations made by PNC on the record, and the court finds them to weigh in
favor of enforcing the jury trial waivers.
Finally, the last factor–the negotiability of the waivers–appears to weigh
against enforcing them simply because PNC has not offered any evidence to show
that these provisions were, in fact, subject to negotiation here or, at least, that they
12
have been negotiated in other comparable commercial lending relationships. (Doc.
40 at 14). Instead, PNC seems to place the burden back on Defendants to show that
the waivers were non-negotiable. See id. (“[N]othing in the records indicates that the
Defendants could not have negotiated with PNC regarding the jury waivers.”).
Nonetheless even without the benefit of the fourth factor, the balance of the other
factors favors enforcing the waivers and, akin to Bakrac, this court does not reach a
determination of which way the Eleventh Circuit ultimately will go because PNC
“prevails regardless of who has the burden.” Bakrac, 164 F. App’x at 823 n.1; (Doc.
40 at 9).
IV.
Conclusion
For the reasons stated above, PNC’s Renewed Motion is GRANTED and
Defendants’ jury demand is HEREBY STRICKEN. Accordingly, and with
substantive liability already established against Defendants, PNC is entitled to
recover from Cedar Creek and Mr. Roberson, jointly and severally, the outstanding
principal, interest, and other fees, as set forth under the terms of the various loan and
guaranty agreements, which calculations, previously provided to the court as of
August 28, 2015, are to be supplemented by PNC and filed in the form of a proposed
order of final judgment, no later than 5:00 p.m. on June 20, 2016, with a copy10
10
Preferably in WordPerfect format.
13
submitted to the court via chambers email: hopkins_chambers@alnd.uscourts.gov.
Any objections to PNC’s calculations are due 7 days after the proposed order of final
judgment is filed into the record. At the end of such 7 day period, the proposed order
will be under submission and final judgment in favor of PNC and against Cedar
Creek and Mr. Roberson will be entered shortly thereafter.
DONE and ORDERED this the 13th day of June, 2016.
VIRGINIA EMERSON HOPKINS
United States District Judge
14
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?