736 Building Owner, LLC et al v. Regions Bank et al
Filing
127
ORDER granting Defendant's 93 Motion to Strike Plaintiffs' jury demand and enforce their contractual waivers of trial by jury. Plaintiffs' jury demand is stricken. Signed by District Judge Keith Starrett on June 1, 2016 (dsl)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION
736 BUILDING OWNER, LLC, et al.
V.
PLAINTIFFS
CIVIL ACTION NO. 3:14-CV-222-KS-MTP
REGIONS BANK
DEFENDANT
MEMORANDUM OPINION AND ORDER
The Court described the background of this case in a previous order [126]. For
the reasons provided below, the Court grants Defendant’s Motion to Strike [93]
Plaintiffs’ jury demand and enforce their contractual waivers of trial by jury.
Plaintiff 736 Building Owner, LLC (“Owner”) entered into a Construction Loan
Agreement [93-1] with Defendant on October 29, 2010. The Construction Loan
Agreement contained the following provision: “Waive Jury. All parties to this
Agreement hereby waive the right to any jury trial in any action, proceeding, or
counterclaim brought by an party against any other party.” On the same day, Owner
executed a Promissory Note [93-1], which contained the following provision: “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.”
Plaintiff Cytec Software Systems, Inc. (“Cytec”) likewise executed a Promissory
Note [93-2] on February 27, 2009, that contained the following provision: “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.”
On the same date, Cytec entered into a Commercial Pledge Agreement [93-2] with
Defendant, which contained the following provision: “Waive Jury. All parties to this
Agreement hereby waive the right to any jury trial in any action, proceeding, or
counterclaim brought by any party against any other party.”
Finally, Plaintiff Oscar De Leon entered two Commercial Guaranty [93-3]
agreements with Defendant – one on October 29, 2010, and another on February 27,
2009. The guaranties contained the following provision: “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.”
Plaintiffs do not dispute the authenticity of these loan documents. Defendant
filed a Motion to Strike [93] Plaintiffs’ jury demand and enforce their contractual
waivers of the right to trial by jury. A private litigant may waive its right to a jury in
civil cases. Commodity Futures Trading Com v. Schor, 478 U.S. 833, 848-49, 106 S. Ct.
3245, 92 L. Ed. 2d 675 (1986). But the waiver must be “voluntary, knowing, and
intelligently made.” D. H. Overmeyer Co. v. Frick Co., 405 U.S. 174, 186, 92 S. Ct. 775,
31 L. Ed. 2d 124 (1972). Federal courts have considered the following factors in making
this determination:
(1) whether there was a gross disparity in bargaining power between the
parties; (2) the business or professional experience of the party opposing
the waiver; (3) whether the opposing party had an opportunity to
negotiate the contract terms; (4) whether the clause containing the
waiver was inconspicuous; and (5) whether the opposing party was
represented by counsel.
Branch Banking & Trust Co. v. Price, No. 2:11-CV-23-KS-MTP, 2011 U.S. Dist. LEXIS
129367, at *3-*4 (S.D. Miss. Nov. 8, 2011) (citing cases).
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“[A]s the right of jury trial is fundamental, courts indulge every reasonable
presumption against waiver.” Aetna Ins. Co. v. Kennedy, 301 U.S. 389, 393, 57 S. Ct.
809, 81 L. Ed. 1177 (1937). However, the Fifth Circuit has not addressed whether the
movant or opposing party bears the burden of proof on a motion to enforce a
contractual waiver of the right to trial by jury. See RDO Fin. Servs. Co. v. Powell, 191
F. Supp. 2d 811, 813 (N.D. Tex. 2002); Westside Marrero Jeep Eagle v. Chrysler Corp.,
56 F. Supp. 2d 694, 707 (E.D. La. 1999). Circuits are split on this issue. See Bakrac,
Inc. v. Villager Franchise Sys., 164 F. App’x 820, 823 n. 1 (11th Cir. 2006) (citing Pierce
v. Atchison, Topeka & Santa Fe Ry. Co., 110 F.3d 431, 435 n. 4 (7th Cir. 1997)
(collecting cases)). The Court will assume, without deciding, that Defendant has the
burden of proof.
A.
Gross Disparity in Bargaining Power
Defendant presented no evidence of the parties’ bargaining power. Plaintiffs
provided an affidavit from [101-1] from De Leon, in which he testified that leading up
to the execution of the loan documents, he had allowed a commitment from an
alternative lender to expire in reliance on Defendant’s representations. He stated that
although Plaintiffs had not defaulted on their original loan, the project was incomplete
and unable to generate income. He concluded that the “power was all one-sided.”
“[J]ury trial waivers are common in loan agreements and loan guarantees, and
these are regularly enforced.” Westside-Marrero, 56 F. Supp. 2d at 706 (citing cases).
Therefore, the mere fact that Plaintiffs needed a loan is not sufficient to demonstrate
a gross disparity in bargaining power. “To invalidate a waiver provision, . . . the
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bargaining differential must be the kind of ‘extreme bargaining disadvantage’ or ‘gross
disparity in bargaining position’ that occurs only in certain exceptional circumstances.”
Id. at 709. De Leon claimed that “other lenders were not available,” but it is
undisputed that Plaintiffs were able to secure alternative funding after Defendant
allegedly breached the loan commitment. The Court further notes that the jury waivers
apply equally to Plaintiffs and Defendant. Branch Banking, 2011 U.S. Dist. LEXIS
129367 at *4.
In conclusion, while there may have been some disparity in bargaining power
among Plaintiffs and Defendant, the record does not support a finding of gross
disparity. De Leon’s affidavit testimony was vague and, at times, conclusory with
respect to this issue. The Court concludes that this factor weighs in favor of enforcing
the waivers.
B.
Business Experience
De Leon has been the owner and president of Cytec, an engineering services
company and systems integrator, for decades. He was the managing member of Owner
when the loan documents were executed. He signed the loan documents on behalf of
all Plaintiffs, and he was the 30(b)(6) deponent for both Cytec [93-2] and Owner [93-1]
in this litigation. After reading his testimony in this case [94-1, 94-2, 94-5, 102-1, 1022, 102-5] and considering the undisputed facts concerning the type and scope of the
development project he managed, the Court easily concludes that De Leon had
significant business and professional experience when he signed the loan documents
at issue. This factor weighs in favor of enforcing the waivers.
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C.
Opportunity to Negotiate Contract Terms
Defendant stated in briefing that “each of the Plaintiffs had the opportunity to
read the loan documents and negotiate their terms,” but it provided no evidence to
support this assertion. In his affidavit [101-1], De Leon did not specifically state that
he had no opportunity to negotiate contract terms, but he testified that Defendant
“drafted and dictated the terms of the modified loan,” and that he “had no bargaining
power.” In the absence of any evidence from Defendant, the Court concludes that this
factor weighs against enforcing the waivers.
D.
Whether the Clause was Inconspicuous
The jury waiver provisions were not inconspicuous. Their typeface was the same
size and font as the other sections of the agreement, with the section titles in bold
print. They were neither more nor less conspicuous than any other section of the loan
documents. Therefore, this factor weighs in favor of enforcing the waivers.
E.
Represented by Counsel
Neither party presented any evidence or argument related to this factor. The
Court concludes that it is neutral.
F.
Summary
In summary, the record does not demonstrate a gross disparity in bargaining
power among the parties. In fact, it shows that De Leon has significant business
experience. Even if Plaintiffs did not have the opportunity to negotiate the waiver
provisions, they were conspicuous, and Plaintiffs possessed the sophistication and
experience to understand what they were signing. After considering all of these factors,
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the Court concludes that Plaintiffs’ waivers of their right to trial by jury were
“voluntary, knowing, and intelligently made.” D. H. Overmeyer Co., 405 U.S. at 186.
Accordingly, they should be enforced.
G.
Waiver and Estoppel
Plaintiffs argue that Defendant waived its right to enforce the waiver provisions
by failing to assert them earlier in the litigation. Alternatively, Plaintiffs contend that
Defendant should be estopped from enforcing the waivers because it failed to assert
them earlier. Plaintiffs cited no legal authority in support of either argument. Plaintiffs
also failed to articulate any prejudice that enforcement of the jury waivers would
cause. Indeed, Plaintiffs have been on notice since February 1, 2016, that the case may
not be tried to a jury. Their trial preparation has not been prejudiced, particularly in
light of the Court’s most recent continuance.
H.
Conclusion
For all the reasons provided above, the Court grants Defendant’s Motion to
Strike [93] Plaintiffs’ jury demand and enforce their waivers of the right to trial by
jury. Plaintiff’s jury demand is stricken.
SO ORDERED AND ADJUDGED, on this, the 1st day of June, 2016.
s/Keith Starrett
UNITED STATES DISTRICT JUDGE
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