Eurochem Trading USA Corporation v. Ganske, Julie et al

Filing 59

OPINION and ORDER: Plaintiff EuroChem Trading USA Corporation's motion to strike the jury demand, dkt. 28 , is GRANTED with respect to motion to strike the jury demand with respect to the collection claim (dkt. 31 , Count VI) and defendants ' five counterclaims (dkt. 14 , Counts I-VIII at pp. 11-20). The jury demand remains valid and applicable to the 10 claims alleged in the Third-Party Complaint (dkt. 15 ) and the non-collection claims alleged plaintiff in its second amended complaint (dkt. 31 , Counts I-V). Signed by Magistrate Judge Stephen L. Crocker on 6/25/18. (jat)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
EUROCHEM TRADING USA CORPORATION,
Plaintiff,
v.
JULIE L. GANSKE and W. KENT GANSKE,
Defendants.
W. KENT GANSKE, individually and d/b/a AG
CONSULTANTS, and JULIE GANSKE,
Counter-Plaintiffs and Third-Party Plaintiffs,

OPINION and ORDER
18-cv-16-slc

and
WS AG CENTER, INC.,
Third-Party Plaintiffs,
v.
EUROCHEM TRADING USA CORPORATION,
Plaintiff and Counter-Defendant,
and
EUROCHEM GROUP AG, SCOTT SIMON, IVAN
BOASHERLIEV, BENTREI FERTILIZER, LLC and
BEN-TREI, LTD.,
Third-Party Defendants.
___________________________________________________________________________________

In this action for monetary relief pursuant to a guaranty agreement executed by
defendants Julie L. Ganske and W. Kent Ganske , plaintiff EuroChem Trading USA Corporation
(“ECTUS”) has moved to strike defendants’ demand for a jury with respect to all claims arising
out of the guaranty. Dkt. 28. Specifically, ECTUS contends that the guaranty contains a jury
waiver provision and that defendants’ demand for a jury trial was untimely.

For the reasons explained below, I am granting ECTUS’s motion to strike the jury
demand with respect to ECTUS’s collection claim (dkt. 31, Count VI) and the Ganskes’ five
counterclaims (dkt. 14, Counts I-VIII at pp. 11-20). The jury demand remains valid and
applicable to the 10 claims alleged in the Third-Party Complaint (dkt. 15) and the noncollection claims alleged by ECTUS in its second amended complaint (dkt. 31, Counts I-V).

BACKGROUND FACTS
I. The Guaranty and Jury Trial Waiver
In 2017, defendants W. Kent Ganske and Julie Ganske executed a “Continuing Guaranty
(Unlimited),” guarantying payment of all obligations of WS AG Center, Inc. (WSAG) and
Agricultural Consultants (AG Consultants) due and owing to plaintiff ECTUS. W. Kent Ganske
signed the contract on March 8, 2017 and Julie Ganske signed it on May 10, 2017. The
guaranty contains the following provision that appears just above the Ganskes’ signatures:
WAIVER OF JURY TRIAL. NEITHER OF THE UNDERSIGNED
GUARANTOR, NOR THE CREDITOR, NOR ANY ASSIGNEE,
SUCCESSOR, HEIR, OR LEGAL REPRESENTATIVE OF THE
SAME SHALL SEEK A JURY TRIAL IN ANY LAWSUIT,
PR O C EED IN G , C OU NTERCLAIM , OR AN Y O T H ER
LITIGATION OR PROCEDURE ARISING FROM OR BASED
UPON THIS GUARANTY, OR ANY DOCUMENT EVIDENCING,
SECURING OR RELATING TO THE OBLIGATIONS OR TO THE
DEALINGS OR RELATIONSHIP BETWEEN OR AMONG THE
PARTIES THERETO; THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE CREDITOR TO ENTER INTO THIS
TRANSACTION AND CONTINUE TO EXTEND CREDIT TO
DEBTOR. GUARANTOR
AND
CREDITOR
EACH
ACKNOWLEDGE THAT THE PROVISIONS OF THIS SECTION
HAVE EITHER BEEN BROUGHT TO THE ATTENTION OF
EACH PARTY’S LEGAL COUNSEL OR THAT EACH PARTY HAD
THE OPPORTUNITY TO DO SO.

Dkt. 1, exh. 4 at 2.

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II. ECTUS’s Complaint and Amended Complaint and the Ganskes’ Counterclaims
On January 8, 2018, ECTUS filed its complaint in this case seeking to enforce the
guaranty against the Ganskes and collect on a debt owed by WSAG and AG Consultants.
ECTUS amended its complaint on January 17, 2018 to correct the name of defendant W. Kent
Ganske. Dkt. 7. Both the original complaint and amended complaint contain a single count for
collection under the guaranty.
On March 1, 2018, the Ganskes filed their answer to the amended complaint along with
their affirmative defenses and a counter-complaint, which includes eight counterclaims alleging
fraud in the inducement (Counts I and II) and misrepresentation (Count III) in conjunction
with the guaranty,1 a request for declaratory judgment with respect to whether certain claims are
subject to arbitration (Count VI),2 a request for a declaratory judgment that the guaranty is not
valid for lack of consideration (Count VII), and a request for punitive damages (Count VIII).
Dkt. 14. The Ganskes did not request a jury trial at that time. ECTUS answered the countercomplaint on March 22, 2018. Dkt. 22.

III. Third-Party Plaintiffs’ Complaint and Jury Demand
On March 15, 2018, the Ganskes and WS AG Center, Inc. (the third-party plaintiffs)
filed a pleading titled “Verified Counter-Complaint and Third-Party Complaint,” consisting of
10 claims against ECTUS and other related companies and individuals for violations of the

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The counter-complaint does not contain a Count IV or V.

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ECTUS contends, and the Ganskes do not dispute, that Count VI is no longer at issue because
the relevant parties have been dropped from the arbitration at issue in this claim.

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Lanham Act, Defend Trade Secrets Act, Wisconsin Uniform Trade Secrets Act, Wis. Stat. §
134.01, and Wisconsin Deceptive Practices Act and tortious interference, injurious falsehood,
misrepresentation, defamation, and theft. Dkt. 15. Although the third-party complaint did not
contain a jury demand, the third-party plaintiffs filed a separate document on March 27, 2018,
demanding “a trial by jury in the above captioned matter” on behalf of “defendants/counterplaintiffs/third-party plaintiffs.” Dkt. 25. In addition, at the preliminary pre-trial conference
held in this case on March 27, 2018, a jury trial was scheduled for October 21, 2019. Dkt. 26.
ECTUS filed its answer and affirmative defenses to the third-party complaint on April 5, 2018,
dkt. 27, and moved to strike the jury demand on April 9, 2018, dkt. 28.

IV. ECTUS’s Second Amended Complaint
On April 17, 2018, a few weeks after moving to strike the Ganskes’ jury demand, ECTUS
filed a second amended complaint, adding other claims for goods sold, unjust enrichment, and
breach of contract. Dkt. 31. The Ganskes filed their answer to the second amended complaint,
along with a jury demand, on May 15, 2018. Dkt. 45.

ANALYSIS
ECTUS raises two challenges to the demand for a jury trial filed by the third-party
plaintiffs: waiver and timeliness. ECTUS’s primary argument is that the pre-litigation jury
waiver provision in the contract signed by the Ganskes is enforceable as to ECTUS’s collection
claim (initially alleged in the January 2018 complaint and now Count VI of the second amended
complaint) and all five of Ganskes’ remaining counterclaims alleged in their March 1, 2018

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counter-complaint. In a brief argument, ECTUS also contends that the jury demand was
untimely filed with respect to the collection claim. As I discuss below, I am not convinced that
the jury demand should be struck as untimely, but I agree that the waiver provision may be
enforced as to the collection claim and the counterclaims and that any decision with respect to
whether the guaranty was procured by fraud shall be resolved by the court.

I. Timeliness
Under Fed. R. Civ. P. 38(b), a party may demand a jury trial by serving on the other
parties a “written demand–which may be included in a pleading–no later than 14 days after the
last pleading directed to the issue is served.” Typically, the “last pleading” is an answer, or in
the case of a counterclaim, a reply. Fed. R. Civ. P. 12(a). Although a party waives a jury trial
if the demand is not properly served and filed, Rule 38(d), the court may exercise its discretion
to grant a party’s belated request for a jury trial, Rule 39(b). The Court of Appeals for the
Seventh Circuit has held that Rule 39(b) allows district courts “to grant an untimely demand
for a jury, but only . . . if a good reason for the belated demand is shown.” Olympia Express, Inc.
v. Linee Aeree Italiana, S.P.A., 509 F.3d 347, 352 (7th Cir. 2007).
Determining the last pleading directed to the collection claim in this case is complicated
by the number of pleadings filed by the parties. See Communications Maint., Inc. v. Motorola, Inc.,
761 F.2d 1202, 1208 (7th Cir. 1985) (noting determination of last pleading not self-evident
where both parties amended their original pleadings on numerous occasions). In Motorola, the
court of appeals explained that because it is well-settled law that amendments or supplemental
pleadings do not extend the time for making a jury demand “except as to new issues raised by

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the new pleadings,” the crucial decision is “at what point . . . [do] the pleadings finally frame[]
the various issues to be put before the trier-of-fact; that is, when did the pleadings cease raising
new factual issues, and begin simply alleging new legal theories or particularized facts.” Id.
ECTUS contends that the last pleading directed to its collections claim is the Ganskes’
answer, affirmative defenses, and counter-complaint, which were filed on March 1, 2018, more
than 14 days before the filing and service of the jury demand on March 27.3 For their part, the
Ganskes argue that ECTUS’s March 22, 2018 answer (or reply) to the counter-complaint was
the last relevant pleading, which was only five days before they served the jury demand. In
reply, ECTUS contends that the issues raised in the Ganskes’ counter-complaint—including
fraudulent inducement and misrepresentation—are not the same as the collection issue raised
in the amended complaint.
ECTUS cites a few cases from other circuits that support its position that even though
the collection claim and the counterclaims for fraudulent inducement and misrepresentation
arise out of a common set of facts, the issues in these claims are not “essentially similar” because
the ultimate issues for decision are different. See First Wisconsin Nat’l Bank of Rice Lake v.
Klapmeier, 526 F.2d 77, 80 (8th Cir. 1975) (for purposes of jury demand, viewing counterclaim
for fraud in the inducement as “new issue” distinct from original claim for collection of
guaranty); Winchester Indus., Inc. v. Sentry Ins., 630 F. Supp. 2d 237, 240 (D. Conn. 2009)
(plaintiff’s malpractice claim against insurance agent not “essentially similar” to claim for

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ECTUS agrees that the jury demand is timely as to the counterclaims, the third-party complaint,
and the non-collection counts of the second amended complaint because all of those claims raise new issues
not related to the collection claim.

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declaratory judgment that insurance company had no obligation to defend or indemnify plaintiff
for accident).
So, ECTUS makes a fair point that has some support in the case law; however, it is clear
in this case that the Ganskes believed that all of the issues in the amended complaint remained
open until at least the date on which ECTUS filed its reply to the counterclaims. Also relevant
are the fact that ECTUS would suffer little prejudice from allowing a jury because this case is still
at the pleading stage on the third-party claims, and the fact that we have new claims raised in
the second amended complaint. Looking at the totality of these circumstances, I will exercise
the court’s discretion and find that the jury demand was not untimely with respect to the
collection claim alleged in the original complaint. See Winchester, 630 F. Supp. 2d at 241
(finding same where plaintiffs’ failure to make jury demand was not result of accidental oversight
or carelessness but rather was predicated on belief that pleading remained open through reply
to counterclaim).

II. Waiver
The parties agree that the Ganskes signed a guaranty that contains a waiver of a jury trial,
that Wisconsin substantive law applies to the contract in this case, and that Wisconsin allows
contracting parties to waive jury trials. See Janiga v. Questar Capital Corp., 615 F.3d 735, 743 (7th
Cir. 2010) (“[W]e uphold [waivers of the right to a jury trial] even in form contracts.”); IFC
Credit Corp.v. United Bus. & Indus. Fed. Credit Union, 512 F.3d 989, 991 (7th Cir. 2008) (validity
of contract provision waiving jury trial depends on law of jurisdiction whose rules will govern
overall dispute); Parsons v. Associated Banc-Corp, 2017 WI 37, ¶ 35, 374 Wis. 2d 513, 533-34,

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893 N.W.2d 212, 222 (parties’ pre-litigation jury waver provision enforceable without
additional proof that defendants’ knowingly and voluntarily agreed to waiver). The parties
dispute whether the agreement is enforceable and, if it is, whether the agreement applies to the
collection claim and the counterclaims in this case.

A. Scope of Waiver
ECTUS contends that the waiver provision applies to the collection claim and all of the
Ganskes’ counterclaims (fraud, misrepresentation, declaratory judgment, and punitive damages)
because the guaranty language states unambiguously that the Ganskes waive their right to a jury
trial “in any lawsuit, proceeding, counterclaim, or any other litigation or procedure arising from
or based upon this guaranty.” In support of its argument, ECTUS cites cases in which courts in this
circuit and in Wisconsin have interpreted broadly the terms “arising from” and “arising out of”
in arbitration agreements, finding that such language encompasses all disputes having their
“origin or genesis in the contract,” including fraud in the inducement. Sweet Dreams Unlimited,
Inc. v. Dial-A-Mattress Int’l, Ltd., 1 F.3d 639, 642 (7th Cir. 1993); see also Johnson v. Discovery Bank,
2018 WL 840160, *2 (W.D. Wis. 2018) (quoting Sweet Dreams Unlimited); Olson v. Ivanovic,
2017 WI App 21, ¶ 40, 374 Wis. 2d 435, 896 N.W.2d 390 (same); Minerals Dev. & Supply Co.,
Inc. v. Superior Silica Sands, LLC, 2014 WI App 1, ¶ 49, 352 Wis. 2d 246, 841 N.W.2d 580
(agreement to arbitrate “any controversy, claim, question, disagreement or dispute . . . arising
out of or relating to the Agreement” included fraud in the inducement claim).
The Ganskes try to distinguish these cases on the ground that they address arbitration
clauses and not jury waivers, but this argument has no traction. In discussing the choice of law

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issue with respect to jury waivers and arbitration clauses, the Court of Appeals for the Seventh
Circuit noted that an agreement to arbitrate is “another form of jury waiver” that “surrenders
not only a jury trial but also the right to any judicial forum” and applied the same standard to
both. IFC Credit Corp., 512 F.3d at 992, 994 (further explaining that even though UCC
“designates a few kinds of provisions as valid only if separately signed,” neither UCC nor Illinois
law has “separate-signing or separate-negotiation requirement for a clause agreeing to a bench
trial”). Therefore, I find that the waiver provision in this case can encompass all of the parties’
disputes originating from the guaranty, including fraud in the inducement and
misrepresentation.

B. Validity
The Ganskes contend that their counterclaim of fraud in the inducement and allegations
that the guaranty is void for lack of consideration render the whole contract—including the
waiver provision—unenforceable.

ECTUS agrees that the fate of the waiver provision is

dependent on the validity of the guaranty itself, and if I am able to determine from the
undisputed facts on summary judgment that the guaranty is void or unenforceable, then the jury
waiver falls with it. See IFC Credit Corp., 512 F.3d at 994 (noting same). However, the parties
dispute what happens in the event there are material facts in dispute with respect to the fraud
in the inducement claim: does the court apply the waiver provision and decide the issue or is
the question sent to the jury despite the waiver provision? The Ganskes argue that they are
entitled to a jury trial with respect to the fraud counterclaim, whereas ECTUS contends that
they are not.

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Although the Court of Appeals for the Seventh Circuit has not addressed directly whether
a contractual waiver of a jury trial is effective against a claim that the contract containing the
waiver was induced by fraud, it has stated in dicta that “[i]f the facts leave a material dispute
requiring resolution by a trier of fact . . . then the jury-waiver clause might be applied to
determine whether a judge or a jury makes the critical decision.” IFC, 512 F.3d at 994-95
(drawing analogy to arbitration law that holds if parties sign contract with arbitration clause,
arbitrator decides whether contract was signed only as result of fraudulent inducement).
Additionally, the Second and Tenth Circuit Courts of Appeals and several district courts
have held that unless a party alleges that its agreement to waive its right to a jury trial was itself
induced by fraud, the party’s contractual waiver is enforceable with respect to an allegation of
fraudulent inducement relating to the contract as a whole. Merrill Lynch & Co. Inc. v. Allegheny
Energy, Inc., 500 F.3d 171, 188 (2d Cir. 2007); Telum, Inc. v. E.F. Hutton Credit Corp., 859 F.2d
835, 837-38 (10th Cir. 1988); Allyn v. W. United Life Assur. Co., 347 F. Supp. 2d 1246, 1255
(M.D. Fla. 2004) (“As Plaintiffs have failed to show that their assent to the jury trial waivers
themselves was procured by fraud, the Court rejects Plaintiffs’ arguments that the waivers are
invalid.”); Morris v. McFarland Clinic P.C., 2004 WL 306110, at *2 (S.D. Iowa Jan. 29, 2004)
(general allegation of fraud in the inducement with respect to contract does not avoid waiver
provision); Evans v. Union Bank of Switzerland, 2003 WL 21277125, *2 n.1 (E.D. La. 2003)
(relying on Telum in rejecting argument that jury waivers were unenforceable because plaintiffs
asserted fraud with respect to aspects of the contracts wholly unrelated to waiver provision);
Gurfein v. Sovereign Group, 826 F. Supp. 890, 921 (E.D. Pa. 1993) (“general allegation of fraud

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in no way suggests that plaintiff's agreement to waive the right to a jury trial was involuntary or
not knowing”).
This is persuasive authority. As the court in Morris noted, “agreements to waive jury
trials, as well as those fixing venue, making a choice of law, and the like would be practically
unenforceable if they could be avoided simply by an allegation of fraud in the inducement.”
2004 WL 306110, at *2. In this case, the Ganskes concede that they signed a contract with a
jury waiver provision but claim that they did so because representatives of ECTUS made certain
promises about entering a joint venture and extending an additional line of credit. The Ganskes
do not allege that they were fraudulently induced to waive their right to a jury trial. Accordingly,
because the Ganskes knowingly assented to a guaranty containing a jury waiver clause, their
fraudulent inducement claim will be tried to the court, if necessary.
This being so, after summary judgment, I will consider presenting to an advisory jury any
issues that remain with respect to the Ganskes’ fraud claim, especially if any third-party or noncollection claims also survive and proceed to a jury trial. Fed. R. Civ. P. 39©. See also City of
Joliet, Illinois v. New W., L.P., 825 F.3d 827, 831 (7th Cir. 2016) (suggesting in dicta that district
court should have empaneled one jury to hear all issues in case but have court resolve
condemnation issues and jury resolve Fair Housing Act issues). We can address this possibility
at the appropriate time.

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ORDER
IT IS ORDERED that plaintiff EuroChem Trading USA Corporation’s motion to strike
the jury demand, dkt. 28, is GRANTED with respect to motion to strike the jury demand with
respect to the collection claim (dkt. 31, Count VI) and defendants’ five counterclaims (dkt. 14,
Counts I-VIII at pp. 11-20). The jury demand remains valid and applicable to the 10 claims
alleged in the Third-Party Complaint (dkt. 15) and the non-collection claims alleged plaintiff
in its second amended complaint (dkt. 31, Counts I-V).

Entered this 25th day of June, 2018.

BY THE COURT:
/s/
_______________________
STEPHEN L. CROCKER
Magistrate Judge

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