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Rulings on jury waiver, mandatory arbitration affirm right to jury trial.

Two recent rulings reaffirmed the right to trial by jury: The California Supreme Court held that predispute waivers of a jury trial are not allowed under the state constitution, and the First Circuit concluded that an e-mail message was not sufficient notice of a mandatory arbitration policy.

In California, Grafton Partners sued its auditor, the accounting firm PriceWaterhouseCoopers, in June 2002, claiming negligence and misrepresentation stemming from its failure to disclose fraudulent business practices it had discovered. The plaintiffs requested a jury trial, but the trial court denied it based on a waiver contained in the parties' engagement letter. The court of appeal reversed, and the state supreme court agreed.

Arthur Bryant, executive director of Trial Lawyers for Public Justice (TLPJ) in Washington, D.C., said the ruling "soundly rejects the latest corporate strategy aimed at eliminating the right to jury trial."

Writing for the unanimous panel, Chief Justice Ronald George emphasized that the state constitution values the right to trial by jury, which can be waived only under specific terms set by statute: "failure to appear at trial, failure to demand a jury trial within a specified period after the case is set for trial, failure to pay required fees in advance or during trial, oral consent in open court, or written consent filed with the clerk or the court." Because a predispute waiver is not one of the authorized circumstances, it is not valid and the plaintiff is entitled to a jury trial, the court held. (Grafton Partners v. Superior Court of Alameda County, 116 P.3d 479 (Cal. 2005) (citing California Code of Civil Procedure [section] 631).)

The one state appeals court to consider the issue previously had allowed such waivers, comparing them to arbitration agreements standard in many contracts. (Trizec Props., Inc. v. Superior Court, 280 Cal. Rptr. 885 (1991).) In Grafton Partners, the state supreme court disagreed, saying that a predispute waiver of a jury trial is not analogous to an arbitration agreement, because the latter is "an agreement to avoid the judicial forum altogether."

"The ruling is a huge victory for Californians," said Monique Olivier of San Francisco. "It underscores the fundamental, inviolate right to a jury trial under the California Constitution and sends a message to businesses that this right cannot be eliminated." Olivier and her partner James Sturdevant worked on TLPJ's amicus brief, which was joined by ATLA, the Consumer Attorneys of California, and the National Association of Consumer Advocates.

In a concurring opinion, Associate Justice Ming Chin urged the state legislature to authorize predispute jury waivers, noting that nearly every state and federal court to consider the waivers has allowed them; only Georgia has not upheld them. Olivier noted that "the circumstances under which a state legislature may allow waiver of the right to a jury trial may vary from state to state."

In the First Circuit case, the appeals court held that a company's e-mail communication to employees regarding a mandatory arbitration clause included in its employment policy was insufficient notice, and therefore the policy was unenforceable.

Roderick Campbell had worked at General Dynamics for three years when the company president sent an e-mail to all employees announcing that, beginning the following day, May 1, 2001, arbitration would be used to resolve workplace disputes. The message did not explain that the new policy would limit employees' access to the courts. It did not require employees to acknowledge that they had received, read, and understood the policy, nor did it specify that continued employment constituted acceptance of its terms. It did include links to a two-page brochure containing those specifics and the company's dispute-resolution handbook with the full text of the policy.

In December 2002, the company fired Campbell for "persistent absenteeism and tardiness." He claimed he suffered from sleep apnea, which caused these infractions, and sued in Massachusetts state court under the Americans with Disabilities Act.

General Dynamics removed the case to federal court and then sought to enforce the arbitration agreement. The district court found that the e-mall message was not sufficient notice to the plaintiff and denied the defendant's motion to stay proceedings and compel arbitration. (Campbell v. Gen. Dynamics Gov't Sys. Corp., 321 F. Supp. 2d 142 (D. Mass. 2004).)

On appeal, the First Circuit agreed. "To be blunt, the e-mail announcement undersold the significance of the policy and omitted the crucial fact that it contained a mandatory arbitration agreement. The result was that a reasonable employee could read the e-mail announcement and conclude that the policy presented an optional alternative to litigation rather than a mandatory replacement for it," Judge Bruce Selya wrote for the court. (407 F.3d 546 (1st Cir. 2005).)

"Similar to Grafton Partners, Campbell underscores the fundamental right to a judicial forum and the critical need for any waiver of that right to be knowing and voluntary," said Olivier.

Ann-Marie Ahern of Cleveland, immediate past chair of ATLA's Employment Rights Section, had a more cautious reaction to the ruling.

"While the case, at first blush, appears to be a victory for advocates of unimpeded access to the courts, the holding is actually quite troubling," she said. "Instead of chastising the employer's tactics, the court called its decision a 'close case.' Expressly limiting its invalidation of the e-mail arbitration agreement to the facts of the instant case, the court set out a virtual how-to manual for employers who wish to create a valid and enforceable arbitration agreement through e-mail notification."
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Title Annotation:California
Author:Jurand, Sara Hoffman
Date:Oct 1, 2005
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