By Wiessman, Michael L.
The RMA Journal , Vol. 90, No. 7
Banks almost always include jury waiver clauses in loan documents--and why not? There's a basic perception that juries are biased against banks, insurance companies, and large corporations, so it makes sense that banks would want to avoid juries. That would be fine, except that both federal and state constitutional provisions guarantee the right to trial by jury in cases involving money damages.
Both federal and state courts examine jury waivers carefully--sometimes microscopically--before deciding whether to enforce them. Especially in view of the Seventh Amendment to the U.S. Constitution, federal courts insist that the waiver of the right to a jury trial be "knowing" and "intentional." (1)
Bargaining power. First, the court wants to know whether there was a gross disparity in the bargaining power of the borrower and the lender. Did the borrower have no real choice but to sign an agreement containing the waiver because it was desperate for financing? This can be overcome by proving that the borrower had the benefit of counsel and negotiated the terms of the loan agreement. (2) State courts also have used this approach. (3)
Conspicuous versus hidden. But the questions don't stop there. Courts want to know whether the jury waiver clause was "conspicuous."
* For example, in cases where the clause is considered "buried" in the eleventh paragraph of a 16-clause agreement (4) or located on page 20 of a 22-page standardized form contract, (5) the provision has been invalidated.
* On the other hand, where the jury waiver clause is considered clearly visible, in one case located directly above the signatures of the contracting parties, the clause has been upheld. (6)
The requirements for validating jury waiver clauses have been deemed so stringent as to call for an evidentiary hearing on that point alone. A Connecticut court stated that the evidentiary hearing should address the following factors:
* The conspicuousness of the waiver provisions.
* Whether the parties were represented by counsel.
* Whether there was a gross disparity in bargaining power between the parties.
* The business or professional experience of the party opposing the waivers.
* Whether the party opposing the waivers had an opportunity to negotiate contract terms. (7)
Enter the Seventh Circuit. However, a recent decision of the U.S. Court of Appeals for the Seventh Circuit rejects the proposition that a jury waiver clause requires special scrutiny before it will be enforced. (8)
In that case, the trial court declined to enforce the jury waiver clause because it was not a negotiated term (being part of a standard form), it was not conspicuous (appearing in the same type style as all the other clauses), and it was part of a contract that had been negotiated without the benefit of counsel. …