In 1997, the Missouri Supreme Court held that the right to a jury trial, which is guaranteed by the Missouri Constitution (Article I, Section 22(a)), may be waived by contract by “clear, unambiguous, and conspicuous language.” Malan Realty Investors, Inc. v. Harris, 953 S.W.2d 624, 627 (Mo. En Banc. 1997). Relying on that holding, lenders almost uniformly include, in all capital letters, and often in bold-face type, language clearly waiving the rights to a jury trial.
BORROWER HEREBY KNOWINGLY, INTENTIONALLY, VOLUNTARILY AND IRREVOCABLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION ARISING OUT OF OR RELATING TO THIS LOAN AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY.
Post-1997, jury trial waivers were consistently enforced. See, e.g., Savannah Place, Ltd. v. Heidelberg, 122 S.W.3d 74, 79 (Mo. App. S.D. 2003).
One judge of the U.S. District Court for the Eastern District of Missouri, however, seemed to raise the level of clarity required to assure enforcement. In U.S. Bank National Association v. Canny (Case No. 4:10CV421 CDP, ED. Mo. January 24, 2011), the Court refused to grant the bank’s motion to strike guarantors’ jury demand. The bank maintained that the agreement it was seeking to enforce, a forbearance agreement, included a clear, unambiguous and conspicuous jury trial waiver.
The Court stated: “On its face, this document appears to be a clear waiver of the guarantors’ right to demand a jury trial.” But the Court hesitated to strike the jury trial demand since the guarantors unbelievably (to this writer) asserted:
- They were not aware of the waiver, and/or
- They were somehow pressured unwillingly to sign the waiver, and/or
- The bank enjoyed much greater bargaining power and/or
- They did not understand the agreement or the waiver, and/or
- Jury trial waivers are not generally expected in these types of contracts (clearly not the case), and/or
- They implied that they signed the waiver without consulting an attorney, and/or
- They were not sophisticated business people.
The Court stated that, taking the foregoing as true, “this is sufficient to raise a question regarding the voluntariness of the guarantors’ waiver.”
Some interesting facts and allegations:
- The waiver was stated in bold type and all capital letters in a free-standing paragraph immediately preceding the signature pages.
- The waiver was not included in any of the amendments to the agreement.
- The amendments included the standard language that all previous provisions remained in effect unless otherwise stated.
- In a footnote the Court noted that in their brief the guarantors frequently alleged facts hypothetically.
- In response to the bank’s assertion that the guarantors’ attorney reviewed the guaranties and the forbearance agreement, the guarantors did not deny the assertion but answered only that there was insufficient evidence to irrefutably prove that fact.
Although this case was subsequently settled without a precedent-setting opinion (and one can speculate whether the Court’s refusal to strike the jury trial demand factored into the bank’s decision to settle), in light of the language of the Court’s memorandum and order, lenders should consider reviewing their jury trial waiver language and procedures.
A few suggestions to consider:
- Consider requiring borrowers/guarantors to initial the jury trial waiver section of the loan document confirming that they have read and understood its terms.
- Consider restating the jury trial waiver language in all amendments to loan documents and not relying solely on incorporating by reference the waiver in the original agreement.
- Consider adding to the jury trial waiver language to confirm that the borrowers/guarantors have consulted with the legal counsel regarding the waiver and understand its meaning and effect.