United States District Court, D. Colorado
OPINION AND ORDER GRANTING MOTION TO STRIKE JURY
DEMAND AND SETTING TRIAL DATE
MARCIA
S. KRIEGER, CHIEF JUDGE
THIS
MATTER comes before the Court pursuant to the
Plaintiff's (“Tatonka”) Renewed Motion to
Strike Mr. Connelly's Jury Demand (#
117), Mr. Connelly's response
(#120), and Tatonka's reply (#
121). Also pending is the setting of a trial date in
this matter.
The
Court assumes the reader's familiarity with the
proceedings to date. In summary, Tatonka asserts a claim for
breach of contract against Mr. Connelly, alleging that Mr.
Connelly failed to honor a guaranty of loans made by Tatonka
to Mosaica, Mr. Connelly's business. Mr. Connelly
asserts, as an affirmative defense, that both he and Tatonka
intended that his guaranty would apply only to certain loans
that have since been repaid. To the extent that the written
guarantees say otherwise, they should be reformed due to the
parties' mutual mistake.
In his
Answer, Mr. Connelly demanded a trial by jury. Tatonka moves
to strike the jury demand, arguing that guarantees contain a
waiver of any right to a trial to jury in a dispute
concerning the guarantees' enforcement. Specifically,
Tatonka points to Section 17 of each guaranty is entitled
“Governing Law, Etc.”. It includes, among other
provisions (all set forth in capital letters), the following
language: “The Guarantor [i.e. Mr. Connelly]
hereby waives any right to a trial by jury in any action,
proceeding, or counterclaims concerning any rights under this
guaranty, or the other loan documents . . . and agrees that
any such action, proceedings, or counterclaim shall be tried
before a court and not before a jury.”
Preemptive
waivers of a party's right to a jury trial are generally
enforceable, so long as the party giving the waiver did so
knowingly and voluntarily. Telum, Inc. v. E.F. Hutton
Credit Corp., 859 F.2d 835, 837 (10th Cir.
1988). Among the factors that courts examine in determining
whether a waiver was given knowingly and voluntarily are: (i)
the conspicuousness of the waiver in the contract, (ii) the
level of sophistication and experience of the parties
involved, (iii) the waiving party's ability to negotiate
terms of the contract, (iv) the relative bargaining power of
each party, and (v) whether the waiving party was represented
by counsel. Tara Woods Ltd. Partnership v. Fannie
Mae, 2010 WL 1529459 (D. Colo. Apr. 1, 2010) and
cases cited therein; see also Bevil Co., Inc. v.
Sprint/United Management Co., 304 Fed.Appx. 674, 582
(10th Cir. 2008). The 10th Circuit has
not clearly indicated which party bears the burden of proof
where a pre-litigation waiver of a jury right is invoked or
challenged. It may be appropriate for the party opposing a
jury trial to shoulder that burden, given that the Seventh
Amendment otherwise guarantees to parties the right to a
jury's determination. See e.g. Webster Capital
Finance, Inc. v. Newby, 2013 WL 589626 (D.Kan. Feb. 14,
2013). Accordingly, this Court will assume that Tatonka bears
the burden of proving Mr. Connelly's waiver of his jury
right was knowing and voluntary.
Turning
to each of the listed factors, the Court first considers
whether the waiver of the jury right in the guarantees was
conspicuous. Although Mr. Connelly takes some issue with the
vagueness of Section 17's title (“Governing Law,
etc.” instead of a specific reference to a waiver of
jury rights), the fact that the section is lengthy and
contains numerous provisions besides the jury waiver, and the
fact that it does not immediately precede the signature line
of the guarantee, the Court cannot say that any of those
alleged defects, individually or in concert, render the
provision less-than-conspicuous. Unlike any other paragraph
in the guarantees, Section 17 is set off entirely in capital
letters, attesting to its particular importance. Even a
casual reading of the first few lines of that section reveal
that the section involves concessions of important litigation
rights, including choice of law and forum selection clauses
in the first two sentences, further suggesting that the
contents of that section should not be ignored lightly. The
language of the waiver itself is simple and straightforward,
not likely to confuse even the least sophisticated of
readers. Mr. Connelly's position that, to be sufficiently
“conspicuous, ” a waiver must be in a separate
section of a contract, or must be located at a specific place
in the document imposes far more exacting requirements than
courts have articulated. Accordingly, the Court finds that
the jury waiver language was sufficiently conspicuous.
As to
the next factor, Mr. Connelly's response concedes that
“his level of sophistication was adequate under the
circumstances, ” but the Court believes some additional
discussion is warranted. It is undisputed that Mr. Connelly -
an attorney with nearly 40 years of business experience --
was serving as the CEO of Mosaica at the time, and had
occupied that position for nearly 15 years when the
guarantees were executed. The parties acknowledge that
Mosaica had already borrowed millions of dollars from Tatonka
over that time, and that the guarantees that Mr. Connelly
signed on his own behalf in 2013 amounted to nearly $4
million more. In other words, this was no ordinary,
low-stakes commercial transaction involving an
unsophisticated borrower. Mr. Connelly was a sophisticated
businessman and attorney, routinely doing business involving
considerable sums of money. He was not merely of
“adequate” sophistication - he was an extremely
sophisticated participant in these transactions.
Mr.
Connelly insists that he was not able to negotiate the terms
of the guarantees with Tatonka, but that argument falters in
the face of his own affirmative defense. The printed terms of
the guarantees make clear that Mr. Connelly was guaranteeing
all of Mosaica's indebtedness to date. But Mr.
Connelly insists that, in discussions with Tatonka, both
sides understood and agreed that the guarantees would only
apply to certain specific debts of Mosaica. The fact that Mr.
Connelly was - allegedly - able to convince Tatonka to accept
a less-than-comprehensive guarantee of all of Mosaica's
indebtedness suggests that Mr. Connelly had (and successfully
used) some ability to bargain over the terms of the
guarantees. Moreover, even if Mr. Connelly wasn't able to
negotiate the terms of the guarantees themselves, the entire
factual record reflects that Mr. Connelly, on behalf of
Mosaica, had a long and productive business relationship with
Tatonka, which tends to tip this factor in favor of a finding
that his waiver of a jury right in the guarantees was
voluntary.
Similarly,
Mr. Connelly argues that he lacked any meaningful bargaining
power when entering into the guarantees because Mosaica
needed additional loans immediately to avoid an imminent
default and because Mosaica had already pledged all of its
other assets to Tatonka to support the current loans. Thus,
he contends, he had no choice but to cede to Tatonka's
demands, including its demand that he waive a jury trial on
the guarantees. But this argument mistakenly equates
Mosaica's desperate need for additional capital
with Mr. Connelly's ability to grant or withhold
his own personal guarantee of Mosaica's debts. Although
Mosaica may not have had any more assets to offer another
lender as collateral, and thus lacked any bargaining power
relative to Tatonka (a finding the Court need not make), it
is clear that Mr. Connelly's personal guarantee was an
asset that he could offer to any willing lender, not just
Tatonka. The long business history between Tatonka and
Mosaica may have caused Mr. Connelly to consider Tatonka as
his best choice for borrowing additional funds, but that same
long business history would also tend to dissipate, rather
than strengthen, a belief that Tatonka would use its
bargaining power to force Mr. Connelly to agree to a
guarantee he would not otherwise have given. Once again, this
is not the type of contract where an inexperienced consumer
is forced to waive a jury right in order to, say, rent a car
from the only rental agency in town; Mr. Connelly had
considerably more bargaining power than that, even with
Mosaica's dire need for funds. Accordingly, this factor,
to the extent it tips in either direction, favors a finding
that Mr. Connelly gave his guarantee, including a waiver of a
jury trial, willingly.
Finally,
although Mr. Connelly insists that he was not represented by
counsel when he agreed to enter into the guarantees, the fact
remains that Mr. Connelly is an attorney, and an
experienced one at that. He was fully capable of reading and
understanding the jury waiver in the guarantee, and, as
explained above, was fully capable of negotiating with
Tatonka or seeking out another lender if he disagreed with
the guarantees' terms. Thus, the Court finds that Tatonka
has carried its burden of showing that his waiver was knowing
and voluntary. The Court grants Tatonka's motion to
strike his jury demand.
In
addition, as the Court previously noted, Mr. Connelly's
defense of mutual mistake sounds in equity, as it seeks
judicial reformation of the guarantees as its primary relief.
In such circumstances, that defense would be tried to the
Court regardless. Maryland Cas. Co. v. Buckeye Gas
Products Co., 797 P.2d 11, 13 (Colo. 1990). Thus, there
is a separate and independent basis for striking Mr.
Connelly's jury demand, regardless of the sufficiency of
his waiver.
Accordingly,
Tatonka's Renewed Motion to Strike (#
117) is GRANTED.
That
leaves the setting of this matter for a bench trial. As the
Court previously advised the parties at the Pretrial
Conference (# 118), upon their submission of
a revised Proposed Pretrial Order, the Court would set this
matter for trial “in November or December.” The
parties have submitted that revised document (and the Court
approves it), making it appropriate to now set this case for
trial. The Court will conduct a bench trial in this matter,
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