A Follow-Up on Trial By Jury Waivers

By William Coats

In last month's Construction Law column, writer Joe Dirik brought attention to the recent Texas Supreme Court case on waiver of trial by jury. This is a very important development in the law. This month, writer William Coats follows up on some of the considerations that should be given attention when using this new tool.

There is widespread anxiety (some based in fact, some not) about the cost of jury trials and the unpredictability of results. This anxiety has led to contract provisions requiring compulsory arbitration instead of jury trials as the method of settling construction disputes. A new Texas Supreme Court case decided in September, but not yet published at press time, authorizes another option to jury trials that is available in Texas-waiver of trial by jury.

In the case of Prudential Insurance Co. of America and Four Partners, LLC d/b/a Prizm Partners, Realtor, the Texas Supreme Court for the first time held that a provision in a commercial contract under which the parties waive the right to a jury in any trial related to the contract is enforceable so long as the provision is conspicuous. Although the case involved a lease instead of a construction contract, the reasoning of the case should make it equally applicable to construction contracts.

If you wish to consider including such a clause in a subcontract form, and wish to have it track the clause that was enforced by the Texas Supreme Court, it would read as follows:

"Contractor and Subcontractor both waive a trial by jury of any or all issues arising in any action or proceeding between the parties hereto or their successors, under or connected with the subcontract, or any of its provisions."

In making a decision whether or not to include such a provision in subcontracts, you might consider the following factors:

• In a non-jury trial, a single judge is the finder of facts as well as the interpreter of the applicable legal standards. Generally, judges tend to be cautious when performing the role of fact finder, somewhat less likely to decide fact issues passionately and more intent on legal standards of contract interpretation than juries would be.
• Judges are not necessarily "fairer" than juries; they are people too, with the same susceptibility to weaknesses to which all of us are prone.
• Compared to arbitration, there is less chance of a legally flawed result. Legal interpretations of the judge in a non-jury trial are subject to appellate review and possible reversal, but arbitrator's rulings are not subject to appeal except in very rare cases (e.g. fraud).
• If the primary aim is avoidance of jury trial at all costs, having the contract provide for arbitration of all disputes may be a safer way to accomplish this than waiver of jury trial. A large body of law has developed to the effect that if you have an arbitration clause, it captures all disputes remotely related to the project between the parties who have signed the arbitration agreement. For example, if a party claims fraud was committed by another party to an arbitration agreement, that fraud claim is subject to arbitration under the arbitration clause of the contract between the parties, even though a fraud claim is not a claim on the contract. We do not yet know if the Texas appellate courts will be as willing to capture related disputes under a jury-waiver clause as they have been to capture related disputes under an arbitration clause.
• The cost of paying arbitrators is borne by the parties to a dispute and can be expensive, while the salary of a judge in a non-jury trial is borne by the state.
• Non-jury cases are generally quicker to reach a conclusion than cases filed on a jury docket, though generally non-jury cases are not disposed of as quickly as arbitration cases.
• The full range of pretrial discovery is available in jury and non-jury cases, (with the resulting costs and legal fees), but that is not always the case in arbitration cases if at least one of the parties seeks to limit discovery.

Whether to have disputes on a project resolved by a jury, a judge in a non-jury trial or by a panel of arbitrators is now a three-option choice that the parties to a contract can make at the time they enter a contract. No one choice is right for all situations but not considering this new possibility at the time of drafting a new contract would certainly be a mistake.