On April 16, 2015, the Ninth Circuit Court of Appeals ruled that when state law is more protective of the right to a jury trial than federal law, a district court must apply state law when determining the enforceability of a contract’s pre-dispute jury trial waiver.
The case — In re County of Orange — involves a contract dispute between Orange County, California, and Tata America International Corporation. Orange County contracted with TAIC and its affiliate, Tata America, to develop a property tax management system. The contract included a jury trial waiver clause as well as a California choice of law provision.
Orange County filed suit in federal district court for breach of contract under California law and demanded a jury trial. Tata America sought to strike the demand, citing the jury trial waiver in the parties’ contract.
The district court granted Tata America’s motion to strike based on the Erie doctrine (Erie R. Co. v. Tompkins, 304 U.S. 64 (1938)), which holds that a federal court may use federal law instead of state law when deciding civil matters. Federal law upholds the validity of pre-dispute jury trial waivers if they are made knowingly and willingly. The district court applied federal law in finding that since Orange County drafted the jury waiver, it waived its right to a jury trial knowingly and willingly.
Orange County then petitioned the Ninth Circuit Court of Appeals for a writ of mandamus. The appellate court granted that petition, finding that the pre-dispute waiver of the right to a jury trial was unenforceable.
In making its ruling, the Ninth Circuit examined Erie and found that it did not govern the enforceability of a pre-dispute jury trial waiver in instances where state law is more protective than federal law regarding the right to a jury trial. California law prohibits any such waiver of the right to a jury trial unless expressly authorized by statute. The court of appeals determined that Erie therefore required that state law be applied to fill the void in such instances.
Applying California law, the Ninth Circuit ruled that the contract’s jury trial waiver was unenforceable, and granted Orange County’s petition for a writ of mandamus.
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