Arbitration And State Constitutional Rights To A Jury Trial And To Civil Remedies


Somehow, I missed the notably case of Atalese v. U.S. Legal Services Group, LP, decided by the New Jersey Supreme Court on September 23, 2014 (certiorari was denied by the U.S. Supreme Court). In that case, a consumer contract contained an arbitration provision, but failed to clearly state in language that “a reasonable consumer” would understand that the consumer “was having her statutory right to seek relief in a court of law,” so it held that the provision was unenforceable.

While the ruling made little difference in the long term “war” to limit the pernicious effects of arbitration clauses in consumer contracts, because the objection raised by the New Jersey Constitution is simple enough to draft around, it did have the effect of invalidating many, probably thousands, of existing contractual arbitration clauses in New Jersey which lacked the requisite language – freeing consumers under these existing contracts which are often hard to renegotiate from its constraints in the event of a dispute.  And, it did create a trap for the unwary that could invalidate future arbitration contracts, particularly those written into national agreements by non-New Jersey counsel who are unaware of the new New Jersey rule.

The ruling was also colored by the existence of Article I, Paragraph 9 of the New Jersey Constitution, which guarantees that “[t]he right of trial by jury shall remain inviolate.”

A Long Digression On The Right To A Jury Trial With An Emphasis On Colorado

The 7th Amendment to the United States Constitution guarantees the right to a trial by jury in civil cases in federal court where the right to a jury trial existed at common law at the time that the Bill of Right was adopted (i.e. 1791) and in the case of causes of action that didn’t exist then, if a right to a jury trial existed in analogous cases at the time. See, e.g., Chauffeurs, Teamsters, and Helpers Local No. 391 v. Terry, 494 U.S. 558 (1990).  But, the 7th Amendment is one of a handful of provisions of the Bill of Rights which does not apply to state and local governments for rather intricate reasons of constitutional law collectively known as the incorporation doctrine, see, e.g., Minneapolis & St. Louis R. Co. v. Bombolis, 241 U.S. 211 (1916), except that the scope of the right to a civil trial by jury (although not necessarily its existence) is controlled by the 7th Amendment in cases that are brought in state court under federal law, Dice v. Akron Canton & Youngstown R.R., 342 U.S. 359 (1952).

But, in practice, almost every U.S. state generally makes civil jury trials available to litigants in substantially the same circumstances in which they are available in federal court, except for Louisiana whose courts follow the French tradition established before the Louisiana Purchase of this territory from France in civil procedure and private law.  Many states do have isolated statutory carve outs from the general rule which most commonly include exceptions for small claims courts and courts of claims against state governments.  But, the general federal rule in the norm, despite its quirky, arbitrary, and sometimes hard to apply provisions.

No country in the world other than Canada makes such wide use of civil juries.  Countries outside the Anglo-American legal tradition never had them, and the United Kingdom and most other countries in the British Commonwealth have abolished them outside some very isolated circumstances (the few exceptions often include eminent domain condemnation cases and defamation cases).

In my home of Colorado, however, unlike New Jersey, the right to a civil jury isn’t found in the state constitution. See, e.g. Continental Title Company v. District Court, 645 P.2d 1310 (Colo. 1982).  The right to a civil jury trial in Colorado used to be statutory, but that changed when the authority to make state court rule was (wisely) transferred to the Colorado Supreme Court.  See Miller v. District Court, 154 Colo. 125, 388 P.2d 763 (1964).

So, subject to a handful of isolated exceptions (e.g. in eminent domain cases), the right to a jury trial isn’t a statutorily created right in Colorado either. Indeed, there are some classes of cases where jury trials are expressly prohibited by statute.

For example, in all cases arising under Colorado’s dissolution of marriage act, “All issues raised by these proceedings shall be resolved by the court sitting without a jury.” Section 14-10-107(6), Colorado Revised Statutes.  See also, e.g., In re Marriage of Lewis, 66 P.3d 204, 205 (Colo. App. 2003) (“All issues raised or presented in a dissolution proceeding are to be resolved by the court in equity sitting without a jury.”).  Most issues is divorce cases wouldn’t include a right to a jury anyway (even though judicial divorce didn’t exist in Anglo-American jurisprudence in 1791), but some issues commonly decided in divorce cases.  But, some issues decided in divorces (e.g. a request that a soon to be ex-spouse turn over a painting that is allegedly the separate property of the spouse requesting itwhere ownership of the item is disputed), look a great deal like issues where there would ordinarily be a right to a jury trial outside of the divorce context.

Instead of arising via the state or federal constitution or a statute, in Colorado, the right to a civil jury trial in Colorado is almost exclusively a creature of Colorado Rules of Civil Procedure 38(a) (in District Court and Denver Probate Court) and 338(a) (in County Court). These rules are enacted by the Colorado Supreme Court and may be amended by it administratively without legislative or executive branch involvement.

By the terms of these rules, the right to a jury trial in Colorado exists in “actions for the recovery of specific real or personal property, with or without damages, or for money judgment claimed as due on contract, or as damages for breach of contract, or for injuries to person or property[.]”  C.R.C.P. 38(a) and C.R.C.P. 338(a).

In practice, however, the scope of the jury trial right in Colorado has been interpreted in Colorado to be essentially identical in broad outline to the 7th Amendments many esoteric provisions.  As under the 7th Amendment, the right to a civil jury trial in Colorado hinges on whether or not the claim asserted would have historically been brought in “courts of equity” or in “courts of law”, even though Colorado had merged the two parallel English legal systems more than a century ago, as have the federal courts and all but a handful of state court systems (one notable exception is the State of Delaware).  See, e.g., Kaitz v. District Court, 650 P.2d 553 (Colo. 1982).

Similarly, as under the 7th Amendment, the right to a jury trial is determined on the face of the Complaint filed by the plaintiff (or third party plaintiff in the case of a third party complaint, or a cross claim filed by one defendant against another), without regard to any defenses or counterclaims brought by a defendant (or third party defendant or cross claim defendant). See Miller v. District Court, 154 Colo. 125, 388 P.2d 763 (1964) (complaints and cross claims) and Simpson v. Digiallonardo, 29 Colo. App. 556,. 488 P.2d 208 (1971) (third party complaints).

For example,  there is no right to a trial by jury in Colorado in a case to have a trust declared invalid. Ayres v. King, 665 P.2d 594 (Colo. 1983).  But, there is a right to a trial by jury in Colorado in a claim for personal injury arising out an automobile accident.  Suppose that Margaret wants to sue her uncle Fredrick to have a trust that he established that denies her a right to benefit if she marries a man who is not white (such as her current fiance) declared invalid, while Fredrick wants to sue Margaret for injuries he suffered when she carelessly backed into him while leaving his office a few months ago after discussing the trust issue.  Suppose further that Colorado’s mandatory counterclaims statute (sometimes called the “entire controversy doctrine” when implemented via case law rather than by court rule) requires that if one of them sues the other, that any possible lawsuit that the person sued could bring against the person suing them is waived if not raised as a counterclaim.  Cf. Colorado Rule of Civil Procedure 13(a) (which might or might not actually apply to this fact pattern).  (Note, however, that, in part to preserve jury trial rights, the general rule that certain kinds of counterclaims are forever forfeited if they are not filed in a pending current lawsuit between two parties, does not apply to divorce actions in Colorado. Simmons v. Simmons, 773 P.2d 602, 605 (Colo. App. 1988)).

In this scenario, it Margaret files her lawsuit before Fredrick files his lawsuit, then Fredrick is not entitled to a jury trial on his counterclaim against Margaret for personal injuries arising from the car accident.  But, if Fredrick is the first to court and Margaret files her trust claims as a counterclaim, then Fredrick would be entitled to a trial by jury.

There is an exception to this general rule in the case of a fairly trivial loophole utilizing this rule under federal 7th Amendment law that threatened to swallow the rule, and has probably been adopted by many states facing the same issue.  While declaratory judgment actions were traditionally decided by courts of equity, and hence were not tried by juries, you cannot simply rush to court seeking declaratory judgment that you did not commit the federal tort for which there is a right to a trial by jury that someone else has threatened to sue you for, in order to turn their lawsuit into a counterclaim in an equitable action where a jury trial is not available.  Beacon Theaters, Inc. v. Westover, 359 U.S. 500 (1959).  The court reached its decision by relying on the doctrine that equitable remedies like declaratory judgments are not available as a remedy in cases that can be adequately and fully resolved in a court of law in a lawsuit over the underlying tort claim.

This is on the most odd and arbitrary rules of civil procedure that aptly illustrates the curious and problematic results of taking a quite strictly originalist approach to constitutional interpretation.  A well titled law review article on the subject, summed up the situation: Martin H. Redish, “Seventh Amendment Right To Jury Trial: A Study In The Irrationality Of Rational Decision Making“, 70 Northwestern U. Law Rev. 486 (1976-1977).

But, despite the fact that states are under no legal obligation to follow the federal example in this situation, Colorado and almost every other state except Louisiana does just that.  It is a stunning example of how often state legislatures do not act as the “laboratories of democracy” that they are often described as in superficial civics class descriptions of federalism, and instead slavishly act based upon inertia and imitation of federal or uniform law models, even when they are under no obligation to do so and the status quo is one that no one would design if they were starting from scratch.

Back To State Constitutional Rights To Jury Trials

As the recent Atalese case in New Jersey illustrates, state constitution protections of the right to a trial by jury, which are common (adopted in imitation of the federal bill of rights) but not ubiquitous, frequently end up doing much more than supplying a rule of civil procedure for cases pending in state courts.  Indeed, few kinds of state constitutional rights have a history of a more varied and creative mix of applications.

For example, quite a few state constitutional provisions were utilized by state appellate courts to invalidate state tort reform legislation imposing caps on money damage awards on the theory that a constitutional right to a jury trial makes it the prerogative of the jury to determine the amount of money damages that may be awards in cases in which there is a right to a jury trial, which state legislatures may not invade. See, e.g., Lucas v. United States, 757 S.W.2d 687 (Tex. 1988); Condemarin v. University Hosp., 775 P.2d 348 (Utah 1989); Sofie v. Fibreboard Corp., 771 P.2d 711 (Wash. 1989), modified, 780 P.2d 260 (Wash. App. 1989).  Other state courts with a state constitutional right to a jury trial, however, have concluded that their right to a civil trial by jury is procedural and does not extend to the substantive scope of the remedy. Jordan v. Long Beach Community Hosp., 248 Cal. Rptr. 651 (Cal. App. 1988) (review denied and ordered not to be officially published (Sept. 15, 1988)); Yates v. Pollock, 239 Cal. Rptr. 383 (Cal. App. 1987).

A handful of other states have gone even further, holding that a state constitutional right to a jury trial protects not just the procedural right of parties in certain kinds of cases to have their cases decided in a particular kind of way, but also the substantive right to a civil remedy in the form of a legally recognized cause of action for the kinds of injuries where there was historically a right to enforce though a lawsuit in which a civil jury had the power to authorize relief.

But, as often as not, these case actually hinge on one of the thirty-four or so state constitutional provisions which, in imitation of Section 29 of the Magna Carta, guarantee not just a procedural right to a jury trial, but a substantive right to seek redress through the civil courts for any injury of the type described. A typical example of such a provision states that:

Every person within this state ought to find a certain remedy, by having recourse to the laws, for all injuries or wrongs which he may receive in his person, property or character[.] 

Vermont Constitution, Chapter I, Article 4. See generally The Right of Access to Civil Courts under State Constitutional Law: “An Impediment to Modern Reforms, or a Receptacle of Important Substantive and Procedural Rights.”, 13 Rutgers L.J. 399 (1982) (a “Note” authored by a law student on the staff of the law review without public acknowledgement of authorship).

These two kinds of provisions, combined, have been considered to be potential barriers to tort reforms and civil procedure reforms, such as no fault liability regimes, for example, in worker’s compensation systems, for car accidents or for medical malpractice cases.

These state constitutional provisions are generally of little use in the context of arbitration, because the Federal Arbitration Act, 9 U.S.C. Sec. 1, et seq., because Section 2 of the Act pre-empts state law, including state constitutions, in circumstances, are prohibits states from invalidating arbitration clauses in circumstances where the FAA applies (which it does to any transaction involving interstate or international commerce, which is that term that has expansive scope, and to any maritime transaction).

But, Section 2 of the FAA does have an exception in cases where the arbitration clause would be invalid under generally applicable principles of state contract law such as those invoked by the New Jersey Supreme Court in Atalese.  There, while the state constitution colored how those state law contract principles were applied to a contract containing an arbitration clause, the contract law principles applied were sufficiently neutral and universally applicable to all contracts, that the decision to invalidate the arbitration clause escaped FAA preemption.

from Wash Park Prophet
via Denver News

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