Employment Law Daily Employee’s general jury demand didn’t preserve statutory right to jury trial under FAA
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Tuesday, July 11, 2017

Employee’s general jury demand didn’t preserve statutory right to jury trial under FAA

By Kathleen Kapusta, J.D.

The specific procedures in Section 4 of the Federal Arbitration Act for demanding a jury trial on arbitrability issues displace the general procedures under the Federal Rules of Civil Procedure, the Eleventh Circuit declared, finding that a general jury demand in an employee’s complaint failed to preserve his statutory right to a jury trial under Section 4 on disputed questions of fact related to the authenticity of his signature on a purported arbitration agreement. Affirming the decision of the court below, the appeals court also found that his employer did not waive its right to arbitration by participating in the litigation of the merits of the case after its motion to compel arbitration had been preliminarily denied (Burch v. P.J. Cheese, Inc., July 7, 2017, Tjoflat, G.).

Two years after he was fired as general manager of a P.J. Cheese restaurant, the employee sued, asserting claims under numerous federal employment law statutes. In response, P.J. Cheese moved to compel arbitration pursuant to the terms of his employment contract. The employee then filed an affidavit in which he claimed the signature on the alleged arbitration agreement was not his. He did not specifically demand, however, that the authenticity of the signature should be decided by a jury.

Jury or court? Finding that the employee was entitled to a trial on the arbitrabiltiy question, the court denied the motion to compel and moved forward with pretrial proceedings. After 10 months of discovery, P.J. Cheese moved for summary judgment on all claims and the court granted the motion as to all but the employee’s Equal Pay Act claim. At the final pretrial conference, the parties questioned whether they should be litigating the merits of the case because if the employee’s signature was valid, the answer was no. Because the court had originally ruled, four years previously, that the employee was entitled to a trial on the signature question, the issue became who would resolve the question, a jury or the court.

The district court found that the employee’s failure to request a jury trial in accordance with the procedures of Section 4 operated as a waiver of his right to a jury trial on that issue. It also rejected the employee’s argument that P.J. Cheese waived its right to compel arbitration, finding that it had only participated in the litigation on the merits after being required to do so by court order and thus it had not acted inconsistently with the right to arbitrate. It then held a bench trial on the signature issue, found that the employee signed the agreement, granted the motion to compel, and dismissed the case.

No error in holding bench trial. On appeal, the Eleventh Circuit first found that the district court did not err in holding a bench trial on the signature issue in spite of the employee’s general demand for a jury trial in his complaint. Although the employee had a statutory right pursuant to Section 4 to try the signature issue to a jury, the district court found he waived his right by making an untimely and improper demand. On appeal, the employee argued that the procedures in FRCP 38 controlled and the general jury demand in his complaint preserved his statutory right to a jury trial on the disputed signature issue. P.J. Cheese, however, asserted that the procedures in Section 4 controlled and the employee waived his statutory right to a jury trial by failing to make a specific jury demand on the issue as required by that provision.

Rule 38 or Section 4? While Rule 38—which requires a party to serve a written demand for a jury trial no later than 14 days after the last pleading directed to the issue is served—applies in the vast majority of civil cases in federal court, it does not apply in every situation, said the court here, noting that it is only where the FAA is silent that the Federal Rules of Civil Procedure become applicable.

Turning to Section 4 of the FAA, the court found that it “unmistakably provides a specific procedure—apart from those in Federal Rule of Civil Procedure 38—for demanding a jury trial on the issue of arbitrability.” Pursuant to that provision, “the party alleged to be in default may . . . on or before the return day of the notice of application, demand a jury trial of such issue.”

And the employee’s general jury demand did not comply with Section 4’s procedural requirement. As the party alleged to be in default, he was obligated to demand a jury trial of “such issue” “on or before the return date of the notice of application” to submit to arbitration, which here was November 23, 2009. In the use of the term “such issue,” the court found that Section 4 “clearly contemplates that a party must make a specific demand for a jury trial on a specific issue related to the ‘making of the arbitration agreement or the failure, neglect, or refusal to perform the same,’ to preserve its right to a jury trial on the issue.” Here, said the court, the employee’s only jury demand came in the form of a general demand in his complaint. Because he failed to demand a jury trial on a specific issue related to the making of the arbitration agreement, he waived his right to a jury trial on that issue. Accordingly, the district court did not err in holding a bench trial on the issue of arbitrability.

Waiver. And while the employee argued that P.J. Cheese waived its right to compel arbitration by participating in the litigation of the merits of the case after its motion to compel had been preliminarily denied, the court observed that “To preserve its right to arbitrate, a party is not required to gamble a default judgment against it.” Here, P.J. Cheese promptly requested arbitration upon notification of the lawsuit and only participated in litigation on the merits of the case after it was expressly ordered to do so by the district court. “Court proceedings,” said the Eleventh Circuit, “should not be treated as ‘a sort of judicial tightrope which the party seeking arbitration walks at his peril.’” To conclude that P.J. Cheese acted inconsistently with its right to arbitrate, the court noted that it would have to conclude that it should have disobeyed the district court’s order. “We decline to adopt such a position.”

Finally, the court rejected the employee’s contention that the district court erred in failing to proceed summarily to trial on the issue of arbitrability immediately after it determined that there was a fact dispute regarding the existence of an authentic arbitration agreement. For a period of 45 months, the appeals court noted, the employee never once petitioned the district court to hold a trial on arbitrability; he applied, on multiple occasions, for various extensions in the court proceedings; and finally, when discovery was completed, he seized the opportunity to brief the district court on why he was still entitled to a jury trial on the question of arbitrability. Observing that he never once claimed that the district court no longer had the authority to order arbitration under the FAA, the appeals court explained that if arbitration truly would cause him the “great injustice” he now contended, he had ample opportunity to implore the court below to proceed to try the signature issue. Thus, said the court, refusing to entertain this argument, which was raised for the first time on appeal, would not result in the miscarriage of justice.

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