Employee Waived Jury Trial on Formation of Arbitration Agreement

 

The Eleventh Circuit labored to disentangle a procedural morass in Burch v. P.J. Cheese, Inc., 2017 WL 2885095 (11th Cir. July 7, 2017), ultimately holding that the plaintiff, a former employee alleging violations of a raft of federal employment laws, failed to perfect his right to a jury trial on the existence of an arbitration agreement between him and the defendant employer.  The employer responded to his federal complaint by moving to compel arbitration and to stay the litigation pending the arbitration’s completion.  The district court (N.D. Ala.) denied the motion to compel arbitration on the ground that plaintiff’s dispute over whether he actually signed the agreement was a material issue of fact.  But then the case veered off course.  Rather than hold a trial to decide that issue, the court ordered that the litigation proceed in the standard fashion.  After ten months of discovery and a summary judgment motion, one of the plaintiff’s claims survived to be tried.  Only at the final pretrial conference—four years after the complaint was filed—did the court raise the long festering arbitration issue.  The plaintiff contended that whether an agreement was formed should be decided by a jury.  The employer argued that the plaintiff had failed to perfect his jury trial rights under section 4 of the Federal Arbitration Act, and so the issue should be tried to the court.  The district court agreed with the employer, held a bench trial, sent the case to arbitration, and dismissed it without prejudice.

On appeal to the Eleventh Circuit, the employee argued that he was entitled to a jury trial on the existence of the arbitration agreement; that the employer had waived arbitration by not pressing for it sooner during the course of the case; and that the district court erred by waiting so long to decide the arbitration issue.

Although the employee demanded a jury trial under Fed. R. Civ P. 38 when he filed his complaint, to preserve properly his right to a jury trial under section 4 of the Federal Arbitration Act required an additional demand. Specifically, Fed. R. Civ. P. 81(a)(6)(B) provides that the Federal Rules of Civil Procedure apply to arbitration proceedings “except as [the FAA] provide[s] other procedures.”  Accordingly, the court held that the language of section 4 of the FAA controlled:  “If the making of the arbitration agreement . . . [is] in issue, the court shall proceed summarily to the trial thereof.  If no jury trial be demanded by the party alleged to be in default . . . the court shall hear and determine such issue.  Where such an issue is raised, 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 upon such demand the court shall make an order referring the issue or issues to a jury . . . .”  The plaintiff had failed to make this special demand for a jury trial on the existence of an arbitration agreement, and thus lost his right to a jury trial, according to Judge Tjoflat’s opinion for the court.  The Eleventh Circuit is apparently the only circuit to address this issue in a published opinion.

The court had less difficulty rejecting the plaintiff’s argument that the defendant had waived arbitration by litigating, noting the heavy burden shouldered by the plaintiff in making this argument. The employer had sought arbitration at its earliest opportunity, and the court held that the employer was not required to suffer a default judgment or to disobey court orders in order to preserve its rights.  The court also declined to review whether the district court had erred in delaying the trial of the arbitration question for four years, concluding, perhaps mercifully, that the plaintiff had not preserved this issue for appeal.

Posted by Tom Byrne.

 

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