Grafton Partners L.P. v. Superior Court

• Decision Date: 04 August 2005
• Docket Number: No. S123344.,S123344.
• Citation: 32 Cal.Rptr.3d 5,116 P.3d 479,36 Cal.4th 944
• Parties: GRAFTON PARTNERS L.P., et al., Petitioners, v. The SUPERIOR COURT of Alameda County, Respondent; PriceWaterhouseCoopers L.L.P., Real Party in Interest.
• Court: California Supreme Court

32 Cal.Rptr.3d 5

36 Cal.4th 944

116 P.3d 479

GRAFTON PARTNERS L.P., et al., Petitioners, v. The SUPERIOR COURT of Alameda County, Respondent;

PriceWaterhouseCoopers L.L.P., Real Party in Interest.

No. S123344.

Supreme Court of California.

August 4, 2005.

Howard Rice Nemerovski Canady, Falk & Rabkin, Jerome B. Falk, Jr., Steven L.

Mayer, San Francisco; Bartko, Zankel, Tarrant & Miller, John J. Bartko, Christopher J. Hunt and Allan N. Littman, San Francisco, for Petitioners.

McGuinn, Hillsman & Palefsky, Cliff Palefsky and Keith Ehrman, San Francisco, for California Employment Lawyers Association as Amicus Curiae on behalf of Petitioners.

The Arns Law Firm, Morgan C. Smith, Robert S. Arns, San Francisco; Bruce R. Pfaff & Associates and Bruce R. Pfaff for the American Board of Trial Advocates as Amicus Curiae on behalf of Petitioners.

Law Offices of Public Advocates and Richard A. Marcantonio, San Rafael, for Public Advocates, Inc., as Amicus Curiae on behalf of Petitioners.

The Sturdevant Law Firm, James C. Sturdevant and Monique Olivier, San Francisco, for Consumer Attorneys of California, Trial Lawyers for Public Justice, Association of Trial Lawyers of America and National Association of Consumer Advocates as Amici Curiae on behalf of Petitioners.

No appearance for Respondent.

Gibson, Dunn & Crutcher, Daniel M. Kolkey, San Francisco, Scott A. Fink, and Daniel S. Floyd, Theodore J. Boutrous, Jr., Julian W. Poon and Dominic Lanza, Los Angeles, for Real Party in Interest.

Deborah J. La Fetra and Timothy Sandefur, Sacramento, for Pacific Legal Foundation as Amicus Curiae on behalf of Real Party in Interest.

Buchalter, Nemer, Fields & Younger, James B. Wright, Bernard E. Lesage, Los Angeles; Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Richard M. Kohn, Kenneth S. Ulrich; Otterbourg, Steindler, Houston & Rosen, Bernard Beitel, Jonathan N. Helfat and Daniel Wallen, for Commercial Finance Association as Amici Curiae on behalf of Real Party in Interest.

Morgan, Lewis & Bockius, Rebecca D. Eisen, Thomas M. Peterson, Brett M. Schuman and Amanda D. Smith, San Francisco, for Employers Group as Amicus Curiae on behalf of Real Party in Interest.

Leland Chan, San Francisco, for California Bankers Association as Amicus Curiae on behalf of Real Party in Interest.

National Chamber Litigation Center, Robin S. Conrad, Stephanie A. Martz; Mayer, Brown, Rowe & Maw, Donald M. Falk, Palo Alto, and Fatima Goss Graves, for the Chamber of Commerce of the United States of America as Amicus Curiae on behalf of Real Party in Interest.

Wilson, Sonsini, Goodrich & Rosati, Nina F. Locker, Steven Guggenheim and Joni Ostler, Palo Alto, for New Focus, Inc., as Amicus Curiae on behalf of Real Party in Interest.

Allen Matkins Leck Gamble & Mallory, Bruce W. Hyman and Gregg J. Loubier, Los Angeles, for California Mortgage Bankers Association as Amicus Curiae on behalf of Real Party in Interest.

Erika C. Frank; Knox, Lemmon & Anapolsky, Thomas S. Knox and Glen C. Hansen, Sacramento, for California Chamber of Commerce and California Retailers Association as Amici Curiae on behalf of Real Party in Interest.

Stephan, Oringher, Richman & Theodora, Harry W.R. Chamberlain, Robert M. Dato and Brian P. Barrow, Costa Mesa, for Association of Southern California Defense Counsel as Amicus Curiae on behalf of Real Party in Interest.

Wilke, Fleury, Hoffelt, Gould & Birney, Matthew W. Powell, Megan A. Lewis, Sacramento; Willkie Farr & Gallagher, Kelly M. Hnatt; and Richard I. Miller for American Institute of Certified Public Accountants

as Amicus Curiae on behalf of Real Party in Interest.

Fred J. Hiestand, Sacramento, for the Civil Justice Association of California as Amicus Curiae on behalf of Real Party in Interest.

GEORGE, C.J.

The present case concerns what is principally a question of statutory interpretation. At issue is Code of Civil Procedure section 631,¹ a provision prescribing the six means by which parties to a civil lawsuit may waive their right to have their disputes adjudicated in a jury trial rather than in a court trial. Petitioners contend a contractual agreement that is entered into prior to any dispute arising between the contracting parties is not one of the means authorized by statute. In consequence, they claim, their predispute agreement that any lawsuit between them and real party would be adjudicated in a court trial, and not by jury trial, was unenforceable. The Court of Appeal agreed with petitioners' contention, as do we, for the reasons that follow.

I

In March 1999, petitioners engaged real party in interest PriceWaterhouseCoopers L.L.P. (hereafter real party), an accounting firm, to audit certain accounts belonging to two of petitioners' partnerships, Grafton and Allied. On March 11, 1999, real party sent petitioners an engagement letter confirming the terms of the retainer agreement. Under the heading "[r]elease and indemnification," the letter released real party from liability in the event of misrepresentation by the partnerships' management and specified that real party would not be liable to the partnerships except for willful misconduct or fraud. A waiver followed, expressed in these terms: "In the unlikely event that differences concerning [real party's] services or fees should arise that are not resolved by mutual agreement, to facilitate judicial resolution and save time and expense of both parties, [petitioners and real party] agree not to demand a trial by jury in any action, proceeding or counterclaim arising out of or relating to [real party's] services and fees for this engagement."

On June 27, 2002, petitioners filed a complaint against real party, alleging negligence, misrepresentation, and other causes of action based upon real party's asserted failure to disclose and its cover-up of fraudulent business practices that it discovered during its audit. A third amended complaint was filed on March 19, 2003, and petitioners demanded a jury trial. The trial court, relying upon the waiver contained in the engagement letter, granted real party's motion to strike the jury demand.

Petitioners filed a petition for writ of mandate or prohibition in the Court of Appeal, and that court granted relief in petitioners' favor. It concluded that a predispute waiver of a jury trial is not authorized by section 631, and that only those waivers authorized by statute are consistent with article I, section 16 of the California Constitution. We granted real party's petition for review.

II

When parties elect a judicial forum in which to resolve their civil disputes, article I, section 16 of the California Constitution accords them the right to trial by jury (with limited exceptions not relevant in the present case).² Our Constitution treats the historical right to a jury resolution of disputes that have been brought to a judicial forum as fundamental, providing that in "a civil cause," any waiver of the inviolate right to a jury determination must occur by the consent of the parties to the cause as provided by statute. (Cal. Const., art. I, § 16.)³

The statute implementing this constitutional provision is section 631. It holds inviolate the right to trial by jury, and prescribes that a jury may be waived in civil cases only as provided in subdivision (d) of its provisions. (§ 631, subd. (a).) Subdivision (d) describes six means by which the right to jury trial may be forfeited or waived, including failure to appear at trial, failure to demand jury trial within a specified period after the case is set for trial, failure to pay required fees in advance or during trial, oral consent in open court, or written consent filed with the clerk or the court.

A

We begin with a discussion of the relevant state constitutional provision, because the one other Court of Appeal decision to have considered whether predispute jury trial waivers are enforceable concluded that, although section 631 does not authorize such waivers, they are permissible without statutory authorization. (Trizec Properties, Inc. v. Superior Court (1991) 229 Cal.App.3d 1616, 280 Cal.Rptr. 885 (Trizec).) The appellate court reasoned that nothing in the applicable constitutional provision prohibits such waivers, which it found comparable to the arbitration clauses found in many contracts. (Id. at p. 1618, 280 Cal.Rptr. 885.)

The difficulty with the analysis in Trizec is that it is inconsistent with an established line of cases beginning with an early decision of this court. In Exline v. Smith (1855) 5 Cal. 112 (Exline) and subsequent cases, we interpreted substantially similar constitutional language and held that the rules under which the parties to a lawsuit may waive a jury trial must be prescribed by the Legislature, which is without power to delegate to the courts the responsibility of determining the circumstances under which such a waiver may be permitted. (Id. at pp. 112-113; People v. Metropolitan Surety Co. (1912) 164 Cal. 174, 177, 128 P. 324; Biggs v. Lloyd (1886) 70 Cal. 447, 448-449, 11 P. 831; see also Parker v. James E. Granger, Inc. (1935) 4 Cal.2d 668, 679, 52 P.2d 226 [section 631 identifies the exclusive means by which the right to jury trial may be waived]; Cohill v. Nationwide Auto Service (1993) 16 Cal.App.4th 696, 700, 19 Cal.Rptr.2d 924 [same]; Selby Constructors v. McCarthy (1979) 91 Cal.App.3d 517, 524, 154 Cal.Rptr. 164 ["Section 631 has been repeatedly interpreted as setting forth strict requirements"]; De Castro v. Rowe (1963) 223 Cal.App.2d 547, 552, 36 Cal.Rptr. 53 ["It has been repeatedly held that trial by jury may be waived only in the manner designated by . . . section 631"]; 7 Witkin, Cal. Procedure (4th ed. 1997) Trial, § 113, p. 131.) Applying our decisions, and examining the history of the constitutional provision, the Court of Appeal in the present case similarly concluded that a waiver of the right to jury trial is permissible only to the extent expressly authorized by statute. In so holding, the Court of...