Okura & Co.(America), Inc. v. Careau Group

• Decision Date: 16 August 1991
• Docket Number: No. CV 90-0542 SVW.,CV 90-0542 SVW.
• Citation: 783 F. Supp. 482
• Court: U.S. District Court — Central District of California
• Parties: OKURA & CO. (AMERICA), INC., a New York corporation, Plaintiff, v. The CAREAU GROUP, dba Julius Goldman's Egg City, a California corporation; Richard F. Carrott, an individual; Marie Antoinette Carrott, an individual; Commonwealth Land Title Insurance Company, a Pennsylvania Corporation, Defendants, And Related Counterclaims.

783 F. Supp. 482

OKURA & CO. (AMERICA), INC., a New York corporation, Plaintiff, v. The CAREAU GROUP, dba Julius Goldman's Egg City, a California corporation; Richard F. Carrott, an individual; Marie Antoinette Carrott, an individual; Commonwealth Land Title Insurance Company, a Pennsylvania Corporation, Defendants And Related Counterclaims.

No. CV 90-0542 SVW.

United States District Court, C.D. California.

August 16, 1991.

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R.D. Kirwan, James A. Magee and Madelene P. Vanderford, Pillsbury, Madison & Sutro, Los Angeles, Cal., for plaintiff and counterclaim defendant Okura & Co. (America), Inc., a New York corporation, counterclaim defendant Okura & Co., Ltd., a Japanese corporation, and counterclaimants and counterclaim defendants Kiyotsugu Kobori and Shiro Asakawa.

A. Barry Cappello, Frances E. Komoroske and Michael W. McCann, Cappello & Foley, Santa Barbara, Cal., for defendants, counterclaimants, and counter-defendants The Careau Group, Richard F. Carrott and Marie Antoinette Carrott.

MEMORANDUM OF DECISION AND ORDER; ORDER RE DIRECTED VERDICTS AND SANCTIONS; AND ORDER RE JURY TRIAL WAIVER

WILSON, District Judge.

INTRODUCTION

This action was tried to the court during various parts of November and December of 1990. At the conclusion of the trial, the court informed the parties that it would issue an order framing the issues for the parties so that they could submit proposed findings of fact and conclusions of law responsive to the court's concerns. The parties submitted their proposed findings and supporting memoranda in late February, 1991. This memorandum of decision constitutes the court's findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure. Additionally, this memorandum of decision will address the court's finding that the defendants had contractually waived a jury trial on their counterclaims, the question of whether defendant's counsel should be sanctioned, and the basis for the court's directed verdict against the defendants on several of their counterclaims.

Briefly, this litigation arises out of dispute over the proper characterization of the financial infusions made by plaintiff Okura-America into defendants' business, Egg City, to take it out of bankruptcy and whether the parties fulfilled their duties to each other. Plaintiff instituted this litigation seeking a judicial declaration that defendant The Careau Group dba Julius Goldman's Egg City ("Careau") had defaulted on approximately thirty million dollars worth of debt owed to the plaintiff and that defendants Richard Carrott ("Carrott") and Marie Antoinette Carrott ("Mrs. Carrott") were personally liable as guarantors for all or some of that debt. Defendants counterclaimed against Okura-America, its parent corporation, Okura-Japan, and two Okura officers, Messrs. Asakawa and Kobori, claiming, inter alia, that they had defrauded the defendants into agreeing to the form of the financing selected by the plaintiff, that the Okura entities and Asakawa and Kobori breached fiduciary duties owed to the defendants as partners or directors of defendant Careau, and that, even if Okura was only a creditor of Careau, it exercised undue control over the defendant and rendered defendant unable to repay the loan. Defendants also named Q.P. Corporation, a Japanese corporation, and its American subsidiary, Q & B, Inc., as defendants to their counterclaims. However, the court severed the defendants' claims against Q.P. and Q & B. Additionally, Messrs. Asakawa and Kobori counterclaimed against defendants Careau and Carrott for invasion of privacy.

DISCUSSION

I. WAIVER OF RIGHT TO JURY TRIAL.

Prior to trial, plaintiff brought a motion to strike the defendants' demand for jury trial on both the plaintiff's claims and the defendants' counterclaims. The basis for plaintiff's motion was that defendants had waived their rights to jury trial in provisions in the parties' financing agreement, the promissory notes, and the individual defendants' personal guaranties. After holding an evidentiary hearing over several days in August, 1990, the court ruled that the jury waiver provisions were valid. Subsequently, the court found that the waiver encompassed all of the claims in this action and, thus, granted the motion to strike the jury demand in full. The court rejected Careau's contentions that the jury waiver should be construed strictly against finding a waiver on its counterclaims against Okura-Japan and Messrs. Asakawa and Kobori.

Specifically, a provision of the agreement executed by plaintiff Okura-America, as "Lender," and defendant Careau, as "The Company," on December 18, 1987 provides:

Section 7.10. Waiver of Trial by Jury. The Lender and the Company hereby irrevocably waive all right to trial by jury in any action, proceeding or counterclaim arising out of or relating to this Agreement or any of the Operative Agreements or the actions of the Lender in the enforcement thereof.

Trial Exhibit ("Tr. Exh.") No. 256. Additionally, both Richard Carrott and Marie Antoinette Carrott signed personal guaranties for the debts incurred by Careau that provided:

The Guarantor and the lender, by its acceptance of this Guaranty, consent to the personal jurisdiction of the state or federal courts located in the City or County of Los Angeles, and hereby waive their right to trial by jury on any suit, action or proceeding brought to enforce this Guaranty.

Further, each of the Promissory Notes executed by Careau included the following: "The undersigned waives, to the fullest extent permitted by law, any right it has to a jury trial."

While the right to civil jury trial is a fundamental constitutional right, it may be waived by a contract knowingly and voluntarily executed. Leasing Service Corp. v. Crane, 804 F.2d 828, 832-33 (4th Cir.1986). Also, a mere failure to demand a jury trial within ten days of filing a pleading containing issues for which a jury is desired results in waiver of the right to jury trial on those issues. Fed.R.Civ.P. 38(b), (d). As Professor Moore's treatise notes, there is no abstract public policy against contractual waivers of the right to civil jury trial. J. Moore, W. Taggart & J. Wicker, Moore's Federal Practice, para. 38.46 (2d ed. 1985). In the present case, the court's conclusion that the jury waiver was valid was based on its finding that Richard Carrott on behalf of himself and The Careau Group knowingly, voluntarily, and intelligently waived any right to jury trial regarding disputes arising out of the parties' financing agreement. See Leasing Service Corp., 804 F.2d at 832-33. Specifically, the court found that the jury waiver provisions had been negotiated by the parties and were an essential aspect of the parties' bargain. Additionally, the court notes that the waiver signed by Marie Antoinette Carrott was also entered into knowingly, voluntarily, and intelligently. While Mrs. Carrott was not involved in the negotiations of the financing arrangement between Careau and Okura-America, she was aware of the need for her personal guaranty of the debts to be incurred by Careau and, with that knowledge, she accepted the terms of the personal guaranty including its jury trial waiver. Thus, the court found that the jury waiver provisions contained in the various documents were valid.

Having found that the waiver provisions were valid and enforceable, the court had to determine the scope of the jury waiver. With regard to the plaintiff's first amended complaint, the first through seventh and fifteenth through twentieth causes of action seek enforcement of the agreements, notes, and guaranties that contain the waivers or are related to the December 1987 agreement. Additionally, the claims for judicial foreclosure and specific performance would not, in any event, give rise to a right to jury trial. The plaintiff's thirteenth cause of action is for breach of a letter agreement regarding compensation for the services of Messrs. Asakawa and Kobori. Since Asakawa and Kobori provided services to and acted as directors of Careau pursuant to a provision in the December 1987 financing agreement, that cause of action is related to the December 1987 agreement and, thus, is within the jury waiver. However, the plaintiff's eighth through twelfth causes of action for breach of the grain purchase agreement and common counts arising from the grain purchases by Okura for Careau present a more difficult question. The grain purchase agreement is an independent contract that does not contain a jury trial waiver. Thus, if defendants presented a genuine triable issue of fact, they were entitled to a jury trial on plaintiff's claims concerning the grain purchases. The plaintiff's fourteenth cause of action is for breach of an oral contract requiring Careau to reimburse Okura for certain shipping costs. However, that contract was allegedly entered into in mid-1986 and, hence, predates the documents containing the jury waiver provisions. Thus, it appears that defendants were entitled to a jury trial on any genuine issues of fact presented regarding the oral reimbursement agreement.

Further, while it was clear to the court that the jury waivers applied to defendants' counterclaims against Okura-America, the defendants argued that the waivers were not applicable to their counterclaims against Okura-Japan, Messrs. Asakawa and Kobori, Q.P., and Q & B, since only Okura-America was a party to the financing agreement and notes and a beneficiary of the personal guaranties. The court disagreed. The waiver contained in the body of the agreement between Careau and Okura-America provides that the parties waive jury as to "any action, proceeding or counterclaim arising out of or relating to this Agreement or any of the Operative Agreements or the actions of the Lender in the enforcement thereof." Tr. Exh. No. 256....