Cnty. of Orange v. U.S. Dist. Court for the Cent. Dist. of Cal. (In re Cnty. of Orange)

• Decision Date: 16 April 2015
• Docket Number: No. 14–72343.,14–72343.
• Citation: 784 F.3d 520
• Parties: In re COUNTY OF ORANGE. County of Orange, a political subdivision of the State of California, Petitioner, v. United States District Court for the Central District of California, Santa Ana, Respondent, Tata Consultancy Services Ltd., an Indian corporation; Tata America International Corporation, a New York corporation, Real Parties in Interest.
• Court: U.S. Court of Appeals — Ninth Circuit

784 F.3d 520

In re COUNTY OF ORANGE.

County of Orange, a political subdivision of the State of California, Petitioner

v.United States District Court for the Central District of California, Santa Ana, Respondent

Tata Consultancy Services Ltd., an Indian corporation; Tata America International Corporation, a New York corporation, Real Parties in Interest.

No. 14–72343.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 4, 2015.

Filed April 16, 2015.

Benjamin Parker Broderick (argued), Allan L. Schare, Alexander George Brizolis, and Todd Theodora, Theodora Oringher P.C., Costa Mesa, CA, for Petitioner.

William A. Escobar (argued), Kelley Drey & Warren LLP, New York, New York; Allison S. Brehm and Kenneth David Kronstadt, Kelley Drey & Warren LLP, Los Angeles, CA, for Real Parties in Interest.

Petition for Writ of Mandamus.

Before: RONALD M. GOULD and RICHARD C. TALLMAN, Circuit Judges, and EDWARD R. KORMAN, Senior District Judge.^*

OPINION

TALLMAN, Circuit Judge:

This mandamus petition requires us to decide whether, under Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), a federal court sitting in diversity applies state or federal law to determine the validity of a pre-dispute jury trial waiver contained in a contract governed by California law. California and federal law treat such waivers differently: Under California law, pre-dispute jury trial waivers are invalid unless expressly authorized by statute. See Grafton Partners, L.P. v. Superior Court, 36 Cal.4th 944, 32 Cal.Rptr.3d 5, 116 P.3d 479 (2005).¹ Federal law, on the other hand, permits such waivers as long as each party waived its rights knowingly and voluntarily. See Palmer v. Valdez, 560 F.3d 965, 968 (9th Cir.2009). “The compatibility of these provisions, in an action based on [California] law but tried in federal court by reason of the parties' diverse citizenship” implicates the Erie doctrine. Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 419, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996). “Under the Erie doctrine, federal courts sitting in diversity apply state substantive law and federal procedural law.” Id. at 427, 116 S.Ct. 2211.

Because no Federal Rule of Civil Procedure or federal law governs pre-dispute jury trial waivers, we apply the “relatively unguided” Erie analysis to answer the vertical choice of law question presented here. See Hanna v. Plumer, 380 U.S. 460, 471, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965). Doing so, we find that the law governing pre-dispute jury trial waivers is procedural under Erie, and so federal courts should apply federal law to determine the validity of a waiver. But we also conclude that the federal “knowing and voluntary” standard does not necessarily conflict with California's Grafton rule because the federal standard is a constitutional minimum courts use to protect litigants' Seventh Amendment rights to trial by jury.² We hold, therefore, that Erie's federalism principle requires federal courts sitting in diversity to import, as the federal rule, state law governing jury trial waivers where, as here, state law is even more protective than federal law of the jury trial right. Applying California law, we hold that the parties' contractual jury trial waiver is unenforceable. See Grafton, 32 Cal.Rptr.3d 5, 116 P.3d at 492. And because “the only question presented [here] ... is whether the district court erred in denying petitioner's request for a jury trial,” Mondor v. U.S. District Court, 910 F.2d 585, 586 (9th Cir.1990), we GRANT the County's petition for writ of mandamus.

I

The dispute underlying this mandamus petition is a simple breach of contract action. In 2007, Plaintiff—Petitioner the County of Orange (the “County”) hired Defendant—Real Party in Interest Tata America International Corporation and its international affiliate (collectively, “Tata America”) to develop a property tax management system. In 2008, the parties entered into a contract for professional services to develop and implement the computerized system. The contract became final when the County Board of Supervisors approved it on July 15, 2008. The contract contains an unambiguous clause by which each party agrees to waive its right to a jury trial in any dispute arising out of the contract. That clause provides:

Waiver of Jury Trial. Each party acknowledges that it is aware of and has had the opportunity to seek advice of counsel of its choice with respect to its rights to trial by jury, and each party, for itself and its successors, creditors, and assigns, does hereby expressly and knowingly waive and release all such rights to trial by jury in any action, proceeding or counterclaim brought by any party hereto against the other (and/or against its officers, directors, employees, agents, or subsidiary or affiliated entities) on or with regard to any matters whatsoever arising out of or in any way connected with this Contract and/or any other claim of injury or damage.

The contract also contains a California choice of law clause.

Tata America did not perform its obligations under the contract to the County's satisfaction, and, in 2013, the County filed a breach of contract action in the United States District Court for the Central District of California, invoking that court's diversity jurisdiction. See Compl. 1, Apr. 30, 2013, ECF No. 1. The County sued under California contract law, asserting claims for promissory fraud, fraudulent misrepresentation, fraudulent concealment, negligent misrepresentation, and breach of contract. In general, the County alleges that Tata America “failed to live up to the representations and promises [it] made to the County and also failed to comply with generally accepted industry standards.” The Complaint and the First Amended Complaint both include a jury trial demand.

Tata America filed a motion to strike the County's jury demand. See Tata Mot. to Strike 1, Apr. 22, 2014, ECF No. 40. It argued that the County waived its right to a jury trial by proposing and signing the contract containing the jury trial waiver. See id. at 1–2. In its motion, Tata America invoked the district court's power under Federal Rule of Civil Procedure 39, which permits a district court to strike a jury demand if it “finds that on some or all of [the issues raised] there is no federal right to a jury trial.” Fed.R.Civ.P. 39(a)(2).

In a thoughtful and well reasoned opinion, the district court granted Tata America's motion to strike. See Cnty. of Orange v. Tata Consultancy Serv. Ltd., Case No. 8:13–cv–00683–JLS–JC (C.D. Cal. June 10, 2014) (ECF No. 51) (In Chambers) (Order Granting Defendant's Motion to Strike). Noting that “[t]he parties dispute whether federal or California law applies to the determination of whether the County has waived its right to a jury trial,” the court invoked the Erie doctrine. See id. at *3. It relied on Simler v. Conner, 372 U.S. 221, 222, 83 S.Ct. 609, 9 L.Ed.2d 691 (1963), and Byrd v. Blue Ridge Rural Electric Cooperative, Inc., 356 U.S. 525, 537–38, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958), to conclude that the right to a jury trial—including waiver of that right—is a federal procedural issue controlled in federal court by federal law. See Cnty. of Orange, Case No. 8:13–cv–00683–JLS–JC, at *5. It invoked Herron v. Southern Pacific Co., 283 U.S. 91, 94, 51 S.Ct. 383, 75 L.Ed. 857 (1931), as a basis for rejecting the County's argument that California's prohibition on contractual jury trial waivers controls in federal court. Applying this authority, the court “conclude[d] that federal law, not California law, governs the question of whether a party has waived its right to a jury trial in federal court.” See Cnty. of Orange, Case No. 8:13–cv–00683–JLS–JC, at *6. Applying federal law, the district court determined that the County—which drafted the jury waiver at issue here—knowingly and voluntarily waived its right to a jury trial. Id. at *6–7.

The County then filed the petition for writ of mandamus currently before us. In its petition, the County argues that the district court erred under Erie when it applied federal law to evaluate the validity of the waiver. The All Writs Act, 28 U.S.C. § 1651, gives us jurisdiction to resolve this dispute.³

II

A

Before tackling the Erie issue, we consider whether to apply the five factors announced in Bauman v. U.S. District Court, 557 F.2d 650 (9th Cir.1977), to a mandamus petition—like the County's—that alleges the erroneous deprivation of a jury trial.

The All Writs Act provides that federal courts “may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.” 28 U.S.C. § 1651. “A writ of mandamus is an extraordinary or drastic remedy, used only to confine an inferior court to a lawful exercise of its prescribed jurisdiction or to compel it to exercise its authority when it is its duty to do so.” In re Sussex, 781 F.3d 1065, 1070, No. 14–70158, 2015 WL 1379852, at *3 (9th Cir. Jan. 27, 2015) (internal quotation marks omitted). Thus, the petitioner carries the high burden of establishing that his or her “right to issuance of the writ is clear and indisputable.” Bauman, 557 F.2d at 656 (quotation marks omitted).

To evaluate whether the petitioner has carried this burden, we ordinarily examine the five factors set forth in Bauman:

(1) The party seeking the writ has no other adequate means, such as direct appeal, to attain the relief he or she desires. (2) The petitioner will be damaged or prejudiced in a way not correctable on appeal. (This guideline is closely related to the first.) (3) The district court's order is clearly erroneous as a matter of law. (4) The district court's order is an oft-repeated error, or manifests a persistent disregard of the federal rules. (5) The district court's order raises new and important problems, or issues of law of first impression.

Id. at 654–55 (citations omitted); see also In re Sussex, 781 F.3d at 1071, 2015 WL 1379852, at *3.

But Baum...