Ross Dress for Less, Inc. v. Makarios-Oregon, LLC

• Decision Date: 08 July 2022
• Docket Number: 21-35106, No. 21-35132
• Citation: 39 F.4th 1113
• Parties: ROSS DRESS FOR LESS, INC., a Delaware corporation, Plaintiff-Counter-Defendant-Appellant, v. MAKARIOS-OREGON, LLC, an Oregon limited liability company, Defendant-Counter-Claimant-Appellee, and Walker Place, LLC, an Oregon limited liability company; Charles W. Calomaris; Katherine Calomiris Tompros; Jennifer Calomiris, Defendants. Ross Dress for Less, Inc., a Delaware corporation, Plaintiff-Counter-Defendant-Appellee, v. Walker Place, LLC, an Oregon limited liability company, Defendant, and Charles W. Calomaris; Katherine Calomiris Tompros; Jennifer Calomiris, Defendants-Appellants, Makarios-Oregon, LLC, an Oregon limited liability company, Defendant-Counter-Claimant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

39 F.4th 1113

ROSS DRESS FOR LESS, INC., a Delaware corporation, Plaintiff-Counter-Defendant-Appellant,

v.MAKARIOS-OREGON, LLC, an Oregon limited liability company, Defendant-Counter-Claimant-Appellee,andWalker Place, LLC, an Oregon limited liability company; Charles W. Calomaris; Katherine Calomiris Tompros; Jennifer Calomiris, Defendants.

Ross Dress for Less, Inc., a Delaware corporation, Plaintiff-Counter-Defendant-Appellee,

v.Walker Place, LLC, an Oregon limited liability company, Defendant,andCharles W. Calomaris; Katherine Calomiris Tompros; Jennifer Calomiris, Defendants-Appellants,Makarios-Oregon, LLC, an Oregon limited liability company, Defendant-Counter-Claimant-Appellant.

No. 21-35106

No. 21-35132

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 10, 2022 Portland, Oregon

Filed July 8, 2022

Gregory D. Call (argued) and Tracy E. Reichmuth, Crowell & Moring LLP, San Francisco, California; Joel A. Parker, Rebecca Boyette, and Sara Kobak, Schwabe Williamson & Wyatt PC, Portland, Oregon; for Plaintiff-Counter-Defendant-Appellant/Cross-Appellee.

Molly K. Honoré (argued), Paul S. Bierly, and Jeffrey M. Edelson, Markowitz Herbold PC, Portland, Oregon, for Defendant-Counter-Claimant-Appellee/Cross-Appellant.

Before: Richard C. Tallman and Morgan Christen, Circuit Judges, and Frederic Block,^* District Judge.

CHRISTEN, Circuit Judge:

Plaintiff-appellant Ross Dress for Less, Inc. appeals the district court's ruling granting defendant-appellee Makarios-Oregon, LLC's motion to withdraw its demand for a jury trial. Ross argues the district court erred because Federal Rules of Civil Procedure 38 and 39 generally allow a party to rely on another party's jury demand without having to file its own demand. Ross further argues that the Rules require that parties consent before the court may conduct a bench trial if a proper jury demand has been made. Because Ross waived its right to a jury trial in its lease with Makarios, we affirm the district court's ruling.

I

This appeal arises from Ross's lease of the Richmond Building, a five-story property located at 600 SW Fifth Avenue in Portland, Oregon. The basement, first floor, and second floor of the Richmond Building are connected by concrete slabs to the same floors of the adjacent Failing Building, a twelve-story structure on the National Register of Historic Places. In September 1996, Ross assumed all rights in the leases for the Richmond and Failing Buildings. Ross's lease for both buildings expired on September 30, 2016. From 1986 to 2017, the Calomiris family owned the Richmond Building. Makarios-Oregon is an entity associated with the Calomiris family. Makarios received an assignment of all rights to the lease of the Richmond Building in 2011, and thereafter acted as Ross's landlord.

The lease for the Richmond Building was a "triple-net lease," meaning Ross, as tenant, was responsible for all taxes, insurance, and other expenses related to the building's operation, maintenance, and repair. Ross paid $34,000 annually in rent for the entirety of its lease. Four provisions of the lease are at the center of the parties' dispute. Two governed Ross's end-of-lease obligations: Section 16.01 required Ross to surrender the property "in good order, condition, and repair, except for reasonable wear and tear," and Section 16.02 required Ross to "make such alterations to the building then erected on the demised premises as ... necessary to constitute such building an entirely independent and self-sufficient structure." The other two provisions are relevant to the jury demand issue. Section 13.04 of the lease provided that "[t]he Tenant waives all right to trial by jury in any summary or other judicial proceedings hereafter instituted by the Landlord against the Tenant in respect to the demised premises." Section 26.01 stated that "the terms, conditions, covenants, provisions and agreements herein contained shall be binding upon and inure to the benefit of the Landlord, its successors and assigns, and the Tenant, its successors and assigns."

In December 2014, Ross sued Makarios and then-owner of the Failing Building, Walker Place, in the United States District Court for the District of Oregon seeking declaratory relief regarding its end-of-lease obligations for the Richmond and Failing Buildings. Ross asked the district court for a declaratory judgment establishing that: (1) Ross was only obligated to perform the work necessary to physically separate the Richmond and Failing Buildings; (2) the work Ross proposed to Makarios and Walker Place was sufficient to satisfy its lease obligations; (3) Ross was not obligated to perform additional work demanded by the landlords; and (4) the landlords could not withhold consent to Ross's proposed plans. Ross's complaint also demanded a jury trial.

Both defendants filed counterclaims against Ross alleging breach of contract and requesting a declaratory judgment regarding Ross's end-of-lease obligations. Makarios demanded a jury trial on its counterclaims. The parties agreed to bifurcate the case into two phases: in Phase I, the parties were to litigate their declaratory relief claims, and their remaining claims and damages were to be litigated in Phase II. In January 2016, Ross filed a document attesting that it "waives its right to a jury trial under the Federal Rules of Civil Procedure 38, as to any issue in this case for which a right to a jury trial exists." The minutes for a March 2016 status conference with the district court memorialized that "all parties waived their rights to a jury trial on all claims and counterclaims" and the court would conduct a "bench trial, rather than a jury trial." But it appears the court interpreted these waivers to apply only to Phase I of the bifurcated claims because subsequent entries on the district court's docket indicate the court anticipated Phase II would be tried to a jury.

At the conclusion of the Phase I bench trial, the district court denied in part and granted in part the parties' requests for declaratory judgment. The court ruled that Ross's proposed plans to comply with its surrender obligations were insufficient, but it also ruled that Ross was not required to comply with the full scope of work the landlords demanded. The court retained jurisdiction to address the parties' remaining claims and to calculate damages in Phase II. Both defendants filed amended counterclaims against Ross in April 2017, and both demanded a jury trial on those claims. Ross's answers to the amended counterclaims also included a jury demand.

In September 2017, Ross entered into a global settlement agreement with Walker Place. Thereafter, multiple entries on the district court's docket reflect the court's plan to hold a jury trial on Makarios's counterclaims against Ross. But in November 2018, Makarios moved to withdraw its jury demand. The district court received briefing on the motion from both parties. In its opposition, Ross argued it was entitled to rely on Makarios's request for a jury and that pursuant to Federal Rules of Civil Procedure 38 and 39, Makarios could not withdraw its demand unless Ross consented. See Reid Bros. Logging Co. v. Ketchikan Pulp Co. , 699 F.2d 1292, 1304 (9th Cir. 1983) (explaining Rules 38 and 39 are "designed to allow parties to rely upon the jury demand of other parties to the same case" without having to file their own demand). According to Makarios, because Ross waived its right to a jury trial when it entered into the Richmond Building lease, Ross had no ability to object to Makarios's withdrawal of its jury demand or to take advantage of the general rule that parties must consent to a bench trial after a proper jury demand is made, see, e.g., U.S. Sec. & Exch. Comm'n v. Jensen , 835 F.3d 1100, 1107 (9th Cir. 2016).

The district court conducted a telephonic hearing on Makarios's motion in December 2018, and in an oral ruling the court granted Makarios's motion. The court reasoned that Section 13.04 of the lease included "an unequivocal and voluntary and knowing waiver ... by the tenant and its successors, including Ross, to a jury trial." The court acknowledged that Rules 38 and 39 generally allow a party to rely on another party's jury demand, but explained that because the lease included a waiver of the tenant's right to a jury trial, Ross could not invoke the protections of the Rules to oppose Makarios's withdrawal of its demand. "[I]n order to eliminate any potential risk of prejudice to Ross" for having to prepare for a bench trial, the district court authorized Ross to reopen any depositions and to substitute any of its expert witnesses.

In December 2019, the court held a four-day Phase II bench trial. The district court entered final judgment in favor of Makarios for $2,931,829 in January 2021. Ross timely appealed, and Makarios cross-appealed. We have jurisdiction pursuant to 28 U.S.C. § 1291. The bulk of the issues on appeal are resolved in a concurrently filed memorandum disposition. Here, we affirm the district court's order granting Makarios's motion to withdraw its jury trial demand.

II

Whether a party is entitled to a jury trial is a question of law that we review de novo. Thomas v. Or. Fruit Prods. Co. , 228 F.3d 991, 995 (9th Cir. 2000) ; Jensen , 835 F.3d at 1106. We also review de novo "the district court's interpretation of contract provisions," but we review the district court's factual findings for clear error. OneBeacon Ins. Co. v. Haas Indus., Inc. , 634 F.3d 1092, 1096 (9th Cir. 2011). Because jurisdiction in the district court was based on diversity of citizenship, Oregon substantive law and federal procedural law govern. See Feldman v. Allstate Ins. Co. , 322 F.3d 660, 666 (9th Cir. 2003). When applying Oregon substantive law, we are bound by decisions of the Oregon Supreme Court. See In re Kirkland , 915 F.2d 1236, 1238–39 (9th Cir. 1990). Where there is no Oregon Supreme Court decision on point, we must use "intermediate appellate...