Whirlpool Financial Corp. v. Sevaux, 93 C 4725.

• Decision Date: 07 September 1994
• Docket Number: No. 93 C 4725.,93 C 4725.
• Citation: 866 F. Supp. 1102
• Parties: WHIRLPOOL FINANCIAL CORPORATION, a Delaware corporation, Plaintiff/counter-defendant, v. Jean SEVAUX, Defendant/counter-plaintiff.
• Court: U.S. District Court — Northern District of Illinois

866 F. Supp. 1102

WHIRLPOOL FINANCIAL CORPORATION, a Delaware corporation, Plaintiff/counter-defendant, v. Jean SEVAUX, Defendant/counter-plaintiff.

No. 93 C 4725.

United States District Court, N.D. Illinois, Eastern Division.

September 7, 1994.

Richard Paul Glovka, David M. Simon, W. Scott Nehs, Wildman, Harrold, Allen & Dixon, Chicago, IL, for plaintiff.

Alan Hugh Cooper, Conde, Stoner & Killoren, Rockford, IL, Thomas E. Engel, James G. McCarney, Michael I. Verde, Engel & McCarney, New York City, for defendant.

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Plaintiff Whirlpool Financial Corporation ("WFC") brought this complaint against Jean Sevaux ("Sevaux") for his alleged failure to pay on a note. Sevaux has responded with six affirmative defenses and five counterclaims and demanded a jury trial. Presently before this Court is WFC's motion to strike Sevaux's demand for trial by jury. For the reasons set forth below, we deny WFC's motion.

I. Background¹

Beginning in 1990 WFC, a Delaware corporation with its principal place of business in Michigan, retained Sevaux to identify and refer investment opportunities to the company. One of the companies referred to WFC by Sevaux was Raymond de Venezuela ("Raymond"), a Venezuelan organization owned solely by Sevaux.

In November 1991, WFC representatives met with Sevaux and Raymond's counsel, Benner Turner, in Venezuela concerning an equity position for WFC in Raymond. At this time WFC orally agreed to purchase a 50% equity interest in Raymond for $17 million. Additionally, WFC agreed to advance $1 million to Raymond if Sevaux would advance $1 million of his own funds to the company.

In December 1991, WFC representatives and Sevaux discussed the execution of a Term Loan Promissory Note ("Note") by Sevaux in order to secure the $1 million to be advanced by WFC. Sevaux alleges that WFC assured him the Note was an interim measure, that he would not be required to make payment on it, and that the proceeds would be converted to a portion of WFC's equity investment in Raymond. He further alleges that these discussions concerned the mechanics of executing the Note, not substantive negotiations on its terms. WFC had a copy of the six-page Note sent to Sevaux. Among its many terms, the Note contained a section for filling in the number of percentage points above prime at which interest would accrue, and a clause stating:

... BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATED TO THIS NOTE.

Sevaux alleges that he inserted the applicable interest rate provided by WFC, signed and dated the Note on or about December 20, 1991, and returned it to WFC.

On July 28, 1992, WFC informed Sevaux that it would not be investing any money into Raymond. Although payment on the Note was originally due July 1, 1992, the parties agreed to extend the time for repayment to November 30, 1992, and later to June 30, 1993. Sevaux failed to repay the Note on the June 30 maturity date.

On August 5, 1993, WFC filed this action for payment on the Note. On November 4, 1993 Sevaux filed his Answer and Counterclaims against WFC. Sevaux pleaded six affirmative defenses: (1) fraud in the inducement, (2) fraud under 815 ILCS 105/10, (3) estoppel by breach of fiduciary duty, (4) constructive fraud, (5) failure of consideration, and (6) want of consideration under 815 ILCS 105/9. He also pleaded five counterclaims: (1) fraud, (2) breach of contract, (3) promissory estoppel, (4) breach of fiduciary duty and (5) constructive fraud. Essentially, Sevaux alleges that WFC falsely represented an intent to invest $17 million in Raymond, and that in reliance on that promise Sevaux signed the $1 million Note and invested $1 million of his own money into Raymond. WFC is also alleged to have falsely represented that Sevaux would never have to pay on the Note and falsely promised that the $17 million investment would extinguish Sevaux's obligation thereunder. Sevaux asserts that because of WFC's scheme he forewent other financial options to his own and Raymond's financial detriment. On December 14, 1993, after WFC filed a motion to dismiss Sevaux's counterclaims and strike affirmative defenses, Sevaux filed an Amended Answer and Counterclaims along with a Demand for Trial by Jury. Although the Amended Answer and Counterclaims contained further factual detail, they essentially tracked the earlier pleadings and WFC moved to dismiss them.² As of this time, WFC has not filed a reply to Sevaux's counterclaims.

II. Discussion

At issue is whether Sevaux timely requested a jury trial in this matter and whether he waived his right to a jury by virtue of the waiver provision in the Note. We address these issues in seriatim.

A. Timely Demand

The Federal Rules of Civil Procedure provide, in pertinent part, that

any party may demand a trial by jury of any issue triable of right by a jury by (1) serving upon the other parties a demand therefore in writing at any time after the commencement of the action and not later than 10 days after the service of the last pleading directed at such issue, and (2) filing the demand with the court as required by Rule 5(d).

Fed.R.Civ.P. 38(b). Failure by a party to make a timely demand will be construed as a waiver of any right to trial by a jury. Fed. R.Civ.P. 38(d); Communications Maintenance, Inc. v. Motorola, Inc., 761 F.2d 1202, 1208 (7th Cir.1985). The "last pleading directed at such issue" is the final pleading which contests an issue that is subject to jury trial. Early v. Bankers Life & Casualty Co., 853 F.Supp. 268, 270 (N.D.Ill.1994). "Generally, such pleading will be an answer to a complaint or a reply to a counterclaim.... A motion to dismiss a complaint, however, is not considered a `last pleading' directed to an issue triable by a jury." Id. (citations omitted); McCarthy v. Bronson, 906 F.2d 835, 840 (2d Cir.1990) (same), aff'd, 500 U.S. 136, 111 S.Ct. 1737, 114 L.Ed.2d 194 (1991). If the counterclaim raises the same issues as the answer, a jury demand within ten days of the reply will be effective for all issues raised by the answer and counterclaim. 9 Wright & Miller, Federal Practice and Procedure § 2320, at 93 (1971). However, where the counterclaim raises new issues, a demand within ten days of the reply will be effective as to those issues but not as to the issues addressed in the answer and complaint. Id.

Sevaux's jury demand was filed prior to WFC's reply to his counterclaims, and was therefore timely.³ See Stewart v. RCA Corp., 790 F.2d 624, 629-630 (7th Cir.1986) (time to demand jury had not run since defendant had not yet answered). Although some of the factual issues raised by Sevaux in his counterclaims were not addressed in WFC's complaint, they are inextricably intertwined with WFC's allegation that he wrongfully failed to repay the Note.⁴ Therefore, we find that Sevaux's jury demand was timely as to all issues.

B. Waiver

Although the Seventh Amendment to the United States Constitution guarantees the right to a jury trial in civil cases, this right is waivable. Stewart v. RCA Corp., 790 F.2d 624, 630 (7th Cir.1986); Bonfield v. AAMCO Transmissions, Inc., 717 F.Supp. 589, 594 (N.D.Ill.1989). However, such a waiver must be made knowingly and voluntarily. In re Reggie Packing Co., 671 F.Supp. 571, 573 (N.D.Ill.1987). Indeed, "as the right of jury trial is fundamental, courts indulge in every reasonable presumption against waiver." Aetna Insurance Co. v. Kennedy, 301 U.S. 389, 393, 57 S.Ct. 809, 812, 81 L.Ed. 1177 (1937). The factors to consider in determining whether a contractual waiver of the right to jury trial was entered into knowingly and voluntarily include: (1) the parties' negotiations concerning the waiver provision, if any, (2) the conspicuousness of the provision, (3) the relative bargaining power of the parties and (4) whether the waiving party's counsel had an opportunity to review the agreement. Heller Financial, Inc. v. Finch-Bayless Equip. Co., No. 90 C 1672, 1990 WL 77500 (N.D.Ill. May 31, 1990), reconsideration denied, 1990 WL 103232 (N.D.Ill. July 17, 1990); Bonfield, 717 F.Supp. at 595-96; In re Reggie, 671 F.Supp. at 573-74. Although this circuit has not decided which party bears the burden of proving the validity of an alleged waiver, it is clear in this case that Sevaux did not voluntarily and knowingly waive his right to a jury trial.

First, Sevaux asserts (and WFC does not deny) that the parties never discussed the waiver provision in the Note. See Bonfield, 717 F.Supp. at 595 (waiver presumed in part because of express discussion of waiver provision). Sevaux did not draft the terms of the Note, but rather, it was prepared by WFC's counsel and mailed to Sevaux for his signature. "Where a waiver provision is set out in an unnegotiated form contract that is not susceptible to negotiation, it is presumed that there was not a knowing waiver of the right to a jury trial." Heller Financial, 1990 WL 77500, at *2 (citing ...