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Did You Sign Away Your Right To A Jury Trial? Maybe Not.

“The right of trial by jury shall remain inviolate . . . .” Ark. Const. Article 2, §7. The right to a jury trial is a part of our State Constitution, but that right has always been subject to certain limitations. Now, as a result of a recent Arkansas Supreme Court decision, a long-recognized barrier to jury trials – the contractual waiver – has been removed.

In a 4-3 decision, the Arkansas Supreme Court recently held that a predispute jury waiver provision is unenforceable under the Arkansas Constitution. Tilley v. Malvern National Bank, 2017 Ark. 343, 532 S.W.3d 570 (2017). The Tilley case arose out of a foreclosure action filed by Malvern National Bank against Kenneth Tilley. Tilley entered into a loan agreement with the Bank and signed a promissory note in the amount of $221,000, secured by a mortgage on his property. The loan agreement contained a jury waiver clause. After Tilley defaulted on the loan, the Bank sued to foreclose the mortgage. Tilley answered and asked for a jury trial. He also filed a counterclaim against the Bank, alleging that the Bank breached an agreement to loan him additional funds and that the Bank’s failure to loan him the additional money caused him to default on his note.

The Bank moved to strike Tilley’s jury trial demand. The circuit court granted the motion and proceeded with a bench (non-jury) trial, following which the court ruled in favor of the Bank on its foreclosure claim and against Tilley on his counterclaim. Tilley appealed. The Bank first argued that under the “clean-up doctrine”, a court of equity may also decide any legal issues in a case. However, the Tilley court clarified that, due to the passage of Amendment 80 to the Arkansas Constitution, which merged courts of law and equity, the clean-up doctrine has been abolished in Arkansas. Now, a court must look at the remedies sought by a party to decide whether the party’s claim should be decided by a judge as an equitable matter or by a jury as a legal matter.

After deciding that Tilley’s various claims against the Bank, including breach of contract and negligence, are historically legal claims that carry the right to a jury trial, the court next examined whether Tilley waived his right to a jury trial when he signed the loan agreement with the Bank. The loan documents contained a jury waiver clause stating that each party “expressly waives any right to trial by jury of any claim . . . arising under this Agreement or . . . in any way connected with or incidental to the dealings of the parties . . . .” However, siding with Tilley, the Supreme Court held that a predispute contractual jury waiver is unenforceable under the Arkansas Constitution. Even though Article 2, §7 of the Arkansas Constitution states that “a jury trial may be waived by the parties in all cases in the manner prescribed by law”, the Supreme Court interpreted this language to mean that, unless an Arkansas statute or court rule provides otherwise (as in the case of arbitration agreements, which are governed by the Arkansas Arbitration Act), a jury trial waiver “may take place only after a jury demand has been made” and, thus “a jury trial cannot be waived before litigation begins.”

Three justices dissented from the Court’s opinion. In a dissenting opinion which was joined by Justice Womack, Justice Wood opined that the majority interpreted our Constitution too narrowly and that under the common law of this State, a prelitigation contractual jury trial waiver is permissible, as long as it is entered into knowingly and voluntarily.

Clearly, the implications of the Tilley decision are far-reaching. Not just banks, but businesses of all kinds, from landlords to automobile dealers, typically include jury waiver provisions in their contracts. Under Tilley, those waivers are now invalid and one who wishes to try his or her legal claims to a jury, rather than to a judge, will be free to do so.

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