Travelers Casualty and Surety Company of America v. Highland Partnership, Inc. et al, No. 3:2010cv02503 - Document 131 (S.D. Cal. 2013)
Court Description: ORDER denying 125 Motion for Bench Trial. Signed by Judge Anthony J. Battaglia on 3/8/13. (cge)
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Travelers Casualty and Surety Company of America v. Highland Partnership, Inc. et al Doc. 131 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 SOUTHERN DISTRICT OF CALIFORNIA 9 10 11 12 13 14 15 16 TRAVELERS CASUALTY AND ) SURETY COMPANY OF AMERICA, ) ) Plaintiff, ) v. ) ) HIGHLAND PARTNERSHIP, INC., et ) al., ) ) Defendants. ) ) Case No.10cv2503 AJB (DHB) ORDER DENYING TRAVELER’S MOTION FOR A BENCH TRIAL (Doc. No. 125) There are two related causes of action currently pending before the Court, both of 17 which are set for trial beginning the week of April 15, 2013. (Doc. No. 124.) The first 18 cause of action concerns breach of an Indemnity Agreement entered into by and between 19 Plaintiff Travelers Casualty and Surety Company of America (“Travelers” or “Plaintiff”) 20 and Defendants Highland Partnership, Inc. (“Highland Partnership”), Bay Boulevard, 21 LLC (“Bay Boulevard”), Highland Home Builders, Inc. (“Highland Home Builders”), 22 Highland Productions I, LLC (“Highland Productions”), Ian Murray Gill, Gail Stoorza 23 Gill, John David Gardner, Carolyn Marie Gardner, and the Gill Family Trust 24 (collectively, “Defendants”).1 The second cause of action concerns breach of a 25 26 1 On November 26, 2012, the Court granted in part and denied in part Travelers’ motion for summary judgment. (Doc. No. 111.) Accordingly, the only issue left to be 27 litigated by and between Travelers and Defendants is what portion of the $2,153,676 in attorneys’ fees, costs, and expenses (spent in litigating/defending claims against the 28 bonds) was reasonable and thus recoverable from Defendants. (Id.) 1 10cv2503 AJB (DHB) Dockets.Justia.com 1 subcontract entered into by and between San Diego Steel Holdings Group, Inc. (“San 2 Diego Steel” or “Third-Party Defendant”) and Highland Partnership (“Highland 3 Partnership” or Third-Party Plaintiff”) (the “Third-Party Claim”). (Doc. No. 124.) 4 Although there is no dispute that the Third-Party Claim will be tried before a jury, 5 Travelers and Defendants disagree as to whether the reasonableness of Travelers’ 6 attorneys’ fees, costs, and expenses—the only claim left to be tried between Travelers 7 and Defendants—should be determined by a jury or by the Court. (Doc. No. 123 at 1.) 8 After insufficient briefing on this very issue, (Doc. Nos. 125, 126), the Court ordered 9 supplemental briefing, (Doc. No. 127). Specifically, the Court requested Travelers and 10 Defendants to address whether the jury trial waiver was knowingly, voluntary, and 11 intelligent, and therefore enforceable under federal law.2 (Doc. No. 127.) Travelers filed 12 its supplemental brief on February 22, 2012, (Doc. No. 129), and Defendants responded 13 on March 1, 2012, (Doc. No. 130). BACKGROUND 14 15 In April 2006, Defendants Ian Murray Gill, John David Gardner, Gail Stoorza-Gill, 16 and Carolyn Marie Gardner executed a General Agreement of Indemnity (the “Indemnity 17 Agreement” or “Agreement”). (Doc. No. 22, Ex. A.) The Indemnity Agreement was 18 signed by each of the above named signatories in their individual capacity, and in some 19 instances, also on behalf of an entity or a trust. (Id.) Specifically, Ian Murray Gill signed 20 the Agreement in his individual capacity, as President of Highland Partnership, as 21 Managing Member of Bay Boulevard, and as Trustee of the Gill Family Trust, (Doc. No. 22 22, Ex. A at 3-4); John David Gardner signed the Agreement in his individual capacity, 23 as Secretary of Highland Partnership, and as Managing Member of Bay Boulevard, (Id. at 24 4); Gail Stoorza-Gill signed the Agreement in her individual capacity and as Trustee of 25 2 The Court previously determined that the enforceability of the jury trial waiver was governed by federal law rather than state law because the instant action is proceeding in a federal forum. See Simler v. Conner, 372 U.S. 221, 221-22 (1963) (finding that the 27 right to a jury trial in federal court is usually governed by federal law). Neither Travelers nor Defendants contest the Court’s choice of law determination. (Doc. No. 129 at 2:2-4; 28 Doc. No. 130 at 3:4-7.) 26 2 10cv2503 AJB (DHB) 1 the Gill Family Trust, (Id. at 3-4); and Carolyn Marie Gardner signed the Agreement in 2 her individual capacity, (Id. at 4). 3 In August 2007, Highland Productions and Highland Home Builders each signed 4 separate Indemnitor Riders (the “Rider”), thereby agreeing to the terms and conditions of 5 the Indemnity Agreement. (Doc. No. 22, Ex. B at 2, 4.) Ian Murray Gill was the 6 signatory on the Highland Production Rider and the Highland Home Builders Rider as 7 the President of both entities; and John David Gardner was the signatory on the Highland 8 Production Rider and the Highland Home Builders Rider as the Secretary of both entities. 9 (Id. at 3, 5.) Ian Murray Gill, John David Gardner, Gail Stoorza-Gill, and Carolyn Marie 10 Gardner also signed the Riders, either in their individual and/or their representative 11 capacities. (Id. at 2-5.) 12 The Indemnity Agreement, which was signed by all Defendants, contains the 13 following jury trial waiver: “Jury Waiver: Indemnitors hereby waive and covenant that 14 they will not assert any right to trial by jury in respect to any legal proceeding arising out 15 of this Agreement.” (Doc. No. 22, Ex. A at 3.) (emphasis in original). Travelers now 16 moves to enforce this provision, contending Defendants waived their right to a jury trial. 17 (Doc. Nos. 125, 129.) Defendants oppose the motion, arguing that Travelers has not met 18 its burden to show that the jury trial waiver was knowing, voluntary, and intelligent, and 19 thus enforceable under federal law.3 (Doc. Nos. 126, 130.) LEGAL STANDARD 20 21 The Seventh Amendment right to a jury trial in federal court is governed by federal 22 law. Simler v. Conner, 372 U.S. 221, 221–22 (1963); see also Leasing Serv. Corp. v. 23 Crane, 804 F.2d 828, 832 (4th Cir. 1986). Under federal law, there is a strong 24 3 Defendants also contend that Travelers’ motion for a bench trial should have been denied as of February 14, 2013, and that supplemental briefing potentially violates their due process rights. (Doc. No. 130 at 2.) The Court finds this argument without merit for 26 two reasons. First, the argument is moot because the Court is denying Travelers’ motion; and second, because issues should be resolved on their merits whenever possible, and 27 requesting supplemental briefing on the enforceability of the jury trial waiver was necessary to the Court’s determination of the issue, it is difficult to see how supplemental 28 briefing is inconsistent with due process. 25 3 10cv2503 AJB (DHB) 1 presumption against the waiver of this fundamental right. United States v. Cal. Mobile 2 Home Park Mgmt. Co., 107 F.3d 1374, 1378 (9th Cir. 1997) (holding that courts “must 3 indulge every reasonable presumption against the waiver of the jury trial”). A jury trial 4 waiver, however, is enforceable when it is made knowingly, voluntarily, and intelligently. 5 See Phoenix Leasing. v. Sure Broad., 843 F. Supp. 1379, 1384 (D. Nev. 1994) (citing 6 Standard Wire & Cable Co. v. AmeriTrust Corp., 697 F. Supp. 368, 375 (C.D. Cal. 7 1988)); see also Merrill Lynch & Co. v. Allegheny Energy, Inc., 500 F.3d 171, 188 (2d 8 Cir. 2007); K.M.C. Co. v. Irving Trust Co., 757 F.2d 752, 756 (6th Cir. 1985); Leasing 9 Serv., 804 F.2d at 832; Okura & Co. v. Careau Group, 783 F. Supp. 482, 488 (C.D. Cal. 10 1991). The factors consistently used by federal courts to determine whether a waiver was 11 knowing, voluntary, and intelligent include: (1) whether there was a gross disparity in 12 bargaining power between the parties; (2) the business or professional experience of the 13 party opposing the waiver; (3) whether the opposing party had an opportunity to 14 negotiate contract terms; and (4) whether the clause containing the waiver was 15 inconspicuous. See Phoenix Leasing, 843 F. Supp. at 1384 (quoting Hydramar, Inc. v. 16 Gen. Dynamics Corp., 1989 WL 159267, at *3 (E.D. Pa. Dec. 29, 1989)); see also 17 Leasing Serv., 804 F.2d at 833 (applying these same factors). 18 There is a split among the circuits regarding which party has the burden of proving 19 these factors. Compare Irving Trust, 757 F.2d at 758 (placing the burden on the party 20 opposing the waiver) with Leasing Serv., 804 F.2d at 832–33 (placing the burden on the 21 party seeking to enforce the waiver). Nonetheless, because placing the burden of proof 22 on the party seeking to enforce the waiver is most in keeping with the strong presumption 23 against waiver of this fundamental Seventh Amendment right, the Court finds Travelers 24 bears the burden to show that the jury trial waiver included within the Indemnity 25 Agreement was knowing, voluntary, and intelligent. 26 DISCUSSION 27 Travelers’ motion for a bench trial is predicated on the jury trial waiver contained 28 4 10cv2503 AJB (DHB) 1 within the Indemnity Agreement.4 (Doc. No. 22, Ex. A.) However, after examining the 2 jury trial waiver in light of the Phoenix Leasing factors articulated above—specifically 3 whether there was a gross disparity in bargaining power between the parties and the 4 business and professional experience of each Defendant— the Court finds Travelers fails 5 to meet the knowing, voluntary, and intelligent standard as to each Defendant. See 843 F. 6 Supp. at 1384. 7 Specifically, the Court finds Travelers’ complete lack of analysis regarding Gail 8 Stoorza-Gill and Carolyn Marie Gardner, nonetheless any mention of either of these two 9 Defendants, fatal to the instant motion. Although it is without question that Defendants 10 Highland Partnership, Bay Boulevard, Highland Home Builders, Highland Productions, 11 Ian Murray Gill, and John David Gardner are each sophisticated individuals or entities 12 who possess both the professional and business skill necessary to bargain and/or 13 negotiate for favorable contract terms, the Court cannot, nor will it, speculate as to the 14 level of professional, business, or bargaining skills of Gail Stoorza-Gill and Carolyn 15 Marie Gardner. This is Travelers burden. Leasing Serv., 804 F.2d at 833 (4th Cir. 1986) 16 (“Where waiver is claimed under a contract executed before litigation is contemplated, 17 we agree with those courts that have held that the party seeking enforcement of the 18 waiver must prove that consent was both voluntary and informed.”) 19 Thus, because Travelers failed to provide any evidence as to the relative bargaining 20 power between it, and Gail Stoorza-Gill and/or Carolyn Marie Gardner, see MZ Ventures 21 LLC v. Mitsubishi Motor Sales of Am., Inc., 1999 WL 33597219, at *16 (C.D. Cal. Aug. 22 31, 1999) (observing that defendant's failure to present evidence that plaintiff had equal 23 bargaining power weighed in favor of denying the motion to strike jury demand), nor did 24 Travelers submit any evidence as to the level of sophistication of Gail Stoorza-Gill and 25 26 4 The Court agrees with Defendants that proving the reasonableness of Travelers’ attorneys’ fees, costs, and expenses incurred in connection with pursuing the bond claims 27 is a prima facie element of recovery against Defendants. (Doc. No. 130 at 1:2-8.) Such amounts are an element of damages and thus warrant a jury trial when requested. See 28 Hynix Semiconductor Inc. v. Rambus, Inc., 527 F. Supp. 2d 1084, 1087 (N.D. Cal. 2007) 5 10cv2503 AJB (DHB) 1 Carolyn Marie Gardner, see Sullivan v. Ajax Navigation Corp., 881 F. Supp. 906, 911 2 (S.D.N.Y. 1995) (noting that a lack of business acumen weighs against waiver), the Court 3 finds, as it must, the jury trial waiver contained within the Indemnity Agreement 4 unenforceable.5 See 843 F. Supp. at 1384; See, e.g., In re Christou, 448 B.R. 859 (Bankr. 5 N.D. Ga. 2011) (finding that the close relationship between an individual defendant, who 6 had waived his right to a jury trial, and a corporate defendant, who had not waived its 7 right to a jury trial, was not a sufficient reason to deny the corporate defendant the 8 constitutional right to a jury trial). CONCLUSION 9 10 Therefore, for the reasons set forth above, Travelers’ motion for a bench trial is 11 hereby DENIED. Accordingly, the reasonableness of Travelers’ attorneys’ fees, costs, 12 and expenses will be determined by a jury at the same time the jury considers the Third- 13 Party Claim between Highland Partnership and San Diego Steel. The Parties are 14 instructed to refer to the Court’s Jury Trial Preparation and Scheduling Order in advance 15 of trial. (Doc. No. 123.) 16 IT IS SO ORDERED. 17 18 DATED: March 8, 2013 19 Hon. Anthony J. Battaglia U.S. District Judge 20 21 22 23 24 25 26 27 28 5 Travelers does present evidence that the jury trial waiver was conspicuous. (Doc. No. 129 at 5-6.) For example, the waiver is set off in its own paragraph, includes a heading labeled “Jury Waiver,” and contains clear and unambiguous language. (Id.) However, this factor alone, and in light of the first two factors that clearly weigh against enforceability of the waiver, cannot save Travelers’ motion. See Sullivan, 881 F. Supp. at 911 (holding that a “defendant cannot overcome the presumption against a waiver” simply “by referring to the placement and font size of the waiver clause”); see also MZ Ventures, 1999 WL 33597219, at *17 (denying motion to strike jury demand even though there was evidence that the waiver was conspicuous). The same can be said for the third factor—the opportunity to negotiate the terms of the Agreement—as it is unclear whether Travelers or Gail Stoorza-Gill and/or Carolyn Marie Gardner presented the “Personal Residence Exclusion.” (Doc. No. 130 at 4:4-13.) Regardless, the Court finds Travelers complete lack of analysis with regard to these two Defendants dispositive. 6 10cv2503 AJB (DHB)
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