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Within the past few years, two Texas courts, most recently the Texas Supreme Court, have addressed the issue of enforceability of contractual jury waivers, analogizing them to arbitration agreements. Texas general counsel should know that such jury waivers are a viable and perhaps desirable alternative to arbitration agreements between their companies and their employees. In September 2004, the Texas Supreme Court held in In Re: The Prudential Ins. Co. of America and Four Partners LLC, that a party’s agreement in a lease contract to waive its right to a trial by jury is enforceable. In 2003, Houston’s 14th Court of Appeals similarly held in In Re: Wells Fargo Bank, that a commercial party’s contractual agreement to waive its right to a jury trial in the event of a dispute is enforceable. These two cases are the first in Texas to directly address the precise issue of whether such a contractual jury waiver is enforceable. While these cases arise in the commercial context, they give rise to two questions for general counsel who handle labor and employment issues. First, are contractual jury waivers enforceable in the employment context? Second, are they desirable in the employment context? In both cases, the parties resisting the waiver argued that, because the right to a jury trial is a constitutional right, the waiver was invalid. Both courts responded to this argument by noting that parties frequently waive the right to a jury trial in various contexts, including arbitration. Accordingly, both courts concluded that Texas public policy does not prevent a party from waiving its right to a jury trial. More importantly, both courts also noted that a party who agrees to arbitrate disputes agrees to a greater waiver of rights than a party who waives only the right to a jury trial and maintains the right to use the judicial system. Both Texas courts also noted that the vast majority of courts that have addressed this issue have enforced contractual jury waivers. The 14th Court also rejected the resisting party’s argument that it had no opportunity to negotiate the waiver and was forced to accept a “take it or leave it” offer due to the disparity in the parties’ negotiating power. Thus, the “unconscionability” argument failed, as it so often does in cases contesting arbitration provisions. FORK IN THE ROAD Obviously, there are clear parallels between a contractual jury waiver and arbitration. In Prudential (2004), the Texas Supreme Court went so far as to say “if parties are willing to agree to a non-jury trial, we think it preferable to enforce that agreement rather than leave them with arbitration as their only enforceable option.” The court has, it seems, opened the door for Texas employers to craft contractual jury waivers. Indeed, given the Texas Supreme Court’s view of the enforceability of employment arbitration agreements, as illustrated in its 2002 decision in In Re: Halliburton, it seems likely that Texas courts have little choice but to enforce contractual jury waivers in the employment context, too. While it remains to be seen whether Texas employers will implement contractual jury waivers in lieu of arbitration agreements, there may be sound reasons for doing so. The perceived advantage of arbitration, from the view of employers, always has included the facts that it results in trial not by jury, and that it is generally regarded as less expensive and quicker. The perceived disadvantage of arbitration generally has included: 1. the lack of a meaningful appellate remedy in the event of an unfounded decision (something that, in fairness, also is viewed as an advantage by some); 2. limited discovery (also sometimes considered an advantage); and 3. the lack of predictability associated with the selection process of a particular arbitrator for a particular case. Some companies have implemented arbitration agreements that articulate a de novo standard of review, but these instances seem rare. The other issues seem more difficult to eliminate, though most arbitration provisions and rules include discovery rules. A contractual jury waiver, on the other hand, offers the certainty of the Texas Rules of Civil Procedure or Federal Rules of Civil Procedure, the Texas Rules of Evidence or Federal Rules of Evidence, and a known jurist who will resolve the case, failing settlement. Further, the contractual jury waiver does not impact a party’s appellate rights, other than the fact that it implicitly eliminates the deferential standard of review accorded to a jury’s decision. Also, implicitly, it is possible that a contractual jury waiver increases the viability of a party’s ability to obtain summary judgment, since there is no jury to which the judge would be inclined to defer for the resolution of fact issues. The contractual jury waiver should, however, offer the same potential for efficiency that arbitration offers by eliminating the considerable costs associated with a jury trial, as opposed to bench trial. To create an enforceable contractual jury waiver, Texas general counsel and their in-house labor and employment lawyers should follow the road maps in Halliburton and other cases with respect to procedural issues. Because of the nature of the jury waiver — the fact that the parties will remain in the judicial system — most, if not all of the substantive issues that sometimes cause problems in arbitration agreements should be eliminated. Since there are still cases that void agreements to arbitrate on various grounds, Texas employers should be certain to avoid the pitfalls in such cases when crafting contractual jury waivers. For example, in 2003′s In Re: Jobe Concrete Products Inc., the 8th Court of Appeals in El Paso found a jury waiver program unenforceable because the employer reserved the right not to arbitrate. That same year in In Re: Bustamante, the same court found an employer’s reservation of right to unilaterally modify certain parts of its handbook did not affect its obligation to arbitrate. Enforceability of jury waivers in the employment context should not be problematic, so long as the waiver is properly crafted and presented. Whether such waivers present a superior option to Texas general counsel than arbitration provisions is a subject about which reasonable minds can differ. Nonetheless, this is a choice the Texas Supreme Court clearly intended that Texas businesses have, and thus is a fork in the road that any business is free to take. Scott R. McLaughlin is a labor and employment partner in Seyfarth Shaw’s Houston office. His practice focuses on employment and trade secret litigation.

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