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A growing and controversial practice whereby companies agree to waive potential jury trials in civil cases long before any dispute arises received a healthy debate by the California Supreme Court on Wednesday. But the justices gave no clear indication how they would rule. For sure, however, Chief Justice Ronald George and Justice Joyce Kennard seemed strongly opposed to the practice, while Justices Ming Chin and Janice Rogers Brown appeared to believe it might actually be a boon to overburdened trial courts. “From a public policy standpoint, what’s wrong with pre-dispute jury waivers?” Chin asked San Francisco attorney Jerome Falk Jr., who was arguing against them. “What would happen if every case that was filed was tried by jury? Wouldn’t that be impossible?” George, meanwhile, interrogated San Francisco attorney Daniel Kolkey, a former justice on Sacramento’s 3rd District Court of Appeal who favors waivers, by asking how parties could waive a jury trial in litigation that doesn’t yet exist. “How can you have an intelligent waiver if you don’t know there is going to be litigation?” he demanded. The swing votes will come from Justices Marvin Baxter and Carlos Moreno, as well as 2nd District Justice Vaino Spencer, sitting in for Justice Kathryn Mickle Werdegar, who recused herself. None of the three tipped their hands, with Moreno and Spencer asking no questions. Grafton Partners and Allied Capital Partners sued PricewaterhouseCoopers in 2002, claiming that PwC had breached its contract and violated professional duties by not informing them during an audit of their 1998 financial statements that PinnFund U.S.A. Inc. — in which both companies had invested — had been involved in an illegal Ponzi scheme. While acting as a national mortgage lending business, the companies argue, PinnFund had siphoned off millions of dollars in phony commissions. Grafton and Allied Capital sought a jury trial, but Alameda County Superior Court Judge Ronald Sabraw denied it because all parties had signed a pre-dispute jury waiver agreement when PwC had been contracted to perform the audit in 1999. Last year, San Francisco’s 1st District reversed, ruling that the state Constitution “reflects an unwavering commitment” to a trial by jury and that the Legislature has limited consensual waivers to those that “are both executed and filed during the pendency of the lawsuit.” During Wednesday’s hearing, Kolkey, a partner in Gibson, Dunn & Crutcher’s San Francisco office who represented PwC, argued that the court had misunderstood the clear language of Civil Code of Procedure � 631(d)(2), which provides for the waiver of a jury trial “by written consent filed with the clerk or judge.” Kolkey argued that nothing suggests that the written consent must be filed at any particular time to be effective. “At the time you waive the jury, you have to be a party,” he told the justices, “and the waiver is effectuated when you file it.” The chief justice didn’t agree, calling Kolkey’s reasoning “circular.” “What you’re saying is [the waiver] applies to parties to the litigation when there was no litigation,” George said. “How can that be deemed to be an intelligent waiver?” Justice Joyce Kennard jumped in by pointing to Madden v. Kaiser Foundation Hospitals, 17 Cal.3d 699, a 29-year-old ruling in which the court took up waivers in the arbitration setting. “Isn’t there a requirement of a pending action?” Kennard asked Kolkey. “And way back in 1976, we said ‘Yep.’” Falk, a partner at Howard, Rice, Nemerovski, Canady, Falk & Rabkin who represented Grafton Partners, argued that the Legislature has never once thought about allowing pre-dispute jury waivers, instead making it clear that a pending action was necessary before written consent could be filed with the court. Justice Brown weighed in by saying it appeared that the Legislature had never added a “temporal element” to the statute in question, so why should the high court? “It really doesn’t say anything about when you execute it,” she said. Falk argued that if there are ambiguities, they “must be resolved in favor of trial by jury” because of the California Constitution’s strong commitment to that policy. A ruling in Grafton Partners v. Superior Court (PricewaterhouseCoopers), S123344, is expected within 90 days.

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