Seventh Circuit Upholds Jury Trial Waiver, Likening it to Arbitration Agreements

Reversing a trial court decision that found a contract mandating a bench trial in a specified forum invalid, the Seventh Circuit Court of Appeals held that bench trial agreements are enforceable under Illinois law, as they are similar to arbitration agreements where parties voluntarily choose to resolve disputes in an alternative forum.

In IFC Credit Corp. v. United States Business & Indus. Federal Credit Union, No. 07-1037, 2008 WL 126552 (7th Cir. Jan. 15, 2008), Norvergence sold communications equipment and services, but eventually collapsed. IFC brought a right to payment claim under the Norvergence contracts asserting it was a holder in due course.

The contract contained a forum-selection clause requiring that any dispute be resolved through a bench trial in the selected forum. The trial court held that this clause was invalid because United States Business & Industrial Federal Credit Union did not knowingly waive its right to a jury trial. The Court submitted the suit to a jury, which returned a verdict in favor of United States Business & Industrial Federal Credit Union. IFC then appealed, arguing the trial court erred by submitting the case to a jury.

Reversing the trial court, the Court held that Illinois state law governs the validity of a bench-trial agreement. Under the Uniform Commercial Code, which Illinois has ratified, no additional separate signing or separate negotiations requirements exist for agreeing to a bench trial. Moreover, Illinois case law does not mandate that parties must separately sign or separately negotiate a clause requiring a bench trial. Similarly, the Court compared a bench trial provision to Federal Rule of Civil Procedure 38, which automatically deems that a party waives its right to a jury trial if it omits to demand one in its complaint. If Rule 38 does not impose additional requirements for waiving one’s right to a jury trial, then by extension it would seem illogical to impose special requirements for parties in a contract.

The Court analogized a bench trial provision to an arbitration agreement where the parties voluntarily relinquish their right to a judicial forum. Courts do not impose additional requirements for waiver of jury trial rights for form contracts containing arbitration agreements. Therefore, the Court found it was not logical to treat a bench trial agreement less favorably.