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Supreme Court Rules Contractual Jury Waivers are Enforceable

Norman D. Farnam

Diana M. Eisenberg

May 1, 2017

The Wisconsin Supreme Court recently held in Parsons v. Associated Banc-Corp. that contractual pre-litigation jury waivers are enforceable under Wisconsin law.  This case is particularly relevant to lenders and borrowers, but is also applicable to all parties entering into a contractual relationship.  Furthermore, the parties to a contract may be able to waive a right to a jury trial for non-parties, such as spouses or guarantors, for disputes arising out of the contract containing the waiver.  This case appears to conflict with federal precedents and its applicability is limited to Wisconsin.

Case Background

This borrower, Taft Parsons, signed a promissory note stating that both Parsons and Associated “voluntarily, knowingly, irrevocably and unconditionally” waived their rights to have a jury resolve any dispute arising out of the promissory note, any other related document, or the relationship of Parsons and Associated.  After Parsons’ construction project failed, Taft Parsons and his wife, Carol, filed a complaint against Associated for racketeering and negligence that included a demand for a 12-person jury.  Seventeen months after the Parsons requested a jury trial, Associated objected based on the contractual waiver in the promissory note.  The Parsons argued that Taft did not knowingly waive his right to a jury trial, the contractual waiver was unenforceable under Wisconsin law, Associated’s objection was untimely, and Carol Parsons, who did not sign the note, had not waived her right to a jury trial.

The trial court ruled in favor of Associated.  The trial court noted that parties to a contract are presumed to know the terms of the contract.  Noting that Taft Parsons was a sophisticated businessperson, the trial court found he should have noticed the conspicuous jury waiver.  The court also held that Carol Parsons was bound by the waiver because her claims arose out of a dispute between Taft Parsons and Associated, which is covered by the waiver clause.  In an interlocutory appeal, the Court of Appeals reversed the circuit court’s decision, asserting that Associated had to demonstrate that Taft Parsons understood the nature of the rights given up by the waiver.  The Court of Appeals also held that the waiver was procedurally and substantively unconscionable and that Associated’s objection was untimely.

Supreme Court Decision

In its decision, the Supreme Court addressed whether a pre-litigation jury waiver provision in a contract constituted a waiver “in the manner prescribed by law” as required by the Wisconsin Constitution.  The Court analyzed the Wisconsin Constitution and concluded that “prescribed by law” includes common law in addition to statutory law.  As Wisconsin public policy favors freedom of contract, the Court concluded that pre-litigation jury waiver provisions are enforceable.  The Court noted that a party’s jury trial waiver does not have to be an intentional relinquishment of a known right.  As the contractual language was unambiguous, the Court found that it was effective without any additional proof from Associated that Parsons knowingly and voluntarily agreed to the waiver.  The Court also deferred to the trial court’s decision that Associated’s objection was not untimely and declined to address the Parsons’ undeveloped arguments regarding the applicability of the waiver to Carol Parsons.

Key Takeaways

  • Contractual jury trial waivers are enforceable.
  • Jury trial waivers do not have to be an intentional waiver of a known right.
  • The party seeking to invalidate a jury waiver provision bears the burden of proving facts that would justify invalidating the waiver.
  • Jury trial waivers may apply to non-signatory spouses or other third parties for causes of action arising out of the relationship between the parties to the contract.

If you have any questions about how the information in this article may affect you or your business, please contact Norm Farnam at nfarnam@stroudlaw.com, Diana Eisenberg at deisenberg@stroudlaw.com or (608) 257‑2281 or your Stroud attorney.

DISCLAIMER: The information in this article is provided for general informational purposes only, is not necessarily updated to account for changes in the law, and should not be considered tax or legal advice.  This article is not intended to create, nor does the receipt of it constitute, an attorney-client relationship.  You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.