Many contracts include a provision stating that the parties agree to waive their right to a jury trial if they later end up in a dispute over the contract. Not every state court enforces this right, h

Many contracts include a provision stating that the parties agree to waive their right to a jury trial if they later end up in a dispute over the contract. Not every state court enforces this right, however.

In Texas, the state Court of Appeals in 2002 would not enforce a pre-litigation jury waiver. That opinion was not certified for publication. In September 2004, the Texas Supreme Court held that such jury waivers were enforceable.

In an action brought in 2001 by C-Span Entertainment against Blockbuster in the state District Court in Dallas, the Texas Court of Appeals gave effect to a jury waiver contained in a franchise agreement, which was part of an asset sale agreement.

The following is a summary of the court's May 3, 2005, opinion, which, on the court's own motion, replaced the court's March 15, 2005 opinion:

Factual Background: C-Span and Blockbuster in 1999 negotiated an asset sale agreement for C-Span to purchase the assets and operations of 11 Blockbuster stores in East Texas.

Three days after the agreement was signed, the parties executed Blockbuster's standard form franchise agreement that included an irrevocable waiver of trial by jury on any action brought by either of them. The court noted that the three-day difference accounted for the weekend after closing the sale agreement.

After the closing, disputes arose over the accuracy of certain financial information disclosed to C-Span during the negotiations. C-Span in 2001 sued Blockbuster. C-Span later sued for malpractice its counsel, Akin Gump Strauss Hauer & Feld, Edward Fields and Spencer Young. Blockbuster filed counterclaims against C-Span. Blockbuster and Akin Gump also lodged cross-claims against each other.

C-Span requested a jury trial. Blockbuster sought to quash the request in 2004 after the Texas Supreme Court held in another case that it recognized pre-litigation jury waivers.

Akin Gump also sought to quash the request, arguing that all claims should be tried together and be subject to the jury waiver.

The trial court granted Blockbuster's motion and denied Akin Gump's motion. Both parties sought mandamus review.

Court Analysis: C-Span raised four issues in support of its appeal.

First, it argued that Blockbusters' waived its right to object since it delayed raising the issue for two years and by entering a series of jury-trial settings by agreement. The court disagreed, holding that the delay was not unreasonable since prior law did not support enforcement of a jury waiver. When it did, the motion was made.

Second, C-Span argued that the asset sale agreement, which did not contain a jury waiver, was separate from the franchise agreement, which contained the jury wavier. Since the litigation was over the asset sale agreement, the jury waiver did not apply.

The court disagreed, pointing out that the asset sale agreement contained an integration clause and clearly contemplated the franchise agreement.

The integration clause stated in part: "Any reference herein to this Agreement shall be deemed to include the schedules and exhibits." One schedule was titled "List of Franchise Documents." The list included the standard franchise agreement for each of the stores.

Further, the recitals in the asset sale agreement stated that the stores would be operated pursuant to the terms of certain franchise agreements identified on the schedule "to be entered between the seller and the purchaser..."

Finally, the asset sale agreement concludes with a series of promises, which included transfer of franchise documents. The final act of the parties anticipated by the agreement was to assure that the standard franchise agreements were executed and delivered.

As a result, the court held that the asset sale agreement and the standard franchise agreements were part of the same transaction. The jury waiver in the franchise agreement was incorporated into the asset sale agreement.

Third, C-Span argued that the jury-waiver provisions were ambiguous. The court disagreed.

Akin Gump argued that the waiver in the agreement should also apply to its case. The firm presented case law, which held that agent is bound by the same agreement to arbitrate that binds the agent's principal.

In refusing this accept this argument, the court wrote: "In the arbitration cases, the reason to hold the agent to the principal's agreement is that the agent acted on behalf of the principal in the very conduct at issue in the case."

In distinguishing the present case, the court stated that the claim against the law firm was premised on entirely different conduct, i.e., liability of the agent to its principal for allegedly violating its duties as agent. It was not a case of vicarious liability.

Case: In re C-Span Entertainment Inc. and Sunil Dharod and In re Akin Gump Strauss Hauer & Feld LLP, Edward J. Fields Jr. and Spencer B. Young
Court: Court of Appeals of Texas, Dallas; Justices Whittington, Fitzgerald and Lang-Miers; case nos. 05-04-01450 CV, 05-04-01655 CV, May 3, 2005,
Counsel for C-Span and Dharod: Paul Bezney, David Musslewhite and David Wilson Dodge
Counsel for Akin Gump: Alan L. Busch, Robert Ruotolo and Todd Alan Hoodenpyle
Counsel for Blockbuster: Maurice Ladale Brimmage, Todd B. Baker and Thomas E. Kurth