Under Erie, is a contractual jury-trial waiver governed by state or federal law?

In re County of Orange, No. 14-72343 (9th Cir. Apr. 16, 2015).

Justice Brandeis, author of Erie

Justice Brandeis, author of Erie

Here’s a fascinating case about the Erie doctrine. That doctrine, as all first-semester law students learn, requires federal courts sitting in diversity to apply state substantive law but federal procedural law.

So Erie requires some tricky line-drawing between the substantive and the procedural, and the question presented by this appeal is a great example. When contracting parties include a jury-trial waiver as one of their contract’s terms, what law governs that waiver’s enforceability? On the one hand, that seems like a question of substantive contract law, and so governed by state law. On the other, it involves the availability of jury trial in federal court, which seems like a procedural question that must be governed by federal law.

In this case, the parties entered into a contract under California law. And if California law governs the jury-trial waiver issue, then the parties’ waiver is void: in California, contractual jury-trial waivers are void as against public policy. If federal law governs, by contrast, the waiver will be valid as long as it was knowing and voluntary, as it surely was here. 

Now, as federal court mavens will know, what I’ve said so far has skipped the first part of the Erie inquiry: is a contractual jury-trial waiver governed by a Federal Rule of Civil Procedure or federal statute? If it is—and if the Rule or statute is constitutional—then you don’t have to ask whether contractual jury-trial waivers are substantive or procedural under Erie; federal law governs, period.

While no federal Rule or statute governs contractual jury-trial waivers, what about the Seventh Amendment? Doesn’t that govern? As the Ninth Circuit sees it, though, the Seventh Amendment just sets a “floor” on jury-trial waivers. Under the Seventh Amendment, contractual jury-trial waivers are OK so long as they’re knowing and voluntary—but that doesn’t prevent state law from forbidding waivers altogether, as California does. 

Which then takes us back to the question whether contractual jury-trial waivers present a substantive or a procedural question. The Ninth Circuit decides that the enforceability of a contractual jury-trial waiver is a procedural rule governed by federal law, but that federal law incorporates the relevant state-law rule. Hence, contractual jury waivers are governed by state law, so long as state law complies with the Seventh Amendment’s minimum requirements, as California law surely does.