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Vintage Farms LLC v. Armed Forces Bank NA

United States District Court, D. Arizona

June 27, 2017

Vintage Farms LLC, et al., Plaintiffs,
Armed Forces Bank NA, Defendant.


          Honorable G. Murray Snow United States District Judge

         Pending before the Court is Defendant's Motion to Strike Plaintiffs' Jury Demand, (Doc. 20). For the following reasons, the Court grants the motion.


         In 2006 Vintage Farms L.L.C. (“Vintage”), Vanderbilt Farms L.L.C. (“Vanderbilt”), ABCDW L.L.C., Ashton Wolfswinkel, and Brandon Wolfswinkel (together, “the Plaintiffs”) executed a promissory note for $36, 718, 000.00 (“2006 Promissory Note”) in favor of Midwest Bank, N.A. (“Midwest Bank”). (Doc. 20-2 at 2.) In 2010, the Plaintiffs negotiated a settlement of their financial obligations to Midwest Bank (“2010 Agreement”). The property securing the 2006 Promissory Note was sold and assigned to Havrock REIT Sub, L.L.C. for approximately $30, 761, 500.00. (Doc. 20-2 at 3.) The amount that remained unpaid following the sale of the property, approximately $3, 000, 000.00, was secured in a promissory note in favor of Defendant, Armed Forces Bank NA (“AFB”), as successor-by-merger to Midwest Bank (“2011 Promissory Note”). (Doc. 20-1 at 4; Doc. 20-2 at 19.) In accordance with the 2010 Agreement, a judgment was entered in Maricopa County Superior Court for the amount of the 2011 Promissory Note in favor of AFB (“the Judgment”). (Doc. 1-1 at 43-44; Doc. 20-1 at 4; Doc. 20-2 at 11.) The 2010 Settlement Agreement included the following provision:

Waiver of Jury Trial. Lender, Borrower and Guarantors hereby waive, to the fullest extent permitted by applicable law, the right to trial by a jury in any action or proceeding based upon, or related to, the subject matter of this Agreement, the Note, the Security Instrument, and/or the other Loan Documents.

(Doc. 20-2 at 19.)

         In 2015 Plaintiffs agreed to pay, and Defendant agreed to accept, $400, 000.00 to resolve Plaintiffs' financial obligations under the 2011 Promissory Note and Judgment (“2015 Agreement”). (Doc. 20-1 at 4.) Plaintiffs allege AFB advised them that AFB had sufficient authority to consummate the 2015 Agreement, even though one loan participant objected to the agreement's terms. (Doc. 20-1 at 4.) However, in 2016, AFB assigned the 2011 Promissory Note and the Judgment to 40th Street Office Park #2, L.L.C. (“40th Street”), the loan participant who had objected to the 2015 Agreement. (Doc. 20-1 at 5.) Plaintiffs allege that AFB was aware that 40th Street objected to the 2015 Agreement and had no intention of honoring its terms. (Id.) Plaintiffs filed suit against AFB in the Maricopa County Superior Court for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair Dealing, Fraudulent Inducement, and Negligent Misrepresentation. (Doc. 20-1 at 2.) AFB removed the case to this Court on December 1, 2016. (Doc. 1.)

         Plaintiffs filed a Demand for Jury Trial on January 9, 2017. (Doc. 14.) Defendant, in turn, filed a Motion to Strike Plaintiffs' Jury Demand, asking the court to enforce the waiver provision in the 2010 Agreement. (Doc. 20.) Defendant argues that Plaintiffs' four claims each relate to and arise out of the 2010 Agreement, not the 2015 Agreement, and therefore the jury waiver of the 2010 Agreement extends to this action. (Doc. 20 at 1.)


         I. Legal Standard

         A. Validity of Jury Waivers

         The right to a jury trial in civil cases tried before federal courts is constitutionally protected. U.S. Const. amend. VII. A federal court sitting in diversity looks to both federal and state law to determine the validity of a jury trial waiver contained in a contract. In re Cty. of Orange, 784 F.3d 520, 523 (9th Cir. 2015). Under federal law the right to a jury trial may be waived by a contract that was knowingly and voluntarily executed. Id. (citing Palmer v. Valdez, 560 F.3d 965, 968 (9th Cir. 2009) (“[T]he federal standard is a constitutional minimum courts use to protect litigants' Seventh Amendment rights to trial by jury.”). If the applicable state law is more protective of the jury trial right than the constitutional minimum, that higher state standard must be met. Id. Arizona law, however, is arguably less protective than the federal constitutional minimum. See Harrington v. Pulte Home Corp., 211 Ariz. 241, 249-51, 119 P.3d 1044, 1052-54 (Ct. App. 2005) (rejecting the proposition that “any waiver of the right to jury trial must be knowingly, voluntarily and intelligently made”). Accordingly, the federal standard governs.

         Whether a waiver was knowing and voluntary is determined by considering the facts of the case. Palmer, 560 F.3d at 968 (citing Tracinda Corp. v. DaimlerChrysler AG, 502 F.3d 212, 222 (3d Cir. 2007)). District courts commonly consider the following factors 1) whether there was a disparity in bargaining power between the parties, 2) the business acumen of the party opposing the waiver, 3) whether the opposing party had an opportunity to negotiate contract terms, and 4) whether the clause containing the waiver was inconspicuous. See Cannon v. Wells Fargo Bank N.A., 917 F.Supp.2d 1025, 1058 (N.D. Cal. 2013) (collecting cases).

         B. Scope of Jury ...

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