The old saying of “your wish is my command” is often employed when one party’s wish for something to happen becomes another’s command to action to make it happen. Before we get to the significance of that phrase, however, a little background is needed. In the January 22, 2018 issue of the Northwest Arkansas Business Journal, I wrote about a recent decision from the Arkansas Supreme Court that rendered unconstitutional a contractual provision waiving a party’s right to a jury trial.
The reasoning of the Arkansas Supreme Court in its decision in Tilley v. Malvern National Bank was premised on the notion that the Arkansas Constitution only allows a jury trial to be waived “in the manner prescribed by law.” Finding that there was neither an applicable statute in Arkansas nor a rule of civil procedure that authorized such waiver, the Arkansas Supreme Court opined that the right to a jury trial waived prior to litigation arising is unconstitutional and thus unenforceable.
For reasons expressed in my prior article, this decision caused a bit of stir and alarm in the legal, business, and banking communities. I noted that until the Arkansas legislature passed a law supporting the enforcement of pre-litigation jury trial waivers, business parties would need to be cognizant of any attendant risks associated with trying a case to a jury rather than a judge. Many law firms across this great state recognized the dampening effect this decision could have on the business and banking climate in Arkansas and encouraged our legislature to rapidly act to remedy the problem. Our wish became their command and resulted in the recent passage of Senate Bill 5 by the Arkansas General Assembly. Senate Bill 5 became immediately effective on March 19, 2018, when Governor Hutchinson signed the bill into law.
While not a complete fix to the more global problem of the unconstitutionality of pre-litigation jury trial waivers, Senate Bill 5 does provide that any “written provision in a contract to borrow money or to lend money in which the parties agree to waive their respective rights to a trial by jury under [the] Arkansas Constitution . . . is valid and enforceable . . . .”
Accordingly, at least with respect to loan agreements, the right to waive a jury trial has been preserved. While all of our good friends across the Arkansas banking community have reason to applaud, it does leave open the question of whether, or when, the Arkansas legislature will turn to address a pre-litigation jury trial waiver in other contexts and circumstances as well. Until such time, if your wish is to accommodate a pre-litigation jury trial waiver in a non-lending context, the command is that you alternatively consider requiring arbitration of a dispute or that you proceed with caution in front a jury of your peers.
The information provided above is created by Attorney Jason Bramlett of Friday, Eldredge & Clark, LLP. Jason has a comprehensive practice focusing on the representation of financial institutions and commercial parties in connection with a broad spectrum of issues. Jason has a unique practice in that he regularly represents clients on the myriad issues that present themselves in a financial transaction.
This is not a substitute for legal advice and should be considered for general guidance only. For more information or if you have further questions, please contact one of our Banking and Finance attorneys.