Contractual Waiver of Jury Trials Bill Signed by Governor

March 19, 2018

Included in Governor Hutchinson’s recent call for an Extraordinary Session of the General Assembly was an item to address the recent Arkansas Supreme Court decision holding that contractual waivers of jury trials were unenforceable. The Court, in a 4 -3 decision, held in Tilley v. Malvern National Bank that such provisions were invalid because Article 2, Section 7 of the Arkansas Constitution  provided  that a jury trial may only be waived “in the manner prescribed by law,” and neither the General Assembly nor the Supreme Court had enacted statutes or rules permitting waivers. Under the four-justice majority’s ruling, waivers must be approved by either statute or court rule.

The Tilley decision invalidating contractual waivers of jury trials sent ripples through the lending and legal communities as it has become common for loan agreements, promissory notes, and security agreements and mortgages to include such waivers.  In fact, the Tilley decision made Arkansas only the third state - following Georgia and California - to reject these contract provisions. It is impossible to say how many outstanding loan transactions were affected by the decision.

At the recently concluded Extraordinary Session of the General Assembly, bills were introduced to approve pre-dispute contractual waivers of jury trials were introduced in both the Senate and the House of Representatives.  The bills were identical but the Senate bill, SB 5, was subsequently amended to expressly permit parties to a loan transaction to agree to waive their rights to a jury trial.  The waiver would be effective with respect to all disputes except those relating to the revocation of any contract. The House bill was not amended in a similar fashion and did not get out of the House Judiciary Committee.  SB 5, as amended, passed both the Senate and the House.  The bill applies retroactively to contracts and jury proceedings in existence before it goes into effect giving protection to parties whose contractual provisions were invalidated by Tilley. The bill, which included an emergency clause, became effective today (March 19, 2018) upon Governor Hutchinson’s signature.