Choice of Non-California Law to protect Jury Waiver - Not so fast

A recent California Case makes clear that reliance on the selection of another state's law to provide an enforceable jury waiver is mistaken.

In Ricon EV Realty LLC v CP III Rincon Towers, Inc. No. A138463 (Cal. App. 1/31/2017) involved a loan by a New York lender secured by California property that elected New York law. The issue was whether California or New York law would apply to the waiver of jury provision.

The court found that a substantial relationship existed between the transaction and New York, the first test that would allow the application of New York law. The court then turned to the second issue whether the law in question is contrary to a fundamental policy of California. Following an extensive analysis the court concluded that the regulation of jury waivers constituted a fundamental policy of California. Next the court examined the third test whether California has a materially greater interest than the chosen state, and if so then the choice of law provision will not be enforced. The court concluded that California had a materially greater interest than New York in determining the enforceability of jury waiver provisions. So finding the court declined to apply New York law, and in so declining concluded the jury waivers where not enforceable.

What this means for contracts seeking to employ non-California law is that jury waivers under the current state of the law are not, or may not be enforceable (depending on which appellate district the matter is brought). Accordingly, contracts should be draft to provide at least in the alternative for arbitration or judicial referral, if the parties are seeking an alternative to a jury.

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