County of Orange v. United States District Court

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE COUNTY OF ORANGE, No. 14-72343
D.C. No.
COUNTY OF ORANGE, a political 8:13-cv-00683-
subdivision of the State of JLS-JC
California,
Petitioner,
OPINION
v.
UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF
CALIFORNIA, SANTA ANA,
Respondent,
TATA CONSULTANCY SERVICES
LTD., an Indian corporation; TATA
AMERICA INTERNATIONAL
CORPORATION, a New York
corporation,
Real Parties in Interest.
Petition For Writ Of Mandamus
Argued and Submitted
March 4, 2015—Pasadena, California
Filed April 16, 2015
2 IN RE COUNTY OF ORANGE
Before: Ronald M. Gould and Richard C. Tallman, Circuit
Judges, and Edward R. Korman, Senior District Judge.*
Opinion by Judge Tallman
SUMMARY**
Writ of Mandamus / Erie Doctrine
The panel granted a petition for a writ of mandamus
brought by the County of Orange, California, and directed
the district court to deny Tata America International
Corporation’s motion to strike the County’s demand for a
jury trial.
Under California law, Grafton Partners, L.P. v. Superior
Court, 116 P.3d 479 (Cal. 2005), pre-dispute jury trial
waivers are invalid unless expressly authorized by statute.
Federal law, on the other hand, permits such waivers as long
as each party waived its rights knowingly and voluntarily.
The panel held that the five factors to apply to a
mandamus petition, and announced in Bauman v. U.S.
District Court, 557 F.2d 650 (9th Cir. 1977), did not apply in
the extraordinary case where, as here, the petitioner claimed
erroneous deprivation of a jury trial.
*
The Honorable Edward R. Korman, Senior United States District Judge
for the Eastern District of New York, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
IN RE COUNTY OF ORANGE 3
Because no Federal Rule of Civil Procedure or federal
law governs pre-dispute jury trial waivers, the panel applied
the “relatively unguided” Erie R. Co. v. Tompkins, 304 U.S.
64 (1938), analysis. The panel found that the law governing
pre-dispute jury trial waivers was procedural under Erie, and
therefore federal courts should apply federal law to determine
the validity of a waiver. The panel also concluded that the
federal “knowing and voluntary” standard did not necessarily
conflict with California’s Grafton rule because the federal
standard was a constitutional minimum courts use to protect
litigants’ Seventh Amendment rights to trial by jury. The
panel held, therefore, that Erie’s federalism principle required
federal courts sitting in diversity to import, as the federal rule,
state law governing jury trial waivers, where, as here, state
law was even more protective than federal law of the jury
trial right. The panel applied California law, and held that the
parties’ contractual jury trial waiver was unenforceable. The
panel concluded that the district court erroneously deprived
a California county of a jury trial when it granted Tata
America’s motion to strike, and mandamus relief was
therefore warranted.
COUNSEL
Benjamin Parker Broderick (argued), Allan L. Schare,
Alexander George Brizolis, and Todd Thodora, Theodora
Oringher P.C., Costa Mesa, California, for Petitioner.
William A. Escobar (argued), Kelley Drey & Warren LLP,
New York, New York; Allison S. Brehm and Kenneth David
Kronstadt, Kelley Drey & Warren LLP, Los Angeles,
California, for Real Parties in Interest.
4 IN RE COUNTY OF ORANGE
OPINION
TALLMAN, Circuit Judge:
This mandamus petition requires us to decide whether,
under Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), a federal
court sitting in diversity applies state or federal law to
determine the validity of a pre-dispute jury trial waiver
contained in a contract governed by California law.
California and federal law treat such waivers differently:
Under California law, pre-dispute jury trial waivers are
invalid unless expressly authorized by statute. See Grafton
Partners, L.P. v. Superior Court, 116 P.3d 479 (Cal. 2005).1
Federal law, on the other hand, permits such waivers as long
as each party waived its rights knowingly and voluntarily.
See Palmer v. Valdez, 560 F.3d 965, 968 (9th Cir. 2009).
“The compatibility of these provisions, in an action based on
[California] law but tried in federal court by reason of the
parties’ diverse citizenship” implicates the Erie doctrine.
Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 419
(1996). “Under the Erie doctrine, federal courts sitting in
diversity apply state substantive law and federal procedural
law.” Id. at 427.
Because no Federal Rule of Civil Procedure or federal
law governs pre-dispute jury trial waivers, we apply the
“relatively unguided” Erie analysis to answer the vertical
choice of law question presented here. See Hanna v. Plumer,
380 U.S. 460, 471 (1965). Doing so, we find that the law
governing pre-dispute jury trial waivers is procedural under
1
California Civil Code § 631, which Grafton interprets, expressly
authorizes several ways a party may waive its jury trial right. None are
applicable here.
IN RE COUNTY OF ORANGE 5
Erie, and so federal courts should apply federal law to
determine the validity of a waiver. But we also conclude that
the federal “knowing and voluntary” standard does not
necessarily conflict with California’s Grafton rule because
the federal standard is a constitutional minimum courts use to
protect litigants’ Seventh Amendment rights to trial by jury.2
We hold, therefore, that Erie’s federalism principle requires
federal courts sitting in diversity to import, as the federal rule,
state law governing jury trial waivers where, as here, state
law is even more protective than federal law of the jury trial
right. Applying California law, we hold that the parties’
contractual jury trial waiver is unenforceable. See Grafton,
116 P.3d at 492. And because “the only question presented
[here] . . . is whether the district court erred in denying
petitioner’s request for a jury trial,” Mondor v. U.S. District
Court, 910 F.2d 585, 586 (9th Cir. 1990), we GRANT the
County’s petition for writ of mandamus.
I
The dispute underlying this mandamus petition is a simple
breach of contract action. In 2007, Plaintiff - Petitioner the
County of Orange (the “County”) hired Defendant - Real
Party in Interest Tata America International Corporation and
its international affiliate (collectively, “Tata America”) to
develop a property tax management system. In 2008, the
parties entered into a contract for professional services to
develop and implement the computerized system. The
contract became final when the County Board of Supervisors
approved it on July 15, 2008. The contract contains an
2
The Seventh Amendment provides that “[i]n Suits at common law . . . ,
the right of trial by jury shall be preserved.” U.S. Const. amend. VII
(emphasis added).
6 IN RE COUNTY OF ORANGE
unambiguous clause by which each party agrees to waive its
right to a jury trial in any dispute arising out of the contract.
That clause provides:
Waiver of Jury Trial. Each party
acknowledges that it is aware of and has had
the opportunity to seek advice of counsel of
its choice with respect to its rights to trial by
jury, and each party, for itself and its
successors, creditors, and assigns, does hereby
expressly and knowingly waive and release all
such rights to trial by jury in any action,
proceeding or counterclaim brought by any
party hereto against the other (and/or against
its officers, directors, employees, agents, or
subsidiary or affiliated entities) on or with
regard to any matters whatsoever arising out
of or in any way connected with this Contract
and/or any other claim of injury or damage.
The contract also contains a California choice of law clause.
Tata America did not perform its obligations under the
contract to the County’s satisfaction, and, in 2013, the County
filed a breach of contract action in the United States District
Court for the Central District of California, invoking that
court’s diversity jurisdiction. See Compl. 1, Apr. 30, 2013,
ECF No. 1. The County sued under California contract law,
asserting claims for promissory fraud, fraudulent
misrepresentation, fraudulent concealment, negligent
misrepresentation, and breach of contract. In general, the
County alleges that Tata America “failed to live up to the
representations and promises [it] made to the County and also
failed to comply with generally accepted industry standards.”
IN RE COUNTY OF ORANGE 7
The Complaint and the First Amended Complaint both
include a jury trial demand.
Tata America filed a motion to strike the County’s jury
demand. See Tata Mot. to Strike 1, Apr. 22, 2014, ECF No.
40. It argued that the County waived its right to a jury trial
by proposing and signing the contract containing the jury trial
waiver. See id. at 1–2. In its motion, Tata America invoked
the district court’s power under Federal Rule of Civil
Procedure 39, which permits a district court to strike a jury
demand if it “finds that on some or all of [the issues raised]
there is no federal right to a jury trial.” Fed. R. Civ. P.
39(a)(2).
In a thoughtful and well reasoned opinion, the district
court granted Tata America’s motion to strike. See Cnty. of
Orange v. Tata Consultancy Serv. Ltd., Case No.
8:13-cv-00683-JLS-JC (C.D. Cal. June 10, 2014) (ECF No.
51) (In Chambers) (Order Granting Defendant’s Motion to
Strike). Noting that “[t]he parties dispute whether federal or
California law applies to the determination of whether the
County has waived its right to a jury trial,” the court invoked
the Erie doctrine. See id. at *3. It relied on Simler v. Conner,
372 U.S. 221, 222 (1963), and Byrd v. Blue Ridge Rural
Electric Cooperative, Inc., 356 U.S. 525, 537–38 (1958), to
conclude that the right to a jury trial—including waiver of
that right—is a federal procedural issue controlled in federal
court by federal law. See Cnty. of Orange, Case No.
8:13-cv-00683-JLS-JC, at *5. It invoked Herron v. Southern
Pacific Co., 283 U.S. 91, 94 (1931), as a basis for rejecting
the County’s argument that California’s prohibition on
contractual jury trial waivers controls in federal court.
Applying this authority, the court “conclude[d] that federal
law, not California law, governs the question of whether a
8 IN RE COUNTY OF ORANGE
party has waived its right to a jury trial in federal court.” See
Cnty. of Orange, Case No. 8:13-cv-00683-JLS-JC, at *6.
Applying federal law, the district court determined that the
County—which drafted the jury waiver at issue here—
knowingly and voluntarily waived its right to a jury trial. Id.
at *6–7.
The County then filed the petition for writ of mandamus
currently before us. In its petition, the County argues that the
district court erred under Erie when it applied federal law to
evaluate the validity of the waiver. The All Writs Act,
28 U.S.C. § 1651, gives us jurisdiction to resolve this
dispute.3
II
A
Before tackling the Erie issue, we consider whether to
apply the five factors announced in Bauman v. U.S. District
Court, 557 F.2d 650 (9th Cir. 1977), to a mandamus
petition—like the County’s—that alleges the erroneous
deprivation of a jury trial.
The All Writs Act provides that federal courts “may issue
all writs necessary or appropriate in aid of their respective
jurisdictions and agreeable to the usages and principles of
law.” 28 U.S.C. § 1651. “A writ of mandamus is an
3
We review de novo “[w]hether state or federal law applies in a
diversity action.” Olympic Sports Prods., Inc. v. Universal Athletic Sales
Co., 760 F.2d 910, 912 (9th Cir. 1985). We also review de novo whether
a party validly waived its right to a jury trial. Palmer v. Valdez, 560 F.3d
965, 968 (9th Cir. 2009).
IN RE COUNTY OF ORANGE 9
extraordinary or drastic remedy, used only to confine an
inferior court to a lawful exercise of its prescribed jurisdiction
or to compel it to exercise its authority when it is its duty to
do so.” In re Sussex, — F.3d —, No. 14-70158, 2015 WL
1379852, at *3 (9th Cir. Jan. 27, 2015) (internal quotation
marks omitted). Thus, the petitioner carries the high burden
of establishing that his or her “right to issuance of the writ is
clear and indisputable.” Bauman, 557 F.2d at 656 (quotation
marks omitted).
To evaluate whether the petitioner has carried this burden,
we ordinarily examine the five factors set forth in Bauman:
(1) The party seeking the writ has no other
adequate means, such as direct appeal, to
attain the relief he or she desires. (2) The
petitioner will be damaged or prejudiced in a
way not correctable on appeal. (This
guideline is closely related to the first.)
(3) The district court’s order is clearly
erroneous as a matter of law. (4) The district
court’s order is an oft-repeated error, or
manifests a persistent disregard of the federal
rules. (5) The district court’s order raises
new and important problems, or issues of law
of first impression.
Id. at 654–55 (citations omitted); see also In re Sussex, 2015
WL 1379852, at *3.
But Bauman does not apply in the extraordinary case
where the petitioner claims erroneous deprivation of a jury
trial. “The right to a jury trial . . . has occupied an
exceptional place in the history of the law of federal
10 IN RE COUNTY OF ORANGE
mandamus . . . .” Wilmington Trust v. U.S. Dist. Court,
934 F.2d 1026, 1028 (9th Cir. 1991); see also 16 The Late
Charles Alan Wright et al., Fed. Prac. & Proc. Juris.
§ 3935.1 (3d ed. 2014). For that reason, we will “grant
mandamus where necessary to protect the constitutional right
to trial by jury. If the plaintiffs are entitled to a jury trial,
their right to the writ is clear.” Tushner v. U.S. Dist. Court,
829 F.2d 853, 855 (9th Cir. 1987) (Kennedy, J.) (citations
omitted); see also Mondor, 910 F.2d at 585–86 (“While
mandamus relief is extraordinary and is available only in very
limited circumstances, the wrongful denial of a jury trial is an
appropriate basis for such relief.”).
Thus where, as here, the mandamus petition alleges the
erroneous deprivation of a jury trial, the Bauman factors are
inapplicable and “the only question presented . . . is whether
the district court erred in denying petitioner’s request for a
jury trial.” Mondor, 910 F.2d at 586. Furthermore, we may
issue the writ even if “the petitioner is unable to show a ‘clear
and indisputable’ right” to it. Wilmington Trust, 934 F.2d at
1028.
B
To decide whether the district court erred in denying
petitioner’s request for a jury trial we must first
determine—under Erie and its progeny—whether federal
district courts sitting in diversity apply federal or state law to
evaluate the validity of a pre-dispute jury trial waiver. State
and federal law treat such clauses differently: California
generally prohibits pre-dispute waivers, Grafton, 116 P.3d at
479, but federal law permits them as long as the parties
waived their rights knowingly and voluntarily, see Nat’l
Equip. Rental, Ltd. v. Hendrix, 565 F.2d 255, 258 (2d Cir.
IN RE COUNTY OF ORANGE 11
1977). Although courts (including ours) generally recognize
that a party’s right to a jury trial in federal court is a federal
issue controlled by federal law, no circuit court has
considered the narrower question presented here: What law
should federal courts sitting in diversity apply to determine
the validity of a jury trial waiver clause when state law is
more protective than federal law of the right to a jury trial?
i
To answer this question, we begin with Erie. Or rather,
with the Rules of Decision Act, 28 U.S.C. § 1652. The Rules
of Decision Act provides that “[t]he laws of the several states,
except where the Constitution or treaties of the United States
or Acts of Congress otherwise require or provide, shall be
regarded as rules of decision in civil actions in the courts of
the United States, in cases where they apply.” Id. The
Supreme Court interpreted the Rules of Decision Act in Erie.
It held that “[e]xcept in matters governed by the Federal
Constitution or by acts of Congress, the law to be applied in
any case is the law of the state” including state statutory and
common law. Erie, 304 U.S. at 78. Although this holding
seems to preclude entirely application of federal common law
in diversity cases, subsequent decisions have not read Erie so
strictly. See, e.g., Snead v. Metro. Prop. & Cas. Ins. Co.,
237 F.3d 1080, 1094 (9th Cir. 2001) (applying the McDonnell
Douglas burden-shifting model—which is federal decisional
law—in the face of a countervailing state rule because the
state rule is procedural); cf. Semtek Int’l Inc. v. Lockheed
Martin Corp., 531 U.S. 497, 508 (2001) (“[F]ederal common
law governs the claim-preclusive effect of a dismissal by a
federal court sitting in diversity.”). Rather, Erie has come to
stand for the general principle that “federal courts sitting in
12 IN RE COUNTY OF ORANGE
diversity apply state substantive law and federal procedural
law.” Gasperini, 518 U.S. at 427.
When confronted with an Erie question, we first ask
whether a Federal Rule of Civil Procedure or a federal law
governs. Hanna, 380 U.S. at 470–71. If so, we will apply
that rule—even in the face of a countervailing state rule—as
long as it is constitutional and within the scope of the Rules
Enabling Act, 28 U.S.C. § 2072. Olympic Sports Prods. v.
Universal Athletic Sales Co., 760 F.2d 910, 914–15 (9th Cir.
1985) (describing analysis); see also Shady Grove Orthopedic
Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 398 (2010)
(same).
Absent an applicable Federal Rule or law, we apply the
“relatively unguided” Erie analysis, Hanna, 380 U.S. at 471,
which calls on us to determine whether the rules at issue are
substantive or procedural, see Gasperini, 518 U.S. at 427. A
substantive rule is one that creates rights or obligations, or “is
bound up with [state-created] rights and obligations in such
a way that its application in the federal court is required.”
Byrd, 356 U.S. at 535. A procedural rule, by contrast, defines
“a form and mode of enforcing” the substantive right or
obligation. Id. at 536. Although helpful, these definitions
have their limits: “[T]here is no bright line distinguishing
substance from procedure, [and] the meanings of these terms
shade into one another by degrees and vary from context to
context.” Larry Kramer, Choice of Law in Complex
Litigation, 71 N.Y.U. L. Rev. 547, 569 (1996); see also
Gasperini, 518 U.S. at 427 (“Classification of a law as
‘substantive’ or ‘procedural’ for Erie purposes is sometimes
a challenging endeavor.”).
IN RE COUNTY OF ORANGE 13
Thus, even more so than the substantive/procedural
labels, our “unguided analysis” is informed by Erie’s “core
policies.” Olympic Sports Prods., 760 F.2d at 913. These
policies require us to consider whether application of the
federal rule would (1) be “outcome determinative,”
(2) encourage “forum-shopping” between state and federal
courts, or (3) lead to “inequitable administration of the laws.”
Hanna, 380 U.S. at 468 (describing Erie’s “twin aims”);
Guar. Trust Co. of N.Y. v. York, 326 U.S. 99, 110 (1945)
(describing the “outcome determinative” test). If so, the state
rule is likely substantive and we will apply it in federal court.
On the other hand, if the rule implicates an essential
characteristic of the federal system, we typically apply the
federal rule. See, e.g., Gasperini, 518 U.S. at 432; Byrd,
356 U.S. at 537–38.
ii
Although we face an issue of first impression, we do not
write on an entirely blank slate. Federal courts (including
ours) have applied Erie to hold that the right to a jury trial is
a federal procedural issue controlled by federal law. For
example, in Simler, the Court considered whether state or
federal law governs when a court must determine if an action
is legal or equitable “for the purpose of deciding whether the
claimant has a right to a jury trial.” 372 U.S. at 221. The
Court held that “the right to a jury trial in the federal courts
is to be determined as a matter of federal law in diversity as
well as other actions.” Id. at 222. In Byrd, the Court held
that federal courts sitting in diversity must apply federal law
to determine whether a particular factual matter should be
decided by a judge or a jury. Byrd, 356 U.S. at 533–35.
Circuit courts, including the Ninth Circuit, cite these cases for
the general proposition that federal courts sitting in diversity
14 IN RE COUNTY OF ORANGE
apply federal law to determine the scope of the parties’ rights
to a jury trial. See, e.g., Granite State Ins. Co. v. Smart
Modular Techs., Inc., 76 F.3d 1023, 1026–27 (9th Cir. 1996)
(“In a diversity action, federal law governs whether a party is
entitled to a jury trial and if so, on what issues.”).
Several of our sister circuits have applied this general rule
to hold that federal courts sitting in diversity look to federal
law to determine the enforceability of a jury trial waiver
clause such as the one at issue here. See, e.g., Hergenreder
v. Bickford Senior Living Grp., LLC, 656 F.3d 411, 420–21
(6th Cir. 2011); Tracinda Corp. v. DaimlerChrysler AG,
502 F.3d 212, 222 (3d Cir. 2007); Merrill Lynch & Co. Inc.
v. Allegheny Energy, Inc., 500 F.3d 171, 188 (2d Cir. 2007);
Medical Air Tech. Corp. v. Marwan Inv., Inc., 303 F.3d 11,
18 (1st Cir. 2002); Telum, Inc. v. E.F. Hutton Credit Corp.,
859 F.2d 835, 837 (10th Cir. 1988); Leasing Serv. Corp. v.
Crane, 804 F.2d 828, 832–33 (4th Cir. 1986). The Seventh
Circuit took a different approach in IFC Credit Corp. v.
United Business & Industrial Federal Credit Union, 512 F.3d
989, 991–92 (7th Cir. 2008) (Easterbrook, C.J.). There, the
court held that even if federal law governs whether a litigant
waived its right to a jury trial in federal court, federal courts
should import the state rule of decision to determine the
validity of a pre-dispute waiver because “there is no general
federal law of contracts after Erie.” Id.
But the way California law deals with the validity of
pre-dispute waivers makes these cases distinguishable from
ours. Unlike state law in the First, Second, Third, Fourth,
Sixth, Seventh, and Tenth Circuits, California law (along with
Georgia law) is more protective than federal law of the right
to trial by jury. Under California (and Georgia) law, parties
to a contract cannot waive their right to a jury trial before a
IN RE COUNTY OF ORANGE 15
dispute commences, and any contract provision seeking to
effect such a waiver is unenforceable unless expressly
authorized by statute. See Grafton, 116 P.3d at 484.
Recognizing this difference, California and Georgia
district courts sitting in diversity have split on whether state
or federal law governs the validity of a pre-dispute jury trial
waiver. Compare Pallen Martial Arts, LLC v. Shir Martial
Arts, LLC, Case No. 13-cv-05898-JST, 2014 WL 2191378, at
*9 (N.D. Cal. May 23, 2014) (“[T]he growing consensus in
this district is that jury trial waivers are unenforceable in
contract actions brought under California law.”), and GE
Commercial Fin. Bus. Prop. Corp. v. Heard, 621 F. Supp. 2d
1305, 1310 (M.D. Ga. 2009) (“[T]he Court finds that the
contractual jury trial waivers in the Georgia contracts are
null and void under Georgia law and consequently not
enforceable in this action.”), with Cnty. of Orange, Case No.
8:13-cv-00683-JLS-JC, at *5–6 (order appealed here)
(applying the federal “knowing and voluntary” standard to
evaluate the validity of a pre-dispute jury trial waiver), and
GEM Acquisitionco, LLC v. Sorenson Grp. Holdings, LLC,
No. C 09-01484 SI, 2009 WL 3246747, at *4, *6 (N.D. Cal.
Oct. 8, 2009) (same); see also Brian S. Thomley, Comment,
Nothing is Sacred: Why Georgia and California Cannot Bar
Contractual Jury Waivers in Federal Court, 12 Chap. L. Rev.
127, 145 (2008) (noting the divergent case law on this issue).
iii
As this case law suggests, we are not presented with an
easy question. “[C]lassification of a law as ‘substantive’ or
‘procedural’ for Erie purposes is sometimes a challenging
16 IN RE COUNTY OF ORANGE
endeavor. This is one of those times.” Snead, 237 F.3d at
1090 (internal citations and quotation marks omitted).4
On the one hand, rules dictating when a party waives its
right to a jury trial are procedural, and “federal courts sitting
in diversity apply . . . federal procedural law.” Gasperini,
518 U.S. at 427. California’s rule that pre-dispute jury trial
waivers are unenforceable is not a rule that creates “rights and
obligations” for the parties to a contract, see Byrd, 356 U.S.
at 535, nor is it a rule that dictates the substance of a potential
award, see Gasperini, 518 U.S. at 428. Rather, the
rule—which allocates tasks between a judge and a
jury—describes “merely a form and mode of enforcing” the
law. Byrd, 356 U.S. at 536; see also Gasperini, 518 U.S. at
426 (noting that a law is procedural when it “assigns
decisionmaking authority”); Wabol v. Villacrusis, 958 F.2d
1450, 1460 (9th Cir. 1990) (“The jury trial guarantee is
primarily a procedural right designed to safeguard the broader
and more fundamental right to a fair trial . . . .”). Such rules
are procedural under Erie.
4
We use the “relatively unguided” Erie analysis because neither a
Federal Rule of Civil Procedure nor a federal law dictates whether pre-
dispute jury trial waivers are enforceable in federal court. See Hanna, 380
U.S. at 470–71; Olympic Sports Prods., 760 F.2d at 914. Federal Rules
of Civil Procedure 38 and 39 relate to jury trial waivers, but only in the
context of cases already in litigation. See Fed. R. Civ. P. 38(d)
(explaining that a party waives its right to a jury trial by failing to properly
request one); Fed. R. Civ. P. 39 (giving district courts the power to strike
a demand for a jury trial on certain issues). And although the Federal
Arbitration Act, 9 U.S.C. §§ 1–19, permits pre-dispute jury trial waivers,
the Act is not applicable here because it addresses such waivers only in the
context of arbitration clauses, and the contract at issue contains no such
clause.
IN RE COUNTY OF ORANGE 17
Also, application of the federal rule in federal court would
not be “outcome determinative”: California’s Grafton rule
does not “‘have so important an effect upon the fortunes of
one or both of the litigants that failure to [apply] it would
[unfairly discriminate against citizens of the forum state, or]
be likely to cause a plaintiff to choose the federal court.’”
Snead, 237 F.3d at 1090 (alterations in original) (quoting
Gasperini, 518 U.S. at 427). It is too speculative to assume
that an individual who signs a contract containing a jury trial
waiver would seek to void that waiver by rushing to sue an
adversary in the adversary’s home-state court (from which the
adversary could not remove to federal court, see 28 U.S.C.
§ 1441(b)(2)). Viewed this way, application of the federal
law would not promote forum-shopping or cause inequitable
administration of the law. See Chambers v. NASCO, Inc.,
501 U.S. 32, 53 (1991) (a rule will not implicate Erie’s twin
aims when its application to the parties is uncertain). Byrd
confirms that federal courts can apply federal law on jury trial
waivers without undermining Erie’s core principles: It notes
that whether a case is tried by a judge or a jury does not
create “the certainty that a different result would follow, . . .
or even the strong possibility that this would be the case.”
Byrd, 356 U.S. at 539 (internal citations omitted). But see
Bernhardt v. Polygraphic Co. of Am., 350 U.S. 198, 203
(1956) (“The nature of the tribunal where suits are tried is an
important part of the parcel of rights behind a cause of
action.”).
On the other hand, California’s rule is substantive. It is
a state rule of contract interpretation that furthers the state
constitutional policy favoring jury trials, Grafton, 116 P.3d at
482, and rules of contract interpretation and construction are
plainly substantive under Erie, see IFC Credit Corp.,
18 IN RE COUNTY OF ORANGE
512 F.3d at 991–92 (“There is no general federal law of
contracts after” Erie).
But even if we view California’s rule as primarily
procedural, we are not convinced that federal courts sitting in
diversity may disregard it. As we recognized in Feldman v.
Allstate Insurance Co., 322 F.3d 660 (9th Cir. 2003), federal
courts sitting in diversity must give full effect to state
procedural rules when those rules are “intimately bound up
with the state’s substantive decision making” or “serve
substantive state policies.” Id. at 667 (quotation marks
omitted); see also Byrd, 356 U.S. at 535. California’s rule on
pre-dispute jury trial waivers embodies the state’s substantive
interest in preserving the “right to a jury trial in the strongest
possible terms,” Grafton, 116 P.3d at 482, an interest the
California Constitution zealously guards, see Cal. Const. art.
I, § 16 (“Trial by jury is an inviolate right and shall be
secured to all . . . .”). Also, respecting that interest reinforces
the Federal Constitution’s preservation of jury trials in civil
cases. See U.S. Const. amend. VII.
So the question becomes: Can “federal courts . . . give
effect to the substantive thrust of [California’s rule] without
untoward alteration of the federal scheme for the trial and
decision of civil cases[?]” Gasperini, 518 U.S. at 426. We
believe we can.
We hold, first, that federal procedural law governs the
validity of a pre-dispute jury trial waiver in federal court.
This comports with Simler and Byrd, in which the Supreme
Court held that the scope of the right to a jury trial in a
federal diversity case is a federal procedural issue governed
by federal law. Simler, 372 U.S. at 221; Byrd, 356 U.S. at
533–35. It also fits with our general understanding of the jury
IN RE COUNTY OF ORANGE 19
trial right as a procedural right that guarantees a particular
mode of enforcing certain substantive rights. See Wabol,
958 F.2d at 1460 (interpreting the Sixth Amendment right to
a jury trial). Having determined that federal law applies, we
must next ask: What is the federal rule?
The federal “knowing and voluntary” standard adopted by
the district court is not a generally applicable federal rule, but
rather a federal constitutional minimum. “Maintenance of the
jury as a fact-finding body [in both civil and criminal cases]
is of such importance and occupies so firm a place in our
history and jurisprudence that any seeming curtailment of the
right to a jury trial should be scrutinized with the utmost
care.” Dimick v. Schiedt, 293 U.S. 474, 486 (1935) (citations
omitted); see also Hendrix, 565 F.2d at 258 (“It is elementary
that the Seventh Amendment right to a jury is fundamental
and that its protections can only be relinquished knowingly
and intentionally.” (emphasis added)), cited with approval in
Palmer, 560 F.3d at 968. But a federal constitutional
minimum is inapplicable where, as here, state law is more
protective than federal law of federal constitutional rights.
There is, thus, no federal rule that governs the validity of a
pre-dispute jury trial waiver when state law is more protective
than federal law of the jury trial right.
When faced with such a gap, Erie’s federalism principle
directs us to import state law as the federal rule rather than
construct a new federal common law rule. Erie ensures that
“a federal court adjudicating a state-created right solely
because of the diversity of citizenship of the parties is for that
purpose, in effect, only another court of the State . . . .”
Guar. Trust, 326 U.S. at 108. To that end, and absent a
countervailing federal rule or interest, federal courts should
adjudicate state-created rights in a manner that closely
20 IN RE COUNTY OF ORANGE
resembles the way in which a state court would adjudicate
that same right. See, e.g., Bernhardt, 350 U.S. at 202–03.
This goal is particularly important where, as here, the state
rule has a “substantive thrust.” See Gasperini, 518 U.S. at
426. And while expansion of a federal common law rule may
be necessary when federal interests require a “nationally
uniform body of law,” United States v. Kimball Foods, Inc.,
440 U.S. 715, 728 (1979); Byrd, 356 U.S. at 537, here, federal
courts can ensure uniform protection of Seventh Amendment
rights by permitting parties to waive those rights—at
minimum—knowingly and voluntarily, see Hendrix, 565 F.2d
at 258, while still adhering to California’s Grafton rule. For
these reasons, “[t]his is, it seems to us, a classic case for
adopting, as the federally prescribed rule of decision, the law
that would be applied by state courts in the State” whose law
governs the contract. See Semtek, 531 U.S. at 508.
To recap: The law governing jury trial waivers in federal
court is federal procedural law. But the federal rule most
courts use to evaluate such waivers—the “knowing and
voluntary” standard—is a federal constitutional minimum.
Its application is not required where, as here, state law is
more protective than federal law of the jury trial right. So we
are faced with a void in federal law. Rather than expand the
constitutional “knowing and voluntary” standard to fill that
void, we adopt state law as the federal rule. This means that
federal courts sitting in diversity must apply the relevant state
law to evaluate the validity of a pre-dispute jury trial waiver
when that law is more protective than federal law.
C
The parties’ contract is governed by California law.
California law holds, as a matter of public policy, that a
IN RE COUNTY OF ORANGE 21
litigant cannot waive its right to a jury trial by entering into
a contract that contains a pre-dispute jury trial waiver clause.
Grafton, 116 P.3d at 484, 488 (citing Cal. Const. art. I, § 16
and Cal. Civ. Code § 631). This rule is more protective of the
right to a jury trial than the federal “knowing and voluntary”
standard. See Hendrix, 565 F.2d at 258. For that reason,
district courts sitting in diversity must apply California’s rule
on pre-dispute jury trial waivers to contracts governed by
California law.
The district court thus erred when it applied the federal
“knowing and voluntary” standard to uphold the parties’
waiver. While we agree that the County knowingly and
voluntarily waived its right to a jury trial by drafting,
proposing, and signing a contract that contained a jury trial
waiver, California—not federal—law dictates the validity of
the waiver clause. And under California law, the parties’ pre-
dispute waiver clause is unenforceable.5 See Grafton,
116 P.3d at 481. When it granted Tata America’s motion to
strike, the district court erroneously deprived a California
county of a jury trial. Mandamus relief is therefore
warranted. See Mondor, 910 F.2d at 585–86.
5
We are unpersuaded by Tata America’s argument that the parties’ jury
trial waiver is enforceable under California law notwithstanding Grafton.
Tata America cited no post-Grafton authority for its assertion that
“although section 631 does not specifically address legislative waivers of
the right to a jury trial, California Government Code section 25203 [which
permits the County’s Board of Supervisors to enter into contracts and
control litigation on behalf of the County] implicitly provides for the
predispute waiver of jury trials.” We decline to infer such a broad
exception to Grafton, particularly in light of that case’s unequivocal
holding that “section 631 does not authorize predispute waiver of [the
right to a jury trial].” Grafton, 116 P.3d at 488.
22 IN RE COUNTY OF ORANGE
III
For these reasons, we grant Orange County’s petition for
writ of mandamus. We direct the district court to deny Tata
America’s motion to strike the County’s demand for a jury
trial.
Each party shall bear its own costs.
PETITION GRANTED.