In Ex Parte Acosta, No. 1140200, — So. 3d —, No. 1140200, 2015 WL 3537476 (Ala. June 5, 2015), the Alabama Supreme Court refused to incorporate a jury trial waiver from a collateral loan document into a Promissory Note. Instead, the Court construed the jury trial waiver provision strictly and as only applying to claims arising from the collateral document. Therefore, lenders who want to ensure that a jury trial waiver will cover an entire loan transaction, should revisit the language of their jury trial waiver provisions or incorporate a waiver provision into each loan document.
In 2006, Trinity Bank loaned Sergio Acosta money for several real estate developments pursuant to three separate promissory notes. None of the notes included a jury trial waiver. As consideration for the notes, Acosta simultaneously executed four assignments, transferring his interests in the leases and rents from these real estate developments to the bank. Each of the assignments contained a jury trial waiver provision providing that “Acosta hereby waives any right to a trial by jury in any civil action arising out of, or based upon, this assignment.” After Acosta defaulted on the notes, the bank foreclosed on the property and sued Acosta for the deficiency. In response, Acosta asserted counterclaims against the bank (all of which arose under the notes) and demanded a trial by jury.
The bank moved to strike the jury demand based on the jury trial waiver provision in the assignments. It argued that the jury trial waivers in each of the assignments (which covered any civil action “arising out of, or based upon, this assignment”) were broad enough to encompass the notes. It also argued that the jury trial waiver was incorporated into the notes by reference because the notes expressly state that any loan documents executed in conjunction with the notes (e.g., the assignments) were part of the parties’ entire agreement.
The Alabama Supreme Court rejected both arguments. First, the Court held that the plain terms of the assignments’ jury trial waivers limited those provisions to claims arising from the assignments themselves. Second, the court refused to incorporate the jury trial waivers into the notes merely because notes stated that the assignments were part of the parties’ entire agreement and had been executed at the same time. The Court did note, however, that a slight change in the waiver’s language—“arising out of, or based on, this assignment or the loan documents”—might have changed the outcome. In a separate concurrence, Chief Justice Moore suggested that all pre-dispute, contractual jury trial waivers are unenforceable under the Alabama Constitution. No other justices joined in this concurrence.
Because Alabama courts will strictly construe jury trial waivers, lenders should take care in crafting their agreements to ensure that their jury trial waivers will be enforceable as intended. For example, a lender who desires a jury trial waiver for claims arising from any and all documents in a loan transaction should use a jury trial waiver provision that expressly states that it applies to “all loan documents.” Alternatively, lenders should ensure that every loan document contains a jury trial waiver provision. Lenders who fail to do so may have trouble convincing Alabama courts to strike a plaintiff’s jury demand based on a contractual jury trial waiver.