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Parsons v. Associated Banc-Corp

Supreme Court of Wisconsin

April 13, 2017

Taft Parsons, Jr. and Carol Parsons, Plaintiffs-Appellants,
v.
Associated Banc-Corp, Defendant-Respondent-Petitioner, XYZ Insurance Company, Defendant.

          Submitted on Briefs: oral argument: December 2, 2016

         REVIEW OF A DECISION OF THE COURT OF APPEALS 2016 WI.App. 4 4 Reported at: 370 Wis.2d 112, 881 N.W.2d 793

         Source of Appeal: county Court Circuit Milwaukee Jeffrey A. Conen Judge.

          For the defendant-respondent-petitioner, there were briefs by Robert G. Pyzyk, James J. Carrig and Niebler, Pyzyk, Roth and Carrig, LLP, Menomonee Falls. Oral argument by James J. Carrig.

          For the plaintiffs-appellants, there was a brief by Alex Flynn, Marjorie R. Maguire and Alex Flynn and Associates, S.C., Milwaukee. Oral argument by Alex Flynn.

          An amicus curiae brief was filed by Jonh E. Knight, Kirsten E. Spira and Boardman & Clark LLP, Madison, for Wisconsin Bankers Association.

          An amicus curiae brief was filed by Michael J. Cerjak, PKSD, Milwaukee, Mark L. Thomsen and Cannon & Dunphy, S.C., Brookfield for Wisconsin Association for Justice.

          A.W. BRADLEY, J. joined by ABRAHAMSON, J. dissents (opinion filed).

          ANNETTE KINGSLAND ZIEGLER, J.

         ¶1 This is a review of a published decision of the court of appeals, Parsons v. Associated Banc-Corp, 2016 WI.App. 44, 370 Wis.2d 112, 881 N.W.2d 793, which reversed the Milwaukee County circuit court's[1]order granting Associated Banc-Corp's ("Associated") motion to strike Taft and Carol Parsons' ("the Parsons") demand for a jury.

         ¶2 The Parsons are approaching a trial in their lawsuit against Associated for alleged racketeering activity and negligent hiring, training, and supervision. We are asked to decide what form that trial will take. The Parsons seek a jury trial, but Associated asserts that the Parsons contractually waived their right to a jury several years ago, before this litigation arose.

         ¶3 There are two basic issues on this appeal. First, we must examine whether the pre-litigation jury waiver provision in the contract between the Parsons and Associated is enforceable, either with or without proof extrinsic to the terms of the contract that the Parsons knowingly and voluntarily agreed to this waiver. Second, if we conclude that the provision is enforceable, we must examine whether Associated's motion to strike the Parsons' jury demand was untimely.

         ¶4 We conclude that the pre-litigation jury waiver provision in the contract between the Parsons and Associated is enforceable and that Associated does not need to offer additional proof that the Parsons knowingly and voluntarily agreed to this waiver. We further conclude that Associated's motion to strike the Parsons' jury demand was not untimely. Consequently, we reverse the decision of the court of appeals and remand the case to the circuit court for further proceedings consistent with this opinion.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         ¶5 In part because of the unusual posture of this case, the facts pertaining to this lawsuit are largely unimportant to the disposition of this appeal. On May 26, 2011, the Parsons sued Associated in Milwaukee County circuit court asserting claims pertaining to, in the words of the Parsons, "a failed construction project in inner-city Milwaukee."

         ¶6 More specifically, the Parsons' complaint contains the following relevant allegations. In or before 2002, Taft Parsons ("Taft") "conceived of the idea to turn the run-down houses on his block into modern affordable rowhouses." The Parsons obtained financing for this project through State Financial Bank, Associated's predecessor in interest.[2] According to the Parsons, however, Associated "conspired with, aided, and/or allowed the general contractor and project manager [of the project] to improperly take hundreds of thousands of dollars of construction funds from the [Parsons] causing the [Parsons] substantial injury." The complaint asserted ten causes of action and, importantly, demanded a 12-person jury.

         ¶7 On December 12, 2012, the Parsons filed an amended complaint asserting eight causes of action. Before this court, the Parsons contend that they have now "limited their case" to the following two claims presented in their amended complaint: (1) racketeering activity in violation of Wis.Stat. § 946.83(1) (2013-14);[3] and (2) negligent hiring, training, and supervision. In their amended complaint the Parsons again demanded a 12-person jury. On January 9, 2013, the Parsons submitted the jury fee to the circuit court.

         ¶8 On May 14, 2014, Associated filed a motion to strike the Parsons' jury demand. Associated provided the circuit court with a Promissory Note for several hundred thousand dollars dated May 26, 2004 and listing Taft as "Borrower" and Associated as "Lender." The note contained the following relevant language:

WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER (BY THEIR ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE BORROWER AND THE LENDER ARISING OUT OF OR IN ANY WAY RELATED TO THIS DOCUMENT, ANY OTHER RELATED DOCUMENT, OR ANY RELATIONSHIP BETWEEN THE BORROWER AND THE LENDER. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN OTHER LOAN DOCUMENTS.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE .... BORROWER AGREES TO THE TERMS OF THE NOTE.

         (Boldface omitted from first four words and last paragraph.) A few lines below this text was Taft's signature. Accordingly, Associated asked the court to strike the Parsons' jury demand "because it was contractually waived."

         ¶9 The Parsons offered a number of arguments in response to the motion to strike; the following ones are relevant to this appeal. First, while conceding that "the statutes do not provide a deadline for an opposing party to object to a jury demand, " the Parsons argued that Associated's motion to strike was untimely and that Associated had waived its right to object to the jury demand. Second, the Parsons claimed that because of the lack of Wisconsin case law regarding contractual jury waivers, the circuit court was not required to enforce the jury waiver provided by Associated. Third, the Parsons contended that Carol Parsons ("Carol") had not signed the Promissory Note and thus had not waived her right to a jury. Finally, the Parsons asserted that Taft "had no freedom not to sign the Promissory Note for the construction loan."

         ¶10 With regard to this final argument, the Parsons attached an affidavit in which Taft swore to the following, among other things: Taft "never noticed any jury waiver clause in the Promissory Note . . . because [he] was not given time to review the loan documents prior to the closing"; Taft "had no counsel" at the time he signed the Promissory Note; Taft was told "that if [he] did not sign the closing documents immediately, [Associated] would withdraw its support for the construction project"; if Taft "had not gotten the construction loan, " tens of thousands of dollars he had already obtained under another loan "for pre-construction costs would have been down the drain, and [he] would still have owed that money"; Taft "did not knowingly and freely waive any right to a jury trial"; and Taft signed the Promissory Note "under pressure."

         ¶11 On October 24, 2014, the circuit court granted Associated's motion to strike the Parsons' jury demand. Citing as "particularly relevant considerations" "the parties' sophistication, whether the contract was procured fraudulently, and whether the jury waiver clause is conspicuous, " the circuit court concluded that the waiver was enforceable. The circuit court explained in part:

[Taft] is an intelligent business man who undoubtedly has experience reviewing paperwork and entering into contracts; he surely knows the importance of thoroughly reviewing documents. . . . [T]he promissory note also contained multiple bold, capital letter acknowledgements above the signature line. The jury waiver clause is set off from the rest of the document by bold, capital letters, stating "WAIVER OF THE JURY TRIAL." [sic] It is unlikely that [Taft] overlooked the jury waiver clause as the promissory note itself is just a two-page document. Finally, Wisconsin courts presume that a party to a contract had knowledge of it and consented to its terms.

         ¶12 The circuit court rejected the Parsons' timeliness argument in part because the Parsons had not provided any law establishing that Associated's putative delay in objecting to the jury demand waived Associated's right to object to the demand. With regard to the Parsons' claim that Carol was not bound by the jury waiver, the court concluded:

The argument made in the Parsons' brief . . . was superficial. Regardless, the jury waiver applies to "any dispute . . . between or among the Borrower and the Lender arising out of" the promissory note[, ] any other related document, or "any relationship between the Borrower and the Lender." As [Carol]'s claims are ones arising out of the relationship between the borrower and the Bank, the waiver clause also applies to her.

         The circuit court ordered that the Parsons' cause would be heard by court trial.

         ¶13 On November 25, 2014, the Parsons petitioned the court of appeals for leave to appeal a non-final order. On December 12, 2014, the court of appeals granted the petition. On May 20, 2016, in a published opinion, the court of appeals reversed the decision of the circuit court and remanded the case for a jury trial. Parsons, 370 Wis.2d 112, ¶l.

         ¶14 The court of appeals began with the broad proposition that a person may waive his or her right to a jury trial under Article I, section 5 of the Wisconsin Constitution. Id., ¶16. However, the court of appeals concluded that Associated bore the burden of demonstrating that the Parsons "understood the scope of and the specific nature of the rights given up by the waiver." Id., ¶31. Relying on Taft's affidavit, the court determined that Associated had not met that burden and that the circuit court erred in concluding otherwise. See id., ¶¶29-31.

         ¶15 The court of appeals then explained that because "the additional question of whether the waiver clause is invalid because it is unconscionable may well arise during trial, as it did at oral argument, [it would] consider whether the clause, on the record before [it], survives an unconscionability analysis." Id., ¶32. The court of appeals concluded the waiver was procedurally and substantively unconscionable. Id., ¶39.

         ¶16 The court of appeals also considered whether the circuit court erred in allowing Associated to object to the Parsons' jury demand and concluded it had erred for three reasons. First, Associated had forfeited its right to object because its objection was not timely. Id., ¶22. Second, Associated had waived its right to object under Wis.Stat. § 805.01(3) . Id. Third, Associated was "equitably estopped from making its much belated claim for a court trial." Id., ¶23. The court of appeals remanded the case for a jury trial. Id., ¶1.

         ¶17 On June 9, 2016, Associated filed a petition for review in this court. On September 13, 2016, we granted the petition.

         II. STANDARD OF REVIEW

         ¶18 In this case we interpret Article I, section 5 of the Wisconsin Constitution. We review state constitutional questions de novo. State v. Lagrone, 2016 WI 26, ¶18, 368 Wis.2d 1, 878 N.W.2d 636 (quoting State v. Schaefer, 2008 WI 25, ¶17, 308 Wis.2d 279, 746 N.W.2d 457).

         ¶19 We also interpret and apply Wis.Stat. § 805.01 ("Jury trial of right."). "'Statutory interpretation and application present questions of law that we review de novo while benefiting from the analyses of the court of appeals and circuit court.'" Journal Times v. Racine Bd. Police & Fire Comm'rs, 2015 WI 56, ¶42, 362 Wis.2d 577, 866 N.W.2d 563 (quoting 118th St. Kenosha, LLC v. DOT, 2014 WI 125, ¶19, 359 Wis.2d 30, 856 N.W.2d 486).

         III. ANALYSIS

         ¶20 We first address whether the pre-litigation jury waiver provision in the contract between the Parsons and Associated is enforceable. We then address whether Associated's motion to strike the Parsons' jury demand is untimely.

         A. Whether the Pre-litigation Jury Waiver Provision in the Contract between the Parsons and Associated is Enforceable

         ¶21 That a person may waive his or her right to a civil jury trial in Wisconsin is already settled law. Under Article I, section 5 of the Wisconsin Constitution:

The right of trial by jury shall remain inviolate, and shall extend to all cases at law without regard to the amount in controversy; but a jury trial may be waived by the parties in all cases in the manner prescribed by law. Provided, however, that the legislature may, from time to time, by statute provide that a valid verdict, in civil cases, may be based on the votes of a specified number of the jury, not less than five-sixths thereof.

         Wis. Const, art. I, § 5 (emphasis added).

         ¶22 The Wisconsin Statutes set forth a number of ways in which a civil jury trial may be waived. For example, under Wis.Stat. § 805.01(2), "Any party entitled to a trial by jury or by the court may demand a trial in the mode to which entitled at or before the scheduling conference or pretrial conference, whichever is held first. The demand may be made either in writing or orally on the record." § 805.01(2) . However,

[t]he failure of a party to demand in accordance with sub. (2) a trial in the mode to which entitled constitutes a waiver of trial in such mode. The right to trial by jury is also waived if the parties or their attorneys of record, by written stipulation filed with the court or by an oral stipulation made in open court ...

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