RIGHT TO A JURY TRIAL (CIVIL)

 

JOINING OF LEGAL AND EQUITABLE CAUSES OF ACTION

 

Seeking both a money judgment and equitable relief waived the right to a jury trial.

 

An Action by a Judgment Creditor Pursuant to CPLR 5225 and 5227 Seeks both Legal and Equitable Relief---a Jury Trial Is Therefore Not Available

 

The Fourth Department determined an action to enforce a judgment against a party other than the judgment debtor (here a judgment creditor) under CPLR 5225 and 5227 is a proceeding for both legal and equitable relief for which a jury trial is not available:

 

"[T]he right to trial by jury is zealously protected in our jurisprudence and yields only to the most compelling circumstances" ... . "Trial by jury in all cases in which it has heretofore been guaranteed by constitutional provision shall remain inviolate forever" (NY Const, art 1, § 2). "That guarantee extends to all causes of action to which the right attached at the time of adoption of the 1894 Constitution . . . Historically, however, actions at law were tried by a jury, [and] matters cognizable in equity were tried by the Chancellor. Even though the two systems have merged, vestiges of the law-equity dichotomy remain in the area relating to trial by jury" ... .

 

Thus, the right to a jury trial "depends upon the nature of the relief sought" ... . Under the CPLR, a jury trial is available in an action "in which a party demands and sets forth facts which would permit a judgment for a sum of money only" (CPLR 4101 [1] [emphasis added]). Where a plaintiff joins legal and equitable causes of action in a complaint, it waives its right to a jury trial ... . * * *

 

...[W]e conclude that enforcement of a judgment under CPLR 5225 and 5227 against a party other than the judgment debtor is an outgrowth of the "ancient creditor's bill in equity," which was used after all remedies at law had been exhausted. We thus conclude that [the judgment creditor's] use of CPLR 5225 and 5227 in this case is in furtherance of both legal and equitable relief and, therefore, that [the judgment creditor] is not entitled to a jury trial on those combined legal and equitable claims ... . Matter of Colonial Sur Co v  Lakeview Advisors LLC, 2015 NY Slip Op 01002, 4th Dept 2-6-15

 

 

WHERE A PARTY ALLEGES FRAUD IN THE INDUCEMENT TO ENTER A CONTRACT, THE PARTY IS ENTITLED TO A JURY TRIAL DESPITE JURY-TRIAL WAIVER IN CONTRACT

 

'...[A]contractual jury waiver provision is inapplicable to a fraudulent inducement cause of action that challenges the validity of the underlying agreement ... . ...  In cases where the fraudulent inducement allegations, if proved, would void the agreement, including the jury waiver clause, the party is entitled to a jury trial on the claim ...'.

 

 

A Party Alleging Fraudulent Inducement to Enter a Contract May Both Seek to Avoid Terms of the Contract (Here a Jury-Waiver Clause) and Rely on the Contract in Defense of Breach of Contract Allegations/Criteria for Negligent Misrepresentation Cause of Action Explained in Some Depth (Criteria Not Met Here)

 

The First Department, over a dissent, determined a party claiming it was fraudulently induced to enter a contract is entitled to a jury trial despite the jury-trial waiver in the contract. Because a party alleging fraudulent inducement can either seek rescission or stand on the contract and seek damages, the party may both seek to avoid terms in the contract (here the jury-waiver clause) and rely on the contract as a defense to breach of contract allegations. The court also found that the counterclaim for negligent misrepresentation was properly dismissed because the existence of a confidential or fiduciary or other special relationship (approaching privity), which would justify reliance on representations, was not demonstrated.  The criteria for negligent misrepresentation was described in some depth:

 

...[A]contractual jury waiver provision is inapplicable to a fraudulent inducement cause of action that challenges the validity of the underlying agreement ... . ...  In cases where the fraudulent inducement allegations, if proved, would void the agreement, including the jury waiver clause, the party is entitled to a jury trial on the claim ... .

 

..."[A] defrauded party to a contract may elect to either disaffirm the contract by a prompt rescission or stand on the contract and thereafter maintain an action at law for damages attributable to the fraud" ... . As a result, a party alleging fraudulent inducement that elects to bring an action for damages, as opposed to opting for rescission may, under certain circumstances, still challenge the validity of the agreement ... . 

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"A claim for negligent misrepresentation requires the plaintiff to demonstrate (1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance on the information" ... . In commercial cases "a duty to speak with care exists when the relationship of the parties, arising out of contract or otherwise, [is] such than in morals and good conscience the one has the right to rely upon the other for information" ... . Reliance on the statements must be justifiable, and "not all representations made by a seller of goods or a provider of services will give rise to a duty to speak with care" (id.). "Rather, liability for negligent misrepresentation has been imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified" (id.). In order to impose tort liability in a commercial case, "there must be some identifiable source of a special duty of care" ... . ...[A] special duty will be found "if the record supports a relationship so close as to approach that of privity" ... . Generally, however, an arm's-length business relationship between sophisticated parties will not give rise to a confidential or fiduciary relationship that would support a cause of action for negligent misrepresentation ... . J.P. Morgan Sec. Inc. v Ader, 2015 NY Slip Op 03071, 1st Dept 4-14-15