Jury Trial Procedure

Under New York practice, the expression “Be Careful What You Ask For” has special meaning.  Lawyers can find themselves in quite a quandary when they realize that the way they have framed claims or defenses in an initial pleading stays with them for the rest of the case and can eviscerate the right to a trial by jury.

While the time to choose whether to request a jury or bench (decided solely by a judge) trial does not arise until after all pretrial discovery proceedings are complete and the case is ready for trial (see CPLR 3402 and CPLR 4102(a)), whether a party has a right to a jury is governed by the content of and facts alleged in the initial pleadings in the case—the original complaint and the answers/counterclaims thereto.  Generally, alleging facts that require the court to exercise its “equitable” powers constitutes a waiver of the right to a jury trial in the entire case.  Courts therefore need to determine what exactly amounts to “equitable” relief.

I summarized these principles in an earlier article published in my Litigation Review column for the New York Law Journal, as follows:

[A] frequent form of implicit, and possibly inadvertent, waiver of the right to trial by jury occurs when a party requests only equitable relief or combines legal and equitable claims for relief arising out of the same facts or circumstances or transaction.18 Further, even where plaintiff’s counsel avoids an explicit request for equitable relief, and demands only money damages, courts will look past the claim for relief actually pled to determine whether the underlying theories or causes of action are ‘equitable’ in nature or would require equitable remedies, in deciding whether to allow a trial by jury.19 In fact, CPLR 4101(1) explicitly states that the party desiring a jury must demand ‘and set forth facts which would permit a judgment for a sum of money only.’ It is critical, therefore, when formulating theories of a complaint, drafting the allegations and deciding upon the form of relief to demand, that counsel carefully consider the effect on the right to a trial by jury. Waiting until the actual deadline to demand a jury in a note of issue or within the 15 days in response thereto could irreparably effect the right to a jury because the courts hold that ‘[o]nce the right to a jury trial has been intentionally lost by joining legal and equitable claims, any subsequent dismissal, settlement or withdrawal of the equitable claim(s) will not revive the right to trial by jury.’ 20

Similarly, defense counsel can waive the right to a trial by jury by asserting equitable defenses or counterclaims, and in certain jurisdictions, not only with respect to the determination of the defenses or counterclaims, but on plaintiff’s claims as well.21 Thus, defense counsel must also be aware of the effect of their initial pleadings on the ultimate right to a trial by jury. [See footnotes including cases and authorities in hyperlink of the article.]

Rescission for Fraud: Jury Waiver

So, the question arises whether seeking certain relief based upon claims of fraudulent inducement can result in a waiver of the right to a trial by jury.  It depends.  Generally, including any form of equitable relief in a pleading can amount to a jury waiver, but if the facts and allegations in a pleading amount to a claim strictly for money damages, the right to a jury will be preserved.  The Court in Anesthesia Assoc. of Mount Kisco, LLP v Northern Westchester Hosp. Ctr., 59 A.D.3d 481, 482 (2d Dep’t 2009) explained it concisely (citations omitted):

“Once the right to a jury trial has been intentionally lost by joining legal and equitable claims, any subsequent dismissal, settlement or withdrawal of the equitable claim(s) will not revive the right to trial by jury” … However, “[w]here a plaintiff alleges facts upon which monetary damages alone will afford full relief, inclusion of a demand for equitable relief in the complaint’s prayer for relief will not constitute a waiver of the right to a jury trial” … .

A party establishing a claim for fraud can seek monetary damages (the pecuniary loss arising from the fraud) or rescission of the transaction at issue (voiding the contract or other transaction).  Pecuniary damages are precisely the type of relief that would permit a jury trial of such a claim.  On the other hand, rescission is typically considered an “equitable” claim for which no jury trial is allowed.

New Second Department Decision

A new Appellate Division, Second Department, decision reinforces the principle that seeking rescission as a remedy for fraudulent inducement constitutes a waiver of a jury trial.  In Piccoli v Cerra, Inc., 2023 NY Slip Op 02901 (2d Dep’t Decided May 31, 2023), the plaintiff sought to enforce a contract for the sale of certain construction equipment (a “cone crusher”) because the defendant failed to pay as required by the payment schedule.  The defendant asserted, among other things, “various affirmative defenses and counterclaims, including fraud in the inducement based on alleged misrepresentations made by [plaintiff] with respect to the condition of the cone crusher, upon which [defendant] allegedly relied in purchasing same. As relevant here, the first counterclaim sought ‘a judgment that the [underlying agreement] is void ab initio as a result of [plaintiff’s] fraudulent conduct.’”

Defendant subsequently served a jury demand pursuant to CPLR 4102(a), which plaintiff moved to strike “on the ground that the defendants waived their right to demand a jury trial by asserting an equitable counterclaim.”  The Commercial Division (Emerson, J.) granted the motion to strike the jury demand, and the Second Department affirmed, holding in relevant part:

The Supreme Court properly granted the plaintiffs’ motion to strike the defendants’ demand for a jury trial. “Where a plaintiff brings a claim triable by jury and the defendant interposes a related counterclaim not triable by jury, the defendant is held to have waived a jury trial even on the main claim” (Seneca v Novaro, 80 AD2d 909, 910; see Conwell Props., Inc. v DAG Rte. Six, LLC, 210 AD3d 1051, 1051; Nationscredit Fin. Servs. Corp. v Turcios, 55 AD3d 806, 806). Here, contrary to the defendants’ contention, their first counterclaim [alleging that the contract was void ab initio based on fraud] seeks an equitable remedy on its face and in nature and, thus, they waived their right to a jury trial (see Conwell Props., Inc. v DAG Rte. Six, LLC, 210 AD3d at 1051; Nationscredit Fin. Servs. Corp. v Turcios, 55 AD3d at 806).

Thus, not only did the defendant waive a jury on its own counterclaim, but asserting the defense of fraud in the inducement of the contract that plaintiff sought to enforce also deprived defendant of a jury trial of that claim as well.

Jury Trial Contractual Waivers

This case addresses an issue that has caused certain confusion for other courts in deciding whether to enforce contractual jury waiver provisions.  Certain decisions hold that if a contract containing a jury waiver is challenged and only rescission of that contract is sought, the jury waiver is not enforceable at all.  But this does not make sense if the claim for rescission itself is not triable by a jury regardless of the contractual jury waiver.  I have written about this issue in other posts.  See “Jury Waiver Issues Concerning Fraudulent Inducement Claims” and posts and cases cited and discussed therein.