Court of Appeal reverses denial of jury trial, refusing to apply New York law

GMSR’s clients sued their lender for destroying their business by reneging on a promise to provide additional funding.  The lender cross-complained for an alleged $113 million deficiency following foreclosure on the security for its loans.  The trial court rejected the clients’ demand for a jury.  It relied on a jury waiver provision in the parties’ contract, applying the contract’s New York choice-of-law provision (pre-dispute jury waivers are enforceable in New York but not in California).  In the bench trial that followed, the court found against the clients on the complaint and against the lender on the cross-complaint.  Both sides appealed.

The principal issue on appeal was whether the trial court had erred in denying a jury trial and, if so, what the relief should be.  The court accepted GMSR’s arguments that California law governed the jury waiver- because New York’s more permissive law was contrary to fundamental California policy.  It also agreed that denial of a jury trial was a structural error and therefore reversible per se as to all of the clients’ claims, even equitable issues as to which they had no right to a jury.  On the cross-complaint, as to which the lender had waived a jury, the court agreed with GMSR’s arguments that the trial court’s rejection of all of the lender’s claims was supported by substantial evidence.

Himelsein Mandel Fund Management, LLC v. Fortress Investment Group LLC (Mar. 28, 2019, B281210) 2019 WL 1395963 [Second District, Division 4] [nonpublished]

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