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July 31, 1979


The opinion of the court was delivered by: DITTER

In this case, defendants present a challenge to an experimental program instituted by the Department of Justice to test the feasibility of compulsory arbitration in civil suits. Plaintiffs, husband and wife, brought this diversity action *fn1" seeking damages in an amount less than $ 50,000 for personal injuries allegedly suffered by the wife during an assault when she was a business visitor at defendants' hotel. Defendants demanded a jury trial as permitted by Fed.R.Civ.P. 38(b). Pursuant to Local Rule 49, however, the case was referred to arbitration. Defendants now move to prohibit arbitration and to vacate the order of referral.

 Through the addition of Local Rule 49, this court adopted a compulsory, nonbinding arbitration system on February 1, 1978, for a trial period of one year. *fn2" It did so as part of a Department of Justice experiment, *fn3" the express purpose being to test a plan which will "broaden access for the American people to their justice system and to provide mechanisms that will permit the expeditious resolution of disputes at a reasonable cost." Statement of Attorney General Griffin B. Bell before the Senate Committee on the Judiciary, Subcommittee on Improvements in Judicial Machinery, April 14, 1978. Basically, this arbitration system provides that certain types of cases *fn4" with money damages of $ 50,000, or less shall be automatically referred to arbitration, an arbitration hearing held in 30 days in most cases, and an award entered. Unless a party demands a trial De novo within 20 days after the entry of the award, the arbitration panel's decision becomes a final, nonappealable judgment. To discourage frivolous appeals, Local Rule 49 imposes upon the party who demands a trial De novo and fails to obtain a more favorable judgment, exclusive of interest and costs, the amount of the arbitration fees and imposes upon the defendant interest on the award from the time it was filed.

 Defendants contend that by making arbitration a mandatory prerequisite to jury trial, Local Rule 49 violates the parties right to a trial by jury, is inconsistent with the Federal Rules of Civil Procedure, and denies litigants equal protection of the laws.


 Defendants first argue that application of Local Rule 49 will violate their right to trial by jury as at common law, a right guaranteed by the Seventh Amendment and by 28 U.S.C. § 2072. *fn5" As early as 1897, the Supreme Court noted that the aim of the Seventh Amendment "is not to preserve mere matters of form and procedure, but substance of right." Walker v. Southern Pacific Railroad, 165 U.S. 593, 596, 17 S. Ct. 421, 422, 41 L. Ed. 837 (1897). *fn6" The high court has consistently held that:

 The Court's most recent pronouncements regarding changes in the common law right to trial by jury as possible Seventh Amendment violations have been concerned with the number of jurors required by the constitution. In Colgrove v. Battin, 413 U.S. 149, 93 S. Ct. 2448, 37 L. Ed. 2d 522 (1973), the Court held that a local rule providing that a jury trial shall consist of six persons does not violate the substance of the Seventh Amendment, the requirements of 28 U.S.C. § 2072, or the Federal Rules of Civil Procedure.

 Colgrove provides several clues regarding Seventh Amendment substantive rights as contrasted with procedural changes. *fn7" The Court interpreted the Seventh Amendment language that the right of jury trial be preserved as protecting the right to jury trial for cases where it existed at common law rather than as preserving various incidents of trial by jury. Id. at 152-56, 93 S. Ct. at 2450-52. The Colgrove Court, following Williams v. Florida, 399 U.S. 78, 90 S. Ct. 1893, 26 L. Ed. 2d 446 (1970), where the constitutionality of a statute providing for six-member juries in certain criminal cases was upheld, found no difference between trials by juries of twelve and trials by juries of six which would affect the substance of the Seventh Amendment right. Id. at 158-60, 93 S. Ct. at 2453-54.

 In Ballew v. Georgia, 435 U.S. 223, 98 S. Ct. 1029, 55 L. Ed. 2d 234 (1978), the Court had the opportunity to reevaluate its holding in Williams v. Florida, supra, when presented with the issue of whether a state criminal trial with a five-member jury deprives the defendant of the right to trial by jury guaranteed by the Sixth and Fourteenth Amendments. There, the Court balanced harm to defendant in the reduction of jury size with the administrative benefit to the state and held:

While we adhere to, and reaffirm our holding in Williams v. Florida, these studies, most of which have been made since Williams was decided in 1970, lead us to conclude that the purpose and functioning of the jury in a criminal trial is seriously impaired, and to a constitutional degree, by a reduction in size to below six members. We readily admit that we do not pretend to discern a clear line between six members and five. But the assembled data raise substantial doubt about the reliability and appropriate representation of panels smaller than six. Because of the fundamental importance of the jury trial to the American system of criminal justice, any further reduction that promotes inaccurate and possibly biased decisionmaking, that causes untoward differences in verdicts, and that prevents juries from truly representing their communities, attains constitutional significance. Id. at 239, 98 S. Ct. at 1038-39.

 Although Ballew dealt with a criminal trial and the Sixth and Fourteenth Amendments, the Court's evaluation of the factors amounting to a change in the right to jury trial of constitutional proportions is equally applicable here. A change in the right to jury trial is substantive where there is a substantial likelihood that the outcome of the trial would be influenced by the change and where no significant advantage accrues to the government by virtue of the innovation. Cases dealing with arbitration as a prerequisite to jury trial hold that such a preliminary system to trial greatly aids the efficiency of the trial system yet does not influence the outcome of the final verdict for any individual.

 The Supreme Courts of the United States and Pennsylvania have both held that a procedure for nonjudicial determination prior to jury trial does not constitute a Seventh Amendment violation. In Capital Traction Company v. Hof, 174 U.S. 1, 19 S. Ct. 580, 43 L. Ed. 873 (1899), Congress, acting as a legislative body for the District of Columbia, passed a statute providing for trial in civil cases of moderate amount before a justice of the peace with a jury of twelve or less, allowing either party the right to appeal, upon posting of security, to a court of record for a trial by jury. The Court found no Seventh Amendment violation in this system as long as the right to trial by jury was preserved through the appeal. In commenting that the Seventh Amendment sought to preserve the Right to trial by jury and not trial by jury, the Court noted that "it does not prescribe at what stage of an action a trial by jury must, if demanded, be had; or what conditions may be imposed upon the demand of such a trial, consistently with preserving the right to it." Id. at 23, 19 S. Ct. at 589. *fn8"

 The leading case upholding the constitutional validity of a compulsory arbitration system is the Pennsylvania Supreme Court's pronouncement in Smith's Case, 381 Pa. 223, 112 A.2d 625 (1955), appeal dismissed sub nom. Smith v. Wissler, 350 U.S. 858, 76 S. Ct. 105, 100 L. Ed. 762 (1958).

 In Smith's Case, a challenge based on the Pennsylvania Constitution, Article 1, § 6, which provides that trial by jury shall be as heretofore, and the right thereof remain inviolate, *fn9" was brought against a local rule of court authorizing compulsory arbitration pursuant to a Pennsylvania legislative enactment providing for such arbitration in all cases involving claims less than $ 1000. *fn10" The court in Smith's Case construed the Pennsylvania constitutional mandate of trial by jury to be consistent with the U.S. Supreme Court's interpretation of the Seventh Amendment in Hof, and held that "(t)he only purpose of the constitutional provision is to secure the right of trial by jury before rights of person or property are Finally determined. All that is required is that the right of appeal for the purpose of presenting the issue to a jury must not be burdened by the imposition of onerous conditions, restrictions or regulations which would make the right practically unavailable. 381 Pa. at 230-31, 112 A.2d at 629 (emphasis in original). The court also emphasized that the burden imposed on parties by compulsory arbitration was far outweighed by the benefits of a speedy, less expensive, and more efficient trial system. Id. at 229-30, 112 A.2d at 629.

 While conceding that court-mandated arbitration is in general constitutional, defendants seize upon the exception noted in Smith's Case and claim that Local Rule 49 creates a burdensome, onerous condition to jury trials, i. e., since the arbitration limits are so high, $ 50,000, there must be a ...

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