The opinion of the court was delivered by: Joyner, District Judge.
Plaintiff, First Union National Bank, has moved to strike Defendant
Robert Casagrande's demand for jury trial. For the reasons outlined
below, the motion shall be denied.
This case arises out of a $6.35 million dollar loan which was made in
December, 1989 by the Plaintiff's predecessor-in-interest, Fidelity
Bank, to the MM Group, Inc. ("MM") for the purchase of six radio stations
located in Illinois and Ohio. Mark Litton and Robert Casagrande were the
officers and sole shareholders of MM. Given that MM began experiencing
financial difficulties shortly thereafter, it agreed with Fidelity to
modify the terms and conditions of the loan in writing, which
modifications included a Forbearance Agreement, an Amended and Restated
Loan Agreement and an Amended, Restated and Consolidated Stock Pledge
Agreement, all entered into on June 6, 1991. However, MM continued to
suffer from financial problems and, between the fourth quarter of 1991
and the first quarter of 1993, it failed to pay federal withholding taxes
for its employees. In 1996, the U.S. Internal Revenue Service assessed
First Union as a responsible person under 26 U.S.C. § 6672 for some
$140,914.70 in penalties for MM Group's unpaid withholding taxes. In
1997, the IRS levied a second assessment in additional penalties against
First Union in the amount of $320,300.81 for MM's unpaid payroll taxes.
First Union paid the assessments levied against it on May 30, 1996 and
August 27, 1997 but, on May 28, 1998, filed a Form 843 claim with the IRS
Center in Philadelphia seeking a refund of all monies which it paid to
the Government on account of MM Group's withholding tax liability.
The IRS, however, refused the plaintiff's requests for refund and, on
December 11, 1998, it filed this lawsuit against the United States. By
way of Amended Complaint filed on June 18, 1999, First Union joined
Defendants Litton and Casagrande to this action. Mr. Litton has since
settled the claims brought against him by First Union and the United
States Government. First Union now moves to strike Mr. Casagrande's jury
trial demand on the grounds that (1) Casagrande waived his right to a
trial by jury in the Amended and Restated Loan Agreement of June 6,
1991; and (2) Casagrande is not entitled to a jury trial on the U.S.
government's cross-claim against him under 26 U.S.C. § 6672 for
payment of the unpaid taxes and penalties.*fn1
As a general rule, the right to a jury trial is protected by the
Seventh Amendment when the claim is a legal one, but not if it is
equitable and the right to a jury trial in the federal courts is to be
determined as a matter of federal law in diversity as well as in other
actions. Simler v. Conner, 372 U.S. 221, 222, 83 S.Ct. 609, 610, 9
L.Ed.2d 691 (1963); Pappas v. Unum Life Insurance Company, 2000 WL
1137730, **2-3, 2000 U.S. Dist. LEXIS 11308, *6-7 (E.D.Pa. 2000), citing
Hatco Corporation v. W.R. Grace & Co., 59 F.3d 400, 411 (3d Cir.
1995). Thus, the right to a jury trial in federal court, regardless of
whether the claim arises under state law, presents a question of federal
law. In Re City of Philadelphia Litigation, 158 F.3d 723, 726 (3d Cir.
1998). See Also: Cooper Labs., Inc. v. International Surplus Lines
Insurance Co., 802 F.2d 667, 671 (3d Cir. 1986). The federal policy
favoring jury trials is of historic and continuing strength. Simler,
Although the right to a jury trial is guaranteed by the Seventh
Amendment to the U.S. Constitution, like all constitutional rights, it
can be waived by the parties. In Re City of Philadelphia, supra, citing
United States v. Moore, 340 U.S. 616, 621, 71 S.Ct. 524, 95 L.Ed. 582
(1951). See Also: Fed.R.Civ.P. Nos. 38(a), (d); 39. Waiver can be either
express or implied and requires only that the party waiving such right do
so voluntarily and knowingly based on the facts of the case. Seaboard
Lumber Company v. United States, 903 F.2d 1560, 1563 (Fed.Cir. 1990),
citing, inter alia, Commodity Futures Trade Commission v. Schor,
478 U.S. 833, 848, 106 S.Ct. 3245, 92 L.Ed.2d 675 (1986) and Brookhart
v. Janis, 384 U.S. 1, 4, 5, 86 S.Ct. 1245, 16 L.Ed.2d 314 (1966).
In some circumstances, the right to a jury trial can be waived by
inaction or acquiescence. In Re Philadelphia, supra.; Cooper v. Loper,
923 F.2d 1045, 1049 (3d Cir. 1991). The acceptance of contract provisions
providing for dispute resolution in a forum where there is no entitlement
to a jury trial may satisfy the "voluntary" and "knowing" standard.
Given that there is a presumption against waiver, Courts do not uphold
jury trial waivers lightly and the burden of proving that a waiver was
done both knowingly and intelligently falls upon the party seeking
enforcement of a waiver of a jury trial clause. Cottman Transmission
Systems v. Melody, 1994 WL 702913, *1, 1994 U.S. Dist. LEXIS 17773, *2
(E.D.Pa. 1994); Hydramar, Inc. v. General Dynamics Corporation, 1989 WL
159267, *2, 1989 U.S. Dist. LEXIS 15784 *6 (E.D.Pa. 1989), citing Aetna
Insurance Co. v. Kennedy, 301 U.S. 389, 57 S.Ct. 809, 81 L.Ed. 1177
(1937). A waiver is knowing, voluntary and intelligent when the facts
show that (1) there was no gross disparity in bargaining power between
the parties; (2) the parties are sophisticated business entities; (3) the
parties had an opportunity to negotiate the contract terms; and (4) the
waiver provision was conspicuous. Phoenix Four Grantor Trust #1 v. 642
North Broad Street Associates, 2000 WL 1717261, *2, 2000 U.S. Dist. LEXIS
16524, *7 (E.D.Pa. 2000); Today's Man, Inc. v. Nations Bank, N.A., 2000
WL 822500, *4, 2000 U.S. Dist. LEXIS 8710 *12 (E.D.Pa. 2000); Corestates
Bank, N.A. v. Signet Bank, 1997 WL 117010, 1997 U.S. Dist. LEXIS 2686
(E.D.Pa. 1997). See Also: National Equipment Rental, Ltd. v. Hendrix,
565 F.2d 255, 258 (2d Cir. 1977); Hydramar. 1989 WL 159267, *4, 1989
U.S. Dist. LEXIS 15784 at *11.
10.15 WAIVER OF JURY TRIAL THE BORROWERS HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT, THE NOTES, THE LOAN DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN.
BORROWERS HEREBY CERTIFY THAT NO REPRESENTATIVE OR
AGENT OF THE BANK (INCLUDING ITS COUNSEL) HAS
REPRESENTED, EXPRESSLY OR OTHERWISE THAT THE BANK
WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO
ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL. THE
BORROWERS ACKNOWLEDGED THAT THE BANK HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, INTER ALIA, THE
PROVISIONS OF THIS SECTION 10.15.
Casagrande, in turn, contends that he was not a party to those agreements
in that he signed them only in his capacity as a corporate officer and
that even if he did execute them in his individual capacity, the
plaintiff has not met its burden of proving that the jury trial waivers
were knowingly and voluntarily executed.
In reviewing the documents upon which the plaintiff relies, we observe
that Messrs. Litton and Casagrande appear to have executed the Amended,
Restated and Consolidated Stock Pledge Agreement in their individual
capacities as no corporate designations appear with their signatures.
This is in contrast to the manner in which they executed the Forbearance
Agreement and the Amended and Restated Loan Agreement, in that in
executing both of those documents, Mr. Casagrande and Mr. Litton clearly
wrote in that they were signing as President and Vice President
respectively of MM Group, Inc. As paragraph 63 of the Plaintiff's Amended
Complaint avers, "[p]ursuant to Section 1.3.1 of the Stock Pledge
Agreement executed by Casagrande and Litton, the occurrence of an `Event
of Default' under the Forbearance Agreement, the Amended Loan Agreement
and/or any other Loan Documents would constitute an `Event of Default'
under the Stock Pledge Agreement," we conclude that this lawsuit is "in
respect of any litigation arising out of, under, or in connection with
[the Amended, Restated and Consolidated Stock Pledge ...