Parties Litigating Arbitrability Should Consider Procedural Rules in the Federal Arbitration Act
Lenders who move to compel arbitration should always consider the complex interplay between the Federal Rules of Civil Procedure and the Federal Arbitration Act. In Ryan D. Burch v. P.J. Cheese, Inc., 861 F.3d 1338 (2017), the Eleventh Circuit held that a general jury demand in the plaintiff’s complaint was not enough to preserve his statutory right to a jury trial on questions of arbitrability. Specifically, the Court held that the FAA’s procedural requirements for demanding a jury trial on arbitrability trumped the normal requirements for a jury demand found in Federal Rule of Civil Procedure 38. While the case specifically concerns a jury demand, it also demonstrates that the FAA contains procedural requirements and that the Federal Rules only fill the gaps. Therefore, when arbitrability will be an issue, lenders should take care to consider the procedural requirements of the FAA in conjunction with those of the Federal Rules.
Ryan Burch was fired from his management position at P.J. Cheese, a local Papa John’s franchise. Burch filed suit, asserting several employment claims, and demanded a jury trial. In response, P.J. Cheese moved to stay the proceedings and compel arbitration based on an employment contract purportedly signed by Burch. In an affidavit, Burch denied that the signature on the arbitration agreement was his. However, he did not specifically demand that a jury decide the issue of authenticity. The trial court then denied the motion to compel arbitration, concluding that Burch’s denial created a fact dispute over the authenticity of the agreement. At the pre-trial conference, the question arose whether the judge or a jury should try the issue of arbitrability. The trial court ultimately concluded that it should conduct a bench trial. Following the bench trial, the trial court determined that the signature was valid. Thus, the trial court stayed the case and compelled arbitration.
Burch appealed to the Eleventh Circuit, asserting, among other things, that the trial court erred by conducting a bench trial despite his general demand for a jury trial. The Court disagreed and affirmed the trial court’s judgment. Specifically, Burch contended that Rule 38 of the Federal Rules of Civil Procedure applied and that this Rule only requires a party to serve another party with a written demand for a jury trial “no later than [fourteen] days after the last pleading directed to the issue is served.” Thus, his general jury demand in his complaint was sufficient to trigger his statutory right to a jury trial.
The defendant countered that Rule 81 states that the FAA’s procedural requirements take precedence when that Act provides a more specific procedure. Relevant to Burch’s appeal, Section 4 of the FAA contains a specific procedure for demanding a jury trial on arbitrability. Under Section 4 of the FAA, the defaulting party requesting a jury must make their demand “on or before the return day of the notice of application” to submit to arbitration. Because the FAA specifically addressed the procedures for demanding a jury trial, the Court held that Section 4 of the FAA—rather than Rule 38—governed.
Because the FAA specifically addressed the procedures for demanding a jury trial, the Court held that Section 4 of the FAA—rather than Rule 38—governed.
The Court then turned to the issue of whether Burch complied with Section 4’s procedural requirements. Under Section 4, the party in default must demand a jury trial of “such issue” “on or before the return day of the notice of application” to submit to arbitration. The Court reasoned that the statutory term “such issue” contemplates that a party must make a demand for a jury trial on the specific issue (in this instance, on the authenticity of Burch’s signature) in order to preserve the statutory right to a jury trial. Here, Burch only made a general jury demand in the complaint. Thus, because Burch neglected to make a specific jury demand prior to the deadline to submit to arbitration, the Court held that Burch waived his right to a jury trial on arbitrability.
Lenders may find this decision useful if a plaintiff demands a jury trial on the issue of arbitrability but fails to make a specific demand on “such issue.” However, the later lesson is that a lender moving to compel arbitration should always consider whether the FAA has a specific procedural requirement that trumps the requirements of the Federal Rules.