Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

KAROL v. BEAR STEARNS & CO.

February 22, 1989

NATHANIEL H. KAROL, LILIANE L. KAROL and N.H. KAROL & ASSOCIATES, INC., Plaintiffs,
v.
BEAR STEARNS & CO., INC., Defendant


Marvin E. Aspen, United States District Judge.


The opinion of the court was delivered by: ASPEN

MARVIN E. ASPEN, UNITED STATES DISTRICT JUDGE

 On November 25, 1987, plaintiffs Nathaniel H. Karol, Liliane L. Karol and N. H. Karol & Assoc., Ltd. (collectively "the Karols") filed this action charging defendants Bear Stearns & Co. and certain of its agents and officers (collectively "Bear Stearns") with violations of the Securities and Exchange Act of 1934 and various state common law duties. While the Karols indicated on the civil cover sheet that the lawsuit would be tried before a jury, they did not include a jury demand in their complaint or formally request a jury trial within ten days of March 2, 1988, the date Bear Stearns filed its answer. The Karols thereby waived their right to a jury as to all claims set forth in their original complaint. Fed.R.Civ.P. 38. *fn1" Stewart v. RCA Corp., 790 F.2d 624, 629 (7th Cir. 1986) (filing of answer triggers the ten-day requirement of Rule 38); Wall v. National Railroad Passenger Corp., 718 F.2d 906, 909 (9th Cir. 1983) (checking the jury demand box on a civil cover sheet does not satisfy Rule 38). The Karols voluntarily withdrew the state law claims after Bear Stearns moved to compel their arbitration. The Karols now move to amend the complaint to add a jury demand and new federal securities claims. For the following reasons, the motions are granted, and we order the parties to proceed before an arbitrator.

 Motion to Amend to Add Jury Demand to Original Counts

 Rule 39(b) provides that

 
Issues not demanded for trial by jury as provided in Rule 38 shall be tried by the court; but, notwithstanding the failure of a party to demand a jury in an action in which such a demand might have been made of right, the court in its discretion upon motion may order a trial by a jury of any or all issues.

 The Seventh Circuit urges a generous application of Rule 39(b). "In the absence of strong and compelling reasons to the contrary, untimely jury demands should be granted." Merritt v. Faulkner, 697 F.2d 761, 767 (7th Cir.), cert. denied, 464 U.S. 986, 104 S. Ct. 434, 78 L. Ed. 2d 366 (1983). Factors to consider in excusing a jury waiver include "(1) whether the case involves issues which are best tried to a jury; (2) whether granting the motion would result in a disruption of the court's schedule or that of the adverse party; (3) the degree of prejudice to the other party; (4) the length of delay in having requested a jury trial; and (5) the reason for the movant's tardiness in requesting a jury trial." AM International, Inc. v. Eastman Kodak Co., 648 F. Supp. 506, 507 (N.D. Ill. 1986).

 The Karols establish through affidavits that attorney inadvertence explains their failure to comply with Rule 38. They asked their attorney Robert Queeney for a jury trial. Queeney appropriately prepared the civil cover sheet and asked his partner Steven B. Varick to draft the complaint. Varick failed to include a jury demand in the complaint, and Queeney did not become aware of this omission until he had a conversation with opposing counsel on November 15, 1988. Queeney immediately moved to amend.

 The parties dispute whether a waiver resulting from attorney inadvertence may ever be excused. Bear Stearns relies heavily on a pre-Merritt Seventh Circuit decision in which the court stated "as a general rule, mere inadvertence will not justify relief from waiver of the right to trial by jury . . ." Ma v. Community Bank, 686 F.2d 459, 470 (7th Cir.), cert denied and appeal dismissed, 459 U.S. 962, 103 S. Ct. 287, 74 L. Ed. 2d 273 (1982). We do not view that statement as an absolute bar to granting a jury trial under these circumstances. To the extent that it is as categorical as Bear Stearns suggests, we agree with Judge Ann C. Williams' conclusion in Optigraphics Corp. v. Gunthorp-Warren Printing Co., No. 87 C 9597, 1988 U.S. Dist. LEXIS 4116 (N.D. Ill. May 11, 1988), that the Seventh Circuit "implicitly undermined the reasoning in Ma by citing with approval a case where leave to file an untimely jury demand was given notwithstanding counsels' inadvertence." See also Brach v. Amoco Oil Co., 570 F. Supp. 1437, 1440 (N.D. Ill. 1983); G. Bauknecht GmbH v. Electronic Relays, Inc., 569 F. Supp. 404, 415 (N.D. Ill. 1983) (stating with citation to Merritt : "Though case law is split as to what constitutes a sufficient excuse, even the most lenient approach (to which our own Court of Appeals subscribes) requires a showing of inadvertence."). Thus, inadvertence such as that set forth by the Karols may, in the absence of strong and compelling reasons to the contrary, provide a basis for relief under Rule 39(b).

 Bear Stearns has not presented sufficient grounds for denying the Karols their untimely jury demand. The issues to be litigated are no more complex than in any other action under the federal securities laws. The parties have until April 7, 1989, to prepare the final pre-trial order and can adjust their preparations if need be to account for the change of trier of fact.

 Bear Stearns contends that it will suffer significant prejudice from granting the Karols' belated jury demand in that it refrained from enforcing its right to arbitrate these claims on the understanding that the court, rather than a jury, would make findings of fact. We agree with Bear Stearns that the Customer Agreement that forms the basis of its relationship with the Karols gives it the absolute right to arbitrate the claims in this action:

 
Any controversy arising out of or relating to your account in connection with transactions between us or pursuant to this Agreement or the breach thereof shall be settled by arbitration. . . . If you do not make such election . . . then Bear Stearns may make such election. para. 13.

 Arbitration provisions are enforceable as to claims arising under ยง 10(b) of the Securities Exchange Act of 1934 and SEC rules promulgated thereunder. Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 107 S. Ct. 2332, 2343, 96 L. Ed. 2d 185 (1987). The Karols isolate a later clause in that same paragraph to contend that they have an absolute right to a judicial forum notwithstanding the arbitration provision. The sentence from which the Karols lift that clause is as follows:

 
You understand that this Agreement to arbitrate does not constitute a waiver of your right to a judicial forum where such a waiver would be void under the Securities Laws and, specifically does not prohibit you from pursuing any claim or claims arising under ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.