The mystique of the jury trial is deeply embedded in the social consciousness of our country. Non-lawyers who think of litigation tend to recall courtroom thrillers like To Kill a Mockingbird, Erin Brockovich, or Philadelphia. These movies, like the vast majority of courtroom dramas, depict jury trials. Since the public so closely associates trials with juries, litigants are sometimes disappointed to learn that jury trials are uncommon in business litigation generally, and exceedingly rare in business divorce litigation.
The reality is that jury trials are only available in certain types of cases, depending on the relief sought. A recent decision by Manhattan Commercial Division Justice Marcy S. Friedman, Quazzo v Quazzo, 2020 NY Slip Op 32342(U) [Sup Ct NY County July 17, 2020], highlights some of the reasons few business divorce cases wind up before juries. In Quazzo, Justice Freidman took an uncommonly nuanced and thoughtful approach to the difficult, and in some ways conflicting legal rules that govern parties’ rights to a jury trial. The outcome was a case where some of the many claims will be tried in a jury trial (whenever they resume post-COVID), and some will be tried to the judge in a non-jury (or “bench”) trial.
Quazzo is a ten-year-long litigation between a daughter, Cristina, and her father, Ugo, consisting of a proceeding for judicial dissolution of three family-owned, and a separate plenary action for various claims including money damages and equitable relief. Quazzo has twice previously graced this blog’s pages. In 2014, we wrote a post (read here) about Justice Friedman’s decision denying Ugo’s motion for summary judgment dismissing Cristina’s dissolution petition. Five years later, we wrote a second post (read here) about Justice Friedman’s decision denying Cristina’s motion for summary judgment on her petition for dissolution. As a result of those decisions, the case headed towards two likely outcomes: settlement or trial. Cristina and Ugo so far have chosen the latter.
In the filing which precipitated the decision that is the subject of this week’s post, Ugo – the respondent/defendant – filed in both lawsuits a demand for jury trial. Cristina – the petitioner/plaintiff – filed a motion to strike her dad’s jury demand and require the case to be tried in a bench trial. Linked here are the parties’ memoranda of law in support, opposition, and reply.
Any decision about whether a party is entitled to a jury trial in a civil case has to start with the language of CPLR 4101. That statute sets forth the kinds of cases in which a jury trial is permitted. Subsection (1) says that “unless a jury trial is waived” by neither party demanding one, the “issues of fact shall be tried by a jury” in “an action in which a party demands and sets forth facts which would permit a judgment for a sum of money only,” “except that equitable defenses and equitable counterclaims shall be tried by the court.” Boiled down to its most simple form, the statute says that claims that can be characterized as “legal” (for which money damages are sought) are triable to a jury, while claims that are “equitable” (for which some kind of relief other than money damages) are triable to the bench. But making that division between “legal” and “equitable” claims can be surprisingly difficult in practice. Making the analysis even more difficult, the rule that legal claims are triable to the jury, equitable claims are not, is riddled with exceptions.
“At common law,” Justice Friedman explained, “actions at law were triable by jury while suits in equity were not.” Often when courts decide whether a party is entitled to a jury trial, the analysis does not get much further than a consideration of whether the plaintiff has pled equitable claims. Many judges rely on the principle that if the plaintiff has joined legal with equitable claims, there’s no right to a jury trial, that’s the rule, end of story. But Justice Friedman rejected what she called a “categorical” approach to the historical distinction between legal (jury triable) claims, and equitable (non-jury) claims, identifying no less than five exceptions to the general rule that claims traditionally considered equitable are not triable by jury.
Exception No. 1: “The historical categorization of a claim is not . . . the sole inquiry in determining whether the claim is triable by jury. Substantial long-standing authority holds that, in determining this issue, the court must consider not only the historical treatment of a claim as legal or equitable, or the relief demanded, but also whether, on the facts alleged, money damages afford a full and complete remedy.” Under this approach, if a plaintiff “could obtain full relief by means of a monetary award,” then it would eliminate the need for the court to grant equitable relief (emphasis added). Since equitable relief may ultimately be unnecessary, the plaintiff is entitled to a jury trial.
Exception No. 2: Although “fiduciary duty claims historically sound in equity” and are “not triable by jury,” “fiduciary duty claims that primarily seek monetary relief are considered legal in nature and are therefore triable by jury” (quotations omitted).
Exception No. 3: Although “shareholder derivative claims are equitable in nature and therefore not triable by jury, where shareholder derivative claims seek “predominantly legal relief,” or, “the equitable relief sought by plaintiff on the derivative causes of action that also seek monetary relief is incidental to the monetary relief,” the derivative claims will be triable to a jury.
Exception No. 4: Although a claim for an accounting is also traditionally considered “equitable in nature,” “where the accounting is sought merely as a means to calculate money damages on a legal claim, the accounting is incidental to the legal relief,” and the claim may be tried to a jury.
Exception No. 5: “When a complaint either joins legal and equitable causes of action arising out of the same alleged wrong or seeks both legal and equitable relief, there is a waiver of a plaintiff’s right to a jury trial,” but not the defendant’s right to demand a jury trial. Thus, “the fact that a plaintiff may have waived its own right to a jury trial by joining a legal claim with an equitable claim will not affect a defendant’s entitlement to a jury trial on plaintiff’s legal causes of action” (quotations omitted) (emphasis added).
Applying these rules, neither party had a complete win. As to the dissolution proceeding, the Court held that it was not triable by jury because it sought claims solely based upon the dissolution statutes and accompanying equitable relief including an injunction and appointment of a receiver, for which there is no right to a jury trial. In the Court’s words, “monetary relief is sought only in the plenary action.” As to the plenary action, the Court ruled that Cristina’s commingling of legal and equitable claims – though it would have waived her right to a jury trial had she asked for one – did not waive her dad’s right to one because “a defendant’s entitlement to a jury trial” is not defeated by plaintiff’s choice to mix legal and equitable claims. As to specific claims in the plenary complaint, the Court ruled that although many of Cristina’s claims, particularly her derivative claims, were traditionally considered equitable and sought equitable remedies, “the equitable relief sought by [her] on the derivative causes of action that also seek monetary relief is incidental to the monetary relief,” and in any event, much of the equitable relief sought was “duplicative of the equitable relief sought in the special proceeding.” As a result, the Court held all claims in the dissolution petition are triable to the court, eight causes of action in the plenary action are triable by jury, and the remaining claims in the plenary action are triable to the court.
At the conclusion of the decision, Justice Friedman considered, but did not decide, the procedures by which to try some claims to a jury, some to the court. Cristina’s preference: “try the issues that are not triable by jury before empaneling a jury.” Ugo’s preference: try all issues together in a single trial and “request that the jury issue an advisory verdict on issues that are not triable by jury.” Under New York law, a court has the discretion to follow either approach. Though Justice Friedman opined that “a single trial may be not only appropriate but necessary to avoid potentially inconsistent determinations on these claims” given “the extent to which the legal and equitable claims are intertwined here,” the Court ruled that “a final decision on the format of the trial should await further elucidation from the parties,” particularly since “a formal motion to join the special proceeding and plenary action for trial has not been made.”
At the infancy of litigation, practitioner drafting pleadings quite naturally tend to focus on the immediate goals at hand – drafting a pleading that will make an impact upon the adversary and survive a motion to dismiss – rather than the long-term objective – winning at trial. The risk of this approach is that the short-term goals may undercut long term preferences. In particular, for closely-held business owners who have struggling for years with their co-owners, the statute of limitations is a real concern. Very often, lawyers for petitioners / plaintiffs will attempt to extend the statute of limitations by characterizing common-law claims like breach of fiduciary duty as predominantly equitable rather than legal in nature, thus extending the statute of limitations from a three to six years. Quazzo is a reminder to consider at the commencement of litigation whether one may ultimately want a jury trial, and if so, to devote thought into whether those equitable components are really necessary. For defendants / respondents, Quazzo provides some comfort that even if a petitioner / plaintiff may have waived a right to jury trial, with some nuanced argument, you may still be entitled to a jury trial.