Unreported / Non-Citable
Background
Bank of America sued Ztar Mobile, Inc. and its president and CEO, Kevin T. Haddad, for breach of contract after a $6 million revolving line of credit matured and the defendants allegedly failed to pay the amounts due. Haddad had executed the 2019 loan agreement on Ztar’s behalf and personally guaranteed the loan.
The loan agreement, related security agreement, and guaranty each contained bold-faced, all-capitalized jury-trial waivers. The parties’ earlier loan documents and three subsequent amendments also contained or reaffirmed jury waivers. After Ztar and Haddad demanded a jury trial, Bank of America moved to strike the demand.
Ztar and Haddad argued that the waivers were not knowing and voluntary, citing the parties’ relative bargaining power, Haddad’s lack of legal training, an asserted lack of negotiation, and the placement of the waiver provisions within the documents.
The Court’s Holding
The court granted Bank of America’s motion and struck the jury demand. Applying Fifth Circuit law, it explained that once a facially valid contractual jury waiver is established, the party opposing enforcement bears the burden of showing that the waiver is unenforceable. Ztar and Haddad did not carry that burden.
The relevant factors favored enforcement. The ordinary borrower-lender relationship did not create the extreme bargaining disparity needed to invalidate the waivers; Haddad’s decade-plus experience as Ztar’s president and CEO supported his ability to understand them; the defendants presented no evidence that the terms were nonnegotiable and acknowledged negotiating other loan terms; and the waivers were conspicuous and unambiguous because they appeared in bold, capitalized language.
The court concluded that Ztar and Haddad knowingly and voluntarily waived their jury-trial rights. It ordered the case to proceed to a bench trial and reset the final pretrial conference accordingly.
Key Takeaways
- A party resisting a facially valid contractual jury waiver bears the burden of proving that the waiver is unenforceable.
- An ordinary disparity between a commercial lender and borrower, without an exceptional or gross bargaining disadvantage, does not invalidate a jury waiver.
- Bold, capitalized, and unambiguous waiver language may be conspicuous even when it appears within a longer agreement containing other emphasized provisions.
Why It Matters
The decision shows that federal courts in the Fifth Circuit will enforce pre-dispute jury waivers in commercial lending documents when the circumstances demonstrate knowing and voluntary assent. A party generally cannot avoid a waiver merely by pointing to a lender’s greater bargaining power, choosing not to involve counsel, or asserting that it did not negotiate the provision.
Businesses and guarantors should treat jury waivers as consequential terms, particularly when the same waiver is repeated or reaffirmed across related agreements and amendments. Here, those provisions changed the mode of trial for the underlying contract dispute from a jury trial to a bench trial.