A. Introduction
Law in the United States provides a constitutional right to a jury trial not only in criminal cases but also in many civil cases. However, parties often unknowingly trade away their civil jury rights in so-called “adhesion” contracts—the form contracts businesses present on a take-it-or-leave-it basis to consumers, workers, and others who typically do not read, let alone understand, the whole contract. Courts in the U.S. typically enforce the unread arbitration clauses of such contracts, so arbitration law in the U.S. routinely makes superficial “adhesive” consent sufficient to trade away the constitutional right to a jury in civil cases. This Article explains this aspect of arbitration law in the U.S. and contextualizes it by also discussing non-arbitration adhesion contracts that similarly trade away constitutional rights in the U.S., and by offering an international comparative perspective.
Following this introduction, Part B places arbitration law in the context of dispute resolution in the U.S. Then, Part C explains how the Federal Arbitration Act enforces arbitration agreements according to the easily satisfied consent standards of general contract law, which results in the enforcement of most adhesive arbitration agreements. Part D shows that the FAA’s widespread enforcement of adhesive arbitration agreements is unusual from an international comparative perspective. Part D shows also that arbitration agreements in the U.S. typically trade away a right that, although it exists virtually nowhere else in the world, is constitutional in the U.S.—the right to a civil jury.
Part E notes that arbitration agreements are not the only agreements trading away the civil jury right, as this right is also traded away by agreements permitting parties to litigate disputes but requiring that, if such litigation requires a trial, the trial will be before a judge rather than a jury. In other words, these clauses call for a bench trial rather than arbitration to replace what might otherwise have been a jury trial, so these clauses may be called “bench trial clauses.” Although courts and contracts usually describe arbitration and bench-trial clauses as “waiving” the jury right, Part E calls attention to the facts that “waiver” is generally defined as the intentional relinquishment or abandonment of a known right, but in the typical adhesion contract, the non-drafting party likely does not intend anything about her jury right. Moreover, the definition of waiver may suggest that “waiving” a right is simply giving away the right without getting anything in return. That is not what happens in contracts, which necessarily involve a bargain or exchange. In other words, contracts involve parties trading away rights, not giving them away. So, the typical consumer, worker, or other party to an adhesion contract with a clause requiring arbitration or a non-jury (bench) trial does not “waive” (intentionally give away) their jury right. Instead, they unintentionally trade away their jury right, along with other rights traded away by other clauses of the contract, in exchange for whatever consideration the other party is providing in the contract.
Part F highlights the odd fact that, although an arbitration agreement is a bigger commitment—a bigger departure from the default—than a bench trial agreement, courts often hold bench trial clauses to a higher standard of consent than they hold arbitration clauses. In other words, some courts do not enforce bench trial agreements in circumstances, such as lack of “knowing” consent, in which the court would enforce an arbitration agreement. This oddity is, at one level, largely explained by the FAA and the absence of a comparable statute enforcing bench trial agreements. But Part F argues that cases holding that the U.S. Constitution’s Seventh Amendment requires “knowing” consent to trade away the civil jury right are inconsistent with Supreme Court cases enforcing arbitration agreements that have received merely unknowing, that is, adhesive, consent. Part F argues that the cases holding that the U.S. Constitution requires “knowing” consent to trade away the civil jury right rest on shaky foundations and should be overruled.
Parts G and H support this argument by analogizing to other contexts in which courts enforce adhesion contracts trading away rights under the U.S. Constitution. Part G discusses contract clauses trading away the constitutional jury right by requiring plaintiffs to sue, not in a U.S. court subject to the jury right, but in the court of a nation that lacks it. And Part H discusses contract clauses trading away constitutional Due Process rights (1) not to be subject to the jurisdiction of a court with which the party lacks “minimum contacts,” and (2) to notice and a hearing before government takes property. Both of these discussions, like earlier parts of this Article, distinguish between federal and state courts. This is because the U.S. Constitution permits states to require “knowing” consent, or other high levels of consent, except where a federal statute preempting inconsistent state law, such as the FAA, requires enforcement of clauses in contracts subject merely to lower standards of consent, such as adhesive consent.
Part I’s conclusion returns to the international comparative level to observe that a peculiarity of law in the U.S., its widespread enforcement of adhesive arbitration agreements, largely serves to override three other peculiarities of civil litigation in the U.S.: (1) The civil jury, (2) Optout class actions, and (3) Extensive discovery.
B. Litigation and Consent to Alternative Dispute Resolution
Courts provided by government are the default adjudicators in the United States. Everyone has the right to litigate in court unless they have opted out of the litigation default by contracting into an alternative process of dispute resolution.Footnote 1 In the most common alternative processes, settlement negotiation and mediation, parties do not contract for a legally binding result until after the dispute has arisen.Footnote 2 Such post-dispute settlement agreements tend to be the product of relatively well-informed consent by each party, and often even consent informed by advice from the party’s lawyer. The same is true of post-dispute arbitration agreements, which resemble other post-dispute settlement agreements, in their typically high levels of consent.Footnote 3
In contrast are predispute arbitration agreements. These are contracts providing that, if a dispute arises, the parties will resolve that dispute in arbitration rather than litigation.Footnote 4 Predispute arbitration agreements are typically just one clause—the arbitration clause—of a broader contract. And especially if that broader contract is a “contract of adhesion,”Footnote 5 the non-drafting party may not notice, let alone read and understand, the arbitration clause. So that clause is, like many of the contract’s other clauses, the product of merely “adhesive” consent, rather than knowing consent, by the non-drafting party.
This contrast between “adhesive consent” and “knowing consent” largely tracks Karl Llewellyn’s well-known distinction between “blanket assent” and “specific assent.”Footnote 6 Llewellyn wrote of a form contract the seller drafts and presents to the buyer:
Instead of thinking about ‘assent’ to boiler-plate clauses, we can recognize that so far as concerns the specific, there is no assent at all. What has in fact been assented to, specifically, are the few dickered terms, and the broad type of the transaction, and but one thing more. That one thing more is a blanket assent (not a specific assent) to any not unreasonable or indecent terms the seller may have on his form, which do not alter or eviscerate the reasonable meaning of the dickered terms. The fine print which has not been read has no business to cut under the reasonable meaning of those dickered terms which constitute the dominant and the only real expression of agreement, but much of it commonly belongs in.Footnote 7
While “blanket assent” is the more common phrase among courts and commentators in the U.S.,Footnote 8 “adhesive consent” has been used by at least one leading Contracts scholar,Footnote 9 and I use it here to emphasize adhesion contracts and the word consent, which is in the title of the conference for which this Article was written: (Informed) Consent to Dispute Resolution Agreements.Footnote 10
C. Enforcement of Adhesive and Other Arbitration Agreements
In the United States, the Federal Arbitration Act (FAA), with just a few narrow exceptions, makes predispute arbitration agreements “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”Footnote 11 Moreover, the FAA requires courts to enforce arbitration agreements not with the usual remedy for breach of contract in the U.S., money damages, but with the stronger remedy of specific performance—court orders staying litigation and compelling arbitration.Footnote 12 Broadly controversial are Supreme Court decisions applying the FAA (1) in state court to preempt state law, and (2) to the agreements of consumers and (3) workers, especially respecting (4) class actions and (5) statutory claims.Footnote 13 All five of these developments—which have driven the widespread enforcement of consumers’ and workers’ adhesive arbitration agreements—are widely characterized as post-1980 inventions of the Supreme Court unsupported by the original FAA.Footnote 14 This characterization is insufficiently sympathetic to the Supreme Court because it does not give sufficient weight to the difficult position the Court was in when deciding those cases.
The FAA was enacted in the 1920s before the landmark federalism case of Erie v. Tompkins, the New Deal’s expansion of the Commerce Clause and thus of federal power to preempt state law, the growth of federal employment and consumer law in the 1960s and 1970s, and the ensuing explosion of class actions. Each of these enormous changes to our nation’s legal landscape … conflicted with the premises underlying the FAA. While Congress could have amended the FAA to accommodate and be more consistent with these enormous changes, it did not. So, reconciling an old statute with a half century of law in tension with that statute’s premises became the Court’s task.Footnote 15
The Court navigated this task in a more principled and judicious way than it is often given credit for, as I have explained in a 2018 article entitled, A Short Defense of Southland, Casarotto, and Other Long-Controversial Arbitration Decisions.Footnote 16
Congress has enacted several exceptions to the FAA’s enforcement of arbitration agreements.Footnote 17 Other bills to reduce the FAA’s applicability to various adhesion contracts or disputes arising out them have also been introduced in Congress.Footnote 18 A broad prohibition of arbitration clauses in consumer contracts passed the House of Representatives twice in recent years but did not receive a vote in the Senate.Footnote 19
Nevertheless, as the FAA stands today, most adhesive arbitration agreements are enforceable with respect to most disputes. For example, if a business’s website or app links the business’s form contract terms and says clicking “accept” or “purchase” is agreement to those terms, a court will probably hold that a consumer’s click manifests the consumer’s assent to the form contract, including its arbitration clause.Footnote 20 So the consumer may not sue the business in court but must instead bring the consumer’s claim in arbitration.
Critics of such arbitration clauses often call them or arbitration arising out of them “forced” or “mandatory.”Footnote 21 This pejorative disregards the consumer’s unforced choice to click her assent to the form. What some call “forced arbitration” is better called “adhesive arbitration,” which recognizes that adhesion contracts are contracts, and contracts are not forced unless formed under duress or—“with more of a stretch”—“circumstances that satisfy other contract defenses,” “such as undue influence, misrepresentation, and perhaps even unconscionability.”Footnote 22
Moreover, unlike adhesive and other contractual arbitration, some statutes in the U.S. mandate arbitration of claims arising out of those statutes, although the parties have not agreed, even adhesively, to arbitrate.Footnote 23 Such statutorily mandated arbitration is, compared to the arbitration arising out of adhesion contracts, better described as “mandatory” or “forced.”
To put it another way, the main concern about adhesive arbitration agreements is not that somebody forces consumers to click or sign, but that the fine print few consumers read might be overly harsh to them. This problem of overly harsh terms in adhesion contracts has for over a century led to judicial and legislative regulation of adhesive terms,Footnote 24 and both sorts of regulation address arbitration clauses. Courts refuse to enforce some arbitration clauses,Footnote 25 and, as noted above, Congress has enacted several statutes making various types of arbitration clauses unenforceable.Footnote 26
Outside these exceptions though, the FAA makes most adhesive arbitration agreements enforceable with respect to most disputes. The Supreme Court’s 1996 decision, Doctor’s Associates v. Casarotto,Footnote 27 interpreted the FAA to require courts to enforce adhesive arbitration agreements. While Casarotto is controversial,Footnote 28 it straightforwardly applies the FAA’s text—making arbitration agreements “enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract”—amid contract law in the U.S. that generally enforces non-arbitration terms of adhesion contracts.Footnote 29 In other words, general contract law’s standards of consent are low—satisfied by “adhesive” consent—and the FAA adopts those standards.
Parties perform their arbitration agreement by introducing evidence and argument to the arbitrator, who then renders a decision.Footnote 30 That decision, the “arbitration award,” governs in the important sense that courts enforce it as they would a court’s judgment,Footnote 31 and courts may vacate it only under the narrow grounds in FAA section 10.Footnote 32 Judicial enforcement of arbitration awards is akin to courts enforcing contracts because a party’s refusal to comply with an arbitration award is breach of a contract—the arbitration agreement, which includes a promise to comply with the arbitration award.Footnote 33 Accordingly, the FAA’s narrow grounds for a court to vacate an award resemble the grounds for non-enforcement of contracts.Footnote 34 This reinforces the conclusion that the FAA’s emphasis is contract-enforcement at the award enforcement stage, as well as at the pre-arbitration executory agreement stage.
D. Adhesive Arbitration and the Civil Jury—Two U.S. Peculiarities
From the perspective of other “advanced democracies,”Footnote 35 the United States is unusual in the extent to which it enforces consumers’ adhesive arbitration agreements. As Symeon C. Symeonides wrote in 2013, “it is worth noting for the benefit of foreign readers that, unlike many other Western countries, which do not enforce pre-dispute arbitration clauses in consumer and employment contracts, American law has no such qualms. Indeed, … arbitration clauses in consumer contracts have become fairly routine.”Footnote 36 While some Canadian provinces now enforce consumers’ adhesive arbitration agreements, others do not,Footnote 37 and they are, with narrow exceptions, unenforceable in the European Union,Footnote 38 United Kingdom,Footnote 39 and Japan.Footnote 40
Moreover, an arbitration agreement in the U.S. is an agreement not to exercise a constitutional right—the right to a jury trial. Few nations outside the U.S. have a constitutional right to a jury in civil cases.Footnote 41 Perhaps these two peculiarities of the U.S.—adhesive arbitration and the civil jury right—are connected. As I wrote over twenty years ago,
The United States is the only major nation to make extensive use of jury trials in civil cases. When comparative law books survey adjudication around the world, the aberrant presence of the civil jury in the United States (and formerly in England) receives significant discussion, while the unique arbitration law of the United States receives no mention at all. This is undoubtedly explained in part by the fact that the United States has been outside the mainstream on civil juries far longer than it has been outside the mainstream on arbitration. But it is also explained by the fact that extensive use of the civil jury is a far more important anomaly than enforcement of consumer and employment arbitration agreements.Footnote 42
The Seventh Amendment to the U.S. Constitution provides that “[i]n suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved.”Footnote 43 While the Seventh Amendment applies only in federal court,Footnote 44 nearly all state constitutions similarly protect the civil jury right in state courts.Footnote 45 Courts generally interpret federal and state constitutional provisions to confer a civil jury trial right only in cases arising at law, as opposed to cases in equity,Footnote 46 which basically means the jury right applies to claims seeking money damages, but not to claims seeking injunctions.Footnote 47
As arbitration does not have a jury, some parties opposing enforcement of their arbitration agreements argue that enforcement would violate their constitutional right to a jury trial. Courts nearly always reject these arguments.Footnote 48 In doing so, some courts reason in two steps:
[T]he Seventh Amendment does not confer the right to a trial, but only the right to have a jury hear the case once it is determined that the litigation should proceed before a court. If the claims are properly before an arbitral forum pursuant to an arbitration agreement, the jury trial right vanishes.Footnote 49
This two-step reasoning is important and will reappear below in this Article’s discussion of related topics.
E. “Waiving” Rights Contrasted with Trading Them Away in a Contract
Whatever their reasoning in rejecting jury right challenges to arbitration agreements, courts typically use the language of waiver. That is, courts often say that agreeing to arbitrate “waives” the jury right.Footnote 50 Courts have been saying this for at least a century. For example, soon after its 1920 enactment, the New York Arbitration Act was challenged on the ground that it was inconsistent with the jury-trial right granted by New York’s state constitution.Footnote 51 In an opinion by Judge Benjamin Cardozo, New York’s highest court rejected this challenge, holding that the jury trial right “is one that may be waived. It was waived by the consent to arbitrate.”Footnote 52
This use of the word “waiver” fits how parties and courts typically describe non-arbitration agreements in which parties agree not to exercise their jury right. Many contracts that do not require parties to arbitrate nevertheless say that the parties “waive” their right to a jury trial. For example, a 1993 contract to sell a farm in Virginia did not have an arbitration clause but said, “[e]ach party hereby waives trial by jury respecting any claim arising from or related to this Agreement.”Footnote 53 Under such a contract clause, if a dispute arises, each party will be free to litigate it, but if that litigation requires a trial, either party may require that the trial be before a judge rather than a jury. In other words, these clauses call for a bench trial rather than arbitration to replace what might otherwise have been a jury trial. Consequently, these clauses may be called “bench trial clauses,” and a few courts have used this phrase.Footnote 54
Instead of saying “bench trial clause” though, most courts and contract drafters call them “jury waiver” clauses. Nevertheless, we can question use of the word “waiver” in this context of a contract clause requiring arbitration or a bench trial, especially if the contract is an adhesive form document the non-drafting party is unlikely to read before signing, clicking, or otherwise manifesting assent. “Waiver” is generally defined as the “the intentional relinquishment or abandonment of a known right.”Footnote 55 But in the typical adhesion contract, the non-drafting party likely does not intend anything about her jury right. She may, for example, intend to download an app, open a bank account, buy a car, or whatever else is her main purpose in contracting, but if she has not read deeply enough to notice the clause requiring a bench trial or arbitration rather than a jury trial, she probably has no intent related to her jury right.
Moreover, the definition of “waiver” as “the intentional relinquishment or abandonment of a known right” may suggest that waiving a right is simply giving away a right without getting anything in return. But that is not what happens in contracts. Contracts necessarily involve a bargain or exchange—what common law systems call “consideration.”Footnote 56 In other words, contracts involve parties trading away rights, not giving them away. A bench trial or arbitration clause does not give away the jury trial right. A bench trial or arbitration clause trades away the jury right, along with other rights traded away by other clauses of the contract, in exchange for whatever consideration the other party is providing in the contract. So, the typical consumer, worker, or other party to an adhesion contract with a bench trial or arbitration clause does not “waive” (intentionally give away) their jury right but rather unintentionally trades away their jury right. This unintentional trade of rights is central to adhesion contracts and is ill described by the word “waiver.”Footnote 57
F. Bench Trial and Arbitration Clauses Compared
Bench trial clauses and arbitration clauses are similar in that both trade away the civil jury right. But while that is the only right traded away in a bench trial clause, arbitration clauses also trade away rights to other aspects of U.S. litigation unavailable in arbitration, such as class actions,Footnote 58 and perhaps extensive discovery.Footnote 59 Much as the civil jury is a peculiarity of the U.S., so are optout class actions driven by entrepreneurial plaintiffs’ lawyers,Footnote 60 and extensive discovery.Footnote 61 So, it is noteworthy that a fourth peculiarity of the U.S.—widespread enforcement of adhesive arbitration agreements—serves in large part to override the other three peculiarities of U.S. civil litigation: juries, entrepreneurial optout class actions, and extensive discovery. In short, enforcing the arbitration agreements of U.S. consumers generally moves their claims from the unusual procedures of U.S. courts to procedures closer to the global norm.
As the previous paragraph explains, from the U.S. perspective an arbitration agreement is a bigger commitment than a bench trial agreement because an arbitration agreement commits parties to a bigger deviation from the default process—litigation culminating in a jury trial—than a bench trial agreement does. Oddly though, as the following pages explain, adhesive arbitration agreements are more likely to be enforced than are adhesive bench trial clauses. This is odd because law generally requires a higher level of consent for enforcement of bigger commitments than for smaller commitments.Footnote 62
This oddity of adhesive arbitration agreements more likely to be enforced than adhesive bench trial clauses is, at one level, largely explained by the FAA and the absence of a comparable statute enforcing bench trial agreements. As noted above, the FAA, which preempts inconsistent state law,Footnote 63 requires courts to enforce arbitration agreements “save upon such grounds as exist at law or in equity for the revocation of any contract.”Footnote 64 That is, the FAA requires courts to enforce arbitration agreements that meet contract law’s easily satisfied “adhesive” standards of consent. In contrast, no federal statute requires courts to enforce bench trial agreements at all. So, states may hold bench trial agreements to higher standards of consent than those in contract law or even outright prohibit bench trial agreements.Footnote 65 For example, the California Supreme Court holds that “California constitutional and statutory provisions do not permit predispute jury waivers” at all.Footnote 66 In contrast, comparable and even much narrower state statutes prohibiting enforcement of predispute arbitration agreements are preempted by the FAA.Footnote 67
In addition, because no federal statute requires courts to enforce bench trial agreements at all, federal courts may hold bench trial agreements to higher standards of consent than those in contract law and thus higher than the adhesive consent standards the FAA prescribes for arbitration agreements. For example, a 1977 Second Circuit case, National Equipment Rental, Ltd. v. Hendrix,Footnote 68 required “knowing and intentional” consent to enforce a bench trial clause. The Second Circuit stated that “the Seventh Amendment right to a jury is fundamental” and “its protection can only be relinquished knowingly and intentionally.”Footnote 69 Hendrix held that this “knowing and intentional” consent standard was not met by “a provision literally buried in the eleventh paragraph of a fine print, sixteen clause agreement. Embedded there are the crucial words: ‘Lessee hereby waives a trial by jury.’”Footnote 70 This is exactly the sort of adhesive clause that, had it been an arbitration clause after Casarotto, would have been enforced under the FAA.Footnote 71
Hendrix’s “knowing and intentional” consent standard, or something similar, like “knowing and voluntary,” has been adopted for bench trial clauses by many other federal courts,Footnote 72 even while federal and state courts have, following Casarotto, applied the FAA’s lower contract law standards of consent to enforce adhesive arbitration clauses. That is, some cases hold bench trial clauses to a higher standard of consent than the standard the FAA prescribes for arbitration clauses. To the extent these cases, like Hendrix, say the higher (“knowing”) standard of consent is required by the Seventh Amendment,Footnote 73 these cases indirectly challenge the constitutionality of the FAA, which enforces adhesive agreements trading away the Seventh Amendment right unknowingly.Footnote 74
While research revealed no case explicitly rejecting a knowing consent standard for bench trial clauses, some courts that ostensibly apply a “knowing” consent standard do so in ways that may reduce it to contract law’s adhesive consent standard. For example, the District of Columbia Court of Appeals said in Pers Travel, Inc. v. Canal Square Assocs.,Footnote 75 that, although a predispute contractual “waiver” of the jury right “must be knowing and voluntary, [citing Hendrix], several courts have held that jury waiver clauses ‘are enforceable unless they are unconscionable, offend public policy, or are shown to be unfair in the particular circumstances.’”Footnote 76 This approach seems to abandon the purported requirement that consent be “knowing,” because neither the defense of unconscionability nor of public policy requires that consent be knowing.Footnote 77 Neither of these defenses prevents courts from enforcing countless adhesive terms that have received only unknowing (adhesive) consent. If, like Pers Travel, courts abandon the purported requirement that consent be “knowing,” by equating “knowing and voluntary” with merely avoiding “unconscionable, offend public policy, or [] unfair,” then they may lower the Seventh Amendment’s standard of consent down to the FAA’s “adhesive” standard, which would preserve the FAA’s constitutionality.
Conversely, reading Hendrix and similar bench-trial-clause decisions to say the Seventh Amendment requires consent above the adhesive consent sufficient for the FAA would lead in either of two directions. One would be to render the FAA unconstitutional insofar as it has been applied, in Casarotto and other Supreme Court cases, to enforce adhesive arbitration agreements. The other would be the two-step reasoning quoted above: “[T]he Seventh Amendment does not confer the right to a trial, but only the right to have a jury hear the case once it is determined that the litigation should proceed before a court. If the claims are properly before an arbitral forum pursuant to an arbitration agreement, the jury trial right vanishes.”Footnote 78
This two-step reasoning is, however, difficult to reconcile with cases like Hendrix. If Hendrix and its ilk say the Seventh Amendment requires a level of consent above the adhesive consent sufficient for contract law, then how can “claims [be] properly before an arbitral forum pursuant to an arbitration agreement” that is the product of merely adhesive consent? So, neither reading of Hendrix smoothly reconciles with Casarotto.
In short, Hendrix and other cases similarly saying the Seventh Amendment requires a “knowing” consent standard for bench trial clauses are difficult to reconcile with the constitutionality of the FAA as interpreted in Casarotto and other Supreme Court cases, unless one reads the former group of cases as merely adding toothless “knowing” rhetoric to what is in substance an easily satisfied contract law analysis. This reading, frankly, seems less forthright than just saying Hendrix and its ilk are wrong. Contrary to Hendrix, the Seventh Amendment civil jury right (unlike the Sixth Amendment jury right applicable to criminal prosecutions to which Hendrix analogizedFootnote 79) does not require a “knowing” consent standard for bench trial clauses or for arbitration clauses. The Seventh Amendment is satisfied by contract law’s low adhesive standards of consent.
For the proposition “that the Seventh Amendment right to a jury is fundamental and that its protection can only be relinquished knowingly and intentionally,”Footnote 80 Hendrix cited three cases, none of which involved a predispute adhesion contract like the lease in Hendrix. These three cases cited by Hendrix instead involved dubiously alleged post-dispute waivers of constitutional rights. Moreover, one of these three cases did not even involve the Seventh Amendment, as it was a criminal case governed by the Sixth Amendment jury right. Hendrix said:
It is elementary that the Seventh Amendment right to a jury is fundamental and that its protection can only be relinquished knowingly and intentionally. Johnson v. Zerbst, [304 U.S. 458] (1938); Heyman v. Kline, 456 F.2d 123, 129 (2d Cir. 1972), cert. denied, [409 U.S. 847] (1972). Indeed, a presumption exists against its waiver. Aetna Insurance Co. v. Kennedy, [301 U.S. 389] (1937).Footnote 81
Johnson did not involve the Seventh Amendment. Johnson involved a criminal defendant sentenced to over four years in prison after his dubious post-arrest waiver of his Sixth Amendment right to counsel in a criminal case.Footnote 82 Heyman was a civil case, but it involved an alleged post-dispute jury waiver via oral statements by the party’s attorney during a pretrial conference with the judge.Footnote 83 And Aetna was another civil case involving another alleged post-dispute jury waiver—requesting a directed verdict.Footnote 84 None of these three cases is even remotely analogous to a predispute adhesion contract like the lease in Hendrix. None of these three cases even involved a contract, let alone a predispute contract, let alone a predispute adhesion contract. And one of them was a criminal case governed by a different part of the Constitution than the Seventh Amendment.
In short, Hendrix failed to ground in precedent its assertion that “the Seventh Amendment right to a jury … can only be relinquished knowingly and intentionally.”Footnote 85 That assertion by Hendrix was, from the start, on shaky foundations. And about twenty years later, Casarotto and other Supreme Court arbitration cases implicitly overruled Hendrix by enforcing adhesion contracts—unknowing consent—trading away the civil jury right. Casarotto, however, did not mention the jury right, and the Supreme Court has not explicitly overruled Hendrix which, as noted above, continues to be followed by some other federal cases applying a knowing consent standard to bench trial clauses, even as they apply Casarotto’s adhesive consent standard to arbitration clauses. These two bodies of case law have yet to be reconciled or harmonized.Footnote 86
Guidance for harmonizing them is provided by the following sections of this Article.
G. Choice of Court (Forum Selection) Clauses Trading Away the Constitutional Jury Right
I. Federal Cases
Arbitration and bench trial clauses are not the only contract clauses trading away the jury right. A third type of contract clause that also can trade away the jury right is the choice-of-court, or “forum selection,” clause. A forum selection clause is like an arbitration clause except that the forum it chooses is a court rather than arbitration. Court enforcement of forum selection clauses resembles court enforcement of arbitration clauses. For example, court enforcement of a forum selection clause may be against a plaintiff who sued in a court other than the court required by the parties’ contract.Footnote 87 Such enforcement stays or dismisses the plaintiff’s case in a court prohibited by the contract, thus leaving the plaintiff’s only option for recovery suing in the contractually required court.
If the court in which plaintiff chose to sue—and which would have heard the case but for the forum selection clause—has a constitutional jury right, but the forum chosen by contract does not, then enforcement of the clause results in the clause trading away the constitutional jury right. For example, a plaintiff might have had a constitutional right to a jury trial in the court in the United States that would have been available to the plaintiff but for the forum selection clause choosing a court outside the U.S. that does not have civil juries.Footnote 88 In other words, U.S. parties contracting to resolve disputes in courts outside the U.S. often trade away their constitutional jury right, much like parties contracting to resolve disputes in arbitration or a bench trial do.
An important Supreme Court case enforcing an international forum selection clause against a U.S. party was 1972’s The Bremen v. Zapata Off-Shore Co. Footnote 89 The Court dismissed a claim brought in a U.S. federal court by a barge owner which had hired the defendant to tow the plaintiff’s barge from Louisiana to Italy. The Court dismissed the case in the U.S. because the parties’ contract required disputes to be resolved by a court in England.Footnote 90 In The Bremen, the Supreme Court held that “[a] clause of this kind is enforced unless it imposes a venue ‘so gravely difficult and inconvenient that [the plaintiff] will for all practical purposes be deprived of his day in court.’”Footnote 91 Neither the Supreme Court nor the lower courts in The Bremen discussed the jury right, however.
The Supreme Court first enforced an adhesive forum selection clause against a consumer plaintiff in Carnival Cruise Lines, Inc. v. Shute, Footnote 92 which involved a passenger injured on a Carnival Cruise Lines ship. The passenger sued Carnival in a federal court in Washington State, even though the cruise ticket form contract required disputes be resolved in the “courts of Florida.”Footnote 93 The Ninth Circuit refused to enforce the clause, objecting that “there is no evidence that the provision was freely bargained for. To the contrary, the provision is printed on the ticket, and presented to the purchaser on a take-it-or-leave-it basis.”Footnote 94 In other words, the Ninth Circuit refused to enforce the adhesive forum selection clause simply because it was adhesive. The Supreme Court reversed and enforced the clause to require the plaintiff to bring her suit in Florida. In doing so, the Supreme Court’s Carnival Cruise decision rejected “the Court of Appeals’ determination that a nonnegotiated forum-selection clause in a form ticket contract is never enforceable simply because it is not the subject of bargaining.”Footnote 95 Moreover, Carnival Cruise endorsed adhesive forum selection clauses as a matter of policy, culminating with a cite to a Seventh Circuit opinion by Law & Economics legend, Judge Richard Posner:
Including a reasonable forum clause in a form contract of this kind well may be permissible for several reasons: First, a cruise line has a special interest in limiting the fora in which it potentially could be subject to suit. Because a cruise ship typically carries passengers from many locales, it is not unlikely that a mishap on a cruise could subject the cruise line to litigation in several different fora. Additionally, a clause establishing ex ante the forum for dispute resolution has the salutary effect of dispelling any confusion about where suits arising from the contract must be brought and defended, sparing litigants the time and expense of pretrial motions to determine the correct forum and conserving judicial resources that otherwise would be devoted to deciding those motions. Finally, it stands to reason that passengers who purchase tickets containing a forum clause like that at issue in this case benefit in the form of reduced fares reflecting the savings that the cruise line enjoys by limiting the fora in which it may be sued. Cf. Northwestern Nat. Ins. Co. v. Donovan, 916 F.2d 372, 378 (CA7 1990).Footnote 96
Carnival Cruise did not discuss the jury right, presumably because that right applies in both state and federal courts in both Washington and Florida. In sum, while Carnival Cruise and later cases enforce adhesive forum selection clauses,Footnote 97 and later Supreme Court cases follow The Bremen in enforcing international forum selection clauses,Footnote 98 the Supreme Court has not yet addressed the effect of international forum selection clauses on the constitutional jury right.
That said, many federal courts have enforced international forum selection clauses that prevent the plaintiff from suing in the United States, where the plaintiff may have had a jury right, thus leaving the plaintiff only with the option of suing in a foreign court that lacks the civil jury right. Furthermore, these cases often involve individual plaintiffs, and thus presumably adhesive contracts,Footnote 99 asserting claims that would be constitutionally entitled to a jury trial in the U.S.Footnote 100 So, many federal courts have enforced apparently adhesive international forum selection clauses to effectively trade away the constitutional jury right.Footnote 101 But only a small number of federal courts have discussed the effect of international forum selection clauses on the jury right.
One of these federal courts held that enforcement of an international forum selection clause would violate the opposing party’s constitutional right to a jury trial. In DHX, Inc. v. Allianz AGF MAT Ltd.,Footnote 102 a California corporation, DHX, sued its English insurer, Allianz, in a California court. The insurer removed to federal court and moved to dismiss based on a forum selection clause providing that “any dispute between the Assured and Insurers shall be submitted to the exclusive jurisdiction of the High Court of Justice, England.”Footnote 103 The California corporation argued “that this clause should be invalidated by the court because it functions to deprive it of its right to a trial by jury.”Footnote 104 The district court agreed. Similar to Hendrix, the DHX district court said “‘[b]ecause the right to a jury trial is a fundamental right guaranteed to our citizenry by the Constitution, courts should indulge every reasonable presumption against waiver.’”Footnote 105 The DHX district court found this presumption not overcome by the English forum selection clause because it did not mention the jury right and neither did any other provision of the contract.Footnote 106 On appeal however, the parties informed the Ninth Circuit that “they have settled the economic issues in this case,” and “agreed in open court on appeal that there are no objections to vacating the district court’s” order, so the Ninth Circuit remanded for a determination by the district court whether that order should be vacated.Footnote 107
In contrast to the DHX district court’s opinion is Hoes of Am., Inc. v. Hoes,Footnote 108 which enforced a foreign forum selection clause notwithstanding its effect on the jury right. In Hoes, an Illinois corporation sued a German defendant in a U.S. federal court despite the contract between the parties providing that “court procedures shall be held in Bremen.”Footnote 109 So the district court considering an agreement to litigate in Bremen, Germany, cited the earlier Supreme Court case, coincidentally named The Bremen, in enforcing the clause, notwithstanding plaintiff’s argument that “in Germany,” “(1) there is no right to jury trial; (2) there is limited opportunity for discovery which is deemed essential in these business tort allegations; and (3) there is no right to punitive damages.”Footnote 110 In other words, the Hoes court enforced an international forum selection clause trading away the constitutional jury right, and other rights also largely peculiar to U.S. civil litigation.
Also enforcing a foreign forum selection clause notwithstanding its effect on the jury right is Alternative Delivery Sols., Inc. v. R.R. Donnelley & Sons Co. Footnote 111 In Alternative Delivery, a U.S. corporation, ADS, sued a Mexican defendant in Texas state court. The defendant removed to federal court and moved to dismiss based on a “forum selection clause in the agreement requiring ADS to bring its claims in Mexico City.”Footnote 112 Citing The Bremen and Shute, the federal district court enforced the clause to dismiss the case.Footnote 113 In response to plaintiff’s argument that enforcing the clause would violate plaintiff’s constitutional right to a trial by jury, the Alternative Delivery court said, “[t]o invalidate all forum selection clauses that designate forums that do not provide for a jury trial would implicate many of the comity concerns raised by the Supreme Court in The Bremen and other cases concerning international agreements.”Footnote 114 More specifically, in response to plaintiff’s argument “that it did not knowingly waive its right to jury trial,” the court said,
[I]t would have been naive for Plaintiff to assume that Mexican courts and Mexican law provide all the same rights and procedures as the United States and Texas do. Surely the fact that Mexico might not provide a jury was foreseeable to Plaintiff, and Plaintiff voluntarily entered the contract to choose Mexico City as the forum and Mexican law as the governing law, with all the attendant rights and procedures of the Mexican forum. Thus, Plaintiff waived the right to a jury trial under federal or state law when it entered into the contract designating Mexico City and Mexican law.Footnote 115
This passage, read in context of plaintiff’s argument “that it did not knowingly waive its right to jury trial,” seems to deny that “knowing” consent is required to trade away the jury right.
In addition, Alternative Delivery used to the two-step reasoning quoted above in connection with cases holding that arbitration agreements trade away the jury right.Footnote 116 Alternative Delivery quoted the Fifth Circuit’s statement that “[t]he Seventh Amendment does not confer the right to a trial, but only the right to have a jury hear the case once it is determined that the litigation should proceed before a court. If the claims are properly before an arbitral forum pursuant to an arbitration agreement, the jury trial right vanishes.”Footnote 117 Alternative Delivery then said,
Though the Fifth Circuit’s language refers to litigation before a court, it should reasonably be limited to litigation before a United States court [because only they have the civil jury right]. Thus, once it is determined that a party has agreed to litigate in a foreign forum that does not provide a jury trial, the jury trial right vanishes.
Accordingly, when ADS agreed to a foreign forum, it implicitly waived its right to a jury trial under federal or state law, and those rights are therefore not implicated. The Court will not invalidate the forum selection clause on this basis.Footnote 118
This two-step reasoning, while difficult to reconcile with cases like Hendrix, as explained above,Footnote 119 is consistent with the Alternative Delivery court’s rejection of a knowing consent requirement to trade away the jury right.
Alternative Delivery was followed by another judge in the same federal district in Bancroft Life & Cas. ICC, Ltd. v. FFD Res. II, LLC.Footnote 120 In Bancroft Life an insurer sued an insured.Footnote 121 The insured counterclaimed and the insurer moved to dismiss the counterclaims on the ground that they, unlike the insurer’s claims, were covered by a forum selection clause specifying the courts of St. Lucia.Footnote 122 Among the insured’s arguments against enforcing that clause was that “St. Lucia does not recognize a right to a jury trial in civil cases.”Footnote 123 The federal district court rejected this argument and said, “numerous courts have held that ‘a lack of jury trials does not render a forum inadequate.’”Footnote 124
At the federal appellate level, the Sixth and First Circuits have enforced forum selection clauses while recognizing their effect on the jury right. In Interamerican Trade Corp. v. Companhia Fabricadora de Pecas,Footnote 125 the contract between a Delaware corporation and a Brazilian manufacturer provided, “[i]n relation to the interpretation and compliance with this Agreement, the parties elect the jurisdiction of the competent Courts of Sao Paulo, Brazil, waiving any other jurisdiction that may correspond to them by reason of their present or future domicile.”Footnote 126 Despite this clause, the Delaware corporation sued in the U.S., so the federal district court dismissed, “holding that because of the forum selection clause the lawsuit could only be brought in Sao Paulo, Brazil.”Footnote 127 On appeal, the Delaware corporation contended “that litigation in Brazil would bar as a practical matter its claim, because in Brazil,” among other things, “a jury trial is not available.”Footnote 128 Without further discussion of the jury right, the Sixth Circuit affirmed the district court’s dismissal, thus enforcing the international forum selection clause. The Sixth Circuit cited The Bremen as well as Shute and said,
[T]he courts in Brazil are fully competent; litigation in Brazil may be more inconvenient for ITC but is not unjust; other courts have found Brazil to be a proper forum; and, speculative concern regarding fairness of a foreign court, which parties must have considered when negotiating the agreement, does not justify refusal to enforce the clause.Footnote 129
In short, the Sixth Circuit in Interamerican Trade Corp. enforced an international forum selection clause trading away the constitutional jury right.
While Interamerican Trade Corp. and other above-discussed cases enforced international forum selection clauses against businesses rather than individuals, the First Circuit enforced an adhesive forum selection clause against an individual in Rivera v. Centro Medico de Turabo, Inc. Footnote 130 Rivera involved one of the few U.S. trial courts that lacks a constitutional jury right—the Commonwealth Court of First Instance in Puerto Rico. In Rivera, a patient brought medical malpractice claims in a federal court governed by the constitutional jury right, but defendants moved to dismiss, based on a forum selection clause requiring suits be brought in Puerto Rico’s equivalent of a state court, the Commonwealth Court of First Instance.Footnote 131 The clause said, “[i]n the event that by act or omission I consider that physical, emotional or economic damages have been caused to me, I expressly agree to submit to the Jurisdiction of the Court of First Instance of the Commonwealth of Puerto Rico, for any possible claim.”Footnote 132
The First Circuit interpreted the clause to mandate suits be brought in the Court of First Instance, rather than merely permit suits to be brought there.Footnote 133 The First Circuit rejected plaintiff’s argument that the forum selection clause was unenforceable because it was in an adhesion contract applying to a tort action.Footnote 134 The First Circuit acknowledged that “Rivera’s relationship with the hospital grew out of a grave medical condition. He was likely more focused on that medical condition than the significance of the documents that he was asked to sign. He was not thinking about possible lawsuits.”Footnote 135 Nevertheless, the First Circuit rejected the plaintiff’s argument that the forum selection clause was unenforceable due to “overreaching.” The Rivera court said of the forum selection clause, “[t]he language of the clause was clear. The clause was in bold print and marked off from the rest of the one-page form by a special box. It was not ‘buried in fine print’ or otherwise obscured. The clause required the patient to signal his assent by placing his initials next to it.”Footnote 136 The First Circuit then rejected plaintiff’s “argument that the forum selection clause is unenforceable because an individual’s waiver of his right to trial by jury must be unequivocal.”Footnote 137
In sum, with the exception of perhaps just the DHX district court, federal courts have enforced forum selection clauses trading away the constitutional jury right. And at least one of these cases, Rivera, enforced such a clause in an adhesion contract against an individual. Little if anything in these federal cases suggests the Seventh Amendment requires a higher level of consent to trade away its jury right. So, federal cases on international forum selection clauses do not support Hendrix, and similar cases on bench trial clauses, saying “knowing” consent is required to trade away cases the Seventh Amendment jury right. Rather, federal cases on international forum selection clauses are overwhelmingly consistent with the FAA’s enforcement of adhesive arbitration agreements trading away that right.
II. State Cases
In contrast to the First Circuit’s Rivera decision and most of the other federal cases just discussed, California courts have refused to enforce forum selection clauses that would trade away the constitutional right to a jury trial. The Seventh Amendment, as noted above, applies only in federal court,Footnote 138 and no preemptive federal statute requires courts to enforce forum selection clauses. So, federal law does not restrict a state’s ability to choose its own law on the level of consent needed to trade away the state’s civil jury right. And on matters of state law, including interpretation of a state’s constitution, the U.S. Supreme Court and other federal courts defer to the state’s highest court as the final word on that state’s law.Footnote 139 So, while federal courts may conclude that adhesive consent is enough to trade away the Seventh Amendment jury right, a state’s courts may conclude that only a higher level of consent is enough to trade away the state’s constitutional jury right. For example, as noted above, the California Supreme Court held in Grafton Partners L.P. v. Superior Court,Footnote 140 that only post-dispute consent is enough to trade away the civil jury right in California’s constitution.Footnote 141
While Grafton involved a bench trial clause, other California cases have applied Grafton to forum selection clauses. For example, in Handoush v. Lease Finance Group, LLC,Footnote 142 a commercial equipment lease said of any disputes arising out of the lease:
All Disputes shall be instituted and prosecuted exclusively in the federal or state courts located in the State and County of New York notwithstanding that other courts may have jurisdiction over the parties and the subject matter. YOU AND WE WAIVE, INSOFAR AS PERMITTED BY LAW, TRIAL BY JURY IN ANY DISPUTE ….Footnote 143
Despite this clause, the lessee sued in a California court. The trial court enforced the clause in granting the lessor’s motion to dismiss. The California Court of Appeal reversed, citing Grafton as making the civil jury right “unwaivable in predispute contracts under California law.”Footnote 144 “While California law holds predispute jury trial waivers are unenforceable,” the Handoush Court of Appeal said, “it is undisputed that under New York law there is no similar prohibition.”Footnote 145 In sum, Handoush held that, “[b]ecause New York permits predispute jury trial waivers, and California law does not, enforcing the forum selection clause has the potential to operate as a waiver of a right the Legislature and our high court have declared unwaivable.”Footnote 146
Similarly, in another California case, EpicentRx, Inc. v. Superior Court,Footnote 147 a Delaware company’s certificate of incorporation and bylaws included a forum selection clause that “identified the Delaware Court of Chancery as the exclusive forum in which EpicentRx shareholders may pursue four types of claims against EpicentRx and its directors, officers, and employees.”Footnote 148 Despite this clause, a shareholder sued EpicentRx in a California court,Footnote 149 so EpicentRx moved to dismiss in reliance on the forum selection clause. The trial court declined to enforce the forum selection clauses and denied the motion to dismiss.Footnote 150 The Court of Appeal affirmed, citing Handoush, and pointing out that “EpiRx would not be entitled to a jury trial in the Delaware Court of Chancery, which sits as a court of equity.”Footnote 151
In EpicentRx, the parties seeking to enforce the forum selection clause argued that California’s
rule against predispute jury trial waivers does not apply where, as here, parties have agreed to remove their dispute from the California judicial system. In particular, they emphasize that California courts do not apply the predispute jury waiver rule when they consider the enforceability of arbitration agreements, even though such agreements mandate the submission of disputes to arbitrators in lieu of juries within the California judicial system.Footnote 152
To this, the EpicentRx Court of Appeals replied that while an arbitration agreement is “an agreement to avoid the judicial forum altogether,” a forum selection clause is an
agreement to submit disputes to a designated judicial forum—in the present case, a judicial forum in Delaware. Because the parties to a forum selection clause agree to have their disputes resolved in a judicial forum, rather than withdrawing the dispute from the judicial forum altogether, the [California statute’s] rule against predispute jury waivers applies.Footnote 153
Whatever the merits of this distinction between arbitration clauses and forum selection clauses, a more straightforwardly persuasive distinction between them is that FAA preemption prevents California from relying on its state jury right to deny enforcement to arbitration clauses, but no federal law similarly prevents California from relying on its state jury right to deny enforcement to Delaware forum selection clauses. In short, states can go their own way on forum selection clauses, like bench trial clauses, but not arbitration clauses, because only the last of these are empowered by a federal statute that preempts inconsistent state law.
H. Predispute Agreements Trading Away Constitutional Due Process Rights
I. Overview
The previous parts of this Article show that although all three types of contract clauses discussed above—arbitration, bench trial, and forum selection—trade away the constitutional jury trial right:
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1. Only the first of these (the arbitration clause) is empowered by a federal statute that preempts inconsistent state law; and
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2. Only the second of these (the bench trial clause) is, in federal court, often subject to “knowing” consent standards that exceed the contract law standards of consent adopted by the FAA.
This second point identifies an anomaly created by Hendrix and its ilk, which, as explained above, rest on shaky foundations that have been implicitly overruled by Casarotto and other Supreme Court arbitration cases enforcing adhesion contracts’ unknowing consent trading away the Seventh Amendment jury right.Footnote 154 The previous pages call for this overruling to made explicit by holding that the Seventh Amendment right may be traded away by an adhesion contract. In other words, by holding that contract law standards of consent govern bench trial clauses, as well as arbitration and forum selection clauses in federal court.
This call for harmonization, the following pages show, is strengthened by the fact that other federal constitutional rights are also traded away by adhesion contracts. In particular, contract law standards of consent govern rights under the Due Process Clauses of the Fifth and Fourteenth Amendments, which provide that government shall not “deprive any person of life, liberty, or property, without due process of law.”Footnote 155
II. The Due Process Right of Minimum Contacts
Under the Due Process Clauses, defendants have a constitutional right not to be sued in, that is, subject to the jurisdiction of, a court with which the defendant lacks “minimum contacts.”Footnote 156 The Supreme Court established this right in 1945’s International Shoe Co. v. Washington,Footnote 157 and reaffirmed it in several cases,Footnote 158 including Mallory v. Norfolk Southern Railway Company,Footnote 159 from 2023.
This constitutional right of minimum contacts was traded away in an adhesion contract in what was perhaps the first Supreme Court case involving a constitutional right adhesively traded away, 1964’s National Equip. Rental, Ltd. v. Szukhent. Footnote 160 Michigan residents leased farm equipment from a Delaware corporation with its principal place of business in New York. The contract said, “the Lessee hereby designates Florence Weinberg, 47—21 Forty-first Street, Long Island City, N.Y., as agent for the purpose of accepting service of any process within the State of New York.”Footnote 161 Although the lessees “were not acquainted with Florence Weinberg,”Footnote 162 and otherwise lacked contacts with New York,Footnote 163 a bare 5-4 majority of the Supreme Court permitted a New York court to exercise jurisdiction,Footnote 164 over a dissent stating that “upholding service of process in this case raises serious questions as to whether these Michigan farmers have been denied due process of law in violation of the Fifth and Fourteenth Amendments.”Footnote 165
The Szukhent majority understood the Michigan lessee defendants’ adhesive appointment of Weinberg as their agent for receipt of service to be the defendants’ consent to New York courts exercising jurisdiction over the defendants.Footnote 166 So, the Szukhent Court enforced an adhesive consent-to-jurisdiction clause against the non-drafters,Footnote 167 and thus implicitly held that contract law’s easily satisfied “adhesive” standards of consent apply to the constitutional right not to be sued in a jurisdiction with which one lacks minimum contacts. In contrast, the dissenting opinions objected to “companies exerting their economic power” through contract “boilerplate.”Footnote 168 So they would require “in addition to his mere signature on the form, that the individual understandingly consented to be sued in a State not that of his residence.”Footnote 169
Szukhent’s enforcement of consent-to-jurisdiction clauses was bolstered by the Court’s 1985 decision in Burger King Corp. v. Rudzewicz. Footnote 170 Although Burger King did not involve a consent-to-jurisdiction clause, the Burger King Court said,
because the personal jurisdiction requirement is a waivable right, there are a “variety of legal arrangements” by which a litigant may give “express or implied consent to the personal jurisdiction of the court.” Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 703 (1982). For example, particularly in the commercial context, parties frequently stipulate in advance to submit their controversies for resolution within a particular jurisdiction. See National Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311 (1964). Where such forum selection provisions have been obtained through “freely negotiated” agreements and are not “unreasonable and unjust,” [citing The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, (1972)], their enforcement does not offend due process.Footnote 171
As Professor G. Richard Shell explains, the Burger King Court “signaled its acceptance of standardized contracts as a means of waiving the due process rights embodied in the ‘minimum contacts’ limits of personal jurisdiction.”Footnote 172 In Burger King, “the Court declared that a choice of law clause contained in the boilerplate language of a franchise agreement, combined with the proposed twenty-year business relationship contemplated by the agreement, was persuasive evidence that a party had consented to be sued in the forum whose law had been selected.”Footnote 173
In short, Szukhent and Burger King establish that the Due Process right of minimum contacts may be traded away in an adhesion contract, so contract law standards of consent—not a higher knowing consent standard—governs this Due Process right, much as it governs the Seventh Amendment jury right, except in the outlier—bench trial clause—cases like Hendrix.
States, however, may give this “minimum contacts” right greater protection than the Due Process clause requires. Or, to put it another way, “[t]here is no rule that the states must always enforce consent-to-jurisdiction clauses to the fullest extent permitted by the U.S. Constitution.”Footnote 174 In their 2021 article, Enforcing Inbound Forum Selection Clauses in State Court,Footnote 175 John Coyle and Katherine Richardson discuss state cases that address the enforceability of consent-to-jurisdiction clauses,Footnote 176 which Coyle and Richardson call “inbound forum selection” clauses because the clauses bring jurisdiction into the court in which the plaintiff sued.Footnote 177 Surveying states’ varying treatment of these clauses, Coyle and Richardson identify seven methods by which states evaluate the validity of such clauses, ranging from the easily satisfied “adhesive” consent standards of The Bremen and Carnival Cruise to outright refusal to enforce consent-to-jurisdiction clauses.Footnote 178 Some of these refusals are by courts that “interpreted their state long-arm statute to say that a consent-to-jurisdiction clause—standing alone—is not enough to confer jurisdiction on a state court,”Footnote 179 while others apply state statutes that prohibit consent-to-jurisdiction clauses in certain contexts, such as consumer leases,Footnote 180 and consumer credit agreements.Footnote 181 In sum, the law on consent-to-jurisdiction (inbound forum selection) clauses resembles the law on the (outbound) forum selection clauses discussed in Part F insofar as federal courts generally enforce both types of clause in adhesion contracts but states vary in the extent to which they require a higher level of consent.
III. Due Process Rights to Notice and a Hearing
Due process generally requires notice and an opportunity to be heard before government takes one’s property. This constitutional right, however, is often traded away in adhesion contracts. The most common of these contracts is the security agreement, in which the debtor grants a security interest or similar lien to the creditor. This area of Due Process law developed over several Supreme Court cases.
In Sniadach v. Family Finance Corp. of Bay View,Footnote 182 the Supreme Court held that garnishment of a debtor’s wages without prior notice or a hearing violated Due Process. A few years later though, in D.H. Overmyer Co. v. Frick Co.,Footnote 183 the Supreme Court cited Szukhent in stating that “[t]he due process rights to notice and hearing prior to a civil judgment are subject to waiver.”Footnote 184 Overmyer involved a cognovit note, an “ancient legal device by which the debtor consents in advance to the holder’s obtaining a judgment without notice or hearing, and possibly even with the appearance, on the debtor’s behalf, of an attorney designated by the holder.”Footnote 185 Unlike other states at that time, Ohio law permitted cognovits, albeit with the limitation “that in Ohio a court has the power to open the judgment upon a proper showing.”Footnote 186 Thus, it was possible for a debtor who had signed a cognovit to ultimately avoid judgment on the debt. Nevertheless, a cognovit note traded away the debtor’s Due Process rights to notice and a hearing prior to the entry of judgment.Footnote 187 The Overmyer Court pointed out that Overmyer was a corporation and its agreement “was not a contract of adhesion.”Footnote 188 Overmyer’s consent to the cognovit was knowing, in contrast to the unknowing consent routinely given to the terms of adhesion contracts.
The same year as Overmyer, the Supreme Court prevented enforcement of an adhesion contract trading away Due Process rights in Fuentes v. Shevin.Footnote 189 Fuentes involved consumer adhesion contracts through which the consumers bought goods under “conditional sales contract[s] calling for monthly payments over a period of time.”Footnote 190 Under the law of Fuentes’ era, the seller in a conditional sales contract retained title to the goods until the consumer paid the debt. By contrast, under current state law, the Uniform Commercial Code, these transactions are treated as sales with title passing to the consumer but with the seller retaining a security interest in the goods.Footnote 191 Under both the UCC and the state law in Fuentes, if the consumer debtor defaults, the seller or other creditor may obtain possession of the goods through a replevin action in which a court orders a sheriff or similar government official to take the goods from the consumer.Footnote 192 The state replevin statutes in Fuentes permitted creditors, upon ex parte (without the opposing party presentFootnote 193) application to a court clerk and the posting of a bond, to obtain a writ of replevin instructing the sheriff to seize the goods.Footnote 194 Seizure of the goods occurred without the debtor receiving notice or the opportunity for a hearing, so the Fuentes Court held that the debtors were deprived of their property without Due Process of law.Footnote 195
The Fuentes Court distinguished its holding from that of Overmyer by emphasizing the different types of consent given in the two cases. Unlike Overmyer, the parties in Fuentes “were far from equal in bargaining power” and the “waiver provision was a printed part of a form sales contract.”Footnote 196 Fuentes held that “waiver of constitutional rights in any context must, at the very least, be clear. We need not concern ourselves with the involuntariness or unintelligence of a waiver when the contractual language relied upon does not, on its face, even amount to a waiver.”Footnote 197 The Court stated that there was no clear waiver because the contracts
simply provided that upon a default the seller “may take back,” “may retake” or “may repossess” merchandise. The contracts included nothing about the waiver of a prior hearing. They did not indicate how or through what process—a final judgment, self-help, prejudgment replevin with a prior hearing, or prejudgment replevin without a prior hearing—the seller could take back the goods.Footnote 198
Fuentes, however, was “sharply curtailed”Footnote 199 only two years later by Mitchell v. W. T. Grant Co.,Footnote 200 the facts of which were almost identical to those of Fuentes—a consumer debtor’s default on a conditional sales contract.Footnote 201 As in Fuentes, the state statute in Mitchell permitted the creditor, upon ex parte application and the posting of a bond, to obtain a writ instructing the sheriff or constable to take possession of the goods from the debtor.Footnote 202 Nevertheless, Mitchell rejected the debtor’s argument that Due Process entitled the debtor to a hearing before seizure of the goods.Footnote 203 Mitchell distinguished Fuentes due to the different state statutes in each case. The statute in Mitchell required the creditor’s affidavit seeking the writ to allege specific facts and provided for the writ to be issued by a judge with discretion to deny it,Footnote 204 while the statutes in Fuentes allowed the creditor’s affidavit to be conclusory and provided for the writ to be issued by a court clerk without judicial participation.Footnote 205
Mitchell treated the consumer debtor’s adhesion contract with the seller-creditor as trading away the Due Process right to a pre-deprivation hearing. Mitchell did so by distinguishing a hypothetical case in which no such contract had been formed, so the creditor would be seeking to seize property in which it lacked a lien or other property interest. Mitchell said, “this is not a case where the property sequestered by the court is exclusively the property of the defendant debtor. The question is not whether a debtor’s property may be seized by his creditors, pendente lite, where they hold no present interest in the property sought to be seized.”Footnote 206 Rather, in Mitchell the question was the effect of the contract through which the seller-creditor received or retained a property interest in the goods possessed by the consumer debtor.
To put it in modern—UCC—words, because the consumer buyer in Mitchell had contractually granted the seller a lien, “both seller and buyer had current, real interests in the property,” so “[r]esolution of the due process question must take account not only of the interests of the buyer of the property but those of the seller as well.”Footnote 207 Thus, the Mitchell Court here suggests that, had there been no contract granting a lien, so the seller-creditor would be unsecured, then the Due Process result would have been different.Footnote 208 In other words, the adhesion contract through which the seller-creditor received or retained a property interest traded away the consumer debtor’s Due Process right to a pre-deprivation hearing. As Richard Shell writes, Mitchell “put to rest any notion that contractual waivers of due process rights would always be governed by special default rules or limited to sophisticated parties.”Footnote 209 Mitchell plainly does not require knowing consent but rather applies contract law’s easily satisfied “adhesive” standards of consent.
In its more recent case on point, Connecticut v. Doehr,Footnote 210 the Supreme Court continued its treatment of some debtor-creditor contracts as trading away the Due Process right to a pre-deprivation hearing. Unlike the plaintiff in Mitchell, who had such a contract, the plaintiff in Doehr did not. The Doehr plaintiff, who brought assault and battery claims in state court,Footnote 211 won prejudgment attachment of the defendant’s real estate, without the defendant receiving notice or the opportunity for a hearing. Doehr held this unconstitutional, a deprivation of the defendant’s property without due process. Doehr distinguished Mitchell on several grounds, including the fact that “in Mitchell, the plaintiff had a vendor’s lien to protect,” while the Doehr “plaintiff had no existing interest in Doehr’s real estate when he sought the attachment.”Footnote 212 In other words, the contract through which the Mitchell creditor received or retained an interest in property possessed by the debtor had no analog in Doehr.
Following Mitchell and Doehr, lower courts have continued to hold that debtors can by contract trade away their Due Process rights to notice and a hearing before the state deprives them of property interests. For example, a Second Circuit case, Shaumyan v. O’Neill,Footnote 213 involved the same prejudgment attachment statute that Doehr held unconstitutional in the absence of a contract between the plaintiff and defendant. In Shaumyan, by contrast, the Second Circuit held the statute constitutional where the debtor had contracted away Due Process rights.Footnote 214 Shaumyan distinguished Doehr on two grounds: First, Shaumyan involved a predispute contract.Footnote 215 Second, Shaumyan involved a lien that would not have arisen but for that contract.Footnote 216
Other courts similarly treat certain debtor contracts as trading away the debtor’s Due Process rights to notice and a pre-deprivation hearing. A common type of such a contract is the modern, UCC, version of the transaction in Fuentes and Mitchell—the security agreement in which the debtor grants the seller or other creditor a lien in the goods (the “collateral”Footnote 217) possessed by the debtor. Even in consumer contracts of adhesion, courts continue to follow Mitchell by treating security agreements as trading away the debtor’s Due Process rights to notice and a hearing before the state takes the collateral from the debtor. An example is Quinata v. Nishimura,Footnote 218 in which Quintana borrowed from a bank and formed a security agreement with the bank granting it a security interest in her vehicle.Footnote 219 When Quintana defaulted, the state court granted the bank’s ex parte motion asking for the sheriff to take the vehicle and give it to the bank.Footnote 220 Quintana then sued in federal court alleging that her Due Process rights were violated, but the federal district court found no violation of Due Process because the Hawaii statute complied with Due Process as applied by the Supreme Court in Mitchell. The Quinata court said, “[t]his case is factually similar to Mitchell v. W.T. Grant Co., 416 U.S. 600 (1974), which upheld a Louisiana statute allowing the prejudgment seizure of goods subject to a security interest.”Footnote 221 The Ninth Circuit affirmed without opinion.Footnote 222
Quinata is an example of a consumer’s adhesion contract trading away the Due Process rights to pre-deprivation notice and a hearing. Adhesive security agreements are routine,Footnote 223 and routinely enforced by courts. So, contract law’s easily satisfied “adhesive” standards of consent are sufficient to trade away the Due Process rights to pre-deprivation notice and hearing.
I. Conclusion
This Article makes at least three big points. First, a peculiarity of law in the United States, its widespread enforcement of adhesive arbitration agreements, largely serves to override three other peculiarities of civil litigation in the U.S.: (1) The civil jury, (2) Optout class actions, and (3) Extensive discovery. Enforcing the arbitration agreements of U.S. consumers generally moves their claims from the unusual procedure of U.S. courts to procedures closer to the global norm of comparable nations.
Second, the FAA’s enforcement of adhesive arbitration agreements contrasts with federal cases, like Hendrix, holding that the Seventh Amendment jury right may be traded away in a bench trial clause only by “knowing” consent. But these cases are inconsistent not only with the Supreme Court’s FAA cases but also with cases enforcing adhesive forum selection clauses trading away the Seventh Amendment right. And they are also inconsistent with cases enforcing adhesive consent-to-jurisdiction clauses and adhesive security agreements, both of which trade away constitutional Due Process rights. In sum, contract law standards of consent generally govern both Seventh Amendment and Due Process rights, but cases requiring “knowing” consent for bench trial clauses are outliers.
Third, states are free to require higher standards of consent to trade away jury and Due Process rights except where a preemptive federal statute says otherwise. The FAA is such a federal statute. In contrast, no analogous federal statute governs bench trial clauses, forum selection clauses, consent-to-jurisdiction clauses, or security agreements. This observation largely explains the case law on these five types of contract clauses.
Acknowledgment
The author thanks Nicholas Mouttotos, Michel Borchardt, Stefan F. Thönissen, Oleg Goldschmidt, Liz Kantor, Blake Wilson, and Shusuke Kakiuchi for help with German, British, and Japanese law, Lynn LoPucki for constructive suggestions, and Tara Phipps, Peyton Augustine, Thea Hack, Alex Falk, Kelen Kenol, Michael Moore, Israel Nelson, Reagan Hoskin, and Kas Caton for research assistance.
Funding Statement
The author thanks the University of Kansas for a General Research Fund award to fund this research.
Competing Interests
No specific funding has been declared in relation to this article.
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