MINNESOTA SUPREME COURT FINDS CONSTITUTIONAL RIGHT TO JURY TRIAL TO DETERMINE ATTORNEY FEES RECOVERABLE UNDER A CONTRACT
In a recent decision, the Minnesota Supreme Court became the first court in the United States to recognize a constitutional right to a jury trial to determine attorney fees recoverable under a contract. United Prairie Bank-Mountain Lake v. Haugen Nutrition & Equipment, LLC, --- N.W.2d ---, 2012 WL 832833 (Minn. March 14, 2012).
Background
In United Prairie Bank-Mountain Lake, the defendant landowners defaulted on a bank loan. The bank brought an action under its loan documents, which included a provision entitling the bank to its attorney fees incurred in enforcing its rights. The loan documents did not, however, contain a waiver by the borrower of the right to a trial by jury. The district court entered judgment for the bank, denied the landowners’ request to have the question of attorney fees submitted to a jury, and awarded the bank over $400,000.00 in attorney fees. The Minnesota Court of Appeals affirmed the district court’s decision denying the landowners’ request to have the question of attorney fees submitted to a jury.
However, in a 5-2 decision, the Minnesota Supreme Court held that a party has a right to a jury trial under the Minnesota Constitution to determine attorney fees recoverable under a contract. The Supreme Court noted that the Minnesota Constitution provides for the right to a jury trial in all cases at law. Therefore, the Court reasoned, a constitutional right to trial by jury exists because the substance of a claim for attorney fees recoverable under a contract is similar to a claim for contractual indemnification, a traditionally legal claim, and the nature of a request for monetary relief under a contract is a traditionally legal remedy.
In reaching its decision, the Supreme Court expressly acknowledged the difficulties associated with submitting the complicated question of attorney fee awards to juries. Nevertheless, the majority opinion concluded that, “[t]he availability of a constitutionally-guaranteed right to a trial by jury does not and should not turn on the practical difficulties of its implementation.” Id. at * 8 (citing United States v. Booker, 543 U.S. 220, 243-44 (2005)).
What the United Prairie Bank-Mountain Lake Decision Means for Lenders and Creditors
The United Prairie Bank-Mountain Lake decision reinforces the importance of obtaining broad jury trial waivers. The decision does not alter longstanding Minnesota law providing that the right to a jury trial may be validly waived. See Minn. R. Civ. P. 38; Weber Elec. Co. v. Tuminelly, Inc., 206 N.W.2d 656, 657 (Minn. 1973). Thus, lenders and creditors should be careful to include broad jury trial waiver provisions in their loan documents. In light of this decision, prudent lenders and creditors should review their standard jury trial waiver provisions to assess whether a borrower, guarantor, or reviewing court could credibly construe the provision to permit trial by jury on the specific issue of attorney fees. If such interpretation is not clearly barred, improved waiver language is advisable to avoid the submission of this important and complicated issue to a jury.
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