A contractual right to de novo jury trials? It exists–should you use it your commercial Ks?

In a recent Illinois Supreme Court opinion, the Illinois Court upheld a clause allowing a party to requests a new de novo jury trial after it lost the arbitration.  Often a mandatory arbitration award may be entered and enforced in court by the party prevailing in the arbitration proceeding.  However, in a recent case, Phoenix Ins Co. v. Rosen, No. 110679, 2011 WL 1500013 (Ill. Sup. Ct.), Phoenix was allowed to contractually avoid the adverse arbitration award and seek a de novo jury trial in court.

Phoenix’s insurance policy contained a mandatory arbitration provision that required Rosen to participate in mandatory arbitration instead of going to a court house.  After Rosen went through mandatory arbitration and prevailed, Phoenix filed a lawsuit in an Illinois Court seeking a de novo jury trial instead of paying the $382,500 the Arbitrators awarded to Rosen.  In permitting Phoenix to acquire a de novo jury trial, the Illinois Supreme Court considered various policies, such as, the following: a) policy favoring freedom to contract; b) policy in favor of enforcing arbitration provisions; c) policy in favor of jury trials; d) policy against unconscionable or adhesion contracts; and e) general public policies against harm to the public interest.

In effect, Phoenix was able to contractually avoid the adverse arbitration award and acquire a de novo jury trial on Rosen’s claim for insurance coverage.  However, there is nothing in the Illinois Supreme Court’s opinion that limits its rationale to claims for insurance coverage.  It may be permitted in an assert purchase agreement, employment agreement, intellectual property license, or a commercial sales agreement.  Thus, you may be able to avoid an adverse arbitration award by drafting and implementing a clause that permits a de novo jury trial.  Is this the right solution to manage your business and legal risk? Maybe.

If you have any questions about drafting and implementing risk management provisions in your commercial agreements or enforcing your commercial agreements, then please do not hesitate to contact us.

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