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Triboro, Inc. v. Siren, Inc.

2006 WL 2990365 (U.S. Dist. Ct. D. N.J. 2006) (Unpublished)

NOTES; JURY WAIVERS — Where a document, such as a promissory note, contains a jury trial waiver, intended third-party beneficiaries of that document are subject to the same contractual provision and are therefore bound by such a jury waiver.

One company sold another company large amounts of products for which it claimed the purchasing company did not pay. The seller sued the buyer in District Court, alleging breach of contract and breach of the duty of good faith. The buyer filed an answer, which included an affirmative defense stating that it had paid off its debt to the seller. The buyer also filed a third-party complaint against an individual it identified as “an owner, officer, and/or director” of the seller. Its claims were based on the agent’s alleged breach of contracts with the buyer’s owner. The buyer claimed that its owner signed two promissory notes and gave cash to the seller’s agent in exchange for the agent’s promise that the amounts would be applied to the buyer’s account with the seller. However, the buyer claimed the agent never applied the amounts to pay for the buyer’s purchases. The buyer demanded a jury trial. The agent moved to dismiss the third-party complaint for failure to state a claim, or in the alternative, asked the Court to strike the buyer’s demand for a jury trial with respect to the counts regarding the promissory notes.

To support his assertion that the third-party complaint should be dismissed, the agent argued that the only relief available to the buyer would be a reduction of its potential liability to the seller. The Court rejected this argument, stating that it was supported by neither legal authority nor logic. The agent also asserted that the buyer’s contention that it paid the agent had already been properly addressed by the affirmative defense in the buyer’s answer. The Court found that this argument implied that paying the agent was equivalent to paying the seller. However, in his motion, the agent denied that he and the seller were interchangeable entities. The Court stated that the agent’s conflicting messages regarding his relationship with the seller made it impossible to conclude that the claim against him was properly addressed in the affirmative defense against the seller. Therefore the Court rejected this as a reason to conclude that the buyer’s complaint failed to state a cause of action. The agent further argued for dismissal on the grounds that the parties in the original litigation were not parties to the contracts on which the third-party complaint was based. The Court found that it was irrelevant that the buyer and seller companies were not named parties in the contract, because the third-party complaint relied on the claim that the buyer was the intended third-party beneficiary of the buyer’s owner’s contracts with the agent. Third party beneficiaries generally have standing in such situations, and the Court found that by accepting the claim that the contracts were intended for the buyer’s benefit for purposes of the motion to dismiss, the buyer’s claims were valid. Therefore, the Court rejected the agent’s motion to dismiss on the grounds that the third-party complaint did not state a cause of action.

The agent also argued that waiver language in the promissory notes mandated dismissal of the counts regarding the notes. The notes contained a provision stating that the buyer waived any defenses, counterclaims or other objections to the payment of the note. The Court found that an action against the agent for his failure to apply the notes to the buyer’s obligations did not involve the buyer raising objections to paying the notes. The buyer was not contesting its obligations under the promissory notes. Consequently, the Court found that the notes’ waiver did not constitute grounds for dismissing the third-party complaint.

The agent also contended that judicial efficiency required that the buyer’s claims be dismissed. The agent argued that the third-party complaint duplicated the affirmative defense that the buyer set forth in its answer to the seller’s complaint. The Court found that because of the unclear relationship between the seller and its agent, the affirmative defense and the third-party complaint were not identical. Therefore, the Court rejected the agent’s judicial efficiency argument.

The agent made the additional argument that the promissory notes’ waiver provisions required the buyer’s demand for a jury trial to be stricken with respect to the counts regarding the notes. The notes’ relevant provision stated that the buyer waived trial by jury in any action arising out of the notes. The Court explained that intended third-party beneficiaries to contracts are subject to the same contractual provisions as the parties who negotiated the contracts. Therefore, the Court found that, in the instant case, the buyer was bound by the jury waiver provisions. The Court further found that there was no great disparity in bargaining power between the parties, both parties were experienced businesspeople, there was no evidence that the agreement had not been negotiated, and the waiver was conspicuous. Therefore, the Court found the jury waiver to be valid, and granted the agent’s motion to strike the buyer’s jury demand with respect to the counts regarding the promissory notes.

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