Corporate executives and their lawyers often complain about large jury awards against corporations. Almost always, they have in mind individuals or classes of individuals suing corporations. Increasingly, though, corporations are suing other corporations for large amounts of money, often involving intellectual property — patents, trademarks, copyrights, and trade secrets.
The second largest verdict in 2018, for example, involved two corporations: Amrock (formerly, “Title Source”) versus HouseCanary.
The Amrock case is particularly interesting in that the defendant, HouseCanary, won the large verdict. Amrock (Title Source), an affiliate of Quicken Loans, was a large plaintiff suing a small, start-up company, HouseCanary, for $6 million. Amrock’s original claim is that HouseCanary failed to fulfill a contract because it created unusable software products. Amrock refused to pay, and sued for breach of a contract. But HouseCanary went on the offensive by counter-suing for theft of intellectual property.
A Texas, state-court jury awarded HouseCanary $706 million. The trial judge denied Amrock’s motion for a new trial and added prejudgment interest, along with attorney’s fees, for a total of $740 million.
Very few civil suits ever go to trial. But when they do, generally the plaintiff either wins money or loses and gets no money. Here, however, the plaintiff Amrock not only failed to win any money, but got slammed by an incredibly large verdict.
The case has since become one of competing charges of fraud. At trial, HouseCanary successfully argued that Amrock took its intellectual property by fraud. Now, in a second motion for a retrial, Amrock claims newly discovered evidence of fraud by HouseCanary from one of its former executives who says HouseCanary never had any intellectual property to steal. The intrigue of the combined allegations of fraud presents a plausible plot for a John Grisham novel.
This and other complicated commercial cases ought not to be tried before a lay jury. But what about the right of each of the parties to demand a jury trial?
The right to jury trial is fundamental — even though few civil cases actually go to trial. Nevertheless, jury trials are not available in all civil cases. The availability of the right depends on whether the case is filed in federal or state court and, if in a state court, in which state.
In federal court, the Seventh Amendment controls the right to jury trial in civil cases. As in 18th Century England, the right applies only “In Suits at common law, where the value in controversy shall exceed twenty dollars.” Thus, suits in equity and admiralty, non-common-law cases, are not entitled to jury trials in federal courts. Given, however, that British common-law courts had special juries, including commercial juries made up of merchants, the Seventh Amendment would not seem to bar commercial juries in federal court.
Theoretically, Congress could legislatively provide for juries of citizens with business experience in complex commercial cases. Politically, however, that will not happen.
Creating Commercial Juries
Creation of commercial juries, if it comes, will be in the states. The Seventh Amendment currently does not apply to the states.
For its first 150 years, the Bill of Rights did not apply to the states. States had their own bills of rights. The Bill of Rights was added as a control on the federal government. Then the Supreme Court decided, one by one, to apply most provisions of the Bill of Rights to the states. So far, however, the Court has exempted the Seventh Amendment.
All states provide civil jury trials, protected by state constitutions in all but one or two states. Nevertheless, a number of states have created commercial courts. In such courts, cases are tried to a judge. But the parties in those cases must consent to trial without jury.
Creating commercial juries in state courts would depend on the language of each state’s constitution and related statutes. The wording of some state constitutional provisions for civil jury trials may be consistent with the common-law inclusion of commercial juries. Therefore, in such states, a change in the state constitution may not be necessary before the legislature could enact a statute allowing commercial juries. In states like Texas, with a constitutional protection of civil jury broader than that of the common law, however, a constitutional change would be necessary.
Amending State Constitutions
Many state constitutions are easily amended — generally much too easily. Nevertheless, any change in a state’s civil-jury-trial right would be controversial. Still, as long as any amendment clearly applied only to commercial disputes — not tort cases — the political opposition by the plaintiff attorneys would likely be significantly less.
Any state attempting to create commercial juries would have to avoid violating the Fourteenth Amendment’s Equal Protection Clause, as applied particularly to women and minorities. Therefore, state law would have to ensure commercial juries chosen from a cross-section of persons in the community with knowledge of business.
The increasing complexity of commercial litigation should be a concern to those beyond companies that litigate such issues. A loss of confidence in the ability of courts fairly to dispose of commercial cases — especially those involving intellectual property — will have a severely negative impact on the American culture of innovation.
- Baker, Ph.D., is professor emeritus at Louisiana State University Law Center.
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Author: TERRY JONES