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Huntingford v. Pharmacy Corporation of America

United States District Court, D. New Mexico

April 3, 2019




         The Court takes up this matter-a contractual dispute over whether Plaintiff Ross Huntingford is entitled to a $1, 250, 000 deferred payment-to determine whether Defendant PharMerica has “waived a waiver” in the contract. The parties clearly and intentionally waived, “TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ” the right to a jury trial in any disputes arising under the contract. (See Doc. 1-1 at 47.) Yet, when Mr. Huntingford filed suit in state court, he requested a jury trial. Over a year later, PharMerica moved to strike the jury demand. Now, Mr. Huntingford urges the Court to deny PharMerica's Motion to Strike Jury Demand (Doc. 120) because PharMerica's conduct suggests that it was consenting to try the case by jury and thus waived the contractual jury trial waiver. Having considered the motion, the parties' briefing on the issue, and the applicable law, the Court finds that the waiver is valid and enforceable and will grant PharMerica's motion.

         I. Background [1]

         In 2013, the parties entered into an Asset Purchase Agreement (APA) for PharMerica to purchase Mr. Huntingford's pharmacy business, which provides pharmaceutical products, supplies, and consultation services to long-term care facilities in New Mexico. (Doc. 1-1 at 15.) The APA includes a deferred payment clause, which provides that if the gross profit of the business meets a certain target threshold at the two-year anniversary of the closing date, then PharMerica must make an additional “deferred payment” to Mr. Huntingford. (Id. at 17.) After the two-year anniversary, PharMerica provided Mr. Huntingford with spreadsheets showing that he fell short of the threshold and was not entitled to the deferred payment. (See Doc. 39-1 at 14-19.) Mr. Huntingford does not trust PharMerica's calculations and alleges that he is entitled to the deferred payment. (See Doc. 1-1 at 6.) Two claims remain in the case: (1) that PharMerica breached the contract by failing to pay Mr. Huntingford the deferred payment or provide a detailed statement of profits; and (2) that PharMerica breached its implied duty of good faith and fair dealing by managing the purchased accounts so poorly that Mr. Huntingford could not earn the deferred payment. (See Doc. 106 at 21.)

         Section 8.13 of the APA includes the following language:

Jurisdiction: Waiver of Jury Trial. The Parties hereby agree that any dispute or controversy arising out of or related to this Agreement or the transactions contemplated hereby shall be conducted only in the state and federal courts located in New Castle County, Delaware. Each Party hereby irrevocably consents and submits to the exclusive personal jurisdiction of and venue in the federal and state courts located in the State of Delaware. EACH PARTY HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. . . .

(Doc. 1-1 at 47.) Mr. Huntingford's original complaint, filed in the New Mexico Second Judicial District Court on November 7, 2017, was accompanied by a demand for jury trial. (See Docs. 113 at 1; 113-1.) When PharMerica removed the action in December 2017, its civil cover sheet acknowledged Mr. Huntingford's jury demand. (Doc. 2 at 1.) In the parties' Joint Status Report and Provisional Discovery Plan filed on January 22, 2018, the box next to “[t]his is a jury case” is checked. (Doc. 13 at 4.) On February 6, 2018, the Court set the current dates for jury selection and jury trial. (Doc. 25.) As Mr. Huntingford notes, “[o]n July 17, 2018, Pharmerica filed its Answer to Huntingford's Complaint . . . and once again made no mention of disputing Huntingford's jury demand.” (Doc. 113 at 2 (citing Doc. 53).)

         Almost a year after Mr. Huntingford filed his complaint, the parties filed their first proposed pretrial order on October 30, 2018. (Doc. 79.) In that document, under the header “Submissions for Bench Trials, ” PharMerica asserted for the first time that Mr. Huntingford had waived his right to a jury trial in Section 8.13 of the APA. (See Id. at 22.) PharMerica argued that Mr. Huntingford “has suffered no prejudice because he knew years ago that he waived a right to a jury trial and has not changed his course of conduct in the litigation based on an unfounded belief that he was entitled to try his case in front of a jury.” (Id. at 23.) In the same section of the proposed pretrial order, Mr. Huntingford countered that PharMerica “has consented to a jury trial throughout the course of this litigation, and should not be permitted to raise this untimely objection to Plaintiff's jury demand.” (Id. at 22.)

         In its subsequent briefing on this issue, PharMerica asserts that because the remaining claims in the case are based on “a valid and enforceable contract and that contract includes a jury trial waiver[, ]” the waiver in Section 8.13 of the APA should control and the Court should conduct a bench trial rather than a jury trial. (Doc. 116 at 1.) According to PharMerica, some of the prior claims at issue-unjust enrichment and quantum meruit-were based on the lack of a valid and enforceable contract, and thus potentially subject to a jury trial and not bound by the waiver in the APA. (Id.) Now that the Court has dismissed the quantum meruit and unjust enrichment claims and affirmed the validity of the APA, PharMerica argues, only disputes rooted in the APA remain and the contract clearly waives a right to jury trial in such disputes. (See Docs. 87 at 9; 116 at 17.)

         Mr. Huntingford, for his part, asserts that PharMerica waived its right to enforce the waiver by failing to object to his jury demand until the October 2018 pretrial order and failing to file a formal motion to strike the jury demand.[2] (Doc. 113 at 2.) He argues that PharMerica acknowledged the demand for jury trial but never sought to strike it, and that “Pharmerica's conduct throughout this case evinced its consent to trying this case to a jury and its belated objection to doing so should be denied.” (Id.)

         On the same day it submitted its response to Mr. Huntingford's briefing on the jury trial issue, PharMerica filed its formal Motion to Strike Jury Demand (Doc. 120). The motion incorporates many of the legal arguments and citations that PharMerica already laid out in its briefing on the jury trial issue, arguing in large part that the contractual jury trial waiver is valid and should be enforced now that only contractual claims remain at issue in the case. (See Docs. 116; 119; 120.) PharMerica further argues that Mr. Huntingford will not be prejudiced by a bench trial and that a bench trial will conserve the Court's and the parties' resources. (Doc. 120 at 3.)

         II. Legal Standard

         Under Federal Rule of Civil Procedure 38, “[t]he right of trial by jury as declared by the Seventh Amendment to the Constitution-or as provided by a federal statute-is preserved to the parties inviolate.” Fed.R.Civ.P. 38(a). However, this right may be waived, and the Court may determine whether such a right exists for each issue to be tried. See Fed. R. Civ. P. 39(a) (“When a jury trial has been demanded under Rule 38, . . . trial on all issues so demanded must be by jury unless . . . the court, on motion or on its own, finds that on some or all of those issues there is no federal right to a jury trial.”). The failure to properly demand a jury is one way a party can waive its right to a jury trial. See Fed. R. Civ. P. 38(d) (“[a] party waives a jury trial unless its demand is properly served and filed”). Delaware law, which governs contractual disputes arising under the APA, also allows parties to waive their jury trial right by contract. See Graham v. State Farm Mut. Auto. Ins. Co., 565 A.2d 908, 911-12 (Del. 1989) (“The Delaware Constitution preserves the right to trial by jury as it existed at common law. . . . That right is not absolute but subject to waiver if the parties so intend.”) (citations omitted).

         Here, the parties do not dispute whether the APA's contractual waiver of the jury trial right is valid, but whether PharMerica's actions in this case may have waived the otherwise valid contractual waiver. Under Delaware law, contractual provisions may be waived by the parties' conduct. See AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 444 (Del. 2005) (“It is well settled in Delaware that contractual requirements or conditions may be waived” (citing Pepsi-Cola Bottling Co. v. Pepsico, Inc., 297 A.2d 28, 33 (Del. 1972))). The standard for proving waiver of contractual provisions is, however, “quite exacting.” Id. (citing Am. Family Mortg. Corp. v. Acierno, 640 A.2d 655 (Del. 1994)). ‘“Waiver is the voluntary and intentional relinquishment of a known right.' It implies knowledge of all material facts and an intent to waive, together with a willingness to refrain from enforcing those contractual rights. The facts relied upon to prove waiver must be ...

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