One court got it right.  In Too Tall, Inc. v. Sara Lee Bakery Group, Inc., Bus. Franchise Guide (CCH) ¶14,229 (D.N.Mex.,2009), the U.S. District Court for the District of New Mexico denied Sara Lee's motion to strike the distributor's jury demand, notwithstanding that the subject distribution agreement contained a bilateral jury trial waiver.
 
As observed in our April 2008 newsletter, Nobody Put A Gun To Your Head:Judicial Enforcement of Jury Trial Waivers By Franchisees, most modern-day franchise agreements call for the franchisee to waive its constitutional right to a trial by jury concerning any disputes that arise from the franchise relationship.  Franchisors often are eager to avoid facing juries, which are generally perceived as being reflexively empathetic toward the "little guy" and often willing to redistribute the wealth of deep pocket corporations such as franchisors.  For example, a Miami jury recently awarded roughly $365,000 to five South Beach master franchisees as a result of the franchisor's fraudulent business practices.
 
To be valid, however, a franchisee's waiver of this fundamental right must be both knowing and voluntary, taking into account the following four factors:

In Too Tall, the court held that although the jury trial waiver was sufficiently conspicuous (contained in capital letters on page 22 of the 26-page form distribution agreement), Sara Lee failed to meet its burden of demonstrating that the distributor's fundamental right to a jury trial was knowingly and validly waived with respect to the final three factors.
 
The court found that Sara Lee failed (i) to negate the gross disparity in bargaining power between itself and the distributor, (ii) to demonstrate that the distributor had a sufficient level of business knowledge, and (iii) that the distributor had a meaningful opportunity to negotiate the terms of the agreement.  The distributor's owner, a former delivery driver for Sara Lee, was not a sophisticated businessman, had no business education or significant business experience, did not bargain before entering into the contract, and was not represented by counsel.
 
The result in Too Tall contrasts with Aamco Transmissions, Inc. v. Baker, 2008 WL 509220 (E.D.Pa.,2008), the subject of our April 2008 newsletter.  In Baker, the court enforced the jury trial waiver contained in the parties' franchise agreement, finding that the franchisee's waiver was knowing and voluntary.  Unlike in Too Tall, where the distributor argued that he was an unsophisticated employee who was faced with a choice between termination of his employment or signing the distribution agreement (Sara Lee had recently switched its operations from an in-house system to an independent contractor arrangement), the franchisee in Baker, who had a high level of sophistication - including a college degree and more than 17 years of business experience - elected to sign on with AAMCO after carefully analyzing the AAMCO opportunity as well as other business opportunities before investing.
 
Taken together, these two cases suggest that the validity of a boilerplate jury waiver often will turn solely on the extent of the franchisee's sophistication.  Absent exceptional circumstances, the conspicuousness factor will almost always weigh in favor of enforcement.  Conversely, the parties' relative bargaining power and opportunity for negotiation generally will favor non-enforcement.  As was the case in Too Tall, there is an inherent gross imbalance in the relative bargaining power as between a franchisor and a prospective franchisee or distributor, and franchise agreements are generally presented on an as is, take-it-or-leave-it basis, without any opportunity for negotiation.
 
In our view, the most significant aspect of the Too Tall decision is the reverence that the court afforded to the plaintiff's constitutional right to jury trial.  Unlike the Baker court, the Too Tall court appropriately held Sara Lee to a very high standard for determining the validity of a waiver of a constitutional right, noting that (i) the burden was on Sara Lee to establish this validity, and (ii) because the right of a jury trial is fundamental, courts indulge every reasonable presumption against waiver.  This is the prism through which the validity of all jury trial waivers must be viewed.