Trez Capital Corporation v. Noroton Heights & Company, LLC

Background

This contract dispute involves Trez Capital (Florida) Corporation, a non-bank lender, and Noroton Heights & Company, LLC, the borrower. On November 15, 2019, they signed a loan agreement for approximately $45 million to finance renovation and redevelopment of a mixed-use shopping center in Darien, Connecticut. Trez Capital advanced an initial funding amount of $5.9 million but did not advance the rest of the loan. Trez Capital later determined that Noroton had not met five of thirteen conditions for future funding. Noroton repaid the initial funding amount in full on July 2, 2020, and the loan agreement terminated under its terms.

Noroton later asserted that Trez Capital breached the loan agreement. In its answer and counterclaims, Noroton demanded a jury trial. Its six counterclaims alleged breach of contract, violation of the duty of good faith and fair dealing, promissory estoppel, unjust enrichment, negligent misrepresentation, and violation of the Connecticut Unfair Trade Practices Act. Noroton moved to enforce its jury demand as to its breach-of-contract, good-faith-and-fair-dealing, negligent-misrepresentation, and Connecticut-law claims.

The Jury Waiver

The loan agreement contained a section titled “Dispute Resolution.” It warned in prominent language that the section contained a jury waiver, an arbitration clause, and a class-action waiver, although the arbitration subsection was marked “Intentionally Omitted.” The jury-waiver subsection stated that both parties waived their rights to a jury trial in connection with any “Dispute” and that disputes would be resolved by a judge without a jury. The agreement did not separately define “Dispute”; instead, its definition referred back to the jury-waiver subsection. Another subsection stated that each party had been induced to enter the agreement by, among other things, the mutual waivers in that section.

The court applied federal law because the enforceability of a jury waiver is a procedural issue in federal court. A contractual jury waiver is enforceable if it was made knowingly, intentionally, and voluntarily. In evaluating that question, the court considered the negotiability of the terms, the prominence of the waiver, the parties’ relative bargaining power, and the business sophistication of the party opposing the waiver.

The court found that Noroton knowingly, voluntarily, and intentionally waived a jury trial. The waiver was conspicuous and preceded by the warning “READ IT CAREFULLY.” The court also found that Trez Capital and Noroton were comparably sophisticated business entities and that both were represented by counsel during negotiations. Although the undefined term “Dispute” could affect the waiver’s scope, the court held that it did not make the waiver itself unenforceable. The parties’ intent to waive a jury trial for disputes arising from the loan agreement was clear.

Whether the Waiver Survived Termination

Noroton argued that the waiver ended when the loan agreement terminated after repayment because the agreement did not expressly say that the waiver would survive. The court rejected that argument. The waiver applied to “any Dispute,” and another provision instructed that “any” meant “any or all” of the relevant disputes. The court concluded that this language naturally included disputes about the agreement whenever they arose.

The court also concluded that the dispute arose during the life of the loan agreement, when Trez Capital refused to provide additional funding based on Noroton’s alleged failure to satisfy five future-funding requirements. The fact that the lawsuit was filed after termination did not remove it from the waiver’s scope. The court found that the agreement’s other survival clauses, which addressed expenses and indemnification, did not show that no other contractual obligations survived. Those clauses addressed different subjects.

Negligent-Misrepresentation Claim

Noroton separately argued that the waiver did not cover its negligent-misrepresentation claim because the claim concerned conduct that allegedly induced Noroton to enter the agreement. Noroton alleged that Trez Capital misrepresented the security of funds available to finance the entire loan amount.

The court held that this claim fell within the broad waiver. It reasoned that the claim concerned the central contract dispute: whether Trez Capital improperly terminated the agreement by refusing to fund the second tranche of the loan. The court therefore concluded that the jury waiver covered Noroton’s negligent-misrepresentation claim as well.

Disposition

Judge Denise Cote denied Noroton’s May 20, 2022 motion to enforce its jury demand.