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RIGHT TO JURY TRIAL ON DEFENDANT'S COUNTERCLAIM DESPITE PLAINTIFF'S CLAIM BEING ASSERTED IN ADMIRALTY
By Shaun F. Carroll |
Foreign insurers contemplating legal action the U.S. should be aware of a recent federal court decision in New York which holds that a plaintiff-claimant’s assertion of non-jury claims in an admiralty action cannot prevent a defendant from demanding a jury trial on his counterclaims where appropriate non-admiralty jurisdictional grounds are present. The decision in Sphere Drake Insurance PLC v. J. Shree Corp., 98 Civ. 5753 (S.D.N.Y.) clarifies an issue on which other federal courts have disagreed in the past.
The choice to proceed in admiralty without a jury or in diversity with a jury is one which as a practical matter is initially in the hands of the plaintiff. Over the years, the courts have split on the issue of whether the plaintiff’s choice is binding upon counterclaims asserted by a defendant. Some courts have ruled that the plaintiff’s choice of admiralty jurisdiction precludes a demand by the defendant for a jury trial even as to a non-admiralty counterclaims. See, St. Paul Fire & Marine Insurance Co. v. Holiday Fir Inc., 1996 WL 148350 (S.D.N.Y. 1996). Others have held that a defendant in admiralty retains the right to demand a trial by jury on counterclaims based upon non-admiralty jurisdictional grounds. Wilmington Trust v. U.S. District Court for the District of Hawaii, 934 F.2d 1026 (9th 1991) cert. denied, 503 U.S. 966 (1992). The recent decision in Sphere Drake comes down squarely on the side of preservation of the right to a trial by jury for non-admiralty counterclaims.
In Sphere Drake, London underwriters filed a declaratory judgment action in New York grounded in admiralty jurisdiction (i.e., without a jury) seeking a declaration that a policy covering the defendant’s shipment of gemstones was void or otherwise inapplicable. The defendant counterclaimed for breach of contract and bad faith, demanding a jury trial on those issues. Underwriters sought to have the jury demand stricken based on their designation of the suit as one in admiralty. Judge Richard N. Berman denied the underwriter’s motion and ruled that defendant’s claims sounding in breach of contrast and bad faith and predicated on the court’s diversity jurisdiction must be tried to a jury.
Shaun F. Carroll is a partner with Nourse & Bowles, LLP. This article has been previously published as part of the firm's monthly submission to the Maritime Law Brief section of Lloyd's of London Press' website, www.llplimited.com/usreg.shtml.