Betta Products, Inc. v. Distribution Systems And Services

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
BETTA PRODUCTS, INC., No. 03-10925
Debtor(s).
______________________________________/
BETTA PRODUCTS, INC.,
Plaintiff(s),
v. A.P. No. 05-1046
DISTRIBUTION SYSTEMS AND SERVICES,
INC., aka DSS,
Defendant(s).
_______________________________________/
Memorandum on Motion to Strike Jury Demand
_________________
This adversary proceeding started out fairly simply. In its complaint, plaintiff and Chapter 11 debtor
in possession Betta Products, Inc. (“Betta”) alleged that defendant Distribution Systems and Services, Inc.
(“DSS”) breached a written warehouse agreement by failing, refusing or being unable to produce inventory of
Betta which DSS had contracted to warehouse. Betta sought either turnover of its missing inventory or
damages exceeding $1 million.
DSS did not demand a jury in its answer to the complaint. However, it thereafter made a motion to
Entered on Docket
June 05, 2007
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 05-01046 Doc# 151 Filed: 06/05/07 Entered: 06/05/07 11:15:09 Page 1 of
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arbitrate the dispute pursuant to the warehouse agreement, and Betta did not oppose. The court assumed at
that time that the dispute would be expeditiously resolved with little court time involved. The court was very
wrong.
The case began going south when DSS made a motion before the arbitration panel to exclude any tort
claims of Betta. Panicking at the thought of losing a theory of recovery, Betta came running back to this court
to amend its complaint to add tort claims. The court granted the motion but severed the tort claims from the
contract claims being arbitrated, assuming that the issue was a tempest in a teapot since the essential issue was
whether DSS properly warehoused Betta’s property and that would be decided by the arbitration panel.
Again, the court was wrong.
At this point, Betta got the bright idea that since it now had a tort action pending before this court it
could ignore the arbitration proceeding. It sought to dismiss its contract claims and only litigate the tort claims.
However, it made a fundamental mistake in thinking that the arbitration panel was some sort of extension of
this court and sought dismissal with this court instead of the arbitration panel. The court refused to intervene
and the arbitration panel proceeded, in the absence of Betta, to rule in favor of DSS.
That leaves the tort claims of the amended complaint. The factual allegations and the damages sought
are the same, except that Betta has added a prayer for punitive damages. In its answer to the amended
complaint, DSS asserted a jury demand for the first time. Betta’s motion to strike the jury demand is now
before the court.
The court would very much like to allow DSS a jury, as it has formed a strong dislike for the
gamesmanship practiced by both sides which has turned this case from a straightforward claim for damages
into an exercise in the nuances of civil procedure; allowing a jury would mean that the district court would be
saddled with this albatross. However, it does not appear that DSS is entitled to a jury.
The general rule is that an amended complaint which advances new theories of recovery raises new
issues and revives a lapsed right to demand a jury. See annot., “Waived Right to Jury Trial as Revived by
Amended or Supplemental Proceedings,” 18 ALR Fed. 754, 757-8. However, the rule is somewhat different
in this circuit. Here, where the original complaint and the amended complaint turn on the same matrix of facts
Case: 05-01046 Doc# 151 Filed: 06/05/07 Entered: 06/05/07 11:15:09 Page 2 of
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the presentation of a new theory of recovery does not constitute the presentation of a new issue on which a
jury trial should be granted. Lutz v. Glendale Union High School, 403 F.3d 1061, 1066 (9th Cir. 2005);
Las Vegas Sun, Inc. v. Summa Corp., 610 F.2d 614, 620 (9th Cir. 1979).
The amended complaint is based on exactly the same facts as the original complaint. The only new
factor other than a new theory of recovery is a demand for punitive damages. However, this is merely a
change in the relief sought. The cases are fairly uniform in holding that a change in desired relief does not
revive a right to a jury. 18 ALR Fed. at 770-773. For example, in Lanza v. Drexel & Co., 479 F.2d
1277, 1310 (2nd Cir. 1973), the Second Circuit held that where a defendant attempted to assert a right to a
jury trial demand in response to the plaintiff's amended securities complaint that added a claim for punitive
damages, the defendant's failure to demand a jury trial as to the original complaint waived his right as to all
issues relating to this general area of dispute, including the allegations of the amended complaint.
For the foregoing reasons, the court concludes that the amended complaint did not revive DSS’ right
to demand a jury trial. Counsel for Betta shall accordingly submit a form or order granting its motion to strike
the jury demand.
Dated: June 5, 2007
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 05-01046 Doc# 151 Filed: 06/05/07 Entered: 06/05/07 11:15:09 Page 3 of
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