December 17, 2017

Any Type Of Fraud Is Triable To A Jury; Cardinal Health Ventures, Inc. v. Scanameo

Category: Indiana Law Review | Author: | Share:

Common law actions may generally be tried to a jury. Other types of action (such as equity) may not. But that line is not as bright as this general rule seems. For example, fraud claims are common law claims, even if the particular type of fraud at issue is defined by statute.

The Scanameos purchased shares in two medical clinics from Cardinal Health for over $500,000. They later regretted this purchase of those “worthless” shares and sued, alleging securities fraud. The Scanameos made a timely jury demand, but they later regretted this, too, and to strike their jury demand. Cardinal Health objected, but the trial court granted the Scanameos’ motion, and Cardinal Health appealed.

On appeal, the Court noted that the Indiana Constitution guarantees the right to a jury trial on any action which were triable to a jury before June 18, 1852. In other words, if the claim sounds in law, then it is triable to a jury; if it sounds in equity it is tried to the court. It is the substance of an action which controls, no matter the action’s caption or formal denomination.

The claim in this case, securities fraud, is defined by statute, and the Scanameos relied on the statutory language to argue that it need not be tried to a jury. But the language offered no help. The Scanameos argued that the statute used to refer to a trial by jury, it did not now, and that it now included the phrase “determined by the court or arbitrator.” But this quoted language is set off from the rest of the statutory language by commas with a reference to attorney’s fees. And this grammatical construction meant that it only applied to attorney’s fees, not the statute as a whole.

But more fundamentally, the Court noted that a claim for securities fraud is, at its heart, a claim for fraud. And it had previously found that jury trials are appropriate in cases alleging fraud. Moreover, the Scanameos sought money damages, not equitable relief, which further supported the idea that the claim was a legal claim, not an equitable claim.

As the Scanameos had properly invoked their right to a jury trial, they needed Cardinal Health’s consent to withdraw that request. Cardinal Health did not consent, so the trial court erred when it granted the Scanameos’ motion to strike the jury demand.

Lesson:

There is a constitutional right to a jury trial on claims for security fraud.