California Supreme Court Rules That There Is No Right to a Jury Trial for Claims Brought Under California’s Unfair Competition Law and False Advertising Law
June 10 2020
As the State of California looks to plug a massive hole in its budget, the regulated community can expect agencies with the authority to generate revenue by imposing civil penalties to become even more active. Those sued for the first time by agencies seeking to recover civil penalties sometimes assume their case will be decided by a jury. A recent decision by the California Supreme Court demonstrated the complexity of the issue.
In Nationwide Biweekly Administration, Inc. v. Superior Court, 9 Cal.5th 279 (2020), the court considered whether claims brought under California’s Unfair Competition Law (“UCL”) and the False Advertising Law (“FAL”) must be tried to a jury. The Court granted review to decide the issue after the intermediate court of appeal created a split of authority on the subject, and reversed the lower court’s decision, which had held that there was a right to a jury on the claims for statutory damages.
Statutory claims can engender disputes over the right to a jury trial because California’s Constitution essentially preserves the right to a jury for legal claims for which there was a right to a jury at common law when the state Constitution was adopted in 1850. When a claim is based on a statute, courts must determine whether the claim it authorizes is comparable to a common law cause of action. If the claim is comparable to those adjudicated by the English courts of equity, there is no right to a jury. Based on its thorough review of the legislative history of the UCL and FAL, the Nationwide court concluded that they are equitable in nature.
Because the UCL and FAL provide for monetary penalties and injunctive relief, the court analyzed how to classify statutory claims that involve legal and equitable elements that cannot be separated. In such situations, courts must decide whether the “gist” of the action is equitable or legal. The Court observed that California appellate courts had routinely concluded that the UCL and FAL are equitable. The Court also found that the bulk of the remedies available (e.g. injunctive relief and restitution) under the UCL and FAL are equitable. With respect to the civil penalties authorized by the UCL and FAL, the Nationwide court explained that they are preventive, and designed to secure compliance, rather than compensatory. Id. at 326. Finally, the Court concluded that the “expansive and broadly worded substantive standards that are to be applied in determining whether a challenged business practice or advertising is properly considered violative of the UCL or the FAL call for the exercise of the flexibility and judicial expertise and experience that was traditionally applied by a court of equity.” Id. at 327. For all these reasons, the Court concluded that the “gist” of the actions authorized by the UCL and FAL are equitable.
In its decision, the Nationwide court took pains to distinguish Tull v. United States, 481 U.S. 412 (1987), where the U.S. Supreme Court held that a jury must decide the amount of civil penalties that may be imposed for violations of the Clean Water Act. Nationwide distinguished Tull on several grounds, including the following: (1) Tull was based solely upon the right to a jury provided under the federal constitution, which applies only in federal courts; and, (2) civil penalties authorized by the Clean Water Act are authorized under statutory provisions distinct from those authorizing injunctive relief. The Nationwide court also noted that the Tull did not engage in the “holistic gist of the action” analysis California courts have long applied. The Nationwide court also noted that the liability determination under the Clean Water Act involved the type of factual determination traditionally made by juries. Id. at 333. Finally, the Nationwide court observed that the Tull court was not called upon to decide whether a jury trial is constitutionally mandated whenever a statute permits the recovery of civil penalties. Nationwide, therefore, highlights the differences in the right to a jury under California and federal law.
In summary, while Nationwide provides definitive authority regarding the equitable nature of claims brought under the UCL and FAL, the court pointed out in its conclusion that it “had no occasion in this case to decide how the California constitutional jury trial provision applies to other statutory causes of action that authorize both injunctive relief and civil penalties.” Id. at 327. The concurring opinion by Justice Kruger underscored the limited scope of the decision by noting that “government actions seeking civil penalties, generally speaking, sound in law rather than equity and thus carry with them a constitutional right of jury trial under both” the federal and California constitutions. Id. at 335 (Kruger, J. concurring in the judgment.) Whether that general rule applies will, of course, depend on the statutory framework at issue, and other pertinent facts and circumstances unique to the case.