Friday, May 1, 2020
Page 1
California Supreme Court:
Defendant Gets No Jury Trial Though Civil Penalties Sought
C.A. Decision Granting Writ to Company Sued Under UCL and FAL Is Reversed
By a MetNews Staff Writer
A defendant in an action under the Unfair Competition Law or the False Advertising Law has no right to a trial by a jury even where the government is seeking civil penalties, the California Supreme Court held yesterday, reversing a judgment of the First District Court of Appeal.
Chief Justice Tani Cantil-Sakuye wrote the majority opinion, in which Justices Ming Chin, Carol Corrigan and Josh Groban joined. Justice Leondra Kruger penned a concurring opinion, signed by Justices Goodwin Liu and Florentino Cuéllar.
Cantil-Sakuye took the approach that there is a state constitutional right to a civil jury only as to actions triable by a jury, under English common law, when California’s first constitution was adopted in 1850; that no action resembling those under the Unfair Competition Law (“UCL”) or the False Advertising Law (“FAL”) then existed; and that the gist of actions under the UCL or FAL is equitable, nor legal, precluding a right to a jury.
Unlike 1850 Actions
She wrote:
“[W]hen the Legislature adopted the civil penalty provisions of the UCL and FAL in 1972 and 1965 respectively, permitting government officials, and government officials alone, to seek civil penalties along with injunctive or other equitable relief in the civil actions such officials bring under the UCL and FAL…, the causes of action under the UCL and FAL continued to constitute causes of action that were not of like nature or of the same class as any common law action.”
The chief justice continued:
“[I]n the absence of a comparable common law counterpart, in deciding whether there is a right to a jury trial under the California Constitution, we must look to the statutory scheme as a whole to determine whether the gist of a cause of action under the UCL or the FAL seeking both injunctive relief and civil penalties is legal or equitable.”
Two Aspects Unseverable
Where both legal and equitable remedies are sought and the issues can be tried separately, she said, a jury can be empaneled to decide the legal issues, but noted:
“All parties before us agree that the legal and equitable aspects of the UCL and FAL actions at issue are nonseverable and that the gist of the action standard applies.”
She said “the primary objective of both statutes is preventive, authorizing the exercise of broad equitable authority to protect consumers from unfair or deceptive business practices and advertising,” adding:
“[A]lthough the statutes also authorize in actions brought by the Attorney General, a district attorney, or other government officials (but not private parties), the imposition of civil penalties—a type of remedy that in some contexts is properly considered legal in nature—the UCL and FAL statutes specify that in assessing the amount of the civil penalty to be imposed under these statutes, the court is afforded broad discretion to consider a nonexclusive list of factors that include the relative seriousness of the defendant’s conduct and the potential deterrent effect of such penalties, the type of qualitative evaluation and weighing of a variety of factors that is typically undertaken by a court and not a jury.”
Penalties Unlike Damages
She pointed out:
“Notably, the civil penalties that may be awarded under the UCL and FAL, unlike the classic legal remedy of damages, are noncompensatory in nature; they require no showing of actual harm to consumers and are not based on the amount of losses incurred by the targets of unfair practices or misleading advertising….[T]he civil penalties obtained by the government in actions under the UCL and FAL are to be utilized for the enforcement of the statutes in question.”
The opinion reverses a June 13, 2018 decision by Div. One of the First District Court of Appeal granting a writ of mandate that directs the Alameda Superior Court to grant a jury trial to Nationwide Biweekly Administration, Inc. and others, operators of a debt payment service. They are being sued by the California Department of Business Oversight and the district attorneys of four counties based on allegations of shoddy business practices.
1987 Decision
The Court of Appeal’s opinion, by Justice Kathleen Banke, relied heavily on the United States Supreme Court’s 1987 decision in Tull v. United States. It was decided there that a real estate developer, sued under the Clean Water Act, had a right, under the Seventh Amendment, to have a jury decide whether he was liable for civil penalties, but with a judge setting amounts of the penalties if liability were found.
Cantil-Sakauye recited the Seventh Amendment applies only to the federal government, with state civil jury rights be determined by state constitutions. In any event, she said, there is a distinction:
“[U]nlike actions under the UCL and FAL in which the equitable (injunctive relief) and legal (criminal penalties) nature of the available remedies are unquestionably nonseverable features of a single cause of action…, in Tull the court held that under the applicable Clean Water Act, the equitable (injunctive relief) and legal (criminal penalties) remedies were severable.”
Cantil-Sakuye commented in a footnote:
“In the answer brief filed in this court, Nationwide claims that the government seeks to impose “over $19.25 billion in civil penalties.” The complaint, however, seeks no specific amount in penalties, and, as explained hereafter, the applicable statutes and case law grant trial courts broad, but not unlimited, discretion to impose penalties in a reasonable amount (up to $2,500 per violation) in light of the nature and severity of an offending business’ conduct….The answer’s hyperbole in this regard does not advance its legal argument.
Concurring Opinion
Kruger agreed that the gist of an action under the UCL is equitable, but said that can not so readily be said of an action under the FAL, which she observed “in significant respects resembles the common law cause of action for negligent misrepresentation, a species of the tort of deceit.”
Although she opined that “the majority comes up short in its effort to show that FAL claims implicate inherently equitable judgment uniquely suited to a court,” she agreed that in the case at hand, the gist of the action is equitable because “the causes of action under the UCL and the FAL are inherently intertwined.”
The case is Nationwide Biweekly Administration, Inc. v. Superior Court, 2020 S.O.S. 2022.
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