California: No Right to Jury in Unfair Competition, False Advertising Cases

The Facts

The case was brought by the district attorneys of four counties, acting on behalf of the People of the State of California, alleging that Nationwide Biweekly Administration, Inc., Loan Payment Administration LLC and the sole shareholder of both entities (collectively, referred to “Nationwide”) violated the UCL and FAL business practices. The district attorneys requested an injunction, restitution, and civil penalties up to $2,500 for each violation of the UCL or FAL.

Answering the complaint, Nationwide demanded a jury trial. The district attorneys opposed the jury demand. The trial court granted the People’s motion to strike the jury demand. Nationwide then filed a petition for a writ of mandate in the Court of Appeal, challenging the trial court’s ruling. The Court of Appeal reversed, concluding that Nationwide had a right to a jury trial while relying heavily on the reasoning of the United States Supreme Court’s decision in Tull v. United States (1987) 481 U.S. 412. The People appealed to the California Supreme Court.

The Court’s Reasoning

In its holding, the California Supreme Court stated that “legislative history and legislative purpose of both statutes convincingly establish” that, when civil penalties, as well as injunctive relief and restitution, are sought under these statutes, the Legislature intended to have these causes of actions to be tried by the court.  Under the UCL, “the (1) the origin of the government’s cause of action … as an action simply to enjoin an unfair business practice and (2) the language of the statutory provision relating to the awarding of civil penalties in such an action — clearly support the conclusion that the Legislature, in enacting the UCL, intended to create an equitable, rather than a legal, cause of action.” Similarly under the FAL, “in light of the language and legislative history of the statute and the relevant judicial precedent… the Legislature intended that the civil cause of action embodied in the FAL would be tried by a court of equity rather than by a jury in all FAL actions.”

The Supreme Court further held that the California Constitution does not guarantee a right to jury trial in an action under the UCL or FAL seeking both injunctive relief and civil penalties because the “gist” (nature of the rights involved and the facts of the particular case) of the action is equitable in nature.  The Court relied in part on one of its previous decisions stating that under the California Constitution, a jury trial must be granted where the “gist” of the action is legal. In cases involving severable legal and equitable issues, the trial court generally has the authority to determine in what order the matters should be heard, and “equity first preference” is a long-standing feature of California law.

In cases involving non-severable legal and equitable issues, California’s decisions have relied upon “the gist of the action” standard in determining whether the action should be considered legal or equitable for purposes of the constitutional jury trial issue. In reaching its decision that the “gist” of claims under the UCL and FAL do not include a right to trial by jury, the Court compared the statutory schemes of the UCL and FAL with California’s Proposition 65, a consumer protection statute intended to give consumers information about certain chemicals contained in products sold in California.

What the Decision Means

With its decision in Nationwide, the California Supreme Court has settled any remaining arguments as to whether a UCL or FAL claim seeking civil penalties and equitable relief should be tried before a court or jury. The decision may have an impact on other types of claims, including employment litigation.  Plaintiffs frequently include UCL claims in employment class actions alleging wage and hour violations, with the UCL used to obtain a longer four-year statute limitation. Also, the reasoning of Nationwide may extend to wage and hour related claims for civil penalties brought under the Private Attorneys General Act (known as PAGA) and serve to bar a jury trial. PAGA authorizes aggrieved employees to file lawsuits to recover civil penalties that ordinarily could be sought by the state for alleged Labor Code violations.

How courts will apply the decision in future cases remains to be seen as the Court expressed no opinion regarding whether the holding would apply to other statutory claims authorizing both injunctive relief and civil penalties. Overall, the Nationwide case seems favorable for defendants as it will put both UCL and FAL claims before judges instead of juries.