Any party to an action under California Unfair Competition Law (UCL) or
False Advertising Law (FAL) should beware of the California Supreme Court’s
recent decision in
Nationwide Biweekly Administration Inc. v. Superior Court of Alameda
(2020) 9 Cal.5th 279.
In Nationwide, the California Supreme Court determined that there
is no right to a jury trial for these claims. Furthermore, any claims
brought with a UCL or FAL claim risk being tried only after the trial court
has decided the UCL or FAL claims in a bench trial. Determination of issues
in the bench trial will be binding in a jury trial on the other
non-equitable claims and could make such a trial unnecessary.
On the other hand, defendants facing these claims may be able to utilize
this precedential decision to press for dismissal or settlement of UCL and
FAL claims or use it to their procedural advantage. This decision also has
implications for Proposition 65, California’s Consumers Legal Remedies Act
(CLRA) and potentially all other statutory claims in California that
authorize equitable relief. Any party with a current pending action
involving such claims should consider this precedential decision in its
litigation strategy moving forward.
In Nationwide, the California Supreme Court held that claims
arising under the UCL or FAL “are equitable in nature and properly tried by
a court rather than a jury,” even where the government seeks civil
penalties in connection with its claims.
Chief Justice Tani Cantil-Sakauye, who authored the opinion, wrote, “Such
causes of action are equitable either when brought by a private party
seeking only an injunction, restitution, or other equitable relief or when
brought by the Attorney General, a district attorney, or other governmental
official seeking not only injunctive relief and restitution but also civil
penalties. Accordingly, we conclude that there is no right to jury trial in
such actions under the California Constitution.”
After analyzing the legislative history, the court concluded that “in
enacting the UCL [the California legislature] intended to create an
equitable, rather than a legal, cause of action.” And concluded likewise
for the FAL.
Key Implications of the Nationwide Decision
There Is No Right to a Jury Trial for UCL and FAL Claims.
The court clarified conflicting precedent in holding that UCL and FAL
claims are equitable and there is no right to a jury trial for these claims
under the California Constitution.
The court determined that the California State Legislature intended that
UCL actions be tried by judges, rather than juries, for two primary
reasons. First, the UCL originated as a statute solely to permit litigants
to enjoin unfair and misleading business practices, and, second, the
statute contemplates the application of broad and general standards that
are better suited for the traditional, flexible equitable authority of
courts, rather than juries.
With respect to FAL claims, the court likewise concluded that the language
and legislative history of the statute, as well as relevant precedent,
strongly suggest that determinations under the FAL regarding whether an
advertisement is untrue or misleading requires the “exercise of the type of
equitable discretion and judgment typically employed by a court of equity.”
Chief Justice Cantil-Sakauye wrote, “These very broadly worded consumer
protection statutes were fashioned to permit courts to utilize their
traditional flexible equitable authority, tempered by judicial experience
and familiarity with the treatment of analogous business practices in this
and other jurisdictions, in evaluating whether a challenged business act or
practice or advertising should properly be considered impermissible under
these statutory provisions.”
In addition, the court held that no right to jury trial exists under the
California Constitution for equitable claims where the “gist of the action”
at issue is equitable. The court relied on a common-law rule that “a jury
trial must be granted where the gist of the action is legal, where the
action is cognizable at law.” The gist of action is determined by
evaluating the “nature of the rights involved and the facts of the
The court reasoned that the “gist of the action” is equitable where the
“bulk of the remedies provided for in the statutes” are “clearly equitable
in nature.” In the Nationwide case, the government sought civil
penalties but the court held that this did not make the gist of the action
legal because the penalties are noncompensatory in nature and their
assessment requires the consideration of a broad array of nonexclusive
factors, which typically requires broad discretion and flexibility. Thus,
the court decided that the gist of actions arising under both the UCL and
FAL is equitable in nature, and no constitutional right to a jury trial
exists for these claims.
Other Claims Brought With UCL or FAL Claims May Be Subject to
Severance and a Bench Trial if the Gist of the Action Is Equitable
Equally significant, the California Supreme Court held that UCL and FAL
claims can be severed from other claims that are entitled to a jury trial
and tried first in a bifurcated procedure. If other claims are
nonseverable, then where the “gist of the action” is under the UCL or FAL,
it will be considered equitable in nature and tried via a bench trial. This
could mean that plaintiffs bringing UCL and FAL claims may forfeit their
right to a jury trial, either because the issues of the case are decided in
a first-phase bench trial or because these claims make the gist of the
entire action equitable. Plaintiffs should think carefully before including
UCL or FAL claims in their complaints. Defendants facing these claims
should utilize this precedential decision to press for dismissal or
settlement of those claims and be aware of the potential procedural
arguments and advantages Nationwide presents.
The court explained that when the legal and equitable claims are severable,
prior decisions establish that “the trial court generally has authority to
determine in what order the matters should be heard, and if the equitable
issue is tried by the court first and if the court’s resolution of that
issue determines a matter that would otherwise be resolved by a jury with
regard to the legal claim or issue, the court’s resolution of the matter
will generally be binding and may leave nothing for a jury to resolve ...
[a]nd although a trial court retains discretion regarding the order in
which the issues should be tried, the governing California cases express a
preference that the equitable issues be tried first.” (2020 WL 2107914,
*17). This should cause plaintiff’s lawyers to think twice about including
a UCL or FAL claim and cause defense lawyers to pause when moving to remove
such claims from the litigation. Retention of such claims may defeat a
plaintiff’s request for a jury – though when facing a motion to try the UCL
or FAL claims first, the plaintiff may attempt to drop that claim unless
there are limitations on the right to dismiss.
In addition, where the legal and equitable issues are not severable, the
“gist of the action” analysis will determine whether there is a right to a
jury trial. Claims brought with UCL or FAL claims may result in loss of a
right to jury trial for the entire action if the “gist of the action” is
determined to be under the UCL, FAL
or other equitable statutory claims.
Other Equitable Claims in California, Including Under Prop. 65 and
CLRA, Likely Have No Right to a Jury Trial.
Though the California Supreme Court expressly limited its holding to UCL
and FAL claims, the chief justice’s opinion favorably discusses a Prop. 65
case, which held that there was no right to a jury trial (at *19-20) and
describes Prop. 65 as an analogous equitable statute much like the UCL and
FAL statutes. This may give Prop. 65 defense lawyers some comfort that both
liability and penalties will be determined by a court. Plaintiff’s
attorneys also may be dissuaded from filing certain actions knowing that
juries will not decide any issues.
Despite the California Supreme Court’s pointed caveat about the limited
applicability of its decision, the framework set out in Nationwide will likely steer courts to similar conclusions when
analyzing other statutory causes of action for equitable relief in years to
come. If a statutory claim requires application of flexible and
discretionary standards and predominantly contemplates equitable remedies,
it is likely that future courts will similarly conclude that no right to a
jury trial attaches to such claims. McGuireWoods will keep a close eye on
future decisions to see how broadly California courts apply this ruling and
what additional claims may fall
within Nationwide’s seemingly far-reaching ambit.