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 County (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
(1) 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 particular case.”
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.
(2) 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 in Nature.
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.
(3) 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.