Nationwide Biweekly Admin., Inc. v. Superior Court of Alameda Cnty.

9 Cal.5th 279

462 P.3d 461

261 Cal.Rptr.3d 713

NATIONWIDE BIWEEKLY ADMINISTRATION, INC., et al., Petitioners,

v.The SUPERIOR COURT OF ALAMEDA COUNTY, Respondent;

The People, Real Party in Interest.

S250047

Supreme Court of California.

April 30, 2020

Law Office of Alan S. Yockelson, Alan S. Yockelson ; Ponist Law Group, Sean E. Poinst; Jones Day, Nathaniel Garrett, San Francisco, and James R. Saywell, for Petitioners.

No appearance for Respondent.

Jeannine M. Pacioni and Dean D. Flippo, District Attorneys (Monterey), Cynthia J. Zimmer and Lisa Green, District Attorneys (Kern), Nancy E. O’Malley, District Attorney (Alameda), Lori Frugoli, Edward Berberian and Jeremy M. Fonseca, District Attorneys (Marin), Matthew L. Beltramo, Assistant District Attorney (Alameda), John F. Hubanks and Christopher Judge, Deputy District Attorneys (Monterey), John Thomas Mitchell, Deputy District Attorney (Kern), Andres H. Perez, Deputy District Attorney (Marin); Mary Ann Smith, Sean Rooney, Robert R. Lux and William Horsey for Real Party in Interest.

Xavier Becerra, Attorney General, Nicklas A. Akers, Assistant Attorney General, Michele Van Gelderen, Sheldon H. Jaffe and Vivian F. Wang, Deputy Attorneys General, for the Attorney General as Amicus Curiae on behalf of Real Party in Interest.

Mark Zahner ; Matthew T. Cheever, Deputy District Attorney (Sonoma) and Patrick Collins, Deputy District Attorney (Napa) for California District Attorneys Association as Amicus Curiae on behalf of Real Party in Interest.

Opinion of the Court by Cantil-Sakauye, C. J.

Under two of California’s most prominent consumer protection statutes — the unfair competition law (UCL)¹ and the false advertising law (FAL)² — the Attorney General or local prosecuting authorities may bring a civil action against a business that has allegedly engaged in an unfair, unlawful or deceptive business act or practice or false or misleading advertising and may obtain civil penalties as well as injunctive relief and restitution in such an action. In this case we must decide whether, when the government seeks civil penalties as well an injunction or other equitable remedies under those statutes, the causes of action are to be tried by the court (that is, the trial judge) or, instead, by a jury.

For more than 45 years, a uniform line of California Court of Appeal decisions has held that such causes of action under the UCL and FAL are to be tried by the court rather than by a jury. In the current writ proceeding in this case, however, the Court of Appeal, relying primarily on a decision of the United States Supreme Court applying the civil jury trial provision of the Seventh Amendment to the federal Constitution — Tull v. United States (1987) 481 U.S. 412, 107 S.Ct. 1831, 95 L.Ed.2d 365 ( Tull ) — disagreed with the earlier line of decisions and held that the jury trial provision of the California Constitution should be interpreted to require a jury trial in any action brought under the UCL or FAL in which the government seeks civil penalties in addition to injunctive or other equitable relief. We granted review to resolve the conflict in the Court of Appeal decisions.

For the reasons discussed hereafter, we conclude that the causes of action established by the UCL and FAL at issue here are equitable in nature and are properly tried by the court rather than a jury. As we explain, the legislative history and underlying purpose of the statutory provisions in question demonstrate that 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.

With regard to petitioners’ constitutional claim, it is firmly established that California’s constitutional jury trial provision preserves the right to jury trial in civil actions comparable to those legal causes of action in which the right to jury trial existed at the time of the first Constitution’s adoption in 1850 and does not apply to causes of action that are equitable in nature. At early common law, "legal" causes of action (or "actions at law") typically involved lawsuits in which the plaintiff sought to recover money damages to compensate for an injury caused, for example, by the defendant’s breach of contract or tortious conduct, whereas "equitable" causes of action (or "suits in equity") sought relief that was unavailable in actions at law, such as an injunction to prohibit ongoing or future misconduct or an order requiring a defendant to provide specific performance or disgorge ill-gotten gains. The consumer protection statutory causes of action at issue here are quite different from any early common law cause of action that was in existence at the time the civil jury trial provision of the California Constitution was first adopted. Given the nature of the substantive standard to be applied and the remedies afforded by the statutes, we conclude that the gist of both the UCL and FAL causes of action at issue here is equitable and consequently such actions are properly tried by the court rather than by a jury.

As further explained, the United States Supreme Court decision in Tull , supra , 481 U.S. 412, 107 S.Ct. 1831, relied upon by the Court of Appeal below, does not govern this case for a variety of reasons. To begin with, the Tull decision rests upon the federal high court’s interpretation of the civil jury trial provision of the Seventh Amendment to the federal Constitution, and that court’s decisions explicitly hold that the Seventh Amendment applies only to federal court proceedings, not state court proceedings. The constitutional right to jury trial in state court civil proceedings is governed only by the civil jury trial provisions of each individual state’s own state constitution. In several important respects, California decisions have construed the civil jury trial provision of the California Constitution in a manner differently from how the federal high court has interpreted the federal civil jury trial provision. These differences are significant in this context and serve to distinguish the Tull decision from this case. Second, unlike the broad, flexible standards embodied in the two consumer protection statutes at issue in this case, there is no indication that the relevant substantive statutory standard at issue in Tull called for the exercise of a court’s traditional equitable authority and discretion in determining whether a violation of the statute had occurred. Accordingly, the court in Tull had no occasion to determine how the federal constitutional civil jury trial provision should be interpreted or applied in such a setting.

Because the nature of the substantive statutory standards and remedies embodied in the civil causes of action under the UCL and the FAL establish the equitable nature of the actions, we limit the holding in this case to the UCL and FAL setting and express no opinion regarding how the state constitutional jury trial right applies to other statutory causes of action that authorize both injunctive relief and civil penalties.

I. FACTS AND PROCEEDINGS BELOW

Petitioners Nationwide Biweekly Administration, Inc., Loan Payment Administration LLC, and Daniel S. Lipsky, the alleged alter ego, principal and sole shareholder of both entities (hereafter collectively referred to as Nationwide) operated a debt payment service in California and other states. Nationwide’s program claimed to save debtors money through a process in which the debtor would reduce the amount of interest owed over the life of a loan by having the debtor accelerate the repayment of the debt through an extra monthly payment each year. Under the program, a debtor would pay to Nationwide one-half the debtor’s ordinary monthly loan payment every two weeks (biweekly) rather than one full payment once a month, resulting in an extra month’s payment each year (26 half-payments equal 13 full payments), and Nationwide would in turn pay those amounts to the debtor’s lender. Nationwide advertised its services statewide, mostly through direct mailers to consumers with outstanding residential mortgages, and through follow-up telephone conversations with consumers who responded to the mailers.

In May 2015, the district attorneys of four counties, acting on behalf of the People, filed a civil complaint alleging that Nationwide had violated the UCL and FAL by, among other things, employing business practices that: (1) misleadingly implied that Nationwide was affiliated with the consumer’s lender; (2) disguised the amount that Nationwide’s services actually cost by failing to fully and adequately disclose the amount, payment schedule, and effect of Nationwide’s fees; and (3) overstated the amount of savings a consumer could reasonably expect to receive through Nationwide’s services.³ The complaint also stated that Nationwide’s practices have been the subject of numerous consumer complaints and regulatory and law enforcement activities around the country, including an action brought by the federal Consumer Financial Protection Bureau

(CFPB).⁴

The complaint’s prayer for relief requested that the court (1) issue an injunction prohibiting the business practices found to violate the provisions of the UCL or FAL, (2) order restitution of all money wrongfully acquired by Nationwide from California consumers in violation of the UCL and FAL, and (3) impose civil penalties up to $2,500 for each violation of the UCL or FAL found by the court.⁵

In its amended answer to the complaint, Nationwide demanded a jury trial "on all issues so triable," and the People, in response, filed a motion to strike the jury demand "based on well settled law that this is an equity action requiring a court trial." After...