The California Supreme Court has held that causes of action under two of the state’s most prominent consumer protection statutes—the unfair competition law (“UCL”) and the false advertising law (“FAL”)—are to be tried by the court rather than a jury. In doing so, the court affirmed decades of California Court of Appeal precedent and overturned a lower court’s ruling that a jury trial is required when civil penalties are sought in state court.

In Nationwide Biweekly Administration Inc. v. Superior Court, the district attorneys of four counties filed a complaint alleging that mortgage servicer Nationwide Biweekly, its subsidiary and its owner (collectively, “Nationwide”) had violated the UCL and FAL through false and misleading advertising practices and operating without a license, among other allegations. The government sought an injunction, restitution of all money wrongfully acquired by Nationwide from California consumers and civil penalties of up to $2,500 for each violation found.

In its amended answer to the complaint, Nationwide demanded a jury trial, but the trial court granted the government’s motion to strike that jury demand. Nationwide challenged that ruling in the Court of Appeal, which subsequently disagreed with the trial court, holding that because civil penalties were sought in addition to injunctive relief and restitution, the “gist” of the government’s UCL and FAL claims should be considered legal rather than equitable, “giving rise to a right to a jury trial” under the California Constitution. The California Supreme Court granted the government’s petition for review to determine whether there is a right to a jury trial in a UCL or FAL action brought by the government seeking civil penalties as well as injunctive relief and restitution.

In a majority opinion authored by Chief Justice Cantil-Sakauye, the Supreme Court reversed the Court of Appeal and held that the UCL and FAL causes of action at issue were equitable in nature and therefore properly tried by the court rather than a jury.

The court first relied on the statutes’ legislative history and underlying purpose, concluding 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.”

With respect to determining the amount of civil penalties to be imposed under the UCL and FAL, the decision stressed courts’ “broad discretion” to consider a variety of factors, including the severity of the defendant’s conduct and the potential deterrent effect of such penalties, “the type of qualitative evaluation and weighing … that is typically undertaken by a court and not a jury.”

The court then rejected Nationwide’s constitutional arguments, holding that California’s constitutional jury trial provision does not apply to causes of action that are equitable—as opposed to legal—in nature. According to the court, causes of action under the UCL and FAL are equitable both when brought by private parties seeking only injunctive relief and when brought by governmental officials seeking not only injunctive relief and restitution but also civil penalties.

The court also rejected the Court of Appeal’s reliance on Tull v. United States, 481 U.S. 412 (1987), in which the United States Supreme Court interpreted the jury trial provision of the Seventh Amendment to the federal Constitution and held that where the government seeks both injunctive relief and civil penalties, the defendant is entitled to a jury trial on the question of liability. Referring to Tull‘s holding that the Seventh Amendment applies only to federal—not state—court proceedings, the Nationwide Biweekly majority reinforced that the constitutional right to jury trial in state court civil proceedings is governed only by that state’s own constitution.

Finally, the court limited its holding to the UCL and FAL setting and “express[ed] 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.” Still, in resolving the ambiguity as to whether California UCL and FAL claims seeking civil penalties in addition to injunctive relief should be tried by the court or a jury, Nationwide Biweekly provides clarity and strategic considerations for litigants in this area.