State high court: No jury for trials of false ad claims
Businesses accused by state or local authorities of false advertising or unfair business practices are not entitled to a jury trial, the California Supreme Court ruled Thursday.
Violations of the state’s False Advertising Law and Unfair Competition Law can carry substantial civil penalties — potentially many billions of dollars in this case, according to the accused company, a debt payment service. But while both businesses and individuals are entitled to a jury determination of ordinary claims for damages, the court said disputes under these two business laws involve complex questions of fairness and equity that are traditionally decided by judges in nonjury trials.
Deciding whether a business practice was deceptive to consumers or unfair to competitors requires “judicial experience and familiarity with the treatment of (comparable) business
practices here and elsewhere,” Chief Justice Tani CantilSakauye said in the majority opinion. Such a decision, she said, “does not typically involve the type of ordinary factfinding assigned to a jury.”
For example, she said, a past case involved a dispute over whether a cereal company had falsely advertised sugary products as “healthful and nutritious,” a question that was properly decided in a nonjury trial.
Before a lowercourt decision in this case, CantilSakauye said, California courts had consistently required disputes under both laws to be tried by a judge rather than a jury. The False Advertising Law was passed in 1941, the Unfair Competition Law in 1933, and both were later amended to allow the state attorney general and county district attorneys to seek civil penalties for violations.
Three justices joined CantilSakauye’s opinion. In a separate opinion, Justice Leondra Kruger, joined by Justices Goodwin Liu and Mariano-Florentino Cuéllar, agreed that the current case involved complex questions suitable for a nonjury trial, but said some claims of false advertising turn on factual issues and could be submitted to a jury.
The court did not decide whether juries should hear suits under California’s Private Attorneys General Act, which allows private citizens to sue businesses for alleged violations of state consumer laws when state officials take no action. Those suits are filed in the name of the state, which collects 75% of any civil penalties, with the rest going to the private whistleblower.
The case involved Nationwide Biweekly Administration Inc. and its affiliates, which advertised that their system of loan repayments saved interest money for borrowers by arranging more frequent repayments. The company was sued in 2015 by district attorneys in Alameda, Marin, Monterey and Kern counties, who said Nationwide had overstated the alleged savings, failed to disclose all of its fees, and had been the subject of complaints from consumers and regulatory agencies.
The U.S. Consumer Financial Protection Bureau filed a separate suit against the company in federal court in San Francisco and won a $7 million verdict from a judge after a nonjury trial in 2017, a verdict that is now on appeal.
The district attorneys’ suit, filed in Alameda County, seeks court orders against any illegal practices, restitution for customers harmed by the company and civil penalties of up to $2,500 for each violation, penalties the company says could exceed $19 billion. A state appeals court ruled that Nationwide was entitled to a jury trial to determine whether it had violated the law and would have to pay civil penalties, but the state’s high court disagreed.
Although the trial will determine whether the company will be financially penalized, Cantil-Sakauye said, the central question is whether its conduct “violates the policy or spirit of one of those laws,” in the words of a previous ruling requiring a nonjury trial.
Lawyers for the company were not immediately available for comment.