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

• Decision Date: 13 June 2018
• Docket Number: A150264
• Citation: 24 Cal.App.5th 438,234 Cal.Rptr.3d 468
• Parties: NATIONWIDE BIWEEKLY ADMINISTRATION, INC., et al., Petitioners, v. The SUPERIOR COURT of Alameda County, Respondent; The People, Real Party in Interest.
• Court: California Court of Appeals Court of Appeals

24 Cal.App.5th 438

234 Cal.Rptr.3d 468

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

v. The SUPERIOR COURT of Alameda County, Respondent;The People, Real Party in Interest.

A150264

Court of Appeal, First District, Division 1, California.

Filed June 13, 2018

Law Office of Alan S. Yockelson, Alan S. Yockelson ; Ponist Law Group PC, Sean E. Poinst, for Petitioners.

No appearance for Respondent.

Matthew L. Beltramo and Nancy O'Malley, District Attorneys (Alameda), John Thomas Mitchell and Lisa Green, District Attorneys (Kern), Andres Humberto Perez, Edward Berberian and Jeremy M. Fonseca, District Attorneys (Marin), John Fulton Hubanks and Dean D. Flippo, District Attorneys (Monterey); California Department of Business Oversight, Mary Ann Smith, Deputy Commissioner, Sean Rooney, Assistant Chief Counsel, Robert R. Lux and William Horsey, Senior Counsel, for Real Party in Interest.

Banke, J.

I. INTRODUCTION

Nationwide Biweekly Administration, Inc., Loan Payment Administration, LLC, and Daniel S. Lipsky, the alleged alter ego, principal and sole shareholder of Nationwide and Loan Payment (collectively petitioners) operate a debt payment service that claims to reduce the amount of interest owed by accelerating debt repayment via an extra annual payment. The California Department of Business Oversight and the District Attorneys of four counties (collectively the People) challenge a number of petitioners' business practices and in the underlying action seek civil penalties under Business and Professions Code sections 17200 and 17500, and Financial Code section 12105, subdivision (d), as well as injunctive relief, restitution, disgorgement, the voiding of petitioners' allegedly unlawful contracts, costs and attorney fees. In conjunction with their answer, petitioners demanded a jury trial, which the People successfully moved to strike.

Petitioners sought writ relief, which we initially denied. On review, our Supreme Court transferred the matter back to this court, with directions to issue an order to show cause why petitioners do not have a right to a jury trial "where the government seeks to enforce the civil penalties authorized under Business and Professions Code sections 17206 and 17536 and Financial Code section 12105, subdivision (d)."

We now grant petitioners' request for extraordinary relief, in part, concluding the "gist" of the statutory causes of action asserted against them are legal, thereby giving rise to a right to jury trial. However, following the approach taken by the United States Supreme Court in Tull v. United States (1987) 481 U.S. 412, 107 S.Ct. 1831, 95 L.Ed.2d 365 ( Tull ), we also conclude the right to jury trial extends only to the issue of liability and that the amount of statutory penalties, as well as whether any equitable relief is appropriate, is properly determined by the trial court.

II. BACKGROUND

The People have alleged six causes of action against petitioners—engaging as a "prorater" without a business license ( Fin. Code, §§ 12200, 12200.1 ), imposing overcharges and unauthorized charges ( Fin. Code, §§ 12314, 12314.1 ), unlawful use of a lender’s name in written solicitations ( Bus. & Prof. Code, §§ 17200, 14701 ), false advertising ( Bus. & Prof. Code, § 17500 ), and unfair competition ( Bus. & Prof. Code, § 17200 ).¹ The complaint seeks civil penalties of $2,500 for each separate violation of Business and Professions Code sections 17200 and 17500, civil penalties of $10,000 for each separate violation of Financial Code section 12105, subdivision (d), injunctive relief, restitution, disgorgement, and the voiding of petitioners' unlawful contracts, as well as costs and attorney fees. Petitioners filed an answer denying the People’s claims and demanded a jury trial.

After the People successfully moved to strike the jury demand, petitioners filed the instant original proceeding in this court, seeking a writ of mandate under Code of Civil Procedure section 1085. After we summarily denied the writ petition, petitioners filed a petition for review by the Supreme Court, which the high court granted, transferring the matter back to us with directions. We then vacated our prior order denying relief, issued an order to show cause (OSC) and received full briefing by the parties.

III. DISCUSSION

A. General Principles Governing the Right to Jury Trial

Under California law, the right to a jury trial in a civil action is afforded both by statute and the California Constitution. ( Shaw v. Superior Court (2017) 2 Cal.5th 983, 993, 216 Cal.Rptr.3d 643, 393 P.3d 98 ( Shaw ).) "As a general matter, the California Legislature has authority to grant the parties in a civil action the right to a jury trial by statute, either when the Legislature establishes a new cause of action or with respect to a cause of action that rests on the common law or a constitutional provision.... Given the Legislature’s broad general legislative authority under the California Constitution and in the absence of any constitutional prohibition ... the Legislature may extend the right to a jury trial to instances in which the state constitutional jury trial provision does not itself mandate a right to a jury trial." ( Id . at pp. 993–994, 216 Cal.Rptr.3d 643, 393 P.3d 98.)

However, "even when the language and legislative history of a statute indicate that the Legislature intended that a cause of action established by the statute is to be tried by the court rather than by a jury, if the California constitutional jury trial provision itself guarantees a right to a jury trial in such a cause of action, the Constitution prevails and a jury trial cannot be denied." ( Shaw , supra , 2 Cal.5th at p. 994, 216 Cal.Rptr.3d 643, 393 P.3d 98.)

Whether petitioners are " ‘constitutionally entitled to a jury trial ... is a pure question of law that we review de novo.’ " ( Monster, LLC v. Superior Court (2017) 12 Cal.App.5th 1214, 1224, 219 Cal.Rptr.3d 814.)

As none of the statutes at issue here provide for trial by jury, we turn our attention to article I, section 16 of the California Constitution, which states in pertinent part: "Trial by jury is an inviolate right and shall be secured to all...." ( Cal. Const., art. I, § 16.)

"Notwithstanding the breadth of this declaration, past California cases make clear ‘that the state constitutional right to a jury trial "is the right as it existed at common law in 1850, when the [California] Constitution was first adopted." ’ " ( Shaw , supra , 2 Cal.5th at pp. 994–995, 216 Cal.Rptr.3d 643, 393 P.3d 98.) "[I]f a proceeding otherwise identifiable in some sense as a ‘civil action at law’ did not entail a right to jury trial under the common law of 1850, then the modern California counterpart of that proceeding will not entail a constitutional right to trial by jury." ( Crouchman v. Superior Court (1988) 45 Cal.3d 1167, 1174, 248 Cal.Rptr. 626, 755 P.2d 1075, italics omitted; C & K Engineering Contractors v. Amber Steel Co. (1978) 23 Cal.3d 1, 8, 151 Cal.Rptr. 323, 587 P.2d 1136( C & K Engineering ) ["We have long acknowledged that the right so guaranteed ... is the right as it existed at common law in 1850, when the Constitution was first adopted, ‘and what that right is, is a purely historical question, a fact which is to be ascertained like any other social, political or legal fact.’ "].)²

The common law as it existed in 1850 "includes not only the lex non scripta but also the written statutes enacted by Parliament." ( People v. One 1941 Chevrolet Coupe (1951) 37 Cal.2d 283, 286, 231 P.2d 832 ( 1941 Chevrolet ).)

" ‘As a general proposition, "[T]he jury trial is a matter of right in a civil action at law, but not in equity." [Citations.] ... " ‘If the action has to deal with ordinary common-law rights cognizable in courts of law, it is to that extent an action at law. In determining whether the action was one triable by a jury at common law, the court is not bound by the form of the action but rather by the nature of the rights involved and the facts of the particular case—the gist of the action. A jury trial must be granted where the gist of the action is legal, where the action is in reality cognizable at law.’ " ’ " ( Shaw , supra , 2 Cal.5th at p. 995, 216 Cal.Rptr.3d 643, 393 P.3d 98, quoting 1941 Chevrolet , supra , 37 Cal.2d at p. 299, 231 P.2d 832.) The right to jury trial " ‘embraces cases of the same class thereafter arising.... The introduction of a new subject into a class renders it amenable to its general rules, not to its exceptions.’ " ( 1941 Chevrolet , at p. 300, 231 P.2d 832.)

"Determining whether the gist of a claim is in law or equity ‘depends in large measure upon the mode of relief to be afforded.’ " ( Asare v. Hartford Fire Ins. Co. (1991) 1 Cal.App.4th 856, 867, 2 Cal.Rptr.2d 452.) " ‘[I]f the action is essentially one in equity and the relief sought "depends upon the application of equitable doctrines," the parties are not entitled to a jury trial. [Citations.] Although we have said that "the legal or equitable nature of a cause of action ordinarily is determined by the mode of relief to be afforded" [citation], the prayer for relief in a particular case is not conclusive [citations]. Thus, "[t]he fact that damages is one of a full range of possible remedies does not guarantee ... the right to a jury...." ’ " ( Shaw , supra , 2 Cal.5th at p. 995, 216 Cal.Rptr.3d 643, 393 P.3d 98, quoting C & K Engineering , supra , 23 Cal.3d at pp. 8–9, 151 Cal.Rptr. 323, 587 P.2d 1136.)

B. The Right to Jury Trial in Government Enforcement Actions Seeking Statutory Penalties

Petitioners do not dispute that the statutory causes of action asserted against them did not exist in 1850.³ Instead, they claim that under the "gist of the action" test, the causes of action are legal and thus carry with them the right to jury trial. This is so, say petitioners, because civil enforcement actions for statutory penalties are "analogous to an action for debt at common law, which is legal in nature."

Petit...