State ex rel. Attorney Gen. of Iowa v. Autor

• Docket Number: 21-0831
• Decision Date: 26 May 2023
• Parties: STATE OF IOWA, ex rel., ATTORNEY GENERAL OF IOWA, Appellee, v. TRAVIS AUTOR, REGENERATIVE MEDICINE AND ANTI-AGING INSTITUTES OF OMAHA, LLC, and OMAHA STEM CELLS, LLC, Appellants.
• Court: Iowa Supreme Court

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STATE OF IOWA, ex rel., ATTORNEY GENERAL OF IOWA, Appellee, v. TRAVIS AUTOR, REGENERATIVE MEDICINE AND ANTI-AGING INSTITUTES OF OMAHA, LLC, and OMAHA STEM CELLS, LLC, Appellants.

No. 21-0831

Supreme Court of Iowa

May 26, 2023

Submitted April 4, 2023

Appeal from the Iowa District Court for Polk County, Scott D. Rosenberg, Judge.

Appellants claim that the district court erred by striking their jury demand in a civil action under the Iowa Consumer Fraud Act. AFFIRMED AND REMANDED.

David N. Fautsch (argued), Mark E. Weinhardt, and Nathan D.B Converse (until withdrawal) of The Weinhardt Law Firm, Des Moines, for appellants.

Brenna Bird, Attorney General, and Amy Licht (argued), William Pearson, and J. Andrew Cederdahl, Assistant Attorneys General, for appellee.

May J., delivered the opinion of the court, in which all justices joined.

MAY JUSTICE.

The Iowa Consumer Fraud Act (CFA), Iowa Code section 714.16 (2020), authorizes the attorney general to pursue civil enforcement actions. Subsection 714.16(7) requires that these actions "shall be by equitable proceedings." The defendants contend that this requirement is unenforceable because it violates the jury right preserved by article I section 9 of the Iowa Constitution. We disagree.

I. Background.

Through the CFA, our legislature has deemed "a variety of bad business practices unlawful." State ex rel. Miller v. Cutty's Des Moines Camping Club, Inc., 694 N.W.2d 518, 524 (Iowa 2005). But violating the CFA does not "amount[] to perpetration of a crime." Grinnell Mut. Reins. Co. v. Jungling, 654 N.W.2d 530, 537 (Iowa 2002) (quoting Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 228 (Iowa 1998)). Instead, subsection 714.16(7) authorizes the attorney general to enforce the CFA through "civil action[s]." Iowa Code § 714.16(7). Because subsection 714.16(7) is at the center of this dispute, we reproduce its full text here:

7. A civil action pursuant to [section 714.16] shall be by equitable proceedings. If it appears to the attorney general that a person has engaged in, is engaging in, or is about to engage in a practice declared to be unlawful by this section, the attorney general may seek and obtain in an action in a district court a temporary restraining order, preliminary injunction, or permanent injunction prohibiting the person from continuing the practice or engaging in the practice or doing an act in furtherance of the practice. The court may make orders or judgments as necessary to prevent the use or employment by a person of any prohibited practices, or which are necessary to restore to any person in interest any moneys or property, real or personal, which have been acquired by means of a practice declared to be unlawful by this section, including the appointment of a receiver in cases of substantial and willful violation of this section. If a person has acquired moneys or property by any means declared to be unlawful by this section and if the cost of administering reimbursement outweighs the benefit to consumers or consumers entitled to the reimbursement cannot be located through reasonable efforts, the court may order disgorgement of moneys or property acquired by the person by awarding the moneys or property to the state to be used by the attorney general for the administration and implementation of this section. Except in an action for the concealment, suppression, or omission of a material fact with intent that others rely upon it, it is not necessary in an action for reimbursement or an injunction, to allege or to prove reliance, damages, intent to deceive, or that the person who engaged in an unlawful act had knowledge of the falsity of the claim or ignorance of the truth. A claim for reimbursement may be proved by any competent evidence, including evidence that would be appropriate in a class action.

In addition to the remedies otherwise provided for in this subsection, the attorney general may request and the court may impose a civil penalty not to exceed forty thousand dollars per violation against a person found by the court to have engaged in a method, act, or practice declared unlawful under this section; provided, however, a course of conduct shall not be considered to be separate and different violations merely because the conduct is repeated to more than one person. In addition, on the motion of the attorney general or its own motion, the court may impose a civil penalty of not more than five thousand dollars for each day of intentional violation of a temporary restraining order, preliminary injunction, or permanent injunction issued under authority of this section. A penalty imposed pursuant to this subsection is in addition to any penalty imposed pursuant to section 537.6113. Civil penalties ordered pursuant to this subsection shall be paid to the treasurer of state to be deposited in the general fund of the state.

Id.

Another statutory provision-the Older Iowans Act (OIA), Iowa Code section 714.16A-is also relevant here. The OIA augments the CFA. It provides, "If a person violates [the CFA], and the violation is committed against an older person [separately defined to mean anyone sixty-five or older], . . . the court may impose an additional civil penalty not to exceed five thousand dollars for each such violation." Id. § 714.16A(1)(a), (3). The OIA also lists certain factors that courts must consider when "determining whether to impose" its additional civil penalty "and the amount of any such penalty." Id. § 714.16A(2).

In 2020, the attorney general commenced this civil CFA action against defendants Travis Autor, Regenerative Medicine and Anti-Aging Institutes of Omaha, LLC, and Omaha Stem Cells, LLC (defendants).^[1] The attorney general's petition alleged that the defendants had violated the CFA and the OIA by engaging "in false, misleading, and deceptive conduct and unfair practices in the sale and advertisement of stem cell and exosome therapy in Iowa." In its introduction, the petition announced that "[t]his lawsuit . . . seeks a permanent injunction against Defendants to stop them from swindling additional Iowa victims; an order directing them to reimburse money [that] victims spent on bunk treatments and imposing civil penalties for their false, misleading, and deceptive conduct and unfair practices; and other relief." In its final pages, the petition provided a more specific list of remedies sought. Those remedies included (1) "a preliminary injunction restraining [d]efendants" and their agents "from engaging in any of the deceptive, misleading, and unfair practices alleged" in the petition; (2) a posttrial order "mak[ing] permanent the [preliminary] injunction[], expanding [its] provisions as necessary by including, inter alia, such 'fencing in' provisions as are reasonably necessary to ensure that [d]efendants . . . do not return to the unlawful practices alleged" in the petition; (3) a judgment against the defendants "jointly and severally, for amounts necessary to restore to Iowans all money acquired by means of" violations of the CFA; (4) a judgment against the defendants "jointly and severally, for such additional funds as are necessary to ensure complete disgorgement of all ill-gotten gain traceable to the unlawful practices alleged"; (5) a civil penalty against each defendant "for up to $40,000.00 for each separate violation" of the CFA; and (6) an additional "civil penalty of up to $5,000.00" against each defendant under the OIA.

The defendants answered and demanded a jury. The attorney general moved to strike the jury demand. The motion explained that because subsection 714.16(7) requires that civil actions "shall be by equitable proceedings," the defendants are not entitled to a jury trial. Iowa Code § 714.16(7). The defendants responded that our constitution requires a jury trial because the attorney general was seeking substantial monetary remedies, including disgorgement beyond net profits, penalties of up to $40,000 per violation under the CFA, penalties of up to $5,000 per violation under the OIA, and joint and several liability. The district court granted the motion to strike. The defendants then applied for interlocutory review. We granted review and retained the case.

II. Standards for Judicial Review.

Because this case turns on the constitutionality of section 714.16(7)'s "equitable proceedings" requirement, our review is de novo. State ex rel. Miller v. Pace, 677 N.W.2d 761, 767 (Iowa 2004). There is a strong presumption that statutes are constitutional. "A party challenging a statute carries a heavy burden of rebutting the presumption of constitutionality with which statutes are cloaked." O'Hara v. State, 642 N.W.2d 303, 314 (Iowa 2002) (finding no constitutional right to jury trial for actions classified as "special" rather than "civil"). "The party must negate every reasonable basis upon which the statute can be upheld as constitutional." Id. It is an "important and oft-repeated rule" that "no court is authorized to declare an act of the legislature invalid unless it is plainly, palpably, and beyond doubt repugnant to some provision of the constitution." Littleton v. Fritz, 22 N.W. 641, 646 (Iowa 1885) (evaluating alleged violation of article I, section 9).

III. Analysis.

A. General Principles.

Article I, section 9 of the Iowa Constitution provides that "[t]he right of trial by jury shall remain inviolate." The words "shall remain" mean that the right protected is a right that existed when the constitution was adopted. Littleton, 22 N.W. at 643. At the time the constitution was adopted, a jury was available in actions at law, but not in a case "of equitable cognizance." Id. Put another way there was not-and is not-a jury right for cases within the court's equitable...