The Iowa supreme court recently analyzed the state’s consumer protection statute and found that the attorney general’s enforcement of the statute does not require a jury trial because they are equitable, rather than legal.
The Iowa attorney general sued several companies, alleging false and misleading claims in violation of Iowa’s Consumer Fraud Act (CFA) and Older Iowans Act (OIA). The attorney general sought: a preliminary injunction: a posttrial order making the injunction permanent, including “fencing in” provisions as necessary to deter future violations; a judgment against the defendants jointly and severally, for restitution and disgorgement; and civil penalties of up to $40,000.00 per violation of the CFA and up to $5,000 per violation of the OIA.
The defendants demanded a jury trial and the attorney general moved to strike the jury demand, arguing that because the statute requires that civil actions “shall be by equitable proceedings,” defendants are not entitled to a jury trial. The defendants argued that the state constitution requires a jury trial because the attorney general was seeking substantial monetary remedies. The district court struck the jury request and the defendants appealed to the state supreme court.
The supreme court first reiterated that under the Iowa constitution, “there is not a jury right for cases within the court’s equitable jurisdiction” and noted that the legislature can “enlarge the jurisdiction of a court of equity” and had removed the right to jury trial in divorce and mechanic lien cases. The CFA provides that civil CFA actions by the attorney general “shall be by equitable proceedings.” To determine whether the legislature had acted within its authority, the Iowa supreme court looked at the “essential nature” of the proceedings, rather than at the remedy.
The court determined that the essential nature of an action by the attorney general under the CFA is equitable. The Iowa legislature was therefore entitled to provide for a “complete disposition “ of CFA actions through equitable proceedings. The court noted that “injunctive relief is at the center of CFA actions.” Issuing and enforcing injunctions clearly invoke the court’s equitable powers. Also, the CFA states that a court “may,” rather than “must,” award monetary remedies such as restitution and civil penalties, and does not contemplate damages. The court also took notice of the decisions in a majority of other states that there is no constitutional right to a jury trial under their unfair or deceptive trade practices statutes.
The court rejected the defendants’ arguments that the CFA is comparable to either criminal anti-fraud statutes or common law fraud tort actions, pointing to longstanding Iowa decisions that the CFA is not a criminal statute “nor merely a codification of common-law fraud.” Defendants also argued that the remedies sought by the attorney general were more legal than equitable in nature. Again, the supreme court cited a line of cases holding that even if some of the CFA’s remedies could be classified as legal, the court could still award them under its authority to “determine all questions material or necessary to accomplish full and complete justice between the parties.”
The court also rejected defendants’ argument that the attorney general seeks joint and several liability, which is not mentioned in the CFA. If it is available, the court found that it is not inherently incompatible with equitable jurisdiction. Finally, defendants argued that the attorney general’s request for an injunction did not save the attorney general’s action from being legal, rather than equitable, because the defendants are out of business and injunctive relief would not be relevant. The court held “we do not think that the constitutionality of the legislature’s “equitable proceedings” command should turn on whether the defendants claim to have stopped their allegedly unlawful actions. Rather, we think the analysis should turn on the inherent nature of CFA civil actions as codified. And, as codified, the CFA civil action is largely centered on enjoining misconduct, a traditional function of equity.”
The statute also provides, “the attorney general may seek an injunction based on the defendants’ alleged prior misconduct.”
The court concluded by noting that its opinion applies only to causes of action available to the attorney general, not the statute’s private cause of action available to consumers. State ex rel. Attorney General of Iowa v. Autor, 2023 Iowa Sup. LEXIS 58 (Iowa 2023).