Federal Trade Commission et al v. Quincy Bioscience Holding Company, Inc. et al

Filing 170

OPINION & ORDER: That Defendants' demand for a jury trial is granted. (Signed by Judge Louis L. Stanton on 4/26/2021) (ml)

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
FEDERAL TRADE COMMISSION , ET AL .,

tL:::::===========--

Plaintiffs ,
- against -

17 Civ . 124

QUINCY BIOSCIENCE HOLDING CO .,
ET . AL .,

INC .,

(LLS)

OPINION & ORDER

Defendants .
Before the Cour t

is the issue of whether defendants are

entitled to a jury trial in an action brought under Section
13(b) of t he Federal Trade Commission Act
Executive Law§ 63(12)

( " FTC Act " ) , New York

and New York General Business Law§§ 349 ,

350 - d .
After the parties submitted their briefs , the Supreme Court
of the United States held that Section 13(b) of the Act does not
authorize the FTC to seek , or the Court to award , equitable
monetary relief,

such as restitution or disgorgemen t. See AMG

Cap. Mgmt ., LLC v.
2021 WL 1566607

Fed. Trade Comm ' n ,

S . Ct .

, No . 19 - 508 ,

(U . S . Apr . 22 , 2021) . As such , the FTC may only

seek injunctive relief in this case. That relief is purely
equitable and does not confer a Seventh Amendment right to a
jury. See Chevron Corp . v . Donziger, No. 11 CIV . 0691 LAK , 2013
WL 5526287 , at *2

(S . D.N.Y . Oct . 7 , 2013)

injunctions

are purely equitable and carry no right to

tr i al by jury . ") .

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( " Cases seeking only

Therefore , the only remaining questions are whether the
Seventh Amendment confers a right to a jury trial under the
state causes of action , and, if it does , whether defendants have
waived that right .
DISCUSSION

The Seventh Amendment provides : " In Suits at common law ,
where the value in controversy shall exceed twenty dollar s, the
right of trial by jury shall be preserved .

" U.S . Const .

amend . VII . The Seventh Amendment mandates that a jury demand be
honored if there is any legal claim , regardless of whether the
legal issues are " incidental " to the equ i table issues. Dairy
Queen , Inc . v . Wood , 369 U.S. 469 , 473 - 474 , 82 S. Ct . 894 , 897 ,
8 L . Ed . 2d 44

(1962) .

Plaintiffs suggest that state law determines whether the
state causes of action ent i tle defendants to a jury trial . But
the right to a jury tr i al in federal court is governed by
federal law , regardless of whether the substantive claim ari s es
under state or federal law . Simler v . Conner , 372 U. S . 221 , 222 ,
83 S . Ct . 609 , 610 , 9 L . Ed.2d 691 (1963) (" the characterization of
that state - created claim as legal or equitable for purposes of
whether a right to jury trial is indicated must be made by
recourse to federal law ." ) ; see also Geneva Pharms . Tech . Corp .
v. Barr Lab ' ys , Inc ., No . 98 CIV . 861 RWS , 2003 WL 1345136 , at *2
(S . D. N. Y. Mar . 19 , 2003)

(" Whether a suit is legal or equitable

is determi ned by federal law , even while the cause of act i on is
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created by state law ." ) . In applying a Seventh Amendment
analysis to the state law claims , "a federal court must first
consider state law to determine the nature of the action and the
remedies provided under that law; then the court should turn to
federal law to characterize the action and remedies as either
legal or equitable. " Davila v . New York Hosp. , No . 91
CIV.5992(SWK) (NG) , 1995 WL 115598 , at *l (S.D . N. Y. Mar . 17 ,
1995)

(internal citations and quotation marks omitted) .
Turning first to the New York statutes at issue , Executive

Law§ 63(12) empowers the Attorney General to bring an action
for injunctive relief , restitution , damages, and costs where any
person or business has engaged in repeated or persistent
fraudulent or illegal conduct. GBL § 349 authorizes the Attorney
General to bring an action to "enjoin [deceptive] acts or
practices and to obtain restitution of any moneys or property
obtained directly or indirectly by any such unlawful acts or
practices" , and GBL § 350 authorizes the Court to impose civil
penalties of up to $5 , 000 per violation of the GBL .
Under federal law , to determine whether those causes of
action involve legal rights, "The standard test is to determine
first whether the action would have been deemed legal or
equitable in 18th century England , and second whether the remedy
sought is legal or equitable in nature ." Germain v. Connecticut
Nat. Bank , 988 F.2d 1323 , 1328 (2d Cir. 1993) . The second factor
is more important than the first. Granfinanciera , S . A. v .
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Nordberg , 492 U.S . 33 , 42

(1989) ; Tull v . United States , 481

U. S . 412 , 421 (1987) (" We reiterate our previously expressed v iew
that characterizing the relief sought is more important than
finding a precisely analogous common - law cause of action in
determining whether the Se v enth Amendment guarantees a jury
tria l ." )

(internal citation and quotation marks omitted) .

Here , the elements of the statutory causes of action cover
conduct beyond common - law fraud so there i s no precise analogue
common - law cause of action. The nature of the remedy (the more
important factor ) supports a finding that the NYAG ' s claim for
civil penalties is legal in nature . It thus entitles d efendants
to a jury trial . 1
The Supreme Court , in Tull v . United States , made it clear
that civil penalties are a legal remedy that could not be
enforced by c o urts in equity . 481 U. S . at 422 . While in this
case the NYAG argues it is primarily seeking equitable relief ,
including restitution , disgorgement of profit s, and injunctive
relief , it also seeks the impositio n of potentially million s of
dollars in civil penalties , which can " hardly be considered
incidental to " or " intertwined with" the equitable relief

Puret es t Ice Cream , I nc. v . Kr af t , Inc . , 61 4 F . Supp . 994 (D . M
ass. 1985)
di d not involve a re q uest fo r civil pena lt i e s. In Te s co Ente r p r i s e s , In c. v .
Fi bredyne Corp . , No . 2 : 90 - CV- 856 AW
T, 20 1 5 WL 788900 , a t *3 (D . Conn . Feb .
24 , 2015) the reme dy of civil pena l ties was not s ought a nd the r efore wa s not
a fa ctor in the Cour t ' s analy s is . See United State s v . Accola de Con str . Grp. ,
Inc ., No. 15 CIV . 5855 (JCF) , 2017 WL 227 1 462 , a t *2 (S. D. N. Y. May 23 , 2017)
( " Of cours e, if the Governmen t were seeking legal a s well as e quitable relief
in this case , the calculus might be different . The TSCA does p rovide for th e
a ward of civil penalties in an admini s trative proceeding . " ) .
1

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sought . Id. at 424 - 25 . Indeed , as in Tull , the penalties are
provided for in a separate provision of the GBL and may be
imposed independently of the injunctive and equitable monetary
relief.

See Id . at 425

( " each kind of relief is separably

authorized in a separate and distinct statutory provision ." )
Even if the claim for penalties could be characterized as
incidental to any primary equitable relief , the right to a jury
trial on the legal issue would remain . See id .

("if a legal

claim is joined with an equitable claim , the right to jury trial
on the legal claim ,
remains intact ." )
n.

11 ,

including all issues common to both claims ,

(citing Curtis v . Loether ,

415 U. S . 189 ,

196 ,

(1974)) (internal quotation marks omitted) ; see also

Robine v . Ryan ,

310 F . 2d 797 ,

798

(2d Cir . 1962) ("The Supreme

Court ' s decision in Dairy Queen makes plain that the right to a
jury trial of a legal cause of action is not lost by joinder
with an equitable claim except in extraordinary circumstance s.
This is true even if the cause of action at law is thought to be
incidental to another cause of action in equity or if the
plaintiff could have proceeded entirely in equity ." )

(internal

citations and quotation marks omitted)
Therefore , defendants have a constitutional right to a jury
trial to determine their liability with respect to the NYAG ' s
claim for civil penalties under GBL § 350 - d .
Defendants have made a timely demand for a jury trial in
satisfaction of Federal Rule of Civil Procedure 38 . The record
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of communications during May of 2019 shows that plaintiffs were
indeed aware of defendants'

jury demand and that the parties

subsequently memorialized their conflicting opinions with
regards to that demand in the case management statement .
Therefore, plaintiffs were on notice of defendants '

jury demand,

and defendants took no action to waive their right to a jury
trial . See Ginsberg v. Twayne Publishers , Inc ., 600 F. Supp .
247, 248

(S . D. N. Y. 1984)

("Rule 38 requires only that a jury

demand be made in writing , not that it be contained in a
pleading or indeed take any particular form ." ) .
CONCLUSION
Defendants ' demand for a jury trial is granted .

Dated :

New York , New York
April 26 , 2021

~ L.j ~
Louis L . Stanton
U. S . D. J .

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