No Jury Trial Right Under the Insurance Fraud Prevention Act

Allstate New Jersey Ins. Co. v. Lajara, 433 N.J. Super. 20 (App. Div. 2013).  Plaintiff insurers sued a number of defendants under the Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 to -30 (“the Act”).  Plaintiffs asserted that they had paid out millions of dollars in benefits that defendants, who included doctors, chiropractors, attorneys, and others, obtained by violating the Act.  The Commissioner of the Department of Banking and Insurance intervened in the case and asserted his own claims against defendants, as authorized by the Act.

Plaintiffs originally sought a jury trial, but later they moved to withdraw their jury demand.  Defendants opposed that motion, and demanded a jury trial.  The Commissioner moved to strike jury demands as regarded his claims.  The Law Division granted plaintiffs’ motion to withdraw their jury demand and struck defendants’ jury demands.  Defendant obtained leave to appeal.  Applying the de novo standard of review, the Appellate Division today affirmed, with Judge Ostrer writing the panel’s opinion.

The Act does not expressly confer a right to a jury trial.  Thus, it was necessary to see whether the Act “impliedly requires a jury trial, or creates a cause of action and right to relief subject to the constitutional right to trial by jury.”  Judge Ostrer found none of that.

Addressing the statutory issue first, in order to avoid if possible an unnecessary constitutional law ruling, Judge Ostrer noted that the plain language of the Act did not afford a jury trial.  He observed that “in the absence of an express provision, our courts have consistently denied a right to a jury trial for newly created statutory causes of action.”  The panel was “reluctant to infer statutory provisions of law when the Legislature has not seen fit to expressly include them.”  This was especially so since the Legislature knows how to provide expressly for jury trial rights and sometimes does so.

This argument, which appears in prior cases as well, seems thin.  It is circular to say that because no express jury trial right appears in a statute, no jury trial right can be implied from the statute.  There is no point to looking at implied intent if the absence of an express statement trumps everything.

The substance of the Act, however, provided better support for the denial of a jury trial.  The Act explicitly designates the court as the finder of fact on a “critical fact issue” that is a predicate for liability.  That provision cut strongly against finding an implied legislative intent to allow a jury trial.  The fact that the Commissioner can proceed before an administrative forum where no jury trial is permitted, even as to restitutionary actions for inusrers, was further evidence that the Legislature did not intend to permit jury trials under the Act.

Defendants contended that just as the Consumer Fraud Act was found in Zorba Contractors, Inc. v. Housing Authority of Newark, 362 N.J. Super. 124 (App. Div. 2003), to afford a jury trial right, the Act should be so construed.  Judge Ostrer distinguished Zorba and the CFA.  Instead, the panel found persuasive decisions that had denied jury trials under other relatively new statutes.

Nor did the constitutional guarantee of trial by jury confer a jury trial under the Act.  Jury trials are not available in primarily equitable actions, as measured by the relief available.  Here, the key relief available to insurers was restitution, an equitable remedy.  Moreover, even if that restitution could be loosely characterized as “damages,” a legal remedy for which a jury trial is normally available, the Act also affords attorneys’ fees and costs, which prior cases have held to be equitable remedies.

Separately, jury trials are available “only where the right to a jury trial existed at common law.”  Though defendants analogized the Act to common law fraud, Judge Ostrer found that comparison to be flawed.  “A private action under the Act– which does not require proof of scienter– is more akin to equitable fraud, to which no jury trial right attaches.”  Besides, since even elements of equitable fraud such as reasonable reliance and damages are not part of the Act, the statute “has distinctive features … virtually unknown to the common law.”  Accordingly, the Act did not fall within the constitutional parameter of a cause of action known at common law.  Therefore, the Constitution did not call for a jury trial.