This post was authored by summer associate Reilly Wright

In United States v. ERR, LLC, No. 21-30028 (5th Cir. May 26, 2022), the Fifth Circuit ruled that the Seventh Amendment guarantees the right to a jury trial for defendants facing subrogation and recoupment claims under the Oil Pollution Act of 1990 (the “OPA”). In 2015, ERR was found responsible for an oil spill originating from a wastewater treatment center that it owned and operated on the banks of the Mississippi River. In 2017, the United States sued ERR under the OPA for removal costs it had paid from the Oil Spill Liability Trust Fund (the “Fund”) to Oil Mop LLC, a spill-response service provider. ERR demanded a jury trial, which the district court denied, finding that the relief provided for in the OPA was in the nature of equitable restitution, so its claims sounded in equity, not in law. However, the Fifth Circuit overturned that decision, holding that such claims were legal in nature and therefore provide ERR the right to a jury trial.

Under OPA, a spill response contractor who cleans up a spill must first submit its claim to the liable entity. However, if the bill remains unpaid for ninety (90) days, the contractor has the option to either sue the responsible party or to seek compensation from the Fund. If the contractor pursues the second avenue and receives payment from the Fund, then the United States has subrogration rights and can bring suit against the responsible party to recover the monies paid, as well as attendant interest, administrative costs and fees. In addition, the United States can seek, on its own account, recoupment for removal costs and other damages.

To determine whether ERR maintained the right to a jury trial under the Seventh Amendment, the Fifth Circuit considered two factors: (1) whether the statutory right of action under OPA is comparable to an 18th-century common law cause of action brought before 18th-century English courts of law and (2) whether the remedy sought by the Government is equitable or legal in nature. The Fifth Circuit held that both of the Government’s claims, for recoupment and subrogation, satisfy these factors and entail the right to a jury.

The Fifth Circuit found that the Government’s recoupment claim was a tort claim at its foundation. Tort claims were historically brought in courts of law in 18th-century England as either claims for trespass or quasi-contract. The OPA of 1990 presents itself in the same way as a common law tort by allowing injured parties to bring claims for either money damages (akin to trespass) or monetary restitution (akin to quasi-contract) for the breach of a duty. According to the Fifth Circuit, the recoupment claim is essentially a quasi-contract claim for restitution because the Government paid for cleanup and sought reimbursement from ERR. As a quasi-contract claim sounds in law, not equity, the first factor supports the right to a jury.

While restitution as a remedy can sound in either law or equity, the Fifth Circuit fount that the original understanding of restitution at law matches what the United States sought under OPA. Traditionally, a restitution at law action existed when an individual had a claim to recover money with respect to some benefit that the defendant received from the plaintiff’s actions. Restitution in equity did not seek to impose personal liability on defendants, but rather sought to restore to the plaintiff specific property or funds in the defendant’s possession. The Fifth Circuit found the removal costs in this case were analogous to a restitution in law remedy because the United States sought an imposition of personal liability on ERR, who failed to pay for a spill cleanup that it was responsible for.

As to the subrogation claim, the Fifth Circuit held the act of merely substituting one plaintiff for another does not alone make an action equitable in nature for the purpose of the Seventh Amendment. Supreme Court precedent indicates that courts should consider whether the underlying claim is legal or equitable, when deciding if an action deserves a jury trial; See Ross v. Bernhard, 396 U.S. 531 (1970); Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558 (1990). The underlying claim, at the heart of this case, is the recoupment claim for damages related to the spill cleanup. As this claim would traditionally be brought in a court of law, the Court held that the nature of the action favors the right to a jury trial.

Another Fifth Circuit decision filed a week earlier, Jarkesy v. Sec. & Exch. Comm’n, 34 F. 4th 446 (5th Cir. May 18, 2022) also found a right to a jury trial for a defendant facing fraud claims brought by the United States in the context of an SEC in-house adjudication. In that case, the Court emphasized that Congress cannot circumvent the Seventh Amendment jury-trial right by simply passing a statute that allows “traditional legal claims” to only be heard by an administrative tribunal. Although in Jarkesy the SEC sought two equitable remedies along with civil penalties from Jarkesy, the Fifth Circuit held that the jury right still attaches because civil penalties are a legal remedy. Furthermore, the court found that granting the jury-right would not dismantle the SEC’s statutory scheme and that fraud claims are not uniquely situated for agency adjudication.

The ERR and Jarkesy decisions indicate the Fifth Circuit’s willingness to protect and potentially expand the Seventh Amendment right to a jury trial, at least in cases where the United States is pursuing statutory claims against a private party. These decisions are likely to have a significant impact on how statutory claims are decided even where a statute does not explicitly provide for the right to a jury trial.