Cases Combining Law and Equity
The Seventh Amendment was enacted in response to the Supreme Court’s 5-4 decision in
Lochner v. New York (1905) (hereinafter referred to as Lochner v.), a case in which the Court
held that state laws that violated the constitutional guarantees of the right to freedom of contract
and the right to equal protection of the laws were also void. In contrast to Lochner, which had
held that individuals lacked the right to regulate their economic activity, the Seventh Amendment
was an attempt to enlarge the government’s right to interfere with economic activity.
Since Lochner, there have been a number of Supreme Court decisions holding that states may not
engage in invidious discrimination based on a person’s failure to marry in violation of state anti-
miscegenation laws, such as bans on interracial marriage. After Obergefell v. Hodges was
decided on June 26, 2015, the Supreme Court took another step in expanding protections for
same-sex couples. In a case with interesting parallels to Brown v. Board of Education, however,
the Supreme Court recently struck down part of a Tennessee constitutional amendment that
forbade the government from taking “state action” to “recognize or give formal recognition to
any religion.”
It seems that discrimination against members of the LGBT community is not the only type of
state action that the Supreme Court now seems ready to strike down. In Hernandez v. Mesa
(2015), the Court invalidated part of a Utah state statute that criminalized the “admission or
sponsorship” of anyone to the state, even if the person had no intention to reside there.
Before Hernandez, Utah’s statute also criminalized the “indirect” admission of an individual to
the state, which was defined as discrimination against a handicapped individual. Noting that state
law had already eliminated the statute’s unconstitutional disparate treatment of the disabled,
Justice Anthony Kennedy, writing for the Court, stated that the Utah law “passes a constitutional
threshold” and is therefore not preempted by the Fifth Amendment. (Chief Justice Roberts and
Justice Alito concurred in the judgment in this case.)
Hernandez takes the Utah statute a step further by striking down a broad categorical ban on
“advertising” to the state. While the Supreme Court has held that there is a “general prohibition
on criminalizing speech that is protected by the First Amendment,” Hernandez held that this
general prohibition should also encompass advertising that encourages an individual to move to
the state.
To be sure, the Supreme Court has not yet said that states cannot ban all forms of discrimination
based on sex or race, only that their laws must still treat each individual differently on that basis.
But in Hernandez, it was determined that it was constitutional to impose a similar, broad-based
ban on advertising that encourages an individual to move to the state. To be sure, at this early
stage in the legal history of the U.S., there will need to be a number of cases in which states’
This statement is consistent with the Supreme Court’s decision in the 2012 case, United States v.
Windsor, in which the Court ruled that the federal government must recognize the same-sex
marriages of individuals who are federal employees. Sessions has chosen to ignore the Supreme
Court’s Windsor decision and rescinded a series of executive actions, including the
implementation of same-sex marriage protections that were instituted by the previous
administration.
This Justice Department is, of course, playing for time in the hopes that a replacement for Justice
Kennedy is confirmed in the coming months. But the Supreme Court has explicitly stated that it
is prepared to invalidate laws that do not treat “individuals in a manner consistent with the
Federal Constitution.” We believe it is quite possible that the Supreme Court will begin
addressing a broad array of laws that violate the Constitution as soon as it has a ninth Justice to
replace Justice Scalia, who passed away this year.
The Supreme Court’s recognition of discrimination against gay and lesbian individuals as a form
of state action brings us one step closer to ensuring that all Americans have the same opportunity
for full participation in the social and economic life of the nation.
The Seventh Amendment uses the term “common law” to refer to cases in which the right to jury
trial was preserved. This term’s use reflected the division of the English and United States legal
systems into separate law and equity jurisdictions, in which actions subject to the former but not
the latter were triable to a jury. In the early federal court system, courts had jurisdiction over
both suits in law and equity, but the suits occupied separate sides of a federal court’s civil docket
and were subject to distinct law and equity procedures, including the use or nonuse of the jury.1
Adoption of the Federal Rules of Civil Procedure in 1938 merged law and equity into a single
civil jurisdiction and established uniform rules of procedure.2 Legal and equitable claims that
previously were brought as separate causes of action on different “sides” of the court could now
be joined in a single action, and in some cases, such as those with compulsory counterclaims,
had to be joined in one action.3 However, the courts retained the traditional distinction between
law and equity for purposes of determining when there was a constitutional right to trial by jury,
which led to some difficulty.4
The Supreme Court resolved the difficulty by stressing the fundamental nature of the jury trial
right and protecting it against diminution through resort to equitable principles. In Beacon
Theatres v. Westover, a plaintiff sought a declaratory judgment and an injunction barring the
defendant from instituting an antitrust action against it; the defendant filed a counterclaim
alleging violation of the antitrust laws and asking for treble damages.5 The Supreme Court held
that the district court erred in denying the defendant a jury trial on all issues in the antitrust
controversy because the complaint for declaratory relief “presented basically equitable issues.” 6
The trial court’s error, in the Court’s view, would compel the defendant to split its antitrust case
in two, trying part to a judge and part to a jury, impermissibly delaying and subordinating its
counterclaim that it was required by the Federal Rules of Civil Procedure to bring within the
same action.7 Long-standing equity principles, according to the Court, dictated that “only under
the most imperative circumstances which in view of the flexible procedures of the Federal Rules
we cannot now anticipate, can the right to a jury trial of legal issues be lost through prior
determination of equitable claims.” 8
Later, in Dairy Queen v.Wood, the Supreme Court reversed a district court’s order striking a
plaintiff’s demand for jury trial.9 There, the plaintiff-trademark owner sought several types of
relief against the defendant-licensee for the licensee’s alleged breach of a licensing contract,
including an injunction and an accounting for money damages.10 The Court held that, even
though the claim for legal relief was characterized by the district court as “incidental” to the
equitable relief sought, the Seventh Amendment required that the factual issues pertaining to
whether there had been a breach of contract to be tried before a jury.11 Thus, the rule emerged
that legal claims must be tried before equitable ones, and before a jury if the litigant so
wished.12
In Ross v. Bernhard, the Court further held that the right to a jury trial depends on the nature of
the issue to be tried, rather than the procedural framework in which it is raised.13 The case
involved a stockholder derivative action, which had always been considered to be a suit in
equity.14 The Court agreed that the action was equitable, but concluded that it involved two
separable claims. The first, the stockholder’s standing to sue for a corporation, was an equitable
issue; the second, the corporation’s claim asserted by the stockholder, may be either equitable or
legal.15 Because the Federal Rules of Civil Procedure merged law and equity in the federal
courts, there was no longer any procedural obstacle to transferring jurisdiction to the law side
once the equitable issue of standing was decided. Thus, the Court continued, if the corporation’s
claim that the stockholder asserted was legal in nature, it should be heard on the law side and
before a jury.16
Footnotes
1
See Kristin A. Collins, “A Considerable Surgical Operation” : Article III, Equity, and
Judge-Made Law in the Federal Courts, 60 Duke L.J. 249, 253 (2010).
2
See Ross v. Bernhard, 396 U.S. 531, 539 (1970).
3
See 8 Moore’s Federal Practice - Civil § 38.12 (2022).
4
Under the old equity rules, an absolute right to a trial of the facts by a jury could not be
impaired by any blending with a claim, properly cognizable at law, of a demand for
equitable relief in aid of the legal action or during its pendency. Hipp v. Babin, 60 U.S.
(19 How.) 271, 278 (1857). The Supreme Court interpreted the Seventh Amendment to
prohibit the trial of equitable and legal issues in the same suit, so that aid in the federal
courts had to be sought in separate proceedings. Scott v. Neely, 140 U.S. 106, 109
(1891); Bennett v. Butterworth, 52 U.S. (11 How.) 669 (1850); Lewis v. Cocks, 90 U.S.
(23 Wall.) 466, 470 (1874); Killian v. Ebbinghaus, 110 U.S. 568, 573 (1884); Buzard v.
Houston, 119 U.S. 347, 351 (1886). If an action at law evoked an equitable counterclaim,
the trial judge would order the legal issues to be separately tried after the disposition of
the equity issues. In this procedure, however, res judicata and collateral estoppel could
operate so as to curtail the litigant’s right to a jury finding on factual issues common to
both claims. However, priority of scheduling was considered to be a matter of discretion.
Federal statutes prohibiting courts of the United States from sustaining suits in equity if
the remedy was complete at law served to guard the right of trial by jury and were
liberally construed. Schoenthal v. Irving Trust Co., 287 U.S. 92, 94 (1932). Nor was the
distinction between law and equity to be obliterated by state legislation. See Thompson v.
Railroad Cos., 73 U.S. (6 Wall.) 134 (1868). If state law, in advance of judgment, treated
the whole proceeding upon a simple contract, including determination of validity and of
amount due, as an equitable proceeding, it brought the case within the federal equity
jurisdiction upon removal. However, the Supreme Court determined that when an action
at law in state court furnished an adequate and complete remedy, the existence of a
potential cause of action in courts of equity pursuant to a separate state statute could not
enlarge the federal courts’ equity jurisdiction. This jurisdictional rule applies even if,
under state law, the equity court could summon a jury on occasion. Whitehead v.
Shattuck, 138 U.S. 146 (1891); Buzard, 119 U.S. 347; Greeley v. Lowe, 155 U.S. 58, 75
(1894). Furthermore, when state law provides an equitable remedy, such as to quiet title
to land, the federal courts enforce it, if it does not obstruct the rights of the parties as to
trial by jury. Clark v. Smith, 38 U.S. (13 Pet.) 195 (1839); Holland v. Challen, 110 U.S.
15 (1884); Reynolds v. Crawfordsville Bank, 112 U.S. 405 (1884); Chapman v. Brewer,
114 U.S. 158 (1885); Cummings v. Nat’l Bank, 101 U.S. 153, 157 (1879); United States
v. Landram, 118 U.S. 81 (1886); More v. Steinbach, 127 U.S. 70 (1888). Cf. Ex parte
Simons, 247 U.S. 321 (1918). The transfer of cases to the other side of the court was
made possible through the inclusion in the Law and Equity Act of 1915 of § 274(b) of the
Judicial Code, 38 Stat. 956. The new procedure permitted legal questions arising in an
equity action to be determined without sending the case to the law side. This section also
permitted equitable defenses to be interposed in an action at law. The same order was
preserved as under the system of separate courts. The equitable issues were disposed of
first; if a legal issue remained, it was triable by a jury. Enelow v. N.Y. Life Ins. Co., 293
U.S. 379 (1935). See also Liberty Oil Co. v. Condon Bank, 260 U.S. 235 (1922). There
was no provision for legal counterclaims in an equitable action because Equity Rule 30
required the answer to a bill in equity to state any counterclaim arising out of the same
transaction, which was not intended to change the line between law and equity and was
construed as referring to equitable counterclaims only. Am. Mills Co. v. Am. Sur. Co.,
260 U.S. 360, 364 (1922); Stamey v. United States, 37 F.2d 188 (W.D. Wash. 1929).
Equitable jurisdiction existing at the time of a bill’s filing was not disturbed by the
subsequent availability of legal remedies, and the scheduling was discretionary. Am. Life
Ins. Co. v. Stewart, 300 U.S. 203 (1937).
5
359 U.S. 500, 501–04 (1959).
6
Id. at 504–07.
7
Id. at 509. The Supreme Court later observed, in Parklane Hosiery Co. v. Shore, 439 U.S.
322, 334 (1979), that Beacon Theatres reflected the Court’s concern that when legal and
equitable claims are joined in the same action, res judicata or collateral estoppel may
foreclose relitigation of an issue common to both sets of claims before a jury if such an
issue was first determined by a judge. The Court explained, however, that this concern
merely reflected a general prudential rule that a trial judge “has limited discretion in
determining the sequence of trial and that discretion must, wherever possible, be
exercised to preserve jury trial.” Parklane, 439 U.S. at 334 (internal quotations omitted).
Thus, in Parklane, the Court held that the plaintiff stockholders’ use of offensive
collateral estoppel in that case-which precluded the defendants from relitigating certain
issues that had resolved adversely against them in a prior governmental enforcement
action-did not violate the defendants’ Seventh Amendment right to a jury trial. Id. at 336–
37.
8
Beacon Theatres, 359 U.S. at 510–11.
9
369 U.S. 469, 479–80 (1962).
10
Id. at 475.
11
Id. at 479–80. 12
If legal and equitable claims are joined, and the court erroneously dismissed the legal
claims and decides common issues in the equitable action, the plaintiff cannot be
collaterally estopped from relitigating those common issues in a jury trial. Lytle v.
Household Mfg., Inc., 494 U.S. 545 (1990).
13
396 U.S. 531 (1970).
14
The stockholders’ derivative action is a creation of equity made necessary by the
traditional concept of the “corporate entity” or the “concept of separate personality.” That
is, the corporation is an entity distinct and separate from its shareholders. Thus, while
shareholders were relieved from unlimited liability for corporate liabilities, the
complementary result was that harm to the corporation did not confer any right of action
upon a shareholder to sue to right that harm. However, if the harm were caused by the
abuse of those who managed and controlled the corporation, the corporation naturally
would not proceed against them, and the common law courts would not allow the
shareholders to bring an action running to the “separate personality” of the corporation.
Accordingly, equity permitted a derivative action in which the shareholder was permitted
to set in motion the adjudication of a cause of action belonging to the corporation. Bert S.
Prunty, The Shareholders’ Derivative Suit: Notes on Its Derivation, 32 N.Y.U. L. Rev.
980 (1957).
15
Ross, 396 U.S. at 538.
16
Id. at 539–41. Justices Potter Stewart and John Marshall Harlan and Chief Justice Warren
Burger dissented, arguing that the Seventh Amendment did not expand the right to a jury
trial, that the Rules simply preserved the right as it had existed, and that it was error to
think that the two could somehow “magically interact” to enlarge the right in a way that
neither did alone. Id. at 543 (Stewart, J., dissenting).
