Pennsylvania Businesses Are Strictly Liable for Violations of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, the Pennsylvania Supreme Court Holds

Pennsylvania consumers can bring a claim under this catch-all provision by showing that:

• They purchased “goods or services primarily for a personal, family or household purpose.”
• They sustained an “ascertainable loss of money or property.”
• The loss occurred “as a result of the use or employment by a vendor of a method, act, or practice declared unlawful by” the UTPCPL.
• The consumer justifiably relied upon the business practice when deciding whether to buy the product or service. 73 P.S. § 201-9.2(a).

A UTPCPL claim can bite with sharp teeth. A successful claim can carry an award of treble damages, plus costs and attorneys’ fees. These statutory damages are in addition to any damages awardable under common law arising from the same transaction. Understandably, then, a recent appeal presented to the Pennsylvania Supreme Court attracted a wave of amicus filings from advocacy groups representing interests on both sides of the consumer litigation “V.”

In Gregg v. Ameriprise Financial, Inc., No. 29 WAP 2019, 2021 WL 607486, at *6 (Pa. Feb. 17, 2021), the Pennsylvania Supreme Court adopted a strict liability standard of proof for a violation of the UTPCPL: “An act or a practice is deceptive or unfair if it has the capacity or tendency to deceive, and neither the intention to deceive nor actual deception must be proved; rather, it need only be shown that the acts and practices are capable of being interpreted in a misleading way.” 2021 WL 607486, at *7.

Gregg arose from the sale of a life insurance policy. Two consumers, husband and wife, met with a financial advisor for Ameriprise Financial, Inc., who offered to review their financial portfolio and goals. The Ameriprise agent advised them about insurance and investment options, and after an in-person meeting among them, the consumers agreed to allow him to invest their money in a variable life insurance policy. The agent told the consumers that he was going to invest the cash value from an old life insurance policy into their new policy and certain other financial products. However, without telling them, the agent invested the consumers’ money into other funds that increased his commission. The consumers eventually learned what happened and sued Ameriprise, their insurer and the agent for fraudulent misrepresentation, negligent misrepresentation and violation of the UTPCPL’s catch-all provision. A jury heard their common law misrepresentation claims but returned a defense verdict on both counts.

As Pennsylvania consumers have no right to a jury trial of their UTPCPL claims, a judge considered that claim in Gregg. The defendants argued that judgment in their favor on the misrepresentation claims necessarily barred entry of judgment for plaintiffs on the UTPCPL claim, arguing res judicata and collateral estoppel. The trial judge disagreed, concluding that the agent’s representations to the consumers “created a likelihood of confusion or misunderstanding” because the agent “failed to clearly and fully explain the cost and terms of the [life insurance] policy.” The consumers reasonably relied on the agent’s representations to their financial detriment, the judge found. 2021 WL 607486, at *11. Accordingly, the consumers won a judgment on their UTPCPL claim, together with an award of damages, costs and attorneys’ fees. On appeal, a divided Pennsylvania Supreme Court affirmed the judgment.

In Gregg, the Pennsylvania Supreme Court announced a strict liability standard for private consumer claims arising under the UTPCPL’s catch-all provision. The five main points of the Court’s reasoning are excerpted below:

• “Deceptive conduct under the CPL is not dependent in any respect upon proof of the actor’s state of mind.” 2021 WL 607486, at *2.
• “It is the capacity to deceive rather than the actor’s state of mind that renders conduct actionable under the amended catch-all provision of the CPL.” At *7.
• “The plain language of the current statute imposes liability on commercial vendors who engage in conduct that has the potential to deceive and which creates a likelihood of confusion or misunderstanding. That is all that is required. The legislature required neither carelessness nor intent when a cause of action is premised upon deceptive conduct.” at * 9.
• “Without a state of mind requirement, the amended catch-all provision fairly may be characterized as a strict liability offense.”
• “It is the vendor—not the consumer—that is charged with complying with the CPL, as the vendor is in a better position to determine whether the representation might be deceptive. Strict liability for such violations is consistent with the legislative mandate to eradicate the use of unfair and deceptive conduct in consumer transactions.”

In summary, under the catch-all provision of the UTPCPL, the actor’s state of mind as to either the truth or falsity of a representation or whether a representation will deceive a consumer is now irrelevant. Going forward, in consumer transactions in Pennsylvania, if a business agent’s representation is found to create a likelihood of confusion or misunderstanding in dealings with a consumer, the business may be held strictly liable for the consumer’s financial losses sustained in justifiable reliance on the conduct. The business will not have a defense that its agent acted reasonably or that the misrepresentation was made innocently. Private plaintiffs must still prove that they justifiably relied on the alleged deceptive conduct, but they can establish that deceptive conduct occurred without proving that the agent fraudulently or negligently misrepresented a material fact.

In light of Gregg, businesses selling goods and services to consumers in Pennsylvania should consider:

• Reviewing training materials for sales and marketing teams on the front lines interacting with consumers to ensure those materials emphasize the importance of clear and accurate explanations of the goods or services being sold.
• Reviewing marketing materials and any other writings provided to consumers to determine if those materials have any language that “might be deceptive,” particularly in the sale of highly technical goods and services.
• Ensuring that systems are in place to record and monitor agent compliance with approved marketing and related disclosures to consumers.

Co-authors Tom Ayala and Paige Willan are partners in the litigation department at Klehr Harrison.