In a decision likely to have broad ramifications for consumer protection claims in Pennsylvania, our Supreme Court has ruled that plaintiffs claiming violations of the Unfair Trade Practices and Consumer Protection Law are not required to prove that the defendant intended to deceive or defraud. The Court’s 4-3 majority ruling in Gregg v. Ameriprise Financial, Inc., ___ A.3d ___, No. 29 WAP 2019, 2021 WL 607486 (Pa. Feb. 17, 2021), firmly establishes that companies doing business directly with consumers can be held strictly liable for deceptive sales practices even when the alleged misrepresentations were unintentional or negligent.
Gary and Mary Gregg originally sued Ameriprise and its agent, Robert A. Kovalchik, alleging that Kovalchik made material misrepresentations to the Greggs to induce them to buy certain insurance policies. They claimed that they relied on Kovalchik’s advice and liquidated their investment accounts and insurance policies to re-invest the proceeds in a variable life insurance policy and several other investment accounts established by Kovalchik and Ameriprise. The Greggs alleged that Kovalchik did not invest the money in the accounts and insurance policies as he had promised, and that the actual investment activity carried out by Kovalchik increased his commission significantly.
The Greggs’ lawsuit asserted violations of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, as well as common law claims for breach of fiduciary duty, negligent misrepresentation and fraudulent misrepresentation. The jury trial on the common law claims resulted in a verdict in favor of the defendants. The parties then proceeded to a bench trial Consumer Protection Law claims, after which the trial court entered a verdict in favor of the Greggs in the amount of $52,431.29. Following the trial court’s verdict in favor of the Greggs, Ameriprise filed post-trial motions arguing, among other points, that the Greggs had failed to establish that Kovalchik’s misrepresentations were, at the very least, negligent. The trial court rejected that argument, denied the post-trial motions, and later granted the Greggs’ request for attorneys’ fees and costs under the Consumer Protection Law.
On appeal, the Superior Court held that the test for deceptive conduct under the Consumer Protection Law is whether the conduct has the tendency or capacity to deceive, without any regard to the actor’s state of mind. Gregg v. Ameriprise Fin., 195 A.3d 930, 939 (Pa. Super. 2018). It affirmed the verdict, ruling that the Greggs were not required to prevail on common law claims of fraudulent misrepresentation and negligent misrepresentation in order to succeed on their Consumer Protection Law claim. Ameriprise then appealed that ruling to the Pa. Supreme Court.
The Supreme Court’s majority ruling in favor of the Greggs adopts the reasoning used in the lower courts. It noted specifically that the 1996 addition of the word “deceptive” to the description of the type of conduct barred by the catch-all provision of the Consumer Protection Law was critical. That amendment placed the duty of compliance with the Consumer Protection Law on commercial vendors, without regard to their intent. The Court explained that if the General Assembly intended to limit the catch-all provision to cover only common law misrepresentation claims, it would have done so directly by, for example, barring only fraudulent or negligent conduct.
The majority found Ameriprise’s representation to the Greggs created a likelihood of confusion or misunderstanding because Kovalchik failed to clearly and fully explain the costs and terms of the [life insurance] policy. This resulted in the Greggs’ reasonable belief that they would not pay any additional money for a new life insurance policy. It found that this analysis did not depend on Ameriprise’s state of mind because the catch-all provision of the Consumer Protection Law is appropriately treated as a strict liability provision.
Justice Todd, joined by Chief Justice Saylor and Justice Baer, dissented from the majority opinion, writing that the appropriate interpretation of the catch-all provision is that a vendor may only be liable for deceptive conduct when he or she knows, or reasonably should know, that his conduct is likely to cause misunderstanding or confusion in a consumer regarding the goods or services being sold.
A copy of the majority opinion can be found here.