Gregg, G. v. Ameriprise Financial, Aplts. ( 2021 )

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IN THE SUPREME COURT OF PENNSYLVANIA
WESTERN DISTRICT
SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.
GARY L. GREGG AND MARY E. GREGG, : No. 29 WAP 2019
:
Appellees : Appeal from the Order of the
: Superior Court entered September
: 12, 2018 at No. 1504 WDA 2017,
v. : affirming the Judgment of the Court
: of Common Pleas of Allegheny
: County entered September 27, 2017
AMERIPRISE FINANCIAL, INC., : at No. GD 01-006611.
AMERIPRISE FINANCIAL SERVICES, :
INC., RIVERSOURCE LIFE INSURANCE : ARGUED: May 21, 2020
COMPANY AND ROBERT A. KOVALCHIK, :
:
Appellants :
OPINION
JUSTICE WECHT DECIDED: FEBRUARY 17, 2021
In 1999, Gary and Mary Gregg sought the expertise of Robert A. Kovalchik, a
financial advisor and insurance salesperson for Ameriprise Financial, Inc. Engaging in
what the trial court would later conclude to be deceptive sales practices, Kovalchik made
material misrepresentations to the Greggs to induce them to buy certain insurance
policies. The Greggs ultimately sued Ameriprise Financial, Inc., Ameriprise Financial
Services, Inc., Riversource Life Ins. Co., and Kovalchik (collectively, Ameriprise) under
Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (“CPL”), 73 P.S. §
201-2(4)(xxi).1 The Greggs’ complaint also asserted, inter alia, common law claims for
negligent misrepresentation and fraudulent misrepresentation.
The case proceeded to a jury trial on the common law claims, resulting in a defense
verdict. The CPL claim proceeded to a bench trial. After the trial court ruled in favor of
the Greggs on that CPL claim, Ameriprise filed a motion for post-trial relief arguing (among
other points) that the Greggs failed to establish that Kovalchik’s misrepresentations were,
at the very least, negligent, a finding that Ameriprise asserted was required to establish
deceptive conduct under the CPL.
The trial court denied relief, and the Superior Court affirmed. Like the trial court,
the Superior Court concluded that the Greggs were not required to prevail on the common
law claims of fraudulent misrepresentation or negligent misrepresentation in order to
succeed on their CPL claim. Gregg v. Ameriprise Fin., 195 A.3d 930, 936 (Pa. Super.
2018). Applying Commonwealth v. TAP Pharm. Products, Inc., 36 A.3d 1197 (Pa.
Cmwlth. 2011), rev’d on other grounds, 94 A.3d 350 (Pa. 2014), the Superior Court held
that the test for deceptive conduct under the CPL is whether the conduct has the tendency
or capacity to deceive, without regard to the actor’s state of mind. Gregg, 195 A.3d at
939.
On appeal, this Court is tasked with determining whether, as the Superior Court
held, a strict liability standard applies to the Greggs’ CPL claim. A plain language analysis
of the relevant statutory provision leads inexorably to the conclusion that deceptive
conduct under the CPL is not dependent in any respect upon proof of the actor’s state of
mind. The Superior Court’s holding is consistent not only with the plain language of the
CPL, but also with our precedent holding that the CPL is a remedial statute that should
1 This section, known as the “catch-all” provision, prohibits anyone who advertises,
sells, or distributes good or services from “[e]ngaging in any . . . fraudulent or deceptive
conduct which creates a likelihood of confusion or misunderstanding” during a
transaction. 73 P.S. § 201-2(4)(xxi).
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be construed broadly in order to comport with the legislative will to eradicate unscrupulous
business practices. See Commonwealth by Creamer v. Monumental Props., Inc., 329
A.2d 812, 817 (Pa. 1974). Accordingly, we affirm.
In 1999, Kovalchik held himself out as someone having skill, training, and expertise
in insurance and investment products and solicited the Greggs to become his customers.
Meeting with his new clients, Kovalchik offered a review of the Greggs’ financial worth,
investment goals, and insurance products. Kovalchik encouraged the Greggs to rely
upon his advice and counsel, and to trust him to achieve their financial goals. This
included delegating investment decisions to Kovalchik. In the course of consulting with
Kovalchik, the Greggs revealed that they owned seven Prudential Life Insurance policies
with a combined value of $121,000. Kovalchik advised the Greggs to liquidate these
policies and place the assets into IDS Life Insurance, a corporation that Riversource Life
Insurance later acquired.
Kovalchik advised the Greggs to purchase a new Flexible Premium Variable Life
Insurance Policy (the “Policy”) for Mr. Gregg with a spousal rider for Mrs. Gregg. In
addition, Kovalchik persuaded the Greggs to surrender their existing IRA accounts and
use those funds to purchase new IRAs through IDS. Finally, Kovalchik advised the
Greggs that if they also gave him $300 every month, that money would increase the
savings portion of the Policy. Kovalchik’s sales pitch led the Greggs to believe that, if the
Greggs purchased the new Policy and made annual payments, the Policy would accrue
significant cash value that they could use to fund their retirement.
The Greggs followed Kovalchik’s advice. The Greggs purchased the Policy; rolled
over their existing IRAs into new IRAs with IDS; surrendered the proceeds of their seven
Prudential Life Insurance policies; provided Kovalchik with a check for $300; and
authorized an automatic monthly withdrawal of $300 from their checking account to cover
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the savings portion of the Policy. Accordingly, Prudential sent several checks to IDS from
the liquidated insurance policies.
Unbeknownst to the Greggs, Kovalchik divided their $300 payment between the
Policy and two IRAs. When Prudential sent a check for $11,601.34 to the Greggs,
Kovalchik promised to deposit approximately $9,500 from this check into the Policy.
Instead, Kovalchik put $1,700 into each of the new IRAs. Kovalchik put the balance of
these proceeds into a new AXP Growth Fund account that he opened for the Greggs.
Despite his assertions, Kovalchik did not place any of the $9,500 into the Policy. Each
IRA transaction increased Kovalchik’s commission via a surcharge of 5.75%. Further,
upon Kovalchik’s advice, the Greggs declined to enroll Mrs. Gregg in an Air Force benefits
plan that would have paid military benefits to Mrs. Gregg if Mr. Gregg died. The Greggs
also began sending Kovalchik an additional monthly check, which they believed was
going toward the Policy. Instead, Kovalchik placed these funds into the AXP Growth
Fund, again increasing Kovalchik’s commissions with a surcharge of 5.75%.
In January 2001, the Greggs received a class-action notice that led them to believe
that the insurance companies had broken the law. The Greggs sued Ameriprise,
Kovalchik, and IDS Life Insurance Company, asserting causes of action for negligent
misrepresentation, fraudulent misrepresentation, violation of the catch-all provision of the
CPL, breach of fiduciary duty, and negligent supervision. All claims related to the Greggs’
purchase of the Policy. The Greggs alleged that Kovalchik misrepresented that the initial
lump-sum payment and a one-time payment of $300 would fund the Policy for its term,
and that the Policy would accrue significant cash value based upon an initial payment
and annual payments thereafter.
In response to Ameriprise’s motion for summary judgment, the trial court dismissed
the Greggs’ negligent supervision claim. On September 16, 2014, the case proceeded
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to a jury trial on the Greggs’ common law claims for breach of fiduciary duty, fraudulent
misrepresentation, and negligent misrepresentation. Following trial, the trial court granted
Ameriprise’s motion for directed verdict on the breach of fiduciary duty claim. The jury
returned a verdict in favor of Ameriprise on the claims for fraudulent and negligent
misrepresentation.
The CPL count, as the sole remaining claim, was submitted to the trial court based
upon the evidence that had been introduced during the jury trial. Ameriprise argued that
the jury verdict in its favor on the common law negligent misrepresentation claim barred
a verdict in the Greggs’ favor on the statutory claim under principles of res judicata and
collateral estoppel. The trial court disagreed. On December 17, 2014, the trial court
entered a verdict in the Greggs’ favor for $52,431.29, which represented the premium the
Greggs had paid to the insurance companies plus interest, with a deduction for the
amount the insurance companies had already paid to the Greggs in September 2012. On
January 6, 2015, the Court granted the Greggs’ request for attorneys’ fees and costs
under the CPL.
Ameriprise appealed, raising two issues, only one of which remains relevant at this
juncture.2 Ameriprise argued that the jury’s verdict on the common law misrepresentation
claims required the trial court to dismiss the Greggs’ CPL claim in accord with the
doctrines of res judicata and collateral estoppel.
In an opinion filed pursuant to Pa.R.A.P. 1925(a), the trial court explained that
there was no state of mind required to sustain a private cause of action under the catch-
all provision of the CPL. The trial court distinguished the absence of a state of mind
requirement under the CPL from the common law claims of fraudulent or negligent
2 Ameriprise’s second issue concerned the amount of damages, and was premised
upon Ameriprise’s argument that the trial court had failed to account for the value of the
insurance coverage Ameriprise had provided to the Greggs from 1999-2012.
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misrepresentation, which required proof of intent to deceive or negligence, respectively.
See TAP Pharm. Products, Inc., 36 A.3d at 1255 (holding that a jury’s defense verdict on
common law claims for fraudulent and negligent misrepresentation did not bar a public
CPL enforcement action). Applying TAP, the trial court held that “the test for deceptive
conduct under the [CPL] is ‘essentially whether the conduct has the tendency or capacity
to deceive, which is a lesser, more relaxed standard than that for fraud or negligent
misrepresentation.’” Tr. Ct. Op. at 3 (quoting TAP, 36 A.3d at 1253).
According to the trial court, the evidence demonstrated that Ameriprise’s conduct
created a likelihood of confusion or misunderstanding in the Greggs’ dealings with
Ameriprise. Even if Kovalchik did not directly misrepresent the cost of the Policy to the
Greggs, the trial court found, Kovalchik failed to explain clearly and fully the cost and
terms of the Policy. Kovalchik’s explanations left the Greggs with the reasonable belief
that they would not have to pay any additional money to fund the Policy once their existing
policies were transferred to Ameriprise. The trial court additionally noted that the Greggs
relied upon Ameriprise to their financial detriment when they elected to forego the
purchase of the survivor benefit option for Mr. Gregg’s military pension and instead
cashed in their whole life policies to purchase the variable life insurance policy
recommended by Kovalchik. Crediting the Greggs’ testimony, the trial court found that
they had proved all elements of a CPL claim by a preponderance of the evidence.
On appeal to the Superior Court, Ameriprise again argued that the defense verdict
on the common law claims of fraudulent and negligent misrepresentation precluded
liability under the CPL by application of res judicata and collateral estoppel principles.
Gregg, 195 A.3d at 935. According to Ameriprise, the Greggs were required to establish,
at a minimum, negligent misrepresentation in order to establish liability under the catch-
all provision of the CPL.
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Like the trial court, the Superior Court rejected this argument. The Superior Court
held that the Greggs could prevail on their CPL claim without proof of Ameriprise’s state
of mind. The Superior Court reasoned that, by “eliminating the common law state of mind
element (either negligence or intent to deceive),” id. at 940 (quoting TAP, 36 A.3d at
1253), the General Assembly “imposed strict liability on vendors who deceive consumers
by creating a likelihood of confusion or misunderstanding in private, as well as public,
causes of action.” Id. Neither carelessness nor intent, which is required for negligent or
fraudulent misrepresentation claims, respectively, are required for claims under the catch-
all provision of the CPL. Id. Rather, what the statute requires is, according to the Superior
Court, a likelihood of confusion or misunderstanding by the consumer. Id. at 939.
Ameriprise sought allowance of appeal in this Court. We granted review to
determine:
Whether the Superior Court improperly held that a strict liability standard
applies to a claim under the “catch-all” provision of the [CPL] as amended
in 1996, even though the provision expressly requires proof of “fraudulent
or deceptive conduct.”
Gregg v. Ameriprise Fin., Inc., 216 A.3d 222 (Pa. 2019). This question involves statutory
interpretation, and therefore presents a question of law. Meyer v. Comty. Coll. of Beaver
Co., 93 A.3d 806, 813 (Pa. 2014). Our scope of review is plenary, and our standard of
review is de novo. Id.Ameriprise argues that “deceptive conduct” as used in the catch-all provision is the
act of intentionally giving a false impression or recklessly making a false representation
with the intent that the other person should rely on it. Relying on various dictionary
definitions of “deceit” and “deception,” Ameriprise argues that the Court should construe
“deceptive” in the catch-all provision to depend upon the actor’s intent to mislead.
Ameriprise further argues that the CPL was enacted as a fraud prevention statute.
Consistent with the legislature’s intent to eradicate fraud, Ameriprise urges a reading of
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the catch-all provision in which the terms “fraudulent” and “deceptive” are synonymous.
Consistent with this interpretation, Ameriprise argues that the Greggs were required to
prove more than mere confusion or misunderstanding. Examining the legislative history
of the CPL, Ameriprise asserts that the catch-all provision was amended in 1996 to
encompass “deceptive conduct” in order to combat telemarketing schemes, not to impose
strict liability on vendors of goods and services. Had the General Assembly intended to
create a strict liability offense, Ameriprise believes, it would have done so by including
language imposing strict liability.
Finally, Ameriprise argues that the Superior Court should not have relied upon TAP
because TAP involved a public enforcement action under the CPL, and is therefore
inapplicable to private causes of action. Ameriprise believes that this distinction is
important because, in a public action, the Attorney General is not required to prove that
the consumer relied upon the fraudulent or deceptive conduct or that the statements
caused actual harm. In a private action, however, this Court has held that reliance and
causation are required. See Toy v. Metropolitan Life Ins. Co., 928 A.2d 186, 202-03 (Pa.
2007).
In support of Ameriprise, amici curiae Pennsylvania Coalition for Civil Justice
Reform, Pennsylvania Bankers Association, Pennsylvania Health Care Association,
Pennsylvania Manufacturers’ Association, UPMC, American Property Casualty Insurance
Association, American Tort Reform Association, Chamber of Commerce, and National
Federation of Independent Business argue that the Superior Court’s conclusion is wrong
as a matter of law. Amici question why, if the legislature intended to transform the catch-
all provision from one requiring proof of fraudulent intent to one of strict liability, it did not
do so expressly. Amici curiae Pennsylvania Association of Realtors and Pennsylvania
Builders Association advance the same argument, and assert that applying a strict liability
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standard under the catch-all provision will subject millions of consumer transactions to
new liability and will open the floodgates of litigation.
In opposition, the Greggs argue that the term “deceptive” in the consumer
protection context has taken on a distinct meaning, and is a broader, more flexible
standard of actionable misconduct than the traditional tort of common law fraud. In
particular, the Greggs note that the CPL describes a wide range of “unfair” and “deceptive”
conduct, but references “fraudulent” acts only in the catch-all provision. The Greggs
believe that this reflects legislative intent to prohibit a wider range of conduct than what
the common law encompassed.
According to the Greggs, federal courts have held that misrepresentation that has
the tendency or capacity to mislead consumers is a deceptive act. To consider whether
the representation is deceptive, courts will consider the impression created by the
representation. The Greggs see no requirement of intent under the catch-all provision.
Finally, the Greggs observe that this Court has recently endorsed a broad interpretation
of the catch-all provision, holding that “deceptive conduct” includes an act or practice that
“has the capacity or tendency to deceive,” without regard to the actor’s intent to deceive
or actual deception. Commonwealth by Shapiro v. Golden Gate National Senior Care
LLC, 194 A.3d 1010, 1023 (Pa. 2018).
The Pennsylvania Association of Justice (“PAJ”), arguing as amicus curiae in
support of the Greggs, maintains that the assertions of Ameriprise’s amici curiae are not
consistent with legislative requirements for private causes of action under the CPL.
Specifically, PAJ notes that liability under the catch-all provision also requires that the
conduct created a likelihood of confusion or misunderstanding. A subjective assertion
will not suffice. Also filing an amicus curiae brief in support of the Greggs, the
Commonwealth of Pennsylvania argues that, as previously determined by the Superior
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and Commonwealth Courts, the 1996 amendment establishes a strict liability standard
for fraudulent and deceptive conduct.3
The National Consumer Law Center, National Association of Consumer
Advocates, Community Legal Services, and others have also filed an amicus curiae brief
in support of the Greggs. These amici note that, of the twenty enumerated provisions of
the CPL that precede the catch-all provision, some include an intent requirement, while
some do not. That the legislature premised liability in the catch-all provision on “any
other” such conduct indicates that the legislature did not intend to require intent.
Moreover, these amici argue, the history of the CPL indicates that it was intended to add
additional consumer protections beyond what the common law provided. Consumer
protections are understood as strict liability provisions under federal law, as well as under
the laws of many states. These states, as well as the federal government, understand
that where a transaction is deceptive, a business has no right to keep the consumer’s
money.
Prior to the adoption of the CPL, individual consumers who had been victimized in
the marketplace by unscrupulous vendors could vindicate their rights only under the
common law theories of negligent and fraudulent misrepresentation. Fraudulent (or
intentional) misrepresentation requires the plaintiff to prove six elements: (1) a
representation; (2) that is material to the transaction at issue; (3) made falsely, with
knowledge of its falsity or reckless disregard as to whether it is true or false; (4) with the
intent to mislead another person into relying on it; (5) justifiable reliance; and (6) an injury
proximately caused by the reliance. Bortz v. Noon, 729 A.2d 555, 560 (Pa. 1999). The
four elements of a common law claim for negligent misrepresentation are: (1) a
3 See Brief for the Cmmw. of Pa. as Amicus Curiae Supporting Appellees (citing
Bennett v AT Masterpiece, 40 A.3d 145 (Pa. Super. 2012); and Commonwealth v.
Percudani, 825 A.2d 743 (Pa. Cmwlth. 2003)).
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misrepresentation of a material fact; (2) made under circumstances in which the actor
should have known of its falsity; (3) with an intent to induce another to act on it; (4) thereby
causing injury to a party who justifiably relied upon the misrepresentation. Id. at 561. In
contrast with intentional misrepresentation, a negligent “misrepresentation must concern
a material fact and the speaker need not know his or her words are untrue, but must have
failed to make a reasonable investigation of the truth of these words.” Id.
Against this common law backdrop, and drawing upon the model of consumer
protection statutes drafted by the Uniform State Law Commissions and the Federal Trade
Commission, Pennsylvania’s General Assembly passed the CPL in 1968.4 The intent of
the General Assembly was “to benefit the public at large by eradicating, among other
things, ‘unfair or deceptive’ business practices.” Monumental, 329 A.2d at 815. To this
end, the CPL recognized “the unequal bargaining power of opposing forces in the
marketplace” and “attempt[ed] to place on more equal terms seller and consumer.” Id. at
816. This Court has stated emphatically that, as a remedial statute, the CPL “is to be
construed liberally to effect its object of preventing unfair or deceptive practices.” Id. at
817.
Section 201-9.2 creates a causation element, which requires a private plaintiff to
demonstrate justifiable reliance. See Schwartz v. Rockey, 932 A.2d 885, 897 n.16 (Pa.
2007) (noting that “the justifiable reliance criterion derives from the causation
requirement” of Section 201-9.2). Regardless of which unfair method of competition a
plaintiff challenges in a private cause of action, therefore, Section 201-9.2 requires the
plaintiff to establish justifiable reliance. Creating both public and private causes of action,
4 See Stephen Buckingham, Distinguishing Deception and Fraud: Expanding the
Scope of Statutory Remedies Available in Pennsylvania for Violations of State Consumer
Protection Law, 78 TEMP. L. REV. 1025, 1028 (2005); Charlotte E. Thomas, The
Quicksand of Private Actions Under the Pennsylvania Unfair Trade Practices Act: Strict
Liability, Treble Damages, and Six Years to Sue, 102 DICK. L. REV. 1, 2 (1997).
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the legislature established a statutory claim for anyone who demonstrates that: (1) they
purchased or leased “goods or services primarily for a personal, family, or household
purpose”; (2) they suffered an “ascertainable loss of money or property”; (3) the loss
occurred “as a result of the use or employment by a vendor of a method, act, or practice
declared unlawful by” the CPL; and (4) the consumer justifiably relied upon the unfair or
deceptive business practice when making the purchasing decision. 73 P.S. § 201-9.2(a);
Id., § 201-8; see also Schwartz, 932 A.2d 897 n.16.
While Section 201-2(4) enumerates twenty distinct unfair methods of competition
and unfair or deceptive acts and practices that are unlawful, the legislature also included
the catch-all provision in Section 201-2(4)(xxi). Prior to its amendment in 1996, the catch-
all provision made it unlawful to engage in “any other fraudulent conduct which creates a
likelihood of confusion or of misunderstanding.” Id § 201-2(4)(xvii) (1968) (amended
1996). Pennsylvania courts interpreted this provision as requiring proof of common law
fraud. See, e.g., Hammer v. Nikol, 659 A.2d 617, 619 (Pa. Cmwlth. 1995) (“To be
actionable under the catchall provision, however, the ‘confusion or misunderstanding’
created must be fraudulent.”); Prime Meats, Inc. v. Yochim, 619 A.2d 769, 773 (Pa. Super.
1993) (requiring the plaintiff to prove elements of common law fraud to recover under the
CPL’s catch-all provision because that section forbade only fraudulent conduct).
Common law fraud was dependent upon proof of the actor’s state of mind, requiring proof
that the actor acted intentionally. Bortz, 729 A.2d at 561.
Apparently dissatisfied with this restrictive interpretation, in 1996, the General
Assembly expanded the unlawful conduct barred by the catch-all provision so as also to
prohibit deceptive conduct. The resulting iteration bars “engaging in any other fraudulent
or deceptive conduct which creates a likelihood of confusion or of misunderstanding.” 73
P.S. § 201-2(4)(xxi) (1996). While the pre-amendment language had been interpreted as
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barring only common law fraud, the amended language expanded liability by barring any
deceptive conduct that creates a likelihood of confusion or of misunderstanding. It is this
amended language that the Court is called upon to interpret today.
With this background in mind, we confront the plain language of the catch-all
provision to determine whether, as the Superior Court held, a strict liability standard
applies to the Greggs’ CPL claim. When this Court interprets legislative enactments, we
are mindful that “[t]he object of all interpretation and construction of statutes is to ascertain
and effectuate the intention of the General Assembly.” 1 Pa.C.S. § 1921(a). “The best
indication of legislative intent is the plain language of the statute.” Kistler v.
Commonwealth, State Ethics Comm’n, 22 A.3d 223, 227 (Pa. 2011). “When the words
of a statute are clear and free from all ambiguity, they are presumed to be the best
indication of legislative intent.” Chanceford Aviation v. Chanceford Twp. Bd. of
Supervisors, 923 A.2d 1099, 1104 (Pa. 2007) (quotations omitted). “Words and phrases
shall be construed according to rules of grammar and according to their common and
approved usage; but technical words and phrases and such others as have acquired a
peculiar and appropriate meaning or are defined in this part, shall be construed according
to such peculiar and appropriate meaning or definition.” 1 Pa.C.S. § 1903(a). As the CPL
is a remedial statute, we must construe it liberally. Monumental, 329 A.2d at 815-16.
The addition of “deceptive” to describe the type of conduct barred by the catch-all
provision of the CPL expanded that provision beyond fraudulent conduct. In particular, in
the context of consumer protection, “deceptive conduct” had acquired a peculiar and
appropriate meaning prior to the 1996 amendment. As we have explained, the CPL is
based upon the Federal Trade Commission Act (“FTCA”) and the Lanham Act. Id. at 818
(observing that parts of the CPL are identical to the FTCA and that the “Lanham Act’s
similarity to the [CPL] is likewise strong”). Under the FTCA, deception is a broader
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concept of misconduct than common law fraud, and requires no proof of the actor’s state
of mind. See, e.g., Montgomery Ward & Co. v. FTC, 379 F.2d 666, 670 (7th Cir. 1967)
(rejecting the argument that deceptive advertising required proof of intent: “whatever
Wards’ intentions were in the advertising, they are not controlling in the determination of
its deceptiveness”). Rather than being premised upon intent, misrepresentation that has
the tendency or capacity to deceive is a deceptive act under federal law. Id. (“Actual
deception, proved by deceived consumers, is not necessary: the likelihood of deception
or the capacity to deceive is the criterion by which the advertising is judged.”); see also
Removatron Int’l Corp. v. FTC, 884 F.2d 1489, 1496 (1st Cir. 1989) (explaining that a
deceptive representation depends upon the impression created by the representation,
rather than its truth or falsity).
In FTC v. Algoma Lumber Co., 291 U.S. 67 (1934), the Supreme Court of the
United States defined deceptive conduct in the context of consumer protection as conduct
that has the “capacity to deceive.” Id. at 81. Our General Assembly assumedly was
aware of the High Court’s longstanding expansive definition when it chose the same
language in 1996. As prescribed in the 1996 amendment to the CPL, therefore, deceptive
conduct as it pertains to consumer protection plainly has the same meaning that the
Supreme Court embraced in Algoma Lumber. 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.
Indeed, this Court recently applied this well-established definition of deceptive
conduct to the CPL’s catch-all provision without regard to the actor’s state of mind. In
Golden Gate, the Court recognized the remedial purposes of the CPL and held that “[a]n
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
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be shown that the acts and practices are capable of being interpreted in a misleading
way.” 194 A.3d at 1023 (cleaned up).
Golden Gate answers the question before us today. And its plain language
interpretation is consistent with cases from the intermediate appellate courts in the years
since the 1996 amendment. The Superior Court initially continued to interpret Section
201-2(4)(xxi) to require proof of common law fraud without regard to the effect of the 1996
amendment. See, e.g., Ross v. Foremost Ins. Co., 998 A.2d 648, 654 (Pa. Super. 2010)
(holding that the catch-all provision required proof of common law fraud); Skurnowicz v.
Lucci, 798 A.2d 788 (Pa. Super. 2002); Booze v. Allstate Ins. Co., 750 A.2d 877 (Pa.
Super. 2000); Fay v. Erie Ins. Group, 723 A.2d 712 (Pa. Super. 1999); Sewak v. Lockhart,
699 A.2d 755 (Pa. Super. 1997); DiLucido v. Terminix Int'l, Inc., 676 A.2d 1237 (Pa.
Super. 1996). The Superior Court in these cases did not discuss the 1996 amendment,
but continued to apply its pre-existing precedent without regard for the statutory change.
At the same time, several decisions from the federal courts in the Eastern District
of Pennsylvania rejected the Superior Court’s disregard for the statutory change. See
Flores v. Shapiro & Kreisman, 246 F.Supp.2d 427 (E.D. Pa. 2002) (noting that
maintaining the pre-1996 pleading requirements would render the words “or deceptive
conduct” redundant and superfluous); Patterson v. Chrysler Fin. Co., 263 B.R. 82, 92 n.
17 (Bankr. E.D. Pa. 2001) (discussing how another court’s failure to analyze the impact
of the 1996 amendment to the CPL on the requirement that a plaintiff show all of the
elements of common law fraud to prevail in a CPL action); Rodriguez v. Mellon Bank,
N.A., 218 B.R. 764, 784 (Bankr. E.D. Pa.1998) (noting that the addition of “or deceptive
conduct” signals an approval of a less restrictive interpretation of the CPL).
The Commonwealth Court addressed the 1996 amendment in Commonwealth v.
Percudani, 825 A.2d 743 (Pa. Cmwlth. 2003), and diverged from the Superior Court.
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Based upon the language of the 1996 amendment, this Court’s instruction to construe the
CPL liberally, and the Superior Court’s failure to provide any rational basis for its
continuing restrictive view of the catch-all provision, the Commonwealth Court adopted
the position of the Bankruptcy Court. Id. at 747.
The Superior Court eventually became aware that its precedent did not account
for the amended language. In Bennet v. A.T. Masterpiece, 40 A.3d 145, 154 (Pa. Super.
2012), the Superior Court aligned itself with the Commonwealth Court in recognizing that
“the legislature's inclusion of ‘deceptive’ in 1996 signaled that either fraudulent or
deceptive conduct would constitute a catchall violation.” Id. at 154.
In TAP, the Commonwealth Court found no inconsistency between a jury’s defense
verdict on claims of negligent or fraudulent misrepresentation and a trial court’s decision
that the defendant violated the catch-all provision of the CPL. 36 A.3d at 1253.
Interpreting the catch-all provision, the Commonwealth Court held that the test for
deceptive conduct is “whether the conduct has the tendency or capacity to deceive.” Id.We agree. This test is, as the Commonwealth Court has recognized, a lesser, more
relaxed standard than that for fraudulent or negligent misrepresentation. See id. As the
Commonwealth Court concluded, all that the statute requires the plaintiff to prove is that
“the acts or practices are capable of being interpreted in a misleading way.” Id.Courts in states that employ language similar to that of our CPL have also held
that proof of intent is not necessary in order to establish deceptive conduct. See, e.g.,
State of Alaska v. O’Neill Investigations, Inc., 609 P.2d 520, 535 (Alaska 1980); Regency
Nissan, Inc. v. Taylor, 391 S.E.2d 467, 470 (Ga. Ct. App. 1990); State ex rel. Kidwell v.
Master Distribs, Inc., 615 P.2d 116, 122 (Idaho 1980); Kowalski v. Cedars of Portsmouth
Condo. Ass’n, 769 A.2d 344, 349 (N.H. 2001); see also Buckingham, supra note 2, at
1034 n.103.
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It is noteworthy as well that Black’s Law Dictionary defines “deceptive act” as
follows: “As defined by the Federal Trade Commission and most state statutes, conduct
that is likely to deceive a consumer acting reasonably under similar circumstances. —
Also termed deceptive practice; deceptive sales practice.” Deceptive Act, Black’s Law
Dictionary (11th ed. 2019).
Mindful of our task liberally to construe the CPL in accord with the General
Assembly’s intent to eradicate unfairness and deception in consumer transactions,
Monumental, 329 A.2d at 817, we are bound to conclude again that the plain language of
the amended provision eliminates the state of mind element that was required prior to the
amendment. 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.
Had 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. By choosing instead to bar “deceptive
conduct,” the General Assembly signaled its intent to dispense with consideration of the
actor’s mental state.
Accordingly, under the plain meaning of the statute, deceptive conduct during a
consumer transaction that creates a likelihood of confusion or misunderstanding and
upon which the consumer relies to his or her financial detriment does not depend upon
the actor’s state of mind. Liberally construing the CPL as we must, the amended
language places the duty of compliance with the CPL on commercial vendors, without
regard to their intent. Without a state of mind requirement, the amended catch-all
[J-31-2020] - 17
provision fairly may be characterized as a strict liability offense. As the Superior Court in
this case held:
[A]ny deceptive conduct, “which creates a likelihood of confusion or of
misunderstanding,” is actionable under 73 P.S. § 201-2(4)(xxi), whether
committed intentionally (as in a fraudulent misrepresentation), carelessly
(as in a negligent misrepresentation), or with the utmost care (as in strict
liability). Whether a vendor's “conduct has the tendency or capacity to
deceive . . . is a lesser, more relaxed standard than that for fraud or
negligent misrepresentation.” TAP, 36 A.3d at 1253. The only thing more
relaxed than negligence––regarding a consumer's burden of proof––is strict
liability.
Gregg, 195 A.3d at 939.
Like other strict liability offenses, liability for deceptive conduct under the CPL
cannot be excused if consumers rely upon that conduct to their financial detriment.
Representations made in the consumer context are within the exclusive control of the
vendor:
[A commercial transaction] occurs in a designed setting entirely of the
vendor’s own creation via preplanned marketing schemes. Thus, vendors
place themselves, by choosing where, when, and how they enter the
market, in a much stronger position to comply fully with the [CPL] before
soliciting or interacting with consumers. Vendors not only elect whether to
enter a market, but, because “the market” is a fictional place, they have full
volitional control over their conduct when in it.
The [CPL] is for consumer protection. It undoes the ills of sharp business
dealings by vendors, who, as here, may be counseling consumers in very
private, highly technical concerns. Like the Greggs, those consumers may
be especially reliant upon a vendor’s specialized skill, training, and
experience in matters with which consumers have little or no expertise.
Therefore, the legislature has placed the duty of [CPL] compliance squarely
and solely on vendors; they are not to engage in deceitful conduct and have
no legally cognizable excuse, if they do.
Id. at 939-40. 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
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mandate to eradicate the use of unfair and deceptive conduct in consumer transactions.
Monumental, at 815-16.
The General Assembly knows well how to add a state of mind requirement to a
statute. Within the CPL itself, numerous provisions require intent or knowledge before a
violation will be found. See, e.g., 73 P.S. § 201-2(4)(ix) (requiring proof of intent not to
sell goods and services as advertised); id. § 201-2(4)(x) (requiring proof of intent not to
supply public demand); id. § 201-2(4)(xv) (requiring proof that the vendor made knowing
misrepresentations). The absence of any reference to the actor’s state of mind in the
catch-all provision demonstrates that the legislature did not intend to require proof of the
actor’s state of mind. “[W]here a section of a statute contains a given provision, the
omission of such a provision from a similar section is significant to show a different
legislative intent.” Fletcher v. Pa. Prop. & Cas. Ins. Guar. Ass’n, 985 A.2d 678, 684 (Pa.
2009). It is not for the courts to add a state of mind requirement to the statute where the
legislature did not choose to do so. See Commonwealth v. Rieck Inv. Corp., 213 A.2d
277, 282 (Pa. 1965) (courts should not add to a statute a requirement that the legislature
chose not to include).
Strict liability is not a foreign concept in consumer protection. For example, the
Fair Debt Collection Practices Act is generally characterized as “a strict liability statute to
the extent it imposes liability without proof of an intentional violation.” Allen ex rel. Martin
v. LaSalle Bank, N.A., 629 F.3d 364, 368 (3d. Cir. 2011); see also In re Porter, 961 F.2d
1066, 1078 (3d Cir. 1992) (recognizing that the Truth in Lending Act “achieves its remedial
goals by a system of strict liability in favor of the consumers when mandated disclosures
have not been made.” (quotations omitted)). The Superior Court’s characterization of the
catch-all provision as creating strict liability makes perfect sense in this context. Under
the catch-all provision of the CPL, the actor’s state of mind as to either the truth or falsity
[J-31-2020] - 19
of the representation or the effect that the misrepresentation will have on the consumer
is irrelevant.
We reject Ameriprise’s argument that the catch-all provision means something
different depending upon whether it is brought in a public enforcement action or a private
action. Toy does not support Ameriprise’s argument. There, a private purchaser of
insurance brought a CPL claim against an insurer under the catch-all provision as it stood
prior to its 1996 amendment. Interpreting the pre-1996 version of the catch-all provision,
the Court required the plaintiff to demonstrate the common law requirements of justifiable
reliance and causation of harm. In doing so, the Court suggested that these requirements
derived solely from the common law. As the Court subsequently clarified, however, these
elements were statutory, deriving from the CPL itself. Schwartz, 932 A.2d at 897, n.16.
There is no basis upon which we can glean different requirements from the statute
depending upon whether the action is public or private, and Toy does not support such
an interpretation.
While the learned Dissent recognizes that neither an intention to deceive nor actual
deception must be proven, see Golden Gate, 194 A.3d at 1023, it nevertheless discerns
an open question concerning the state of mind that must be established under Section
201-2(4)(xxi). Dissenting Op. at 7. The Dissent attempts to establish that a
demonstration of deceptive conduct under the catch-all provision does not depend upon
the vendor’s knowledge of the truth or falsity of the statement, but instead upon the
“vendor’s state of mind with respect to the misleading or confusing effect his statements
or actions are likely to have on a consumer.” Id. at 8. For the Dissent, this means that a
vendor can act without regard to the truthfulness of the statement, but can be liable only
if the vendor is or should be aware that the statement is capable of misleading the
consumer. The Dissent considers this to be a negligence standard. Id. at 9.
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Although the Dissent perceives the absence of an explicit strict liability designation
to signal an intent requirement, it is the absence of an intent requirement that imposes a
strict liability standard. As explained above, if the General Assembly intended to add a
state of mind requirement, it would have done so. The Dissent’s vexation with the “strict
liability” label notwithstanding, such a label is an apt description of the state of mind, or
lack thereof, encompassed within “deceptive conduct.” A statute that requires no proof
of the actor’s state of mind imposes liability without regard to state of mind. Under the
catch-all provision of the CPL, the actor’s state of mind as to either the truth or falsity of
the representation or the effect that the misrepresentation will have on the consumer is
irrelevant.
The Dissent also finds it “incongruous” that the legislature would prohibit fraudulent
conduct, which requires an intentional state of mind, and then lower the bar to include
deceptive acts without regard to the actor’s state of mind. Dissenting Op. at 5. We
perceive nothing incongruous in the establishment of multiple ways to demonstrate a
violation of the catch-all provision, or in a lowering of the bar in order to capture conduct
based upon strict liability. Where the statute is silent as to the requisite state of mind, the
statute requires neither intent to deceive nor negligence with regard to the effect of the
misrepresentation.5 Further, even if the legislature’s policy choice were to strike us as
5 The Dissent faults our plain language analysis of the catch-all provision as failing
to give effect to the meaning of fraud, rendering that term surplusage. Dissenting. Op. at
9. But fraud and deceptive conduct are distinct concepts, with their own requirements of
proof. And they are alternative ways to establish a violation of the catch-all provision.
When the General Assembly chose the amendatory language, it borrowed a term that
was well-established in the field of consumer protection, a term that is not dependent in
any respect upon intent. See Commonwealth v. Percudani, 825 A.2d 743, 747 (Pa.
Cmwlth. 2003) (holding that maintaining the pre-1996 pleading requirements would
render the words “or deceptive conduct” redundant and superfluous, contrary to the rules
of statutory construction).
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“incongruous,” that would be no concern of ours. Finding the language to be plain, our
task is complete.
In ruling in the Greggs’ favor, the trial court found that Ameriprise’s representations
to the Greggs “created a likelihood of confusion or misunderstanding” because Kovalchik
“failed to clearly and fully explain the cost and terms of the [life insurance] policy.” Tr. Ct.
Op., 12/5/2017, at 4. As a result, the Greggs “reasonably believed” that they would not
pay any additional money for the new life insurance policy. Id. The trial court’s finding of
liability under the catch-all provision did not depend upon Ameriprise’s state of mind.
Because the Superior Court was correct in its characterization of the catch-all provision
as a strict liability provision, we affirm.
Justices Donohue, Dougherty and Mundy join the opinion.
Justice Todd files a dissenting opinion in which Chief Justice Saylor and
Justice Baer join.
The Dissent’s intent requirement would read into the statute words that are not
there. Rieck Inv. Corp., 213 A.2d at 282; Danganan v. Guardian Protection Services, 179
A.3d 9, 17 (Pa. 2018) (“the Court may not supply additional terms to, or alter, the language
that the Legislature has chosen”). There is simply no indication in the plain language of
the catch-all provision that deceptive conduct depends upon intent.
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