Takeaways from the New Strict Liability Standard in Pennsylvania Consumer Protection Law
Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL) is a tool for consumers of goods, services, or real estate to sue businesses for deceptive business practices. Businesses must understand this law and its developments to ensure that they are prepared for any potential liability, which can be significant. Recently, the Pennsylvania Supreme Court issued its opinion in Gregg v. Ameriprise Financial, imposing a lessened burden on plaintiffs bringing claims under the catch-all provision of this law. As such, a basic understanding of the UTPCPL in its modern context is essential for those participating in the sale of goods, particularly when the sale involves a potential failure to disclose defects during the sale of real estate.
The UTPCPL lists 20 explicitly forbidden “unfair methods of competition” and “unfair or deceptive acts or practices” in addition to a general “catch-all” provision prohibiting the engagement in “any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding.” Just a few examples of the express prohibitions in the law include “[r]epresenting that goods or services are of a particular standard, quality or grade, or that goods are of a particular style or model, if they are of another,” and “[a]dvertising goods or services with intent not to sell them as advertised.”
The enforcement of this law is generally the responsibility of the attorney general or a district attorney. Consumers are permitted to bring civil suits on their own behalf, however. The UTPCPL allows a payment of costs and restitution when a violation has occurred. In fact, it allows for awards of triple damages in addition to a payment of attorneys’ fees. Although the award is only as high as triple damages at the judge’s discretion, this can come to a significant amount of liability for a business.
The UTPCPL is not only enforceable against Pennsylvania residents or businesses that are working or operating in Pennsylvania, but in 2018, the Pennsylvania Supreme Court held that out-of-state residents and businesses headquartered and operating in Pennsylvania are controlled by UTPCPL.
The Gregg v. Ameriprise Financial case arose through a relationship between Gary and Mary Gregg and an advisor and insurance salesperson for Ameriprise Financial, Inc., Robert A. Kovalchik. The Greggs sued Ameriprise, claiming Kovalchik made material misrepresentations to induce them to purchase insurance policies. The Pennsylvania Supreme Court had to determine whether the Greggs’ claims for deceptive conduct under the UPTCPL were dependent upon proof of Kovalchik’s state of mind.
When the case originally went to trial, the jury returned a defense verdict on the common law fraudulent and negligent misrepresentation claims. The UTPCPL claim then proceeded to a bench trial and the court found Ameriprise liable, awarding the Greggs over $52,000. Ameriprise challenged the award, arguing that the trial court should have dismissed the UTPCPL claim after the jury determined the Greggs could not establish that Kovalchik’s misrepresentations were at least negligent to support the common law claims. This argument was partially contingent on the idea that the common law claim was a negligence claim, meaning that Ameriprise was not sufficiently careful, not that it was intentional in the misrepresentation by Kovalchik. Ameriprise argued that contrarily, liability under the UTPCPL requires a level of knowingness for liability to attach.
The Pennsylvania Supreme Court instead held that 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.” Because the state of mind of the actor does not play into liability, the court created a strict liability standard. This means that, as long as the plain meaning of the statute is met, the intention of the actor is irrelevant. Going forward plaintiffs bringing claims under the catch-all provision of the UTPCPL will no longer need to prove that vendors, or their employees, acted with carelessness or intent.
This lessened burden makes it even more crucial that a business, when selling goods, makes disclosures to consumers regarding any defects. In the real estate context, a material defect is defined as a problem with property or a portion of the property that would have a significant impact on the value of the property or that involves an unreasonable risk to the people on the property. The new strict liability standard means that defendants can no longer defend UTPCPL claims under the catch-all provision by asserting that the defendant, or their employees, acted innocently or did not intend to deceive the plaintiff. The Gregg decision indicates that the Pennsylvania Supreme Court will interpret the consumer protection law liberally and will charge the vendor, not the consumer, with the responsibility of complying with the UTPCPL. In light of the modern UTPCPL, businesses must ensure that they are thorough in reviewing, identifying, and disclosing any potential material defects to a property they are selling. Regardless of whether they believed the defect was material or whether they have the intention to deceive, the new strict liability standard can leave the business liable for up to three times the damages inflicted upon the consumer.