Strict Liability under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law’s Catchall Provision
Gregg v. Ameriprise Financial, Inc., 195 A.3d 930 (Pa. Super. 2018), allocatur granted June 27, 2019, appeal docket 29 WAP 2019
Under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL), there is a “catchall” provision that “prohibits anyone who advertises, sells, or distributes goods or services from ‘[e]ngaging in any. . . fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding’ during a transaction. 73 P.S. § 201-2(4)(xxi).” Slip Op. at 1-2. After disagreement in the appellate courts on how much protection the provision provides consumers, Superior Court adopted aconsumer-friendly view in Bennett v. A.T. Masterpiece Homes, 40 A.3d 145 (Pa. Super. 2012) when it held that a consumer was not required to prove that the business acted with the intent to defraud in order to state a claim under the catch-all provision; however, the court did not address the level of culpability necessary for a customer to succeed in a claim under the catch-all provision. The current case arises from Ameriprise Financial, Inc.; Ameriprise Financial Services, Inc.; Riversource Life Insurance Company; and Robert A. Kovalchik (the “Insurance Companies”)’s invitation for Superior Court to reverse Bennett and open up the split in authority that originally occurred.
In 1999, Robert Kovalchick solicited Gary and Mary Gregg (the Greggs) as new customers as their financial adviser and insurance salesperson. During their meeting, Kovalchik said he would advise and counsel the Greggs on their insurance and investment products and that they should rely on and trust his advice to achieve their financial goals.. During a second meeting, Kovalchik recommended various insurance and investment products and advised the Greggs to liquidate their Prudential life insurance policies and place the assets into another life insurance corporation that the Insurance Companies later acquired. Kovalchik also advised the Greggs to take out a Flexible Premium Variable Life Insurance Policy from the new life insurance corporation, surrender their IRAs and purchase new ones through the new life insurance corporation and to refrain from enrolling Mrs. Gregg into an Air Force-provided plan.The Greggs, following the advice of Kovalchik, paid Kovalchick automatic monthly withdrawals of $300 to “increase the savings portion” of the new life insurance policy; however, instead of investing in the policy, Kovalchick placed a portion of the Gregg’s contribution into a growth fund that increased his commission with a surcharge, which resulted inthe Greggs paying an additional $200 per month that was going into the growth account instead of the insurance policy as they believed.
After receiving a class action notice, the Greggs believed the Insurance Companies were in violation of the law and filed suit alleging fraudulent and negligent misrepresentation and a violation of the catchall provision of the UTPCPL. The common law claims went to a jury trial that resulted in a defense verdict for the Insurance Companies. The UTPCPL catchall deception claims thereafter went to a bench trial in which the trial judge found for the Greggs and awarded damages, costs and attorneys fees. The Insurance Companies appealed to Superior Court claiming that the jury’s verdict on the common law misrepresentation claims defeated the Gregg’s UTPCPL catchall deception claim under the doctrines of res judicata and collateral estoppel.
Superior Court declined the Insurance Companies invitation to reconsider its decision in Bennet and held that the UTPCPL catchall provision for deception is broader than common law fraudulent or negligent misrepresentation, does not require a finding that the defendant intended to deceive or acted negligently in creating deception, and thus neither collateral estoppel nor res judicata applied because the judge and jury decided distinct issues, concluding:
… the General Assembly, by “eliminating the common law state of mind element (either negligence or intent to deceive),” [Commonwealth v.] TAP [Pharmaceutical Products, Inc.,] 36 A.3d  at 1253 [(Pa. Cmwlth. 2011), reversed on other grounds, 94 A.3d 350 (Pa. 2014)], imposed strict liability on vendors who deceive consumers by creating a likelihood of confusion or misunderstanding in private, as well as public, causes of actions. Carelessness or intent, required for negligent or fraudulent misrepresentations, may be absent when perpetrating “deceptive conduct” under 73 P.S. § 201-2(4)(xxi). Given their varying degrees of requisite intent, UTPCPL catchall violation and the torts of negligent and fraudulent misrepresentation raise separate legal issues, as a matter of law.
As such, we conclude that the [I]nsurance [C]ompanies’ assertions of res judicata and collateral estoppel fail the first step of their respective tests. Common law misrepresentations and UTPCPL catchall violations present distinct legal issues. Thus, the trial judge properly made a separate finding of fact under TAP, and the [I]nsurance [C]ompanies’ first appellate issue lacks merit.
Slip Op. at 17-18.
The Supreme Court granted allocatur to determine:
Whether the Superior Court improperly held that a strict liability standard applies to a claim under the “catch-all” provision of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. §§ 201-1 et seq as amended in 1996, even though the provision expressly requires proof of “fraudulent or deceptive conduct.”
As part of the courts’ ongoing Covid 19 response, the Supreme Court will hear oral argument in this case via video conference: www.pacourts.us/courts/supreme-court/may-2020-supreme-court-session.