Unfair Trade Practices and Consumer Protection Law; actionable false advertising vs. puffery; whether Attorney General is a “person in interest” who can recover damages

Shapiro v. GGNSC LLC, 16 MAP 2017, 158 A.3d 203 (Pa. Cmwlth, 2017) (en banc) (direct appeal from Commonwealth Court)

This is an appeal from the Commonwealth Court’s dismissal on preliminary objections of a complaint filed by the Attorney General against GGNSC LC et al., Pennsylvania nursing homes operated by Golden Living parent companies, based on alleged violations of the Unfair Trade Practices and Consumer Protection Law (CPL).  The Commonwealth Court found that statements made in Golden Living’s advertising materials were not actionable under the CPL because they were puffery.  The Commonwealth Court also found that under the CPL the Attorney General is not a “person in interest” entitled to recover damages when he sues as a plaintiff.  The Commonwealth Court also held that the Attorney General failed to allege facts necessary to pierce the corporate veil in order to hold the nursing homes’ parent entities liable for unjust enrichment.  Finally, in sustaining preliminary objections, the Commonwealth Court did not expressly provide the Attorney General with leave to amend the complaint against Golden Living.

The Attorney General challenges each of these holdings in his direct appeal to the Supreme Court, arguing that dismissal of his complaint on preliminary objections without leave to amend was a “radical” act that “may well have wide-ranging and unintended consequences that limit the ability of the Attorney General to protect the Commonwealth of Pennsylvania and, particularly her most vulnerable citizens, from the deceptive practices of a wide swath of business that span the gamut – nursing homes, payday lenders, opioid manufacturers, and beyond.”

The Attorney General’s central claim against Golden Living is that, through a campaign of allegedly deceptive marketing materials and billing statements, Golden Living materially misrepresented the quantity, frequency and availability of services related to the activities of daily living that it would provide to its nursing home residents, because staff was insufficient to provide the promised services in a timely manner. The Commonwealth alleges that Golden Living’s failure to provide these services is the result of an institutional and systemic scheme to skimp on the staffing required to deliver the basic care Golden Living’s residents required and to, instead, maximize profits from residents and their families who were deceived by the claims made.

Golden Living responds that the Commonwealth Court’s sustaining of preliminary objections was well reasoned and should be affirmed.  Golden Living, it maintains, simply stated its desire to provide quality care at its skilled nursing facilities, that the Commonwealth has previously certified to the federal government that Golden Living’s care for the years in question was compliant with minimum staffing requirements under the law such that the Attorney General is claiming that the required level of care exceeds those minimum staffing levels, that there is nothing deceptive about the puffery in its marketing materials, and that the Attorney General has failed to identify even a single deceptive statement from a single resident assessment, care plan, or billing statement.

Golden Living also defends the Commonwealth Court’s decision that the CPL does not afford restoration damages to the Attorney General for payments made to Golden Living by the state or individual consumers. The General Assembly has already created a statutory scheme that provides a remedy for the state to recover reimbursement where services were not adequately rendered, and the CPL does not allow the Attorney General to obtain a windfall by demanding that restitution be made directly to him for payments made to Golden Living by residents or the state on their behalf. Governmental entities like the Attorney General are not included within the CPL’s definition of “person[s],” Golden Living argues, and only non-governmental “person[s]” are entitled to seek restoration under the CPL.

Next, Golden maintains that the Commonwealth Court properly rejected the Attorney General’s attempt to pierce the veil and impose liability on Golden Living’s parent entities that do not provide patient care and that do not receive payments for services.  Golden Living argues that the Attorney General failed to allege that Golden Living’s facilities were set up as sham entities to perpetuate a fraud, or that any of its claims arise from abuse of the corporate form. Moreover, the Attorney General’s attempt to assert an equitable unjust enrichment claim against the Golden Living parent entities is impermissible because existing statutes and regulations already provide an adequate remedy whereby the state can seek reimbursement from those facilities for any payments made for services that were not adequately rendered.

Finally, Golden Living argues, the Attorney General does not deserve an opportunity to amend, because he already filed an amended complaint that failed to remedy the insufficient specificity of the first, and waived the opportunity to seek leave to amend when, after the Commonwealth Court stated OAG may seek leave to amend, OAG chose not to do so.

The case has attracted significant interest from amici.  Briefs in support of the Attorney General were filed by the Center for Advocacy for the Rights and Interests of the Elderly and Community Legal Services, AARP, the City of Philadelphia, and the Philadelphia District Attorney.  Briefs in support of Golden Living’s position were filed by the Pennsylvania Health Care Association, the American Health Care Association, Leading Age PA, and the United States Chamber of Commerce.

For more information, contact Kevin McKeon or Dennis Whitaker.