A Wolf in Wolf’s Clothing: Why Pennsylvania Supreme Court Adoption of Strict Liability for Consumer Protection Law Catch-All Claims Poses No New Threat
Just over a month ago, in Gregg v. Ameriprise Fin., Inc., the Supreme Court of Pennsylvania issued a 4-3 opinion settling the question of whether the “catch-all” provision of Pennsylvania’s amended Unfair Trade Practices and Consumer Protection Law (CPL) — which bars “fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding” — applies “a strict liability standard.” 245 A.3d 637 (Pa. 2021). The Court answered the question in the affirmative, and held that “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.” Acknowledging that its ruling would have the effect of creating “a strict liability offense,” the Court nonetheless concluded that strict liability for CPL catch-all violations was “consistent with the legislative mandate to eradicate the use of unfair and deceptive conduct in consumer transactions.”
The ruling came over objections detailed in an amicus brief filed by 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, which generally argued that imposition of strict liability was inconsistent with both the statutory terms and legislative history, and was an outcome procedurally better left to the legislature, and that would substantively create “a dangerous new cause of action” ripe for “abuse” that would “flood civil dockets” with claims from consumers who merely bear “buyer’s remorse.” The ruling, which some commentators believe could open “the floodgates of claims,” was quickly criticized as a “liability-expanding decision” that would “worsen the state’s civil justice climate” by making “it easier for consumers to file suits against businesses,” which would lead “to a rise in litigation costs which will be passed on to consumers” and would, ultimately, “significantly harm consumers, businesses, and the Commonwealth.”
Though clearly not an overtly business-friendly decision, the reality is that Gregg is not particularly ground-breaking, and therefore should not, in itself, pose any significant new threat that the business community did not already face. As one commentator notes, the decision did nothing more than definitively place Pennsylvania among a majority of states that do not require a showing of intent for such claims (of note, Australian courts similarly apply strict liability in consumer protection laws).
The decision is also not a departure from in-state precedent; as the Court put it, “[s]trict liability is not a foreign concept in consumer protection.” Indeed, Pennsylvania state courts, following the lead of federal court interpretations of the federal statute upon which Pennsylvania’s CPL is modeled, have long held that “[u]nfair or deceptive trade practices are illegal and, therefore, enjoinable whether or not the seller of goods or services intended to deceive the buyer,” and that a seller’s “good faith” is not “determinative of whether his statements are deceptive and misleading.” Com. v. Foster, 57 Pa. D. & C.2d 203, 206 (Pa. Com. Pl. 1972). As one federal court noted 15 years before Gregg:
The General Assembly of Pennsylvania enacted the [CPL] to prohibit a wide variety of both deceptive and unfair business practices. Com. ex. rel. Zimmerman v. Nickel, 26 Pa. D. & C.3d 115, 119 (Pa.Comm.Pl.1983). While its general aim is the prevention of fraud, any act or practice that has a capacity or tendency to deceive falls within the ambit of the act. Id. at 120 (citing Resort Car Rental Sys., Inc., v. Capital FTC, 518 F.2d 962, 964 (9th Cir.1975)). Neither an intent to deceive nor actual deception need be proven to establish liability. Id. (citing Warner Lambert Co. v. FTC, 562 F.2d 749, 763 (D.C.Cir.1977) and Montgomery Ward Co. v. FTC, 379 F.2d 666, 672 (7th Cir.1967)). And an act or practice need not be proven to be deceptive in order to be declared “unfair”-which necessarily involves consideration of a variety of factors including whether the practice causes substantial injury to consumers or others. Id. (citing FTC v. Sperry and Hutchinson Co., 405 U.S. 233, 244-45 n. 5, 92 S.Ct. 898, 31 L.Ed.2d 170 (1972)).
Westfield Grp. v. Campisi, No. 2:02CV997, 2006 WL 328415, at *18 (W.D. Pa. Feb. 10, 2006).
As explained by the Pennsylvania Superior Court in Bennett v. A.T. Masterpiece Homes at Broadsprings, LLC (a decision cited in a Commonwealth amicus brief and the Court in Gregg), some state courts had, before 1996, held that a CPL catch-all claim required “proof of common law fraud.” 40 A.3d 145, 152 (Pa. Super. Ct. 2012). But that changed with a 1996 statutory amendment, which added the term “deceptive conduct” to the CPL catch-all provision, “substantively altering the catchall provision and allowing for liability based on the less restrictive standard of ‘deceptive conduct.’” Id. That amendment led to a steady “line of cases” from both state and federal courts holding that “the 1996 amendment lessened the degree of proof required” to prove a CPL catch-all claim. Id.
If that line of cases did not necessarily make Gregg a foregone conclusion, it certainly foreshadowed it. Gregg simply put a final seal on the matter. So, while the business community may be disappointed by the ruling, it can at least take solace in the reality that the decision did not amount to a tectonic jurisprudential shift, and should therefore not necessarily open any floodgates that had not already opened in the prior two-and-a-half decades.