The Pennsylvania Supreme Court issued its highly anticipated decision in Gregg v. Ameriprise Financial, Inc. at the end of last week.
In 1996, the General Assembly amended the catchall provision of the Unfair Trade Practices and Consumer Protection Law, 73 P.S. 201-2(4)(xi), to prohibit anyone who advertises, sells, or distributes goods or services from “engaging in any deceptive conduct . . . which creates a likelihood of confusion or misunderstanding” during a transaction. Prior to that amendment, the catchall provision only prohibited “fraudulent conduct” creating a likelihood of confusion or misunderstanding and it was well-settled that a plaintiff would have to show all of the elements of fraud in order to prevail. Since the 1996 amendment, the lower courts, state and federal, have struggled to ascertain and apply the necessary elements of a cause of action under the deceptive conduct prong of the catchall provision. Some courts required a plaintiff to prove the state of mind of the defendant by showing either negligence or an intent to deceive. Many plaintiffs also argued, though few courts agreed, that a plaintiff need not demonstrate justifiable reliance in order to prevail under the deceptive conduct prong.
In Gregg, a 4-3 majority of the Pennsylvania Supreme Court finally put these issues to rest. First, citing its decision in Schwartz v. Rockey, 932 A.2d 885 (Pa. 2007), the Supreme Court explained that section 201-9.2 “creates a causation element, which requires a private plaintiff to demonstrate justifiable reliance . . . [r]egardless 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.”
Second, as to whether the deceptive conduct prong required any showing of intent, the majority first recognized that the General Assembly intended the 1996 amendment to broaden the scope of liability under the catchall provision: “in 1996, the General Assembly expanded the unlawful conduct barred by the catch-all provision so as also to prohibit deceptive conduct.” The majority then applied what it considered to be the plain language of the statute: “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. . . [and] does not depend upon the actor’s state of mind.” In short, the majority concluded that the deceptive conduct prong imposes “strict liability” for deceptive conduct that creates a likelihood of confusion or misunderstanding and upon which the consumer justifiably relies.
The dissent argued that by eliminating any state of mind requirement the majority rendered the fraudulent conduct prong “mere surplusage” and violated the rule of statutory construction that the General Assembly intends an entire statute to be effective. The dissent explained: “The majority’s construction of Section xxi – imposing strict liability for deceptive conduct – obviates the need for a consumer to ever allege fraudulent conduct in order to prevail under this section. By this interpretation, the legislature’s addition of the language ‘deceptive conduct’ effectively swallows Section xxi’s companion prohibition against fraudulent conduct which immediately precedes it, rendering that companion provision meaningless.” The majority brushed aside the dissent’s argument concluding that given the statute’s “plain language”, “our task is complete.”
As a result of Gregg, neither a private plaintiff nor the Attorney General need establish the defendant’s state of mind in order to prevail under the deceptive conduct prong. A private plaintiff is also relieved of the burden of proving a uniform state of mind when seeking the certification of a putative class. Gregg did not give the plaintiff’s bar everything it may have desired, however. Plaintiffs, including those seeking to certify a class, will still need to demonstrate justifiable reliance. That remains a difficult burden and a particular obstacle to class certification as the courts view the issue as highly individualized.