PA Supreme Court Finds Intent Is Not Nine-Tenths of the Law



[co-author: Michael Ingram]

We regularly tell clients that intent is meaningless when it comes to deception under Section 5 of the FTC Act. And that’s true (or we wouldn’t say it). But fewer people realize that it’s not necessarily true when it comes to a minority of the states. As of a couple weeks ago, however, that number has shrunk by one, courtesy of the Pennsylvania Supreme Court. In Gregg et al. v. Ameriprise Financial Inc. et al., the Pennsylvania Supreme Court held that Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (CPL) does not require a showing of intent to hold defendants liable. This 4-3 decision, which was nearly 20 years in the making, makes clear that the statute functions in a strict liability manner. There no longer needs to be a finding of fraud or negligence for a court to deem a business’s practices deceptive. This broadens the power of the law to regulate unscrupulous business practices.

In 1999, Gary and Mary Gregg enlisted the expertise of Robert A. Kovalchik, a financial adviser and insurance salesman for Ameriprise Financial Inc. Kovalchik engaged in what the trial court described as deceptive sales practices, as Kovalchik misrepresented his investment strategy for the Greggs. It was not disclosed to the Greggs that Kovalchik would earn a significant amount of money in commission while the Greggs would incur additional costs.

The trial court ruled in favor of the Greggs, to which Ameriprise appealed. On appeal, the Pennsylvania Superior Court affirmed the lower court’s decision concluding that the Greggs were not required to prevail on a common law claim of fraudulent misrepresentation or negligent misrepresentation in order to succeed on their claims under the CPL. The Supreme Court of Pennsylvania agreed with the lower court. Writing for the majority, Justice David N. Wecht stated, “A plain language analysis of the relevant statutory provision leads inexorably to the conclusion that deceptive conduct under the [CPL] is not dependent in any respect upon proof of the actor’s state of mind.”

Pennsylvania joins the majority of states that do not require a showing of intent before the consumer or attorney general can bring a lawsuit. Looking ahead, businesses should ensure that their practices are inherently fair and not deceptive to consumers, as the requirement for intent is quickly vanishing across the country.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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