Intro  0:00  
The Supreme Court of Pennsylvania is the highest court in the Commonwealth and the oldest appellate court in the nation, an institution that shapes our practice, our laws, and our lives. Welcome to this standard of review by SCOPAblog.

Corrie  0:19  
Hello, everyone, and welcome to this the first episode of the standard of review. I'm your host Corrie Woods. I'm a Pennsylvania appellate attorney. And before I started my practice, I worked for some time for the Supreme Court of Pennsylvania. While I was there, the Court made a lot of decisions that were intellectually interesting, or practically impactful, but which weren't really being covered or at least covered in an accessible way. So when I started my practice, I started writing SCOPAblog. There, you can find an entry each month summarizing the courts precedential Holdings, and its grants of new appeals. But from time to time, there are decisions that I'd like to examine more closely, whether they involve interesting issues of law, issues of public policy, or issues about the legal profession and how we practice. On the standard of review, I'll be addressing one decision at a time by interviewing the people who know it best. So without further ado, let's get right into it. Our guest today is Ken Behrend. Ken Behrend is the principal owner of Behrend Law Group LLC, a Pittsburgh law firm he founded in 2018. He's argued over 50 appeals before the appellate courts of Pennsylvania, and has also argued before the United States Courts of Appeals for the first, third and eighth circuits, as well as the Supreme Court of West Virginia. The vast majority of his arguments are mostly concerning consumer protection issues within the insurance industry. Most recently, he argued before the Pennsylvania Supreme Court and won the case we'll be talking about today, Gregg versus Ameriprise Financial, in which the court held that proof of violation of the Pennsylvania consumer protection law may be established by applying a strict liability regime for deceptive business practices, causing consumer confusion or misunderstanding. Welcome, Ken.

Ken  1:54  
Glad to be here.

Corrie  1:55  
Yep. So Ken, before we get started, can you just tell us a little bit about your practice in terms of consumer protection? 

Ken  2:02  
Yeah, actually. It started way back in the early 80s. My father came in, he's a trial lawyer came into the office, I was just a young associate and said, we have this case here. And I don't understand what what was going on with it. But it sure looks as if the insurance company did something wrong and sold them an automobile policy incorrectly, long and short of it, they got them to coordinate their health benefits back when that was a thing. In other words, you could get your health benefits paid through your health insurance and through your auto insurance, both if you were in a car wreck and a sense of coordinated benefits that statutorily. So that's no longer possible in Pennsylvania, but at the time it was and he said figure something out. And I looked at it, we did not have a bad faith statute back in the early 80s. And so I was looking at that case law that I saw there was a concurring opinion by Chief Justice Nix at the time, who talked about common law fraud would still be a claim. And I said, Well, why not statutory fraud and common law fraud. I had recently settled a small automobile engine repair case that was never done correctly and used the consumer protection law and started figuring out how that statute worked. So that first case, it was called Pekular versus Eich and State Farm the the first insurance case, and I applied the consumer protection law to the sale of insurance. And at the time, I didn't know that was a thing you could not do. I was just a young lawyer, and I said seems like it's a good or a service and should fit the statutory definition. But after that got thrown out of court, on preliminary objections, and then the Superior Court reversed, and agreed with me. And all of a sudden I became a consumer protection lawyer. I didn't realize this was a big thing. But the petition for allowance of appeal filed by the the insurance company had an amicus brief attached from the insurance industry of Pennsylvania or something words to that effect they said we do $4 billion of business in the Commonwealth. I figured, well, I'm going to lose this argument. But the Supreme Court refused the allowance of appeal, the Superior Court opinion upheld. And that has been the genesis of all these cases, I've been fighting with insurance companies in sales practices ever since.

Corrie  4:14  
Wow, that's that's very interesting. So it's almost like thinking of the old Commonwealth versus Monumental Properties case that expanded the CPL into landlord tenant law, you know, a whole birth of claims was created. And it sounds like you were there for the delivery of, as you say, an entire industry's regulation.

Ken  4:35  
Yes. Because the other big fight back then was, well, the bad faith. We don't have that we have an Unfair Insurance Practices Act. And there's no private right of action that controls all sales practices, consumer protection should not overlay when there's already one statutory scheme in place for the Unfair Insurance Practices Act. Again, the Superior Court rejected that argument also. So they allow for the private right of action to go forward.

Corrie  4:59  
So Ken, before we jump into Gregg proper, maybe we could start with a little bit of legislative history with respect to the Pennsylvania Unfair Trade Practices and Consumer Protection Law. As I understand it, it was enacted way back in 1968, with a private cause of action added in 1976. And back then the statute prohibited into addition to a number of specific deceptive business practices, quote, unquote, fraudulent conduct that caused consumer confusion or misunderstanding. And in the ensuing years, the courts really ran with the term fraudulent, is that right?

Ken 5:38  
Yeah, that's a fair statement. And I'll get into the fraudulent aspect in a second. But first of all, I say how the statute came into being the Federal Trade Commission was having problems with so much consumer fraud going on in our country, that they could not do enough enforcement actions. So they approached all the States Attorney Generals and said, Would you enact individual state based consumer protection laws based upon the Federal Trade Commission Act, and they all got together as a national association of attorneys generals, and they put together variants of the unfair trade practices consumer protection law, there seems to be three variations of it across the country. Some states are virtually identical to Pennsylvania, and others have a lot of similarities. So that started in '68, our attorney general got so overwhelmed that they went back to the legislative Attorney General at the legislature said, Hey, open this up to a private right of action. So individuals can bring cases also because we don't have the manpower to enforce the statute. And that's what happened with the amendment in '76. And at that time, there were 17 sub parts that you could sue under and the 17th was the catch all, which is where the fraudulent conduct came into play. And what happened. Interestingly, it was a dichotomy, a split between the Commonwealth Court and the Superior Court. The Commonwealth Court all the way back in 1971, I believe it was, before the statute was even passed started getting into the concept of what is meant by a capacity to deceive or what is deceptive conduct. And that was first actually defined in 1971 in Commonwealth vs Hush Tone Industries, which is under the old 1968 version of the statute. That got followed, continuously, all the way up through the Supreme Court in the Golden Gate case. Back in 2018, or was it 19. Anyway, it was very recent Supreme Court decision where they adopted the definition of deceptive practices. And in the Golden Gate case they cite to Commonwealth vs. People's Benefits Services, well the People's Benefit Services case got it from the Hush Tones case, all the way back in 1971. So that definition has stayed consistent since the early 70s. The Superior Court, on the other hand, latched on to the fraudulent conduct language and the catch all statute and said you have to prove all the elements of common law fraud, though no court when it came down to it actually required all the elements. They proved. They they required causation, reliance on upon the misrepresentation. And then actual damages, were the only three elements of common law fraud they actually ever applied in any of the opinions. So but but so because of that dichotomy, you have a line of cases, coming up one way through the Commonwealth Court, where it's a little easier to prove a consumer protection violation, but that's through the Attorney General. And then you had the private right of action, which was supposed to mirror the Attorney General action not to be different. So the courts were struggling over how do you put these two together and ultimately led to the amendment in 1996, which was designed to bring the two courts together, though, it did not initially do that.

Corrie 8:52  
And and Ken, if we could talk just a little bit about First of all, the legislative change in 1996 goes from fraudulent conduct to fraudulent or deceptive conduct. Now, it's my understanding that was not particularly well received, initially, and some courts even just seemingly ignored it. Is that correct?

Ken 9:10  
Yeah. You then you had the history of the the well, the Commonwealth Court embraced it immediately in the in the Commonwealth v, Perkadottie, saying very clearly, that the deceptive conduct, you can't ignore that language, it has to be applied and mean something other than fraudulent and then goes through some of the history and deceptive is something lesser than fraudulent. Well, the Superior Court continued to fight that. And they there was a resistance there for some reason, and it took a number of years before eventually, I think it was the Bennett v. Masterpiece Homes case, where the Superior Court finally said, Hey, no, this is wrong. We've been interpreting it wrong for all these years we've been we've been applying the pre amendment language to the post amendment cases and that was wrong of us to do so. And that's when they started catching up and started joining but that still did not resolve the issues.

Corrie  10:02  
You mentioned that, you know, this this kind of dichotomy exists for a pretty long period of time with no apparent reason. Do you think? Well, let me just ask, do you have any understanding of why the Superior Court might have been so resistant to that change? Do you think it's something institutional or just, you know, sometimes when attorneys, and then judges see words like fraudulent, they feel a little more comfortable going back to the common law than then conducting statutory interpretation?

Ken 10:31  
I have found, generally speaking, the judges are uncomfortable with the consumer protection law. I mean, the older generation of judges, which is shifting and moving now, I mean, they were brought up and taught common law in law school. And, and then they see it's an anti fraud statute was passed where they figure Well, I know common law, that's my comfort zone, I'm going to stay within my comfort zone and continue to apply the same understanding I have of the law to this new statute. Yeah. And as the statute evolved, they didn't change their interpretation.

Corrie  11:08  
And do you think to some degree that the the fact that I believe the private right of action has treble damages of up to I think it's three times the amount of actual damages plus costs plus fees? Do you think there's something of a floodgates argument, or at least motivating factor on the bench to kind of prevent too much consumer litigation? And obviously, that's a subjective term too much, but too much in the particular judge's point of view.

Ken  11:35  
I've heard noises to that effect. I have no evidence of it seen no proof of it. There's been no study that confirms anything even remotely close to that. I think it's a you know, one of these presumptions that sounds like it could be a thing. But when really gets looked at it's no, it's not there. And more importantly, the statute was designed to curb unscrupulous business practices in our Commonwealth. And it's something that, you know, the legislature felt very strongly about this, why they adopted the statute. And then they allow for the private right of action, because people were being taken advantage of and the judges slowly but surely are coming around to understanding that it is a broader statute. It is designed to protect consumers, and they need to take an active role in protecting consumers.

Corrie  12:25  
So we're still in the early 2000s. And we've still got the intermediate appellate court split here in Pennsylvania over you know, what's what's really happening with this language deceptive conduct, Does that ever get resolved by the Superior Court? Before Gregg?

Ken  12:44  
Well, the closest was the discussion in the Bennett case, but it doesn't really close the door. Because Bennett had some other issues in it that created it didn't clarify the point sufficiently enough to get us all the way home. So quite frankly, it wasn't until Gregg came back said, Look, this is a very specific intent statute. I mean, excuse me, you do not have to prove intent. It's a strict liability statute that clarified the point and made it you know, crystal clear that either if you violated it, you know that the court has to take action if they It doesn't matter whether the vendor intended or not, there's no language about intent in the statute. That was something that was being infused or added by the courts and improperly so. In the first case, it really clarified that point is this Gregg case  against Ameriprise.

Corrie 13:36  
Yep. So let's talk about that case, in particular, it starts in 2001. Can you tell us a little bit just factually about Ameriprise's conduct here, and how that fits into the rubric of fraudulent or deceptive?

Ken  13:51  
Sure. How this case came into my office. Ameriprise had a class action against itself on a national basis for deceptively selling life insurance policies were the allegations. And the main allegation is with Universal Life Insurance, they were selling it as if it was a whole life insurance and what the difference is universal life insurance, the cost of insurance charge goes up every year in the person's life. The older you get, the more expensive it becomes. But in a whole life policy, that's all factored together. So you pay a level premium, it's the same and so long as you pay your premium, you always have a death benefit. Well with a universal life policy, if the agent under sells the cost of the policy, you can purchase it paying a level premium just like whole life, except you'll end up running out of money when the cost of insurance starts going through the roof about the retirement age. So in other words, you have to pay a lot more money into the policy than the agent was representing. And so people were buying these policies paying premiums on for 20, 30 years and finding out they had no insurance coverage. So that's the general gist of the conduct. But that this concept didn't start with Ameriprise actually started the first case I filed was in 1991 against Metropolitan Life, called Lasune versus Metropolitan Life and there were the same business practice every major life insurer was doing in the country. Allegheny County we had over 600 lawsuits filed against various life insurance companies starting in the mid 90s. Through the early 2000s, and Ameriprise was sort of the end of that wave of cases. And I should say that this is a part of a, an approach to consumer protection cases that multiple issues were resolved over the course of the various life insurance cases. Gregg is sort of the culmination of a number of issues, I had to argue in a case called Toy versus Metropolitan Life was what type of reliance was required, and that went to the Pennsylvania Supreme Court. And that was decided in 2007. But that case was filed in 1994. There the court said justifiable reliance is required. Actually, I should go back one step Pekular versus Eich and State Farm in 1986. Consumer Protection Law was applied to the sale of insurance. So which I mentioned earlier, but that's when this all started. So now I have the Toy case. Then there was Agliori versus Metropolitan Life, which defined what is meant by an ascertainable loss under the statute. Then the Lasune case I just mentioned versus Metropolitan Life, talked about the measure of damages. Was it just your out of pocket loss, or can you get reasonable expectation damages, and the court says either one, whichever is greater. Then there's a case of the Dearmitt versus New York Life. These are all cases I argued. There, the defense wanted an offset applied to the treble damages, and when they do the offset was that was one of the issues in Dearmitt is after the trebling, then the offset occurs whether treble damages should be awarded is a case I did not argue but I cite to often is Metz v. Quaker Highlands. And that that talks about the standard of when and why a court should treble damages. The burden of proof I had argue in Bain versus Ameriprise. It's a preponderance of the evidence, the defense was arguing for clear and convincing evidence under the fraud standard. And I said no it's a statute, it's preponderance of the evidence, then what are the expectations of the consumer when you're starting to look at the damages issue, and the reasonable expectations doctrine was applied to consumer protection sales also, and that of all crazy things was in the case of Knouse versus General American, which I argued in the Eighth Circuit Court of Appeals. And that got there because I filed cases against General American in Pittsburgh, in Allegheny County, they get removed the federal court, and then they got transferred to the class action down in St. Louis. So here I am. I'm arguing 22 cases at one time, before a panel of the Eighth Circuit, so I had a judge from Missouri, one from South Dakota and from North Dakota, and we're arguing Pennsylvania law.

Ken  17:47  
Talk about an out of body experience. But the Court did beautifully. I was the first argument of the day and they allowed me to argue for over 40 minutes and typically you only get 15. Wow. And it was unanimous decision said no reasonable expectations apply. These people were taken advantage of they didn't have to read the policy sent back all the claims back to a state court in Allegheny County. But that was a two year side adventure in those cases. The next issue is a jury or non jury for consumer protection. I argued that in Fazio versus Garden Light, Guardian Life, and is found to be non jury. And then most recently in Richards versus Ameriprise, Do you get your fees for doing appellate work also? And the court agreed with me saying that wait, under consumer protection, statutory fee shifting does not apply only to the trial. It also applies to any appellate work you have to do on the consumer protection issues. In that particular case, Plaintiff won, Ameriprise appealed came back down, we asked for our fees for the appeal. Ameriprise objected to that it got appealed a second time. And now we're back down on that after the second time and we're putting in our fee petition is going in now for the waiting on a decision for the second appeal. So yeah, so all of those issues, and there's still more coming down the pike. But yeah, so getting back to so that all leads towards the Gregg decision. It's on the back, or the shoulders of all those other cases leads up to Gregg. And finally we got to the issue of intent. And does the vendor have to show intent to mislead or deceive? And the court agreed with me and said no.

Corrie  19:25  
Yep. So before the court, what were the principal arguments of the parties, as you see them, and how did the court resolve them?

Ken 19:33  
Well, for the intent issue. I actually never had a case prior to Gregg where proof of intent was even a question. Typically that something's very simply established. However, in this particular case, the jury said there was no fraudulent misrepresentation. And the jury said there was no negligent misrepresentation. But the court found that there was deceptive conduct. So that brought the issue right to the forefront. Well, wait a second, don't you also have to prove intent just like they for the common law claims it should have to be proved for the consumer protection claim.

Corrie  20:09  
So usually it just sort of gets gets put in the wash. But here you have a split factfinder. And so the issue is just sort of perfectly teed up at that point.

Ken  20:17  
Exactly, exactly. And what was very helpful was the Commonwealth Court had looked at the issue in the TAP Pharmaceuticals case, there is the same thing they had a fraudulent misrepresentation claim, and consumer, excuse me, in a negligent misrepresentation claim, the jury went for defense on both of them. And then what was left was deceptive conduct. And the Commonwealth Court said deceptive conduct claim is permitted to go forward. And the Supreme Court affirmed that, but when it came up, and Gregg, the same issue, the defense was arguing, well, TAP Pharmaceutical only applies to the public right of action of Attorney General and not under the private right of action to a private citizen. So that was another hurdle we had to overcome,

Corrie  20:57  
Which doesn't really make a whole lot of sense, when you think about it, given the the same sort of statutory language that's that's being used in, in both sections, right?

Ken  21:05  
Well, yeah, exactly. That's what the Gregg case it does, it merges the two halves of the statute into one hole, which is how the legislature always intended it. The only remaining significant distinction is the proof of reliance. And under the Attorney General, they don't have to prove a consumer relied upon deceptive advertising, they can just say it's deceptive advertising and stop it. Whereas in a private right of action, the consumer must state that they relied upon that deceptive ad, upon buying the product. I'm just using the sizing, as example. And why I do that, because there's been a number of class actions that were attempted, and they all were shut down, because they could not prove class wide reliance, whereas an attorney general class, it's not an issue.

Corrie  21:51  
Yeah. And so I kind of want to push on that a little bit. Because in Gregg, there's some conversation about the requirement of justifiable reliance deriving from the causation element in the statute. And there's also language in which the court refers to it being upon you know, a burden upon the vendor to eradicate business practices. This isn't that are deceptive in nature. It's not the burden of the consumer. I guess my question is, do you see that as potentially winnowing away at least certain aspects of the justifiable reliance requirement,

Ken  22:28  
it appears to create a crack in that wall, I argued parallel to this issue in Toy versus Metropolitan Life, the statute clearly is a causal connection. In other jurisdictions, the word language as a result of his means causal connection doesn't mean justifiable reliance. And I argued that to the Supreme Court and indeed there was a I want to say a 1968 decision of the Supreme Court interpreting the words as a result of to mean a causal connection in a different statute. Supreme Court did not go with me on that point. So I argued in the alternative, that there are different levels of reliance, and that the lowest level of reliance is something called statutory reliance, which is another way of getting to a causal connection that you do not have to show justifiable reliance. And the court, again, did not go with me on that in the Toy case. However, it's an issue that is contrary to most consumer protection laws across the country. Typically, where you see a requirement of justifiable reliance with with the statutory claim is where there are punitive damages could be awarded under the statute, where there only remedial damages like Pennsylvania, as treble damages are remedial, in all of those statutes across the country. There is no justifiable reliance requirements. So I'm hoping that as the evolution keeps progressing forward within understanding these types of claims under the statute, that we can get to that point that justifiable reliance could eventually be removed. Because again, it's not in the language of the statute. It's not there.

Corrie 24:01  
Yeah. Well, thank you so much, Ken, for taking the time. It's it's definitely apparent that Gregg has been something of a capstone so far in a career that's spent, you know, really beefing up consumer protection across Pennsylvania. And as a consumer, thank you for doing that over the last couple of decades. 

Ken  24:22  
You're welcome. It wasn't by design, it was out of necessity, when you have a large number of cases ongoing, and any one of them, I could lose all of them if I lost the one of those consumer protection issues. So you had to fight them. And a lot of them, we would win the trial and the insurance company was appealing them, so. A lot of these issues got developed because of insurance companies filing appeals, which are but there were some instances where we were thrown out of court on summary judgment, and we had to bring up an issue and got it presented that way. But yeah, I had no idea when I started down this path that it would be so many issues involved. And how many unanswered answered questions are were with the statute. So it's been a journey. I appreciate that. Thank you.

Corrie  25:06  
Absolutely. So the ACBA is hosting a webinar on the Gregg decision where Ken will be part of a panel of attorneys and a judge discussing the impact of Gregg on how to prove a unfair trade practices consumer protection law claim. That'll occur on Tuesday, April 27, from 2pm to 4pm. Ken, where can folks find more information about that?

Ken  25:29  
Just go to the Allegheny County Bar Association website, and they have a little spot to click on for CLE. And you can pull it up though they have a list of the upcoming events that they're having. And look for April 27. And you'll see the webinar there.

Corrie  25:47  
Excellent. Thanks again, Ken, for taking the time and joining us here today.

Ken  25:51  
You're welcome. It's my pleasure to be here.

Corrie  25:54  
That's all for this first episode of the standard of review. If you like what you've heard, and you want to hear more, please subscribe for new episodes in your pod catcher of choice. If you'd like to reach out whether to suggest a topic or a guest for a new episode. You can find me on the web at Woods Law Offices dot com or find Woods Law Offices on Facebook, Twitter, or LinkedIn. Thanks so much for listening. And we'll see you next time on The Standard of Review.

Outro  26:21  
Thanks for listening to The Standard of Review by SCOPAblog. This episode has been brought to you by Woods Law Offices, Raising the Bar for Pennsylvania Appeals. Check them out at www dot Woods  Law Offices dot com.