Pa. Supreme Court fixes ridiculously overbroad holding of puffery

Commonwealth v. Golden Gate National Senior Care LLC, —
A.3d —-, 2018 WL 4570102, No. 16 MAP 2017 (Pa. Sept. 25, 2018)
The Pennsylvania Supreme Court reinstated a bunch of claims
against a bunch of nursing homes under the state Unfair Trade Protection and
Consumer Protection Law, though not unjust enrichment claims. In essence, the
nursing homes allegedly made materially misleading statements about the nature
and quality of the care provided to their nursing home residents. They
allegedly knowingly failed to provide the level of care they advertised, as
they purposefully understaffed the facilities so as to maximize their profits. Chain-wide
misrepresentations included brochures, videos, websites, and video
advertisements, with claims such as:
“Snacks and beverages of various
types and consistencies are available at any time from your nurse or nursing
assistant.”
“We have licensed nurses and
nursing assistants available to provide nursing care and help with activities
of daily living …. Whatever your needs are, we have the clinical staff to
meet those needs.”
“Clean linens are provided for you
on a regular basis, so you do not need to bring your own.”
“A restorative plan of care is
developed to reflect the resident’s goals and is designed to improve wellness
and function. The goal is to maintain optimal physical, mental and
psychological functioning.”
“A container of fresh ice water is
put right next to your bed every day, and your nursing assistant will be glad
to refill or refresh it for you.’ ”
“We work with an interdisciplinary
team to assess issues and nursing care that can enhance the resident’s
psychological adaptation to a decrease of function, increase levels of
performance in daily living activities, and prevent complications associated
with inactivity.”
In truth, residents allegedly routinely have to wait hours
for food, assistance with toileting, changing of soiled bed linens, and other
elements of basic care, and sometimes must forego them entirely.
On the individual facility level, the AG alleged misrepresentations
in the resident assessment and care plans created for each resident: services
promised in the care plans were not provided because of intentional
understaffing. Also, the facilities allegedly generated billing statements
which indicated that certain care was provided when it was not, which were then
paid by public funds when residents received Medicaid or Medicare. The facilities
allegedly further deceived the Pennsylvania Department of Health by temporarily
increasing the number of staff on hand during inspections and by willfully
creating inaccurate and/or falsified resident care records for review.
The Commonwealth Court found the marketing and advertising
materials to be mere puffery: too broad or vague, or merely expressing an
intent. Then the court held that resident assessments, care plans and bills
weren’t covered by the UTPCPL because they weren’t advertising but rather
isolated statements to potential customers, or in the case of resident care
plans were created after a customer was admitted to a facility. The court also
found that the allegations about care deviating from promises were too
conclusory and unspecific. The AG didn’t identify any  “particular care plan … from which the
Facility deviated, or … identify[ ] any specific bill for services that were
not provided.”  Further, the AG didn’t allege
“how a consumer could be misled by a billing statement to believe that he
received services or assistance that he had not in fact received, or how an
un-itemized per diem charge could convey to a consumer that a particular
service had been provided in the first place.”
Here, the state supreme court identified two types of
puffery: (1) “hyperbolic boasting or bluster that no reasonable consumers would
believe to be true” and (2) “claims of superiority over a competitor’s product,”
though the examples are “statements that a laboratory imaging device provided ‘unprecedented
clarity,’ or the advertisement of a product as ‘the complete sports drink,’” so
I’m pretty sure “claims of superiority” is implicitly modified by “vague or
general,” especially since the court continues by saying that a key
characteristic of puffery is that “consumers understand that the statements are
not to be takenliterally. … It is these characteristics – the patently
hyperbolic or excessively vague character that dissuades any reasonable
consumer from placing reliance thereon as fact – that render puffery
non-actionable under the UTPCPL.”
Puffery is usually a question of fact. It was so here:
We hesitate to conclude that
consumers seeking a nursing home would necessarily find statements promising to
provide food, water, and clean linens to be hyperbolic in any respect, or to be
vague statements of optimism or intent. To the contrary, for residents of
nursing homes, many of whom are physically compromised and require assistance
with day-to-day living activities, regular access to these items is essential,
and there is no reason to think that a consumer would not take these statements
seriously.
Plus, the lower court didn’t consider the overall
context.  For example, it held that, “We
believe that respecting your individuality and dignity is of utmost
importance[,]” qualified as puffery “based on the preface alone” – that is,
based on the use of the phrase “we believe,” which was impermissible slicing
and dicing (something that’s also basic First Amendment defamation doctrine). Nor
was “[a] container of fresh ice water is put right next to your bed every day,
and your nursing assistant will be glad to refill or refresh it for you” mere
optimism or vague, given the obvious message that “a resident will have ready
access to water every day,” something that would be highly relevant to an
immobile resident.
The lower court also erred in holding that statements in
patient assessments, care plans and billing statements weren’t actionable
because they weren’t ads, applying the definition of advertising elaborated by
judges under the Lanham Act. Though some provisions of the UTPCPL specifically
mention advertising, the court pointed to two relevant UTPCPL provisions
covering conduct other than advertising. Subsection (v) prohibits conduct
“[r]epresenting that goods or services have sponsorship, approval, characteristics,
ingredients, uses, benefits or quantities that they do not have or that a
person has a sponsorship, approval, status, affiliation or connection that he
does not have,” and subsection (xxi) prohibits “[e]ngaging in any other
fraudulent or deceptive conduct which creates a likelihood of confusion or of
misunderstanding.”  The court declined to
rewrite the statute to impose the “advertising” limitation on all the provisions.
It further pointed out that other subsections prohibit “failing to comply with
the terms” of a written guarantee or warranty and “making solicitations for
sales of goods or services” without first providing certain information, making
clear that the statute overall wasn’t intended to be limited to “advertising”
under the Lanham Act.
Likewise, the lower court erred in finding the complaint
insufficiently detailed. The AG pled factual allegations based on interviews
with former employees and residents’ family members, as well as on information
from the Centers for Medicare and Medicaid services; the complaint included
representative examples of the alleged failures.  “Pennsylvania is a fact-pleading
jurisdiction; as such, a complaint must provide notice of the nature of the
plaintiff’s claims and also summarize the facts upon which the claims are
based.” But there’s no requirement to plead the evidence upon which the pleader
will rely to later prove the claims. The defendants were informed of the claims
against them, even without identifying particular patients, care plans,
assessments, or bills.
In addition, the lower court erred in holding that the state
couldn’t seek return of monies spent because it wasn’t a “person” under the
statute. The relevant statutory phrase is “person in
interest,” that is, “those whose interests were
affected by the enjoined conduct, i.e., those who lost money or property
because of the enjoinable conduct that was found to violate the UTPCPL.” This included the state when it was the one that lost money, especially given the rule of construction that this consumer protection statute
is to be interpreted liberally.  

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