Forcing adversaries to prove intent is where adept attorneys can easily earn their keep. Mounting the offensive is never an easy feat, especially when allegations of fraud require such a stringent inquiry into the mental processes of an oftentimes shrewd defendant.
The stakes can be especially high, too, with punitive damages or treble damages claims lying out there, as the case may be. And the icing on the crumbling cake of exposure are those occasional instances where the individual owners of an entity behave in a manner that gives rise to the potential for personal liability, losing the protection of the corporate veil.
Just last month, our Pennsylvania Superior Court handed down a critical decision in Bennett v. A.T. Masterpiece Homes at Broadsprings , Pa. Super. Ct., 1302 MDA (2011), a case that forms yet another chapter in the storied history of the well-intended Unfair Trade Practices and Consumer Protection Law. Perhaps at least a limited discussion of the origin of the act is in order.
Originally conceived as a statute affording private remedies to consumers of “goods or services,” the act allowed for treble damages to be imposed on those who ran afoul of the statute. The Superior Court, in Gabriel v. O’Hara , 534 A.2d 488 (1987), expanded the act’s scope by ruling that sales of residential real estate are also within its purview, a great day for righteous plaintiffs lawyers indeed. Resultantly, unfair trade claims are now included routinely in fraud litigation versus real estate agents, sellers, inspectors and developers.
Up until the mid-90s, 1996 to be precise, the act addressed only “fraudulent conduct.” And naturally this required a plaintiff to prove all the elements of common law fraud: proof that a material misrepresentation was made intentionally, or with reckless disregard of its truth inducing justifiable reliance and injury based on such reliance. Now however, the act we have is the result of a concerted effort to expand the definition of conduct deemed to be “unfair or deceptive acts or practices.” This 1996 amendment broadened the definition of deceptive conduct within the “catchall” definition.
Despite the 1996 legislative amendment that added the phrase “deceptive conduct,” the Superior Court, by its own admission, required an aggrieved party to establish the elements of common law fraud under the act for liability to attach. In arguing for a reversal of the jury’s decision in Masterpiece , Grant Colledge, the appellant, heavily relied on Skurnowicz v. Lucci , 798 A.2d 788 (Pa. Super 2002), which held that there must be a showing of common law fraud. Hence, it was argued that not only should the UTPCPL claim never have been submitted to a jury but also, in the alternative, the charge employing the phrase “misleading conduct” constituted misleading and reversible error.
A great deal of the Masterpiece court’s analysis was consumed by the court’s defense of its holding that the trial judge’s instruction to the jury on “misleading conduct” under the act’s “catchall” provision was not an error warranting reversal. But to get there, the court had to explain away its line of cases that did in fact require the proof of fraud — cases handed down as late as 2010.
The Masterpiece court cited to a litany of decisions in which either the Commonwealth Court or U.S. district courts permitted liability based on the less stringent deceptive conduct standard. Holding otherwise, the Superior Court said, would have led to a result that “ignore[d] the textual changes of the 1996 amendment as well as the rules of statutory construction.”
“Where words of a later statute differ from those of a previous one on the same subject they presumably are intended to have a different construction,” and “every word, sentence and provision of a statute must be given effect,” the court said in Masterpiece . The legislature “does not intend a result that is absurd, unreasonable or impossible of execution.”
The Masterpiece case involved two sets of plaintiffs, the Bennetts and Hoefferles, couples who commenced an action against the same builder of their new homes. Numerous building deficiencies were allegedly endemic in both properties, the opinion said. The Hoefferles alleged their home contained non-grade lumber, floors that sagged and bounced, and insulation, height clearances, ventilation and electrical systems in violation of code. Not only was a gas smell allegedly emanating from a basement, but the Masterpiece court accepted the testimony of an engineering expert who opined that if corrective action had not been taken by the Hoefferles, there would have been structural failure in the sloping roof surface area. That expert also testified for the Bennetts concerning foundational concerns and other comparable issues.
According to the opinion, a bifurcated jury eventually concluded liability was founded under contract, warranty and UTPCPL theories. The statutory multiplier was utilized as well, awarding the Bennetts about $173,000 and the Hoefferles about $55,000, inclusive of attorney fees. Critically also, as to piercing, it was determined that the assurances of the appellant, Colledge, rose to the level of a personal guarantee. The court cited to statements such as, “‘I will take care of it,’” and, “‘I guarantee it,’” which in the court’s estimation constituted specific assumptions of personal liability.
Prior to the Masterpiece decision, the Superior Court had repeatedly ruled that a plaintiff suing under the act’s catchall provision must still prove all elements of common law fraud. However, the Masterpiece case now brings the Superior Court’s reading of the catchall phrase in line with the Commonwealth Court, the bankruptcy court and most rulings from the U.S. district courts. Cohesion and clarity will assuredly make pursuing arguably deceptive consumer practices far easier. Sellers and service providers would be wise to take heed. •
Harper J. Dimmerman is an adjunct profes-sor at Temple University’s Fox School of Business and published novelist. His firm represents clients in general litigation, various land use, residential, com-mercial real estate and criminal law matters. They also provide approved attorney title insurance services and real estate consulting statewide. He can be reached via email at firstname.lastname@example.org or telephone at 215-545-0600.
James M. Lammendola is an instructor at Temple University’s Fox School of Business who was in private practice for 20 years. He may be reached via email at email@example.com or telephone 215-204-4124.