Wednesday, September 26, 2018

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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