Com. ex rel. Corbett v. Peoples Benefit

• Decision Date: 14 May 2007
• Docket Number: No. 557 M.D. 2005.,557 M.D. 2005.
• Citation: 923 A.2d 1230
• Parties: COMMONWEALTH of Pennsylvania, Acting by Attorney General Thomas W. CORBETT, Jr., Plaintiff v. PEOPLES BENEFIT SERVICES, INC., Defendant.
• Court: Pennsylvania Commonwealth Court

923 A.2d 1230

COMMONWEALTH of Pennsylvania, Acting by Attorney General Thomas W. CORBETT, Jr., Plaintiff v. PEOPLES BENEFIT SERVICES, INC., Defendant.

No. 557 M.D. 2005.

Commonwealth Court of Pennsylvania.

Argued April 10, 2007.

Decided May 14, 2007.

David Sumner, Sr. Deputy Attorney General and Linda J. Williams, Chief Deputy Attorney General, Harrisburg, for plaintiff.

Don M. Tellock, New York, NY, for defendant.

BEFORE: SMITH-RIBNER, Judge, FRIEDMAN, Judge, SIMPSON, Judge.

OPINION BY Judge FRIEDMAN.

Before this court are the cross motions for summary judgment filed by Peoples Benefit Services, Inc., (PBS) and the Commonwealth of Pennsylvania, Acting by Attorney General Thomas W. Corbett, Jr., (Commonwealth). The motions arise from an action filed against PBS by the Commonwealth, pursuant to section 4 of Pennsylvania's Unfair Trade Practices and Consumer Protection Law (UTPCPL),¹ alleging unfair and deceptive trade practices targeting Pennsylvania senior citizens and violations of other statutory provisions governing marketing, telemarketing and direct mail. We deny the motions.

PBS has sold discount prescription drug, medical and dental cards and/or memberships and related services to senior citizens since 1994, marketing its products and services through direct mail, telephone solicitations and television advertisements. After the federal government established its own Medicare-endorsed prescription drug discount cards and prescription drug coverage programs, PBS began marketing a new prescription drug discount card and began mailing new solicitations and otherwise advertising its goods and services.

On November 2, 2005, following its investigation of PBS's business practices, the Commonwealth filed an eight-count Complaint in Equity (Complaint) against PBS for alleged violations of the UTPCPL, Telemarketer Registration Act (Telemarketing Act),² Fictitious Names Act³ and related federal laws and regulations. On the same date, the Commonwealth filed a petition for preliminary injunction and special relief, seeking to enjoin PBS's advertisements and solicitations.

In its Complaint, the Commonwealth alleges generally that PBS has engaged in unfair methods of competition and unfair or deceptive acts or practices by marketing in ways that could confuse or mislead consumers into believing that PBS and/or its goods and services are government related, in violation of sections 2 and 3 of the UTPCPL.⁴ On November 22, 2005, PBS filed preliminary objections to the Commonwealth's Complaint, requesting that each count of the Complaint be dismissed with prejudice.⁵

In January 2006, this court conducted a three-day hearing on the Commonwealth's preliminary injunction request, at which both parties presented evidence. In addition, prior to the preliminary injunction hearing, PBS took the deposition of the Commonwealth's Rule 4007.1(e) designee, Kimberly J, Wuchina.⁶ Following the hearing, by order dated January 26, 2006, Senior Judge Keith B. Quigley denied the Commonwealth's petition for preliminary injunction without prejudice.

Subsequently, in Commonwealth ex rel. Corbett v. Peoples Benefit Services, Inc., 895 A.2d 683 (Pa.Cmwlth.2006), this court dismissed the preliminary objections filed by PBS and directed PBS to file an answer to the Commonwealth's Complaint. On April 27, 2006, PBS filed an answer and new matter, and the Commonwealth filed its response to the new matter on May 15, 2006. Thereafter, both PBS and the Commonwealth filed motions to compel discovery. These motions each were denied, the parties were ordered to submit pre-trial statements and a trial date was set for March 2007.

On December 5, 2006, the Commonwealth filed an amended motion for partial summary judgment (Commonwealth's Motion).⁷ On December 15, 2006, PBS cross-filed for summary judgment (PBS's Motion), responding to the Commonwealth's Motion and setting forth grounds for entry of summary judgment in its favor. Following the submission of briefs, the motions were argued before this court, and the matter is now ripe for disposition.⁸

I. Pa. R.C.P. No. 1035.3

As a preliminary procedural matter, the Commonwealth contends that this court should enter summary judgment against PBS pursuant to Pa. R.C.P. No. 1035.3.⁹ The Commonwealth asserts that PBS failed to file a timely response to the Commonwealth's motion for summary judgment and that this court may, and should, enter judgment against PBS on that basis, particularly given that PBS has over a dozen lawyers, already has been instructed as to the importance of deadlines, has sought no extension and has offered no explanation for its failure to respond to the averments in the Commonwealth's Motion.

PBS counters that Pa. R.C.P. No. 1035.3 specifies no required form of response so long as the adverse party identifies (1) facts in dispute or (2) facts essential to the cause of action that were not produced. PBS asserts that it did so in its own motion for summary judgment, filed just ten days after the Commonwealth's Motion, which constituted a sufficient response under Pa. R.C.P. No. 1035.3.

Rule 1035.3 permits entry of judgment for failure to respond to a motion for summary judgment but does not require it. Under the circumstances here, where PBS has submitted a filing that addresses the Commonwealth's Motion and the Commonwealth has shown no prejudice because of the form of PBS's response, we decline to enter summary judgment against PBS on this basis.

II. Pa. R.C.P. No. 4007.1(e)

PBS first argues that the sworn testimony of Wuchina, the Commonwealth's Rule 4007.1(e) designee, establishes that there are no disputed issues of material fact regarding the allegations in the Commonwealth's Complaint and, in fact, demonstrates that PBS is entitled to judgment as a matter of law. Specifically, Wuchina was asked whether she knew of any consumers who purchased any of PBS's products under the mistaken belief that the product was affiliated with, or endorsed by, any government agency or program, and Wuchina answered "no" in each case. (Wuchina dep. at 46-58.) Wuchina also testified that she was unaware of any conduct by PBS that would violate the Telemarketing Act or its Do Not Call provisions. (Wuchina dep. at 59-60.) PBS maintains that, under Rule 4007.1(e), an organization must prepare its designee to give binding testimony on its behalf. Mellon Bank, N.A., v. Bank of Mid-Jersey, 1992 WL 80800 (E.D.Pa. 1992); Ierardi v. Lorillard, Inc., 1991 WL 158911 (E.D.Pa.1991) (stating, with respect to the federal equivalent of Rule 4007.1(e), that a named organization or government agency has an obligation to prepare its designee to be able to give binding answers on behalf of that party); Graham v. I.M.O. Industries, Inc., 16 Pa. D. & C. 4th 492 (1992) (stating that testimony of a designated subordinate employee may be binding on a corporation under Rule 4007.1(e)). Thus, according to PBS, this court should accord Wuchina's testimony binding effect and preclude the Commonwealth from submitting and relying on contradictory evidence in its summary judgment filings. We disagree.

As the Commonwealth correctly notes, PBS raised this identical Rule 4007.1(e) argument in its January 6, 2006, Motion for Sanctions and for Preclusion of Evidence Against the Commonwealth.¹⁰ Having denied that motion by order dated January 26, 2006, we will not grant summary judgment to PBS on this basis.

III. Merits

(a) UTPCPL Violations

The first three counts of the Commonwealth's Complaint allege generally that PBS's advertisements and solicitations are deceptive and misleading in violation of various UTPCPL provisions.¹¹ An act or a practice is deceptive or unfair if it has the "capacity or tendency to deceive." Commonwealth ex rel. Zimmerman v. Nickel, 26 Pa. D. & C.3d 115, 120 (1983). Neither the intention to deceive nor actual deception must be proved; rather, it need only be shown that the acts and practices are capable of being interpreted in a misleading way. Id. The test for the court is to determine the overall impression arising from the totality of what is said, as well as what is reasonably implied, in the advertisement or solicitation. Commonwealth v. Hush-Tone Industries, Inc., 4 Pa.Cmwlth. 1 (1971); Nickel. In consumer protection cases brought in the public interest by the Attorney General, where establishing a violation hinges upon the content of the solicitations themselves, summary judgment may be granted without the need for extrinsic evidence and even in the presence of extrinsic evidence offered by the defense. State by and Through McGraw v. Imperial Marketing, 203 W.Va. 203, 506 S.E.2d 799 (1998); Double Eagle Lubricants, Inc. v. Federal Trade Commission, 360 F.2d 268, (10th Cir.1965). Moreover, we are cognizant of our supreme court's directive that the UTPCPL is to be construed liberally to effectuate its objective of protecting consumers of this Commonwealth from fraud and unfair or deceptive business practices. Commonwealth by Creamer v. Monumental Properties, Inc., 459 Pa. 450, 329 A.2d 812 (1974).

Here, the Commonwealth contends that PBS has violated the UTPCPL as a matter of law because the tendency to confuse or mislead is readily apparent from the "four corners" of PBS's mailed referenced solicitations.¹² The Commonwealth asserts that the layout of these solicitations, along with the typeface, names, terminology, symbols and logos used in them, convey the false impression that PBS, or its goods and services, are somehow approved by or affiliated with, a government agency or program. For example, the solicitations contain statements about the recipient's "eligibility" for certain benefits, and they ask recipients to call and verify information "according to our records." In addition, the solicitations contain personal information, such as names and birthdates, which consumers expect to be held by a government agency. The Commonwealth also claims that the timing is relevant, where, in...