Commonwealth v. Golden Gate Nat'l Senior Care LLC

Decision Date22 March 2017
Docket NumberNo. 336 M.D. 2015,336 M.D. 2015
Citation158 A.3d 203
Parties COMMONWEALTH of Pennsylvania Acting by Attorney General, Kathleen Kane, Plaintiff v. GOLDEN GATE NATIONAL SENIOR CARE LLC; GGNSC Holdings LLC; GGNSC Administrative Services LLC; GGNSC Clinical Services LLC; GGNSC Equity Holdings LLC; GGNSC Harrisburg LP ; GGNSC Harrisburg GP, LLC; GGNSC Camp Hill III LP ; GGNSC Camp Hill III GP, LLC; GGNSC Clarion LP ; GGNSC Clarion GP, LLC; GGNSC Gettysburg LP ; GGNSC Gettysburg GP, LLC; GGNSC Altoona Hillview LP ; GGNSC Altoona Hillview GP, LLC; GGNSC Lansdale LP; GGNSC Lansdale GP, LLC; GGNSC Monroeville LP ; GGNSC Monroeville GP, LLC; GGNSC Mt. Lebanon LP; GGNSC Mt. Lebanon GP, LLC; GGNSC Phoenixville II LP ; GGNSC Phoenixville II GP, LLC; GGNSC Philadelphia LP ; GGNSC Philadelphia GP, LLC; GGNSC Wilkes–Barre II LP ; GGNSC Wilkes–Barre II GP, LLC; GGNSC Tunkhannock LP ; GGNSC Tunkhannock GP, LLC; GGNSC Erie Western Reserve LP ; GGNSC Erie Western Reserve GP, LLC; GGNSC Pottsville LP ; GGNSC Pottsville GP, LLC, Defendants
CourtPennsylvania Commonwealth Court

Victoria S. Nugent, Washington, DC, for plaintiff.

Thomas H. Lee, II, Philadelphia, and Elizabeth M. Locke, Alexandria, VA, for defendants.

BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge, HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE P. KEVIN BROBSON, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE ANNE E. COVEY, Judge, HONORABLE MICHAEL H. WOJCIK, Judge

OPINION BY JUDGE COVEY

Before this Court are Golden Gate National Senior Care, LLC, et al.' s (Golden Gate) preliminary objections to the Commonwealth of Pennsylvania's (Commonwealth) Amended Complaint and Petition for Injunctive Relief addressed to this Court's original jurisdiction.1

Golden Gate consists of a group of companies that manage and operate 36 skilled nursing facilities (Facilities) in Pennsylvania. GGNSC Holdings LLC, Golden Gate National Senior Care LLC, GGNSC Clinical Services LLC, and GGNSC Administrative Services LLC are described in the pleadings as parent entities (Parent Entities).2 On July 1, 2015, the Commonwealth, by the Office of Attorney General (OAG), filed a Complaint and Petition for Injunctive Relief (Original Complaint) addressed to this Court's original jurisdiction against 14 of Golden Gate's Pennsylvania Facilities. On August 6, 2015, Golden Gate filed preliminary objections to the Original Complaint setting forth ten objections.

On September 8, 2015, the Commonwealth filed an Amended Complaint and Petition for Injunctive Relief (Amended Complaint), naming an additional 11 of Golden Gate's Pennsylvania Facilities as defendants.3 Therein, the Commonwealth asserted the following three claims against Golden Gate: (1) Unfair Trade Practices and Consumer Protection Law (UTPCPL)4 violations (seeking injunctive relief, restoration and civil penalties); (2) breach of contract (seeking damages); and (3) unjust enrichment (seeking disgorgement).

The Commonwealth alleged that Golden Gate engaged in unfair and deceptive acts and practices towards Pennsylvania consumers and the Commonwealth by: (1) making chain-wide misrepresentations in marketing materials; (2) making Facility-level misrepresentations in its marketing materials, resident assessments/care plans and billing statements, presenting misleading appearances during Commonwealth inspections, and creating false records; (3) making misleading statements about the level of care that would be provided to residents; and (4) failing to provide basic care. On October 8, 2015, Golden Gate filed preliminary objections to the Amended Complaint, setting forth twelve objections (Preliminary Objections).

This Court's review of preliminary objections is limited to the pleadings. Pa. State Lodge, Fraternal Order of Police v. Dep't of Conservation & Natural Res. , 909 A.2d 413 (Pa. Cmwlth. 2006), aff'd , 592 Pa. 304, 924 A.2d 1203 (2007).

[This Court is] required to accept as true the well-pled averments set forth in the ... complaint, and all inferences reasonably deducible therefrom. Moreover, the [C]ourt need not accept as true conclusions of law, unwarranted inferences from facts, argumentative allegations, or expressions of opinion. In order to sustain preliminary objections, it must appear with certainty that the law will not permit recovery, and, where any doubt exists as to whether the preliminary objections should be sustained, the doubt must be resolved in favor of overruling the preliminary objections.

Id. at 415–16 (citations omitted).

I. Preliminary Objections 1 and 2

Golden Gate in its Preliminary Objection 1 alleges that the OAG lacks statutory authority to pursue this action because it effectively seeks to regulate skilled nursing facility staffing levels, an area within the Pennsylvania Department of Health's (DOH) exclusive purview. In its Preliminary Objection 2, Golden Gate avers that the Commonwealth is attempting to set new minimum staffing requirements by "completely bypass[ing] the regulatory procedures in place that govern how changes to laws and regulations are to be made, including the requirements of public notice and the opportunity for [Golden Gate] and other interested parties to be heard on any such changes." Preliminary Objection 2 at 13, ¶ 33.

On March 30, 2016, this Court issued an order, wherein it noted the parties' agreement that Preliminary Objections 1 and 2 were resolved by this Court's opinion in GGNSC Clarion LP v. Kane , 131 A.3d 1062 (Pa. Cmwlth. 2016) (GGNSC Clarion ), which dismissed a declaratory judgment action raising the same issues presented in Preliminary Objections 1 and 2. For the reasons explained therein, Preliminary Objections 1 and 2 are overruled.

II. UTPCPL—Preliminary Objections 4, 5, 6, 7, 8 and 10

Golden Gate's Preliminary Objections 4, 5, 6, 7, 8 and 10 all pertain to the alleged UTPCPL violations.5

Initially, we note that Section 3 of the UTPCPL states that "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce as defined [in Section 2(4)(i)-(xxi) of the UTPCPL6 ] ... are hereby declared unlawful." 73 P.S. § 201–3. Section 2(4) of the UTPCPL provides, in relevant part:

‘Unfair methods of competition’ and ‘unfair or deceptive acts or practices' mean any one or more of the following:
....
(v) Representing 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;
....
(ix) Advertising goods or services with intent not to sell them as advertised;
(x) Advertising goods or services with intent not to supply reasonably expectable public demand, unless the advertisement discloses a limitation of quantity;
....
(xxi) Engaging in any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding.

73 P.S. § 201–2(4). This Court has explained:

An act or a practice is deceptive or unfair if it has the ‘capacity or tendency to deceive.’ 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. The test for the [C ]ourt 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. 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. Moreover, we are cognizant of our [S]upreme [C]ourt'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 v. Peoples Benefit Servs. Inc. , 923 A.2d 1230, 1236 (Pa. Cmwlth. 2007) (citations omitted; emphasis added) (Peoples Benefit II ); see also Pa. Dep't of Banking v. NCAS of Del., LLC , 995 A.2d 422 (Pa. Cmwlth. 2010). Nonetheless, the UTPCPL does not apply to providers of medical services. See Walter v. Magee–Womens Hosp. of UPMC Health Sys. , 876 A.2d 400 (Pa. Super. 2005) ;7 see also Foflygen v. R. Zemel, M.D. (PC) , 420 Pa.Super. 18, 615 A.2d 1345 (1992). "Nursing homes are not one-dimensional business enterprises, but instead they are hybrid organizations, offering both medical and non-medical services." Zaborowski v. Hosp. Care Ctr. of Hermitage, Inc. , 60 Pa. D. & C.4th 474, 493 (C.P. Mercer 2002). Thus, courts have held that nursing homes are liable under the UTPCPL only for the non-medical services they provide. Id. ; see also GGNSC Clarion ; Goda v. White Cliff Leasing P'ship , 62 Pa. D. & C.4th 476 (C.P. Mercer 2003) ;8 Simmons v. Simpson House, Inc., ––– F.Supp.3d ––––, 2016 WL 7209931 (E.D. Pa. No. 15–06636, filed December 12, 2016).

A. Preliminary Objection 4—Puffery

In Preliminary Objection 4, Golden Gate contends that the purported representations attributed to it in the Amended Complaint do not violate Sections 2(4)(v) and 2(4)(ix) of the UTPCPL because they do not constitute false advertising since they are puffery rather than material representations.

Courts have held that Sections 2(4)(v) and 2(4)(ix) of the UTPCPL are limited to false advertising claims. See Seldon v. Home Loan Servs., Inc. , 647 F.Supp.2d 451 (E.D. Pa. 2009).9 The United States Third Circuit Court of Appeals has explained: "Material representations must be contrasted with statements of subjective analysis or extrapolations, such as opinions, motives and intentions, or general statements of optimism, which constitute no more than puffery ...." EP Medsystems, Inc. v. EchoCath, Inc. , 235 F.3d 865, 872 (3d Cir. 2000) (emphasis added; quotation marks...

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