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Pa. Supreme Court Finds Pa. Consumer Protection Law May Protect Nonresidents

Client Alert

Authors: A. Christopher Young, Joseph C. Crawford and Samuel D. Harrison

2/26/2018
Pa. Supreme Court Finds Pa. Consumer Protection Law May Protect Nonresidents

On February 21, the Pennsylvania Supreme Court held that nonresidents can bring a claim against a business headquartered and operating from Pennsylvania under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL), even if the conduct at issue occurred outside the Commonwealth. Danganan v. Guardian Protection Services, No. 36 WAP 2017, 2018 Pa. LEXIS 955, at *6 (Pa. Feb. 21, 2018). Relying on the plain language of the UTPCPL and its underlying remedial purpose, the Supreme Court, as the final word on Pennsylvania law, settled the question of the proper interpretation of the law and rejected decisions by several federal district courts that nonresidents were either barred from bringing claims under the statute or needed to show some connection to Pennsylvania to proceed. While the decision raises the specter of UTPCPL liability for Pennsylvania businesses to plaintiffs around the globe, the reality is that the Danganan decision may only have shifted the sufficient-nexus analysis to a choice-of-law question. As the Supreme Court said in its decision, jurisdictional requirements and choice-of-law analysis, which were not included in the certified questions, need to be considered. And those considerations may ultimately frustrate nonresidents’ ability to maintain suits against Pennsylvania businesses under the UTPCPL.

Background

The case arose when Guardian Protective Services, which is headquartered in Pennsylvania, continued to charge its customer Danganan for a home security equipment and services contract after he moved from Washington, D.C. to California and attempted to cancel the contract. Id. at *2. Danganan sued on behalf of himself and a putative nationwide class of claimants who were subject to the same form contract. Id. at *3.

After removal to federal court, the U.S. District Court for the Western District of Pennsylvania dismissed the claim for lack of a sufficient nexus between Danganan, his injury and Pennsylvania. The district court noted that, while the UTPCPL is to be liberally construed, precedent existed for a “sufficient nexus” requirement. Specifically, relying on several other federal court opinions applying the UTPCPL and imposing such a requirement, the district court held that Danganan had not demonstrated a sufficient nexus to Pennsylvania to give rise to liability. Danganan v. Guardian Prot. Servs., Civ. A. No. 15-1495, 2016 U.S. Dist. LEXIS 96419, at *3-5, *10-11 (W.D. Pa. July 25, 2016) (“Plaintiff has no connection to Pennsylvania whatsoever and therefore cannot add any factual allegations demonstrating a sufficient nexus with the Commonwealth in order to be able to recover under the UTPCPL.”).

Supreme Court’s Decision

On appeal, the U.S. Court of Appeals for the Third Circuit certified questions to the Pennsylvania Supreme Court designed to identify how the conduct at issue must be related to Pennsylvania in order to bring a UTPCPL claim. Reading the language of the UTPCPL closely, the Supreme Court determined that “the plain language definitions of ‘person’ and ‘trade’ and ‘commerce’ evidence no geographic limitation or residency requirement relative to the [UTPCPL’s] application.” Danganan, 2018 Pa. LEXIS 955, at *16. Additionally, while the definition of “commerce” included conduct “directly or indirectly affect[ing] the people of th[e] Commonwealth,” that individual prong did not limit preceding language in the definition that did not contain a geographic tie. Id.; see also id. at *18 (suggesting that, even if that prong did apply, “the alleged misconduct of one Pennsylvania business may affect, in both direct and indirect ways, the people of the Commonwealth, even if the subject transactions are aimed at non-residents and occur wholly outside the state’s borders.”).

The court also explained that the lack of a geographic-nexus requirement was consistent with the remedial purpose of the statute, which warranted a liberal construction to achieve its “object of preventing unfair or deceptive practices.” Id. at *17. Ultimately, despite acknowledging some potential merit to Guardian Protective Services’ contention that a geographic nexus should apply, the court held that the UTPCPL’s “prescription against deceptive practices employed by Pennsylvania-based businesses may encompass misconduct that has occurred in other jurisdictions.” Id. at *18.

Implications

At first glance, Danganan seems to represent a watershed reinterpretation of the UTPCPL, permitting potentially worldwide liability for Pennsylvania businesses and overturning many previous decisions on the issue. After all, as the district court noted, there was a body of federal case law clearly identifying a nexus or residency requirement under the UTPCPL. See, e.g., Baker v. Family Credit Counseling Corp., 440 F. Supp. 2d 392, 413 (E.D. Pa. 2006) (“There is no decision by a Pennsylvania state court limiting application of the UTPCPL to Pennsylvania residents. Nevertheless, applying federal law, the Court agrees with defendants that the UTPCPL provides a remedy only to Pennsylvania residents.”).

However, a close examination of Danganan reveals the holding may not have such far-reaching results. The Supreme Court was confronted with discretely worded certified questions and a statute that plainly contained no geographic limitation. The Supreme Court seemed to acknowledge the box it was in when it noted: “Regarding Guardian’s concern that any person around the globe may file a cause of action pursuant to the UTPCPL without any connection to the Commonwealth, Appellant accurately observes that other legal precepts may offer limitations, such as jurisdictional principles and choice-of-law rules.” Danganan, 2018 Pa. LEXIS 955, at *19. And indeed, one of the primary authorities relied on by Danganan for the holding that the UTPCPL has no geographic limitation was Thornell v. Seattle Service Bureau, Inc., 363 P.3d 587 (Wash. 2015). As the Danganan opinion explained, acknowledging Guardian’s observation, Thornell ultimately resulted in a mooting of the geographic holding when, on remand, a choice-of-law analysis found that a different jurisdiction had the most significant relationship to the cause of action, “employing reasoning that substantively aligns with the sufficient nexus text.” Danganan, 2018 Pa. LEXIS 955, at *15.

Nevertheless, the potential expansion of liability under the UTPCPL is of consequence to any Pennsylvania business, particularly given the potential for treble damages, 73 P.S. § 201-9.2(a), and an amenability to adjudication by class action. Danganan, 2018 Pa. LEXIS 955, at *3 (“Appellant filed a complaint in the Court of Common Pleas of Philadelphia County on behalf of himself and a putative class of nationwide plaintiffs who were subject to the same form contract.”). Accordingly, it will be worth following Danganan’s application to see if choice-of-law rules and jurisdictional doctrines become substitutes for the now-defunct sufficient-nexus test.

The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.

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