Pennsylvania Supreme Court Extends Reach of Unfair Trade Practices and Consumer Protection Law to Transactions Occurring Outside Pennsylvania and to Non-PennsylvaniansOn March 5, 2018 by Schnader in Finance
The Supreme Court greatly expanded the territorial reach of the Unfair Trade Practices and Consumer Protection Law recently, holding that the Law reaches the alleged acts of Pennsylvania-based companies outside the Commonwealth.
Answering a certified question from the United States Court of Appeals for the Third Circuit, the Court in Danganan v. Guardian Protection Services held that the UTPCPL could reach the extraterritorial acts of companies headquartered in Pennsylvania, no matter how tenuous Pennsylvania’s link to the alleged act. In doing so, the Court rejected years of federal district court decisions concluding that the UTPCPL only may be invoked: (1) by Pennsylvania plaintiffs; and (2) where the alleged wrongful acts have a sufficient nexus to Pennsylvania.
The plaintiff in Danganan alleged that he purchased home alarm services for his Washington, D.C. residence from Guardian, a company headquartered in Pennsylvania. He signed a three-year agreement, which he allegedly attempted to cancel when he sold his D.C. home and moved to California. Danganan alleged, however, that Guardian continued billing him for the services. Danganan filed a putative class action in the Court of Common Pleas of Philadelphia County alleging, among other things, that the defendant violated the provision of the UTPCPL stating that: “[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce . . . are . . . unlawful.” The UTPCPL defines “commerce,” in relevant part as “any trade or commerce directly or indirectly affecting the people” of Pennsylvania. The defendant removed to federal court, with the case ultimately ending up in the United States District Court for the Western District of Pennsylvania. The District Court granted Guardian’s motion to dismiss, holding that plaintiff had not established a “sufficient nexus” between the alleged acts and Pennsylvania and that the UTPCPL generally applied only to Pennsylvania residents. Danganan appealed to the Third Circuit, which certified two questions to the Pennsylvania Supreme Court, including whether a non-Pennsylvania resident could bring suit against a Pennsylvania company for a transaction occurring outside of Pennsylvania.
The Court adopted a broad reading of the UTPCPL, heavily relying on a 2015 Washington Supreme Court decision, Thornell v. Seattle Service Bureau, Inc., 363 P.3d 587, which interpreted a similar Washington State law. In particular, the Court adopted Thornell’s broad definitions of the words “person” and “commerce” and the phrase “indirectly affecting the people of Washington.”
As a result, the Court found that there are no territorial limitations in the terms “person,” “trade” and “commerce” in the UTPCPL and no explicit requirement that a plaintiff reside in Pennsylvania. The Court also put great weight on the broad remedial purpose of the UTPCPL. Thus, the Court found “that the Law’s prescription against deceptive practices employed by Pennsylvania-based businesses may encompass misconduct that has occurred in other jurisdictions.”
In so holding, the Court rejected the “sufficient nexus” test relied on by the District Court. The Court held that “there is no textual basis in the UTPCPL for its imposition, and the Court may not supply additional terms to, or alter, the language that the Legislature has chosen.”
In apparent recognition of the potentially broad application of its opinion, the Court stated that the rule it announced could be limited through jurisdictional and choice-of-law principles.
Nevertheless, the rule announced by the Court in Danganan represents a major expansion of the reach of the UTPCPL. It potentially expands the remedies available to foreign plaintiffs in their dealings with Pennsylvania-based companies—no matter how remote the connection to Pennsylvania is to any specific act—and may encourage these plaintiffs to bring suit in Pennsylvania rather than their home states or in the state where the acts occurred in the hopes that courts will apply the UTPCPL. While that may seem like a hassle, the broad remedies of the UTPCPL, including treble damages and attorneys’ fees, could make it a worthwhile effort for plaintiffs and their counsel.