United States Court of Appeals for the Third Circuit Limits Claimants Under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law to Those Who Prove Justifiable Reliance

United States Court of Appeals for the Third Circuit Limits Claimants Under Pennsylvania's Unfair Trade Practices and Consumer Protection Law to Those Who Prove Justifiable Reliance

May 2006

Pennsylvania’s Unfair Trade Practices and Consumer Protection Law seems to provide an ever-expanding source of civil law suits. This Act is directed against unfair methods of competition and unfair or deceptive acts or practices. Arguments have been made that the Act is not solely an anti-fraud statute, but is an anti-deception statute, and that the elements of proving deception are something less than the elements of proving fraud.

In Tran v. Metropolitan Life Ins. Co., 408 F.3d 130 (3d Cir. 2005), the U.S. Court of Appeals for the Third Circuit addressed 5 subsections of the Act, with varying forms of misconduct, to determine whether the Plaintiff needed to prove justifiable reliance on the alleged misconduct. This conduct included representations concerning the sponsorship and quality of goods or services, false advertising, failure to comply with warranties and knowing misrepresentations about the need for repairs. The Third Circuit analyzed recent Pennsylvania Supreme Court and Superior Court case law, and found that the statute was fundamentally rooted in fraud prevention. The Court thus concluded that plaintiffs alleging wrongful conduct under this Act must prove justifiable reliance.

This will be the binding law in federal Pennsylvania courts unless reversed by an en banc panel of the Third Circuit, or until such time as the Supreme Court of Pennsylvania reaches a different conclusion. In fact, the Pennsylvania Supreme Court has pending before it the case of Toy v. Metropolitan Life Ins. Co., in which it granted an appeal on August 2005. The Superior Court’s Toy decision provided guidance for the Tran Panel’s conclusion as to how the Supreme Court would rule.

One of the issues framed by the Toy appellant, that the Pennsylvania Supreme Court specifically stated was to be resolved on appeal is: “Does the Superior Court’s decision conflict with the Rules of Statutory Construction under Pennsylvania law by interpreting the Unfair Trade Practices and Consumer Protection Law requires [sic] that justifiable reliance under common law fraud must be established to bring a claim under the Statute, as well as does the decision contradict the reasoned decisions of appellate courts in other jurisdictions that require a lesser standard of reliance to bring a claim under those States’ consumer protection statutes[?]” This case will be closely watched to determine if civil claims will be expansively permitted under the Consumer Protection Law. (The Supreme Court will also be addressing the issue of the scope of Pennsylvania’s insurance bad faith statute, making this an even more significant opinion that will determine the course of thousands of pieces of litigation in the future).

For further information please contact Lee Applebaum at (215) 893-8702 or lapplebaum@finemanlawfirm.com.