The Pennsylvania Superior Court recently departed from a settled line of cases in holding that “misleading conduct,” as opposed to fraud, could support a violation of the catchall provision of the Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), 73 P.S. § 201-2(4)(xxi). The ruling makes life more difficult for defendants selling goods and services, including residences, because plaintiffs asserting these claims will find it easier to survive dispositive motions. In addition, the court disregarded the corporate shield of an LLC and held that a managing member who made representations to the plaintiffs could be personally liable to them.
The case of Bennett v. A.T. Masterpiece Homes, 2012 Pa. Super. 60 (March 6, 2012) involved two residential real estate transactions. Plaintiffs (the “Purchasers”) contracted with defendant (the “Contractor”) to purchase new homes, but during construction discovered building deficiencies and structural failures. When the Purchasers raised their concerns, the Contractor’s managing member provided specific (and critically, personal) assurances to them regarding the quality of work on the homes. When construction was complete, the defects remained. The Purchasers brought claims for breach of contract and breach of warranty, and under the UTPCPL, against the Contractor and the managing member. A jury found the Contractor and the managing member liable on all three claims and awarded damages. Exercising authority under the UTPCPL, the court then doubled the damages and also assessed attorney’s fees.
The appeal involved only the claims of the managing member. Among other things, he asserted that the trial court erred by permitting the jury to hold him personally liable for breach of the UTPCPL when there was no evidence of any fraudulent conduct. The Superior Court affirmed, concluding that misleading conduct could suffice to establish a catchall violation, despite an earlier decision, Skurnowicz v. Lucci, 789 A.2d 788 (Pa. Super. 2002), in which the court had required proof of common law fraud. The Superior Court looked closely at the language of a 1996 amendment to the catchall provision, noting that the pre-1996 statute prohibited “fraudulent conduct” creating a likelihood of confusion or misunderstanding, but the current provision proscribed “fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding.” The court looked to federal and Commonwealth Court cases discussing the amendment in detail and concluded that those cases accurately interpreted the amended provision to lower the degree of proof required for catchall liability to either fraudulent or deceptive conduct.
The full impact of the Superior Court’s holding remains to be seen, and because the case was not appealed to the Supreme Court, the Commonwealth’s highest court will not be addressing the issue under these facts. However, it is safe to say that plaintiffs will likely survive preliminary objections or motions to dismiss, as well as summary judgment motions, more easily than they did before. In addition, plaintiffs will likely include individuals as defendants, given the court’s approval of the managing member’s individual liability. As a result, there will likely also be more pressure on defendants to settle these cases.
Our commercial litigation team has successfully defended many companies against UTPCPL claims, and has defended individuals against attempts to hold them personally liable by piercing the corporate veil. We will continue to monitor the impact of Bennett on Pennsylvania jurisprudence.
Client Alert 2012-096