Plaintiffs No Longer Need a “Nexus” to Pennsylvania in Order to Bring Claims Under the Unfair Trade Practices and Consumer Protection Law

In answering a certified question from the Third Circuit, the Pennsylvania Supreme Court recently issued a decision that greatly expands the reach of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL). In Danganan v. Guardian Protection Services, the Supreme Court held that “a non-Pennsylvania resident may bring suit under the UTPCPL against a [Pennsylvania]-headquartered business based on transactions that occurred out-of-state.”

Plaintiff Danganan contracted with Guardian Protection Services (“Guardian”), a Pennsylvania-headquartered business, for home security equipment and services at the plaintiff’s then-home in Washington, DC. The contract contained, inter alia, a choice-of-law provision, stating that the “Agreement shall be governed by the laws of Pennsylvania.” After moving to California, the plaintiff attempted to cancel the agreement, but Guardian continued to bill the plaintiff, claiming the agreement authorized ongoing charges through the contract’s term, regardless of cancellation attempts. The plaintiff brought suit in Pennsylvania state court, and Guardian removed the matter to the United States District Court for the Western District of Pennsylvania. Guardian then moved to dismiss, arguing that the plaintiff had not, pursuant to the UTPCPL, demonstrated a “sufficient nexus” between Pennsylvania and the improper conduct alleged in the complaint. The district court agreed and dismissed the complaint. On appeal, the Third Circuit certified two questions to the Pennsylvania Supreme Court: (1) Whether a non-Pennsylvania resident may bring suit under the UTPCPL against a business headquartered in and operating from Pennsylvania, based on transactions which occurred outside of Pennsylvania; and (2) If the UTPCPL does not allow a non-Pennsylvania resident to invoke its protections, whether the parties can, through a choice-of-law provision, expand its protections to parties to the contract who are non-Pennsylvania resident consumers.

The Pennsylvania Supreme Court, in interpreting the plain words of the UTPCPL, observed “that the plain language definitions of ‘person’ and ‘trade’ and ‘commerce’ evidence no geographic limitation or residency requirement relative to the Law’s application.” The Court also noted that the remedial goal of the statute, “as well as its corollary liberal interpretation, so as to ‘effect its object of preventing unfair or deceptive practices,’” lent “additional support to an understanding of the Law as protective of non-residents in the absence of contrary statutory language.” Thus, the Court held 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” used by the trial court, finding that there was no support for the test in the plain language of the statute. In response to Guardian’s argument that any person around the globe may file a cause of action pursuant to the UTPCPL without any connection to the Commonwealth, the Court noted that “other legal precepts may offer limitations, such as jurisdictional principles and choice-of-law rules.”

Because the Supreme Court so held, it noted that the second certified question – whether parties can use a choice-of-law provision to expand the UTPCPL’s protections to non-resident consumers – was moot.

This decision certainly expands the scope of the UTPCPL, and companies doing business in Pennsylvania can expect an increase in both the number of consumer fraud actions under the statute and the number of putative class members. Defendants in such suits should focus on other legal theories to ward off improper claims, such as “jurisdictional principles and choice-of-law rules,” as the Supreme Court suggested.

Caroline E. Oks is an Associate in the Gibbons Commercial & Criminal Litigation Department.