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. e du/thir dc ir c uit_1997/219Filed September 16, 1997

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 96

- 1994

ROLAND R. ALGRANT; THE DOUGLAS F. ALLISON

TRUST; ANCHOR SALES ASSOCIATES, INC; DANIEL

AVERY; JAMES B. BAGLEY; THOMAS S. BORON; MARY

PAT BORON; FRANKLIN E DWARD CATER, JR.; PAUL W.

DLABAL; MICHAEL B. ELEFANTE; HERBERT FISHER;

SUSAN E. HAAR; MARILYN C. HARLIN; STEVEN G.

HOROWITZ; HERBERT J. HOSTETLER; RUDOLPH S.

MAURIZI ESTATE; DR. P. JAGANNADHA REDDY; E.W.

RICHARDON, JR.; PATRICK RUPPERT; SUSAN SLOAN;

NARENDRA K. SOOD; USHA R. SOOD; GEORGE L.

YONANO; LUCRETIA L. YONANO,

Appellants,

v.

EVERGREEN VALLEY NURSERIES LIMITED

PARTNERSHIP; THE PARKINSON PENSION TRUST; E.

WAYNE POCIUS; RUSSELL M. DIMMICK; VAN PINES OF

PA; WILLIAM L. PARKINSON, DR.; UNIQUE GARDEN

CENTER COMPANY

An Appeal from the United States District Court

for the Eastern District of Pennsylvania

Civil Action No. 95

- CV

- 7224

Argued June 13, 1997

Before: MANSMANN, NYGAARD and ROSENN,

Circuit Judges.

(Opinion Filed September 16, 1997)

Alexander D. Bono (argued)

Timothy D. Katsiff

Blank, Rome, Comisky & McCauley

1200 Four Penn Center Plaza

Philadelphia, PA 19103

Counsel for Appellants

E. Parry Warner (argued)

Obermayer, Rebmann, Maxwell &

Hippell

One Penn Center, 19th Floor1617 John F. Kennedy Boulevard

Philadelphia, PA 19103

- 1895

Counsel for Appellees The Parkinson

Pension Trust and Dr. Willi am L.

Parkinson

Joseph A. McGinley (argued)

Lavin, Coleman, O'Neil, Ricci,

Finarelli & Gray

510 Walnut Street, Suite 1000

Philadelphia, PA 19106

Counsel for Appellees E. Wayne

Pocius, Rus sell M. Dimmick,

Van Pines of Pennsylvania,

and Unique Garden Center

Company

OPINION OF THE COURT

ROSENN, Circuit Judge.

This appeal raises two important issues of first

impression in this court relating to commercial p romissory

obligations and securities. First, whether the obligors on

unmatured promissory notes can obtain declaratory relief

against the obligees of those notes and have the notes

declared void and unenforceable, when the concurrent legal

remedy unde rlying the request for declaratory relief would

be barred by the statute of limitations. Second, whether

transactions involving investment securities are covered

under section 9.2(a) of the Pennsylvania Unfair Trade

2

Practices and Consumer Protection Law ("UTP/CPL"), which

creates a private right of action for consumers injured in

the purchase or lease of goods or services. The United

States District Court for the Eastern District of

Pennsylvania held that t he action for declaratory relief was

time

- barred because the corollary legal actions were based

on conduct for which the statute of limitations had run.

The court also held that investment securities are not

"goods" under the UTP/CPL. The plaintiffs ti mely appealed.

We affirm.

I.

Taking the facts in the light most favorable to the

plaintiffs, as did the district court, it appears that in 1986

the defendants organized Evergreen Valley Nurseries

Limited Partnership ("Evergreen") to acquire, grow and sell

nursery stock. The nursery stock consisted ofapproximately 950,000 evergreen trees ("nursery stock") on

two leased properties in Pennsylvania, one in Lehigh

County (called "Raven Valley") and one in Tioga County

(called "the Tioga Farm"). I n July 1986, the Parkinson

Pension Trust ("Trust"), at the direction of Dr. William L.

Parkinson, its sole trustee, purchased the Raven Valley

nursery stock from Van Pines of Pennsylvania ("Van Pines")

and its general partners for approximately $3.6 mi llion. E.

Wayne Pocius and Russell Dimmick are the general

partners of Van Pines and are also the sole shareholders of

Unique Garden Center ("Unique"), the general partner of

Evergreen. The Trust then purchased the Tioga Farm

nursery stock from Pocius and Dimmick for approximately

$600,000.

Following the acquisition of the nursery stock by the

Trust, Evergreen then purchased an undivided 91.2%

interest in the Trust's nursery stock for the price of $10.4

million. Evergreen financed the purchase o f the nursery

stock by a $13.5 million offering of Evergreen limited

partnership units, pursuant to a private placement

memorandum ("PPM"). A substantial number of these units

purchased by the plaintiffs are the genesis of this lawsuit.

They paid $150 ,000 for each unit under the terms of the

PPM; the purchase price consisted of a $70,000 cash

3

payment, a $9,500 subscription note due on January 20,

1997, and a $70,500 promissory note ("investor note")

payabl e to the Trust, which became due and payable on

July 1, 1996.

The PPM issued by Evergreen did not disclose that

Evergreen was to pay the Trust approximately $10.4 million

for 91.2% of the nursery stock which the Trust had

purchased from Evergreen fo r about $4.2 million. Thus, it

failed to disclose that the purchase price for the interest in

land had more than doubled in two months. The PPM did

not mention the intricate entanglement of the parties

involved in the underlying transactions or the sel f

- dealing

in the purchase of the nursery stock.

In 1989, the Internal Revenue Service ("IRS") issued a

report concluding that the price of the nursery stock had

been significantly overvalued. Although Evergreen initially

contested the IRS report, in 1993 Evergreen and the IRS

entered into a closing agreement in which Evergreen

admitted that the nursery stock had been over

- valued by at

least $3.2 million. On October 11, 1993, the plaintiffs

obtained a copy of the closing agreement between the IRS

and Evergreen.The plaintiffs filed their complaint in the district court on

November 16, 1995, raising four claims. The first three

claims sought a declaratory judgment that certain Investor

Notes were void and unenforceable because they had been

procured through fraud: (I) declaratory relief under Section

29(b) of the Securities Exchange Act of 1934, 15 U.S.C.

S 78cc(b) (Supp. 1997); (II) declaratory relief under Section

508 of the Pennsylvania Securities Act, 70 Pa. Cons. Stat.

S 1

- 508 (1994) ; and (III) declaratory relief based on common

law fraud. Count IV alleged a violation of the UTP/CPL. The

plaintiffs asserted that because of the Trust's expressed

intent to collect on the investor notes in July 1996, they

were compelled to bring this action to declare the notes void

and unenforceable.

The defendants moved to dismiss the complaint pursuant

to Federal Rule of Civil Procedure 12(b)(6) for failing to state

a claim upon which relief could be granted. The district

court dismissed Cou nts I, II, and III as time

- barred and

4

dismissed Count IV for failing to state a claim on which

relief can be granted. The plaintiffs appealed from the

dismissal of all four claims.

II.

When reviewing a mo tion to dismiss under Rule 12(b)(6)

on statute of limitations grounds, the court exercises

plenary review to determine "whether `the time alleged in

the statement of a claim shows that the cause of action has

not been brought within the statute of limi tations.' " Cito v.

Bridgewater Township Police Dep't, 892 F.2d 23, 25 (3d Cir.

1989) (citations and emphasis omitted). This court

exercises plenary review over a district court order

dismissing a complaint pursuant to Rule 12(b)(6) for failure

to sta te a claim upon which relief can be granted. Moore v.

Tartler, 986 F.2d 682, 685 (3d Cir. 1993).

Because actions for declaratory relief do not have their

own statute of limitations, the district court concluded that

the plaintiffs' causes of action a re governed by the period of

limitations applicable to the substantive claims underlying

the action, citing Cope v. Anderson, 331 U.S. 461, 463

- 64

(1947). Thus, the district court held that the statute of

limitations to be applied would be the same reg ardless of

the posture of the case, whether offensive or defensive.

Accordingly, if the underlying action is time

- barred, so is

the action for declaratory relief. Judge Huyett, the trial

judge, then perceptively determined that Counts I, II, andIII w ere all barred by the applicable statutes of limitations.

Although this court of appeals has not yet spoken on the

issue, a number of other courts have. The First, Sixth,

Ninth and Tenth Circuit Courts of Appeals have all held

that an action for decl aratory relief will be barred to the

same extent the applicable statute of limitations bars the

concurrent legal remedy. International Ass'n of Machinists

& Aerospace Workers v. Tennessee Valley Authority, 108

F.3d 658, 668 (6th Cir. 1997); Levald, Inc . v. City of Palm

Desert, 998 F.2d 680, 688

- 89 (9th Cir. 1993); Gilbert v. City

of Cambridge, 932 F.2d 51, 57

- 58 (1st Cir. 1991); Clulow v.

Oklahoma, 700 F.2d 1291, 1302 (10th Cir. 1983)."It is

settled, therefore, that where legal and equitable claims

5

coexist, equitable remedies will be withheld if an applicable

statute of limitations bars the concurrent legal remedy."

Gilbert, 932 F.2d at 57. The Court of Appeals for the

Second Circuit, applying state law, has also held that when

a "claim for declaratory relief could have been resolved

through another form of action which has a specific

limitations period, the specific period of time will govern."

Town of Orangetown v. Gorsuch, 718 F.2d 29, 41

- 42 (2d

C ir. 1983) (applying New York law). As the district court

found in this case, see infra at p. 10

- 12, the plaintiffs'

claims could have been resolved by available timely legal

remedies, including an action to rescind under the federal

Securities Exchange Act of 1934. See Gatto v. Meridian

Medical Associates, Inc., 882 F.2d 840, 842 (3d Cir. 1989).

The aforementioned courts which applied federal law

relied on analogous Supreme Court precedent to reach this

conclusion. In Russell v. Todd, 309 U.S. 280 , 289 (1940),

the Court recognized the long

- standing doctrine that"when

the jurisdiction of the federal court is concurrent with that

at law, or the suit is brought in aid of a legal right, equity

will withhold its remedy if the legal right is barred b y the

local statute of limitations." In Cope v. Anderson, 331 U.S.

at 464, the Court reiterated this position, stating that

"equity will withhold its relief in such a case where the

applicable statute of limitations would bar the concurrent

legal reme dy." We have followed this proposition. See Gruca

v. United States Steel Corp., 495 F.2d 1252, 1257 (3d Cir.

1974). However, neither the Supreme Court nor this court

has addressed the question in the posture in which it is

presented in the instant case

.

The plaintiffs argue that the statute of limitations does

not bar an action for declaratory relief based on a claim

that is purely defensive in nature. For this proposition, theyrely heavily on this court's opinion in Silverman v. Eastrich

Multip le Investor Fund, L.P., 51 F.3d 28 (3d Cir. 1995). In

Silverman, the plaintiff moved in federal court for injunctive

and declaratory relief to proclaim a guaranty void after the

defendants confessed judgment in state court against the

loan guarantors, including the plaintiff. Id. at 30. The

defendants moved for dismissal, asserting that the claim

was time

- barred under the Equal Credit Opportunity Act

6

("ECOA") on which the plaintiff guarantor relied. Id. at 3 1.

The trial court granted the motion. Id. On appeal, we held

that when the creditor endeavors to enforce the guaranty

the claim could be asserted "as a defense to the state

confession of judgment." Id. at 32. In Silverman, the

defendants had not only obtained judgment, in contrast to

this case where no action has yet begun on the notes, but

enforcement of the judgment was imminent. Thus, there

the plaintiffs' challenge to the confession of judgment was

defensive.

Although Silverman did allow th e assertion of a defensive

claim after the statute of limitations on the underlying

violation had run, the holding was definitely moored to the

plaintiff 's defensive position in response to the state

confession of judgment. The court stated:

There are numerous circumstances under which a

guarantor may institute an action to declare his or her

guaranty void and seek damages or other relief. The

expiration of the statute of limitations calculated from

the executi on of said guaranty may bar the institution

of such independent action. No such bar exists,

however, to the utilization of such grounds as a

defense.

51 F.3d at 32. The court noted that "plaintiff retained the

right to assert th e violation when efforts were made to

collect and enforce the Guaranty." Id. (emphasis added).

In Silverman, the plaintiff had no prior opportunity to

respond to the state court confession of judgment, thus

limiting her available remedies to the equi table claim she

pursued. Id. The court noted that "[the plaintiff's] ECOA

claim was raised in direct response to Eastrich's state court

confession of judgment, which did not require or provide for

an answering pleading. . . . Thus, in essence, plaintif f's

alleged ECOA violation is asserted as a defense to the state

confession of judgment." Id. Accordingly, despite plaintiffs'

assertions in the instant case, Silverman does not stand for

the proposition that an independent action offensively fordecl aratory relief from potential liability on a note may be

brought even though the plaintiff had a legal remedy before

the statute of limitations on the concurrent legal remedy

7

had run. On the contrary, Silverman holds only that where

judgment has been confessed, a purported obligor may

assert as a defense to its enforcement a statutory violation

which would have been time

- barred if asserted offensively

in an independent action.1 In this instant case, however,

the creditors have taken no legal action to collect on the

Investors Notes, plaintiffs have no voidable judgment, and

recoupment is not now before us.

The Supreme Court set forth in Bull v. United States, 295

U.S. 247 (1935), a rationale similar to Silverman. Bull, a

partner in a ship

- brokering business, died in February and

his estate continued to receive the profits of his partnership

for one year after his death. Id. at 251. His estate valued

the partnership only by the profits received up to Bull's

death. The United States, however, declared all profits

received by the estate to be corpus under the estate tax and

taxed the property accordingly. The estate did not challenge

the assessment at the time. Id. at 251

- 52. Four years later,

the United States notified the estate that the same property

was income and taxable as such. Id. at 252. The estate

then pursued the administrative remedies to challenge the

double taxation of the same property. When the final

administrative appeal had bee n rejected, the estate brought

an action in the Court of Claims, seeking a refund of the

amount paid as income tax or, in the alternative, a refund

for the tax paid on the same property when the estate tax

was paid. Id. at 253. The Court of Claims foun d that the

statute of limitations barred the second ground for relief,

seeking correction of the estate tax. Id. at 254.

_________________________________________________________________

1. The other cases cited by the plaintiffs are equally distingu ishable on

the same grounds. See Sony Electronics v. Putnam, 906 F. Supp. 228

(D.N.J. 1995) (party could bring time

- barred claim as defense to action

to collect on guaranty but could not assert claim as counterclaim

seeking monetary damages); FDIC v. M edmark, Inc., 897 F. Supp. 511

(D. Kan. 1995) (party could assert time

- barred claim defensively in action

by lender to collect on guaranty); Integra Bank/Pittsburgh v. Freeman,

839 F. Supp. 326 (E.D. Pa. 1993) (party could assert time

- barred claim

by w ay of recoupment in action by lender to collect on guaranty); Mellon

Bank, N.A. v. Pasqualis

- Politi, 800 F. Supp. 1297 (W.D. Pa. 1992) (party

could assert defense which could not be asserted affirmatively because

of the bar of the statute of limitations when lender brought action to

collect on mortgage and notes).8

The Court in Bull first determined that the portion of the

profits paid the estate was income, not corpus, and thus

wrongly subjected to the estat e tax as such. Id. at 257. The

Court then held that the claim for refund of the estate tax

was not barred by the statute of limitations. The Court

noted that, prior to the institution of proceedings to collect

income tax on the same property, the estat e had no

grounds to seek a refund of the money as a product of

double taxation. Additionally, the Court noted that, under

the law, "[p]ayment precedes defense" when challenging a

tax assessment. Id. at 260. Therefore, the estate was

entitled to raise the claim only as a defense after paying the

income tax on the same profits.

If the claim for income tax deficiency had been the

subject of a suit, any counter demand for recoupment

of the overpayment of estate tax could have bee n

asserted by way of defense and credit obtained

notwithstanding the statute of limitations barred an

independent suit against the Government therefor. This

is because recoupment is in the nature of a defense

arising out of some feature of the transaction upon

which the plaintiff's action is grounded. Such a

defense is never barred by the statute of limitations so

long as the main action itself is timely.

Bull, 295 U.S. at 262. The Court the n determined that "[the

Government] has given [the estate] a right of credit or

refund, which though he could not assert it in an action

brought by him in 1930, had accrued and was available to

him since it was actionable and not barred in 1925, when

the Government proceeded against him for the collection of

income tax. The pleading was sufficient to put in issue the

right to recoupment." Id. at 263. Thus, the estate's claim

was not barred by the statute of limitations. Id.

Bull, like Silverman, recognizes that a claim can be raised

defensively even if it would be barred if brought

independently. Like Silverman, the plaintiff in Bull had no

opportunity to present the claim as a defense to the tax

assessment, having been summarily assessed with the tax

and later compelled to pursue administrative remedies

before seeking legal adjudication of the right to refund.

Therefore, despite the unusual posture of the case, the

9

claim was not time

- barred becaus e the Court considered itas a defense to the judgment obtained against the estate

administratively.2 The crux of the decision was the

existence of a claim against the estate. In the present

matter, the plaintiffs could have asserted their claims

inde pendently by an action to rescind or other legal options

within the time allowed by the statute of limitations. They

chose not to do so. Therefore, their remedy now is to wait

until the Trust seeks to collect on the notes and then assert

the claims def ensively. However, in the absence of any

action taken against them to collect the debt, plaintiffs are

not entitled to bring an independent action essentially

seeking a recision by posturing it as defensive.

Moreover, the plaintiffs' action before us is not saved by

the doctrine of recoupment. Under Pennsylvania law, "the

defense asserted by way of recoupment must be related to

the nature of the demand brought by the plaintiff." Mellon

Bank, N.A. v. Pasqualis

- Politi, 800 F. Supp. 1297, 1301

(W.D. Pa. 1992) (citing Porter v. Levering, 199 A. 482, 484

(1938)). As the Pennsylvania Supreme Court noted in

Household Consumer Discount Co. v. Vespaziani, 415 A.2d

689, 694 (Pa. 1980), recoupment is not a set

- off "because

it is not in the nature of a cr oss demand, but rather it

lessens or defeats any recovery by the plaintiff."

Recoupment, then, is a defensive claim which can only be

asserted in response to an independent action instituted by

another party; recoupment does not permit the party

asser ting it to present otherwise time

- barred claims simply

by creative pleading in an independent proceeding brought

by it.

The dissent, in concluding that this declaratory judgment

action may be maintained despite the long lapse of time

since the alleg ed frauds were committed, focuses on the

_________________________________________________________________

2. In United States v. Dalm, 494 U.S. 596, 608 (1990), the Supreme

Court stated that "our decisions in Bull and [Stone v. White, 301 U.S.

532 ( 1937)] stand only for the proposition that a party litigating a tax

claim in a timely proceeding may, in that proceeding, seek recoupment

of a related, and inconsistent, but now time

- barred tax claim relating to

the same transaction." Therefore, the Sup reme Court has very

specifically limited the holding of Bull, and the holding is not

applicable

to the situation sub judice.

10

"defendants' expected enforcement of a future obligation,"

dis. op. at 25, rather t han on the acts of fraud which is the

basis of plaintiffs' present claims. The dissent asserts that

the "substantive claim Algrant seeks to vindicate inpursuing Counts I through III is the claim that Algrant is

not liable for future obligations under the Investors Notes."

Dis. op. at 21. The plaintiffs, however, allege that the

Investor Notes were obtained by fraud and specific intent to

deceive and "are void and unenforceable in their entirety

because they were induced by fraud" and were made in

violation of the 1934 Federal Securities Exchange Act, the

Pennsylvania Securities Act, and Pennsylvania common

law. The potential collection on the notes is at this time

only a possibility, not an action in court. However, the door

has been closed to the right to rescind the notes, and other

legal options for relief under the federal and state statutes,

and Pennsylvania common law which the plaintiffs cannot

now open at this late date by an offensive independent

action. As the Court of Appeals for the Second Circuit

stated, if "a claim for declaratory relief could have been

resolved through another form of action which has a

specific limitations period, the specific period of time will

govern." Georgetown v. Gorsuch, 718 F.2d 29, 42 (2d Cir.)

c ert. denied 465 U.S. 1099 (1984).

The theory of plaintiffs' case, and with which the dissent

agrees, is that they are entitled to declaratory relief now

and need not wait until action is taken to collect on the

notes, because they would raise the fra ud defense in such

an event. The court in Gilbert responded to a similar

argument in these words:

We find this idea, albeit precocious, to be equally

unavailing. The temporal bar cannot be sidestepped

merely by asserting that th e appellants' declaratory

judgment suit was brought to establish defenses

against the rainy day, in the future, when the

Ordinance might be enforced against them . . . . Such

a smoke

- and

- mirrors approach would place far too

much priority on theoretical possibilities at the expense

of practical actualities, requiring us, in the last

analysis, to treat aggressor as defender, petitioner as

respondent. In effect, it would serve to make justiciable

11

claims which were simultaneously stale (i.e., time

- barred as to the actual permit denial) and unripe (i.e.,

not yet mature as to any potential enforcement action).

The decided cas es are to the contrary.

932 F.2d at 58.

We, therefore, hold that when plaintiffs' claims are barred

by a statute of limitations applicable to a concurrent legal

remedy, then a court will withhold declaratory judgmentrelief in an independent suit essentially predicated upon

the same cause of action. Otherwise, the statute of

limitations can be circumvented merely by "[d]raping their

claim in the raiment of the Declaratory Judgment Act." Id.

at 58. Accordingly, we turn to each of the plaintiffs' claims

to determine whether the claim would be barred by the

applicable statute of limitations.

A.

The district court dismissed Count I as time

- barred.

Count I sought declaratory relief that, pursuant to S 29(b)

of the Securities Exchange Act of 1934, 15 U.S.C. S 78cc(b),

the promissory investor notes were void and unenforceable

because they were obtained by fraud in violation of federal

securities laws. Under the statute of limitations actually set

forth in S 29(b) an action pursuant to that section is barred

one year from the time of discovery of the violation of the

federal securities laws and three years from the time the

violation occurred. Gatto v. Meridian Medical Assoc., Inc.,

882 F.2d at 842. The district court held that this clai m,

brought more than two years after the discovery of the

fraud and almost nine years after the transaction, was

barred by the statute of limitations under S 29(b). Applying

the statute of limitations from the corollary action to the

plaintiffs' claim for declaratory relief, we see no error in the

district court's dismissal of the claim as time

- barred.

B.

The district court also dismissed Count II as time

- barred.

Count II sought a declaratory judgment that, pursuant to

section 508 of the Penns ylvania Securities Act ("PSA"), 70

12

Pa. Cons. Stat. S 1

- 508, the investor notes were void and

unenforceable because they were induced by fraud in

violation of Pennsylvania securities law. The district court

co ncluded that the applicable statute of limitations was the

one/four year statute of limitations, pursuant to 70 Pa.

Cons. Stat. S 1

- 504. Section 504(a) states:

No action shall be maintained to enforce any liability

under section 501 (or section 503 in so far as it relates

to that section) unless brought before the expiration of

four years after the act or transaction constituting the

violation or the expiration of one year after the plaintiff

receives actu al notice or upon the exercise of

reasonable diligence should have known of the facts

constituting the violation, whichever shall first expire.70 Pa. Cons. Stat. S 1

- 504. Plaintiffs challenge application

of this statute of limitations to their claim, asserting that

the statute of limitations set forth in S 504 expressly does

not apply to claims brought pursuant to S 508.

Section 508 of the PSA provides that:

No person may base any suit on any contract in

violation of this act or any rule or order hereunder if he

has made or engaged in the performance of such

contract or has acquired any purported right under

any such contract with knowledge of the facts by

reason of which its making or performance was in

violation.

70 Pa. Cons. Stat. S 1

- 508. The plaintiffs have premised

their claim for declaratory relief under this section of the

PSA. This section, however, does not create an affirmative

cause of action on which the pla intiffs can seek relief.

Section 506 puts clear limitations on a party's ability to

assert a right of action under the PSA. According to that

provision:

Except as explicitly provided in this act, no civil

liability in favor of any pr ivate party shall arise against

any person by implication from or as a result of the

violation of any provision of this act or any rule or

order hereunder. Nothing in this act shall limit any

13

liability which may exist by virtue of any other statute

or under common law if this act were not in effect.

70 Pa. Cons. Stat. S 1

- 506. Section 508 does not explicitly

provide for civil liability; rather, it simply creates a defens e

to any suit brought on a contract that violates the PSA.

Thus, the plaintiffs could only have brought their action

under S 501, which is expressly subject to the one

year/four year statute of limitations of S 504. Therefore,

plaintiffs' action for d eclaratory relief brought two years

after they learned of the violation and over nine years after

the allegedly fraudulent transaction, is barred by the

statute of limitations applicable to the corollary legal claim.

Judge Huyett, therefore, did not er r in dismissing Count II

as time

- barred.3

C.

The district court dismissed Count III as time

- barred.

Count III sought a declaratory judgment that, pursuant toPennsylvania common law, the investor notes are void and

unenforceable as they were obta ined by fraud in violation of

Pennsylvania tort law. The statute of limitations in

Pennsylvania is two years for "[a]ny other action or

proceeding to recover damages for injury to person or

property which is founded on negligent, intentional, or

other wise tortious conduct or any other action sounding in

trespass, including deceit or fraud." 42 Pa. Cons. Stat.

S 5524(7). The plaintiffs concede that they knew of the

fraud by October 11, 1993; the complaint was notfiled

until November, 1995. An indepe ndent action clearly would

be barred by the two

- year statute of limitations governing

fraud actions. Accordingly, the action for declaratory relief

here is governed by the applicable statute of limitations on

the concurrent legal remedy. We, therefore, see no error by

the district court's dismissal of Count III as time

- barred.

_________________________________________________________________

3. An action brought in equity is governed by the doctrine of laches. See

Russell v. Todd, 309 U.S. 280, 28 7 (1940). Therefore, had the plaintiffs

sought equitable relief, or if the corollary action to their declaratory

judgment suit is viewed as an action in equity, the claim would still be

time

- barred by the doctrine of laches.

14

III.

The district court also dismissed Count IV of plaintiffs'

claim which sought relief under the UTP/CPL, 73 P.S.

S S 201

- 1 to 201

- 9.2. Specifically, the plaintiffs sought relief

under S 201

- 9.2, which provides a private right of a ction

for:

[A]ny person who purchases or leases goods or services

primarily for personal, family or household purposes

and thereby suffers any ascertainable loss . . . as a

result of the use or employment by any person of a

method, act or practice declared unlawful by section 3

of this act.

The trial court stated that "[i]n order to bring a private

action under Section 201

- 9.2, plaintiffs must show that

they purchased or leased goods or services. Becau se

plaintiffs' purchase of the Evergreen units does not involve

the provision of a service, plaintiffs may bring an action

under Section 201

- 9.2 if the units are "goods" within the

meaning of the act." Algrant v. Evergreen Valley Nurseries

Ltd. Partne rship, 941 F. Supp. 495, 499 (E.D. Pa. 1996).

The court then held that investment securities were neither

goods nor services under its construction of Pennsylvania

law. The court was also persuaded that the PSA coveredconduct and practices relating to securities transactions to

the exclusion of the Pennsylvania consumer protection

laws, and that plaintiffs had failed to state a cause of action

for which relief could be granted. Accordingly, the district

court then dismissed Count IV.

The distric t court examined the UTP/CPL in light the

Federal Trade Commission Act ("FCTA"), 15 U.S.C. S S 41

- 47, as well as cases involving other state's unfair trade

practices statutes with identical language. Pennsylvania

courts have looked to the FCTA for gui dance in construing

the UTP/CPL. See Commonwealth v. Monumental Properties,

Inc., 329 A.2d 812, 818

- 20 (Pa. 1974). The FCTA has not

been applied to securities transactions. As the district court

observed, courts construing state law in light of the FTC A

have found, that despite its broad language and remedial

scope, the FTCA and similar state consumer protections

laws do not extend to investment securities. See Spinner

15

Corp. v. Princeville Development Corp ., 849 F.2d 388, 393

(9th Cir. 1988); Stephenson v. Paine Webber Jackson &

Curtis, Inc., 839 F.2d 1095, 1101 (5th Cir. 1988); Lindner v.

Durham Hosiery Mills, Inc., 761 F.2d 162, 167 (4th Cir.

1985). In each of the foregoing cases, the courts noted tha t

the state legislatures had enacted extensive laws regulating

the sale of the securities. Giving plaintiffs a remedy under

both consumer protection laws and securities laws would

be "inconsistent with a coherent legislative intent." Spinner

Corp., 84 9 F.2d at 391. Pennsylvania also extensively

regulates securities transactions pursuant to the

Pennsylvania Securities Act of 1972, 70 P.S. S S 1

- 101 to

1

- 704 (1994 and Supp. 1997), and provides remedies under

that Act. We also believe that allowing pl aintiffs to obtain

remedies under both the UTP/CPL and the Securities Act is

not consistent with coherent legislative intent.

We turn to the question of whether an investment

security is a "good" under the UTP/CPL. Although Denison

acknowledged that reference to the FTCA for aid in

interpreting the UTP/CPL is for guidance only and is not

controlling, 759 F. Supp. at 205, the exclusion of securities

from the definition of goods under the FTCA is consistent

with Pennsylvania's rules of statutory co nstruction. Thus

we predict, as did the district court, that the Pennsylvania

Supreme Court would hold that investment securities are

not goods under the UTP/CPL and therefore the UTP/CPL

does not provide a cause of action for a party alleging fraud

i n the securities themselves. Accordingly, we conclude that

the district court did not err in dismissing Count IV of the

plaintiff 's complaint for failure to state a cause of actionupon which relief could be granted.

We find no Pennsylvania case law addressing this issue.

The plaintiffs argue that those federal courts that have

confronted this issue have split on whether the UTP/CPL

covers the sales of investment securities, while the majority

holding that the UTP/CPL does cover these transaction s.4

_________________________________________________________________

4. See Lebovic v. Nigro, Civ. No. 96

- 319, 1996 WL 179982, at *2 (E.D. Pa.

Apr. 15, 1996); S. Kane & Son Profit Sharing Trust v. Marine Midland

Bank, Civ. No. 95

- 7058, 1996 WL 20060 3, at *3 (E.D. Pa. Apr. 25, 1996);

Advest Inc. v. Kirschner, Civ. No. 92

- 6656, 1994 WL 18592, at *2 (E.D.

Pa. Jan. 21, 1994); Denison v. Kelly, 759 F. Supp. 199, 202

- 05 (M.D. Pa.

1991); McCullough v. Shearson Lehman Bros. Inc., 1988 WL 23008, *4

(W.D. Pa. Feb. 18, 1988).

16

Only one trial court, in addition to the district court in this

case, has held that it does not. See Klein v. Opp, 944 F.

Supp. 396, 398 (E.D. Pa. 1996).

A closer analysis of the cases r elied upon by the plaintiffs

show that they are distinguishable; most of the cases

involved situations in which the alleged violation of the

UTP/CPL was committed by a brokerage house customarily

selling the securities of third parties. In this case, t he

plaintiffs have alleged that the fraud was in the valuation

fixed by the issuer of the investment securities themselves

and misrepresentations the issuer made concerning these

securities. Plaintiffs have not alleged any fraudulent

conduct in the ac tual sale of the securities.

Denison, 759 F. Supp. at 199, the only case providing an

analysis and reasoning for its conclusion that the UTP/CPL

sale covers the investment securities, addressed a factually

different scenario. There, the fraud alleged was in the

actual sale of the securities from a brokerage house to the

plaintiffs. In Denison, the plaintiffs alleged that the

defendants "had churned their account and had purchased

investments inappropriate to the plaintiffs' stated desire for

long term growth and appreciation." 759 F. Supp. at 200.

Therefore, the alleged fraudulent conduct was in the

"services" provided by the brokerage house, which is

covered by the UTP/CPL. The plaintiffs did not allege any

fraud related to the securities the mselves.

The other cases holding that the UTP/CPL covers the

purchase of securities also deal specifically with the

transaction, and not with the securities themselves. See S.

Kane & Son, 1996 WL 200603, at *3 (claim that seller ofinvestment used m oney in regular operations rather than in

escrow account as promised and subsequently went

bankrupt); Advest Inc., 1994 WL 18592, at *2 (actionable

conduct was broker's fraudulent assurance that shares

could be sold at profit); McCullough, 1988 WL 2300 8, at *4

(claims allege that broker misled purchaser by providing

inaccurate information and advice regarding securities).5

_________________________________________________________________

5. Two of the cases cited by the plaintiffs for the proposit ion that the

UTP/CPL covers securities transactions assumed this for purposes of

17

These cases all involve the provision of services and thus

are squarely within the protections of the UTP/CPL.

The only case which cannot be so readily distinguished is

Lebovic v. Nigro, 1996 WL 179982, *2 (E.D. Pa. Apr. 15,

1996). In Lebovic, the plaintiff orally agreed to form a new

corporation with the defendant and bought "shares" in this

new corporation. The defendant a llegedly never performed

his part of the oral bargain and converted the money

plaintiff paid for these shares in the new corporation to his

own personal use. 1996 WL 179982 at *1. The court,

without analysis, held that the UTP/CPL applied to the

purch ase of securities, simply citing S. Kane & Sons,

Denison, & McCullough. Id. at *2. The court then dismissed

the claim, however, holding that the plaintiff, who had

purchased the stock as part of an ownership agreement,

was not a consumer within the con templation of the

UTP/CPL. Id. at *3. Thus, this case offers little support for

the proposition that the UTP/CPL covers investment

securities as "goods" under S 9.2. In fact, it could

contemplate a ruling that the plaintiffs, purchasers of

interests i n a limited partnership, are not "consumers"

protected under the UTP/CPL.

The difficulty arises because the term "goods" is not

expressly defined in the UTP/CPL. Pennsylvania law,

however, has established rules of statutory construction to

be employ ed when defining a term not defined in the

statute itself. There are a number of approved ways of

construing terms that are not otherwise defined in the

statute. Generally, "[w]ords and phrases shall be construed

according to their common and approved usage." 1 Pa.

Cons. Stat. S 1903(a). According to the dictionary, the term

"goods" generally does not include securities. See Webster's

Seventh New Collegiate Dictionary 360 (1969). Additionally,

words can be construed by reference to other statutes. 1

_________________________________________________________________reaching other issues and did not directly reach that matter. See Klein

v. Boyd, 949 F. Supp. 280, 285 (E.D. Pa. 1996) (assuming UTP/CPL

covers sale of securities to decide privity is sue); Rosen v. Fidelity

Fixed

Income Trust, 169 F.R.D. 295 (E.D. Pa. 1995) (assuming UTP/CPL covers

sale of securities to determine class certification issue). Thus, these

cases are not persuasive on the critical issue before us.

18

Pa. Cons. Stat. SS 1921(c), 1932. The district court did just

that, comparing the term "goods" under the UTP/CPL with

the term "goods" under the Uniform Commercial Code.

As the district court noted, the Pennsylvania legislature

used the same language in section 201

- 9.2 of the UTP/CPL

as it did in defining "consumer goods" in Pennsylvania's

Uniform Commercial Code. Compare 13 Pa. Cons. Stat.

S 9109 ("Goods are: (1) `Consumer goods' if they are used or

bought for use primarily for personal, family or household

purposes.") with 73 Pa. Cons. Stat. S 201

- 9.2 (providing

right of action for person buying or leasing "goods or

services primarily for personal, family or household

purposes"). Under the UCC provision dealing with sale s,

"goods" is defined as "all things (including specially

manufactured goods) which are movable at the time of

identification to the contract for sale other than . . .

investment securities." 13 Pa.Cons. Stat. S 2105(a). In fact,

the Pennsylvania UCC contains a separate provision dealing

solely with investment securities. See 13 Pa. Cons. Stat.

S 8101 et seq. Thus, by comparing this statute to the UCC,

the district court determined that the definition of goods

under the UTP/CPL does not include inv estment securities.

IV.

Accordingly, the district court committed no error in its

order dismissing the plaintiffs' complaint. The dismissal of

the action, however, is without prejudice to the plaintiffs'

right to invoke the claims they have raised in this

proceeding as defenses to any suit brought by the Trust to

collect upon the notes referred to in this action.

Each side to bear its own costs.

19

MANSMANN, J., dissenting.

I believe that a party ma y bring a defensive declaratoryjudgment action to assert his non

- liability for future

obligations under a written instrument so long as the

jurisdictional requirements of the Declaratory Judgment

Act are satisfied, even when the party's unpursued caus e of

action for damages based on the same instrument is time

barred. I also believe that purchasers of investment

securities may seek the protection of the Pennsylvania

Unfair Trade Practices and Consumer Protection Law so

long as the securities are purchased primarily for personal

purposes. I respectfully dissent.

I.

The primary purpose of the Declaratory Judgment Act is

"to avoid accrual of avoidable damages to one not certain of

his rights and to afford him an early adjudication without

w aiting until his adversary should see fit to begin suit, after

damage had accrued." Travelers Ins. Co. v. Davis, 490 F.2d

536, 543 (3d Cir. 1974) (quoting E. Edelmann & Co. v.

Triple

- A Specialty Co., 88 F.2d 852, 854 (7th Cir. 1937));

accord Cunningham Bros., Inc. v. Bail, 407 F.2d 1165,

1167

- 68 (7th Cir. 1969); Luckenbach Steamship Co. v.

United States, 312 F.2d 545, 548 (2d Cir. 1963). The Act

allows "prospective defendants to sue to establish their

nonliability." Beacon Theatres, Inc. v. Westover , 359 U.S.

500, 504 (1959).

Bearing in mind the remedial character and legislative

purpose of the Declaratory Judgment Act, we have

repeatedly emphasized that the Act should have a liberal

interpretation. Exxon Corp. v. Federal Trade Comm'n, 588

F. 2d 895, 900 (3d Cir. 1978); Simmons Aerocessories v.

Elastic Stop Nut Corp. of Am., 257 F.2d 485, 489 (3d Cir.

1958); Aralac, Inc. v. Hat Corp. of Am., 166 F.2d 286, 291

(3d Cir. 1948). Indeed, federal courts' jurisdiction over

declaratory judgment act ions are limited by just two

primary considerations: the action must present a case or

20

controversy and it must be ripe for disposition. Travelers

Ins. Co. v. Obusek, 72 F.3d 1148, 1153

- 54 (3d Cir. 1995).1

T he district court and the majority do not contend that

Algrant failed to satisfy the "case or controversy" or

"ripeness" requirements under the Act. Rather, the majority

agrees with the district court that Algrant's first three

causes of action are bar red by the statute of limitations.

Actions for declaratory relief do not have their own

statute of limitations. See Luckenbach, 312 F.2d at 548

("Limitations statutes do not apply to declaratory judgmentsas such. . . . There are no statutes which pr ovide that

declaratory relief will be barred after a certain period of

time."). Rather, since "[d]eclaratory relief is a mere

procedural device by which various types of substantive

claims may be vindicated," it is the substance of the right

sued on, and not the remedy invoked, that governs the

applicable limitations period. Id. at 548 & n.2. As the

district court observed, "the declaratory judgment action

must be brought within the limitations period applicable to

the substantive claim underlying the request for declaratory

relief." Algrant v. Evergreen Valley Nurseries Ltd.

Partnership, 941 F. Supp. 495, 497 (E.D. Pa. 1996).

The substantive claim Algrant seeks to vindicate in

pursuing Counts I through III is the claim that Algrant is

not li able for future obligations under the Investor Notes.

Algrant invokes section 29 of the Securities and Exchange

_________________________________________________________________

1. To satisfy the "case or controversy" requirement, a declaratory

judgm ent action must present a legal controversy (1) that is real and not

hypothetical, (2) that affects an individual in a concrete manner so as to

provide the factual predicate for reasoned adjudication, and (3) that

sharpens the issues for judicial resolu tion. Obusek, 72 F.3d at 1154

(citing Armstrong World Indus., Inc. v. Adams, 961 F.2d 405, 410 (3d Cir.

1992)).

To satisfy the "ripeness" requirement, a plaintiff in a declaratory

judgment action must demonstrate (1) that the probability of future

h arm is real and substantial, of sufficient immediacy and reality to

warrant the issuance of a declaratory judgment, (2) that the legal status

of the parties will be changed by the declaration, and (3) that the

declaratory judgment will have utility (i.e ., that it will be of some

practical help to the parties). Id. at 1154

- 55.

21

Act of 1934, section 508 of the Pennsylvania Securities Act,

and common law fraudulent inducement for the sole

purpose of establishin g his non

- liability under the Notes.

Algrant does not seek damages pursuant to these laws;

rather, Algrant relies on these laws to establish a defense to

the defendants' anticipated claims to enforce the Notes.

Since the substantive claim underlying the declaratory

judgment action is Algrant's defense to the defendants'

potential claim under the Notes, the declaratory judgment

action is not time

- barred until the defendants' claim is

time

- barred. As the Court of Appeals for the Second Circuit

held in Luckenbach:

Non

- liability is the negative of the claim or cause ofaction with respect to which the declaration is sought.

For purposes of the statute of limitations non

- liability

is inextricably linked with that cause of action. So long

as the claim can be made, its negative can be asserted.

When the claim itself has been barred, a declaration of

non

- liability is also barred . . . .

Luckenbach, 312 F.2d at 549; see also United States v.

West ern Pac. R.R. Co., 352 U.S. 59, 72 (1956) (statutes of

limitations do not apply to defenses).

The majority perceives Counts I through III quite

differently. The majority focuses on the limitations periods

governing offensive actions for damages broug ht under the

laws which Algrant cites to establish a defense. The

majority reasons that, since an independent cause of action

for damages under these laws would have been barred, so

too must a defensive declaratory judgment action which

invokes these laws be barred. I believe that the majority

misconstrues the nature of Algrant's claim. The substantive

claim underlying Algrant's request for declaratory relief is

not the claim for damages Algrant elected not to pursue;

Algrant does not seek a coerci ve judgment. Rather, the

substantive claim is the defendants' potential action against

Algrant to enforce the Notes. Counts I through III do not

exist for the purpose of establishing that the defendants

committed fraud; rather, they exist to establish that Algrant

is not liable under the Notes. Cf. Luckenbach, 312 F.2d at

548 (declaratory judgment action may proceed when

22

plaintiff seeks "only a declaration of non

- liability" and not

a time

- barred "coercive judgment").

The majority concludes that Algrant may not assert the

defenses articulated in Counts I through III until the

defendants seek enforcement of the Notes. Under the

majority's reasoning, Algrant's claims are both stale and

unripe; they were brought both too late and too soon. Given

that the jurisdictional requirements of the Declaratory

Judgment Act are satisfied now, it makes little sense to

force Algrant to wait (while potential liability looms) until

the defendants seek judicial enfor cement of the Notes

before asserting the very defenses which he properly asserts

in this action. As a prospective defendant seeking to obtain

an early adjudication of an actual controversy so as to

avoid the accrual of avoidable damages, Algrant is exa ctly

the type of person the Declaratory Judgment Act was

intended to assist.

The majority improperly links the timeliness of defensivedeclaratory judgment actions with the timeliness of other

remedies that might have been available had Algrant

cho sen to pursue them. The Declaratory Judgment Act

provides that courts "may declare the rights and other legal

relations of any interested party seeking such declaration,

whether or not further relief is or could be sought." 28 U.S.C.

S 2201(a) (emphasi s supplied). Indeed, when coercive relief

is deemed unavailable, the court may, "if it serves a useful

purpose, grant instead a declaration of rights." Fed. R. Civ.

P. 57 advisory committee's note. Thus, the availability of a

declaratory judgment remed y is not dependent on the

existence or timeliness of an alternative, coercive remedy.

Written instruments "may be construed before or after

breach at the petition of a properly interested party." Id.

Under the majority's reasoning, however, written

instruments may only be construed (1) after breach, in

litigation of an action on that breach or (2) sufficiently

before breach so as to coincide with a timely cause of

action for damages based on conduct which may also

render the written instrument un enforceable. During these

periods, the declaratory judgment plaintiff ordinarily has

other options (e.g., asserting a defense, bringing a claim for

damages), and the declaratory judgment action often

23

becomes redundant. The majority prevents an individual

from seeking a declaratory judgment when it would be most

useful

-- during an actual controversy, when the party

threatened with liability desires an early adjudication to

avoid the unnecessary accrual of damages without waiting

until his adversary should see fit to begin an action after

the damage has accrued. See Saum v. Widnall, 912 F.

Supp. 1384, 1394 (D. Colo. 1996).

In Silverman v. Eastrich Multiple Investor Fund, L.P., 51

F.3d 28 (3d Cir. 1995 ), the plaintiff brought an action

seeking a declaration that the requirement that she

guarantee a loan for the benefit of her spouse was in

violation of the Equal Credit Opportunity Act. We held that

even if the plaintiff's "right to initiate an actio n for damages

based upon such alleged violations is barred by the statute

of limitations, no such bar exists to asserting such violation

as a defense to efforts to collect on said guaranty." Id. at 29

(emphasis supplied). We permitted the plaintiff's

declaratory judgment action to go forward because it was

defensive in nature. The majority reads Silverman narrowly,

concluding that the plaintiff 's declaratory judgment action

was only permitted because the action was brought in

response to the defen dant's state court confession of

judgment.I interpret Silverman more broadly, to permit a party to

bring a defensive declaratory judgment action (i.e., to

thwart "efforts" to enforce a written instrument), even when

the action raises issues that wo uld be time

- barred if

brought offensively (i.e., to obtain damages). Id. at 32. The

Declaratory Judgment Act permits parties to bring an

action to establish a defense even before a controversy has

reached the stage at which the declaratory judgment

de fendant may sue for coercive relief. By forcing Algrant to

wait until the defendants bring suit on the Notes, the

majority has undermined the primary purpose of the Act.

The cases from our sister courts of appeals cited by the

majority are distinguis hable. In Levald, Inc. v. City of Palm

Desert, 998 F.2d 680 (9th Cir. 1993), for example, the

plaintiff's challenge to an ordinance was time

- barred

because the plaintiff suffered a single harm, measurable

and compensable when the ordinance was passed y ears

24

before. Id. at 688. The declaratory judgment action was no

different in substance from the time

- barred action for

damages for the past injury. See also International Ass'n of

Machinists & Aerospace Worke rs v. Tennessee Valley Auth.,

108 F.3d 658, 667

- 68 (6th Cir. 1997) (plaintiff 's claim for

declaratory relief was tied to time

- barred substantive claims

for damages arising from prior breach of collective

bargaining agreement; court was not faced with actual

controversy about anticipated future breach); Clulow v.

Oklahoma, 700 F.2d 1291, 1293

- 95, 1302

- 03 (10th Cir.

1983) (declaratory judgment plaintiff could not vindicate

past alleged wrongs in claims that were inextricably linked

to time

- barred ca uses of action for damages). In contrast,

Algrant does not seek to vindicate prior wrongs in an action

indistinguishable from a time

- barred offensive action for

damages. Algrant merely seeks a declaration about a future

obligation.

In Gilbert v. Cit y of Cambridge, 932 F.2d 51 (1st Cir.

1991), also cited by the majority, the plaintiffs' "as

- applied"

challenge to an ordinance was barred by the statute of

limitations because the injury was inflicted at the time the

ordinance was applied; the substan ce of the claim was no

different from the time

- barred claim for damages. Id. at 57

- 58. Importantly, the court also noted that the declaratory

judgment action was not yet "mature as to any potential

enforcement action." Id. at 58 (emphasis supplied). T he fact

that "potential" enforcement actions remained mere

"theoretical possibilities" rendered the plaintiffs' declaratory

judgment action unripe. Id. In contrast, Algrant'sdeclaratory judgment action is ripe; there is a present

controversy about th e defendants' expected enforcement of

a future obligation.2

_________________________________________________________________

2. The majority also cites Town of Orangetown v. Gorsuch, 718 F.2d 29

(2d Cir. 1983), but that case was decided under New Yo rk law. Id. at 41

- 42. Under Pennsylvania law, a party may pursue a declaratory judgment

action to ascertain future obligations of the parties to a contract even

though a damages claim for breach of contract is time

- barred. Wagner v.

Apollo Gas Co., 58 2 A.2d 364, 365

- 66 (Pa. Super. Ct. 1990). In

Pennsylvania, a four

- year "catch all" statute of limitations applies to

certain declaratory judgment actions, see 42 Pa. Cons. Stat. Ann.

S 5525(8), but the statute does not begin to run until there exists an

" `actual controversy' indicating immediate and inevitable litigation, and

a direct, substantial and present interest." Wagner, 582 A.2d at 366.

25

II.

The Pennsylvania Unfair Trade Practices and Consumer

Pr otection Law ("UTP/CPL"), Pa. Stat. Ann. tit. 73, S 201

- 1

et seq., provides that any person who purchases "goods or

services primarily for personal, family or household

purposes and thereby suffers any ascertainable loss of

money or property" may bring a private action for damages.

Id. S 201

- 9.2(a). The legislative intent in enacting the

UTP/CPL was "to enhance the protection of the public from

unfair or deceptive business practices. . . . The central

underlying intent was fraud prevention, and the act must

be construed liberally to effectuate that remedial intent."

Valley Forge Towers S. Condominium v. Ron

- Ike Foam

Insulators, Inc., 574 A.2d 641, 644 (Pa. Super. Ct. 1990),

aff 'd, 605 A.2d 798 (Pa. 1992); accord Commonwealth v.

Monumental Prope rties, Inc., 329 A.2d 812, 815

- 17 (Pa.

1974) (Consumer Protection Law is to be construed liberally

to effect object of preventing unfair or deceptive practices).

When determining the scope of the UTP/CPL, I note that

the Act is not concerned with the type of product

purchased; instead, it is concerned with the purpose of the

purchase. "The purpose of the purchase, and not the type

of product purchased, controls." Valley Forge, 574 A.2d at

648 (emphasis in original). So long as the product

(whatev er its type) is purchased "primarily for personal,

family or household purposes," the purchase is protected

by the Act. Thus, in deciding whether the Evergreen units

purchased by Algrant come within the protection of the

UTP/CPL, we should focus on the purpose of the purchase.

There is no indication that Algrant purchased theEvergreen units as a limited partner for a business

purpose. Rather, the securities were purchased as personal

investments. Due to the passive nature of the typical

limited partnership arrangement, an individual who invests

in a limited partnership is not characterized as engaging in

business activity. See Freedman v. Tax Review Bd. of City

of Phila., 243 A.2d 130, 133

- 35 (Pa. Super. Ct. 1968), aff'd,

258 A.2d 323 (Pa. 19 69). Algrant was a passive limited

partner who did not participate in the business in any way.

Since Algrant purchased the Evergreen units for a personal

26

purpose, he was not engaged in a business activity and the

purchase is protected by the UTP/CPL.

The majority focuses on the term "goods" and notes that

investment securities are excluded from the definition of

"goods" under the Pennsylvania Uniform Commercial Code

("UCC") provision dealing with sales. 13 Pa. Cons. Stat.

Ann. S 2105(a). In so doing, the majority reads an exception

into the UTP/CPL that is not present. Indeed, while the

UCC may limit its scope by expressly excluding investment

securities from its definition of "goods," Ifind it tellin g that

the UTP/CPL does not contain such an exclusion. Cf.

Monumental Properties, 329 A.2d at 824 (cautioning courts

not to "woodenly apply" definition in UCC, which furthers

commercial objectives, to the Consumer Protection Law,

which furthers consum er objectives; to do so might"defeat

the [Consumer] Law's remedial objects").

In Monumental Properties, the court emphasized its

intention to interpret the Consumer Protection Law broadly:

There is no indication of an intent to exclude a cla ss or

classes of transactions from the ambit of the Consumer

Protection Law. When the Legislature deemed it

necessary to make an exception from the Law's scope,

it did so in clear language.

329 A.2d at 815 n.5. The UTP/CP L contains no "clear

language" excluding the purchase of personal investment

securities from the protection of the law. The legislature

could easily include such language, as it did for

broadcasters, printers and publishers. Pa. Stat. Ann. tit.

73, S 201

- 3. Until the legislature chooses to create a

"securities exception" to the UTP/CPL, the courts should

not recognize one.

For the foregoing reasons, I respectfully dissent.

A True Copy:Teste:

Clerk of the United States Court of Appea ls

for the Third Circuit

27