Opinion ID: 3036350
Heading Depth: 2
Heading Rank: 3

Heading: Hunt Must Allege Justifiable Reliance Under

Text: the “Deception” Prong of the Post-1996 Catch- all Provision Given the Pennsylvania courts’ repeated holdings that “[t]o bring a private cause of action under the [Consumer Protection Law], a plaintiff must show that he justifiably relied on the defendant’s wrongful conduct or representation and that he suffered harm as a result of that reliance,” Yocca, 854 A.2d at 438 (where, as here, the plaintiffs pressed a claim under the post-1996 catch-all provision, see id.; Plaintiffs[’] Third Amended Class Action Complaint in Civil Action at 18–19, Yocca, No. GD 01-016041), we conclude that private plaintiffs alleging deceptive conduct under the statute’s post-1996 catchall provision must allege justifiable reliance. 15 Hunt’s arguments to the contrary do not persuade us. First, he contends that the Pennsylvania Supreme Court meant to create a justifiable reliance requirement only for claims of fraud, not claims of deceptive or unfair practices. Hunt’s Br. 15–18. He points to the Court’s statement in Weinberg that “[n]othing in the [statute’s] legislative history suggests that the legislature ever intended statutory language directed against consumer fraud to do away with the traditional common law elements of reliance and causation.” 777 A.2d at 446 (emphasis added). This language hardly means that only plaintiffs bringing claims under the provisions of § 201-2(4) that pertain to fraud need allege justifiable reliance. Indeed, in Weinberg the Court required the plaintiffs to allege justifiable reliance under Consumer Protection Law § 201-2(4)(v), which the Court described as an allegation of “deceptive marketing of goods.” Id. at 444 (emphasis added); see supra note 7. And to the extent the Weinberg Court arguably suggested a limitation of the sort Hunt would have us recognize, that suggestion, as noted above, was dispelled by Yocca. Similarly, we find Hunt’s arguments relating to the 1996 amendment to the catch-all provision unpersuasive. He argues, and the District Court concluded, that after the 1996 amendment’s addition of the words “or deceptive” to the catchall provision, a plaintiff alleging deception under that provision need not prove all the elements of common-law fraud.13 Hunt, 13 “[T]o establish common law fraud, a plaintiff must prove: (1) misrepresentation of a material fact; (2) scienter; (3) intention by the declarant to induce action; (4) justifiable 16 2006 WL 2619806, at ; Hunt’s Br. 10–14. Some authority supports that proposition. See, e.g., Commonwealth v. Percudani, 825 A.2d 743, 746–47 (Pa. Commw. Ct. 2003). But even accepting that proposition for the sake of argument, it does not necessarily follow that justifiable reliance is one of the common-law-fraud elements from which a private Consumer Protection Law plaintiff alleging mere deception is excused. Such a reading is especially appropriate because the justifiable-reliance requirement on which we base our decision emanates not from the catch-all provision that the legislature amended in 1996, but rather from the private-plaintiff standing provision. See Schwartz, 932 A.2d at 897 & n.16; Weinberg, 777 A.2d at 445–46. A private-plaintiff standing provision, by its nature, applies to all private plaintiffs, whatever substantive subsection of § 201-2(4) they invoke, for its purpose is to separate private plaintiffs (who may only sue for harm they actually suffered as a result of the defendant’s deception) from the Attorney General (who may sue to protect the public from conduct that is likely to mislead). See Schwartz, 932 A.2d at 897 n.16; Weinberg, 777 A.2d at 444–46.14 It is thus reliance by the party defrauded upon the misrepresentation; and (5) damage to the party defrauded as a proximate result.” Colaizzi v. Beck, 895 A.2d 36, 39 (Pa. Super. Ct. 2006). 14 By contrast, the Pennsylvania Commonwealth Court’s decision in Percudani involved a suit by the Pennsylvania Attorney General, not private plaintiffs, so the Consumer Protection Law’s private-plaintiff standing provision was not at issue there. See 825 A.2d at 744. 17 unsurprising that in Yocca, where the plaintiffs sued under the amended version of the catch-all provision, see Plaintiffs[’] Third Amended Class Action Complaint in Civil Action at 18–19, Yocca, No. GD 01-016041, the Pennsylvania Supreme Court continued to hold that justifiable reliance is a requirement for private plaintiffs, see 854 A.2d at 438–39 (citing Weinberg, 777 A.2d at 446 (grounding reliance requirement in privateplaintiff standing provision)).15 Toy is not to the contrary. There, the Pennsylvania Supreme Court dismissed as “irrelevant” the plaintiff’s argument that the 1996 amendment to the Consumer Protection Law’s catch-all provision confirmed that justifiable reliance was not required. 928 A.2d at 203 n.20. That argument was irrelevant because the plaintiff was actually suing under the pre1996 version of the statute. Id. Hunt overreads Toy to the extent he argues that because the Court found the argument “irrelevant” as to a claim under the pre-1996 statute, it must have found that argument “relevant” as to the post-1996 version of the statute. We read footnote 20 in Toy as merely suggesting that even assuming the plaintiff’s argument had merit under the post-1996 catch-all provision, this would not help the plaintiff because she was suing under the pre-1996 provision. Assuming 15 We thus think mistaken those trial-court opinions that rely on the 1996 amendment to conclude that reliance is no longer required of private plaintiffs suing under the Consumer Protection Law’s catch-all provision. See, e.g., Alberton v. Commonwealth Land Title Ins. Co., 247 F.R.D. 469, 480–81 (E.D. Pa. 2008); Foultz v. Erie Ins. Exch., No. 3053, 2002 WL 452115, at –12 (Pa. C.P. Mar. 13, 2002). 18 a premise for the sake of argument, of course, is not the same as validating that premise. This reading of footnote 20 is especially appropriate because, as discussed above, Toy reiterated the standing rule of Weinberg that “a plaintiff alleging violations of the Consumer Protection Law must prove the common law fraud element of justifiable reliance.” Id. at 208. We also find unpersuasive Hunt’s argument that some subsections of § 201-2(4) are incompatible with a justifiablereliance requirement. See Hunt’s Br. 15 n.3 (citing § 201- 2(4)(xii) (proscribing certain buyer referral agreements), (xiii) (proscribing pyramid and chain-letter schemes), (xiv) (proscribing failure to honor written warranty), (xvi) (proscribing repairs or improvements that are inferior to what was promised in writing), (xviii) (proscribing confession-ofjudgment clauses in consumer contracts)). He does not explain why a justifiable-reliance requirement would be incompatible with these subsections. To the extent he means that some of these subsections do not appear to proscribe deception or fraud (thus making it odd to ask whether the plaintiff would have purchased the product had he known the “truth”), this argument is inapplicable to this case, as here the wrong that Hunt attributes to Smokeless is deception. Hunt’s complaint is that Sm okeless’s “decep tion, including its affirm ative misrepresentations and omissions concerning the price of moist smokeless tobacco products, likely misled all consumers acting reasonably under the circumstances to believe that they were purchasing moist smokeless tobacco products at prices born[e] by a free and fair market.” App. 83 (Complaint); see also Hunt’s Br. 6 (“The issue here is whether a claim for ‘deceptive 19 conduct’ under the catch-all provision requires proof of justifiable reliance.”).16 In sum, the Supreme Court of Pennsylvania has announced and applied a broad rule that private plaintiffs must allege justifiable reliance under the Consumer Protection Law. We thus think it imprudent to create an exception here for plaintiffs suing under the “deception” prong of the Consumer Protection Law’s catch-all provision, and we decline to do so. V. Hunt Has Not Adequately Pled Justifiable Reliance Hunt has not adequately alleged that he justifiably relied on Smokeless’s deception, for he has not alleged that Smokeless’s deception induced him to purchase Smokeless’s products or engage in any other detrimental activity. See Weinberg, 777 A.2d at 446 (stating that the plaintiff in that case “must allege reliance, that he purchased Ultra® because he heard and believed Sunoco’s false advertising” (emphasis added)). Although Hunt alleges he and his putative class members “relied on a presumption that they were paying prices set by an efficient market,” App. 49 (Complaint), he leaves us guessing as to how his knowledge that the market was 16 Hunt also cites Commonwealth v. Monumental Props. Inc., 329 A.2d 812, 817 (Pa. 1974), for its admonition that the Consumer Protection Law “is to be construed liberally to effect its object of preventing unfair or deceptive practices.” But Weinberg relied on Monumental Properties as support for its justifiable-reliance requirement. See Weinberg, 777 A.2d at 446. 20 inefficient would have changed his conduct. “[A] court need not credit a complaint’s ‘bald assertions’ or ‘legal conclusions’ when deciding a motion to dismiss.” Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). We reject Hunt’s suggestion that he enjoys a presumption of reliance, as this suggestion is inconsistent with Pennsylvania case law. See Toy, 928 A.2d at 202 (stating that “a plaintiff alleging violations of the Consumer Protection Law must prove justifiable reliance” (emphasis added)); Yocca, 854 A.2d at 438 (“To bring a private cause of action under the [Consumer Protection Law], a plaintiff must show that he justifiably relied on the defendant’s wrongful conduct or representation and that he suffered harm as a result of that reliance.”). Hunt cannot enjoy a presumption of what he must prove affirmatively—that is, under the Consumer Protection Law, Hunt must prove justifiable reliance affirmatively. A presumption of reliance is also inconsistent with Pennsylvania Superior Court precedent. In Debbs, for instance, the Pennsylvania Superior Court interpreted Weinberg and other precedents to require an individualized showing by each private plaintiff suing under the Consumer Protection Law’s post-1996 catch-all provision that he actually relied on the defendant’s alleged material omission (i.e., that the omission actually affected his decision whether to purchase the product). 810 A.2d at 155–58 (suit against Chrysler by automobile owners who alleged that Chrysler withheld information that air bag deployment caused serious burns). Rejecting a broad 21 presumption of reliance,17 the Court decided that common questions of law and fact did not predominate over individual issues. Thus, it held that the plaintiffs’ Consumer Protection Law claims were not appropriate for class certification. Id. at 158–59. Similarly, in Aronson v. GreenMountain.com, the Superior Court refused to presume reliance by customers of GreenMountain who sued the company under the Consumer Protection Law for false advertising. 809 A.2d 399, 405 (Pa. Super. Ct. 2002). The Court reasoned that “‘[t]here is no authority which would permit a private plaintiff to pursue an advertiser because an advertisement might deceive members of the audience and might influence a purchasing decision when the plaintiff himself was neither deceived nor influenced.’” Id. (quoting Weinberg, 777 A.2d at 446). Hunt’s arguments to the contrary do not convince us. His reliance on cases from non-Pennsylvania jurisdictions that do presume reliance is misplaced, as those cases (state cases, and federal cases imposing no constitutional or other federal restraint on Pennsylvania’s Consumer Protection Law) do not bind the Pennsylvania Supreme Court. In any event, unlike the claims in many of those cases, see, e.g., Basic Inc. v. Levinson, 485 U.S. 224 (1988), Hunt’s claim does not lend itself to a presumption of reliance. Securities-fraud cases, for instance, presume reliance where a defendant makes material 17 The Court recognized a narrow exception, not applicable to our case, that allows a presumption of reliance where the defendant and plaintiffs are in a fiduciary relationship. Id. at 157. 22 misrepresentations about a company to an efficient securities market. See Basic, 485 U.S. at 245–47. There, “[b]ecause most publicly available information is reflected in [the] market price, an investor’s reliance on any public material misrepresentations, therefore, may be presumed for purposes of a Rule 10b-5 action.” Id. at 247. Hunt, by contrast, does not allege that Smokeless made a misrepresentation to an efficient market; rather, he alleges that Smokeless concealed the inefficiency of the market for Smokeless’s product. Moreover, the presumption of reliance in securities cases stems in part from the materiality of the misrepresented information, and Hunt has not explained how the information Smokeless concealed was material to a purchasing decision. See id. We are hard-pressed to understand how a potential purchaser’s knowledge that a market for a product is inefficient would influence his decision whether to purchase that product. By contrast, where a seller deceives a potential purchaser as to the nature, quality or origin of a product, it is easy to understand the purchaser’s later claim that the misrepresented information was important to his purchasing decision. A purchaser of a car, for instance, can plausibly claim that he might not have made the purchase had he known that the car actually had 200,000 miles on it instead of 200 as he was initially told. But it is far less clear to us that the purchaser would find it important that the market for that car is inefficient. Hunt’s lack of even an attempt at an explanation as to the materiality of Smokeless’s misrepresentations makes us particularly hesitant to accept his conclusory assertion that we should presume he relied on 23 Smokeless’s deception.18