Violating Fundamental Principles of Federalism
A federal court may act as a judicial pioneer when interpreting the United States Constitution and federal law. . . . [H]owever, federal courts may not engage in judicial activism. Federalism concerns require that we permit state courts to decide whether and to what extent they will expand state common law. Our role is to apply the current law of the appropriate jurisdiction, and leave it undisturbed. . . . Absent some authoritative signal from the legislature or the state courts, we see no basis for even considering the pros and cons of innovative theories. We must apply the law of the forum as we infer it presently to be, not as it might come to be.Id. (various citations, including to Challoner, omitted).
Federal courts may not engage in judicial activism. Federalism concerns require that we permit state courts to decide whether and to what extent they will expand state common law. . . . Our role is to apply the current law of the jurisdiction, and leave it undisturbed.Id. at 101. The court of appeals applied the Challoner rule even though the defendants, through removal, were responsible for the case being in federal court.
Public nuisance is a matter of state law, and the role of a federal court ruling on a matter of state law . . . is to follow the precedents of the state’s highest court and predict how that court would decide the issue presented. It is not the role of a federal court to expand or narrow state law in ways not foreshadowed by state precedent.273 F.2d at 541. Then in Philadelphia:
[P]ublic nuisance is a matter of state law, and it is not the role of a federal court to expand state law in ways not foreshadowed by state precedent. Instead, a federal court follows the precedents of the state’s highest court and predicts how that court would decide the issue presented. Pennsylvania precedent does not support the public nuisance claim plaintiffs advance here, and we cannot predict that the Pennsylvania Supreme Court will choose to expand state public nuisance law in the manner plaintiffs urge.Id. at 421 (citations to Lead Industries, Leo, and Camden omitted)
Ignoring Controlling Law - Elements Of Fraud Applying To UTPCPL Claims
The Legislature realized, as has often been stated, that no sooner is one fraud specifically defined and outlawed than another variant of it appears. Rather than restricting courts and the enforcing authorities solely to narrowly specified types of unfair and deceptive practices, the Legislature wisely declared unlawful “any other fraudulent conduct.” This is a common and well-accepted legislative response to the mischief caused by unfair and deceptive market practices.Id. at 826-27 (footnotes omitted).
It readily appears that Commonwealth actions and private actions are distinguishable. . . . There 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.777 A.2d at 445-46 (citations omitted). Because “[t]he UTPCPL’s underlying foundation is fraud prevention,” the court found “nothing in the statute which suggests such a private right” going beyond fraud. Id. at 446 (quoting Monumental Properties). Reviewing the act’s legislative history, the Weinberg court concluded:
Nothing in the 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.Id. (footnote citing legislative history omitted).
[W]e reiterated [in Weinberg] that the [UTPCPL]’s underlying foundation is fraud prevention, and held that nothing in the legislative history of the [UTPCPL] 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. Accordingly, we concluded that all of the plaintiffs’ claims incorporated the traditional elements of common law fraud of reliance and causation.928 A.2d at 202 (numerous cites to Weinberg omitted).
As the type of reliance that a plaintiff alleging common law fraud must prove is justifiable reliance, Weinberg necessarily states that a plaintiff alleging violations of the [UTPCPL] must prove justifiable reliance. Therefore, under Weinberg we hold that justifiable reliance is an element of [plaintiff’s UTPCPL] claims.928 A.2d at 202-03.
To bring a private cause of action under the UTPCPL, 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.Id. at 438 (citing, inter alia, Weinberg).
[T]he Pennsylvania Supreme Court . . . has categorically and repeatedly stated that, due to the causation requirement in the [UTPCPL]’s standing provision, a private plaintiff pursuing a claim under the statute must prove justifiable reliance. It has not recognized any exceptions, and has applied this rule in a variety of situations. These include, in Yocca, a claim-like [plaintiff’s] claim here – under the post-1996 catch-all provision. The Pennsylvania Superior Court has applied the Supreme Court’s standing rule to the post-1996 catch-all provision, and our Court has interpreted the rule to apply to all UTPCPL subsections. Given this significant authority on statutory standing, we think the Pennsylvania Supreme Court would require justifiable reliance where a private plaintiff alleges deceptive conduct under the post-1996 catch-all provision.538 F.3d 221-22 (citing, in addition to cases already mentioned in this post, Schwartz v. Rockey, 932 A.2d 885, 897 n. 16 (Pa. 2007); Debbs v. Chrysler Corp., 810 A.2d 137, 156-58 (Pa. Super. 2002); Sexton v. PNC Bank, 792 A.2d 602, 607-08 (Pa. Super. 2002); and Santana Products, Inc. v. Bobrick Washroom Equipment, Inc., 401 F.3d 123, 136 (3d Cir. 2005)).
Given the Pennsylvania courts' repeated holdings that to bring a private cause of action under the [UTPCPL], 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, we conclude that private plaintiffs alleging deceptive conduct under the statute's post-1996 catchall provision must allege justifiable reliance.538 F.3d at 224-25 (lots more citations omitted).
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[W]e find [plaintiff’s] arguments relating to the 1996 amendment to the catch-all provision unpersuasive. . . . [T]he 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. A private-plaintiff standing provision, by its nature, applies to all private plaintiffs, whatever substantive subsection of [the UTPCPL] 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). It is thus unsurprising that in Yocca, where the plaintiffs sued under the amended version of the catch-all provision, the Pennsylvania Supreme Court continued to hold that justifiable reliance is a requirement for private plaintiffs.
On final passage the bill’s prime sponsor stated:
I state, in my opinion, this bill . . . is the most meaningful bill in this package because it defines unfair methods of competition and deceptive trade practices. . . . [I]t protects both the unsuspecting and innocent consumer and the legitimate businessman, both of whom are subject to fraudulent schemes by the unscrupulous profiteer.Legislative Journal – House, at 1231 (July 8, 1968) (Remarks of Rep. Daniel Beren). See Id. at 1648 (“We spelled out 13 sections, as I mentioned before, relating to consumer fraud”) (July 17, 1968).
(12) engaging in any other conduct which similarly creates a likelihood of confusion or of misunderstanding.Vol. XXVI, “Suggested State Legislation,” at A-73 §1(d)(12) (Council of State Governments 1967). The catch-all provision as passed by the Pennsylvania legislature was critically different:
(xiii) engaging in any other FRAUDULENT conduct which creates a likelihood of confusion or of misunderstanding.Vol. II, Laws of the General Assembly of the Commonwealth of Pennsylvania Passed at the Session of 1968, No. 387, at 1225 §2(4) (xiii) (Sec’y of Cmwlth. 1968) (emphasis added).
Both of those bills would seek to increase both the civil and criminal penalties presently in Pennsylvania’s law . . . to combat consumer fraud of all types, and particularly telemarketing fraud. The bills in front of us, Mr. President, increase the penalties for fraud and in fact . . . amend the deceptive business practices law by creating an increased penalty anytime the victim is over 60 years of age.Pa. Legislative Journal, Senate, at p. 2427 (Sep. 25, 1996). Sen. Fisher concluded:
[W]e are going to have penalties in place . . . that are going to say to the fraudulent telemarketers of this world, if you want to conduct this kind of despicable scheme, do not come to Pennsylvania . . . because we are going to come after you.Id. at 2428; see Id. (“We think it is very important to do the things that were just stated by the previous speaker”) (remarks of Minority Leader Sen. Robert Mellow (D-Lackawanna)). Nothing anywhere else in the legislative history of the 1996 amendments suggests any intent to disturb the UTPCPL’s longstanding fraud-based foundation.
Ignoring Controlling Law - UTPCPL Associational Standing
[A]lthough the Pennsylvania Supreme Court has never addressed the issue, other courts in this state have held that the UTPCPL applies to the purchase of securities. Finally, since [the corporation’s] profit-sharing trust was formed to provide benefits for the employees upon their retirement, the securities purchased are for the employees' personal use.Id. at *3.
The court [in a case cited by plaintiffs], without analysis, held that the UTP/CPL applied to the purchase of securities, simply citing S. Kane & Son [and some other cases]. Thus, this case offers little support for the proposition that the UTP/CPL covers investment securities. . . .126 F.3d at 188 (citations omitted). That was the end of S. Kane and its “broad” reading of the UTPCPL as embracing securities transactions. Or at least it should have been.
The difficulty arises because the term “goods” is not expressly defined in the UTP/CPL. . . . [W]ords can be construed by reference to other statutes. 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 §201-9.2 of the UTP/CPL as it did in defining “consumer goods” in Pennsylvania's Uniform Commercial Code. . . . Under the UCC provision dealing with sales, “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. §2105(a). In fact, the Pennsylvania UCC contains a separate provision dealing solely with investment securities. See 13 Pa. Cons.Stat. § 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 investment securities. Accordingly, the district court committed no error in its order dismissing the plaintiffs’ complaint.
In construing claims under the [UTP]CPL, Pennsylvania courts have distinguished purchases made for business reasons, which are not actionable, from those made for “personal, family or household use.” [Plaintiff surgeon] suggests his purchase qualifies, because he “purchased” the screws for his patients’ “personal use.” But we have uncovered no Pennsylvania decision finding actionable a non-representative plaintiff’s claim based on others’ “personal uses.” [Plaintiff surgeon] employed the screws only in his medical practice. His alleged losses were not “personal,” but affected only his medical practice. Therefore, he lacks standing under the [UTP]CPL.285 F.3d at 242 (citations omitted).
- The United States Supreme Court and the Third Circuit require federal courts making Erie predictions to do so conservatively. Sheet Metal did quite the opposite, interpreting the UTPCPL “broadly” in ways that Pennsylvania courts have not done.
- On multiple occasions the Pennsylvania Supreme Court has unanimously concluded that UTPCPL plaintiffs must plead and prove the elements of common-law fraud, and in particular reliance. Sheet Metal does not cite these decisions, and holds the opposite.
- Both the Pennsylvania Supreme Court and the Third Circuit have held the 1996 amendment to the UTPCPL’s “catch-all” provision does not change the incorporation of common-law fraud elements into the UTPCPL because that incorporation is effectuated by a different section of the statute. Sheet Metal does not cite these decisions, and holds the opposite.
- Sheet Metal claims to find support for its conclusions in the UTPCPL’s “legislative history,” but cites nothing to support that statement. In fact, the legislative history of both the original act and the 1996 UTPCPL amendments confirms the statute’s purpose as an anti-fraud act.
- Relying upon an overruled district court case, Sheet Metal asserts that a third-party payer of a prescription for a drug can be considered a consumer under the UTPCPL. Sheet Metal does not cite a much more analogous Third Circuit decision holding that a prescribing doctor, far closer to consumer-patients than a TPP, has no standing as a consumer under the Act.
That’s spherical error as we see it. The Sheet Metal decision concerning the UTPCPL is simply wrong any way one chooses to look at it.