Danganan v. Guardian Protective Services: UTPCPL violation need not be in Pennsylvania

The Pennsylvania Supreme Court ruled unanimously in Danganan v. Guardian Protective Services that a violation of the Unfair Trade Practices Consumer Protection Law need not have occurred in Pennsylvania to be cognizable under the statute. This case was certified to SCOPA from the Third Circuit, meaning that the Third Circuit asked SCOPA to settle an unsettled question of Pennsylvania law so that the Federal Court could adjudicate the dispute. This case represents a relatively rare look into a unique aspect of our federalist judicial system.

Danganan hired Guardian Protective Services, which is a home security company based in Lancaster, Pennsylvania (home of relatively lax home defense) to monitor his house in Washington, D.C. (home of the world’s most secure house). The contract, which contained a choice of law clause for Pennsylvania, and which required an aggrieved party to file suit in the other party’s home jurisdiction, ended up going sour after Guardian refused to terminate it when Danganan moved to California in the middle of the contract. Danganan filed a putative class action against Guardian in Pennsylvania, and Guardian removed the case to federal court based on diversity jurisdiction. (More on this in the conclusion, below). The Third Circuit certified the question to SCOPA of whether the UTPCPL governs conduct outside of Pennsylvania.

Majority by CJ Saylor: The UTPCPL prohibits unfair trade practices wherever they occur

Writing for the unanimous Court, the Chief Justice rules that the UTPCPL (which desperately needs a better acronym) holds that there is “no geographic limitation or residency requirement” in the text of the UTPCPL. In addition, the UTPCPL is “remedial legislation”—that is, legislation addressed to a perceived problem which the legislature hopes to curb. The law’s purpose is “fraud prevention,” and “equalizing the bargaining power of the seller and consumer, ensuring the fairness of market transactions, and preventing deception and exploitation.” The majority finds nothing in the law to limit the geographic reach of the statute, nor requiring some “sufficient nexus” between the plaintiff and the Commonwealth. The Supreme Court rejects Guardian’s argument that this holding will result in suits anywhere in the world against them based on UTPCPL, finding that “other legal precepts” such as jurisdiction and choice of law rules will limit the holding sufficiently.

With this conclusion, the Court declines to reach the second certified question from the Third Circuit—the interpretation of the choice of law provision of the contract. The question is mooted, and the case is returned to the Third Circuit.

Conclusion: How is this case in Federal Court?

This case will have a tremendous impact on future litigation, as it is now clear that the UTPCPL may be alleged against a Defendant where Pennsylvania law governs a contract, regardless of where the suit is actually brought, and regardless of where the acts giving rise to the claim occurred. Indeed, major companies may wish to carefully consider the wisdom of choice of law provisions naming Pennsylvania in future contracts.

The case has a jurisdictional curiosity of another type, however: the introduction mentions that Guardian removed the case to federal court based on diversity jurisdiction after being sued in Pennsylvania, where it is “headquartered.” This doesn’t make any sense, as 28 U.S.C. § 1441(b)(2) disallows removal based on diversity where any defendant is sued in its home state. Perhaps this will be explained in the ultimate holding of the Third Circuit or District Court in this matter—but it is not clear as to how any Federal Court has Subject Matter Jurisdiction over this case.