Hunt v. U.S. Tobacco Co.

• Decision Date: 05 August 2008
• Docket Number: No. 07-2134.,07-2134.
• Parties: Gregory HUNT, individually and on behalf of himself and all others similarly situated v. UNITED STATES TOBACCO COMPANY; U.S. Smokeless Tobacco Company, f/k/a United States Tobacco Company; United States Tobacco Sales and Marketing Company, Inc.; United States Tobacco Manufacturing Company, Inc.; Ust Inc.; U.S. Tobacco Brands Inc.; United States Smokeless Tobacco Manufacturing Limited Partnership, Appellants.
• Court: U.S. Court of Appeals — Third Circuit

538 F.3d 217

Gregory HUNT, individually and on behalf of himself and all others similarly situated v. UNITED STATES TOBACCO COMPANY; U.S. Smokeless Tobacco Company, f/k/a United States Tobacco Company; United States Tobacco Sales and Marketing Company, Inc.; United States Tobacco Manufacturing Company, Inc.; Ust Inc.; U.S. Tobacco Brands Inc.; United States Smokeless Tobacco Manufacturing Limited Partnership, Appellants.

No. 07-2134.

United States Court of Appeals, Third Circuit.

Argued April 17, 2008.

Filed: August 5, 2008.

Margaret M. Zwisler, Esquire, (Argued), Charles H. Samel, Esquire, Latham & Watkins, Washington, D.C., for Appellants.

Alan M. Sandals, Esquire, Sandals & Associates, Philadelphia, PA, Kenneth G. Gilman, Esquire, Douglas M. Brooks, Esquire, (Argued), David Pastor, Esquire, Daniel D'Angelo, Esquire, Gilman & Pastor, Boston, MA, for Appellee.

Before: SCIRICA, Chief Judge, AMBRO and FISHER, Circuit Judges.

OPINION OF THE COURT

AMBRO, Circuit Judge.

We consider whether a private plaintiff alleging "deceptive" (rather than "fraudulent") conduct under the amended catch-all provision of the Pennsylvania Uniform Trade Practices and Consumer Protection Law must prove that he justifiably relied on the defendant's alleged deceptive conduct or statements. Concluding that under the private-plaintiff standing provision of that Law he must so prove, and finding an allegation of justifiable reliance lacking in the Complaint, we vacate the District Court's judgment denying the defendant's motion to dismiss and remand the case for determination whether to permit leave to amend.

I. Background

Plaintiff-appellee Gregory Hunt and proposed class members in this putative class action suit allege that U.S. Smokeless Tobacco Company ("Smokeless") engaged in anticompetitive behavior that artificially inflated the price of the company's moist smokeless tobacco products, causing purchasers to pay at least $0.07 per can more than they would have paid in an efficient market. The alleged misconduct included theft and concealment of competitors' distribution racks and point-of-sale advertisements at various stores, as well as dissemination of disparaging and false statements about competitors' products. Hunt further alleges that Smokeless concealed its anticompetitive behavior, thereby leading "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."¹

In a suit by one of Smokeless's competitors, a jury found Smokeless liable for the underlying antitrust violations. Conwood Co., L.P. v. United States Tobacco Co., No. 5:98-CV-108-R, 2000 WL 33176054 (W.D.Ky. Aug.10, 2000), aff'd, 290 F.3d 768 (6th Cir.2002). Hunt does not press, however, an antitrust claim. Instead, he frames Smokeless's misconduct as consumer deception in violation of Pennsylvania's Uniform Trade Practices and Consumer Protection Law ("Consumer Protection Law"), 73 Pa. Cons.Stat. §§ 201-1 to 201-9.2. Specifically, he brought his suit in the Pennsylvania Court of Common Pleas under the so-called "catch-all provision" of the Consumer Protection Law, § 201-2(4)(xxi), which, following a 1996 amendment adding the words "or deceptive," proscribes "[e]ngaging in any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding."²

After removing the case to the United States District Court for the Eastern District of Pennsylvania under the Class Action Fairness Act, 28 U.S.C. § 1453 (permitting the removal of certain class actions to federal court on diversity grounds), Smokeless moved to dismiss the Complaint under Federal Rule of Civil Procedure 12(b)(6) on the ground that Hunt failed to allege that he had justifiably relied on Smokeless's deceptive conduct and suffered harm as a result of that reliance. The District Court denied the motion, holding that "Plaintiff does not need to establish reliance under the catch-all provision of the [Consumer Protection Law]." Hunt v. United States Tobacco Co., No. 06-cv-1099, 2006 WL 2619806, at *2 (E.D.Pa. Sept.11, 2006). It reasoned that because the Consumer Protection Law should be construed liberally, and because the legislature added the words "or deceptive" to the catch-all provision in 1996, the provision should be read to relieve plaintiffs of proving all the elements of common-law fraud. Id.

The District Court granted Smokeless's motion to certify the Court's order for interlocutory appeal, presenting the issue whether a plaintiff is required to prove reliance in order to state a deception claim under the amended catch-all provision of the Consumer Protection Law. We then granted permission to appeal pursuant to 28 U.S.C. § 1292(b).

II. Standard of Review and Governing Law

We exercise de novo review. See Dixon Ticonderoga Co. v. Estate of O'Connor, 248 F.3d 151, 161 (3d Cir.2001). Moreover, "[w]e accept all factual allegations in the complaint[ ] and all reasonable inferences to be drawn therefrom in the light most favorable to the plaintiffs." Anthony v. Council, 316 F.3d 412, 416 (3d Cir.2003) (internal quotation marks omitted).

Sitting in diversity, we must apply Pennsylvania's law, as it governs the cause of action here. See Yurecka v. Zappala, 472 F.3d 59, 62 (3d Cir.2006). "In those few instances in which the highest state court has recently spoken to the precise question at issue in a particular setting, the duty of the federal court to determine and apply state law is easily met. After all, [t]he State's highest court is the best authority on its own law." McKenna v. Ortho Pharm. Corp., 622 F.2d 657, 661 (3d Cir.1980) (internal quotation marks omitted; alteration in the original). By contrast, "[i]n the absence of any clear precedent of the state's highest court, we must predict how that court would resolve the issue." Yurecka, 472 F.3d at 62 (citing Polselli v. Nationwide Mut. Fire Ins. Co., 126 F.3d 524, 528 n. 3 (3d Cir.1997)). "In making such a prediction, we should consider relevant state precedents, analogous decisions, considered dicta, scholarly works, and any other reliable data tending convincingly to show how the highest court in the state would resolve the issue at hand." Id. (internal quotation marks omitted).

III. The Consumer Protection Law's Basic Framework

The Consumer Protection Law prohibits "unfair methods of competition" and "unfair or deceptive acts or practices" in the conduct of trade or commerce. 73 Pa. Cons.Stat. § 201-3; see also Toy v. Metro. Life Ins. Co., 593 Pa. 20, 928 A.2d 186, 190 n. 4 (Pa.2007). Section 201-2(4) "lists specific unfair methods of competition and unfair or deceptive acts or practices, and includes a catchall provision." Id. "The statute creates a private right of action in persons upon whom unfair methods of competition and unfair or deceptive acts or practices are employed and who[,] as a result, sustain an ascertainable loss." Id. (citing 73 Pa. Cons.Stat. § 201-9.2).³

IV. Hunt Must Allege Justifiable Reliance

We believe the Pennsylvania Supreme Court has effectively answered the question presented in this case. That Court has categorically and repeatedly stated that, due to the causation requirement in the Consumer Protection Law's standing provision, 73 Pa. Cons.Stat. § 201-9.2(a) (permitting suit by private plaintiffs who suffer loss "as a result of" the defendant's deception), a private plaintiff pursuing a claim under the statute must prove justifiable reliance. See, e.g., Schwartz v. Rockey, 593 Pa. 536, 932 A.2d 885, 897 n. 16 (2007) (stating that "the justifiable reliance criterion derives from the causation requirement which is express on the face of section 9.2[, the statute's private-plaintiff standing provision]"); Toy, 928 A.2d at 202 ("[A] plaintiff alleging violations of the Consumer Protection Law must prove justifiable reliance."); Yocca v. Pittsburgh Steelers Sports, Inc., 578 Pa. 479, 854 A.2d 425, 438 (2004) ("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."). It has not recognized any exceptions, and has applied this rule in a variety of situations. These include, in Yocca, a claim— like Hunt's claim here—under the post-1996 catch-all provision. See Plaintiffs['] Third Amended Class Action Complaint in Civil Action at 18-19, Yocca, No. GD 01-016041 (Pa.Ct.C.P.2001) (accusing defendant of, inter alia, "[e]ngaging in any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding"). The Pennsylvania Superior Court has applied the Supreme Court's standing rule to the post-1996 catch-all provision, see Debbs v. Chrysler Corp., 810 A.2d 137, 156-58 (Pa.Super.Ct.2002); Sexton v. PNC Bank, 792 A.2d 602, 607-08 (Pa.Super.Ct.2002), and our Court has interpreted the rule to apply to all Consumer Protection Law subsections, see Santana Prods., Inc. v. Bobrick Washroom Equipment, Inc., 401 F.3d 123, 136 (3d Cir.2005). 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.

A. Pennsylvania Courts' Interpretation and Application of the Consumer Protection Law's Private-Plaintiff Standing Provision

The Supreme Court of Pennsylvania has consistently interpreted the Consumer Protection Law's private-plaintiff standing provision's causation requirement to demand a showing of justifiable reliance, not simply a causal connection between the misrepresentation and the harm.⁴ In Weinberg v. Sun Co., it held that plaintiffs bringing a private suit under Consumer Protection Law § 201-2(4)(v)⁵ and (ix)⁶ must allege that they relied on the defendant's deceptive conduct. 565 Pa. 612, 777 A.2d 442,...