Earl v. NVR, Inc. – 3d Cir. – March 5, 2021 – reported decision
Held: Pa. state consumer protection claims about a residence and its condition are not barred either by the economic loss doctrine or the gist of action doctrine, overruling Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002), which “no longer accurately reflects the state of Pennsylvania law with regard to” those doctrines.
Economic loss doctrine –
“The Pennsylvania Supreme Court has still not weighed in directly on the applicability of the economic loss doctrine to the UTPCPL. It has clarified, however, that though the economic loss doctrine is “well-established” in Pennsylvania, the common law rule gives way if there is a “statutory basis to impose liability for economic losses,” such as when a statute “provide[s] a private cause of action for economic losses.” Excavation Techs., Inc. v. Columbia Gas Co. of Pa., 985 A.2d 840, 842-43 (Pa. 2009). The UTPCPL does just that. It permits plaintiffs to recover for “any ascertainable loss of money or prop- erty, real or personal.” 73 Pa. Cons. Stat. § 201-9.2 (emphasis added).
The Pennsylvania Superior Court has extended this logic in considering the eco- nomic loss doctrine’s relationship to the UTPCPL in two decisions that have directly undermined the basis for our holding in Werwinski: Knight v. Springfield Hyundai, 81 A.3d 940 (Pa. Super. Ct. 2013) and Dixon v. Nw. Mut., 146 A.3d 780 (Pa. Super. Ct. 2016). In the absence of binding Pennsylvania Supreme Court authority, “[t]he rulings of intermediate appellate courts must be accorded significant weight and should not be disregarded absent a persuasive indication that the highest state court would rule otherwise.” U.S. Underwriters Ins. Co. v. Liberty Mut. Ins. Co., 80 F.3d 90, 93 (3d Cir. 1996). Both Knight and Dixon must be granted due deference. . . . .
..... We acknowledge and appreciate the concern raised by the Court in Dixon, and in so doing have determined that it is now appropriate to set aside our holding in Werwinski with respect to the economic loss doctrine’s application to UTPCPL claims.
Gist of action doctrine –
The gist of the action doctrine provides that “an alleged tort claim against a party to a contract, based on the party’s actions undertaken in the course of carrying out a contractual agreement, is barred when the gist or gravamen of the cause of action stated in the complaint, although sounding in tort, is, in actuality, a claim against the party for breach of its contractual obligations.” Dixon, 146 A.3d at 788 (quoting Bruno v. Erie Ins. Co., 106 A.3d 48, 53 (Pa. 2014) (footnotes omitted)). . . .
If read expansively, the doctrine could plausibly be understood to bar the instant action, given the existence of a contract between Earl and NVR involving the purchase and construction of the Home. Earl’s complaint is not primarily premised upon the terms of the contract, however, but on the marketing and representations that induced her to enter into the contract in the first instance, as well as statements made to her by agents of NVR during the homebuilding process. Knight is once again illustrative for our purposes, as the Court encountered a similar set of facts and determined the gist of the action doctrine did not apply:
Although she purchased the vehicle pursuant to the contract, the alleged representations by Appellees occurred prior the signing of any contract. Furthermore, the above false advertisements, statements, and assurances are rendered unlawful by sections 201–2(4)(v), (vii), (ix), (xi), and (xxi) of the UTPCPL. These are not masked claims for breach of contract; the gist of the action here is in tort, and the contract is collateral to the matters alleged. As such, the gist of the action doctrine did not warrant the dismissal of Knight's UTPCPL claims. Knight, 81 A.3d at 951 (internal citations omitted).
While the allegations here and in Knight both sound in fraud rather than negligence, in Dixon the Superior Court determined that even UTPCPL claims grounded in negligence may not be barred by the gist of the action doctrine:
Deceptive conduct ordinarily can only take one of two forms, either fraudu- lent or negligent. As noted above, the pre–1996 catchall provision covered only fraudulently deceptive practices. The broadening of the UTPCPL so as to not require fraud therefore ipso facto makes negligent deception, e.g., neg- ligent misrepresentations, actionable under the post–1996 catchall provision. Dixon, 146 A.3d at 790. The Dixon Court consequently allowed the plaintiff’s claims there to go forward, and both Dixon and Knight thus suggest that the gist of the action doctrine should not preclude liability under the UTPCPL where the contract is collateral to any allegedly deceptive conduct, as has been alleged in this case. We therefore hold that the gist of the action doctrine does not bar Earl’s UTPCPL claim from going forward.
