Third Circuit panel sends class action suit filed against home security company back to District Court

By Nicholas Malfitano | Aug 14, 2018

PHILADELPHIA – A class action lawsuit initiated against a Warrendale home security company and which invoked the Unfair Trade Practices and Consumer Protection Law, has been remanded to its court of origin by the U.S. Court of Appeals for the Third Circuit.

On Aug. 6, Third Circuit judges Joseph A. Greenaway Jr., Patty Shwartz and U.S. District Court for the District of New Jersey Judge Jerome B. Simandle (appointed by designation) remanded the case filed by Jose Danganan of Washington, D.C. versus Guardian Protection Services, of Warrendale.

In April 2013, Danganan signed a standard form contract with Guardian to provide home security at his Washington, D.C. residence. The contract set a monthly payment schedule, explained the initial term of the agreement would be three years and included a choice-of-law clause stating the agreement would be governed by the laws of Pennsylvania. The following year, Danganan sold his Washington, D.C. home, moved to San Francisco, and notified Guardian that he wished to cancel his service. Despite this notice of cancellation, Guardian continued to bill Danganan each month.

Danganan made several of these monthly payments to Guardian under self-proclaimed “protest," as he was concerned that doing otherwise would adversely impact his credit rating. Subsequent to Danganan challenging the charges, Guardian offered him an opportunity to buy out the duration of his contract for $525, which he refused. Instead, Danganan brought the instant class action litigation on behalf of himself and more than 17,000 similarly situated consumers, alleging that Guardian’s standard contract was “misleading, deceptive, and substantively unfair, in violation of both the Pennsylvania Unfair Trade Practices and Consumer Protection Law and Fair Credit Extension Uniformity Act.”

Guardian subsequently filed a motion to dismiss, which the District Court granted, concluding that non-residents of Pennsylvania cannot recover under the two statutes unless they plead allegations that have a “sufficient nexus” with the Commonwealth. That result led Danganan to file the instant appeal.

Danganan alleges that Guardian violated the Pennsylvania UTPCPL, along with the related FCEUA, by continuing to charge monthly service fees to customers for whom the company was no longer providing home protection services.

Greenaway stated the lack of a precedential opinion on the subject from a Pennsylvania court left the Third Circuit to consider two questions: (1) Whether a non-Pennsylvania resident may bring suit under the UTPCPL against a business headquartered in and operating from Pennsylvania, based on transactions which occurred outside Pennsylvania – and secondly, (2) If the UTPCPL does not allow a non-Pennsylvania resident to invoke its protections, whether the parties ca, through a choice-of-law provision, expand its protections to parties to the contract who are non-Pennsylvania resident consumers.

“The Pennsylvania Supreme Court accepted the certification and, in a thorough opinion, held that the UTPCPL’s ‘prescription against deceptive practices employed by Pennsylvania-based businesses may encompass misconduct that has occurred in other jurisdictions.’ In so concluding, the court reasoned that the statute’s plain language ‘evidences no geographic limitation or residency requirement relative to the Law’s application.’ As such, the court “rejected the sufficient nexus test as employed by the District Court and advanced by Guardian.’ This holding rendered the second certified question moot,” Greenaway said.

“Adhering to the principle first articulated in Erie Railroad Co. v. Tompkins, that federal courts are required to apply state substantive law to diversity actions, we must apply the conclusions of the Pennsylvania Supreme Court in this case. Because that court concluded, contrary to the District Court, that the UTPCPL may provide a cause of action to non-residents in circumstances like those alleged by Danganan, we will reverse the decision of the District Court dismissing his complaint and remand for further proceedings consistent with this opinion and the decision of the Supreme Court of Pennsylvania.”

The plaintiff is represented by James M. Pietz of Feinstein Doyle Payne & Kravec in Pittsburgh, Michael D. Donovan of Donovan Litigation Group in Berwyn and Christian X. Schreiber of Chavez & Gertler in Mill Valley, Calif.

The defendant is represented by Laura E. Vendzules, Michael A. Iannucci, Will Rosenzweig and Amy Joseph Coles of Blank Rome, in both Philadelphia and Pittsburgh.

U.S. Court of Appeals for the Third Circuit case 16-3379

U.S. District Court for the Eastern District of Pennsylvania case 2:18-cv-01495

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

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