STAR et al v. ROSENTHAL et al
MEMORANDUM. ( SIGNED BY HONORABLE STEWART DALZELL ON 8/9/12. ) 8/9/12 ENTERED AND COPIES E-MAILED.(gn, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
GREGORY J. STAR, et al.
LAWRENCE J. ROSENTHAL, et al.
August 9, 2012
Plaintiffs Gregory J. and Luba Star (collectively, the
“Stars”) bring suit against defendants Lawrence J. and Phyllis B.
Rosenthal1 (collectively, the “Rosenthals”), asserting several
Pennsylvania state-law claims arising out of the Stars’ purchase
of a house from the Rosenthals.
The Stars allege that this home proved subject to water
They further claim that though the Rosenthals knew
the house had this defect, the Rosenthals nonetheless made false
representations to the Stars in order to induce them to buy the
house and later to refrain from bringing suit.
Specifically, the Stars allege six claims2 against the
Rosenthals: (1) violation of Pennsylvania’s Real Estate Seller
Disclosure Law (“RESDL”), 68 Pa. Cons. Stat. Ann. §§ 7301, et
The docket lists the latter defendant’s name as
“Phyllis B. Rsenthal,” in obvious error.
Because the amount in controversy exceeds $75,000 and
the parties are completely diverse, we have jurisdiction over
this matter pursuant to 28 U.S.C. § 1332.
seq.; (2) fraudulent misrepresentation; (3) violation of
Pennsylvania’s Unfair Trade Practices and Consumer Protection Law
(“UTPCPL”), 73 Pa. Stat. §§ 201-1, et seq.; (4) negligent
misrepresentation; (5) breach of contract; and (6) unjust
The Stars plead their fifth and sixth counts in the
alternative to the other claims they present.
The Rosenthals have filed a motion to dismiss all claims
in the complaint, to which the Stars have responded.
reasons we discuss below, we will grant the Rosenthals’ motion to
dismiss in part, as to Count I of the complaint, and will direct
them to file an answer to the remaining allegations of the
In ruling on a motion to dismiss for failure to state a
claim pursuant to Fed. R. Civ. P. 12(b)(6), we must "‘accept all
factual allegations in the complaint as true and give the pleader
the benefit of all reasonable inferences that can be fairly drawn
Ordonez v. Yost, 289 Fed. Appx. 553, 554 (3d Cir.
2008) (quoting Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir.
We may "‘consider only allegations in the complaint,
exhibits attached to the complaint, matters of public record, and
documents that form the basis of a claim,'" Brown v. Daniels, 128
Fed. Appx. 910, 913 (3d Cir. 2005) (quoting Lum v. Bank of
America, 361 F.3d 217, 222 n.3 (3d Cir. 2004)), where a document
forms the basis of a claim if it is "integral to or explicitly
relied upon in the complaint."
In re Burlington Coat Factory Sec.
Litig., 114 F.3d 1410, 1426 (3d Cir. 1997)) (emphasis and internal
quotation marks omitted).
As our Court of Appeals has explained,
this means that we may "consider an undisputedly authentic
document that a defendant attaches as an exhibit to a motion to
dismiss if the plaintiff's claims are based on the document."
Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998
F.2d 1192, 1196 (3d Cir. 1993).
Since the Stars’ complaint relies
in part on certain documents, we will review both the allegations
of the complaint and the features of those documents that are
material to the Rosenthals’ motion to dismiss.
According to the Stars, they are husband and wife living
at 1708 Brittany Drive in Ambler, Pennsylvania, while the
Rosenthals are husband and wife living in West Palm Beach,
Pls.’ Compl. ¶¶ 2-3.
The Stars aver that on August 21,
2008 they entered into an Agreement of Sale (the “Agreement”) with
the Rosenthals to purchase the Rosenthals’ residential property
(the “house”) located at 1708 Brittany Drive in Ambler.
Rosenthals had lived in the house continuously from its
construction in 1987 until its sale to the Stars.
Id. ¶¶ 4-6.
The Agreement provided that “[t]he following are part of
this Agreement if checked: . . . Seller’s Property Disclosure
Ex. A to Pls.’ Compl. (“Agreement”) § 34; see also
Pls.’ Compl. ¶ 7.
The Seller’s Property Disclosure Statement (the
“Disclosure”) that the Rosenthals provided to the Stars included
the following questions: (1) “Are you aware of any water leakage,
accumulation, or dampness within the basement or crawl space?,”
Ex. B to Pls.’ Compl. (“Disclosure”) § 4(b); (2) “Are you aware of
any fire, storm, water, or ice damage to the property?,” id. §
6(f); (3) “Do you know of any past or present drainage or flooding
problems affecting the property?,” id. § 16(b)(2); (4) “Are you
aware of any insurance claims filed relating to the property?,”
id. § 19(g); and (5) “Are you aware of any material defects to the
property, dwelling, or fixtures which are not disclosed elsewhere
on this form?”
Id. § 19(h).
The Rosenthals checked “No” in
response to each of these questions.
Id. §§ 4(b), 6(f), 16(b)(2),
19(g)-(h); see also Pls.’ Compl. ¶¶ 8, 10-13.
The Disclosure also
included the question, “Are you aware of any past or present water
leakage in the house or other structures?”, and in response the
Rosenthals checked “Yes” and wrote “upstairs hall bathroom windows
leaked, replaced in 1993.”
Disclosure § 6(a); see also Pls.’
Compl. ¶ 9.
The Stars further allege that during a September 3, 2008
home inspection they attended with an (unnamed) inspector they had
hired, Lawrence Rosenthal “specifically denied any water
infiltration in the basement of the House.”
Pls.' Compl. ¶ 19.
During the same inspection, when Lawrence heard the inspector say
that “any signs of water penetration in the basement occurred
while the House was being built and before it was fully enclosed,”
he did not correct this statement.
Id. ¶ 20.
According to the Stars, in the summer of 2009 “the area
experienced heavy directional rain and wind which pounded against
the front of the House,” causing “water to literally flow over the
front wall of the basement of the House,” Id. ¶ 15.
subsequent storm involving heavy directional rain, water flowed in
and through the living room windows, in and around the front door,
and over and through the front wall of the basement of the house.
Id. ¶¶ 16-17.
Nonetheless, during an October, 2009 visit by the
Rosenthals at which the Stars recounted their recent experience of
basement water infiltration, the Rosenthals denied having had any
prior water infiltration.
Id. ¶ 18.
The Stars claim that in the summer of 2011 they
discovered files in the house’s basement -- titled “Lib. Mut. -Claim -- 90-91" and “LM/Cutler Lawsuit 91-92” -- that the
Rosenthals had left behind.
Id. ¶¶ 21-22.
The Stars allege that
these files demonstrate that the Rosenthals experienced
significant and persistent water infiltration throughout the house
and that they filed an insurance claim and lawsuit related to this
Id. ¶ 23.
The Stars also aver that during that
same summer they found photographs dated between 1990 and 1992
that the Rosenthals had taken of extensive water infiltration
through the windows, front door, and basement of the house that
mirrored the infiltration the Stars experienced.
Id. ¶ 25.
The Stars allege that each of the Rosenthals' answers on
the Disclosure was false, and that the Rosenthals knew them to be
false at the time they made them.3 Id. ¶¶ 14, 26-30.
claim that had they “been told the truth about the extensive and
persistent water infiltration to which the House had been
subjected for more than 20 years, they would not have purchased
Id. ¶ 31.
They thus suggest that they have suffered
The Stars elaborate that the Rosenthals’ response to
Disclosure § 6(a) was “purposefully incomplete” and designed to
“create the appearance of candor as a means to gain the Stars’
trust and confidence.” Id. ¶ 30.
damages that include: (1) the purchase price of the house; (2) all
improvements to the house made since its purchase; (3) all other
costs associated with purchasing and maintaining the house; (4)
all costs associated with remediation efforts aimed at stemming
the flow of water into the house; (5) diminution in the value of
the house; (6) “mental anguish, anxiety, and emotional distress”;
and (7) “such other further injuries and damages as will be
demonstrated through discovery of this matter.”
Id. ¶ 35.
Notably, the Agreement contains the following release
language at § 27:
Buyer releases, quit claims and forever
discharges SELLER, ALL BROKERS, their
LICENSEES, EMPLOYEES and any OFFICER or
PARTNER of any one of them and any other
PERSON, FIRM or CORPORATION who may be liable
by or through them, from any and all claims,
losses or demands, including, but not limited
to, personal injury and property damage and
all of the consequences thereof, whether known
or not, which may arise from the presence of
termites or other wood-boring insects, radon,
lead-based paint hazards, mold, fungi or
indoor air quality, environmental hazards, any
defects in the individual on-lot sewage
disposal system or deficiencies in the on-site
water service system, or any defects or
conditions on the Property. Should Seller be
in default under the terms of this Agreement,
or in violation of any seller disclosure law
or regulation, this release does not deprive
Buyer of any right to pursue any remedies that
may be available under law or equity. This
release will survive settlement.
The Supreme Court has explained that “only a complaint
that states a plausible claim for relief survives a motion to
dismiss” pursuant to Rule 12(b)(6), leading a reviewing court to
engage in a “context-specific” inquiry that “requires [it] to draw
on its judicial experience and common sense.”
129 S. Ct. 1937, 1950 (2009).
Ashcroft v. Iqbal,
To survive this inquiry, a pleading
may not simply offer “labels and conclusions,” Bell Atlantic Corp.
v. Twombly, 550 U.S. 544, 555 (2007), and “[t]hreadbare recitals
of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.”
Iqbal, 129 S. Ct. at 1949.
Rather, a plaintiff must provide “enough facts to raise
a reasonable expectation that discovery will reveal evidence of
the necessary element[s]” of each cause of action.
County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (internal
quotation marks omitted).
Moreover, a defendant may raise an
affirmative defense “on a Rule 12(b)(6) motion if the predicate
establishing the defense is apparent from the face of the
Bethel v. Jendoco Constr’n Corp., 570 F.2d 1168, 1174
n.10 (3d Cir. 1978).
Thus, a complaint may fail to survive a
motion to dismiss either because (1) the plaintiff has failed to
supply well-pled allegations in support of one or more elements of
a cause of action, or (2) the allegations of the complaint
themselves establish that the plaintiff cannot prevail.
We will take up each of the Stars’ claims in turn.
Count I: Violation Of Pennsylvania’s RESDL
The Stars aver that “[p]ursuant to 68 Pa. Con. Stat.
Ann. § 7301(11), Defendants are liable to Plaintiffs for any and
all actual damages suffered as a result of Defendants’ violation
of the Real Estate Seller’s Disclosure Law, and the damages
alleged in this complaint were proximately caused by Defendants’
intentional concealment of known defects.”
Pls.’ Compl. ¶ 43.
The Rosenthals respond that “the Plaintiffs failed to file their
RESDL claim within the applicable two-year statute of limitations
and, in fact, missed the statutory deadline by more than a year,”
so that “Count I of Plaintiffs’ Complaint is time-barred and
should be dismissed.”
Defs.’ Mem. in Supp. of Mot. Dismiss
(“Defs.’ Mem.”) at 6.
The Stars retort that “there is no doubt that [they]
have alleged facts sufficient to trigger Pennsylvania’s tolling
The only issue is whether tolling principles apply to
claims under the RESDL, which is a question of first impression,”
Pls.’ Resp. to Def.’s Mot. Dismiss (“Pls.’ Resp.”) at 8.
Stars suggest that we should answer this question in the
affirmative (1) based on the legislative history of the RESDL, id.
at 8-9; and (2) by analogy to other consumer protection statutes
and common law claims.
Id. at 9-11.
Under 68 Pa. Cons. Stat. Ann. § 7303,
Any seller who intends to transfer any
interest in real property shall disclose to
the buyer any material defects with the
property known to the seller by completing all
applicable items in a property disclosure
statement which satisfies the requirements of
section 7304 (relating to disclosure form). A
signed and dated copy of the property
disclosure statement shall be delivered to the
buyer in accordance with section 7305
(relating to delivery of disclosure form)
prior to the signing of an agreement of
transfer by the seller and buyer with respect
to the property.
Section 7308 adds that “[i]n completing the property disclosure
statement, the seller shall not make any representations that the
seller or the agent for the seller knows or has reason to know are
false, deceptive or misleading and shall not fail to disclose a
known material defect.”
Section § 7311 provides that
General rule. -- A residential real
estate transfer subject to this chapter
shall not be invalidated solely because
of the failure of any person to comply
with any provision of this chapter.
However, any person who willfully or
negligently violates or fails to perform
any duty prescribed by any provision of
this chapter shall be liable in the
amount of actual damages suffered by the
buyer as a result of a violation of this
chapter. This subsection shall not be
construed so as to restrict or expand the
authority of a court to impose punitive
damages or apply other remedies
applicable under any other provision of
Statute of limitations. -- An action for
damages as a result of a violation of
this chapter must be commenced within two
years after the date of final settlement.
As our Court of Appeals has explained, "[w]hen a state's
highest court has not spoken on a subject, we must attempt to
predict how that tribunal would rule.
In making such
determinations, we give due deference to the decisions of lower
U.S. Underwriters Ins. Co. v. Liberty Mut.
Ins. Co., 80 F.3d 90, 93 (3d Cir. 1996) (citations omitted).
research suggests, however, that no Pennsylvania state or federal
court has considered whether § 7311(b) is subject to tolling.
therefore must interpret this provision from scratch, drawing on
the plain language of the statute as well as Pennsylvania
jurisprudence on tolling, limitations periods, and statutory
The Stars correctly note that “Pennsylvania courts apply
both the discovery rule and the doctrine of fraudulent concealment
to toll a statute of limitations,” Pls.’ Resp. at 7.
Pulli v. Ustin, 24 A.3d 421, 425 (Pa. Super. 2011) (“‘In
Pennsylvania, there are two well-recognized legal constructs that
toll the running of the statute of limitations: the discovery rule
and the doctrine of fraudulent concealment.'”) (quoting Coleman v.
Wyeth Pharmaceuticals, Inc., 6 A.3d 502, 510 (Pa. Super. 2010)).
But as the Stars themselves recognize, see Pls.’ Resp. at 8,
Pennsylvania courts distinguish between “statutes of limitations”
and “statutes of repose,” explaining that
The difference between statutes of repose and
statutes of limitations is that statutes of
limitation[s] are procedural devices which bar
recovery on a viable cause of action, where
statutes of repose are substantive in nature
because they extinguish a cause of action and
preclude its revival. In addition, statutes
of limitation[s] begin to run from the time of
an injurious occurrence or discovery of the
same, whereas statutes of repose run for a
statutorily determined period of time after a
definitely established event independent of an
injurious occurrence or discovery of the same.
Miller v. Stroud Twp., 804 A.2d 749, 752 (Pa. Commw. Ct. 2002)
(quoting Altoona Area Sch. Dist. v. Campbell, 618 A.2d 1129, 1134
(Pa. Commw. Ct. 1992)) (brackets in Miller).
Critically, tolling doctrines are inapplicable to
statutes of repose unless such doctrines are explicitly
incorporated into the given statute.
See, e.g., Westinghouse
Elec. Corp./CBS v. W.C.A.B. (Korach), 883 A.2d 579, 588 n.11 (Pa.
2005) (“[A] statute of repose may also prevent the accrual of a
cause of action where the final element necessary for its creation
occurs beyond the time period established by the statute.
end of the time period specified in the statute, the cause of
action ceases to exist, unless the claimant can bring himself
within any tolling provision enunciated in that statute.");
Commw., Dept. of Transp., Bureau of Driver Licensing v. Grubb, 618
A.2d 1152, 1155 n.1 (Pa. Commw. Ct. 1992) (“By definition,
statutes of repose set a designated event for the statutory period
to start running and they provide that at the expiration of the
period, any cause of action is barred regardless of the usual
reasons for tolling.”) (internal quotation marks omitted);
DaimlerChrysler Corp. v. Commw., 885 A.2d 117, 121 (Pa. Cmwlth.
2005) (“Because it is a statute of repose, taxpayers' rights to a
refund are extinguished and once quashed, due process demands
nothing because there are no rights to 'process.' Therefore,
Seller's due process rights are not subject to equitable tolling
as Seller suggests.") (citation omitted).
As the Supreme Court of Pennsylvania has explained, “the
critical distinction in classifying a statute as one of repose or
one of limitations is the event or occurrence designated as the
'triggering' event,” Westinghouse Elec. Corp., 883 A.2d at 588
While a statute of limitations has as its triggering event
“the point at which all the elements of the action have coalesced,
resulting in a legally cognizable claim,” a statute of repose
“typically sets the triggering event as something other than the
point at which the cause of action arises.”
See also Abrams
v. Pneumo Abex Corp., 981 A.2d 198, 211 (Pa. 2009) (“‘Unlike an
ordinary statute of limitations which begins running upon accrual
of the claim, the period contained in a statute of repose begins
when a specific event occurs, regardless of whether a cause of
action has accrued or whether any injury has resulted.’”) (quoting
City of McKeesport v. W.C.A.B. (Miletti), 746 A.2d 87, 91 (Pa.
The triggering event under § 7311 is clearly not the
accrual of a cause of action since such a claim coalesces once (1)
“any person . . . willfully or negligently violates or fails to
perform any duty prescribed by any provision of this chapter,” and
(2) “actual damages [are] suffered by the buyer as a result of a
violation of this chapter.”
68 Pa. Cons. Stat. Ann. § 7311(a).
Instead, § 7311(b) (emphasis added) provides that “[a]n action for
damages as a result of a violation of this chapter must be
commenced within two years after the date of final settlement,” an
event that will often fail to coincide with the occurrence of the
two elements described above.
Section 7311(b) thus appears to
impose a statute of repose, not a statute of limitations.
The Stars note that § 7311(b) is entitled “Statute of
limitations,” not “Statute of repose.”
Pls.’ Resp. at 8.
title has minimal probative value regarding the actual character
of this provision given that other Pennsylvania statutory
provisions that indisputably impose statutes of repose are
nonetheless sometimes identified by the General Assembly as
statutes of limitations.
Compare, e.g., 13 Pa. Cons. Stat. Ann. §
2725 (defining “Statute of limitations in contracts for sale")
with Nationwide Ins. Co. v. General Motors Corp./Chevrolet Motor
Div., 625 A.2d 1172, 1174-75 (Pa. 1993) (“Section 2725 sets tender
of delivery as the point at which the cause of action accrues . .
. [I]n breach of warranty cases the four-year statute of
limitations is essentially a statute of repose."); 77 Pa. Cons.
Stat. Ann. § 602 (“[S]aid limitations shall not take effect until
the expiration of two years from the time of making of the most
recent payment prior to date of filing such petition.”) (emphasis
added) with Zafran v. W.C.A.B. (Empire Kosher Poultry, Inc.), 713
A.2d 698, 701 n.12 (Pa. Commw. Ct. 1998) (“The period of
limitations set forth in section 315 of the Act, 77 P.S. § 602,
like other statutes of limitations under the Act, is not a pure
statute of limitations but is a statute of repose.”); 42 Pa. Cons.
Stat. Ann. § 5536(b)(2) (referring to “[t]he limitation prescribed
by subsection (a)”) (emphasis added) with Miller, 804 A.2d at 752
(“[S]ection 5536 of the Judicial Code is a statute of repose.”).
The Stars also suggest that when the RESDL was enacted,
“[t]he legislature reasoned that the two-year period would
typically be adequate time to bring a claim because most
‘problem[s] with [a] property [are] discovered within the first
several weeks of occupancy,’ and the statute ‘gives the buyer two
years to discover what the problems may be.’” Pls.’ Resp. at 9
(quoting 1996 Pa. Leg. J. -- Senate 2139 (Jun. 18, 1996)
(statement of Sen. Corman)) (brackets in Pl.’s Resp. and emphasis
1 Pa. Cons. Stat. Ann. § 1921(c)(7) provides that
“[w]hen the words of the statute are not explicit, the intention
of the General Assembly may be ascertained by considering, among
other matters: . . . [t]he contemporaneous legislative history.”
While we believe that the language of § 7311
unambiguously demonstrates that it imposes a statute of repose, to
the extent this remains open to debate the legislative history
that the Stars cite only fortifies our conclusion that this
provision does not impose a statute of limitations.
After all, if
the tolling principles normally applicable to statutes of
limitations -- including the discovery rule -- were meant to apply
to the RESDL, there would have been no need for Senator Corman to
explain that “if there is a problem with the property it is
discovered within the first several weeks of occupancy, and here
it gives the buyer 2 years to discover what the problems may be.”
1996 Pa. Leg. J. -- Senate 2139 (June 18, 1996) (statement of Sen.
See also 1996 Pa. Leg. J. -- Senate 2138 (June 18, 1996)
(statement of Sen. Brightbill) (“What this does is shortens the
time period from 6 years to 2 years.
What that means is that
unless a consumer quickly and accurately determines what the
problems are with a property, they lose their cause of action.”).
The suggestion by Senators Corman and Brightbill that a plaintiff
might lose a cause of action under the RESDL if a problem or
defect is not discovered within two years of final settlement
underscores that tolling principles do not apply to § 7311.
Finally, the Stars contend that “[g]iven Pennsylvania’s
concern for protecting consumers from fraud and misrepresentation,
and the Commonwealth’s broad application of tolling principles in
general, the Pennsylvania Supreme Court would almost certainly
find that tolling principles are to be applied to claims under the
RESDL,” Pls.’ Resp. at 11.
In support of this argument the Stars
point to the applicability of tolling to claims under the UTPCPL,
negligence and fraud claims, and certain federal claims.
Of course, whether tolling applies to common law and
federal causes of action is an inquiry that sheds little light
upon whether it similarly applies to the RESDL.
As for the
UTPCPL, our capacity to analogize this statute to the RESDL is
hampered by the wholly different language the Pennsylvania General
Assembly used to impose temporal limits upon claims under the
See, e.g., Gabriel v. O'Hara, 534 A.2d 488, 494 (Pa.
Super. 1987) (“[T]here being no express limitation on private
actions under the UTPCPL, and since their claims fall within the
ambit of that statute, the six-year ‘catchall’ limitations period
of section 5527(6) of the Judicial Code, 42 Pa. Cons. Stat. Ann. §
5527(6), applies.”); 42 Pa. Cons. Stat. Ann. § 5527 ("Any civil
action or proceeding which is neither subject to another
limitation specified in this subchapter nor excluded from the
application of a period of limitation by section 5531 (relating to
no limitation) must be commenced within six years.").
We further note that, as Judge Wettrick of the Allegheny
County Court of Common Pleas has observed, the “Disclosure Law
expands the seller's obligations and the buyer's remedies” as
compared to the common law.
550, 556 (Pa. Com. Pl. 2005).
Vaughn v. Drab, 73 Pa. D. & C. 4th
Given the potency of the RESDL, it
should not be surprising that the Pennsylvania General Assembly
chose to impose strict limits on when claims under this statute
could be brought.
In the end, the language of Section 7311(b) makes plain
that this statute is one of repose not amenable to tolling, and
thus the Stars' arguments against this conclusion do not persuade.
The complaint makes clear that the date of final settlement
preceded October of 2009 -- when the Rosenthals allegedly visited
the Stars in the house4.
But the Stars did not file their
complaint in this action until November 22, 2011 -- more than two
Section 7311(b) thus bars the Stars from bringing
suit under the RESDL, and we will grant the Rosenthals’ motion to
dismiss Count I of the complaint.5
The Stars allege that the Rosenthals made
representations during this visit that “were consistent with
representations made . . . prior to the sale,” Pls.’ Compl. ¶ 18,
and the only logical inference from this averment is that the
Rosenthals’ October, 2009 visit postdated the final settlement.
The extinguishment of the Stars’ RESDL claim does
not, however, mean that the Stars cannot bring a breach of
contract claim predicated upon allegedly false disclosures the
RESDL mandates and which were incorporated into the agreement of
sale. See Rendon v. Ragans, 2009 WL 1514471, at *3 (W.D. Pa.
2009) (citations omitted) (“[T]he RESDL does not make itself the
sole remedy here for an action emanating from a sale of real
property. At the same time, a breach of contract claim under
Pennsylvania law is subject to a four-year limitations period.”).
Counts II & IV: Misrepresentation
In support of their fraudulent misrepresentation claim,
the Stars contend that “[d]efendants made their representations,
both prior to and after the sale, intending that the Plaintiffs
would rely upon their representations, and the Plaintiffs did, in
fact, justifiably rely to their detriment on the Defendants’
Pls.’ Compl. ¶ 48.
As for their negligent
misrepresentation claim, the Stars claim that “misrepresentations
were made by the Defendants under circumstances in which the
Defendants ought to have known of their falsity” and “with the
intent to induce Plaintiffs to purchase the House,” id. ¶¶ 58-59,
causing damages to the Stars.
Id. ¶ 60.
The Rosenthals respond
that “Plaintiffs’ fraudulent and negligent misrepresentation
claims are barred by the gist of the action doctrine because they
are nothing more than contract claims masquerading as tort
Defs.’ Mem. at 7.
The Stars retort that “Defendants’
misrepresentations and omissions occurred prior to signing the AOS
and were violations of duties imposed by common law and statute,
and not by the AOS.
Thus, the gist of the action doctrine has no
Pls.’ Resp. at 16.
As Judge McVerry noted last year, "[t]he Pennsylvania
Supreme Court has not expressly adopted the gist of the action
doctrine," though "both the United States Court of Appeals for the
Third Circuit and the Pennsylvania Superior Court have predicted
it would do so."
PPG Indus., Inc. v. Generon IGS, Inc., 760 F.
Supp. 2d 520, 527 n.1 (W.D. Pa. 2011).
Judge Rambo described the
gist of the action doctrine in Sarsfield v. Citimortgage, Inc.,
707 F. Supp. 2d 546, 553 (M.D. Pa. 2010) (citations and internal
quotations marks omitted), as follows:
Tort actions lie for breaches of duties
imposed by law as a matter of social policy,
whereas contract actions lie only for breaches
of duties imposed by consensual agreements
between particular individuals. Thus, a claim
is limited to a contract claim when the
parties[’] obligations are defined by the
terms of the contracts, and not by the larger
social policies embodied by the law of torts.
On the other hand, if the contract is merely
collateral to the wrong described, the
existence of a contract does not prevent
recovery in tort. Pennsylvania courts have
recognized four areas where the gist of the
action doctrine precludes recovery in tort:
(1) where liability arises solely from the
contractual relationship between the parties;
(2) when the alleged duties breached were
grounded in the contract itself; (3) where any
liability stems from the contract; and (4)
when the tort claim essentially duplicates the
breach of contract claim or where the success
of the tort claim is dependent on the success
of the breach of contract claim.
The gravamen of the Rosenthals’ argument is that “absent
the Agreement and the Seller Disclosure, the Rosenthals’ purported
obligation to reveal known, material defects to the Plaintiffs
would not have materialized.”
untrue under Pennsylvania law.
Defs.’ Mem. at 8.
This is plainly
As the Superior Court of
Pennsylvania explained in Roberts v. Estate of Barbagallo, 531
A.2d 1125, 1130-31 (Pa. Super. 1987),
a vendor or his agent may be liable not only
for failure to disclose a dangerous condition
but also for failure to disclose material
information. Section 550, Restatement,
Second, of Torts provides:
§ 550[.] Liability for Fraudulent Concealment
One party to a transaction who by
concealment or other action
intentionally prevents the other
from acquiring material information
is subject to the same liability to
the other, for pecuniary loss as
though he had stated the
nonexistence of the matter that the
other was thus prevented from
Liability under this section is encompassed by
the Supreme Court's rule that fraud may arise
by: 1) the making of a knowingly false
representation of fact; 2) an intentional
concealment of true facts which is calculated
to deceive the other party; or 3) a
nonprivileged failure to disclose certain
facts to the other party. . . . Under § 550,
the concealment must be intentional and it
must relate to material information.
In the context of sales of real property, a seller not only has an
obligation not to intentionally conceal material information, but
must also avoid innocent misrepresentations of material facts.
See Boyle v. Odell, 605 A.2d 1260, 1265 (Pa. Super. 1992) (“[I]f
it is determined that a purchaser in a real estate transaction has
suffered from fraud by the seller, even in the nature of an
innocent misrepresentation of a material fact, a right of
rescission is established.
Moreover, the purchaser is given the
election of remedies; he may seek to rescind the deed, or in the
alternative, may sue for damages.”) (citations omitted).
In Onconome, Inc. v. Univ. of Pittsburgh, 2009 WL
5064481, at *11 (W.D. Pa. 2009), Judge Schwab emphasized that “the
focus of analysis under [the gist of the action] doctrine is
whether actions lie from a breach of the duties imposed as a
matter of social policy or from the breach of duties imposed by
mutual consensus pursuant to contract.”
obligations to (1) disclose known, material defects to the Stars
and (2) avoid innocent misrepresentations as to material facts
arose independently of the Agreement and the Disclosure, though
these obligations were to an extent codified in the parties'
As a result, the gist of the action doctrine does not
In a sense, the Stars’ breach of contract claim
duplicates their misrepresentation claims -- not vice versa, as
commonly seen when the gist of the action doctrine is invoked.
bar the Stars’ misrepresentation claims, and we will deny the
Rosenthals’ motion to dismiss Counts II and IV of the complaint.
Count III: Violation Of The UTPCPL
Under Count III of the complaint, the Stars aver that
“[u]nder the UTPCPL, 73 P.S. § 201-2(4)(xii), it is unlawful for
one to engage in any deceptive or fraudulent conduct which creates
confusion or misunderstanding in the sale of real estate” and that
“[t]he fraudulent misrepresentations of Defendants were
intentionally false and deceptive and created a misunderstanding
on the part of Plaintiffs with respect to their purchase of the
Pls.’ Compl. ¶¶ 52-53.
The Rosenthals counter that (1)
“[t]he language of that section [§ 201-2(4)(xii)] does not pertain
to real estate transactions as Plaintiffs allege and is wholly
inapplicable to the case at bar,” Defs.’ Mem. at 9-10, and (2)
“[t]o the extent the Plaintiffs argue that their claim is based
upon [73 Pa. Cons. Stat. Ann. § 201-2(4)(xxi)] of the UTPCPL,
Count III of Plaintiffs’ Complaint should still be dismissed
because Plaintiffs’ claim is barred by the economic loss
Cf. Sarsfield, 707 F. Supp. 2d at 553 (“Pennsylvania courts have
recognized four areas where the gist of the action doctrine
precludes recovery in tort: . . . (4) when the tort claim
essentially duplicates the breach of contract claim.”).
Id. at 10.
The Stars respond that “the economic loss
rule cannot be applied to allow Defendants -- who are clearly
guilty of fraud -- to escape statutory liability.”
Pls.’ Resp. at
Under 73 Pa. Cons. Stat. Ann. § 201-2(4),
“Unfair methods of competition” and “unfair or
deceptive acts or practices” mean any one or
more of the following:
. . .
Promising or offering prior to time
of sale to pay, credit or allow to
any buyer, any compensation or
reward for the procurement of a
contract for purchase of goods or
services with another or others, or
for the referral of the name or
names of another or others for the
purpose of attempting to procure or
procuring such a contract of
purchase with such other person or
persons when such payment, credit,
compensation or reward is contingent
upon the occurrence of an event
subsequent to the time of the
signing of a contract to purchase;
. . .
Engaging in any other fraudulent or
deceptive conduct which creates a
likelihood of confusion or of
The Rosenthals are thus correct in their assertion that § 2012(4)(xii) has no relevance to the facts of this case, and we will
presume that the Stars bring Count IV pursuant to § 201-2(4)(xxi)
-- also known as the “catchall provision.”7
provides in relevant part that “[u]nfair methods of competition
and unfair or deceptive acts or practices in the conduct of any
trade or commerce as defined by subclauses (i) through (xxi) of
clause (4) of section 2 of this act and regulations promulgated
under section 3.1 of this act are hereby declared unlawful,” and
Section 201-9.2(a) establishes a private cause of action for:
Any person who purchases or leases goods or
services primarily for personal, family or
household purposes and thereby suffers any
ascertainable loss of money or property, real
or personal, as a result of the use or
employment by any person of a method, act or
practice declared unlawful by section 3 of
this act, may bring a private action to
recover actual damages or one hundred dollars
($100), whichever is greater. The court may,
in its discretion, award up to three times the
actual damages sustained, but not less than
one hundred dollars ($100), and may provide
such additional relief as it deems necessary
or proper. The court may award to the
We note that while there is some question as to
whether the UTPCPL applies to transactions in real property,
those Pennsylvania courts to consider the question have thus far
concluded that it does. See Schwartz v. Rockey, 932 A.2d 885,
897 n.15 (Pa. 2007) (“[T]he Superior Court has held, based on
policy considerations, that the private-right-of-action provision
of the UTPCPL extends to real estate transactions, see Gabriel v.
O'Hara, 368 Pa. Super. 383, 388-92, 534 A.2d 488, 491-93 (1987),
although such decision has been subject to critical commentary as
being inconsistent with the plain terms of the statute.”).
plaintiff, in addition to other relief
provided in this section, costs and reasonable
The Rosenthals challenge the Stars’ assertion of a
UTPCPL claim pursuant to the economic loss doctrine, which, as our
Court of Appeals explained in Duquesne Light Co. v. Westinghouse
Elec. Corp., 66 F.3d 604, 618 (3d Cir. 1995), “prohibits
plaintiffs from recovering in tort economic losses to which their
entitlement flows only from a contract.”
This doctrine “gained
momentum,” id., in our Courts of Appeals’s estimation, in East
River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 871
(1986), where the United States Supreme Court held in the
admiralty products liability context that “a manufacturer in a
commercial relationship has no duty under either a negligence or
strict products-liability theory to prevent a product from
The doctrine received another infusion of energy from
Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002), in which
our Court of Appeals concluded that (1) “the doctrine applies to
transactions between manufacturers and ordinary consumers,” id. at
674; (2) “the district court correctly applied the economic loss
doctrine to appellants' fraudulent concealment claims,” id. at
681; and (3) “the same policy justifications for applying the
doctrine to appellants' common law intentional fraud claims
support the doctrine's application to appellants' UTPCPL claims.”
En route to these conclusions, Werwinski noted that
“[a]lthough the Supreme Court of Pennsylvania has not ruled on the
viability of the economic loss doctrine, an en banc panel of the
Pennsylvania Superior Court adopted the doctrine largely as set
forth in East River.”
Id. at 671 (citing REM Coal Co. v. Clark
Equipment Co., 563 A.2d 128, 134 (Pa. Super. 1989)).
On the one hand, several formulations of the economic
loss doctrine appear to suggest that it bars the Stars’ UTPCPL
While the Stars’ entitlement to economic losses8 does not
“flow only from a contract,” Duquesne Light, 66 F.3d at 618, but
rather from Pennsylvania’s broader policies against intentional
concealment and innocent misrepresentation of material facts
respecting sales of real property, see Section II.B, supra, it
The Stars argue that “Defendants improperly
categorize the Stars’ damages as being limited to solely economic
losses,” since “certain of their damages are presently unknown
and, given that their harm relates to long-term water
infiltration issues, further investigation may reveal a mold
problem.” Pls.’ Resp. at 18. Given that the Stars do not allege
that they have suffered such injury in their complaint, we will
not consider this allegation in ruling on the Rosenthals’ motion.
As for the Stars’ claimed damages for emotional distress,
“because claims for emotional distress are not compensable under
the UTPCPL the fact that Plaintiffs have [pled] them is
immaterial.” Sarsfield, 707 F. Supp. 2d at 559 n.6.
nonetheless appears true that the Rosenthals’ alleged violations
of the UTPCPL “‘did not cause harm to the plaintiffs distinct from
those caused by the breach of contract,’” Werwinski, 286 F.3d at
678 (quoting Pub. Serv. Enter. Group, Inc. v. Phila. Elec. Co.,
722 F. Supp. 184, 201 (D.N.J. 1989)), and that the “‘loss of the
benefit of a bargain is the plaintiff's sole loss.’”
Id. at 680
(quoting Duquesne Light, 66 F.3d at 619).
Notwithstanding these formulations and the expansion of
the doctrine in Werwinski, the above-cited cases nonetheless make
clear that the doctrine is not meant to apply to transactions in
Thus, as the Supreme Court explained in East
River, 476 U.S. at 871 (emphasis added), “a manufacturer . . . has
no duty . . . to prevent a product from injuring itself,” and
suggested that the need for a remedy in tort is reduced when “the
product has not met the customer's expectations.”
Id. at 872
In REM Coal, 563 A.2d at 134 (emphasis added),
the Pennsylvania Superior Court explained that the doctrine
applied in actions “involving a product that malfunctions where
the only resulting damage is to the product itself.”
Werwinski, 286 F.3d at 681 (emphasis added), which concerned a
products liability class action, our Court of Appeals suggested
that the economic loss doctrine was needed to avoid “exposing
manufacturers to substantially greater liability.”
Werwinski prefaced its conclusion that the economic loss doctrine
applies to the UTPCPL by noting that “the Pennsylvania UTPCPL . .
. only applies to products purchased for ‘personal, family or
household purposes,’” id. (quoting 73 Pa. Cons. Stat. Ann. § 2019.2(a)), apparently unmindful that in Gabriel, 534 A.2d at 492-93,
the Pennsylvania Superior Court concluded that “sales of real
property [are] protected by the UTPCPL.”
Pennsylvania courts have not hesitated to permit claims
under the UTPCPL involving transactions in real property -- even
where plaintiffs claimed only economic losses.
Schwartz, 932 A.2d at 887-88 (“This appeal involves a civil action
initiated by home purchasers against the sellers for fraudulent
non-disclosure and/or concealment of water infiltration. . . .
Buyers pursued claims of common-law fraud and violations of the
Unfair Trade Practices and Consumer Protection Law, initially
seeking compensatory damages under both theories of relief, in
addition to treble damages and attorneys' fees under the UTPCPL.”)
(remanding for Common Pleas Court to consider awarding treble
damages under the UTPCPL); Metz v. Quaker Highlands, Inc., 714
A.2d 447, 450 (Pa. Super. 1998) (“[A]ware of the needs of the
buyers, the seller failed to disclose and concealed the short-fall
of the property, refused to rectify the matter when the problem
was discovered and caused suit to be instituted to resolve the
In light of such outrageous conduct, to allow the
rescission merely of the sales agreement without imposing a
corresponding penalty for fraudulent behavior in consumer-type
cases would do violence to the intent and purpose of the law
(UTPCPL) enacted specifically by the Legislature to curb and
discourage such future behavior.”); Baker v. Cambridge Chase,
Inc., 725 A.2d 757, 759, 766 (Pa. Super. 1999) (“This case
involves a fraudulent residential real estate transaction. . . .
[T]he Bakers bring their fraud claim under the UTPCPL; they may,
therefore, be entitled to treble damages and attorney's fees in
addition to restitution, and they make demands for the same.”).
We therefore conclude that to the extent we are bound by
our Court of Appeals’s prediction as to how the Supreme Court of
Pennsylvania would apply the economic loss doctrine to UTPCPL
claims, see, e.g., DeFebo v. Andersen Windows, Inc., 654 F. Supp.
2d 285, 294 (E.D. Pa. 2009) (“[T]his Court is bound by a Third
Circuit decision where that court has predicted how the
Pennsylvania Supreme Court will decide an issue.”), Werwinski does
not apply to transactions in real property.
The economic loss
doctrine therefore does not bar the Stars’ claim under the UTPCPL
and we will deny the Rosenthals’ motion to dismiss this claim.
Count V: Breach of Contract
The Stars plead their breach of contract claim in the
alternative, averring that “Defendants materially breached the
Agreement of Sale by making the misrepresentations and omissions
Pls.’ Compl. ¶ 63.
The Rosenthals respond that
“the Agreement which ostensibly forms the basis of Plaintiffs’
breach of contract claim contains a release which effectively bars
claims by the Plaintiffs arising out of the condition of the
property at the time of sale.”
Defs.’ Mem. at 15.
In fact, the
release notes that “[s]hould Seller be in default under the terms
of this Agreement, or in violation of any seller disclosure law or
regulation, this release does not deprive Buyer of any right to
pursue any remedies that may be available under law or equity.”
Agreement § 27.
Thus, to the extent the Rosenthals’ alleged
misrepresentations breached the Agreement, the Stars retain the
right to bring a claim based upon this breach,9 and we will deny
the Rosenthals’ motion to dismiss Count V of the complaint.
Count VI: Unjust Enrichment
Finally, the Stars also assert an unjust enrichment
claim in the alternative, alleging that “[t]he Defendants’
retention of the full sale price of the House is wrongful because
said money was obtained as the direct result of the defendants’
intentional and knowing misrepresentations.”
Pls.’ Compl. ¶ 66.
The Rosenthals suggest that “Plaintiffs’ unjust enrichment claim
must be dismissed because there is an express contract which
governs the parties’ relationship.”
Defs.’ Mem. at 15.
It is true that the Pennsylvania Supreme Court has
"found the quasi-contractual doctrine of unjust enrichment
inapplicable when the relationship between parties is founded on a
written agreement or express contract."
Schott v. Westinghouse
Elec. Corp., 259 A.2d 443, 448 (Pa. 1969).
But as Judge Robreno
The Stars’ misrepresentation claims would also appear
to survive the release clause, since such “clauses do not defeat
a misrepresentation claim recognized under the LeDonne balancing
test.” Vaughn, 73 Pa. D. & C. 4th at 558. See also Rendon, 2009
WL 1514471, at *4 ("[E]ven where there is a clear 'as is' clause,
Pennsylvania law allows a claim to proceed on the basis of
misrepresentation as to the condition of the property.”).
explained in Philadelphia Housing Authority v. CedarCrestone,
Inc., 562 F. Supp. 2d 653, 656 (E.D. Pa. 2008),
This does not mean . . . that the existence of
an express contract between the parties will
always preclude a quantum meruit claim.
Rather, the Court must inquire at the motion
to dismiss stage whether there is any dispute
as to the existence of the express contract,
and whether the scope of the contract includes
the transaction that is the basis for the
quantum meruit claim.
See also 18 KT.TV, LLC v. Entest Biomedical, Inc., 2011 WL
5374515, at *6 (M.D. Pa. 2011) (“[C]laims for unjust enrichment
can be pled in the alternative to breach of contract claims.”).
Moreover, as the Superior Court of Pennsylvania has explained,
“[t]he general rule is that where a purchaser has been harmed by a
real estate broker's10 misrepresentations, the purchaser has a
choice of remedies.
The purchaser may elect to rescind the deed
and to seek a return of the purchase money, or the purchaser may
elect to sue for damages.”
Roberts, 531 A.2d at 1132.
Thus, though the Rosenthals apparently concede that a
contract exists between them and the Stars, the Stars may
nonetheless opt to rescind this contract.
Should they so elect,
While the language of Roberts expressly concerns a
real estate broker’s misrepresentations, the logic of the
decision makes clear that this general rule applies to a seller’s
misrepresentations as to real property as well.
they would be entitled to sue for unjust enrichment on the basis
of any improvements they have made to the house.
Stars have not yet chosen which remedy they will seek, we will
permit them to plead an unjust enrichment claim in the alternative
to the contract claim asserted in Count V of the complaint.
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