The Subrogation Strategist

In Earl v. NVR, Inc., No. 20-2109, 2021 U.S. App. LEXIS 6451, the U.S. Court of Appeals for the Third Circuit (Third Circuit) considered whether, under Pennsylvania law, the plaintiff’s Unfair Trade Practices and Consumer Protection Law (UTPCPL) claims against the builder of her home were barred by the economic loss doctrine. The UTPCPL is a Pennsylvania statute that prohibits “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” 73 Pa. Stat. Ann. § 201-3. The Third Circuit previously addressed the impact of the economic loss doctrine on UTPCPL claims in Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002). In Werwinski, the court held that the plaintiff’s UTPCPL claim was barred by the economic loss doctrine. The Court of Appeals overturned its decision in Werwinski and held that the economic loss doctrine does not bar UTPCPL claims since such claims are statutory, and not based in tort.

In Earl, the plaintiff, Lisa Earl, entered into an agreement with defendant NVR, Inc. (NVR) for the construction and sale of a home in Allegheny County, Pennsylvania. Ms. Earl learned of the home through NVR’s marketing, which described the home as containing “quality architecture, timeless design, and beautiful finishes.” Ms. Earl alleged that during the construction of the home, she had further discussions with agents of NVR, who made representations that the home would be constructed in a good and workmanlike manner and that any deficiencies noted by Ms. Earl would be remedied. The defendant also assured Ms. Earl that the home would be constructed in accordance with relevant building codes and industry standards. After moving into the home, Ms. Earl discovered several material defects in the construction. She provided notice of these defects to NVR, but NVR’s attempts to repair some of the defects were inadequate.

Ms. Earl filed a lawsuit against NVR, asserting counts for violations of the UTPCPL and a breach of the implied warranty of habitability. NVR filed a motion to dismiss both claims. NVR argued, in part, that the economic loss doctrine barred the plaintiff’s UTPCPL claims.

Pennsylvania recognizes the economic loss doctrine as a bar to any cause of action in tort to recover purely economic losses that arise solely from a contract. The United States District Court for the Western District of Pennsylvania (District Court) granted NVR’s motion to dismiss and dismissed both claims. The District Court relied on the Werwinski decision to dismiss the UTPCPL claim, finding that the claim sounded in tort and was thus barred by the economic loss doctrine. Ms. Earl only appealed the dismissal of her UTPCPL claims.

The Court of Appeals noted that when it issued the Werwinski decision, there was a lack of Pennsylvania law on the issue of whether UTPCPL claims were barred by the economic loss doctrine. However, since Werwinksi, the Superior Court issued two decisions that directly conflict with the holding in Werwinski. Those cases were 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 Knight, the Superior Court held that the economic loss doctrine did not apply to claims brought under the UTPCPL that did not sound in tort. The Dixon decision went even further by holding that UTPCPL claims are not barred by the economic loss doctrine irrespective of whether the claim sounds in tort.

The Third Circuit acknowledged the conflict between Werwinski and Dixon. Although Superior Court decisions are not binding, the Third Circuit noted that in the absence of binding Supreme Court of Pennsylvania authority, the rulings of intermediate appellate courts must be given significant weight. The Third Circuit also expressed concern with the potential of a divergence of outcomes depending on whether a plaintiff sues in federal court or state court. For these reasons, the court held that the economic loss doctrine no longer serves as a bar to UTPCPL claims.

The Earl decision brings clarity to the question of whether a UTPCPL claim brought in federal court survives the economic loss doctrine. The Third Circuit decided to keep uniformity with recent decisions from the Superior Court, holding that UTPCPL claims are not barred by the economic loss doctrine. The decision is significant to plaintiffs wishing to bring UTPCPL claims to federal court.