Pa. consumer class action requires reliance

Hunt v. United States Tobacco Co., 538 F.3d 217 (3d Cir. 2008)

Hunt’s putative class action alleged that the defendant (Smokeless) engaged in anticompetitive behavior, artificially inflating the price of its smokeless tobacco by at least 7 cents a can more than an efficient market would have charged. The misconduct allegededly included theft and concealment of competitors’ distribution racks and ads (!) as well as disparaging and false statements about competitors’ products. In a lawsuit by a competitor, a jury found Smokeless liable for the underlying antitrust violations. Hunt claimed that consumers relied on a presumption that they were paying prices set by an efficient market.

The court of appeals held that a private plaintiff alleging deceptive, rather than fraudulent, conduct under Pennsylvania’s Uniform Trade Practices and Consumer Protection Law must prove justifiable reliance. Because Pennsylvania courts have consistently required justifiable reliance, not simply a causal connection between misrepresentation and harm, the court of appeals rejected the district court’s reasoning that the consumer protection law was to be construed liberally and should not require plaintiffs to prove all the elements of common-law fraud. Because Hunt’s complaint lacked such an allegation of justifiable reliance, the case was remanded for a ruling on leave to amend.