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Cessna v. Rea Energy Cooperative, Inc.

United States District Court, W.D. Pennsylvania

June 27, 2017

LEONARD CESSNA, on behalf of himself and all others similarly situated, and GEORGE WORK, on behalf of himself and all others similarly situated, Plaintiffs,



         On December 31, 2015, Leonard Cessna and George Work filed this case in the Court of Common Pleas of Blair County against REA Energy Cooperative, Inc. REA is an electric cooperative of which Cessna and Work (“Plaintiffs”) are current and former members, respectively-meaning REA is and was their electricity supplier. Plaintiffs seek to represent a class of REA members. They allege that REA is improperly withholding revenues in excess of its operating costs and that REA is legally obligated to disgorge these excess revenues to its members. REA removed the case to this Court on February 11, 2016.

         Pending before the Court is REA's motion to dismiss (ECF No. 10) and Plaintiffs' motion to strike REA's motion to dismiss (ECF No. 35). For the reasons that follow, REA's motion to dismiss will be granted and Plaintiffs' motion to strike will be denied.

         I. Background [1]

         The following facts are alleged in the complaint (ECF No. 1-1). The Court accepts these factual allegations as true in deciding REA's motion to dismiss, but “[w]here those allegations are contradicted by written exhibits that [Plaintiffs] attached to [their] . . . complaint, . . . the exhibits trump the allegations.” Abcarian v. McDonald, 617 F.3d 931, 933 (7th Cir. 2010).

         REA is a domestic non-profit corporation that provides residential and business electrical service to its 22, 000 members in Armstrong, Blair, Cambria, Clearfield, Indiana, Jefferson, and Westmoreland Counties, Pennsylvania. (ECF No. 1-1 ¶ 3.) REA is a so-called rural electric cooperative, meaning it is a member-owned entity rather than a publicly traded corporation with freely alienable stock. (Id. ¶ 6.) Leonard Cessna resides in Indiana County, Pennsylvania, and has been a member of REA for approximately 30 years. (Id. ¶ 1.) George Work resides in Jefferson County, Pennsylvania, and was a member of REA for approximately 50 years before he withdrew from membership in 2011. (Id. ¶ 2.) Thus, Cessna has been purchasing and continues to purchase his electricity from REA and Work used to do so. (Id. ¶¶ 1-2.)

         Plaintiffs contend that REA is improperly withholding funds that belong to its members. They contend that REA, as a cooperative, is prohibited from making a profit on business conducted with its members. (Id. ¶ 9.) Cessna and Work explain that “[c]operative principles require that members provide capital for the cooperative's use in proportion to their use of the cooperative, ” and state that this principle is referred to as the “user-owner principle”. (Id. ¶ 15.) The difference between REA's revenues and expenses is therefore considered “margin”-not profit-and this margin belongs to REA's members in the form of patronage capital. (Id. ¶¶ 9-10.)

         The amount of patronage capital that each member earns annually is based on the member's electric usage, and patronage capital is allocated to each member in a separate account on REA's books. (Id. ¶ 5.) These accounts reflect a credit or debit for each year the member was or continues to be a member. (Id. ¶ 17.) The members own an interest in REA worth over $53, 000, 000-as of 2014-represented in the form of this patronage capital. (Id. ¶ 6.) Cessna and Work allege that, because members cannot sell or redeem their interest in REA like stockholders in a publicly traded corporation can, they are “at the mercy of [REA] when it comes to receiving a financial distribution of their accumulated Patronage Capital.” (Id.)

         According to REA's bylaws, its articles of incorporation and bylaws constitute a contract between REA and each member. (Id. ¶ 11.) Cessna and Work allege that REA does not provide its members with a copy of its articles of incorporation. (Id. ¶ 12.) REA's bylaws require that it operate on a cooperative non-profit basis for the mutual benefit of its members. (Id. ¶ 14.) Article VIII of REA's bylaws provides that REA is obligated to account on a patronage basis to its members for all amounts received and receivable from members in connection with REA's services. (Id. ¶ 13.) Article VIII provides further that REA receives all amounts in excess of operating costs and expenses “with the understanding that they are furnished by the [members] as capital.” (Id. ¶¶ 13, 16 (capitalized in original).) Patronage-capital accounts are non-transferrable, cannot appreciate in value, and do not accrue interest. (Id. ¶ 24.) REA's bylaws also provide a mechanism for the return of patronage capital:

In the event of the dissolution or liquidation of the Cooperative, after all outstanding indebtedness of the Cooperative shall have been paid, outstanding capital credits shall be returned without priority on a prorata basis before any payments are made on account or property rights of patrons. If, at any time prior to dissolution or liquidation, the Board of Directors shall determine that the financial condition of the Cooperative shall not be impaired thereby, the capital then credited to patrons' accounts may be returned in full or in part.

(Id. ¶ 13 (quoting REA's bylaws, Article VIII).)

         Plaintiffs assert that, as a result of inflation and the time value of money, the value of patronage capital decreases the longer REA retains it before returning it to its members. (Id. ¶ 24.) And Plaintiffs believe that REA is earning interest on its members' patronage capital and not allocating that interest back to them. (Id. ¶ 25.) In 2011, REA retired patronage capital for the first time since its inception in 1937, though this refund applied only to members who obtained electricity from REA before 1961. (Id. ¶ 26.) Plaintiffs assert that REA's retention of the patronage capital increases the likelihood that it will be unable to locate the members, and that this will result in the eventual escheat of the unclaimed capital to REA. (Id. ¶ 27.)

         Plaintiffs believe and allege the following: (1) that the patronage capital is worth approximately $56, 000, 000 today; (2) that in 2011 REA retired approximately $700, 000 of patronage capital for the years prior to 1961; (3) that REA has not made an appropriate patronage-capital distribution prior to or since 2011; (4) that REA has not made an appropriate attempt to locate the approximately 6, 000 members who failed to redeem their patronage-capital retirement checks in 2011; (5) that REA is poised to retain a large percentage of the patronage capital for the years prior to 1961; (6) that REA has acted unethically and breached its fiduciary duties by failing to locate the members to whom it wrongly denied patronage-capital retirement checks for the past fifty years or longer; (7) that REA should not be permitted to claim that the members are unreachable because it has improperly withheld the patronage-capital retirement checks for over fifty years and has failed to take reasonable steps to locate members; and (8) that REA's failure to adopt a reasonable, workable, and equitable system for returning patronage capital to its members is an abdication of its duty to the members, an abuse of discretion, and a breach of its fiduciary duties. (Id. ¶¶ 28-36.)

         Plaintiffs therefore seek to represent a class of current and former members in this suit against REA. Plaintiffs assert six claims. In Count I, Plaintiffs assert a claim under Pennsylvania's Unfair Trade Practices and Consumer Protection Law. (Id. ¶¶ 44-58.) In Counts II and III, Plaintiffs assert claims for breach of the covenant of good faith and fair dealing and for breach of contract. (Id. ¶¶ 57-70.)[2] In Count IV, Plaintiffs assert, in the alternative, a claim for unjust enrichment. (Id. ¶¶ 71-78.) In Count V, Plaintiffs seek declaratory and injunctive relief. (Id. ¶¶ 79-87.) And in Count VI, Plaintiffs assert a claim for breach of fiduciary duty of an agent or trustee. (Id. ¶¶ 88-92.) Plaintiffs also point to § 7330 of Pennsylvania's Electric Cooperative Law of 1990 (15 Pa. Cons. Stat. § 7330), and argue that if REA's bylaws give its board of directors absolute discretion over the disbursement of patronage capital, then such discretion would violate § 7330. (ECF No. 1-1 ¶ 19-20.)

         On February 18, 2016, REA filed a motion to dismiss Plaintiffs' claims pursuant to Federal Rule of Civil Procedure 12(b)(6) (ECF No. 10). REA's motion to dismiss prompted both a motion to stay (ECF No. 12) and a motion to remand (ECF No. 14) by Plaintiffs. Only once those motions were resolved-and denied-did Plaintiffs file a response to REA's motion to dismiss. In their response, Plaintiffs also moved to strike-rather than simply oppose-REA's motion to dismiss. And Plaintiffs and REA thereafter both moved and were granted leave to file multiple supplemental briefs. REA's motion to dismiss and Plaintiffs' related motion to strike are now ripe for adjudication.

         II. Standard of Review

         In determining the sufficiency of a complaint challenged under Rule 12(b)(6), a district court must conduct a two-part analysis. First, the court should separate the factual and legal elements of the claims. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). Second, the court must determine whether the factual matters alleged are sufficient to establish that the plaintiff has a “plausible claim for relief.” Id. at 211 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)). The complaint, however, need not include “detailed factual allegations.” Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

         The court must also accept as true all factual allegations in the complaint and draw all inferences from the facts alleged in the light most favorable to the nonmoving party. See Id. at 228 (citing Worldcom, Inc. v. Graphnet, Inc., 343 F.3d 651, 653 (3d Cir. 2003)). But “legal conclusions” and “[t]hreadbare recitals of the elements of a cause of action . . . do not suffice.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). Rather, the complaint must present sufficient “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Sheridan v. NGK Metals Corp., 609 F.3d 239, 262 n.27 (3d Cir .2010) (quoting Iqbal, 556 U.S. at 678).

         Ultimately, whether a plaintiff has stated a “plausible claim for relief” is a context-specific inquiry that requires the district court to “draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679 (citation omitted). The record to consider in making this determination includes the complaint and any “document integral or explicitly relied on in the complaint.” U.S. Express Lines, Ltd. v. Higgins, 281 F.3d 383, 388 (3d Cir. 2002) (emphasis and citation omitted).

         III. Analysis

         REA has moved to dismiss Plaintiffs' complaint on several grounds. The Court will first address REA's threshold argument, which is that Plaintiffs' claims are preempted by the Supremacy Clause of the United States Constitution. Next, because the Court holds that Plaintiffs' claims are not barred by the Supremacy Clause, it will address REA's arguments with respect to each of Plaintiffs' claims.

         Federal courts, when presented with state-law claims, “are required to apply the substantive law of the state whose laws govern the action.” Robertson v. Allied Signal, Inc., 914 F.2d 360, 378 (3d Cir. 1990) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938)). Because all of Plaintiffs' claims arise under state law, the Court applies Pennsylvania law in evaluating whether they are actionable.

         A. Supremacy Clause

         REA asserts that Plaintiffs' claims fail because they are preempted by the Supremacy Clause of the United States Constitution. (ECF No. 11 at 6.) Specifically, REA argues that Plaintiffs' claims are preempted to the extent they would force REA to refund patronage capital to a point where its equity would fall below 30%. Such an application of state law is preempted, REA posits, because it would conflict with the federal Rural Electrification Act and related regulations, and would force REA to violate its contract with the United States. In support of this argument, REA points to its loan contract with the Rural Utilities Service-the federal agency tasked with administering the Act-and 7 C.F.R. § 1717.617.[3]

         The Supremacy Clause of the United States Constitution provides that the laws of the United States “shall be the supreme Law of the Land . . . any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” U.S. Const. art. VI, cl. 2. Stated simply, the result of the Supremacy Clause is that “[w]here state and federal laws conflict, the state law is ‘without effect.'” Delaware County, Pa. v. Fed. Hous. Fin. Agency, 747 F.3d 215, 225 (3d Cir. 2014) (citing Mut. Pharm. Co., Inc. v. Bartlett, __ U.S. __, 133 S.Ct. 2466, 2472-73 (2013)). The question is thus whether a given state law and a given federal law actually conflict; if they do, the state law is preempted by the federal law.

         Federal preemption of state law can occur in three ways: (1) express preemption, (2) field preemption, and (3) conflict preemption. See, e.g., Gade v. Nat'l Solid Wastes Mgmt. Ass'n, 505 U.S. 88, 98 (1992). Express preemption occurs when Congress explicitly, through statutory language, states its intent to displace state law. Id. Field preemption occurs when “Congress has legislated comprehensively to occupy an entire field of regulation, leaving no room for the States to supplement federal law.” Hughes v. Talen Energy Mktg., LLC, __ U.S.__, 136 S.Ct. 1288, 1297 (2016) (internal quotation marks and citation omitted). As for conflict preemption, that occurs in two ways: if “it is impossible for a private party to comply with both state and federal law, [or if] under the circumstances of a particular case, the challenged state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363, 372-73 (2000) (brackets, citations, and internal quotation marks omitted). And it is not only federal legislation that preempts state law; “[f]ederal regulations preempt state laws in the same fashion as congressional statutes.” Farina v. Nokia Inc., 625 F.3d 97, 115 (3d Cir. 2010) (citations omitted).

         In their complaint, Plaintiffs allege that § 7330 of Pennsylvania's Electric Cooperative Law of 1990 (15 Pa. Cons. Stat. § 7330) obligates REA to return patronage capital to its members. (ECF No. 1-1 ¶ 19.) Section 7330, titled nonprofit operation, governs the financial operation of Pennsylvania electric cooperatives.[4] Section 7330(a) mandates that electric cooperatives be operated without profit to their members, and § 7330(b) restricts how electric cooperatives can use their revenues. These must be used to first pay “operating and maintenance expenses and the principal and interest on outstanding obligations and, thereafter, to such reserves for improvement, new construction, depreciation and contingencies as the board may, from time to time, prescribe.” 15 Pa. Cons. Stat. § 7330. Revenues not required for these purposes “shall be returned, from time to time, to the members on a pro rata basis, according to the amount of business done with each during the period”-though the cooperative retains discretion on the manner by which to return revenues. § 7330(c).

         Rural electric corporations are also regulated under federal law. REA asserts that it is subject to the federal Rural Electrification Act and its related regulations, and points to 7 C.F.R. § 1717.617 specifically. Section 1717.617 sets forth the criteria under which the Rural Utilities Service will automatically approve a cooperative's patronage-capital refund request if that cooperative has a loan from the Service and is required by its loan documents to obtain approval from the Service before issuing such a refund. REA asserts that it has a loan from the Service and is thus subject to § 1717.617. One of § 1717.617's criteria for automatic approval is that the cooperative's equity, after any refund, must be equal to or greater than 30 percent of its total assets. 7 C.F.R. § 1717.617.

         The Court notes that Plaintiffs do not allege sufficient facts in their complaint to establish that § 1717.617 applies to REA, as REA asserts, and that Plaintiffs make no allegations in their complaint regarding the terms of REA's loan contract with the Service. But even if the Court assumes without deciding that REA is subject to 7 C.F.R. § 1717.617, any possible conflict between that regulation and 15 Pa. Cons. Stat. § 7330 would only limit Plaintiffs' possible relief rather than preempt their claims entirely.

         As an initial matter, this case does not implicate express or field preemption. As noted by the Supreme Court, “[n]othing in the Rural Electrification Act expressly pre-empts state rate regulation of power cooperatives financed by the [Rural Utilities Service].“ Ark. Elec. Coop. Corp. v. Ark. Pub. Serv. Comm'n, 461 U.S. 375, 385 (1983). Although this case does not concern state rate regulation of power cooperatives, that is a distinction without a difference; nothing in the Act expressly preempts any state regulation of power cooperatives.[5] Nor does the Act implicate field preemption. Congress has not legislated so comprehensively in the field of rural electric cooperatives that there is no room for state regulation. The Act does not establish a comprehensive regulatory scheme for rural electric cooperatives; it establishes a framework for providing loans “for the purpose of furnishing and improving electric . . . service in rural areas . . . and for the purpose of assisting electric borrowers to implement demand side management, energy efficiency and conservation programs, and on-grid and off-grid renewable energy systems.” 7 U.S.C. § 902(a). And its provisions leave ample room for state regulation, meaning field preemption is inapplicable here. See Wabash Valley Power Ass'n, Inc. v. Rural Electrification Admin., 988 F.2d 1480, 1486 (7th Cir. 1993) (“More than fifty years of state regulation of cooperative utility rates (in those states that have continued to regulate these rates) since the enactment of the RE Act certainly reflects the fact that Congress has not occupied the field.”).

         This leaves conflict preemption. REA states that “Plaintiffs' claims create an obstacle to and frustrate the purpose of the Rural Electrification Act” (ECF No. 11 at 6), but does not elaborate on this point or explain what purpose would be frustrated-or how. As discussed, the Act is primarily a vehicle for providing federal loans for the purpose of establishing and improving electric service in rural areas. It is conceivable that a hypothetical state law “may so seriously compromise important federal interests, including the ability of the [cooperative] to repay its loans, as to be implicitly pre-empted by the [Act].” Ark. Elec., 461 U.S. at 388 (citations omitted). But § 7330 is not that hypothetical law. Its provisions leave cooperatives with ample room for the prudent operation of their business. Section 7330(a)(1) instructs cooperatives to set their rates so that the cooperative is able to “pay all operating and maintenance expenses necessary or desirable for the prudent conduct of its business and the principal of and interest on the obligations issued or assumed by the corporation in the performance of the purpose for which it was organized.” And § 7330(b) gives cooperatives broad discretion to designate what revenues are required for improvements, new construction, depreciation, and contingencies- and which revenues are therefore exempt from § 7330(c)'s refund requirement. See § 7330(b) (“such reserves for . . . contingencies as the board may, from time to time, prescribe”).

         REA's strongest conflict-preemption argument is that if § 7330(c) requires REA to reduce its equity below 30% then it would be impossible for REA to comply with both § 7330(c) and § 1717.617 and REA would have to violate its loan contract with the Service. There are two problems with that argument. First, § 1717.617 does not actually impose any legal obligations on REA; it merely provides criteria under which the Service automatically approves a cooperative's patronage-capital refund if the Service's approval is required by the cooperative's loan documents. Thus, § 1717.617 itself does not mandate that REA's equity has to stay above 30%. REA is just not granted automatic approval through § 1717.617 to issue a patronage refund if its equity would fall below 30% as a result.[6]

         Because § 1717.617 does not impose any legal obligations on REA, the source for any such obligations that would give rise to a conflict must be found elsewhere-such as in REA's loan agreement with the Service. That brings us to the second problem with REA's preemption argument. Even if REA's loan agreement imposed obligations that interfered with REA complying with state law, it is not clear that this would make a difference here. It is “federal law which preempts contrary state law; nothing short of federal law can have that effect.” Fellner v. Tri-Union Seafoods, L.L.C., 539 F.3d 237, 244 (3d Cir. 2008). A provision in a loan agreement is not federal law, even if one party is a federal agency. Although actions by federal agencies can preempt state law, federal law capable of preempting state law is not created every time an agency makes a statement or takes an action within the agency's jurisdiction. Id. at 245. In determining whether agency action should be afforded preemptive effect, the Third Circuit has “decline[d] to afford preemptive effect to less formal measures lacking the ‘fairness and deliberation' which would suggest that Congress intended the agency's action to be a binding and exclusive application of federal law.” Id.

         The Court cannot at this stage and on this limited record determine whether provisions in REA's loan contract with the Service should be afforded preemptive weight. It thus reserves that question, and for now resolves it on a simpler ground. Assuming for the sake of argument that REA's loan agreement with the Service requires REA to maintain equity greater than or equal to 30% of its assets, and that this provision should have preemptive effect, REA's equity would have to actually fall below 30% of its assets before a conflict would arise. Based on REA's 2014 financial report, this leaves REA with approximately $21, 000, 000 to disgorge before any purported conflict would arise.[7] (See ECF No. 1-1 at 63.) Thus, any possible preemption would only limit Plaintiffs' relief. It would not preempt their claims entirely. The Court therefore turns to the substance of Plaintiffs' claims.

         B. Count I-Pennsylvania's Unfair Trade Practices and Consumer Protection Law

         In Count I, Plaintiffs assert a claim for violations of Pennsylvania's Unfair Trade Practices and Consumer Protection Law, or UTPCPL for short. The UTPCPL is a Pennsylvania consumer-protection law and its “underlying foundation is fraud prevention.” Weinberg v. Sun Co., 777 A.2d 442, 446 (Pa. 2001) (internal quotation marks and citation omitted). It prohibits “[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” 73 Pa. Cons. Stat. § 201-3. Section 201-2(4) defines the prohibited unfair methods of competition and unfair or deceptive acts or practices, and includes a catchall provision (subsection xii) that prohibits “any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding.” The UTPCPL also creates a private right of action for persons who suffer an ascertainable loss as a result of violations of the UTPCPL. 73 Pa. Cons. Stat. § 201-9.2.

         Plaintiffs assert two grounds for recovery under the UTPCPL. First, they allege that REA has failed to comply with a written guarantee or warranty, violating § 201-2(4)(xiv). Second, they allege that REA has engaged in other fraudulent or deceptive conduct, violating § 201-2(4)(xxi).

         REA offers multiple arguments for why Plaintiffs' UTPCPL claim should be dismissed. It argues that the UTPCPL is inapplicable here because Plaintiffs make only conclusory allegations about “unfair or deceptive acts or practices” and because the UTPCPL should not apply to non-profit entities. REA argues further that Plaintiffs' allegation that REA failed to comply with a written guarantee or warranty is insufficient as a matter of law because Plaintiffs fail to actually identify any written guarantee or warranty. And REA argues that Plaintiffs have not sufficiently alleged that REA engaged in fraudulent or deceptive conduct and that Plaintiffs have failed to plead justifiable reliance on REA's supposedly deceptive acts.

         As a preliminary matter, the Court finds unconvincing REA's argument that the UTPCPL should not apply to non-profits. In support of this argument, REA cites only to the concurring opinion in a Pennsylvania Supreme Court case that addressed whether political-subdivision agencies are “persons” under the UTPCPL, Meyer v. Cmty. Coll. of Beaver Cty., 93 A.3d 806, 816 (Pa. 2014) (Castille, C.J., concurring). In that concurrence, the author noted that the UTPCPL by its terms applies only to entities engaged in “the conduct of any trade or commerce” and opined that the defendant in that case-a county community college-was not engaged in trade or commerce because its focus was education rather than private gain. See Meyer, 93 A.3d at 816 (Castille, C.J., concurring).

         This Court disagrees with that rationale and therefore declines to adopt it. The UTPCPL defines “trade or commerce”; § 201-2(3) provides that these terms “mean the advertising, offering for sale, sale or distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value wherever situate, and includes any trade or commerce directly or indirectly affecting the people of this Commonwealth.” That definition does not carve out an exception for trade or commerce that is motivated by a particular goal; as long as the activity involves the “advertising, offering for sale, sale or distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value, ” then it qualifies as trade and commerce. REA might be a non-profit, but it is still engaged in the “sale or distribution of [a] service[]”-namely electrical service-and is thus engaged in trade and commerce as defined by the UTPCPL.[8] Its provisions therefore apply to REA.

         Nevertheless, REA is correct that Plaintiffs have failed to state a claim for a violation of the UTPCPL. To review, Plaintiffs base their UTPCPL claim on REA's alleged failure to “comply with the terms of any written guarantee or warranty given to [Plaintiffs] at, prior to or after a contract for the purchase of goods or services is made” (violating § 201-2(4)(xiv)) and REA engaging in “other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding” (violating § 201-2(4)(xxi)). Yet their factual allegations fall short of stating an actionable UTPCPL claim.

         To state a claim under § 201-2(4)(xiv), a plaintiff must as a threshold matter identify a written guarantee or warranty and its terms. See Seldon v. Home Loan Servs., 647 F.Supp.2d 451, 466 (E.D. Pa. 2009). To state a claim under the UTPCPL's catchall provision, § 201-2(4)(xxi), a plaintiff must allege a deceptive act that is likely to deceive a consumer acting reasonably under similar circumstances. See Slapikas v. First Am. Title Ins. Co., 298 F.R.D. 285, 292 (W.D. Pa. 2014) (citing Seldon, 647 F.Supp. 2dat 470). And for both types of claims a plaintiff must allege (1) justifiable reliance, and (2) that the plaintiff suffered ascertainable loss as a result of that reliance. Yocca v. Pittsburgh Steelers Sports, Inc., 854 A.2d 425, 438 (Pa. 2004) (“To bring a private cause of action under the UTPCPL, a plaintiff must show that he justifiably relied on the defendant's wrongful conduct or representation and that he suffered harm as a result of that reliance.” (citing Weinburg v. Sun Co., 777 A.2d 442, 446 (Pa. 2001)); see also Santana Prods., Inc. v. Bobrick Washroom Equip., Inc., 401 F.3d 123, 136 (3d Cir. 2005) (“a plaintiff bringing an action under the UTPCPL must prove . . . reliance and causation with respect to all subsections of the UTPCPL” upon which that plaintiff brings a claim (citation omitted)). Justifiable reliance in this context means more than a mere causal connection between the wrongful conduct and the harm; the plaintiff “must show that he justifiably bought the product in the first place (or engaged in some other detrimental activity) because of the misrepresentation.” Hunt v. U.S. Tobacco Co., 538 F.3d 217, 222 n.4 (3d Cir. 2008) (citing Weinberg, 777 A.2d at 446). Plaintiff's UTPCPL claim falters primarily on the justifiable-reliance element.

         In Count I of their complaint, Plaintiffs state that REA ”failed to comply with the written warranties, guarantees and representations regarding the return of Patronage Capital” and that REA “knew or should have known that its actions regarding its failure to properly return Patronage Capital were not as warranted, guaranteed and/or represented.” (ECF No. 1-1 ¶¶ 47.a, 48.) Nowhere in that Count, however, do Plaintiffs identify specific language from a specific document, explain what document they contend is a written guarantee or warranty, or explain specifically what guarantee or warranty was violated or how. In their response to REA's motion to dismiss, Plaintiffs state that they incorporated the rest of the complaint into Count I by reference and that “[t]he written Guarantee or Warranty would be in the Penn Lines, Bylaws and Articles of Incorporation.”[9] Plaintiffs go on to argue that “[t]o the extent that [REA] claims that it will return patronage capital when it is financially feasible to but, aside from one time in the last 50 plus years, has failed to do so, this is a failure to comply with a written warranty or guarantee.” (ECF No. 35 at 44.)

         Although Plaintiffs fail to reference a specific document in Count I of their complaint, they do indeed refer to REA's Penn Lines publication, bylaws, and articles of incorporation in other parts of the complaint. Yet Plaintiffs do not allege to have ever seen or relied on the articles of incorporation, nor do they explain what warranties or guarantees it contains or were supposedly violated.[10] That leaves the bylaws and Penn Lines publication.

         Plaintiffs are correct that REA's bylaws contain certain warranties and guarantees regarding the legal status of members' patronage capital. But the relevant provisions contradict Plaintiffs' allegation that these warranties and guarantees were violated. Article VIII provides in part:

In order to induce patronage and to assure that the Cooperative will operate on a non[-]profit basis the Cooperative is obligated to account on a patronage basis to all its patrons for all amounts received and receivable from the furnishing of electric energy and service. ALL SUCH AMOUNTS IN EXCESS OF OPERATING COSTS AND EXPENSES AT THE MOMENT OF RECEIPT BY THE COOPERATIVE ARE RECEIVED WITH THE UNDERSTANDING THAT THEY ARE FURNISHED BY THE PATRONS AS CAPITAL. The books and records of the Cooperative shall be set up and kept in such a manner that at the end of each fiscal year the amount of capital, if any, so furnished by each patron is clearly reflected and credited in an appropriate record to the capital account of each patron. All such amounts credited to the capital account of any patron shall have the same status as though they had been paid to the patron in cash in pursuance of a legal obligation to do so and the patron had then furnished the Cooperative corresponding amounts for capital.

(ECF No. 1-1 at 53 (emphasis in the form of italics added).) The capitalized sentence stresses that all amounts paid by members in excess of REA's costs and expenses are provided by members as capital. And the last quoted sentence is key; it clearly spells out that those excess amounts are deemed to have already been paid back to the members “in cash in ...

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