An August 2017 decision by the Pennsylvania Superior Court, Zajick v. The Cutler Group, (2017 Pa. Super 285), illustrates the pitfalls of pursuing consumer protection relief against a new home builder. The Superior Court considered “whether the trial court committed an error of law in granting Cutler's Motion for summary judgment and dismissing Karen Zajick's complaint asserting a cause of action for The Cutler Group Inc. violation of the Pennsylvania Uniform Trade Practices and Consumer Protection Law. (UTPCPL), 73 P.S Section 201-1 et seq.” Critically, the plaintiff was not the original purchaser from The Cutler Group, Inc. (Cutler) but took title from the first purchaser.

The underlying facts and procedural history are straightforward enough. In December 2008, Zajick purchased an Exton home from Robert and Arlene Santhouse, the original purchasers of the home, in 2003, from Cutler, with the benefit of a professional home inspection at the time of purchase. In March 2011, she noticed leaks in the home. In turn, Zajick notified Cutler and demanded that Cutler repair the leaks. In June 2011, she hired a stucco inspector to conduct a stucco inspection and moisture analysis. The inspector recommended stucco replacement, concluding that the stucco system was defective.

On Aug. 17, 2012, Zajick commenced the underlying action against Cutler. Her legal theories included: breach of contract, breach of express and implied warranties, and violations of Pennsylvania's UTPCPL. Cutler moved for Judgment on the pleadings; the trial court granted the Motion in part, and dismissed all claims except the UTPCPL claim. The lower court denied the motion as it pertained to the UTPCPL claim, permitting Zajick to obtain the evidence necessary to support her UTPCPL cause of action, through discovery. On Nov. 9, 2015, after the discovery deadline passed, Cutler moved for summary judgment. Zajick filed an answer admitting that she never had any communication with Cutler regarding the home before she purchased it; she did not offer any evidence of representations from Cutler to either her or the first purchasers pertinent to the home or the stucco system. Her affidavit stated that her decision to purchase the house was based upon Cutler's reputation in the community, her own personal experience purchasing and inhabiting another home built by Cutler, and general representations made by one of Cutler's sales representatives several years prior. The representations pertained to the construction and quality of the homes in the same development in Malvern as the home at issue. Based on that record, the trial court granted Cutler summary judgment relief, finding no legal basis that reliance on reputation and general statements meet the legal requirements necessary to sustain a successful UTPCPL claim.

First, the Zajick court considered the grant of summary judgment standard, which involves an error of law or abuse of discretion. In consideration of the UTPCPL, the court acknowledged that the statute authorizes a private cause of action for anyone who purchases goods of services primarily for personal purposes and who suffers an ascertainable loss due to any person who performs an unlawful act, method or practice, 73 P. S. Section 201-9.2(a). A plaintiff must show justifiable reliance on the defendant's representation or wrongful conduct and that harm was suffered. Strict technical privity of contract is not required to make out a UTPCPL claim. It was this factor—technical privity—that Zajick raised in her appeal. She contended that the lower court's decision was based on her lack of standing.

The Zajick court took issue with Zajick's characterization of the lower court's rationale. In point of fact, the trial court acknowledged standing on the UTPCPL claim citing Valley Forge Towers Smith Condominium v. Ron-Ike Foam Insulators, 574 A.2d 641, 647 (Pa Super. 1990). UTPCPL claims may be asserted by a subsequent purchaser in the absence of strict privity.

Zajick's claim failed due to her inability to establish any representations made by Cutler “that rise to the level of representations upon which justifiable reliance is foreseeable,” citing Adams v. Hellings Builders, 146 A.23d 795, 801 (Pa. Super 2016). Critically, Mr. and Mrs. Adams, offered the sales agreement between the original purchasers and the builder/seller, which expressly referenced a three-coat stucco system. For the Adams court, the sales agreement was sufficient evidence to demonstrate a representation upon which justifiable reliance was foreseeable.

The Zajick court distinguished Adams from the facts presented by Zajick. In Adams, homeowners once removed, like Zajick, claimed noncompliance with a “three-coat stucco system” that would conform to International residential code standards. In the present matter, Zajick was not able to produce any evidence that Cutler made representations about the specific home or the stucco to her or to the Santhouses, original purchasers.

The absence of proof that representations were made to the Santhouses, coupled with Zajick's admission that there was never any communication with Cutler regarding her specific home prior to the purchase from the Santhouses, led to the conclusion that Zajick failed—as a matter of law—to present and evidence that she justifiably relied on any representations by Cutler.

In conclusion, the law is crystal clear that a residential purchaser has recourse under the UTPCPL against the original builder, where technical privity is lacking. However, relief is only available when concrete representations were made and reliance on the representations was foreseeable.

Harper J. Dimmerman is an adjunct professor at Temple University's Fox School of Business. He represents clients in various litigation and real estate law matters. Contact him at [email protected] or 215-545-0600.

James M. Lammendola is an assistant professor at Temple University's Fox School of Business who was in private practice for 20 years. Contact him at [email protected] or 215-204-4124.