United States: Community Colleges Not Subject To UTPCPL

It only stands to reason, yet it took almost 12 years and repeated appeals for the final determination by the Pennsylvania Supreme Court in Meyer v. Community College of Beaver County, No. 22 WAP 2012, 2014 Pa. LEXIS 1524 (Pa. June 16, 2014), ruling that Pennsylvania's Unfair Trade Practices and Consumer Protection Law does not apply to community colleges as political subdivision agencies.

Meyer's appellate rendezvous included two visits to the Commonwealth Court and two to the Supreme Court. Each appeal grappled with possible legal rationales for applying—or not—the UTPCPL to community colleges.

Ultimately, the Supreme Court ruled that a community college is not a "person" as defined in 73 Pa. Stat. § 201-2(2), and since the UTPCPL is enforceable only against a person, it does not apply to community colleges. This sensible outcome avoids imposing the teeth of the UTPCPL, such as treble damages, cost-shifting and attorney fees, on an institution that offers an affordable, tax-subsidized, post-secondary education. The majority in Meyer stopped there, however, declining to add gloss to the meaning of "trade and commerce," thus limiting Meyer's direct impact to governmental instrumentalities.

The dispute in Meyer involved students enrolled in a nine-month police academy program in 2002 at Beaver County Community College. After a few months, the program's Act 120 certification was suspended—and later revoked—due to inaccuracies in exam score documentation and uncertified instructors. Credits earned were disallowed and the students were forced to repeat classes and pay tuition elsewhere.

The Meyer plaintiffs asserted claims against the college for breach of contract, breach of warranty and for UTPCPL violations. After discovery closed, the college moved for partial summary judgment, arguing that the UTPCPL does not apply to community colleges and that the college was immune from suit under the Political Subdivision Tort Claims Act. The Beaver County Court of Common Pleas denied the motion, concluding that a community college is a person subject to UTPCPL liability and that because the crux of the UTPCPL claims were contractual in nature, the Tort Claims Act did not apply.

The Commonwealth Court granted permission to appeal, reversed and ordered that partial summary judgment be entered, in Meyer v. Community College of Beaver County, 965 A.2d 406 (Pa. Commw. Ct. 2009), or Meyer I. The court declined to address whether the college was a person under the UTPCPL, electing instead to conclude the college was immune as a local agency under the Tort Claims Act. It decided that a local agency can be sued for statutory damages—such as under the UTPCPL—only if the claims fall within one of the eight negligence exceptions in 42 Pa. Cons. Stat. § 8542. Since none of those exceptions was involved, the college had immunity from the plaintiffs' UTPCPL claims.

Meyer's next stop was to the Supreme Court, which reversed the Commonwealth Court in Meyer v. Community College of Beaver County, 2 A.3d 499 (Pa. 2010), or Meyer II. The Supreme Court disagreed with the Commonwealth Court's Tort Claims Act analysis. It was concerned that Meyer I could be construed as holding that political subdivisions have immunity for all claims not enumerated in Section 8542, including claims for breach of contract. The Supreme Court remanded the case to Commonwealth Court to address other UTPCPL issues raised by the college, specifically "whether the legislature intended for the government to be subject to private actions ... based on prohibited conduct or omissions by 'any person.'"

Taking its cue on remand from Meyer II, the Commonwealth Court addressed both whether the college was a person as defined by Section 201-2(2) and whether the plaintiffs' claims were sufficiently tortious in nature that they fell within the negligence exceptions in the Tort Claims Act. This case was captioned at Meyer v. Community College of Beaver County, 30 A.3d 587 (Pa. Commw. Ct. 2011), or Meyer III.

In an about-face, Meyer III concluded that the college was a person under the UTPCPL because the phrase "any other legal entities" in Section 201-2(2) was broad enough to include local agencies. It also ruled that the plaintiffs' allegations sounded in contract since they involved bargained-for expectations, thus rendering the Tort Claims Act inapplicable. Meyer III affirmed the trial court's original order denying partial summary judgment. Meyer III is notable for its three dissents by Judges Dan Pellegrini, Mary Hannah Leavitt and P. Kevin Brobson, which posited that a community college education may not be "trade or commerce" under Section 201-2(3), addressed whether "other legal entities" in Section 201-2(2) included political subdivisions and pointed out the practical consequences of exposing local agencies to UTPCPL liability.

The college again sought review in the state Supreme Court, which again reversed the Commonwealth Court. It ruled that the definition of person in Section 201-2(2) includes "private entities, but not political subdivision agencies." The court reasoned that the UTPCPL was ambiguous and thus reviewed the extrinsic circumstances under which the law was enacted. At that time, sovereign immunity and the presumption against depriving sovereign rights or property were established and the court found no evidence that the legislature intended the UTPCPL to broaden these doctrines.

To the contrary, the court found that the UTPCPL's intended purpose was to balance the inequality between buyers and sellers and to protect consumers from "exploitative merchants," not "to eliminate unfair trade practices in the public sphere." The court concluded that the UTPCPL's treble damages, cost-shifting and attorney fees provisions should not apply to political subdivisions in the absence of clearly manifested legislative intent. Influenced by the dissents in Meyer III, Pennsylvania Supreme Court Chief Justice Ronald D. Castille penned a concurring opinion, noting that when a governmental entity is carrying out a public duty, it is not engaged in a "trade or commerce" within that meaning of the UTPCPL. He added that the college's acceptance of "tuition funds in exchange for providing [an] education does not establish that its mission is profit-making trade or commerce."

The final appellate round in Meyer speaks to a limited holding—that the UTPCPL does not apply to community colleges as political subdivision agencies. The contrasting debate surrounding the meaning of "trade or commerce" in the Meyer III dissents and Castille's concurring opinion may be of greater interest to practitioners. The court could have chosen to hinge UTPCPL liability on the nature of the alleged wrongful activity rather than the college's status as a political subdivision agency.

As Pellegrini explained in Meyer III, the UTPCPL governs "mercantile activity in which the person engaged in that business is doing so for private profit which could motivate unfair or deceptive practices for private gain or, more accurately, private greed."

For example, the college might have operated a snack bar for its students or generated profit through the sale of trademarked products in a book store. Under such an approach, education might not be governed by the UTPCPL, but the business enterprise of a bookstore or snack bar might be viewed as trade or commerce. In lieu of reviewing the nature of the activity at issue, the court adopted the bright line of who was being sued. Certainly, this approach is sensible in the governmental sphere.

On the other hand, Meyer gives little guidance as to what degree the UTPCPL otherwise governs educational institutions or nonprofit entities. Although Pellegrini's dissent focused on community colleges "carrying out a public responsibility with tax dollars to provide students with an affordable education," logic permits the inference that private nonprofit educational institutions also may not be involved in trade or commerce, at least not to the extent that educational activities are challenged. Compare Harris v. Saint Joseph's University, No. Civ. A. 13-3937 (E.D. Pa. May 13, 2014), which declined to dismiss a UTPCPL claim regarding a student disciplinary investigation, with Ke v. Drexel University, No. 11-6708 (E.D. Pa. April 10, 2014), in which a UTPCPL claim was held to be subsumed in a dismissed contract claim.

The Meyer trial court acknowledged the judiciary's reluctance to entertain educational malpractice claims, in Meyer, No. 11345 of 2002 (Pa. Com. Pl., May 12, 2008), but noted that contract claims are permitted against educational institutions in certain instances, as in Swartley v. Hoffner, 734 A.2d 915 (Pa. Super. Ct. 1999).

The subjectivity of what constitutes a good education counsels against a private education falling within the ambit of trade or commerce under the UTPCPL. Certainly, the efforts and talents of individual students and the importance of academic research and publication relative to teaching skills, class size, facilities and the use of teaching assistants impact the quality of an education. But in the final analysis, the difficulty in establishing a usable standard against which the quality of a private education is judged suggests that private education should not be subject to the UTPCPL.

Additionally, Meyer's conclusion that the UTPCPL was intended "to protect consumers from exploitative merchants" raises the question of whether the UTPCPL should apply to nonprofit entities.

As noted, the inquiry could focus either on the nonprofit status or whether the nature of the activity by the nonprofit under scrutiny constitutes trade or commerce. By way of example, a nonprofit's sale of wristbands to fund cancer research may not constitute trade or commerce, while the gift store at an art museum might.

Meyer could have gone further in explaining trade and commerce under the UTPCPL, rather than merely raising the phrase as a means of limiting the purview of the UTPCPL. Hopefully, trial courts in Meyer's aftermath will continue to explore and refine the meaning of trade and commerce under the UTPCPL.

Charlotte E. Thomas practices commercial litigation at Duane Morris in Philadelphia, where she is a partner in the firm's trial practice group. She can be contacted at cthomas@duanemorris.com.

This article originally appeared in The Legal Intelligencer.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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