In a decision issued March 24, 2021, all seven of Pennsylvania’s Supreme Court justices agreed (in a split decision) that Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL) can be enforced only against sellers. In so concluding, the six-justice majority then determined that oil and gas companies are not “sellers” under the UTPCPL when they acquire oil and gas leases from property owners.

Case background

The case arose out of a lawsuit brought by the Pennsylvania Attorney General on behalf of Pennsylvania citizens against two oil and gas companies for allegedly improper efforts to acquire oil and gas leases in Northeastern Pennsylvania. The Pennsylvania Attorney General claimed the two companies essentially divided the counties between themselves in an effort to reduce competition and then used untrue statements to convince property owners to sign leases, in violation of the UTPCPL (including antitrust provisions thereunder) and general antitrust law.

In overruling preliminary objections, the trial court (and, later, the en banc Commonwealth Court on appeal) agreed with the Attorney General that the UTPCPL applied to the oil and gas companies’ conduct in acquiring oil and gas leases from property owners. In so doing, the courts rejected the companies’ argument that they were not sellers, but rather were purchasers, of the leases at issue. Judge Covey of the Commonwealth Court dissented, arguing that the majority misconstrued the statutory text, misconstrued precedent and violated statutory interpretation principles.

Questions on appeal

The Supreme Court granted the gas companies’ petition for allowance of appeal to determine whether (i) the claims at issue were cognizable under the UTPCPL and (ii) the Commonwealth could pursue antitrust remedies under the UTPCPL. The court answered both questions in the negative.

Majority’s reasoning

Justice Mundy, writing for the six-justice majority, set out in detail the reasoning of Judge Covey’s dissent and the arguments raised by the parties and the amici. Thereafter, she plainly and cogently explained why the underlying decisions were wrong and, as a result, the conduct at issue did not give rise to claims under the UTPCPL.

To answer the first question, Justice Mundy looked simply to the plain language of the statute. Noting the UTPCPL only allows claims related to the conduct of “trade or commerce,” the definition of “trade” and “commerce” provided therein by the legislature controlled because when the legislature provides a definition for a term, the courts are not free to ignore that definition or look elsewhere for a different definition. By wrongly ignoring that definition and looking instead to a dictionary definition, the Commonwealth Court improperly read surplusage into the statute.

Justice Mundy also explained how the underlying decisions misinterpreted two Pennsylvania Supreme Court precedents (Monumental Properties and Danganan). As to Monumental Properties, the lower courts expanded that decision in an unsupported manner by citing it for the proposition that the UTPCPL regulates both buyer and seller in a lease transaction. Instead, Monumental Properties simply said the UTPCPL applied to a residential lease situation because the tenants were “in every meaningful sense consumers.” But in the oil and gas leasing situation, it was the oil and gas companies who were the consumers (or purchasers) and the property owners who were the sellers.

As to Danganan, the lower courts simply misread that decision. In Danganan, the Pennsylvania Supreme Court provided an interpretation of the legislature’s definition of “trade” and “commerce” in the UTPCPL in response to a certified question from the Third Circuit Court of Appeals. That definition provides:

“Trade” and “Commerce” 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 this Commonwealth.

The Pennsylvania Supreme Court’s interpretation in Danganan noted that:

[a]lthough the trade and commerce definition includes a clause relating to conduct that “directly or indirectly affect[s] the people of this Commonwealth,” that phrase does not modify or qualify the preceding terms. Instead, it is appended to the end of the definition and prefaced by “and includes,” thus indicating an inclusive and broader view of trade and commerce than expressed by the antecedent language.

The Commonwealth Court had seized on that interpretation to support its view that “trade” and “commerce” was broader than simply selling. But, as the Pennsylvania Supreme Court majority held, that interpretation meant what it said – the second part of the definition did not modify or quantify the first part. Thus, the second part of the definition’s use of trade or commerce still required those terms to carry the definition in the first. Doing otherwise would, as Judge Covey argued in her dissent below, lead to surplusage as the second part essentially would swallow the first.

The majority, applying the plain language of the statute, concluded the UTPCPL claims at issue were not cognizable because the oil and gas companies were “in the position of a buyer, purchasing rights from the landowners’ mineral estates. In turn, the landowners were in the position of a seller, conveying their rights in exchange for signing bonuses, royalty payments, and other considerations.” Thus, the oil and gas companies were “not conducting ‘trade or commerce’ for the purposes of the UTPCPL because [they were] not engaged in the ‘advertising, offering for sale, sale or distribution’ of anything; instead [they were] purchasing oil and gas interests from landowners. … Section 3 of the UTPCPL simply does not regulate buyers’ conduct in commercial transactions.”

As to the second question presented, the majority reasoned that as the UTPCPL did not apply to the oil and gas companies’ conduct, it also did not support antitrust claims based on that conduct.

Accordingly, the majority reversed the decision of the Commonwealth Court that affirmed the denial of the oil and gas companies’ preliminary objections.

Dissent’s argument

Justice Daugherty penned a dissent that agreed with the majority that the UTPCPL applied only to sellers but argued that the oil and gas companies could be sellers of their natural gas exploration and drilling services. Thus, he would have affirmed the dismissal of the preliminary objections below and let the case proceed. The majority addressed Justice Daugherty’s dissent rationale in a footnote, concluding the analysis was erroneous because the oil and gas companies were not obligated to perform any services under the leases.

Photo of Jeremy Mercer Jeremy Mercer

Jeremy is an experienced commercial litigator who, for more than a decade, has focused on energy, with an emphasis on oil and gas litigation. His extensive experience in the shale and hydraulic fracturing arena spans the Commonwealth of Pennsylvania and includes work in…

Jeremy is an experienced commercial litigator who, for more than a decade, has focused on energy, with an emphasis on oil and gas litigation. His extensive experience in the shale and hydraulic fracturing arena spans the Commonwealth of Pennsylvania and includes work in administrative proceedings, state trial and appellate courts, and federal trial and appellate courts.