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The theory of presumption of reliance can be extended to an ordinary consumer when an alleged defect is material, the Commerce Program of the Philadelphia Court of Common Pleas has ruled in partly denying a summary judgment motion against a class action lawsuit. The court also found that a duty to speak exists for a manufacturer who has superior knowledge of a product defect. In Zwiercan, et al. v. General Motors Corp., Commerce Case Management Program Judge Gene Cohen granted in part and denied in part General Motors’ summary judgment motion. Plaintiff Shirley Zwiercan, who owns a 1997 Chevrolet Blazer, alleged that all General Motors vehicles manufactured between 1990 and 1999 are designed so that the front seats are at risk of collapsing during rear-end collisions that happen at moderate speed. Zwiercan’s Blazer has never been involved in a collision. However, she filed suit as a class representative for violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, and for breach of implied warranty of merchantability. In May 2002, the commerce court granted General Motors’ motion for summary judgment for the breach of warranty claim and denied summary judgment for the UTPCPL claim. Remaining before the court was General Motors’ motion for summary judgment for another UTPCPL claim and Zwiercan’s opposition to the motion for summary judgment. In General Motors’ motion, it asserted that Zwiercan’s UTPCPL claim should be dismissed because, it said, Zwiercan’s claims cannot prove reliance and causation to support her UTPCPL claim. The UTPCPL claim should also be dismissed, General Motors argued, because it is barred under the economic loss doctrine and, to the extent that Zwiercan’s claim was based on statements made by General Motors to the National Highway Traffic Safety Administration, such a claim is barred under the supremacy clause of the U.S. Constitution. Cohen first determined that Zwiercan’s UTPCPL claim could withstand General Motors’ challenges. Zwiercan’s claim alleged a violation of UTPCPL § 201-2(4)(xxi). The section defines unfair methods of competition or unfair or deceptive acts or practices as “engaging in any fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding.” In order to establish a claim under this section, a plaintiff either must prove the elements of common-law fraud or prove that the defendant’s deceptive harm caused the plaintiff harm. While Cohen said that General Motors correctly stated that its advertisements are not actionable, the judge said that the main issue rests not in the statements General Motors made to the public, but in its silence when it had a duty to speak. “Defendant argues that it was under no duty to disclose the alleged existence of defective seats in its cars. … The defendant is mistaken; silence can be actionable,” Cohen wrote. According to Pennsylvania law, Cohen said, silence can be actionable, citing the Superior Court’s 1989 decision in Smith v. Renaut, which held that silence is actionable when the defendant has a duty to speak. However, Cohen said that there was little case law on whether a duty to speak exists for business transactions that have not involved active misrepresentation and where no fiduciary or confidential relationship exists. Therefore, he said, the main issue at bar is whether a duty exists between a manufacturer and an ordinary consumer. Federal courts interpreting Pennsylvania law have held that a defendant does not have a duty to speak when the involved parties are sophisticated business entities with equal knowledge of the facts, Cohen said, citing the 3rd U.S. Circuit Court of Appeals decision in Duquesne Light Co. v. Westinghouse Electric Corp. In Duquesne, the court held that there is no duty to speak between two sophisticated business entities with equal knowledge of the facts and legal representation, because neither party is reliant on the other for information. But, Cohen said, the same reasoning cannot be applied to the case at bar because Zwiercan does not have the same level of sophistication and knowledge as General Motors. “Unlike the facts under Duquesne, The unsophisticated plaintiff is at the mercy of the defendant to inform her of a known safety defect,” Cohen wrote. “This court finds that a manufacturer has a duty to disclose a known latent defect to a purchaser when the purchaser is unsophisticated and does not have access to the same information as the manufacturer.” Cohen also turned to the Pennsylvania Supreme Court’s decision in Commonwealth v. Monumental Properties Inc., which held that the UTPCPL should be liberally construed to prevent unfair or deceptive practices and to help put the seller and consumer on more equal footing. The reasoning of Monumental Properties could be applied to Zwiercan’s claims, Cohen said. “Recognizing a duty to speak in the present case is consistent with general fraud concepts and is in line with the purpose of the UTPCPL,” Cohen wrote. “Such an interpretation further defines the scope of the UTPCPL, by giving meaning to the ‘duty to speak’ requirement, and by placing consumers on more equal footing with manufacturers.” Cohen next determined that Zwiercan established that she relied on the acts and omissions of General Motors when she decided to purchase her Blazer. Zwiercan testified that she assumed the front seats of the Blazer were safe and that she thought that General Motors manufactured safe products. Cohen said that this testimony sufficiently established that General Motors’ silence led Zwiercan to believe that the front seat of her car was safe. General Motors countered that Zwiercan failed to establish actual reliance because she relied on a statement that General Motors never said. But, Cohen said, the state supreme court has held that reliance can be presumed when a party makes material representations. The commerce court, he said, has also held in certifying a class UTPCPL claim in Katlin v. Tremoglie, that when a duty to speak exists, reliance by the class plaintiffs is implicit. “Here, the plaintiff has established that the defendant’s silence regarding the alleged defect in the class vehicles was material to the plaintiff’s decision to purchase the car,” Cohen said. “The plaintiff testified that she assumed in the face of the defendant’s silence that the front seats of the car were safe, and that had defendant disclosed that there was a safety defect in the front seats, she would not have bought the car.” But, Cohen ruled in favor of General Motors in determining that Zwiercan was barred from using the UTPCPL to recover for alleged fraudulent statements made to the National Highway Traffic Safety Administration. In its motion to dismiss, General Motors argued that statements made to the NHTSA cannot be used to form the basis of a state action to enforce NHTSA regulations. Cohen agreed, reasoning that federal law preempts Zwiercan’s claim. “Because the plaintiff cannot use the UTPCPL to enforce an alleged fraud on a federal agency, defendant’s motion for summary judgment on this issue is granted,” Cohen wrote. Cohen next determined that the economic loss doctrine did not bar Zwiercan’s UTPCPL claim. General Motors asserted that Zwiercan’s UTPCPL claim was barred by the economic loss doctrine because she did not suffer a personal injury, and the only damage to Zwiercan was the cost of repairing the front seats. General Motors argued that Zwiercan’s only remedy, if any, was based in contract law. But, Zwiercan said that the economic loss doctrine did not apply because the doctrine does not apply to General Motors’ alleged intentional acts. While Cohen acknowledged that confusion exists in Pennsylvania as to the scope of the economic loss doctrine, he determined that in the case at bar, case law did not preclude Zwiercan’s UTPCPL claim. “The plaintiff need not wait until she is physically injured to bring a claim for deceptive practices when the manufacturer had a duty to inform her of a known defect,” Cohen said. “[She] has raised a legitimate question as to whether the defendant’s actions were deceptive under the UTPCPL, but does not have a viable breach of contract claim. To apply the economic loss doctrine to bar the plaintiff’s statutory claim here would frustrate the intent of the UTPCPL, in this context, and would be inconsistent with the purpose of the economic loss doctrine.”

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