In Pennsylvania, it is well-established that a homeowner can assert claims for fraud and violation of Pennsylvania’s consumer protection statute – the Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) – against a contractor based upon the contractor’s representations, even absent any contractual relationship between the homeowner and the contractor. Essentially, where a contractor makes a representation on which reliance is “specially foreseeable” and the homeowner relies upon the representation and sustains damages as a result, the homeowner may have a claim against the contractor. This scenario often comes into play where a homeowner asserts a claim against the builder where the homeowner is not the initial purchaser of the home, but rather a subsequent purchaser.
In this context, the recent case of Adams v. Hellings Builders, Inc. arose. In Adams, the Adams family purchased a home from the Witzky family in 2011. The Witzky family originally purchased the home directly from Hellings Builders after it was constructed in 2008. In 2014, upon learning that other homes in the neighborhood were being tested for moisture, the Adams decided to have their home tested. The results revealed possible moisture and mold due to the improper application of stucco. As a result, the Adams filed a complaint against Hellings, asserting causes of action for fraud and violation of the UTPCPL.
Hellings sought to dismiss the lawsuit, arguing that the Adams could not assert a UTPCPL claim against Hellings because Hellings never had any direct business dealings with the Adams. Additionally, Hellings argued that the Adams could not establish that they had any direct conversations with Hellings and, therefore, could not state a fraud claim. In response, the Adams argued that they justifiably relied upon Hellings’ promotional materials – both in print and on its website – that stated that Hellings was “one of the area’s most reputable builders.” The trial court rejected the Adams’ argument and dismissed their complaint.
On appeal, the Superior Court reversed. In doing so, the Court, relying upon earlier cases, found that the lack of a contract between the Adams family and Hellings could not serve to bar the Adams’ claims for fraud or for violation of the UTPCPL. Instead, the relevant inquiry was whether Hellings made representations on which reliance was specially foreseeable. The Court concluded that the representations contained in Hellings’ promotional materials that it was a reputable builder and touting superior quality and construction could form the basis for claims for fraud and violation of the UTPCPL. Additionally, the Court cited language from Hellings’ sales agreement with the Witzky family, which stated that the stucco system would be installed according to International Residential Code standards. Accordingly, the Superior Court reinstated the Adams’ complaint.
This case could expand liability for contractors and may serve to have a chilling effect on contractor advertising. For the first time, a Pennsylvania appellate court has held that statements pertaining to construction quality in a contractor’s promotional materials may give rise to liability for fraud and violation of the UTPCPL, regardless if the homeowner was a direct purchaser or a subsequent purchaser. In light of this decision, contractors should review the content of their promotional materials to evaluate any potential exposure, paying particular attention to broad claims as to the level of quality of construction. Contact us if you would like additional clarification as to how best to limit your risk in creating promotional materials.
George E. Pallas is the Managing Partner of Cohen Seglias as well as a Shareholder and member of the Board of Directors. He is member of the Firm’s Construction Group and acts as counsel to a wide range of construction clients that include general contractors, subcontractors, and suppliers.
Matthew L. Erlanger is an Associate at Cohen Seglias and a member of the Construction Group. He concentrates his practice in construction litigation.