PA Supreme Court Halts AG Lawsuit Against Oil and Gas Lessees Under UTPCPL
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March 26, 2021
On March 24, 2021, in a 6-1 decision, the Pennsylvania Supreme Court halted a lawsuit against oil and gas lessees by the Pennsylvania Office of the Attorney General (OAG) under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL), 73 P.S. §§ 201-1—201-9.3, for alleged deceptive and anticompetitive practices in obtaining oil and gas leases from landowners, holding that the UTPCPL regulates the conduct of sellers and does not provide a remedy for sellers (i.e., landowners) against buyers (i.e., lessees).
The UTPCPL is a consumer protection law against fraud and deceptive business practices. The Court cited the definition of “trade” and “commerce” under the statute, concluding that the UTPCPL prohibits unfair and deceptive practices in the conduct of “advertising, offering for sale, sale or distribution” of goods. The legislature chose to define trade and commerce as only acts of selling for purposes of the UTPCPL. This choice aligns with the intended purpose of the UTPCPL in protecting consumers. In the leasing transaction at issue, the lessees were in the position of a buyer not a seller, purchasing rights to the landowners’ mineral estates in return for bonuses, royalties and other payments. Therefore, the lessees were not subject to regulation or claims under the UTPCPL. The OAG’s additional anti-trust conduct claims were moot as a result of this decision.
As background, the OAG filed the action under the UTPCPL, and the lessees filed preliminary objections that they were not “sellers” under the terms of the UTPCPL because they acquired mineral rights from landowners. The preliminary objections were overruled by the trial court, a decision subsequently affirmed in part by the Pennsylvania Commonwealth Court.
If you have any questions regarding this decision, or how it could impact you, please contact one of the authors of this alert.