LISOWSKI v. WALMART STORES, INC.

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

CHRISTOPHER LISOWSKI, on behalf )

)

of himself and all others similarly

) 2:20-cv-1729-NR

situated, )

)

Plaintiff,

)

v. )

)

)

WALMART STORES, INC., t/d/b/a )

WALMART, )

)

)

Defendant. )

OPINION

J. Nicholas Ranjan, United States District Judge

Twice in the past two years, Plaintiff Christopher Lisowski went to Walmart

to buy a six-pack of “5-Hour Energy” drinks. With each of these purchases, on top of

the base price, Walmart charged Mr. Lisowski 94 cents in sales tax. Mr. Lisowski

paid the tax, but later came to believe those charges were improper, because 5-Hour

Energy is purportedly a “dietary supplement” not subject to sales tax in

Pennsylvania. So he filed this class action, alleging that Walmart’s incorrect

assessment of sales tax violates the Pennsylvania Unfair Trade Practices and

Consumer Protection Law (“UTPCPL”), and also amounts to conversion, unjust

enrichment, and breach of a constructive trust. Walmart now moves to dismiss Mr.

Lisowski’s claims on several grounds.

Applying the familiar standard of Rule 12(b)(6), the Court will grant Walmart’s

motion and will dismiss this case with prejudice. Simply put, Mr. Lisowski’s

complaint suffers from two insurmountable flaws which, in tandem, cause all his

claims to fail as a matter of law.

First, a retailer’s incorrect assessment of sales tax is not conduct covered by

the UTPCPL, which only regulates activity that is part of “the conduct of any trade

or commerce.” 73 P.S. § 201-3(a). When collecting sales tax, a retailer is not

conducting “trade or commerce,” even if such collection occurs in connection with a

commercial transaction. Instead, because the Commonwealth requires retailers to

collect sales tax on the Commonwealth’s behalf, the retailer steps into the shoes of

the Commonwealth and acts as a state agent, motivated by public duty rather than

private gain. Thus, while it is true that the UTPCPL extends broadly, as to regulate

all manner of deceptive activity in the conduct of trade or commerce, it does not

extend to regulate activity disconnected from the retailer’s commercial interests, such

as tax collection. Mr. Lisowski’s statutory claim fails for that reason.

Second, Mr. Lisowski’s common-law claims are barred by the existence of an

administrative procedure for consumers to obtain sales-tax refunds from the

Pennsylvania Department of Revenue. Pennsylvania law requires claimants to

strictly pursue that statutory remedy, to the exclusion of any common-law relief, so

long as it is constitutionally adequate. Under the Erie doctrine, this is a substantive,

rather than procedural, aspect of Pennsylvania law that applies in a federal court

diversity action. What’s more, the Pennsylvania Supreme Court has already held that

the very same statutory refund procedures provide exclusive and adequate relief for

any improper assessment of sales tax. See Lilian v. Commonwealth, 354 A.2d 250,

252 (Pa. 1976). Because such relief is available to Mr. Lisowski, should he choose to

pursue it, his common-law causes of action must also be dismissed.

For these reasons, discussed in full below, the Court will grant Walmart’s

motion, and dismiss Mr. Lisowski’s complaint with prejudice.

BACKGROUND1

Walmart is a multi-billion-dollar corporation that operates around 8,500 retail

stores in 15 countries, including at least 131 Walmart and Sam’s Club stores in

Pennsylvania alone. ECF 1-2, ¶ 2. Among many other things, Walmart sells “5-Hour

Energy” to customers in Pennsylvania and elsewhere. Id. at ¶ 3. 5-Hour Energy is

an energy drink, marketed as a “dietary supplement,” that provides caffeine

comparable to a cup of coffee, delivered in the form of an easily consumed “shot.” Id.

at ¶¶ 3, 15.2 Bottles of 5-Hour Energy are labeled as “DIETARY SUPPLEMENTS,”

and Walmart sells them in the medicine, drug, and medical-supply section of its

stores. Id. at ¶ 15.

Plaintiff Christopher Lisowski lives in Pittsburgh, Pennsylvania. Id. at ¶ 1.

On December 29, 2019, Mr. Lisowski entered a Walmart in Pittsburgh and bought a

six-pack of 5-Hour Energy, among other things. Id. at ¶ 5. For that item, Walmart

charged Mr. Lisowski the purchase price of $13.48, plus sales tax of $0.94. Id. at ¶¶

6-7. The next year, Mr. Lisowski returned to the same Walmart and bought another

six-pack of 5-Hour Energy. Id. at ¶ 8. Once again, Walmart charged him sales tax of

$0.94 on top of the base purchase price. Id. at ¶ 9.

In Pennsylvania, retailers are required to collect sales tax, equal to 6-8% of the

purchase price, on all sales of tangible, personal property. Id. at ¶ 10; see also 72 P.S.

§ 7202. But there are exceptions. Both the statute and the related regulations

promulgated by Pennsylvania’s Department of Revenue exempt certain items from

imposition of the tax. ECF 1-2, ¶ 11. Of relevance here, the Department of Revenue

1 The Court draws the facts from the allegations in Mr. Lisowski’s complaint, which

the Court must accept as true for purposes of this motion to dismiss.

2 See also “Regular Strength 5-hour Energy Shots,” 5hourenergy.com, available at

https://5hourenergy.com/faq/regular-strength-5-hour-energy-shot-faqs/ (last accessed

July 27, 2021).

has publicly notified all retailers that “Dietary Supplements and Substitutes” are not

subject to sales tax. Id. at ¶ 12. The Department also issued a “Retailer’s

Information” booklet that identifies “dietary supplements and substitutes, in any

form” as exempt from sales tax in Pennsylvania. Id. at ¶ 13.3

Despite these directives regarding “dietary supplements,” Walmart charged

sales tax to Mr. Lisowski, and other similarly situated individuals, on purchases of

5-Hour Energy. Id. at ¶¶ 14, 17. This conduct forms the basis for all of Mr. Lisowski’s

statutory and common-law claims in the complaint.

LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) “tests the

legal sufficiency of the complaint.” Popa v. Harriet Carter Gifts, Inc., 426 F. Supp. 3d

108, 113 (W.D. Pa. 2019) (Stickman, J.) (citation omitted). Such a motion “may be

granted only if, accepting all well-pleaded allegations in the complaint as true and

viewing them in the light most favorable to the plaintiff, a court finds that [the]

plaintiff’s claims lack facial plausibility.” Warren Gen. Hosp. v. Amgen Inc., 643 F.3d

77, 84 (3d Cir. 2011) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56 (2007)).

To evade dismissal, the plaintiff must allege “sufficient factual matter to show

that the claim is facially plausible” and permit a “reasonable inference that the

defendant is liable for the misconduct alleged.” Fowler v. UPMC Shadyside, 578 F.3d

203, 210 (3d Cir. 2009) (cleaned up). Allegations that are “conclusory or bare-bones,”

such as “threadbare recitals of the elements of a cause of action,” will not suffice. Id.

(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)) (cleaned up). Even so, “detailed

3 Walmart mentions in its motion that the Department separately advised retailers

that energy drinks or shots of four ounces or greater are taxable under Pennsylvania

law. ECF 16, p. 2. Because the taxability of 5-Hour Energy is ultimately not relevant

to the grounds on which the Court resolves Walmart’s motion, however, the Court

need not, and does not, determine whether 5-Hour Energy is, in fact, taxable under

Pennsylvania law. For now, the Court assumes Mr. Lisowski is correct that it is not.

pleading is not generally required.” Connelly v. Lane Const. Corp., 809 F.3d 780, 786

(3d Cir. 2016). Rather, the complaint need only contain a “short and plain statement”

showing “more than a sheer possibility that a defendant has acted unlawfully.” Id.

(cleaned up).

The defendant bears the burden of establishing that the plaintiff has failed to

plead a plausible claim for relief. See Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d

1406, 1409 (3d Cir. 1991). When evaluating a defendant’s motion to dismiss, the

Court can only consider the allegations of the plaintiff’s complaint, the exhibits

attached to it, and any documents integral to or explicitly relied on by the complaint.

See Popa, 426 F. Supp. 3d at 113 (citations omitted).

DISCUSSION & ANALYSIS

Pennsylvania’s Unfair Trade Practices and Consumer Protection Law arms

consumers with a powerful weapon to wield against many kinds of unfair and

deceptive practices. See generally 73 P.S. § 201-2(4)(i)-(xxi); 73 P.S. § 201-3. But like

all statutory creations, the reach of that weapon is constrained by the statute’s text.

See Niz-Chavez v. Garland, 141 S. Ct. 1474, 1486 (2021) (“[W]ords are how the law

constrains power.”).

Of relevance here, the UTPCPL limits its application to unfair or deceptive

activity “in the conduct of any trade or commerce.” 73 P.S. § 201-3(a). In other words,

the statute aims not at deception and unfairness generally, but at the particular evils

of deception and unfairness in the commercial sphere—where greed, competition, and

information asymmetry between buyers and sellers create unique opportunities for

fraud and exploitation. See Meyer v. Cmty. Coll. of Beaver Cty., 93 A.3d 806, 811 (Pa.

2014) (“Prior to the enactment of the UTPCPL, common law contract and warranty

theories largely presumed that a consumer and merchant stand at arms-length in

reaching their bargain, failing to recognize that the average consumer relies in great

part on a merchant’s advanced knowledge concerning the goods and services at issue,

and thus failed to protect against numerous unfair and deceptive business

practices[.]” (citation omitted)); see also Loduca v. Wellpet LLC, No. 21-0954, 2021

WL 2948848, at *2 (E.D. Pa. July 13, 2021) (“The Pennsylvania Supreme Court has

stated that the underlying foundation and purpose behind Pennsylvania’s Consumer

Protection Law was the prevention of fraud and protection of the public from unfair

or deceptive business practices and to even the bargaining power between consumers

and sellers in commercial transactions.” (citations omitted)).

That limitation poses a problem for Mr. Lisowski. As will be discussed, his

UTPCPL claim fails because the conduct of which he complains here—incorrect

charge of sales tax on the purchase of 5-Hour Energy—is not an act that Walmart

engaged in as part of “the conduct of” its “trade or commerce.” Nor can Mr. Lisowski

prevail on his common-law claims based on the same conduct. Pennsylvania law

precludes such claims when, as here, a statute provides an exclusive and adequate

alternative remedy—in this case, an administrative procedure for Mr. Lisowski to

obtain a full refund from the Department of Revenue. For those reasons, the Court

must dismiss Mr. Lisowski’s entire complaint.

I. Mr. Lisowski’s UTPCPL claim fails because the improper collection of

sales tax is not an “act … in the conduct of any trade or commerce.”

Beginning with the UTPCPL claim, Walmart argues that dismissal is required

because the allegedly improper collection of sales tax is not an “act … in the conduct

of any trade or commerce.” 73 P.S. § 201-3(a). The Court agrees.

Section 201-3(a) of the UTPCPL prohibits “[u]nfair methods of competition and

unfair or deceptive acts or practices in the conduct of any trade or commerce[.]” 73

P.S. § 201-3(a). The statute defines “[t]rade” and “commerce” to mean, in relevant

part, “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[.]” 73 P.S. § 201-2(3). It then defines

unfair trade practices to include specific categories of conduct enumerated in Sections

201-2(4)(i)-(xx), as well as “[e]ngaging in any other fraudulent or deceptive conduct

which creates a likelihood of confusion or of misunderstanding.” 73 P.S. § 201-

2(4)(xxi); see also Loduca, 2021 WL 2948848, at *2 (“By its statutory language, the

UTPCPL declares that ‘[u]nfair methods of competition and unfair or deceptive acts

or practices in the conduct of any trade or commerce’ are unlawful. 73 P.S. § 201-3. It

goes on to provide a definition of some twenty-one ‘unfair methods of competition’ and

‘unfair or deceptive acts or practices’ in § 201-2(4)[.]”). Mr. Lisowski alleges that

Walmart’s conduct violates the final, catch-all category of this definition. 73 P.S. §

201-2(4)(xxi).4

There is no question that Walmart engages in “trade or commerce,” as defined

by the UTPCPL, when it sells products to consumers, including 5-Hour Energy. The

dispositive question, then, is whether its collection of sales tax at the time of those

sales is an “act … in the conduct of” that commercial activity. The Court finds that

it is not.

No Pennsylvania appellate court has yet interpreted the UTPCPL’s “trade or

commerce” limitation in the context of a case alleging improper collection of sales tax.

4 Mr. Lisowski’s complaint also alleges that Walmart’s conduct violates Section 201-

2(4)(v), which defines unfair trade practices to include “[r]epresenting that goods or

services have sponsorship, approval, characteristics, ingredients, uses, benefits or

quantities that they do not have or that a person has a sponsorship, approval, status,

affiliation or connection that he does not have[.]” 73 P.S. § 201-2(4)(v). Walmart

moves to dismiss that aspect of his claim on the ground that he has not alleged an

actionable “representation” by Walmart, and that any conceivable representation did

not relate to the “characteristics” of the products being sold. Mr. Lisowski does not

address this claim, respond to Walmart’s arguments, or request leave to amend this

claim, so the Court deems it to be forfeited. See Rapid Models & Prototypes, Inc. v.

Innovated Sols., 71 F. Supp. 3d 492, 506, n.8 (D.N.J. 2014) (“[F]ailure to respond to

an argument advanced in support of a motion to dismiss results in a waiver of the

claim sought to be dismissed.” (citations omitted)). But, in any event, this claim is

subject to the same “trade or commerce” limitation discussed above, and so also fails

on that basis.

Absent such authority, this Court looks to “federal cases interpreting state law” and

“decisions from other jurisdictions that have discussed the issue” for guidance. In re

Energy Future Holdings Corp., 842 F.3d 247, 253-54 (3d Cir. 2016).

Most recently, in McLean v. Big Lots, another judge in this District rejected a

similar claim that improper collection of sales tax violates the UTPCPL. See McLean

v. Big Lots Inc., No. 20-2000, 2021 WL 2317417, at *4 (W.D. Pa. June 7, 2021) (Horan,

J.). There, Judge Horan reasoned that the “collection of sales tax” was not an act “in

the conduct of any trade or commerce” because tax collection is “divorced from private

profit” and “[r]etailers … collect sales tax on behalf of the Commonwealth’s

Department of Revenue” only “because state law requires them to do so.” Id. at *4.

In reaching that conclusion, Judge Horan surveyed several relevant

authorities. Preliminarily, she found persuasive the concurring opinion of the

Pennsylvania Supreme Court’s then-Chief Justice Castille in Meyer v. Cmty. Coll. of

Beaver Cty, 93 A.3d 806, 815 (Pa. 2014) (Castille, C.J. concurring). There, Justice

Castille expressed his view that a “governmental entity … carrying out a public duty,

… is not engaged in the conduct of a trade or commerce, but in the conduct of

government.” Id. at 816 (citation omitted). Thus, he reasoned, conduct motivated by

governmental duties fell outside the bounds of the UTPCPL. See id.

Judge Horan, in McLean, also examined decisions from courts in

Massachusetts and Connecticut that addressed similar claims brought under

statutes “nearly identical to the UTPCPL.” McLean, 2021 WL 2317417, at *4. These

other cases likewise concluded that the retailers’ collection of sales tax did not fall

within the realm of the applicable statutes.

In the first such case, Feeney v. Dell, the Massachusetts Supreme Judicial

Court explained that determining whether sales-tax collection was an act “in the

conduct of any trade or commerce” required a “more textured” analysis than simply

considering whether a transaction “occurred in a business context.” Feeney v. Dell,

Inc., 908 N.E.2d 753, 770 (Mass. 2009). The court in Feeney noted that, as here, the

focus of the claims was “not on the transactions as a whole, but on a particular

component of the transactions, the allegedly improper collection of sales tax[.]” Id.

That tax-collection component was, according to the court, distinct from the sale itself

in a crucial respect. That is, “Dell remitted the proceeds from the tax collected to the

Commonwealth—rather than retaining them for its own enrichment[.]” Id. at 771.

As a result, the court determined that Dell had not collected sales tax for “business

or personal reasons,” as required to support a claim under the Massachusetts unfair-

trade-practices statute, but had done so only “pursuant to legislative mandate.” Id.

Similarly, in Blass v. Rite Aid of Connecticut, a Connecticut trial court—in a

decision later affirmed and adopted on appeal5—explained that the “trade or

commerce” limitation in Connecticut’s equivalent statute reflected an intent to ensure

that claims were “consistent with the regulatory principles established by the

underlying statute.” Blass v. Rite Aid of Connecticut, Inc., 16 A.3d 855, 863 (Conn.

Super. Ct. 2009) (cleaned up), aff’d, 16 A.3d 737 (Conn. App. 2011). The court then

concluded that sales-tax collection fell outside the bounds of the statute, because “[a]

retailer gains no personal benefit from the overcollection of taxes,” and, in fact, “such

activity only increases the retailer’s prices, working against its economic interest.”

Id. The court also held that the defendant’s collection of sales tax “was not

commercial because when it collected the plaintiff’s money for taxes, it did so as an

agent of the State.” Id.

Mr. Lisowski, for his part, does not direct the Court to any reasoned decision—

by any court—interpreting the UTPCPL (or a similar statute) as regulating sales-tax

5 The trial court’s reasoning was adopted by the appeals court as its own. See Blass

v. Rite Aid of Connecticut, Inc., 16 A.3d 737, 739 (Conn. App. 2011) (“[B]ecause the

court’s thorough and well reasoned memorandum of decision correctly and concisely

addresses the issues raised in the present appeal, we adopt it as a proper statement

of the law and applicable facts on the issues[.]” (citation omitted)).

collection or, for that matter, any other acts motivated by legal duty rather than

commercial interests. At best, he points to a few examples of one Pennsylvania trial

court denying preliminary objections, without an accompanying opinion, in a handful

of copycat state-court cases that his counsel has recently filed. See ECF 50, p. 6.6 He

also points to an unpublished opinion in Farneth v. Walmart Stores, where a

Pennsylvania trial court granted class certification on a similar claim, but did not

address the UTPCPL’s “trade or commerce” limitation or otherwise decide the case

on its merits. See generally ECF 36-1. The Court finds these decisions to be of little

help in answering the question at hand, which is whether sales-tax collection falls

within the scope of the UTPCPL.

It is clear, then, that the weight of what precedent exists favors Walmart’s

interpretation of the statute. Moreover, Pennsylvania law provides that, as a general

principle of statutory interpretation, “[s]tatutes uniform with those of other states

shall be interpreted and construed … to make uniform the laws of those states which

enact them.” 1 Pa. C.S. § 1927. Thus, interpretations of nearly identical statutes in

other states, such as those in Massachusetts and Connecticut discussed above, are

entitled to greater persuasive weight here than usual. Indeed, all of these consumer

protection statutes are patterned after the federal unfair trade practices act. See In

re Pharm. Indus. Average Wholesale Price Litig., 252 F.R.D. 83, 94 (D. Mass. 2008)

(explaining that all fifty states “provide causes of action for unfair or deceptive trade

practices, most of which are based on the Federal Trade Commission Act (‘FTCA’),”

including statutes, like Pennsylvania’s, which “prohibi[t] … ‘unfair methods of

6 The cases cited by Mr. Lisowski are: Lisowski, et al. v. Giant Eagle, Inc., GD-20-

010525 (Allegheny Cty. Ct. Com. Pl. Jan. 12, 2021) (Ignelzi, J.); Barger, et al. v. Target

Corp., Inc., GD-20-10606 (Allegheny Cty. Ct. Com. Pl. Jan. 12, 2021) (Ignelzi, J.);

Garcia, et al. v. Am. Eagle Outfitters, Inc., et al., GD-20-11057 (Allegheny Cty. Ct.

Com. Pl. June 9, 2021) (Ignelzi, J.).

competition’ and ‘unfair or deceptive acts or practices’ in or affecting commerce, a

formulation identical to the FTCA’s prohibition …”).

Of course, this Court is not bound to follow either McLean or the decisions of

the Massachusetts and Connecticut state courts. But the Court finds these decisions

to be persuasive and consistent with the statutory text.

In response, Mr. Lisowski makes two arguments—neither of which is

ultimately persuasive. First, he makes an attenuated argument based on a different

Pennsylvania statute, the Fair Credit Extension Uniformity Act, which regulates

debt collection activity. The argument goes something like this: (1) The FCEUA

classifies taxes owed to political subdivisions of the Commonwealth (though not taxes

owed to the Commonwealth itself) as “debt[s]” subject to the FCEUA’s regulations,

73 P.S. § 2270.3; (2) The legislature decreed that violations of the FCEUA shall

amount to violations of the UTPCPL, in effect making the FCEUA enforceable

through the UTPCPL, 73 P.S. § 2270.5; (3) Therefore, the Court should infer that the

legislature understood tax collection by government agents to constitute activity “in

the conduct of trade or commerce” subject to the UTPCPL. See, e.g., ECF 36, pp. 11-

12; ECF 45, p. 7; ECF 50, p. 2.

This argument is unpersuasive. Unlike the UTPCPL, the FCEUA does not

contain any “trade or commerce” limitation, and thus does not imply a legislative

judgment or understanding that municipal tax collection (or anything else regulated

by the FCEUA) is a commercial activity. Rather, the FCEUA simply declares that an

additional category of conduct (e.g., deceptive acts by for-profit municipal debt

collectors) should also be actionable under the UTPCPL, whether such conduct is

“commercial” or not. See 73 P.S. § 2270.5(a) (“If a debt collector or creditor engages

in an unfair or deceptive debt collection act or practice under this act, it shall

constitute a violation of the act … known as the Unfair Trade Practices and Consumer

Protection Law.”). If anything, the legislature’s decision to enact a new law subjecting

a particular type of tax collection activity to the UTPCPL suggests that it did not

believe such conduct was already regulated by that statute. Conversely, the

legislature’s decision to exclude taxes owed to the Commonwealth from the FCEUA’s

ambit is an indication that it did not intend for the collection of such taxes by

retailers, as opposed to for-profit municipal debt collectors, to be subject to the same

treatment. See 73 P.S. § 2270.3; Mohamed v. Com. Dep’t of Transp., Bureau of Motor

Vehicles, 40 A.3d 1186, 1194–95 (Pa. 2012) (“…[A] court may not add matters the

legislature saw fit not to include under the guise of construction.” (citation omitted)).

Second, Mr. Lisowski also argues—or at least alludes to—an alternative theory

to support his UTPCPL claim. He claims that Walmart was engaged in “trade or

commerce” because, until August 1, 2016, it received a tax credit equal to 1% of all

sales tax collected from each consumer, and thus profited from its tax-collection

activity. See, e.g., ECF 36, pp. 2, 8; ECF 50, p. 8. There is no dispute that the law

changed in August 2016 to provide retailers with, in effect, a flat $25-per-month tax

credit, no matter how much tax they collect. See 72 P.S. § 7227. But before the change

in the law, Walmart had a plausible incentive to improperly collect a tax because it

would receive a percentage-based tax credit from the Commonwealth.

This argument has some facial appeal. For example, the court in Feeney,

discussed above, considered the profit motive of the retailer in determining whether

it was conducting “trade or commerce.” See Feeney, 908 N.E.2d at 771 (“[S]uch an

allegation could conceivably state a claim … to the extent that it demonstrated a

profit-seeking motive for the collection of the tax. Where, as here, the plaintiffs made

no such allegation in their complaint, dismissal is warranted.”). Ultimately, however,

this Court finds this “kickback” theory to be irrelevant. Even if Walmart could

“profit”—i.e., essentially commit some type of tax fraud by obtaining a credit to which

it wasn’t entitled—that doesn’t change the fact that at all times Walmart was acting

in its capacity as an agent of the Commonwealth. Walmart was the Commonwealth’s

tax collector, not a merchant engaged in commerce.7

Simply put, a retailer cannot be fairly said to collect sales tax as part of (or “in

the conduct of”) its “trade or commerce,” because retailers wear a different hat when

collecting taxes from the one they wear when they market and sell their products.

Instead, “[v]endors who collect sales tax … act as agents of the Commonwealth.” Gray

v. Commonwealth, 714 A.2d 1124, 1125 (Pa. Commw. Ct. 1998). Like any agent, they

“stand in the place of their principal[]” and are indistinguishable from the

Department of Revenue itself when performing that function. Hooker v. Wanigas

Credit Union, 835 F. App’x 110, 112 (6th Cir. 2021) (cleaned up); see also Great Am.

Ins. Co. of New York v. Lowry Dev., LLC, 576 F.3d 251, 257 (5th Cir. 2009) (“Once an

agency relationship is created, the agent steps into the shoes of his or her principal

and has the authority to transact business on the principal’s behalf.” (cleaned up));

cf. Johnson v. Johnson, 332 F. Supp. 510, 513 (E.D. Pa. 1971) (“Iowa Medical Service

thus stands, for purposes of paying claims, in the shoes of the governmental agency,

enjoying no greater discretion than that of the agency.” (emphasis in original)).

As a result, when engaged in collecting sales tax, retailers are no different from

a “government entity” that is “carrying out a public duty” directly. Meyer, 93 A.3d at

816 (Castille, C.J. concurring). That is, they are “not engaged in the conduct of a

trade or commerce, but in the conduct of government.” Id. (citation omitted). And

they do not reap any profits or other tangible benefits for carrying out their legal duty

to collect tax. Instead, they are required to “hold the tax in trust before remitting to

the Commonwealth,” and they “realiz[e] no increase in revenue or profit in a

7 Even if Mr. Lisowski’s “kickback” theory were otherwise well taken, his claim would

still face fatal obstacles. Most evident, it would limit the timeframe of the conduct in

this case to pre-August 1, 2016, sales—but Mr. Lisowski hasn’t alleged that he

purchased any 5-Hour Energy drinks before 2016, let alone that he was improperly

charged sales tax on such.

transaction that charges a sales tax.” McLean, 2021 WL 2317417, at *4. In fact,

collecting sales tax “increases the retailer’s prices, working against its economic

interest.” Blass, 16 A.3d at 863. Retailers persist in collecting it only because refusal

to do so could subject them to suspension or revocation of their business license. See

72 P.S. § 7208(b.1).

Given these considerations, “common sense dictates that the collection and

remittanc[e] of sales tax has little to do with profit and revenue,” and is instead

compelled by “basic compliance with the law.” McLean, 2021 WL 2317417, at *4 n.2.

The Court thus concurs with the reasoning of McLean, Feeney, and Blass, and holds

that the collection of sales tax by retailers, acting as agents of state government, is

an activity “divorced from private profit” that does not occur “in the conduct of any

trade or commerce.” Id. at *4. For that reason, Mr. Lisowski’s UTPCPL claim fails

as a matter of law.

II. Mr. Lisowski’s common-law claims are barred by 1 Pa. C.S. § 1504,

because an exclusive and adequate remedy is provided by statute.

In addition to his statutory claim, Mr. Lisowski asserts common-law claims for

conversion, unjust enrichment, and breach of constructive trust. The Court need not

address the sufficiency of these claims individually, because all fail for the same

reason—Pennsylvania law provides that Mr. Lisowski’s exclusive remedy is to

request a refund of improperly collected sales tax from the Department of Revenue.

Section 1504 of the Pennsylvania Statutory Construction Act provides that

“[i]n all cases where a remedy is provided or a duty is enjoined or anything is directed

to be done by any statute, the directions of the statute shall be strictly pursued, and

no penalty shall be inflicted, or anything done agreeably to the common law, in such

cases, further than shall be necessary for carrying such statute into effect.” 1 Pa. C.S.

§ 1504. In practice, this means that “if the legislature provides a specific, [e]xclusive,

constitutionally adequate method for the disposition of a particular kind of dispute,

no action may be brought … to adjudicate the dispute by any kind of ‘common law’

form of action other than the exclusive statutory method.” Lilian v. Commonwealth,

354 A.2d 250, 253 (Pa. 1976) (quoting Sch. Dist. of Borough of W. Homestead v.

Allegheny Cty. Bd. of Sch. Directors, 269 A. 2d 904, 907 (Pa. 1970)); see also White v.

Conestoga Title Ins. Co., 53 A.3d 720, 729 (Pa. 2012) (“[W]hen a statute articulates a

remedy for the breach of a statutory obligation, that remedy is exclusive and must be

strictly pursued to the exclusion of all ‘civil action remedies’ seeking relief for the

harm that results from an alleged breach of that obligation.”).

Walmart contends that such a remedy exists for Mr. Lisowski. But before

considering whether a statutory remedy bars Mr. Lisowski’s claim, the Court must

first pause to consider whether this rule applies in federal court at all.

A. Pennsylvania’s statutory-remedy rule is substantive law that

applies in federal court.

Federal jurisdiction under the Class Action Fairness Act, or CAFA, “is, at base,

an extension of diversity jurisdiction.” In re Burlington N. Santa Fe Ry. Co., 606 F.3d

379, 381 (7th Cir. 2010). “Therefore the normal rules for analyzing diversity

jurisdiction apply to CAFA cases.” Rivers v. Chalmette Med. Ctr., Inc., 805 F. Supp.

2d 291, 295 (E.D. La. 2011). This includes the ordinary rule that “federal courts

sitting in diversity apply state substantive law and federal procedural law.” Neopart

Transit, LLC v. Mgmt. Consulting, Inc., No. 16-3103, 2017 WL 714043, at *11 (E.D.

Pa. Feb. 23, 2017); see, e.g., Audler v. CBC Innovis Inc., 519 F.3d 239, 248 (5th Cir.

2008) (“Because CAFA is based on diversity jurisdiction, state substantive law

governs the determination of whether Audler’s petition states a claim for relief.”).

“Whether a state rule is substantive or procedural involves a two step

analysis.” King v. E.I. DuPont De Nemours & Co., 741 F. Supp. 2d 699, 702 (E.D. Pa.

2010) (citations omitted). “First, the Court must determine whether the state rule is

in direct conflict with a Federal Rule of Civil Procedure.” Id. If it is, that ends the

analysis, and the federal rule applies. Id. Here, Section 1504 does not directly conflict

with any Federal Rule of Civil Procedure, so the Court turns to the second part of this

analysis.

In the absence of a direct conflict between the state and federal rules, “the court

considers the twin aims” of the so-called “Erie doctrine,” which are “discouragement

of forum shopping and avoidance of inequitable administration of the laws.” Id.

Courts also consider whether the state rule at issue is “outcome determinative”—that

is, a rule is more likely to be substantive, rather than procedural, if applying or

refusing to apply it “significantly affects the result of a litigation[.]” Edelson v.

Soricelli, 610 F.2d 131, 134 (3d Cir. 1979) (citation omitted).

Before delving into the Erie doctrine’s “twin aims,” the Court notes that as to

Section 1504’s statutory-remedy rule, the Pennsylvania Supreme Court’s precedent

is somewhat murky about its exact nature and, specifically, whether it creates a

“jurisdictional” or “non-jurisdictional” requirement. See White, 53 A.3d at 726 n. 11

(“In School Dist. of Borough of West Homestead v. Allegheny … we suggested that

Section 1504 is jurisdictional[.] … However, in other cases, we have characterized the

doctrine of administrative exhaustion as jurisprudential, i.e., a rule that does not

divest a court of subject matter jurisdiction, but, rather, serves as a prerequisite to

the court’s exercise of its subject-matter jurisdiction.”).

One thing is clear, however—whether jurisdictional or not, Section 1504 is, at

bottom, a “rule of exhaustion” that relates to, and “works in concert” with, the

broader, judicially created doctrine of “exhaustion of administrative remedies.” Id.

at 726 n.10. Understanding Section 1504 as an exhaustion requirement is helpful

here, as many courts have considered whether exhaustion requirements are

“substantive,” and they have overwhelmingly concluded that they are.

Of course, “the line between substance and procedure can be a murky one, and

exhaustion requirements are among those matters which, though falling within the

uncertain area between substance and procedure, are rationally capable of

classification as either.” Lamar Co., L.L.C. v. Mississippi Transp. Comm’n, 786 F.

App’x 457, 460 (5th Cir. 2019) (cleaned up). That said, when analyzed in the context

of the Erie doctrine’s “twin aims,” courts have broadly concluded that the best course

is to “treat administrative exhaustion as substantive for Erie purposes and therefore

apply [state] law.” Id.; see Sani-Dairy v. Yeutter, 782 F. Supp. 1060, 1069 (W.D. Pa.

1991) (Brooks Smith, J.) (“In other words, the requirement of exhaustion of remedies

is substantive.”); Lauwrier v. Garcia, No. 12-7381, 2013 WL 11238497, at *6 (C.D.

Cal. Mar. 8, 2013) (“A state statute relegating particular state law claims to an

administrative forum is substantive law.”); see, e.g., Lockhart v. Coastal Int’l Sec.,

Inc., 905 F. Supp. 2d 105, 115, n.9 (D.D.C. 2012) (“The Court notes that under the

broad command of Erie ... federal courts are to apply state substantive law and federal

procedural law when sitting pursuant to their diversity jurisdiction. … The WCA and

the D.C. Court of Appeals’ construction of this law [to include an exhaustion

requirement] are therefore binding on this Court.”) (cleaned up)).8

More precisely, as these courts have reasoned, Erie’s “twin aims” of

discouraging forum-shopping and avoiding inequitable administration of law heavily

favor treating exhaustion requirements as substantive, because: (1) “[l]itigants would

8 See also, e.g., U.S. Fid. & Guar. Co. v. Lee Invs. LLC, 641 F.3d 1126, 1133 (9th Cir.

2011) (“[T]he California Workers’ Compensation Act’s exclusivity provisions are

‘substantive’ provisions which, under Erie, a district court sitting in diversity is bound

to follow.” (cleaned up)); Zapata v. Colorado Christian Univ., No. 18-2529, 2019 WL

1544179, at *4 (D. Colo. Mar. 15, 2019) (“[T]his court must apply CADA’s exhaustion

requirements even though Plaintiff filed suit in federal court rather than state

court.”); Jones v. Deaconess Billings Clinic, No. 06-15, 2008 WL 5435956, at *4 (D.

Mont. July 14, 2008) (“The required exhaustion of the Montana Medical Legal Panel

is a substantive provision which under Erie this Court is bound to follow.”); White v.

Lavigne, 741 F.2d 229, 230 (8th Cir. 1984) (“To waive the exhaustion requirement in

the case at bar for plaintiffs suing in diversity would contravene the policies

underlying the Erie doctrine. Other courts have required exhaustion of

administrative remedies in similar circumstances for the reasons discussed above.”).

engage in forum shopping if federal courts and state courts applied different

administrative exhaustion regimes, because some claims could proceed in one court

system but not the other”; and (2) “it would be unfair for non-diverse litigants to be

able to proceed in state court when diverse but otherwise identically situated litigants

could not proceed because their case was in federal court.” Lamar Co., 786 F. App’x

at 460. The same goes here. Additionally, Section 1504 is likely to be outcome

determinative in any case in which its rule applies, i.e., when a plaintiff fails to

pursue an available statutory remedy that is specific, exclusive, and constitutionally

adequate to redress the plaintiff’s alleged harm. See Edelson, 610 F.2d at 134.

Thus, when analyzed in the context of Erie’s “twin aims,” Section 1504’s “rule

of exhaustion” is a substantive, rather than procedural, requirement that applies in

a federal court diversity action. As such, applying Section 1504, noncompliance with

any specific, exclusive, and adequate remedy provided by another Pennsylvania

statute compels dismissal of any common-law cause of action for failure to state a

claim—even if Section 1504 is non-jurisdictional. Cf. Wesolowski v. United States,

No. 117-749, 2017 WL 3720197, at *7 (S.D. Ind. Aug. 28, 2017) (“Indiana thus

subscribes to the Seventh Circuit’s position that failure to exhaust administrative

remedies does not deprive a court of jurisdiction. … The Court therefore clarifies that

dismissal of Count II of Mr. Wesolowski’s Complaint is required for failure to state a

claim and not for lack of subject matter jurisdiction.”); Lockhart, 905 F. Supp. 2d at

115, n.9 (“Instead, for Federal courts sitting in diversity jurisdiction, the exhaustion

requirement is prudential rather than jurisdictional, and the plaintiff has in fact

‘failed to state a claim on which relief may be granted’ with respect to the

unexhausted claim or claims by failing to demonstrate that a necessary precondition

to judicial review of those claims has been satisfied.” (cleaned up)).

The Court will therefore go on to consider whether Pennsylvania does, in fact,

provide an exclusive and adequate statutory remedy for the harm Mr. Lisowski

alleges in this case. If it does, Mr. Lisowski must strictly pursue that remedy, to the

exclusion of any common-law relief.

B. Pennsylvania provides an exclusive and adequate statutory

remedy for the harm of which Mr. Lisowski complains.

Walmart argues that Mr. Lisowski’s exclusive remedy is to petition the

Pennsylvania Department of Revenue for a refund of any improperly collected sales

tax. Such refunds are mandated by the Pennsylvania Tax Reform Code, which states

that the Department of Revenue “shall … refund all taxes, interest and penalties paid

to the Commonwealth under the provisions of this article and to which the

Commonwealth is not rightfully entitled.” 72 P.S. § 7252. To obtain such a refund,

“a taxpayer who has actually paid tax ... to an agent or licensee of the

Commonwealth authorized to collect taxes[,] may petition the Department of

Revenue for refund or credit of the tax, interest or penalty.” 72 P.S. § 10003.1(a).

Together, these provisions establish a clear procedure for individual taxpayers

to obtain refunds of sales tax improperly collected by the Commonwealth or its

agents—the taxpayer need only file a petition with the Department of Revenue.

Indeed, Mr. Lisowski alleges in his complaint that the Department of Revenue has

already refunded sales tax charged to certain individuals on purchases of 5-Hour

Energy, ECF 1-2, ¶¶ 16(a)-(d), and that the Department did not appeal a previous

decision by its review board that such refunds were appropriate. Id. at ¶ 16(c). Thus,

in both theory and practice, Pennsylvania has provided by statute a remedy for those

who are incorrectly charged sales tax on a purchase.

The only remaining question, then, is whether this remedy is “exclusive” and

“constitutionally adequate.” Lilian v. Commonwealth, 354 A.2d 250, 253 (Pa. 1976).

As it turns out, the Pennsylvania Supreme Court has already considered this precise

issue, and determined that these tax-refund procedures provide an exclusive and

adequate remedy for improper assessments of sales tax. See id. at 252 (“Tax Reform

Code of 1971, … 72 P.S. §§ 7252-7255 … provide for the refunding of improperly

assessed or paid sales taxes, and set forth the procedure whereby such refunds may

be obtained. … Where such an administrative remedy is statutorily prescribed the

general rule is that a court … is without jurisdiction to entertain the action. Strict

compliance with the statutory procedure … is the norm.” (citing 1 Pa. C.S. § 1504)).

Moreover, Section 10003.1, cited above, makes clear that these refund procedures

apply to taxes collected by the Commonwealth’s “agents,” such as Walmart, and not

just by the Commonwealth itself. 72 P.S. § 10003.1(a).

That ends the inquiry. See State Farm Mut. Auto. Ins. Co. v. Coviello, 233 F.3d

710, 713 (3d Cir. 2000) (“When ascertaining Pennsylvania law, the decisions of the

Pennsylvania Supreme Court are … the authoritative source.”). In sum, because

Pennsylvania provides an adequate statutory remedy for improperly collected sales

tax, Section 1504 requires Mr. Lisowski to resort to that remedy, to the exclusion of

any common-law relief.

The Court will thus dismiss all of Mr. Lisowski’s common-law claims.

CONCLUSION

For all the reasons discussed above, Walmart’s motion to dismiss will be

granted.9

Additionally, since the bases for the Court’s decision relate to purely legal

defects in the complaint, rather than factual ones, the Court finds that any

amendment of the complaint here would be futile; the Court will therefore dismiss

9 Because all of Mr. Lisowski’s claims fail on the grounds discussed above, the Court

need not, and does not, consider the other arguments Walmart makes in its motion

to dismiss, e.g., (1) that Mr. Lisowski’s claims are barred by the voluntary-payment

doctrine; or (2) that Mr. Lisowski has failed to allege deceptive conduct or justifiable

reliance to support his UTPCPL claim. The Court notes that Walmart withdrew its

argument that Mr. Lisowski’s claims are barred by the “economic loss” doctrine

following the Third Circuit’s recent decision in Earl v. NVR, Inc., 990 F.3d 310 (3d

Cir. 2021). ECF 39.

the complaint with prejudice. See, e.g., Est. of Tyler ex rel. Floyd v. Grossman, 108 F.

Supp. 3d 279, 297, n.7 (E.D. Pa. 2015) (“The Court has determined that amendment

would be futile on all claims dismissed thus far as the Estate cannot state these

claims as a matter of law—amendment would be of no assistance.”).

An appropriate order follows.

DATE: August 4, 2021 BY THE COURT:

/s/ J. Nicholas Ranjan

United States District Judge