Cavalry SPV I, LLC v. Morrisey

• Decision Date: 13 November 2013
• Docket Number: 12–0546.,Nos. 11–1564,s. 11–1564
• Citation: 752 S.E.2d 356,232 W.Va. 325
• Parties: CAVALRY SPV I, LLC; Cavalry SPV II, LLC; Cavalry Investments, LLC; and Cavalry Portfolio Services, LLC, Defendants Below, Petitioners v. Patrick MORRISEY, Attorney General, Plaintiff Below, Respondent. and Cavalry SPV I, LLC; Cavalry SPV II, LLC; Cavalry Investments, LLC; and Cavalry Portfolio Services, LLC, Defendants Below, Petitioners v. Patrick Morrisey, Attorney General, Plaintiff Below, Respondent.
• Court: West Virginia Supreme Court

232 W.Va. 325

752 S.E.2d 356

CAVALRY SPV I, LLC; Cavalry SPV II, LLC; Cavalry Investments, LLC; and Cavalry Portfolio Services, LLC, Defendants Below, Petitioners

v.Patrick MORRISEY, Attorney General, Plaintiff Below, Respondent.andCavalry SPV I, LLC; Cavalry SPV II, LLC; Cavalry Investments, LLC; and Cavalry Portfolio Services, LLC, Defendants Below, Petitioners

v.Patrick Morrisey, Attorney General, Plaintiff Below, Respondent.

Nos. 11–1564, 12–0546.

Supreme Court of Appeals of West Virginia.

Submitted Oct. 1, 2013.

Decided Nov. 13, 2013.

Syllabus by the Court

1. The Attorney General's investigatory powers include the power to issue investigative subpoenas pursuant to W. Va.Code § 46A–7–104 (1974) (Repl.Vol.2006).

2. When the Attorney General files a cause of action against a person or entity that is subject to an investigative subpoena, the Attorney General's subpoena authority ends as to those matters that form the basis of the complaint's allegations, and the rules of discovery applicable to civil proceedings generally provide the method by which the Attorney General may continue to investigate the alleged wrongdoing. However, an investigative subpoena survives the Attorney General's filing of a lawsuit when the subpoena, in whole or in part, pertains to matters that do not form the basis of the subject complaint.

3. Once the Attorney General has instituted a civil action against a person or entity to enjoin unlawful conduct, the Attorney General may also seek temporary relief against the person or entity during the pendency of such proceedings in accordance with W. Va.Code § 46A–7–110 (1974) (Repl.Vol.2006).

Don C.A. Parker, Bruce M. Jacobs, Spilman Thomas & Battle, PLLC, Charleston, WV, for the Petitioners.

Patrick Morrisey, Attorney General, Elbert Lin, Solicitor General, Norman Googel, Assistant Attorney General, Charleston, WV, for the Respondent.

DAVIS, Justice:

The petitioners herein and defendants below, Cavalry SPV I, LLC (“SPV I”); Cavalry SPV II, LLC (“SPV II”); Cavalry Investments, LLC (“CI”); and Cavalry Portfolio Services, LLC (“CPS”) ¹ appeal from two orders entered by the Circuit Court of Kanawha County pertaining to the enforcement of an investigative subpoena issued against them by the respondent herein and plaintiff below, the Attorney General of West Virginia, Patrick Morrisey ² (“Attorney General”). This Court consolidated the two appeals for purposes of “argument, consideration[,] and decision” by orders entered April 24, 2013.

In Case Number 11–1564, the Petitioners appeal from an order entered October 7, 2011, by the Circuit Court of Kanawha County. By that order, the circuit court denied the Petitioners' motion to dismiss the investigative subpoena; granted the Attorney General's motion for a temporary injunction enjoining the Petitioners from collecting debts they had acquired before they were licensed in West Virginia to do so; compelled the Petitioners to comply with the investigative subpoena; and ordered the Petitioners to send a letter to affected consumers. On appeal to this Court, the Petitioners challenge the validity and enforceability of the Attorney General's investigative subpoena. Upon a review of the parties' arguments, the appendix record submitted for appellate consideration, and the pertinent authorities, we affirm, in part, and reverse, in part, the circuit court's October 7, 2011, order. In summary, we find that the Attorney General's investigatory powers include the power to issue investigative subpoenas pursuant to W. Va.Code § 46A–7–104 (1974) (Repl.Vol.2006) and that the subject investigative subpoena was validly issued in the case sub judice in accordance with the Attorney General's statutory authority to conduct investigations. We further conclude that when the Attorney General files a cause of action against a person or entity that is subject to an investigative subpoena, the Attorney General's subpoena authority ends as to those matters that form the basis of the complaint's allegations, and the rules of discovery applicable to civil proceedings generally provide the method by which the Attorney General may continue to investigate the alleged wrongdoing. However, an investigative subpoena survives the Attorney General's filing of a lawsuit when the subpoena, in whole or in part, pertains to matters that do not form the basis of the subject complaint. Therefore, the Attorney General's investigative subpoena in the case sub judice is enforceable as to matters that are not encompassed by the Attorney General's pending civil action against the Petitioners. Accordingly, we reverse that portion of the circuit court's order that enforced the entirety of the Attorney General's investigative subpoena prior to determining whether any of the matters of inquiry addressed therein are now subject to civil discovery in the pending enforcement proceedings and remand this case to the circuit court to conduct such an analysis. We affirm the remainder of the circuit court's rulings preliminarily upholding the Attorney General's investigative subpoena.

In Case Number 12–0546, the Petitioners appeal from an order entered March 20, 2012, by the Circuit Court of Kanawha County. By that order, the circuit court denied the Petitioners' motion to dissolve or modify the aforementioned temporary injunction; refused the Attorney General's motion for stay of discovery pending the Petitioners' compliance with the Attorney General's investigative subpoena; deemed that portion of the court's October 7, 2011, order requiring the Petitioners to comply with the Attorney General's investigative subpoena to be a final and appealable order; and provided language to be included in the Petitioners' letter to affected consumers. On appeal to this Court, the Petitioners contest the circuit court's decision to uphold its imposition of a temporary injunction. Upon a review of the parties' arguments, the appendix record submitted for appellate consideration, and the pertinent authorities, we affirm the circuit court's March 20, 2012, order. In summary, we find that once the Attorney General has instituted a civil action against a person or entity to enjoin unlawful conduct, the Attorney General may also seek temporary relief against the person or entity during the pendency of such proceedings in accordance with W. Va.Code § 46A–7–110 (1974) (Repl.Vol.2006). We further conclude that the temporary injunction imposed upon the Petitioners herein was properly issued in compliance with this Court's prior holding in Syllabus point 2 of State ex rel. McGraw v. Imperial Marketing, 196 W.Va. 346, 472 S.E.2d 792 (1996). ³

I.FACTUAL AND PROCEDURAL HISTORY

The facts giving rise to the instant controversies are not generally disputed by the parties. All of the Petitioners herein are engaged in various aspects of the collection of consumer debts, which include purchasing charged-off debts that are deemed to be uncollectible by the original creditors and attempting to collect these debts from consumer debtors.⁴ The subject investigation originated when the Consumer Protection Division of the Attorney General's Office received information and approximately sixteen complaints from affected consumers indicating that certain ⁵ of the Petitioners had engaged in conduct in violation of the consumer protection laws of this State.⁶ Based upon this information, as well as the Attorney General's desire to determine whether the alleged violations of the West Virginia Consumer Credit and Protection Act had been committed, and, if so, to prevent further violations thereof, the Attorney General issued the subject investigative subpoena on January 25, 2010. Although all four Petitioners were referenced within the body of the investigative subpoena, only “CAVALRY SPV I, LLC and CAVALRY SPV II, LLC” were named in the style of the subpoena and in the accompanying letter detailing the “Investigation of Cavalry SPV I and II.” ⁷ The Petitioners filed numerous objections in response to the Attorney General's investigative subpoena. At this juncture, the parties differ as to whether the named Petitioners provided information requested by the investigative subpoena; however, it is clear that any such compliance did not respond completely to the subpoena's demands.

Thereafter, on June 3, 2010, the Attorney General filed a civil action in the Circuit Court of Kanawha County against all four Petitioners (1) seeking an order compelling the named Petitioners to comply with the investigative subpoena and (2) alleging violations of the West Virginia Consumer Credit and Protection Act, W. Va.Code § 46A–1–101 et seq.See generallyW. Va.Code § 46A–7–108 (1974) (Repl.Vol.2006) (authorizing Attorney General to bring action to enjoin violations of chapter); W. Va.Code § 46A–7–111 (1999) (Repl.Vol.2006) (permitting Attorney General to bring civil actions against creditors). As to the alleged statutory violations, the Attorney General also sought temporary relief pursuant to W. Va.Code § 46A–7–110 (1974) (Repl.Vol.2006) to enjoin the Petitioners from continuing their alleged misconduct during the pendency of the enforcement proceedings. The Petitioners moved to dismiss the Attorney General's complaint.

By order entered October 7, 2011, which order forms the basis of Case Number 11–1564 in this Court, the circuit court denied the Petitioners' motion to dismiss the complaint and granted the Attorney General's request for temporary relief. In pertinent part, the court ruled:

The Attorney General's motion for temporary injunction against the LLC Defendants should be, and it hereby is, GRANTED against SPV I, SPV II, and Calvary [sic] Investments, but not CPS.⁸

The Defendants SPV I, SPV II, and Calvary [sic] Investments should be, and they hereby are, ENJOINED from engaging in any actions to collect debts acquired prior to the date that they became licensed, including but not limited to, (i) collecting or continuing to collect payments...