State ex rel. Dunlap v. Berger

• Decision Date: 13 June 2002
• Docket Number: No. 30035.,30035.
• Citation: 567 S.E.2d 265,211 W.Va. 549
• Court: West Virginia Supreme Court
• Parties: STATE of West Virginia ex rel. James DUNLAP, Petitioner, v. Honorable Irene C. BERGER, Judge of the Circuit Court of Kanawha County, and Friedman's, Inc., dba Friedman's Jewelers, et al., Respondents.

567 S.E.2d 265

211 W.Va. 549

STATE of West Virginia ex rel. James DUNLAP, Petitioner, v. Honorable Irene C. BERGER, Judge of the Circuit Court of Kanawha County, and Friedman's, Inc., dba Friedman's Jewelers, et al., Respondents.

No. 30035.

Supreme Court of Appeals of West Virginia.

Submitted January 8, 2002.

Decided June 13, 2002.

David L. Grubb, Esq., John W. Barrett, Esq., Grubb Law Group, Brian A. Glasser, Esq., Bailey & Glasser, Charleston, West Virginia, Attorneys for Petitioner.

Gregory R. Hanthorn, Esq., Jones, Day, Reavis & Pogue, Atlanta, GA, Pro Hac Vice for Respondent, Friedman's, Inc.

P. Michael Pleska, Esq., Fazal A. Share, Esq., Ronda L. Harvey, Esq., Bowles, Rice, McDavid, Graff & Love, Charleston, West Virginia, Attorneys for Respondent, Friedman's, Inc.

Harry Deitzler, Esq., Hill, Peterson, Carper, Bee & Deitzler, Charleston, Michael J. Quirk, Esq., Khalid Elhassan, Esq., Trial Lawyers for Public Justice, Washington, DC, for Amicus Curiae, Trial Lawyers for Public Justice.

Charles L. Woody, Esq., Spilman, Thomas & Battle, Charleston, for American Banks Ins. Co. and American Bankers Life Assurance Co.

Farrokh Jhabvala, Esq., Jorden, Burt LLP, Miami, FL, Pro Hac Vice for Respondent, American Banks Ins. Co. and American Bankers Life Assurance Co. STARCHER, Justice:

In the instant case, Mr. James Dunlap,¹ who is a plaintiff below and the petitioner before this Court, claims in a civil lawsuit filed in May of 2000 in the Circuit Court of Kanawha County that Friedman's, Inc., a jewelry store chain doing business in West Virginia ("Friedman's"); Friedman's insurance company partners, American Bankers Insurance Company of Florida and American Bankers Life Assurance Company of Florida (together, American Bankers"); and certain named individuals who are or were managerial employees of Friedman's—all of whom are the defendants below and the respondents in the instant case before this Court (we shall refer to these respondents together as "Friedman's et al.")—have been carrying out a systematic, deceptive, and illegal "loan packing" scheme, with the purpose and effect of surreptitiously adding unrequested insurance charges to the cost of consumers' purchases from Friedman's. In Mr. Dunlap's case, allegedly illegal charges in the amounts of $1.48 for credit life insurance and $6.96 for property insurance were added when Mr. Dunlap bought a ring from Friedman's in 1999; we discuss the details of that purchase infra.

The circuit court concluded that Mr. Dunlap could not go forward with his lawsuit against Friedman's et al. in the circuit court because of certain language in Friedman's purchase and financing agreement document, a form contract that Mr. Dunlap signed when he bought the ring. The circuit court stayed the prosecution of Mr. Dunlap's civil lawsuit against Friedman's et al., and directed Mr. Dunlap (over his objection) to proceed to arbitration proceedings with Friedman's et al., pursuant to language in the purchase and financing agreement document. Challenging the circuit court's order, Mr. Dunlap has petitioned this Court for a writ of prohibition; we conclude that the circuit court's order was erroneous.

I. Facts & Background

Mr. Dunlap filed suit against Friedman's et al. on May 4, 2000. His complaint (we refer here to an amended complaint that the circuit court permitted to be filed) charges that Friedman's et al. have been engaged in an illegal, fraudulent, and unconscionable scheme to charge customers, without the customers' request, knowledge, and/or consent, for credit life insurance, credit disability insurance, and property insurance—all in connection with the purchase and financing of jewelry and/or other consumer goods from Friedman's.

Mr. Dunlap specifically alleges that Friedman's systematically and deliberately directed its employees to conceal and lie about these added charges—going so far as to discharge or threaten to discharge employees who would not go along with the added charges/concealment scheme. Mr. Dunlap has supported his allegations of a comprehensive scheme to defraud consumers with affidavits (filed with his complaint) from former Friedman's employees and customers.

In one of these affidavits, a former Friedman's manager attested:

I was advised by [a Friedman's trainer] to sell property, life and disability insurance to customers who financed their purchases. I was specifically told to just add the insurance onto the sale.... I felt very uncomfortable following these orders. I believed that Friedman's practice of charging consumers a premium for insurance without disclosing it to the consumers was fraudulent, deceitful and wrong.... On many occasions, my employees, per Friedman's orders, sold disability, life and property insurance to customers who financed jewelry, and did not disclose to the customer that the insurance was added to the sale.

Another former Friedman's manager attested:

The computers at our stores were programmed to automatically add on charges for credit life, credit disability and property insurance onto the customer's retail installment contract. In order to remove these charges, the employee would have to manually delete them. I felt very uncomfortable following these orders. I believed that Friedman's practice of charging consumers a premium for insurance without disclosing it to the consumers was fraudulent, deceitful and wrong.

Another former Friedman's employee attested:

... I was informed by ... the district manager, that we, as employees of Friedman's Jewelers, Inc. were to add life, disability and property insurance to customer credit applications without disclosing this information to the customer. If we did not do what was requested, we would be fired. He informed me that two people had been dismissed in Roanoke for refusing to do what they asked.... I was again informed by ... the store manager, during a staff meeting that we were to add life, disability and property insurance to customer credit applications without disclosing this information to the customer.... When I questioned what should we do if a customer questions the insurance, I was told that we should tell the customer that it was a computer error.

One Friedman's employee quit working for Friedman's "after she was instructed to deceive customers," according to an administrative law judge who ruled that the employee was entitled to receive unemployment compensation benefits. The judge's decision further stated:

In this case, the employer instructed its employees to use deceptive practices with regards to the sale of property, disability and life insurance to customers. When a customer opened an account to charge jewelry at the store, the employees were told to automatically add a premium based upon the amount of the charge for life, disability and property insurance. They were told not to give the customer a choice, that they were to automatically add it to the cost of the merchandise. They were further advised that if they did not add the insurance, that they would lose their jobs.

Another former Friedman's employee attested:

Around May 1999, I was informed by... the district manager, that we, as employees of Friedman's Jewelers, Inc. were to add life, disability and property insurance to customer credit applications without disclosing this information to the customer. If we did not do what was requested, we would be fired.

In his circuit court lawsuit, Mr. Dunlap seeks to enforce and vindicate his and other consumers' right not to be victimized by such illegal schemes. Specifically, Mr. Dunlap seeks the following relief and remedies from the circuit court: (1) a declaratory judgment declaring that Friedman's, et al.'s conduct violated the West Virginia Consumer Credit & Protection Act, W.Va.Code, 46A-1-101 et seq. ("the Consumer Protection Act"), West Virginia insurance laws, and the Uniform Commercial Code; (2) an injunction ordering Friedman's et al. to cease their illegal conduct, to establish an employee training program on consumer protection in West Virginia, and to revise its sales procedures for insurance; (3) certification of a class of persons whose rights have been violated by Friedman's et al. in the fashion that Mr. Dunlap's were; (4) court-ordered cancellation of the plaintiffs' and class members' indebtedness to Friedman's et al.; (5) judgment to each plaintiff and class member for statutory damages under the Consumer Protection Act for each violation of the Act; (6) judgment for actual, consequential and incidental damages suffered by each plaintiff and member of the class, including damages for emotional distress, annoyance and inconvenience; (6) judgment for punitive damages to each plaintiff and class member; (7) an award of attorneys' fees; (8) pre-and post-judgment interest; and (9) such other relief as the court determines. Mr. Dunlap's causes of action allege violations of the Consumer Protection Act and W.Va.Code, 33-12-1(a) [1957] (selling insurance without a license); common law fraud; unconscionability; breach of duty of good faith under W.Va.Code, 46-1-203 [1963](UCC); negligent and wilful, wanton and intentional misconduct; and civil conspiracy. Mr. Dunlap requested a jury trial.

On June 23, 2000, Friedman's et al. moved the Circuit Court of Kanawha County to prohibit Mr. Dunlap from going forward in circuit court with his claims against Friedman's et al. and to require Mr. Dunlap to bring any disputes that he has with Friedman's et al. to arbitration. The basis of this motion was language contained in the twopage purchase and financing agreement document that Mr. Dunlap signed in connection with his purchase from Friedman's. We shall review this specific language, after generally describing Friedman's purchase and financing agreement document.

The front page of the purchase and financing agreement document is a pre-printed form, containing a number of boxed spaces with printed titles and explanatory language. For...