State ex rel. McGraw v. TELECHECK SERVICES

• Decision Date: 23 May 2003
• Docket Number: No. 30731.,30731.
• Citation: 213 W.Va. 438,582 S.E.2d 885
• Parties: STATE of West Virginia ex rel. Darrell V. McGRAW, Jr., Attorney General, Plaintiff Below, Appellant, v. TELECHECK SERVICES, INC., et al., Defendant Below, Appellee.
• Court: West Virginia Supreme Court

582 S.E.2d 885

213 W.Va. 438

STATE of West Virginia ex rel. Darrell V. McGRAW, Jr., Attorney General, Plaintiff Below, Appellant, v. TELECHECK SERVICES, INC., et al., Defendant Below, Appellee.

No. 30731.

Supreme Court of Appeals of West Virginia.

Submitted February 11, 2003.

Decided May 23, 2003.

Norman Googel, Assistant Attorney General, Jill L. Miles, Deputy Attorney General, Charleston, for Appellant.

Niall A. Paul, Esq., Bruce M. Jacobs, Esq., Spilman Thomas & Battle, Charleston, for Appellee.

STARCHER, C.J.

In this case we conclude that a circuit court applied an erroneous standard in ruling on a request by the Attorney General for a preliminary injunction in a consumer protection case. We remand the case for hearing on the merits of permanent injunctive relief.

I. Facts & Background

On December 4, 2000, the Attorney General filed an action under W.Va.Code, 46A-1-101 et seq., the West Virginia Consumer Credit and Protection Act ("WVCCPA") alleging that the appellee, Telecheck Services, Inc. ("Telecheck"), a national corporation, was engaging in illegal, unfair, or deceptive acts or practices ("UDAPs") in West Virginia. The Attorney General's complaint asked the court to grant temporary and permanent injunctive relief prohibiting future UDAPs by Telecheck. The Attorney General also sought an award of civil penalties, restitution to consumers, and attorney fees and costs.

Telecheck advertises that it serves over 228,000 clients nationally. When a person presents a personal check to pay for a purchase at a store that has a contract with Telecheck, the store electronically transmits information on the check to Telecheck; Telecheck replies (apparently within seconds) with a "guarantee/no guarantee" response, based on whether or not Telecheck has "negative information" on the check writer.

If the response from Telecheck is "guarantee," then—if the store accepts the check and the check subsequently is dishonored by the bank (i.e., a "bad check")—Telecheck will pay the store the amount of the check, and obtain an assignment of the check from the store. Telecheck then proceeds to try to collect the amount of the check from the check writer.

If the response from Telecheck is "no guarantee," the store remains free to accept the check, but Telecheck will not reimburse the store for the amount of the check if it is dishonored. The evidence in the proceedings below showed that ordinarily a store will not accept a check that Telecheck will not guarantee. Telecheck charges merchants various fees for its services.

The Attorney General's complaint alleged that Telecheck places and keeps consumers' names in its negative information database in circumstances when Telecheck knows or through reasonable diligence should know that the consumer did not previously write a bad check; or that a previous bad check was the result of theft, forgery, or lack of authorization; or that a previously written bad check subsequently cleared or the account was otherwise satisfied—and that this conduct by Telecheck was unfairly causing certain consumers annoyance and inconvenience when their checks were not accepted by stores due to Telecheck's inaccurate information.

The Attorney General also claimed that Telecheck had engaged in other UDAP conduct, including: adding illegal and excessive service charges when it collects on checks that it has guaranteed; re-presenting checks to banks when Telecheck knows or should know that there are not sufficient funds in consumers' accounts, thereby subjecting consumers to further fees and charges; collecting checks by electronically debiting the accounts of consumers without their properly verified consent, and improperly charging fees for such debiting; and harassing consumers on the phone and with threatening letters, in order to collect on checks. The Attorney General also claimed that Telecheck's negative database is in effect a "deadbeat list" and that Telecheck has not registered as a "collection agency" as required by W.Va.Code, 47-16-4 [1973].

The Attorney General filed with his complaint copies of fifty consumer complaint forms (with attachments) identifying instances of alleged conduct by Telecheck involving West Virginia consumers that the Attorney General claimed fit within the foregoing categories of alleged UDAP conduct.

Telecheck filed a motion to dismiss the Attorney General's complaint. The circuit court initially denied the motion to dismiss in an order that sustained some of the Attorney General's basic legal arguments. The court then withdrew that order, and issued a more limited order—still denying the motion to dismiss, but reserving the legal issues in the case.

Limited discovery ensued, followed by two evidentiary hearings, on February 9 and April 6, 2001, where seven consumers and two representatives of Telecheck testified. The circuit court thereafter entered an order, on May 10, 2001, denying the Attorney General's request for preliminary injunctive relief. It is this order that the Attorney General has appealed to this Court.¹

The circuit court's order denying the Attorney General's request for a preliminary injunction contained, inter alia, the following statements, findings, and conclusions:

The Attorney General alleges that injunctive relief is necessary because Telecheck engaged in a pattern or practice of violating the West Virginia Consumer Credit Protection Act (hereinafter "the Act"), W.Va.Code Section 46A-1-101 (1999), et seq. The Court FINDS from the testimony presented thus far that the State has not met its burden of proof for temporary injunctive relief that TeleCheck... [is] engaging in a pattern of [sic] practice of violating the Act.

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I. FINDINGS OF FACT

1. The Attorney General has not met its burden to show by a preponderance of evidence that TWV or TRS engaged in a pattern of practice [sic] of violating the Act.

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II. CONCLUSIONS OF LAW

* * * * * *

4. The Attorney General's request for injunctive relief is based upon the assertion that the defendants have engaged in a "pattern or practice" of alleged wrongful conduct.

5. The Attorney General has failed to introduce sufficient evidence to establish reasonable cause to believe that TeleCheck has engaged in, or is likely to engage in, a pattern of [sic] practice.

* * * * * *

7. The Court finds the testimony regarding the complaints filed by Darla Hodges, Julie Cavender, and Rebecca Severino, to establish isolated incidents of: 1) deviations by TeleCheck from its accepted practices and procedures or 2) TeleCheck employees acting beyond the scope of their employment but is not sufficient to establish reasonable cause to believe TeleCheck is engaging in, or likely to engage in, a pattern or practice of violating the Act.

8. The fact that errors have occurred in the course of handling 48,000,000 checks in the State of West Virginia over the past four years, based on the number of complaints thus far against TeleCheck, has not established an industry pattern and practice of violating the Act.

* * * * * *

10. An allegation that a TeleCheck employee engaged in an act outside the scope of his or her employment is not enough evidence at this point in the injunctive proceedings, that TeleCheck is engaged in, or likely to engage in, a pattern or practice of violating the Act.

Based upon the aforementioned, the Court does hereby DENY the Attorney General's Motion for Preliminary Injunction. [emphasis added throughout].²

The Attorney General's appeal makes two basic arguments.

First, the Attorney General argues that the circuit court erroneously used a "pattern or practice" standard in the preliminary injunction context, and that we should therefore vacate the circuit court's order denying preliminary injunctive relief.

Second, the Attorney General argues that if the circuit court had applied the correct standard, a preliminary injunction should have issued. Therefore the Attorney General asks us to order the circuit court to award a preliminary injunction in accord with the Attorney General's request.

We agree with the Attorney General on the first point. On the second point, however, we conclude that further proceedings relating to preliminary injunctive relief would be contrary to the principle of judicial economy. Therefore, we vacate the circuit court's order and remand the case for further proceedings relating to permanent injunctive relief, holding that the findings and conclusions reached by the circuit court in its order denying preliminary injunctive relief are not applicable in the permanent injunction context.

II. Standard of Review

As a threshold matter, we take up Telecheck's argument that this Court does not have jurisdiction to review the circuit court's interlocutory order denying the Attorney General's request for a preliminary injunction.³

"There are numerous definitions of jurisdiction, the substance of all of which is the power to hear and determine a cause." Johnston v. Hunter, 40 S.E. 448, 50 W.Va. 52 (1901). "Jurisdiction is the inherent power of a court to decide a case." West Virginia Secondary School Activities Commission v. Wagner, 102 S.E.2d 901, 909, 143 W.Va. 508 (1958).

We have stated that:

[t]he "jurisdiction" of this Court comes from three sources—the constitution of this state; the legislature; and the common law, from which emanates some of its so-called inherent power.⁴

State ex rel. Summerfield v. Maxwell, 148 W.Va. 535, 539, 135 S.E.2d 741, 745 (1964).

The scope of this Court's jurisdictional power is principally set forth in W.Va. Const., art. VIII, sec. 3 [1974] (in part), which states that:

[t]he supreme court of appeals shall have original jurisdiction of proceedings in habeas corpus, mandamus, prohibition and certiorari.

The court shall have appellate jurisdiction in civil cases at law where the matter in controversy, exclusive of interest and costs, is of greater value or amount than three hundred dollars unless

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