State ex rel. McGraw v. Telecheck Services, Inc.

Decision Date16 May 2003
Docket NumberNo. 30731.,30731.
CourtWest Virginia Supreme Court
PartiesSTATE OF WEST VIRGINIA EX REL. DARRELL V. McGRAW, JR., ATTORNEY GENERAL, Plaintiff Below, Appellant v. TELECHECK SERVICES, INC., ET AL., Defendant Below, Appellee.


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

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


1. "The Supreme Court of Appeals has original jurisdiction in cases of habeas corpus, mandamus and prohibition and appellate jurisdiction in all other cases mentioned in Article VIII, Section 3, of the Constitution of this State and in such additional cases as may be prescribed by law[.]" Syllabus Point 10 (in part), Aetna Cas. & Sur. Co. v. Federal Ins. Co. of New York, 148 W.Va. 160, 133 S.E.2d 770.

2. West Virginia Constitution, article VIII, section 3, which grants this Court appellate jurisdiction of civil cases in equity, includes a grant of jurisdiction to hear appeals from interlocutory orders by circuit courts relating to preliminary and temporary injunctive relief.

3. "In reviewing the exceptions to the findings of fact and conclusions of law supporting the granting of a temporary or preliminary injunction, we will apply a three-pronged deferential standard of review. We review the final order granting the temporary injunction and the ultimate disposition under an abuse of discretion standard, West v. National Mines Corp., 168 W.Va. 578, 590, 285 S.E.2d 670, 678, we review the circuit court's underlying factual findings under a clearly erroneous standard, and we review questions of law de novo. Syllabus Point 4, Burgess v. Porterfield, 196 W.Va. 178, 469 S.E.2d 114." Syllabus Point 1, State v. Imperial Marketing, 196 W.Va. 346, 472 S.E.2d 792.

4. The statutory standard for issuing a preliminary injunction under W.Va. Code, 46A-7-110 [1974] — whether "there is reasonable cause to believe that the respondent is engaging in or is likely to engage in conduct [prohibited by Chapter 46A]" — does not include the requirement that there first be proved a "pattern or practice" of violations of the statute.

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-1-1 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, et seq. The Court


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.

* * *


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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* * *

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


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...

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