The West Virginia Supreme Court of Appeals (“West Virginia Supreme Court”) recently held that a consumer finance company (“Finance Company”) that entered into marketing agreements with an out-of-state state charted banking institution that is supervised and insured by the Federal Deposit Insurance Corporation (“FDIC”) (“Bank”) was not entitled to the protections afforded by federal preemption in servicing the certain loans because the Finance Company was the “true lender” of the consumer loans at issue.
In so ruling, the West Virginia Supreme Court affirmed the trial court’s ruling that the “predominant economic interest test” is the proper test to evaluate whether claims relating to state interest limitations and usury laws are preempted. The Court further distinguished Discover Bank v. Vaden, 489 F.3d 594 (4th Cir. 2007), because in Vaden, the entity seeking federal preemption protection was a corporate affiliate of the banking institution, whereas here, the Finance Company was in no way affiliated with the bank that would otherwise have been subject to federal preemption protections relating to rate exportation.
The Court also held that:
(1) the Attorney General has authority under the West Virginia Consumer Credit & Protection Act, W. Va. Code § 46A-1-101, et seq. (“WVCCPA”) to bring an action and pursue damages on behalf of consumers pursuant to W. Va. Code § 46A-7-108;
(2) the trial court did not abuse its discretion in admitting certain documents into evidence at trial, because the Finance Company stipulated to the exhibits and otherwise failed to adequately raise the issue at trial;
(3) the trial court’s reliance on the uncontroverted testimony from representative consumer witnesses was not an abuse of discretion;
(4) the trial court award of punitive damages was proper based upon the Finance Company’s supposedly repeated and lengthy violations of the WVCCPA;
(5) the trial court’s award of a civil penalty to the Attorney General was properly levied as an “excess charge” under W. Va. Code § 46A-7-111;
(6) the trial court’s award of an additional civil penalty to the Attorney General under W. Va. Code § 46A-6-104 was not reviewable, as the Finance Company raised this assignment of error for the first time on appeal; and
(7) the trial court’s award of attorneys’ fees was proper, as the Attorney General may recover attorneys’ fees when provided by statute and that the amount of fees awarded were reasonable.
A copy of the opinion is available at: Link to Opinion
The Finance Company entered into marketing agreements with the Bank. The Bank made small unsecured loans at high interest rates to consumers in various states. Under the marketing agreements, the Finance Company purchased the Bank’s loans within three days of each loan's origination date.
In 2006 and into February of 2007, the Finance Company purchased loans made by the Bank to 292 West Virginia residents. Of those loans, ten were for $1,075.00 at an eighty-nine percent annual interest rate; 214 were for $2,600.00 at a ninety-six percent annual interest rate; and the remaining sixty-three loans were for $5,000.00 at a fifty-nine percent annual interest rate. Approximately two-thirds of the West Virginia borrowers defaulted.
In 2007, the Attorney General opened a formal investigation into the Finance Company's business practices in response to consumer complaints of debt collection abuse. On June 7, 2007, the Attorney General demanded that the Finance Company permanently cease its lending program in West Virginia and make restitution to the aggrieved consumers. This demand was based on findings that the Finance Company's agreement with the Bank was essentially a sham that claimed federal preemption as a means of evading West Virginia's licensing and usury laws, and that the Finance Company’s debt collection practices violated the WVCCPA.
The Finance Company claimed that the WVCCPA was preempted by federal law because the loans marketed and serviced by the Finance Company were properly made under a FDIC approved bank installment loan program. That same year, the Finance Company ceased purchasing loans made by the Bank to West Virginia residents. The Finance Company provided various business records including the names and contact information for its West Virginia customers.
In 2008, the Attorney General filed a complaint in West Virginia state court against the Finance Company alleging usurious lending and abusive debt collection practices. The Attorney General claimed that the Finance Company participated in a "rent-a-bank" scheme designed to avoid a state's usury and consumer protection laws by claiming federal preemption under Section 27 of the Federal Deposit Insurance Act ("FDIA). In response, CashCall removed the action to federal court in West Virginia on the ground that the State's claims were preempted given that the Bank originated the loans.
The district court held that the FDIA did not apply to non-bank entities such as the Finance Company. The district court also ruled that it did not have subject matter jurisdiction over the matter because the Attorney General had raised only state law claims against the Finance Company that neither invoked, nor were preempted by, the FDIA. The district court noted that "[i]f [Finance Company] is found to be a de facto lender, then [it] may be liable under West Virginia usury laws." The district court then granted the Attorney General's motion to remand the case to state court.
Following the remand, the Attorney General filed an amended petition. The Attorney General alleged unlawful lending and usury and alleged unlawful debt collection practices. Thereafter, the circuit court bifurcated the claims for bench trial. The "phase one" trial addressed the unfair debt collection claims. The "phase two" trial addressed the unlawful lending and usury claims.
During the phase one trial regarding the Finance Company's alleged unfair collection claims, the testimony showed the Finance Company sent form letters including an employment verification letter, a breach letter, a forty-eight-hour notice letter, a broken promise letter, an arbitration letter, a field visit letter, and a final demand letter. Additional testimony conveyed the phone calls placed by the Finance Company. One exhibit showed that the Finance Company made a total of 84,371 calls to its West Virginia customers.
The trial court determined that this requirement stood in contravention of the policy established by the federal Electronic Transfer Act, 15 U.S.C. § 1693k, and therefore was an unfair and deceptive act or practice pursuant to 15 U.S.C. § 1693o(c). The trial court further found that although the Finance Company told consumers that they could cancel the electronic debits at a later date, the Finance Company refused or resisted efforts made by consumers to cancel such debits. The trial court also found that all of the nine defaulting consumer witnesses were harmed by the overdraft fees and involuntary closure of bank accounts caused by the wrongful electronic debits. In light of these findings, the trial court concluded that requiring consumers to agree to electronic debits as a condition of obtaining a loan was an unfair or deceptive act or practice in violation of West Virginia Code § 46A-6-104.
The trial court also found that the Finance Company engaged in a pattern of making unlawful threats to garnish wages and seize personal or real property in violation of West Virginia Code § 46A-2-124(e)(2) and § 46A-6-104.
The trial court made the following additional findings: (1) based on the undisputed testimony of the Attorney General's witnesses, the Finance Company violated West Virginia Code § 46A-2-124(f) and § 46A-6-104 by threatening to take, and by taking, actions prohibited by the WVCCPA and other laws regulating a debt collector's conduct; (2) the Finance Company engaged in a pattern and practice of making repeated and continuous telephone calls, and making such calls at times it knew were inconvenient, with the intent of annoying, abusing, oppressing, or threatening consumers in violation of West Virginia Code § 46A-2-125(d); (3) the record was replete with undisputed testimony that the Finance Company unreasonably and unlawfully publicized information relating to consumers' alleged indebtedness to employers, relatives, and others in violation of West Virginia Code § 46A-2-126; (4) the Finance Company unlawfully told consumers that it could collect fees and charges, such as charges for a threatened visit to a consumer's home or place of employment, in violation of West Virginia Code § 46A-2-127(g) and § 46A-6-104; (5) the Finance Company made false threats of legal action to consumers including threats to initiate arbitration and threats of non-judicial seizure of property that were not intended under the law or were specifically prohibited by the law, in violation of West Virginia Code § 46A-2-124, § 46A-2-127, and § 46A-6-104; (6) the Finance Company engaged in unfair and deceptive acts or practices by representing to defaulting consumers that they were required to use a payment method that required a fee, such as a "MoneyGram," in violation of West Virginia Code § 46A-2-127 and § 46A-6-104; and (7) the Finance Company’s representation to consumers that it could charge a $15.00 non-sufficient fund ("NSF") fee to consumers when an electronic debit failed, and its charging of the $15.00 NSF fee, violated West Virginia Code § 46A-2-127(g), § 46A-2-128(c), § 46A-2-128(d), § 46A-6-104, and § 46A-7-111(1).
Based on these violations, the trial court awarded the following to the Attorney General: (1) an injunction permanently prohibiting the Finance Company from violating the WVCCPA; (2) a $292,000.00 judgment to make restitution to the 292 West Virginia consumers ($1,000 for each consumer) for the Finance Company's unfair or deceptive acts; (3) a $1,000,000.00 judgment to make restitution to the 292 consumers for the unlawful debt collection practices; (4) a $1,000,000.00 judgment against the Finance Company as a civil penalty to be appropriated by the Legislature for repeated and willful violations of the WVCCPA as authorized by West Virginia Code § 46A-7-111(2); and (5) "costs, including reasonable attorney's fees" to be determined by the trial court following the conclusion of the phase two portion of the case.
The trial court also found that all loan contracts entered between the Finance Company and the West Virginia consumers were void and that any debts still owing were cancelled.
During the phase two trial, the Attorney General produced evidence regarding its claims that the Finance Company made loans without a license from the Division of Banking, was making usurious loans, and violated the West Virginia Credit Services Organization Act, West Virginia Code § 46A-6C-2(a).
Most of the testimony during the phase two trial regarded whether the Finance Company or the Bank was the true lender of the loans to the West Virginia consumers. Both parties agreed that if the trial court found the Bank to be the true lender, then the State's claims that the Finance Company was making loans without a license and making usurious loans would be preempted by federal law.
During its case-in-chief, the Finance Company offered the testimony of only one witness, its general counsel, who testified that he was in charge of the Finance Company's regulatory matters and litigation, and had negotiated most, if not all, of the major contracts between the Finance Company and its financing partners, including the Bank.
The trial court found that numerous provisions of the Finance Company's agreements with the Bank placed the entire monetary burden and risk of the loan program on the Finance Company. The trial court also found that the Finance Company paid the Bank more for each loan than the amount actually financed by the Bank. Additionally, the trial court found that the Finance Company agreed to such terms in an effort to evade state usury laws and that the loans were treated as though they were actually funded by the Finance Company.
Based on these findings, the trial court concluded that the Finance Company was the de facto or true lender of the loans to the West Virginia consumers. Having made this baseline determination, the trial court then ruled, as follows, on the unlawful lending and usury claims: (1) the Finance Company was not the agent of the Bank, but was an independent contractor; (2) the purpose of the lending program was to allow the Finance Company to hide behind the Bank's South Dakota charter and the Bank's resulting right to export interest rates under federal banking law; (3) the loans made by the Finance Company to West Virginia consumers greatly exceeded the maximum allowable interest rates under West Virginia law and were deemed usurious; (4) the Finance Company made loans in West Virginia, directly or indirectly, without obtaining a business registration certificate from the West Virginia Tax Department, in violation of West Virginia Code § 46A-7-115; (5) the Finance Company engaged in unfair or deceptive acts or practices in violation of West Virginia Code § 46A-6-104 because it made and collected usurious loans and excess charges without a license; (6) the Finance Company repeatedly and willfully violated West Virginia Code § 46A-7-115 (making loans in West Virginia without a license) and §46A-6-104 (unfair or deceptive acts or practices) and therefore warranted a civil penalty of up to $5,000 for each violation, as set forth in West Virginia Code § 46A-7-111(2).
Based on these findings, the trial court: (1) permanently enjoined the Finance Company from violating the WVCCPA; (2) imposed a civil penalty against the Finance Company for making loans without a license in the amount of $730,000 to be appropriated by the Legislature; (3) imposed a civil penalty against the Finance Company for engaging in unfair/deceptive acts and for making/collecting usurious loans in the amount of $730,000 to be appropriated by the Legislature; (4) awarded a $10,045,687.96 judgment against CashCall (four times the amount of interest the 292 consumers agreed to pay on their loan) to be distributed to the consumers by the Attorney General; (5) all loan contracts entered between the Finance Companies and West Virginia consumers were void and any debts still owing were cancelled; (6) and awarded "costs, including its reasonable attorney's fees."
Subsequently, the trial court entered its "Final Order Awarding Fees and Costs" that awarded the State a total of $446,180 in attorney's fees, plus $9,789.94 in expenses. The award was based on a $350 per hour rate for each attorney.
The Finance Company appealed the trial court orders. On appeal, the Finance Company raises multiple assignments of error. The first three of these assignments of error address the trial court's phase one order regarding the Attorney General's claims of unfair debt collection. The next six assignments of error addressed the trial court's phase two trial order regarding the Attorney General's claims of unlawful lending and usury. Finally, the last five assignments of error addressed the trial court's order awarding attorney's fees as costs in favor of the Attorney General.
The Court began by addressing the assignments of error relating to the phase one trial order regarding unfair debt collection.
The Finance Company first argued that the trial court erred in awarding relief to consumers because the Attorney General has no authority under the WVCCPA to bring an action or pursue damages on behalf of consumers. The trial court awarded restitution and penalty damages to the State to be distributed to the West Virginia consumers pursuant to Article 5 of the WVCCPA.
As you may recall, W. Va. Code § 46A-5-101(1) provides that a "consumer" may bring an action for civil liabilities and penalties. Further West Virginia Code § 46A-1-102(12) defines a "consumer" as "a natural person who incurs debt pursuant to a consumer credit sale or a consumer loan, or debt . . . [.]" Therefore, the Finance Company claimed that the Attorney General has no statutory authority under Article 5 to bring an action or to pursue damages on behalf of a "consumer" because the State is not a natural person.
West Virginia Code § 46A-7-108 provides that "[t]he attorney general may bring a civil action to restrain a person from violating this chapter and for other appropriate relief." In State ex. rel. McGraw v. Imperial Marketing, 506 S.E.2d 799 (W. Va. 1998), the West Virginia Supreme Court examined the Attorney General's authority to seek consumer restitution and other equitable remedies in its enforcement actions and held that "the phrase 'other appropriate relief' in W.Va. Code, 46A-7-108 [1974], 'indicates that the legislature meant the full array of equitable relief to be available in suits brought by the Attorney General.'" 506 S.E.2d at 811-12. Therefore, the Supreme Court held that a trial court may, under § 46A-7-108, award the State a full array of equitable relief.
In further review of the WVCCPA and Imperial Marketing decision, the Court found that the trial court did not err by granting monetary relief to the State that is to be distributed by the Attorney General to individual consumers. Nor did the trial court err in cancelling the 292 consumers' unsecured debts to the Finance Company. The civil penalties authorized by West Virginia Code § 46A-7-111 and paid to the State do not inure to the State alone. Although such a civil penalty must first be paid to the State, a governmental entity may distribute funds obtained as civil penalties as compensation for pecuniary loss to injured persons. See, e.g., U.S. Dept. of Housing & Urban Development v. Cost Control Marketing & Sales Mgmt. of Virginia, Inc., 64 F.3d 920, 928 (4th Cir. 1995).
The Finance Company's second assignment of error involved an award of damages on the State's summary exhibits because they were "unauthenticated" and contained "unreliable and inadmissible evidence."
We first note that at the start of the phase one trial, the Attorney General and the Finance Company stipulated that their Joint Exhibit Number One was an accurate summary of the Finance Company’s 292 West Virginia consumers' accounts. Hence, the Finance Company made no objection below regarding the information contained in Joint Exhibit Number One.
With regard to Exhibit A (listing the types of letters sent by CashCall to West Virginia consumers) and Exhibit B (summarizing the number of phone calls made by the Finance Company to West Virginia consumers), the Finance Company had sufficient opportunities during trial to provide more accurate records, but failed to do so. Moreover, in the order on appeal, the trial court found Exhibit B to be "substantially accurate" and therefore sufficient to enable it to make its findings of fact regarding collection practices:
The Court found that the trial court did not abuse its discretion in admitting Exhibits A and B into evidence or in relying on them in making its findings.
The West Virginia Supreme Court next examined the trial court’s finding that the State's consumer witnesses were representative of all 292 West Virginia consumers. The Finance Company claims the State's witnesses had "vastly different experiences" and that "none of the ten witnesses presented testimony justifying [a] claim for unfair collection practices[.]" Conversely, the trial court, in its phase one order, described the testimony of the State's representative witnesses as remarkably consistent in regard to the Finance Company's unfair debt collection practices.
With regard to the Finance Company's claim that the trial court erred in extrapolating the experience of the Attorney General's representative consumer witnesses to the pool of all 292 West Virginia consumers, the Finance Company failed to cite to the location in the approximately 6,000 page record on appeal where it objected to the State's use of representative witnesses. As you may recall, W. Va. R. App. P. 10(c)(7) provides, in part, as follows: “[t]he argument must contain appropriate and specific citations to the record on appeal, including citations that pinpoint when and how the issues in the assignments of error were presented to the lower tribunal. The Court may disregard errors that are not adequately supported by specific references to the record on appeal.
Next, the Court noted that it is counsel’s obligation to present specific references to the record. Teague v. Bakker, 35 F.3d 978, 985 n. 5 (4th Cir.1994). State v. Honaker, 454 S.E.2d 96, 101 n. 4 (W. Va. 1994). In failing to object, the Finance Company has waived this issue on appeal. However, the West Virginia Supreme Court noted that the trial court still had the ability to review these documents to determine whether the testimony of the State's witnesses was, in fact, representative of the 292 West Virginia consumers. Accordingly the West Virginia Supreme Court could not find that the trial court erred in relying upon the testimony of the State's representative consumer witnesses.
The Court also examined the assignments of error relating to the Attorney General's claims of unlawful lending and usury.
The Finance Company argued that the trial court erred by applying a "predominant economic interest" test to determine whether the Finance Company or the Bank was the true lender of the loans made to the West Virginia consumers. That test examines which party--as between a bank, such as the Bank, and a non-bank entity, such as the Finance Company--has the predominant economic interest in loans made by the bank.
The Finance Company argued that the proper test is the "federal law test" found at W. Va. Code § 46A-1-102(38). As you may recall, a "regulated consumer loan," exempts from regulation any consumer loan that "qualifies for federal law preemption from state interest rate limitations."
The Finance Company contended that if the trial court had applied the "federal law test," it would have found that the Bank was the true lender because its consumer loans qualified for federal law preemption from state interest rate limitations.
In support of its argument, the Finance Company relied upon the Fourth Circuit Court of Appeals’ (“Fourth Circuit”) opinion in Discover Bank v. Vaden, which found that a true lender is (1) the entity in charge of setting the terms and conditions of a loan, and (2) the entity who actually extended the credit. 489 F.3d 594, 601-03 (4th Cir.2007), rev'd on other grounds, 556 U.S. 49, 129 S. Ct. 1262, 173 L. Ed. 2d 206 (2009). See also Krispin v. May Dep't Stores Co., 218 F.3d 919, 923 (8th Cir. 2000). The Finance Company therefore argued that, in accordance with Vaden, the Bank was the true lender of the loans in this case because it set the terms and conditions of the loans to the West Virginia consumers and actually extended credit to those consumers.
Usury questions were examined in Carper v. Kanawha Banking & Trust Co., 207 S.E.2d 897 (W. Va. 1974). In Syllabus Point 4 of Carper, the Court said as follows: “[t]he usury statute contemplates that a search for usury shall not stop at the mere form of the bargains and contracts relative to such loan, but that all shifts and devices intended to cover a usurious loan or forbearance shall be pushed aside, and the transaction shall be dealt with as usurious if it be such in fact.” 207 S.E.2d 901.
In making its ruling, the trial court relied on Carper and cited to cases in which federal courts applied the "predominant economic interest" test in rent-a-bank cases such as this, where a state usury case against a non-bank entity is removed to federal court on federal preemption grounds. In these cases, most of which involve payday lenders, the federal courts found no federal preemption and remanded the case back to the state court. However, the trial court noted that, on remand, most cases settled and, therefore, were not adjudicated on the merits.
Based on this line of cases, the trial court concluded that the "predominant economic interest" test was the proper standard to determine the true lender in this case.
The West Virginia Supreme Court agreed. It found that the "federal law test” examines only the superficial appearance of a business model. Further, applying the "federal law test" a court would always find that a rent-a-bank was the true lender of loans such as those at issue in this case. Therefore, in light of Carper, the West Virginia Supreme Court found that the trial court did not err in applying the "predominant interest test" as a means of examining the substance, and not just the form, of the applicable marketing agreements.
Next, the West Virginia Supreme Court distinguished both Vaden and Krispen. It noted that in both cases, the non-bank entity was a corporate affiliate of the bank. In contrast, the Finance Company and the Bank are completely separate entities, or, as the trial court noted, "independent contractors to each other in performing their respective obligations [under the agreement]." In fact, both the federal court in its remand order, and the trial court in the order on appeal, rejected arguments based on Vaden and Krispen.
The Court then examined the Finance Company’s argument that the trial court erred in relying on the opinions expressed by the State's expert witness. The Finance Company argued that the expert usurped the role of the court by testifying as to the nature of the relevant law and how the court should apply that law and that the expert was not qualified to testify about the agreements at issue.
The West Virginia Supreme Court of Appeals began its analysis by noting that determining whether a witness is qualified to state an opinion is reviewed under an abuse of discretion standard. Syllabus Point 5, Overton v. Fields, 117 S.E.2d 598 (W. Va. 1960). Additionally, Rule 702 provides that "[i]f scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education may testify thereto in the form of an opinion or otherwise."
The West Virginia Supreme Court was satisfied that the expert witness was properly qualified. For example, the trial court found that the witness had twenty years of experience as an attorney with the National Consumer Law Center; has been qualified as an expert in the fields of predatory lending, credit reporting, debt collecting, electronic commerce and benefits transfer, preservation of home ownership, credit math, among other relevant credentials. Accordingly, the West Virginia Supreme Court found that the trial court did not err in qualifying the witness as an expert in consumer lending.
The West Virginia Supreme Court next addressed the Finance Company’s contention that the trial court erred in applying a "state test" (the "predominant economic interest" test) in deciding a question regarding federal preemption. The Finance Company argued that the only test capable of determining this federal question is the "federal law test."
Initially, the West Virginia Supreme Court recognized that the federal question posed by the Finance Company--whether federal law preempted the issues in this case--was answered by the federal district court in the negative. The trial court implicitly adopted the federal district court's conclusion. Next, the West Virginia Supreme Court noted that it addressed the Finance Company’s allegation that application of the "predominant economic interest” test was improper, and found this argument unpersuasive.
Next, the Financing Company argued that imposing punitive penalties against it was an error, because it did not willfully violate the WVCCPA. The Finance Company highlighted that W. Va. Code § 46A-7-111 provides that the attorney general may bring an action to recover a civil penalty only for willful violations of this chapter. The Finance Company argued that its actions were not willful because it had the good faith belief that its activities complied with West Virginia law. The Finance Company's "good faith belief" is based on an e-mail it received in 2006 from a staff lawyer employed by the Division of Banking that stated the Finance Company did not require a lending license "because the loans being assigned were not 'regulated customer loans' as defined by [W. Va. Code] § 46A-1-102" and thus were not subject to West Virginia law.
However, the West Virginia Supreme Court held that the Finance Company was the true lender of the loans in question. Therefore, the Court held, the Finance Company cannot rely on the e-mail as a defense. Additionally, the West Virginia Supreme Court noted the Finance Company failed to cite to any evidence in the record on appeal that the staff attorney who sent the responsive e-mail had any authority to bind the State with her response.
The trial court's award of punitive damages was based on its lengthy and detailed findings regarding the Finance Company's repeated violations of the WVCCPA. Accordingly, the West Virginia Supreme Court affirmed the trial court ruling as to punitive damages.
The Finance Company next argued that the trial court erred by awarding the State a $10,045,687.96 civil penalty pursuant to West Virginia Code § 47-6-6, because only a borrower or debtor may bring a claim under West Virginia Code § 47-6-6. The Finance Company highlighted that the "Attorney General's powers are limited to those specifically conferred by statute." State ex rel. McGraw v. Scott Runyan Pontiac-Buick, Inc., 461 S.E.2d 516, 523 (W. Va. 1995). Because the Attorney General is not a borrower or a debtor pursuant to West Virginia Code § 47-6-6, he lacked authority to seek or be awarded damages on behalf of the West Virginia consumers.
The West Virginia Supreme Court rejected this argument because the Finance Company mischaracterized the trial court's ruling. The trial court did not issue the ruling pursuant to West Virginia Code § 47-6-6. Instead, it relied upon the public policy established by West Virginia Code § 47-6-6--that the penalty for usury should be four times the amount of interest agreed to be paid--to determine the amount of the civil penalty. Therefore, West Virginia Code § 47-6-6 merely served as a guide to determine the appropriate amount of the restitution award for this violation. In actuality, the award was authorized as an excess charge under West Virginia Code § 46A-7-111, which provides that when a circuit court finds that an excess charge has been made, it must order a full refund of the excess charge to consumers. An unlawful or excessive interest charge or fee constitutes an "excess charge" as defined by West Virginia Code § 46A-7-111(1).
The Court continued, ruling that a West Virginia trial court is empowered by the principles of equity to grant equitable relief to consumers as a means of securing complete justice and accomplishing the manifest public protection purposes of the WVCCPA. Therefore, it found that the trial court did not err by awarding a civil penalty to be distributed by the Attorney General to individual consumers aggrieved by usury.
The West Virginia Supreme Court next examined the trial court’s award to the Attorney General of a $730,000.00 civil penalty under West Virginia Code § 46A-6-104. The Finance Company argued that Article 6 does not apply to consumer lending given that it makes unlawful only unfair and deceptive acts taken "in the conduct of any trade or commerce." "Trade or commerce" is defined as the "advertising, offering for sale, sale or distribution of any goods or services . . . ." W. Va. Code § 46A-6-102(6). Therefore, because consumer lending is neither a "good" nor a "service," the Finance Company contends that § 46A-6-104 does not apply in this case.
However, the West Virginia Supreme Court noted that the Finance Company raised this assignment of error for the first time on appeal. "Our general rule in this regard is that, when nonjurisdictional questions have not been decided at the trial court level and are then first raised before this Court, they will not be considered on appeal." Whitlow v. Bd. of Educ. of Kanawha Cnty., 190 W.Va. 223, 226, 438 S.E.2d 15, 18 (1993). Accordingly, the West Virginia Supreme Court declined to address this issue.
Finally, the Court examined the Finance Company’s assignments of error as they relate to the award of attorneys’ fees. The Court noted that the decision to award such fees rests in the sound discretion of the trial court and exercise of that discretion will not be disturbed except in cases of abuse. Beto v. Stewart, 213 W.Va. 355, 359, 582 S.E.2d 802, 806 (2003).
The West Virginia Supreme Court found that the trial court had express statutory authority to award attorney's fees as costs to the State for its successful prosecution of this enforcement action. West Virginia Code §46A-7-108 provides that the Attorney General may bring an action both to restrain an entity from violating the WVCCPA and to obtain "other appropriate relief" which, pursuant to Imperial Marketing, is the full array of equitable relief including an award of attorney's fees as costs. 203 W.Va. at 213-14, 506 S.E.2d at 812-13. Further, West Virginia Code § 59-2-18 provides that when the State is granted equitable relief, the "fees of attorneys and other officers for services, and allowances for attendance" shall be taxed as part of the costs.
Moreover, the trial court had additional legal authority to award such fees pursuant to Syllabus Point 3 of Sally-Mike Properties v. Yokum, 365 S.E.2d 246 (W. Va. 1986), which provides as follows: "[t]here is authority in equity to award to the prevailing litigant his or her reasonable attorney's fees as 'costs,' without express statutory authorization, when the losing party has acted in bad faith, vexatiously, wantonly or for oppressive reasons."
Here, the Finance Company's actions--such as its refusal to produce the names and contact information for its West Virginia customers and its refusal to produce requested documents in an electronically searchable format--were vexatious and oppressive. Therefore, the trial court clearly had legal authority to grant the State its attorney's fees as costs both for violations of the WVCCPA, and for vexatious and oppressive conduct. As such, we find that the trial court did not abuse its discretion in awarding the State its reasonable attorney's fees as costs.
The Finance Company next argued that the trial court erred in awarding attorney's fees to the State because, pursuant to Hechler v. Casey, 175 W.Va. 434, 333 S.E.2d 799 (1985), the State may not recover attorney's fees where the Attorney General represents it. In Hechler, the West Virginia Supreme Court found that "the Constitution of this State restricts the compensation of the Attorney General . . . to a strict salary basis and bars the officers from supplementing or increasing their legislatively provided compensation by their receipt of fees or any other form of compensation." Id., 333 S.E.2d at 816.
However, the Hechler court also stated that a court could not award attorney's fees to the Attorney General for its work on behalf of the State absent statutory authorization for such an award. As the West Virginia Supreme Court noted, W. Va. Code § 46A-7-108 and § 59-2-18 provide statutory authorization for an award of attorney's fees as costs in a case seeking to enforce the WVCCPA. Therefore, Hechler did not preclude the award of attorney's fees as costs in this case.
Accordingly, the West Virginia Supreme Court affirmed all three of the trial court’s orders.
Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
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