BlueHippo, McGraw reach temporary agreement
Chris Dickerson Jul. 30, 2007, 2:00pm
CHARLESTON – BlueHippo has agreed to temporarily stop selling merchandise in West Virginia after agreeing to an order with Attorney General Darrell McGraw.
McGraw had sued BlueHippo Funding and BlueHippo Capital in March, saying consumers claimed to have paid for equipment they never received, or did receive but that did not work. Also, some consumers paid prices much higher than they would have paid at a store. A news release from McGraw said one consumer paid about $1,800 for a computer similar to one she bought at a national retail store for $400.
BlueHippo is a financial company that provides computers and other equipment to people, regardless of their financial credit. Consumers provide a one-time fee to establish credit with BlueHippo and then pay for their purchases using a 52-week layaway system. The weekly payments are withdrawn straight from the consumer's bank account.
In April, at BlueHippo's request, McGraw's lawsuit was removed to federal court. But it was remanded back to Kanawha Circuit Court last week, according to Senior Assistant Charli Fulton.
After a July 26 hearing on McGraw's petition for preliminary relief, BlueHippo agreed to temporarily stop new sales in West Virginia.
In the Agreed Order filed July 27 by Kanawha Circuit Judge Tod Kaufman, Blue Hippo also has agreed to deposit all payments made by West Virginia residents who have previously purchased merchandise and have open accounts into an escrow account that will be jointly controlled by a representative of the state and a representative of BlueHippo pending the outcome of the case.
Kaufman also ordered BlueHippo to provide an updated list containing the names, addresses, purchases, and charges for all West Virginia consumers who have purchased goods from BlueHippo.
According to the order, the state offered testimony of Sharon L. Williams-Parker, Jane Woodyard, and Michelle Duncan Bishop, Esq., Deputy General Counsel for the Department of Revenue. Fulton represented McGraw's office, and Kara L. Cunningham and Russell D. Jessee of Steptoe & Johnson represented BlueHippo.
The parties told Kaufman they had tried to resolve their issues before the hearing and had done so all but two issues.
Kaufman then said he was ready to accept their agreement that said:
* BlueHippo will not make any new sales in the state, but will continue to receive payment from those who have active open accounts with the company. BlueHippo also can continue to communicate with those consumers.
* BlueHippo will set up an escrow account into which funds from West Virginia consumers will be deposited at least every two weeks. Two signatures – one from the state and one from BlueHippo – will be required to make withdrawals.
* Before filing or proceeding with any action in state court, federal court or an arbitration forum to attempt to enforce obligations or recording any judgments arising from a transaction with a West Virginia consumer, BlueHippo will provide the State with written notice. The state must notify BlueHippo of any objection, in writing, within 14 days of receipt of BlueHippo's notice. If the State does not do so, BlueHippo may proceed. If the state objects, the parties shall present the matter to the Court for resolution.
Kaufman then resolved the two issues that were sticking points.
He sided with the state by demanding BlueHippo to provide a list containing the names and addresses of West Virginia consumers with whom BlueHippo entered into transactions between June 19, 2006, and the present – including the items purchased by the consumer and the amounts charged for the items – and a list containing the names and addresses of West Virginia consumers with whom BlueHippo has entered into transactions, including the items purchased by the consumer and the amounts charged for the items.
Kaufman sided with BlueHippo on the state's request that it post $200,000 bond, saying there "is not an adequate record on which to render a decision at this time, and that additional time in any event would be necessary in order to fully consider the relevant legal issues."
The parties are scheduled to appear at a status conference at 8 a.m. Aug. 22.
BlueHippo also countersued McGraw and state Revenue Secretary James Robert Alsop in federal court in June, saying its national advertising - on television, on the Internet and in print - is "protected commercial speech" under the First Amendment. It also stresses that BlueHippo does not make the first move with consumers.
"BlueHippo did not and does not initiate calls to consumers - including West Virginia consumers," the complaint says. "Rather, all West Virginia consumers with whom BlueHippo has attempted to enter or has entered into a transaction initiated the telephone contact to BlueHippo."
Fulton said McGraw's office also has filed a motion to dismiss BlueHippo's federal countersuit because it it should have been filed as a counterclaim in the original suit instead of being filed separately and in a different court.