Justices suggest lawmakers rewrite baffling credit law

By Steve Korris | Dec 3, 2010

Benjamin CHARLESTON – Tax preparer Jackson Hewitt turned itself into a credit broker when it arranged refund anticipation loans, the Supreme Court of Appeals has decided.



CHARLESTON – Tax preparer Jackson Hewitt turned itself into a credit broker when it arranged refund anticipation loans, the Supreme Court of Appeals has decided.

The Justices on Nov. 23 advised U.S. District Judge Robert Chambers of Huntington to apply West Virginia credit consumer law in considering a class action against Jackson Hewitt.

Chambers asked the Justices last year if he should apply the law in favor of plaintiffs Christian and Elizabeth Harper.

Chambers also wanted to know if Jackson Hewitt acted as agent of the Harpers, but the Justices shrugged their shoulders on that.

They told him they couldn't decide because he failed to supply necessary facts.

Chambers should gather and weigh the facts of any agency relations before deciding whether to certify a class action, Justice Brent Benjamin wrote in the unanimous opinion. The Justices also recommended that West Virginia legislators rewrite the law that baffled Chambers.

John Barrett, Brian Glasser, and Jonathan Marshall, of Bailey and Glasser in Charleston, sued Jackson Hewitt on behalf of Linda Hunter and a class she proposed to represent.

She borrowed against refunds in 2005, signing a loan agreement that Jackson Hewitt forwarded to Santa Barbara Bank and Trust.

She alleged violations of state credit law and breach of an agent's fiduciary duty.

She also alleged breach of contract and breaches of fiduciary duties out of confidential relations and broker relations, but Chambers dismissed those claims.

Hunter dropped out in 2008, and Christian and Elizabeth Harper replaced her.

They claimed they borrowed against refunds from 2005 to 2008, at interest rates from 56 to 83 percent.

Chambers granted substitution but denied revival of claims he dismissed.

The Harpers moved last year to certify a class action, and Jackson Hewitt moved for summary judgment on the remaining claims.

Chambers found that state law covering credit service organizations applied, but he asked the Supreme Court of Appeals if he got it right.

He denied Jackson Hewitt's motion for summary judgment on an absence of agency relations, but asked the Justices to decide whether agency relations existed.

He ruled that the Harpers sued within a four year and he denied Jackson Hewitt's motion to set the limit at a year, but again he punted to the Justices.

In case they agreed with him on all points, he found enough evidence for jurors to determine whether Jackson Hewitt breached a duty of loyalty and trust.

He found enough evidence to determine whether the Harpers suffered damages.

He stayed class certification while awaiting answers.

The Justices found no other possible conclusion but to apply state credit consumer protection law.

Benjamin wrote that "a tax preparer who receives compensation, either directly from the borrower or in the form of payments from the lending bank, for helping a borrower obtain a refund anticipation loan meets the statutory definition of a credit services organization."

The Justices agreed with Chambers on the longer statute of limitations.

They dropped agency relations back in his lap.

Charles Woody, of Spilman, Thomas and Battle in Charleston, represents Jackson Hewitt.

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