HUNTINGTON – Tax preparer Jackson Hewitt claims a Bailey & Glasser client who started a class action over refund anticipation loans obtained one in a scheme to cheat on her taxes.
Bailey & Glasser dismissed Linda Hunter as plaintiff after discovery revealed evidence of fraud, Charles Woody of Charleston wrote to U.S. District Judge Robert Chambers on March 28.
Chambers presides over a claim of substitute plaintiffs Christian Harper and Elizabeth Harper that Jackson Hewitt's refund anticipation loans violated credit consumer law.
"The importance of Mrs. Hunter's apparent actions and subsequent dismissal cannot be ignored," Woody wrote. "Indeed, given the evidence of Mrs. Hunter's unclean hands, Jackson Hewitt could have required dismissal of the original complaint without the opportunity to amend and substitute new plaintiffs.
"And, in fact, the court should wash its hands of the entire original complaint."
He tried to catch the Harpers in an awkward spot, for Glasser has argued that they represent the class Hunter proposed to represent.
"Surely, the Harpers do not contend that they share commonality and typicality with Mrs. Hunter," Woody wrote.
For proof of his fraud charge, Woody cited docket entry number 212.
Chambers can read it but the public can't because he sealed all documents at that number.
John Barrett, Brian Glasser and Eric Snyder sued Jackson Hewitt on Hunter's behalf in 2006, alleging violation of credit law and breaches of fiduciary duties.
They alleged breach of contract but didn't produce a contract, so Chambers dismissed that.
Late in 2007, both sides began filing motions, briefs and exhibits under seal.
In March 2008, both sides asked for a 30-day stay of all proceedings.
"Defendant has obtained discovery relating to plaintiff and her husband's tax returns," they wrote. "Mrs. Hunter no longer desires to participate in this action, and plaintiff's counsel have determined that Mrs. Hunter is not an appropriate class representative."
The Harpers took over, alleging they borrowed against refunds at rates from 56 to 83 percent.
They moved for class certification in 2009, filing exhibits under seal.
Jackson Hewitt filed its opposition under seal with exhibits, at docket number 212.
Chambers reached three decisions but lacked full confidence in them, so he certified questions to the West Virginia Supreme Court of Appeals.
He asked if he correctly decided that state law covering credit service organizations applied.
He asked if he correctly found an absence of agency relationship.
He asked if he correctly applied a four-year statute of limitations in favor of the Harpers, rather than a year as Jackson Hewitt argued.
Last November, the Justices agreed with him in treating Jackson Hewitt as a consumer services organization and in running a four-year limit.
On agency relations, they told him to develop more facts.
Jackson Hewitt petitioned the Justices for rehearing, but they denied it in January.
The case returned to Chambers, who asked for summaries of remaining issues.
Woody answered that he should deny class certification and find the Harpers suffered no injury.
"They do not claim that they would not have purchased a refund anticipation loan had Jackson Hewitt registered as a credit services organization or that they would not have purchased a refund anticipation loan had Jackson Hewitt made disclosures to them required by the credit services organization statute," he wrote.
Richard Brusca and Paul Solomon, of Skadden Arps in Washington, also worked on the summary.
On March 18, Barrett, Glasser and Snyder wrote that they could easily prove class damages.
"Jackson Hewitt's refund anticipation loans were uniform for all of its refund anticipation loans each year, and there is no question that Jackson Hewitt has never registered as a credit services organization or provided required disclosures in West Virginia," they wrote.
They argued that the class period began in 2002, four years before they filed Hunter's suit.
"Because the plaintiffs amended their complaint merely to substitute named plaintiffs who had always been members of the putative class, there is nothing to prevent the amendment from relating back to the original complaint," he wrote.
That triggered Jackson Hewitt to divulge the secret of docket number 212.
Woody wrote that the Harpers downplayed the reason for Hunter's removal.
He wrote that she sought a loan in furtherance of a scheme to defraud the government.
"She cannot have represented at that time any class that included the Harpers or any class that the Harpers now purport to represent," he wrote. "It would be perverse indeed for the court to allow tolling of the limitations period based upon a complaint raising a different transaction, completed two years prior to the first amended complaint, filed by a wrongdoer who utilized the transaction to expedite her tax fraud."
Chambers has set jury trial on Nov. 8.