During the 2021 legislative session, the West Virginia Legislature once again amended the West Virginia Consumer Credit and Protection Act, one of the primary statutes under which consumers sue creditors, collectors and others.
For years, the Act stood substantially in its original form since its 1974 passage. In 2015, the Legislature began amending the Act every year to do the following, among other things:
- Reduce the statute of limitations;
- Reduce the number of penalties per violation;
- Impose explicit call volume caps;
- Impose qualifications on how consumers give notice of being represented by an attorney; and
- Impose a pre-suit notice requirement.
This year, the Legislature considered several bills aimed at further amending and in some instances, restricting the Act. Some of those bills did not pass, but one significant bill did, and its provisions became effective June 16, 2021. It changes consumer litigation in three critical ways.
1. Guidance on Awarding Attorney’s Fees
The Legislature has brought clarity and guidance to trial courts deciding whether to award a party attorney’s fees and expenses in action brought under the Act. Before the new law, the Act merely told trial courts they could award “reasonable” attorney’s fees and expenses to a consumer and award the same to a defendant if it was a bad faith action brought for the purpose of harassment. The new law requires trial courts to conduct a “lodestar” analysis and examine the following factors in determining the amount of fees and expenses to award:
- The time and labor required;
- The novelty and difficulty of the questions;
- The requisite skill to perform the legal service properly;
- Preclusion of other employment by the attorney due to acceptance of the case;
- The customary fee;
- Whether the fee is fixed or contingent;
- Time limitations imposed by the client or the circumstances;
- The amount involved and the amount of the judgment and any nonmonetary relief obtained;
- The experience, reputation and ability of the attorneys;
- The undesirability of the case;
- The nature and length of the professional relationship with the client; and
- Awards in similar cases.
2. Revisions to the Pre-Suit Notice Requirement
Before the new law, the Act included a provision that required a consumer to give pre-suit notice to a defendant and allow that defendant to make a cure offer. If the cure offer was not accepted and the consumer received less than the cure offer at trial, the defendant would not be liable for the consumer’s attorney’s fees and expenses. That provision applied to actions brought under part, but not all, of the Act. A separate pre-suit notice requirement existed for lawsuits alleging unfair or deceptive acts or practices (“UDAP”) in trade or commerce.
The new law combines both pre-suit notice requirements. Whereas the prior version of this requirement appeared to allow a defendant to tell the jury that it provided a cure offer to the consumer, the new version seems to remove that opportunity. Instead, a defendant is permitted to introduce the cure offer in a proceeding before the court (not the jury) to determine an award of attorney’s fees and expenses.
3. Creation of New Provisions on Offers to Settle and Frivolous Claims and Defenses
There is a lot to unpack here. The new law creates a new section of the Act that addresses two issues: offers to settle and motions to determine a claim or defense to be frivolous.
In the first part (offers to settle), the new law supplements the procedures already in place in Rule 68 of the West Virginia Rules of Civil Procedure that allow a party to make an offer of judgment in exchange for resolving the lawsuit. Experience teaches that many defendants are not interested in making that offer because they are required to report a judgment entered against them when they apply for insurance, license renewals or license issuance.
The new law creates procedures that allow either party to make an offer to settle and dismiss all or some of the claims in a lawsuit. Significantly, the offer is not required to include the fact that a judgment will be entered. If the offer is rejected, the party making the offer is not required to pay the other party’s attorney’s fees and expenses (assuming specific criteria in the section are met). Further, an offering party may be awarded its attorney’s fees and expenses if it shows the other party acted without substantial justification or without good faith in rejecting the offer.
In the second part (motions to determine a claim or defense to be frivolous), the new law allows either party to move the court to determine a claim or defense asserted by the opposing party is frivolous. The court is required to hold a hearing and may award damages, including attorney’s fees and expenses, against the party presenting the frivolous claim or defense.
West Virginia already has a provision in Rule 11 of the West Virginia Rules of Civil Procedure that permits awarding sanctions for actions taken without a good faith basis. This new provision of the Act seems to supplement Rule 11. An interesting point to note is that, while this new portion of the law is titled, in part, “damages for frivolous claims or defenses,” its provisions apply not only to claims and defenses but also to “other positions.” It is unclear what actions will presume to be “other positions,” and it likely will be some time before any court decisions clarify this. However, for defendants facing claims they think are frivolous, this portion of the new law provides them a way to bring a focused challenge to those claims with the actual outcome. The consumer may be required to reimburse them for the damages (including attorney’s fees) they incurred in dealing with the frivolous claim.
This year’s amendments to the Act clarify calculating an award of attorney’s fees and foster attempts to resolve lawsuits, both before they are filed and, if not then, before trial. The imposition of the lodestar analysis brings the Act on equal footing with other areas of West Virginia law conducting the same study. The changes to the pre-suit notice requirement may continue to resolve some claims before filing suit. If suit is filed, the new offer of settlement provisions incentivizes parties to settle claims. If they don’t resolve them, the new frivolous claims and defense provisions may penalize them.
Nicholas P. Mooney II is a member attorney in Spilman Thomas & Battle’s Charleston, West Virginia office. His primary range of practice is consumer financial services litigation in federal and state court, devoting more than 20 years to that practice area. He can be reached at (304) 340-3860 or firstname.lastname@example.org.