McGraw hit with countersuit by computer seller

By Chris Dickerson | Jun 27, 2007


CHARLESTON, W.Va. - A company that recently was sued by state Attorney General Darrell McGraw has fired back.

BlueHippo filed a countersuit June 25 against McGraw and state Revenue Secretary James Robert Alsop in federal court.

In an 18-count suit originally filed in March in Kanawha Circuit Court, McGraw seeks an injunction, stopping BlueHippo from doing business in West Virginia. McGraw also seeks a $200,000 bond from the company and $5,000 for each violation of the West Virginia Telemarketing Act. It later was removed to federal court.

In the suit, McGraw's office said consumers claim to have paid for computer 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 states one consumer paid about $1,800 for a computer similar to one she bought at a national retail store for $400.

The suit also alleged that BlueHippo used deceptive business practices to get West Virginia consumers to agree to binding financing plans.

In April, BlueHippo filed a 73-page answer to McGraw's allegations that it has violated the West Virginia Credit and Consumer Protection Act during its sale of computers. The company denied most of McGraw's allegations, though admitted it had not registered with the state's Department of Tax and Revenue and did not pay the department's surety bond.

In the countersuit filed June 25, BlueHippo says 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."

BlueHippo "offers to sell computers and other consumer electronics nationwide through advertisements on television and the Internet and in print," the countersuit states.

The countersuit maintains that certain provisions of state code regarding telemarketing are unlawful prior restraints and unjustifiably discriminatory. It also says these provisions "unduly burden interstate commerce in violation of the Commerce Clause of the United States Constitution"

"The Attorney General has asserted that BlueHippo is subject to the telemarketing provisions in W.Va. Code ... and has specifically asserted that BlueHippo is required to comply with the registration and bonding requirements contained in W.Va. Code ... before doing business in West Virginia," the countersuit states. "The Attorney General has attempted to enforce those provisions against BlueHippo, and has sought, inter alia, to bar BlueHippo from engaging in the sale of consumer goods in West Virginia, to bar BlueHippo from seeking access to state or federal courts to enforce the obligations of West Virginia consumers, to void all transactions between BlueHippo and West Virginia consumers, to require BlueHippo to refund all monies paid by West Virginia consumers and to impose civil penalties against BlueHippo."

In the countersuit, BlueHippo asks for an injunction stopping the actions of McGraw's and for declaratory judgment in its favor. It also seeks attorney fees and other relief.

In BlueHippo's April response to McGraw's suit, Kara Cunningham of Steptoe Johnson in Charleston wrote that the AG's complaint raised questions of federal law.

The notice of removal mentioned a request of nondischargeability from McGraw that would prevent any debt owed by the company to be eliminated through bankruptcy proceedings.

"The dischargeability (or nondischargeability) of a debt under this statute is a federal question, and the Attorney General's request for a finding of nondischargeability thus provides an additional ground for removal," she wrote in the notice of removal to federal court. "Because the Attorney General apparently has requested a finding of nondischargeability, the jurisdictional requirements ... are satisfied and removal is proper."

Calls to McGraw's office for comment about BlueHippo's countersuit were not returned.

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