Paramount Builders Inc. v. Commonwealth

Present: 	Carrico, C.J., Lacy, Hassell, Koontz, and Kinser,
JJ., and Compton and Whiting, Senior Justices
PARAMOUNT BUILDERS, INC., ET AL.
v. 	Record No. 991696 	OPINION BY JUSTICE ELIZABETH B. LACY
June 9, 2000
COMMONWEALTH OF VIRGINIA
FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH
Alan E. Rosenblatt, Judge
In this appeal, Paramount Builders, Inc. and its
president Edward Augustine assert that the trial court should
have set aside a civil investigative order issued against
them. 	We conclude, however, that the application for the
order complied with the requirements of Code § 59.1-201, and
we will affirm the judgment of the trial court refusing to set
aside the order.
The Commonwealth's Attorney for the City of Virginia
Beach (the Commonwealth) filed an application for a civil
investigative order pursuant to § 59.1-201. 	The Commonwealth
sought documents and other information from Paramount
Builders, Inc., and from Edward Augustine, individually and in
his capacity as president of Paramount Builders, Inc., in
connection with the solicitation of customers for their home
improvement business. 	The ex parte application was granted by
the circuit court on January 8, 1999.
Pursuant to § 59.1-201(C), Paramount and Augustine moved
to set aside the order and, in the alternative, moved to

modify the order and for a protective order. 	Both sides filed
memoranda and, following argument of counsel, the trial court
entered an order granting the motion to set aside the
investigative order as to Augustine in his individual
capacity. 	The trial court modified the terms of the civil
investigative order but refused to set it aside as to
Paramount and Augustine as president of Paramount.
In their appeal, Paramount and Augustine (hereinafter
collectively "Paramount") assign error to the trial court's
order refusing to set aside the investigative order, asserting
that the Commonwealth and the application for the civil
investigative order failed to meet the good faith or
impracticality requirement and the reasonable cause
requirement of subsections (A) and (B) of § 59.1-201.
Section 59.1-201 provides in relevant part:
A. 	Whenever the attorney for the Commonwealth
. . . has reasonable cause to believe that any
person has engaged in, or is engaging in, or is
about to engage in, any violation of § 59.1-200,
the attorney for the Commonwealth . . . after
making a good faith effort to obtain such
information, is unable to obtain the data and
information necessary to determine whether such
violation has occurred, or that it is impractical
for him to do so, he may apply to the circuit
court . . . for an investigative order . . . .
B. 	The circuit courts are empowered to issue
investigative orders, . . . . 	An application for
an investigative order shall identify:
1. 	The specific act or practice alleged to be in
violation of § 59.1-200;
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2. 	The grounds which shall demonstrate
reasonable cause to believe that a violation of
§ 59.1-200 may have occurred, may be occurring or
may be about to occur;
3. 	The category or class of data or information
requested in the investigative order; and
4. 	The reasons why the attorney for the
Commonwealth. . . is unable to obtain such data
and information, or the reason why it is
impractical to do so, without a court order.
Paramount argues that before a civil investigative order
can be issued, the Commonwealth must demonstrate "factual"
compliance with subsection (A) of § 59.1-201 and "formal"
compliance with subsection (B) of that section. 	According to
Paramount, subsection (A) requires the Commonwealth to make a
factual showing that it had reasonable cause to believe that a
violation of § 59.1-200 of the Virginia Consumer Protection
Act, Code §§ 59.1-196 through –207 (Consumer Protection Act)
had occurred, was occurring, or would occur, and that it had
made a good faith effort to acquire the desired information
and was unsuccessful, or that it was impractical to seek the
information without a court order. 	Subsection (B), Paramount
continues, requires that the application for the order comply
with the "formal" requirements listed in the subsection's
subparts. 	Under Paramount's analysis, failure to comply with
either of these "factual" or "formal" requirements defeats the
request for a civil investigative demand.
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We disagree with Paramount's construction of these
provisions. 	Subsection (A) describes the circumstances under
which an application for a civil investigative order is
appropriate and subsection (B) incorporates those
circumstances into conditions which must be identified in the
application before a circuit court can issue a civil
investigative order. 	This statutory scheme does not, however,
impose a two-step compliance process as suggested by
Paramount. 	Thus, in resolving this appeal, we are concerned
only with Paramount's allegations that the application did not
comply with the requirements of subsection (B)(1), (2), and
(4).1
Compliance with § 59.1-201(B)(1) and (B)(2).
Subparagraphs (1) and (2) of § 59.1-201(B) require
identification of the alleged acts or practices which violate
the Consumer Protection Act and the grounds which demonstrate
reasonable cause to believe the alleged violations have
occurred, are occurring, or may occur. 	Paragraph 6 of the
application states that "upon information and belief"
Paramount's agents, through directives from Paramount, (1)
induced consumers to execute a waiver of their "three-days
right to cancel" by certain misrepresentations such as
1 Paramount also complains that the trial court should
have conducted an evidentiary hearing; however, Paramount did
not assign error to this issue. 	Rule 5:17(c).
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obtaining a "'special price'" or other non-emergency
situations in violation of the Virginia Consumer Protection
Act, § 59.1-200(9), (14), and (19); (2) failed to leave copies
of the contracts and signed "right to cancel" waivers at
consumers' homes or failed to give such copies to consumers
upon request in a timely manner in violation of §§ 59.1-
21.4(2) and 59.1-200(19); (3) misrepresented that Paramount
was the "sole distributor" or only "locally authorized dealer
of various building supplies" in violation of § 59.1-200(3);
and (4) "made it difficult for consumers to cancel within the
three days' cancellation period" by delaying requests until
after the time period had expired and refusing to accept
delivery of notice of cancellation in violation of § 59.1-
200(19).
To demonstrate that the Commonwealth had reasonable cause
to believe Paramount engaged in the conduct listed in
Paragraph 6, as required by § 59.1-201(B)(2), the application
stated in Paragraph 7 that 19 complaints had been received by
or referred to the Consumer Affairs Division of the
Commonwealth Attorney's Office and that affidavits by a former
employee and a former officer of Paramount recited that the
actions described in Paragraph 6 are "being authorized and
conducted in the regular course of business" by Paramount
against other consumers who may not have yet filed a
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complaint. 	Copies of the affidavits and two of the 19
complaints were attached as exhibits to the application.
Paragraph 8 explained the pattern of operation recited in the
exhibits which the Commonwealth believed showed a practice of
past and continuing violations of the Consumer Protection Act.
Paramount first argues that these allegations are
insufficient because they reflect only opinions and
conclusions, not facts. 	Paramount further asserts generally
that there is no evidence of any directives by Paramount or
its representatives to misrepresent Paramount's role as sole
distributor, to induce customers by false pretenses to sign a
waiver of their right to cancel, or any evidence that
Paramount agents were directed not to leave contracts or
signed waivers with the customers or to delay or make it
difficult for customers to cancel their contracts.
Paramount maintains that the signed waivers were not part
of the sales contract required to be supplied to the customer,
that failure to provide the signed waiver was not part of a
policy to thwart consumer's efforts to cancel, and, finally,
that the waivers themselves did not violate the Home
Solicitation Act because that Act only declares such waivers
void, not in violation of that Act. 	Therefore, Paramount
contends that these actions were not violations of § 59.1-200.
In summary, Paramount asserts that the actions alleged either
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did not occur or that they were not violations of the Consumer
Protection Act.
We disagree with Paramount. 	The recitations in the
application and the attached exhibits indicate that
Paramount's agents, at the direction of Paramount and
Augustine, engage in a standard procedure that includes
offering "showcase home" discounts tied to the execution of
"right to cancel" waivers, failing to give copies of the
waivers to the customers, and enforcing sales contracts
regardless of the validity of the waivers. 	This pattern of
action, as stated in one of the complaints attached to the
affidavit, leaves the consumer with the impression that the
waiver was valid and that the sales contract could not be
cancelled. 	The application clearly alleges that these acts
and practices violate the Consumer Protection Act.
An application for an investigative order must also show
that there is "reasonable cause to believe" that a violation
of the Consumer Protection Act has occurred, is occurring, or
will occur. 	§ 59.1-201(A). 	The "reasonable cause" standard
requires less than the probable cause standard and does not
require a showing that a violation has in fact occurred. 	As
stated by the Commonwealth, "[a]t this point in the
investigation it is not necessary for the Commonwealth to
prove that any customer has actually been deceived; that is to
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be established at trial. 	Rather, what is important is that
the Commonwealth has made its prima facie case of reasonable
cause to investigate." 	The totality of information presented
in the application and exhibits demonstrates that reasonable
cause exists to believe that Paramount would engage in
specific acts which violated § 59.1-200.
Compliance with § 59.1-201(B)(4)
Section 59.1-201(B)(4) requires identification of the
reasons why the Commonwealth "is unable to obtain such data
and information, or the reason why it is impracticable to do
so, without a court order." 	Paragraph 9 of the application
states:
The reason why the Office of Commonwealth's
Attorney is unable to obtain the information/items
as listed in Exhibit "A" is that upon information
and belief and based upon the affidavits, the
Office of Commonwealth's Attorney believes it
would suffer irreparable damages that should a
mere letter, rather than a court order, be sent to
Paramount Builders, Inc., because under
information and belief, Paramount Builders, Inc.,
would destroy many of the necessary documents.
Paramount argues that this statement is insufficient to
satisfy § 59.1-201(B)(4), because the application must
identify either that the Commonwealth was unable to secure the
information or that it was impractical to do so, but not both.
In this case, Paramount asserts, the Commonwealth chose to
assert that it was "unable to obtain" the data, not that it
was "impractical" to do so. 	Having stated that it was unable
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to obtain the information, Paramount continues, the
Commonwealth was required to but did not identify the reasons
why it could not obtain the information. 	Thus, Paramount
concludes, the application fails to comply with the
requirements of § 59.1-201(B)(4).
We agree with Paramount that § 59.1-201(B)(4) is intended
to require the application to identify one of two mutually
exclusive circumstances, either of which will support the need
for a court order. 	The first circumstance is that, even
though the Commonwealth made good faith efforts, it was
"unable to obtain" the information. 	The second circumstance
is that such good faith efforts to obtain the information were
not made because to do so would have been "impractical."2
Paramount seeks to defeat the application in this case on the
theory that the Commonwealth chose the former circumstance
when it used the phrase "unable to obtain" in paragraph 9,
and, therefore, is precluded from relying on any reason of
impracticality to support the issuance of a court order. 	We
disagree.
The identification requirement set out in the statute is
that the application identify reasons why the applicant is
"unable to obtain" information "without a court order" or the
2 Although the intent of § 59.1-201(B)(4) is not disputed,
we nevertheless note that the specific language of the
provision does not accurately reflect that intent.
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reason why "it is impracticable" to obtain such information
"without a court order." 	Paragraph 9 of the application
clearly states that the "reason why" the Commonwealth's
Attorney is "unable to obtain" the information "without a
court order" is because the Commonwealth's Attorney believes
that "should a mere letter, rather than a court order, be sent
to Paramount," Paramount "would destroy many of the necessary
documents." 	There is no confusion over the statement made in
the application. 	It clearly identifies the reason why it
would be impractical to engage in efforts, good faith or
otherwise, to obtain the information without a court order —
because the Commonwealth's Attorney believed that the
information would be destroyed. 	The reasonableness of this
belief was supported by the affidavits accompanying the
application. 	Compliance with subparagraph (4) of § 59.1-
201(B) is not defeated simply because the phrase "is unable to
obtain" was used in identifying why it was impractical for the
Commonwealth to try to obtain the information by letter,
rather than court order. 	Thus, we reject Paramount's claim
that the application failed to comply with the requirements of
§ 59.1-201(B)(4).
Lastly we reject Paramount's argument that the order of
the trial court was wrong because the order was based upon "a
totally inadequate finding with respect to the good faith
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requirements" of the Code. 	The final order of the trial court
states "IT APPEARING that the Commonwealth complied with
§ 59.1-201 of the Code of Virginia (1950), as amended made
good faith efforts and had sufficient reasonable cause."
(Emphasis added.) 	While the emphasized phrase seems to
indicate a finding of good faith efforts and reasonable cause,
the phrase is incomplete and its meaning unclear. 	However,
this confusion does not invalidate the trial court's order.
The order clearly states the dispositive finding, that the
requirements of § 59.1-201 were satisfied. 	There is no
requirement that a trial court's order reflect a specific
finding as to each of the conditions required to be identified
by § 59.1-201(B).
Accordingly, for the reasons stated, we will affirm the
judgment of the trial court.
Affirmed.
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