Judge’s order: WA Attorney General’s Office must pay $4.2M in Value Village lawsuit
A King County Superior Court Judge has ordered the Washington State Attorney General’s Office to pay Value Village more than $4.2 million in attorney’s fees in a case that has dragged on for more than six years.
“We are very pleased with the court’s fee award and the judge’s ruling confirming the full vindication of our defense in this case,” said Richard Medway, General Counsel and Chief Compliance Officer at Savers Value Village, in a statement to McClatchy on Tuesday, Oct. 17. “The fee award against the AG’s office is the largest in this context in Washington state history.”
While Value Village submitted a total of nearly $5.7 million in receipts for attorney’s fees and costs, Judge David Whedbee had the ultimate say in deciding on appropriate fees to be charged to the AGO. On Oct. 17 Whedbee signed the order.
In February of this year, the Washington Supreme Court remanded the case to the King County Superior Court to dismiss the claims brought by the state and to decide if Value Village was entitled to recovery of attorney’s fees and costs.
“The State’s conduct during this case contributed to increased fees and costs,” Whedbee wrote then.
On Sept. 20, the state submitted its objections to the court for the full entitlement of the fees requested by Value Village.
The situation began in 2017 when AG Bob Ferguson’s office alleged that Value Village was deceiving consumers by presenting itself as a charitable nonprofit organization when in reality it is a for-profit corporation.
However, Judge Whedbee said the AG’s office refused to meet with Value Village or identify which practices needed to be changed during an investigation prior to the state filing a lawsuit, inconsistent with the purpose of the Charitable Solicitations Act.
Instead, the state “demanded” that Value Village make a multi-million dollar payment to the AG’s Office to settle the investigation, and when that didn’t happen, the AG’s Office sued the company.
Whedbee also noted that during litigation the AG’s Office continued to send out press releases that claimed Value Village was deceiving its customers.
Additionally, the AG’s Office was sanctioned $41,633 by a trial court in 2020 for its failure to respond in a timely way to discovery requests while also making discovery demands that required Value Village to produce more than 47,000 records.
During appellate proceedings, “the state continually requested reconsideration of rulings, despite unanimous opinions rejecting the state’s arguments and holding that the state’s actions violated established First Amendment principle.”
The state consistently denied applicability of the First Amendment or U.S. Supreme Court precedent for Value Village’s marketing practices and would not engage on the issue during litigation, Whedbee said.
“Whether or not the State might be entitled under court rules to engage in such aggressive litigation, or even acted in ‘good faith’ throughout, such litigation inevitably drives up costs for defendants such as (Value Village) that become the target of the AGO’ s enforcement actions,” Whedbee continued.
Medway noted in his statement to McClatchy that the AGO had admitted early on that “there was never any evidence of consumer harm, consumer confusion, or any intent to deceive.”
“Twelve judges of the Washington Appellate Courts unanimously confirmed this. The Superior Court deemed that the AG’s lawsuit was ‘needless,’ Medway said. “Defending and fully prevailing in this lawsuit was burdensome and costly—but the result underscored the many positive aspects of our unique business model, which benefits the environment, consumers, and our many nonprofit partners.”
In 2019, Value Village agreed to settle without admitting liability for $475,000, but that offer was rejected by the AG’s Office, leading to an additional four-plus years of litigation in the case.
In February, Supreme Court Justices wrote that Value Village markets itself as a philanthropic organization but that its charity partners do not receive any sales revenue nor do those partners receive donations from the company.
The Justices determined that the “State’s claims under the Consumer Protection Act violated (Value Village’s) First Amendment right to engage in constitutionally protected charitable solicitation for the community charities with which (Value Village) worked for decades,” Whedbee wrote.
The AG’s Office “failed to show that any (Value Village) shopper had in fact been deceived or otherwise injured by (Value Village’s) advertising and marketing,” Whedbee said.
The AG’s Office opposed the awarding of any attorney’s fees to Value Village, the filing reads, because it argued that it might deter them from enforcement action. The state also opposed the fees because they argue that they acted in “good faith” during litigation.
Whedbee noted that Ferguson has attempted to persuade state lawmakers without success to “amend the CPA to eliminate or curtail the basis for a fee/cost recovery by defendants” as recently as 2021.
“The Court does not find any serious abuse of governmental power here, but the State’s conduct in this matter raises concerns about government overreach,” Whedbee wrote.
The judge also agreed with Value Village, which said that the lawsuit was “needless” and the AG’s Office has not convincingly proven otherwise.
Medway told McClatchy that Value Village would donate over $1 million of the fee award to charities, consistent with the company’s philosophy.
McClatchy reached out to the AGO for comment.
“This lawsuit helped educate Washington consumers about Value Village’s status as a for-profit company and led the company to change a number of its deceptive practices.” said Brionna Aho, communications director for the AGO. “While ultimately the appellate courts disagreed with our legal position, the judge significantly reduced the fees (Value Village) requested by more than $1.6 million.”
Aho said that no taxpayer dollars would be used to pay the judgment, and that it would instead be paid out of the Adverse Judgment Reserve, which is “funded through recoveries from successful cases.”
“This represents the first loss in a consumer protection case since at least 2012,” Aho said. “Our Consumer Protection Division and other public interest affirmative litigation divisions have recovered more than $1.34 billion in 2022 alone.”
Recoveries from companies such as Purdue Pharma, Facebook and Amazon were noted in a list of recoveries from 2022 provided by Aho to McClatchy in August.
On Oct. 17, the AGO also announced that it had recovered over $2 million “from nearly three dozen debt adjusters who preyed on student borrowers” according to Kiro News.
