Tempdb Growing Out Of Control

Hi all.

I have a db application that has been running fine for months. Volumes have been gradually increasing and one day the system locked up.

A stored proc that typically ran in 3 or 4 minutes never returned. The tempdb kept expanding to fill available disk space (100GB). This was the offending statement inside the stored proc:

INSERT INTO cpp (CPPDate,MerchantLink,ReportNumber,FromDate,ToDate ,TransThreshold,DayThreshold,CPPType)
SELECT S.CPPDate,S.MerchantLink,s.ReportNumber, s.FromDate,s.ToDate, S.OccurThresh,s.DaysThresh,'D'
FROM #stuff S, Trans T with (nolock), Supplier P with (nolock)
where T.MerchantNumber in (SELECT MerchantNumber FROM Merchant WHERE MerchantLink = s.MerchantLink)
AND T.TranDate >= S.FromDate
AND T.TranDate <= S.ToDate
AND T.LoadDate <= @ReportDate2
AND (T.SupplierNumber = P.SupplierNumber
AND T.IncludeInCpp = 'Y'
AND P.CountryNumber IN (SELECT CountryNumber FROM REPORTCOMBO WHERE ReportNumber = s.ReportNumber))
GROUP BY CPPDate,Merchantlink,ReportNumber, FromDate,ToDate, OccurThresh, DaysThresh
HAVING COUNT(DISTINCT T.AccountNumber) >= OccurThresh

I realize that a "group by" uses the tempdb, but can't figure out why it would go away rather than returning an error.

I have a workaround in place now. I split this big query into several steps using a cursor. (slower and clumsier, but it works) Statistics are updated daily, i have tried defragging, and reindexing with no success.

Any thoughts would be appreciated. If you need any more details, please let me know.

Thanks in advance.