Plaintiff Appeals H&R Block Free File Fraud Suit Arbitration Ruling

On Wednesday, the Eighth Circuit Court of Appeals docketed a case accusing H&R Block Inc., H&R Block Tax Group Inc., and HRB Digital LLC (collectively, H&R Block) of deceiving low-income tax-payers eligible to receive free tax preparation and filing services under the federal Free File Program by diverting those taxpayers to paid tax-filing products. The appeal contests the trial court’s order compelling arbitration.

The 2019 class action brought by a taxpayer who used H&R Block’s tax services raised five claims against the company. The defendant moved to compel arbitration based on the arbitration clause contained in the terms and policies that the plaintiff agreed to before using the defendant’s services. 

In a Jul. 27, 2020 order, the court granted the motion. Subsequently, the plaintiff took only her fraud claim to arbitration, prompting the defendant to file a motion to enforce the court’s arbitration order. The plaintiff opposed, arguing that the arbiter could find that “the parties’ container contract was induced by fraud, thereby rendering the attendant Arbitration Agreement unenforceable and terminating the arbiter’s jurisdiction.” 

In a Feb. 10 order, the court disagreed, finding the plaintiff’s logic circular. The court reiterated its previous explanation that the arbitration agreement was severable from the container contract, and thus, not “saved” from enforcement under the Federal Arbitration Act. In addition, the court emphasized that the arbitration agreement was valid and enforceable on its own terms.

The plaintiff now seeks to have the decision reviewed. Her opening brief is due on Apr. 19.

In a similar case, a Northern District of California judge refused to preliminarily approve a $40 million settlement reached by tax preparation services provider Intuit Inc. and taxpayers who used its services earlier this week. In that case, the trial court declined to compel arbitration, but on appeal, the Ninth Circuit reversed the decision, ruling that the class had to take their claims to the para-judicial forum.

The plaintiff-appellant is represented by Bursor & Fisher P.A. and Wagstaff & Cartmell, and the  defendant-appellee by Berkowitz Oliver Williams Shaw & Eisenbrandt LLP, Mayer Brown LLP, and Jones Day.