HR Block 2005 Annual Report Download - page 78

connection with RALs. The settlement agreement also specified Baltimore City, Maryland, instituted on July 14, 1997. This case is
required business practices, procedures, disclosures and forms awaiting trial. No trial date has been set.
for use in making RALs and barred members of the Carnegie PEACE OF MIND LITIGATION ⬎⬎⬎ Lorie J. Marshall, et al. v.
Settlement Class from commencing any other claims or actions H&R Block Tax Services, Inc., et al., Civil Action 2003L000004, in
against us regarding RALs made pursuant to such practices, the Circuit Court of Madison County, Illinois, is a class action
procedures, disclosures and forms (the ‘‘Forward Looking case filed on January 18, 2003, that was granted class certification
Protections’’). In negotiating the settlement, we ascribed on August 27, 2003. Plaintiffs’ claims consist of five counts
significant value to the Forward-Looking Protections and the relating to the POM program under which the applicable tax
expanded class of plaintiffs to be covered by the settlement in return preparation subsidiary assumes liability for additional tax
determining the amount of consideration we were willing to pay assessments attributable to tax return preparation error. The
in settling the case. On May 26, 2005, the court denied approval of plaintiffs allege that the sale of POM guarantees constitutes
the proposed settlement. As discussed in our Form 8-K dated (i) statutory fraud by selling insurance without a license, (ii) an
May 9, 2005, we initially recorded litigation reserves of unfair trade practice, by omission and by ‘‘cramming’’
approximately $38.0 million, after taxes, based on the May 9, 2005 (i.e., charging customers for the guarantee even though they did
proposed settlement. As a result of the May 26, 2005 court ruling not request it or want it), and (iii) a breach of fiduciary duty. In
to deny the settlement, we reversed our legal reserves to amounts August 2003, the court certified the plaintiff classes consisting of
representing our assessment of our probable loss. This class all persons who from January 1, 1997 to final judgment (i) were
action case is scheduled to go to trial on October 17, 2005. We charged a separate fee for POM by ‘‘H&R Block’’ or a defendant
intend to continue defending the case vigorously, but there are no H&R Block class member; (ii) reside in certain class states and
assurances as to its outcome. were charged a separate fee for POM by ‘‘H&R Block’’ or a
Sandra J. Basile, et al. v. H&R Block, Inc., et al, April Term defendant H&R Block class member not licensed to sell
1992 Civil Action No. 3246 in the Court of Common Pleas, First insurance; and (iii) had an unsolicited charge for POM posted to
Judicial District of Pennsylvania, Philadelphia County, instituted their bills by ‘‘H&R Block’’ or a defendant H&R Block class
on April 23, 1993. The court decertified the class on December 31, member. Persons who received the POM guarantee through an
2003. Plaintiffs appealed the decertification, and the Pennsylvania H&R Block Premium office and persons who reside in Alabama
appellate court denied the plaintiff’s appeal. The Pennsylvania are excluded from the plaintiff class. The court also certified a
appellate court subsequently granted plaintiff’s motion for en defendant class consisting of any entity with names that include
banc review of its earlier denial of plaintiff’s appeal. Re-argument ‘‘H&R Block’’ or ‘‘HRB,’’ or are otherwise affiliated or associated
is expected to occur in September 2005. with H&R Block Tax Services, Inc., and that sold or sells the POM
Levon and Geral Mitchell, et al. v. H&R Block and Ruth R. product. The trial court subsequently denied the defendants’
Wren, Case No.CV-95-2067, in the Circuit Court of Mobile County, motion to certify class certification issues for interlocutory
Alabama, instituted on June 13, 1995. Plaintiffs’ motion for class appeal. Discovery is proceeding. No trial date has been set.
certification was granted, and defendants appealed the There is one other putative class action pending against us in
certification. The appeal is pending before the Alabama Supreme Texas that involves the Peace of Mind guarantee. This case is
Court. being tried before the same judge that presided over the Texas
Deandra D. Cummins, et al. v. H&R Block, Inc., et al., Case RAL Settlement and involves the same plaintiffs attorneys that
No. 03-C-134 in the Circuit Court of Kanawha County, West are involved in the Marshall litigation in Illinois and substantially
Virginia, instituted on January 22, 2003. This class action case is similar allegations. No class has been certified in this case.
scheduled to go to trial on October 17, 2005. We believe the claims in the POM action are without merit, and
Lynn Becker v. H&R Block, Case No. CV-2004-03-1680 in the we intend to defend them vigorously. The amounts claimed in the
Court of Common Pleas, Summit County, Ohio, instituted on POM actions are substantial, however, and there can be no
April 15, 2004. The case was removed to federal court, and assurances, as to the outcome of these pending actions
plaintiffs moved to remand the case back to state court. The case individually or in the aggregate. Likewise, there can be no
currently is stayed pending the U.S. District Court’s ruling on assurances regarding the impact of these actions on our
plaintiff’s motion to remand and defendant’s motion to compel consolidated financial statements.
arbitration. OTHER CLAIMS AND LITIGATION ⬎⬎⬎ As reported in a
Joyce Green, et al. v. H&R Block, Inc., Block Financial current report on Form 8-K dated November 8, 2004, the NASD
Corporation, et al., Case No. 97195023, in the Circuit Court for brought charges against HRBFA regarding the sale by HRBFA of
H&R BLOCK 2005 Form 10K
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