HR Block 2007 Annual Report Download - page 105

monthly rentals. Future minimum lease commitments of our continuing We routinely enter into contracts that include embedded
operations at April 30, 2007 are as follows: indemnifications that have characteristics similar to guarantees. Other
(in 000s)
guarantees and indemnifications of the Company and its subsidiaries
2008 $256,555 include obligations to protect counter parties from losses arising from
2009 213,838
the following: (1) tax, legal and other risks related to the purchase or
2010 163,646
disposition of businesses; (2) penalties and interest assessed by federal
2011 99,420
and state taxing authorities in connection with tax returns prepared for
2012 58,985
clients; (3) indemnification of our directors and officers; and (4) third-
2013 and beyond 77,781
party claims relating to various arrangements in the normal course of
$870,225
business. Typically, there is no stated maximum payment related to
these indemnifications, and the term of indemnities may vary and in
Rent expense of our continuing operations for fiscal years 2007, 2006 many cases is limited only by the applicable statute of limitations. The
and 2005 totaled $318.2 million, $301.8 million and $244.2 million, likelihood of any claims being asserted against us and the ultimate
respectively. liability related to any such claims, if any, is difficult to predict. While
In the regular course of business, we are subject to routine we cannot provide assurance we will ultimately prevail in the event any
examinations by federal, state and local taxing authorities. In such claims are asserted, we believe the fair value of these guarantees
management’s opinion, the disposition of matters raised by such taxing and indemnifications is not material as of April 30, 2007.
authorities, if any, in such tax examinations would not have a material
adverse impact on our consolidated financial statements.
NOTE 19: LITIGATION AND RELATED CONTINGENCIES
RAL LITIGATION –We have been named as a defendant in numerous the aggregate. Likewise, there can be no assurances regarding the
lawsuits throughout the country regarding our refund anticipation loan impact of the RAL Cases on our financial statements. The following is
programs (collectively, ‘‘RAL Cases’’). The RAL Cases have involved a updated information regarding the pending RAL Cases that are attorney
variety of legal theories asserted by plaintiffs. These theories include general actions or class actions or putative class actions:
77 m
allegations that, among other things, disclosures in the RAL applications Lynne A. Carnegie, et al. v. Household International, Inc., H&R
were inadequate, misleading and untimely; the RAL interest rates were Block, Inc., et al., (formerly Joel E. Zawikowski, et al. v. Beneficial
usurious and unconscionable; we did not disclose that we would receive National Bank, H&R Block, Inc., Block Financial Corporation, et al.)
part of the finance charges paid by the customer for such loans; untrue, Case No. 98 C 2178, United States District Court for the Northern
misleading or deceptive statements in marketing RALs; breach of state District of Illinois, Eastern Division, instituted on April 18, 1998. This
laws on credit service organizations; breach of contract, unjust case constitutes one of the 2006 Settlements. On April 19, 2006, we
enrichment, unfair and deceptive acts or practices; violations of the entered into a settlement agreement regarding this case, subject to final
federal Racketeer Influenced and Corrupt Organizations Act; violations court approval. The settlement was approved by the court on August 28,
of the federal Fair Debt Collection Practices Act and unfair competition 2006. One objector filed an appeal, which was dismissed on March 1,
regarding debt collection activities; and that we owe, and breached, a 2007. Unless a Petition for Certiorari is filed by the objector and granted
fiduciary duty to our customers in connection with the RAL program. by the United States Supreme Court, the settlement is final.
The amounts claimed in the RAL Cases have been very substantial in Sandra J. Basile, et al. v. H&R Block, Inc., et al, April Term 1992 Civil
some instances. We have successfully defended against numerous RAL Action No. 3246 in the Court of Common Pleas, First Judicial District
Cases, some of which were dismissed on our motions for dismissal or Court of Pennsylvania, Philadelphia County, instituted on April 23, 1993.
summary judgment, and others were dismissed voluntarily by the The court decertified the class on December 31, 2003. The Pennsylvania
plaintiffs after denial of class certification. Other cases have been appellate court subsequently reversed the trial court’s decertification
settled, with one settlement resulting in a pretax expense of decision. On September 26, 2006, the Pennsylvania Supreme Court
$43.5 million in fiscal year 2003 (the ‘‘Texas RAL Settlement’’) and other reversed the appellate court’s reversal of the trial court’s decision to
settlements resulting in a combined pretax expense in fiscal year 2006 decertify the class. The plaintiff is seeking further review by the
of $70.2 million (the ‘‘2006 Settlements’’). appellate court.
We believe we have meritorious defenses to the remaining RAL Cases The People of California v. H&R Block, Inc., H&R Block Services,
and we intend to defend them vigorously. There can be no assurances, Inc., H&R Block Enterprises, Inc., H&R Block Tax Services, Inc., Block
however, as to the outcome of the pending RAL Cases individually or in Financial Corporation, HRB Royalty, Inc., and Does 1 through 50,
H&R BLOCK 2007 Form 10K