HR Block 2009 Annual Report Download - page 17

want it), and (3) a breach of fiduciary duty. The court has certified plaintiff classes consisting of all persons
residing in 13 states who from January 1, 1997 to final judgment (1) were charged a separate fee for POM by “H&R
Block;” (2) were charged a separate fee for POM by an “H&R Block” entity not licensed to sell insurance; or (3) had
an unsolicited charge for POM posted to their bills by “H&R Block.” Persons who received the POM guarantee
through an H&R Block Premium office were excluded from the plaintiff class. In August 2008, we removed the case
from state court in Madison County, Illinois to the U.S. District Court for the Southern District of Illinois. In
December 2008, the U.S. District Court remanded the case back to state court. On April 3, 2009, the United States
Court of Appeals for the Seventh Circuit reversed the decision to remand the case back to state court, ruling that
the case had been properly removed to federal court. The plaintiffs have filed a petition for rehearing of this
decision with the Seventh Circuit.
There is one other putative class action pending against us in Texas that involves the POM guarantee. This case
is pending before the same judge that presided over the Texas RAL Settlement, involves the same plaintiffs’
attorneys that are involved in the Marshall litigation in Illinois, and contains allegations similar to those in the
Marshall case. No class has been certified in this case.
We believe we have meritorious defenses to the claims in the POM Cases, and we intend to defend them
vigorously. The amounts claimed in the POM Cases are substantial, however, and there can be no assurances as to
the outcome of these pending actions individually or in the aggregate.
EXPRESS IRA LITIGATION –On March 15, 2006, the New York Attorney General filed a lawsuit in the Supreme
Court of the State of New York, County of New York (Index No. 06/401110) entitled The People of New York v. H&R
Block, Inc. and H&R Block Financial Advisors, Inc. et al. The complaint alleged fraudulent business practices,
deceptive acts and practices, common law fraud and breach of fiduciary duty with respect to the Express IRA
product and sought equitable relief, disgorgement of profits, damages and restitution, civil penalties and punitive
damages. In July 2007, the Supreme Court of the State of New York issued a ruling that dismissed all defendants
other than HRBFA and the claims of common law fraud. The intermediate appellate court reversed this ruling in
January 2009. We believe we have meritorious defenses to the claims in this case and intend to defend this case
vigorously, but there are no assurances as to its outcome.
On January 2, 2008, the Mississippi Attorney General filed a lawsuit in the Chancery Court of Hinds County,
Mississippi First Judicial District (Case No. G 2008 6 S 2) entitled Jim Hood, Attorney for the State of
Mississippi v. H&R Block, Inc., et al. The complaint alleged fraudulent business practices, deceptive acts and
practices, common law fraud and breach of fiduciary duty with respect to the Express IRA product and sought
equitable relief, disgorgement of profits, damages and restitution, civil penalties and punitive damages. The
defendants have filed a motion to dismiss. We believe we have meritorious defenses to the claims in this case, and
we intend to defend this case vigorously, but there are no assurances as to its outcome.
In addition to the New York and Mississippi Attorney General actions, a number of civil actions were filed against
HRBFA and us concerning the Express IRA product, the first of which was filed on March 15, 2006. Except for two
cases pending in state court, all of the civil actions have been consolidated by the panel for Multi-District Litigation
into a single action styled In re H&R Block, Inc. Express IRA Marketing Litigation (Case No. 06-1786-MD-RED) in
the United States District Court for the Western District of Missouri. The amounts claimed in these cases are
substantial. We believe we have meritorious defenses to the claims in these cases and intend to defend these cases
vigorously, but there are no assurances as to their outcome.
Although we sold HRBFA effective November 1, 2008, we remain responsible for the Express IRA litigation
through an indemnification agreement with Ameriprise. See additional discussion in Item 8, note 19 to the
consolidated financial statements.
SECURITIES LITIGATION –On April 6, 2007, a putative class action styled In re H&R Block Securities Litigation
(Case No. 06-0236-CV-W-ODS) was filed against the Company and certain of its officers in the United States District
Court for the Western District of Missouri. The complaint alleged, among other things, deceptive, material and
misleading financial statements and failure to prepare financial statements in accordance with generally accepted
accounting principles. The complaint sought unspecified damages and equitable relief. The court dismissed the
complaint in February 2008, and the plaintiffs appealed the dismissal in March 2008. In addition, plaintiffs in a
shareholder derivative action that was consolidated into the securities litigation filed a separate appeal in March
2008, contending that the derivative action was improperly consolidated. The derivative action is Iron Workers
Local 16 Pension Fund v. H&R Block, et al., in the United States District Court for the Western District of Missouri,
Case No. 06-cv-00466-ODS (instituted on June 8, 2006) and was brought against certain of our directors and
officers purportedly on behalf of the Company. The derivative action alleges breach of fiduciary duty, abuse of
control, gross mismanagement, waste, and unjust enrichment pertaining to (1) our restatement of financial results
in fiscal year 2006 due to errors in determining our state effective income tax rate and (2) certain of our products
and business activities. We believe we have meritorious defenses to the claims in these cases and intend to defend
H&R BLOCK 2009 Form 10K 13