HR Block 2015 Annual Report Download - page 79

72 2015 Form 10-K | H&R Block, Inc.
For some matters where a liability has not been accrued, we are able to estimate a reasonably possible loss or
range of loss. This estimated range of reasonably possible loss is based upon currently available information and is
subject to significant judgment and a variety of assumptions, as well as known and unknown uncertainties. The matters
underlying the estimated range will change from time to time, and actual results may vary significantly from the
current estimate. Those matters for which an estimate is not reasonably possible are not included within this estimated
range. Therefore, this estimated range of reasonably possible loss represents what we believe to be an estimate of
reasonably possible loss only for certain matters meeting these criteria. It does not represent our maximum loss
exposure. For those matters, and for matters where a liability has been accrued, as of April 30, 2015, we believe the
aggregate range of reasonably possible losses in excess of amounts accrued is not material.
For other matters, we are not currently able to estimate the reasonably possible loss or range of loss. We are often
unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient
information to support an assessment of the reasonably possible loss or range of loss, such as quantification of a
damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by courts
on motions or appeals, analysis by experts, or the status of any settlement negotiations.
On a quarterly and annual basis, we review relevant information with respect to litigation and other loss
contingencies and update our accruals, disclosures and estimates of reasonably possible loss or range of loss based
on such reviews. Costs incurred with defending matters are expensed as incurred. Any receivable for insurance
recoveries is recorded separately from the corresponding liability, and only if recovery is determined to be probable
and reasonably estimable.
We believe we have meritorious defenses to the claims asserted in the various matters described in this note, and
we intend to defend them vigorously, but there can be no assurances as to their outcomes. In the event of unfavorable
outcomes, it could require modifications to our operations; in addition, the amounts that may be required to be paid
to discharge or settle the matters could be substantial and could have a material adverse impact on our business and
consolidated financial position, results of operations and cash flows.
LITIGATION, CLAIMS, INCLUDING INDEMNIFICATION CLAIMS, OR OTHER LOSS CONTINGENCIES PERTAINING TO
DISCONTINUED MORTGAGE OPERATIONS – Although SCC ceased its mortgage loan origination activities in December
2007 and sold its loan servicing business in April 2008, SCC or the Company have been, remain, or may in the future
be subject to litigation, claims, including indemnification claims, and other loss contingencies pertaining to SCC's
mortgage business activities that occurred prior to such termination and sale. These contingencies, claims and lawsuits
include actions by regulators, third parties seeking indemnification, including depositors and underwriters, individual
plaintiffs, and cases in which plaintiffs seek to represent a class of others alleged to be similarly situated. Among other
things, these contingencies, claims and lawsuits allege or may allege discriminatory or unfair and deceptive loan
origination and servicing (including debt collection, foreclosure and eviction) practices, other common law torts, rights
to indemnification and contribution, breach of contract, violations of securities laws and a variety of federal statutes,
including the Truth in Lending Act (TILA), Equal Credit Opportunity Act, Fair Housing Act, Real Estate Settlement
Procedures Act (RESPA), Home Ownership & Equity Protection Act (HOEPA), as well as similar state statutes. Given
the impact of the financial crisis on the non-prime mortgage environment, the aggregate volume of these matters is
substantial although it is difficult to predict either the likelihood of new matters being initiated or the outcome of
existing matters. In many of these matters, including certain of the lawsuits and claims described below, it is not
possible to estimate a reasonably possible loss or range of loss due to, among other things, the inherent uncertainties
involved in these matters, some of which are beyond the Company's control, and the indeterminate damages sought
in some of these matters.
On October 15, 2010, the Federal Home Loan Bank of Chicago (FHLB-Chicago) filed a lawsuit in the Circuit Court
of Cook County, Illinois (Case No. 10CH45033) styled Federal Home Loan Bank of Chicago v. Bank of America Funding
Corporation, et al. against multiple defendants, including various SCC-related entities, H&R Block, Inc. and other
entities, arising out of FHLB-Chicago's purchase of residential mortgage-backed securities (RMBSs). The plaintiff seeks
rescission and damages under state securities law and for common law negligent misrepresentation in connection
with its purchase of two securities collateralized by loans originated and securitized by SCC. These two securities had
a total initial principal amount of approximately $50 million, of which approximately $32 million remains outstanding.
The plaintiff agreed to voluntarily dismiss H&R Block, Inc. from the suit. The remaining defendants, including SCC,
filed motions to dismiss, which the court denied. The defendants moved for leave to appeal and the circuit court