HR Block 2006 Annual Report Download - page 85

impact of the RAL Cases on our financial statements. We have accrued claims consist of five counts relating to the Peace of Mind
our best estimate of the probable loss related to the RAL Cases. The (POM) program under which the applicable tax return preparation
following is updated information regarding the pending RAL Cases that subsidiary assumes liability for additional tax assessments attributable
are attorney general actions or class actions or putative class actions: to tax return preparation error. The plaintiffs allege that the sale of POM
Lynne A. Carnegie, et al. v. Household International, Inc., guarantees constitutes (i) statutory fraud by selling insurance without a
H&R Block, Inc., et al., (formerly Joel E. Zawikowski, et al. v. Beneficial license, (ii) an unfair trade practice, by omission and by ‘‘cramming’’
National Bank, H&R Block, Inc., Block Financial Corporation, et al.) (i.e., charging customers for the guarantee even though they did not
Case No. 98 C 2178, United States District Court for the Northern request it or want it), and (iii) a breach of fiduciary duty. In August 2003,
District of Illinois, Eastern Division, instituted on April 18, 1998. This the court certified the plaintiff classes consisting of all persons who
case is stayed and will be resolved as part of the Carnegie from January 1, 1997 to final judgment (i) were charged a separate fee
Settlement Agreement. for POM by ‘‘H&R Block’’ or a defendant H&R Block class member;
Deadra D. Cummins, et al. v. H&R Block, Inc., et al., Case (ii) reside in certain class states and were charged a separate fee for
No. 03-C-134 in the Circuit Court of Kanawha County, West Virginia, POM by ‘‘H&R Block’’ or a defendant H&R Block class member not
instituted on January 22, 2003. The court approved the terms of the licensed to sell insurance; and (iii) had an unsolicited charge for POM
Cummins Settlement Agreement at a hearing held on June 8, 2006, and posted to their bills by ‘‘H&R Block’’ or a defendant H&R Block class
the settlement will become final upon the expiration of the period for member. Persons who received the POM guarantee through an
objectors to appeal the court’s approval. H&R Block Premium office and persons who reside in Alabama are
Joyce Green, et al. v. H&R Block, Inc., Block Financial Corporation, excluded from the plaintiff class. The court also certified a defendant
et al.,Case No. 97195023, in the Circuit Court for Baltimore City, class consisting of any entity with names that include ‘‘H&R Block’’ or
Maryland, instituted on July 14, 1997; Levon and Geral Mitchell, et al. v. ‘‘HRB,’’ or are otherwise affiliated or associated with H&R Block Tax
H&R Block, Inc. and Ruth Wren, Case No. CV-95-2067, in the Circuit Services, Inc., and that sold or sells the POM product. The trial court
Court of Mobile County, Alabama, instituted on June 13, 1995; and Lynn subsequently denied the defendants’ motion to certify class certification
Becker v. H&R Block, Inc., Case No. CV-2004-03-1680 in the Court of issues for interlocutory appeal. Discovery is proceeding. No trial date
Common Pleas, Summit County, Ohio, Instituted on April 15, 2004. has been set.
These cases are stayed and will be resolved as part of the Cummins There is one other putative class action pending against us in Texas
Settlement Agreement. that involves the POM guarantee. This case is being tried before the
Sandra J. Basile, et al. v. H&R Block, Inc., et al, April Term 1992 Civil same judge that presided over the Texas RAL Settlement, involves the
Action No. 3246 in the Court of Common Pleas, First Judicial District same plaintiffs’ attorneys that are involved in the Marshall litigation in
Court of Pennsylvania, Philadelphia County, instituted on April 23, 1993. Illinois, and contains similar allegations. No class has been certified in
The court decertified the class on December 31, 2003. The Pennsylvania this case.
appellate court subsequently reversed the trial court’s decertification We believe the claims in the POM action are without merit, and we
decision. We are seeking review of the appellate court’s decision by the intend to defend them vigorously. The amounts claimed in the POM
Pennsylvania Supreme Court. actions are substantial, however, and there can be no assurances as to
The People of California v. H&R Block, Inc., H&R Block Services, the outcome of these pending actions individually or in the aggregate.
Inc., H&R Block Enterprises, Inc., H&R Block Tax Services, Inc., Block Likewise, there can be no assurances regarding the impact of these
Financial Corporation, HRB Royalty, Inc. and Does 1 through 50, actions on our consolidated financial statements.
Case No. C 06 2058 SC, in the United States District Court for the EXPRESS IRA LITIGATION –On March 15, 2006, the New York
Northern District of California, instituted on February 15, 2006 (alleging, Attorney General filed a lawsuit in the Supreme Court of the State of
among other things, untrue, misleading or deceptive statements in New York, County of New York entitled The People of New York v.
marketing RALs and unfair competition with respect to debt collection H&R Block, Inc. and H&R Block Financial Advisors, Inc. The
activities; seeks equitable relief, civil penalties and restitution). The case complaint alleges fraudulent business practices, deceptive acts and
was removed to federal court on March 17, 2006, and a motion was filed practices, common law fraud and breach of fiduciary duty with respect
to add HSBC as a necessary party to the case. The California attorney to the Express IRA product. The complaint seeks equitable relief,
general is seeking to remand the case to state court. disgorgement of profits, damages and restitution, civil penalties and
PEACE OF MIND LITIGATION –Lorie J. Marshall, et al. v. H&R Block punitive damages. A number of civil actions were subsequently filed
Tax Services, Inc., et al., Civil Action 2003L000004, in the Circuit Court against us concerning the matter. We intend to defend these cases
of Madison County, Illinois, is a class action case filed on January 18, vigorously, but there are no assurances as to their outcome.
2002, that was granted class certification on August 27, 2003. Plaintiffs’
H&R BLOCK 2006 Form 10K
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