HR Block 2011 Annual Report Download - page 25

The sole remaining case is a putative class action styled Sandra J. Basile, et al. v. H&R Block, Inc., et al., April
Term 1992 Civil Action No. 3246 in the Court of Common Pleas, First Judicial District Court of Pennsylvania,
Philadelphia County, instituted on April 23, 1993. The plaintiffs allege inadequate disclosures with respect to the
RAL product and assert claims for violation of consumer protection statutes, negligent misrepresentation, breach
of fiduciary duty, common law fraud, usury, and violation of the Truth In Lending Act. Plaintiffs seek unspecified
actual and punitive damages, injunctive relief, attorneys’ fees and costs. A Pennsylvania class was certified, but
later decertified by the trial court in December 2003. An appellate court subsequently reversed the decertification
decision. We are appealing the reversal. We have not concluded that a loss related to this matter is probable nor
have we accrued a loss contingency related to this matter. Plaintiffs have not provided a dollar amount of their
claim and we are not able to estimate a possible range of loss. We believe we have meritorious defenses to this case
and intend to defend it vigorously. There can be no assurances, however, as to the outcome of this case or its
impact on our consolidated results of operations.
Express IRA Litigation
We have been named defendants in lawsuits regarding our former Express IRA product. All of those lawsuits have
been settled or otherwise resolved, except for one.
The one remaining case was filed on January 2, 2008 by the Mississippi Attorney General in the Chancery Court
of Hinds County, Mississippi First Judicial District (Case No. G 2008 6 S 2) and is styled Jim Hood, Attorney for the
State of Mississippi v. H&R Block, Inc., H&R Block Financial Advisors, Inc., et al. The complaint alleges
fraudulent business practices, deceptive acts and practices, common law fraud and breach of fiduciary duty with
respect to the sale of the product in Mississippi and seeks equitable relief, disgorgement of profits, damages and
restitution, civil penalties and punitive damages. We are not able to estimate a possible range of loss. We believe we
have meritorious defenses to the claims in this case, and we intend to defend this case vigorously, but there can be
no assurances as to its outcome or its impact on our consolidated results of operations.
Although we sold H&R Block Financial Advisors, Inc. (HRBFA) effective November 1, 2008, we remain
responsible for any liabilities relating to the Express IRA litigation, among other things, through an
indemnification agreement. A portion of our accrual is related to these indemnity obligations.
RSM McGladrey Litigation
RSM EquiCo, Inc. (RSM Equico), its parent and certain of its subsidiaries and affiliates, are parties to a class action
filed on July 11, 2006 and styled Do Right’s Plant Growers, et al. v. RSM EquiCo, Inc., et al. (the “RSM Parties”),
Case No. 06 CC00137, in the California Superior Court, Orange County. The complaint contains allegations relating
to business valuation services provided by RSM EquiCo, including allegations of fraud, conversion and unfair
competition. Plaintiffs seek unspecified actual and punitive damages, in addition to pre-judgment interest and
attorneys’ fees. On March 17, 2009, the court granted plaintiffs’ motion for class certification on all claims. To avoid
the cost and inherent risk associated with litigation, the parties have reached an agreement in principle to settle
this case, subject to approval by the California Superior Court. The settlement would require a maximum payment
of $41.5 million, although the actual cost of the settlement depends on the number of valid claims submitted by
class members. The defendants believe they have meritorious defenses to the claims in this case and, if for any
reason the settlement is not approved, they will continue to defend the case vigorously. Although we have recorded
a liability for expected losses, there can be no assurance regarding the outcome of this matter.
On December 7, 2009, a lawsuit was filed in the Circuit Court of Cook County, Illinois (2010-L-014920) against
M&P, RSM and H&R Block styled Ronald R. Peterson ex rel. Lancelot Investors Fund, L.P., et al. v. McGladrey &
Pullen LLP, et al. The case was removed to the United States District Court for the Northern District of Illinois on
December 28, 2009 (Case No. 1:10-CV-00274). The complaint, which was filed by the trustee for certain bankrupt
investment funds, seeks unspecified damages and asserts claims against RSM for vicarious liability and alter ego
liability and against H&R Block for equitable restitution relating to audit work performed by M&P. The amount
claimed in this case is substantial. On November 3, 2010, the court dismissed the case against all defendants in its
entirety with prejudice. The trustee has filed an appeal to the Seventh Circuit Court of Appeals with respect to the
claims against M&P and RSM. The appeal remains pending.
RSM and M&P operate in an alternative practice structure (“APS”). Accordingly, certain claims and lawsuits
against M&P could have an impact on RSM. More specifically, any judgments or settlements arising from claims
and lawsuits against M&P that exceed its insurance coverage could have a direct adverse effect on M&P’s
operations. Although RSM is not responsible for the liabilities of M&P, significant M&P litigation and claims could
impair the profitability of the APS and impair the ability to attract and retain clients and quality professionals. This
could, in turn, have a material effect on RSM’s operations and impair the value of our investment in RSM. There is
no assurance regarding the outcome of any claims or litigation involving M&P.
H&R BLOCK 2011 Form 10K 13