HR Block 2011 Annual Report Download - page 80

A rollforward of our liability for losses on repurchases for fiscal years 2011, 2010 and 2009 is as follows:
Year Ended April 30, 2011 2010 2009
(in 000s)
Balance as of May 1:
Amount related to repurchase and indemnifications $ 138,415 $ 156,659 $ 193,066
Amount related to indemnity agreement dated April 2008 49,785 49,936 50,000
188,200 206,595 243,066
Changes:
Provisions –––
Losses on repurchase and indemnifications (12,155) (18,244) (36,407)
Payments under indemnity agreement dated April 2008 (49,785) (151) (64)
Balance as of April 30:
Amount related to repurchase and indemnifications 126,260 138,415 156,659
Amount related to indemnity agreement dated April 2008 –49,785 49,936
$ 126,260 $ 188,200 $ 206,595
There have been no provisions for additional losses included in the income statement since April 30, 2008.
NOTE 19: LITIGATION AND RELATED CONTINGENCIES
We are party to investigations, legal claims and lawsuits arising out of our business operations. As required, we
accrue our best estimate of loss contingencies when we believe a loss is probable and we can reasonably estimate
the amount of any such loss. Amounts accrued, including obligations under indemnifications, totaled $70.6 million
and $35.5 million at April 30, 2011 and 2010, respectively. Litigation is inherently unpredictable and it is difficult to
project the outcome of particular matters with reasonable certainty and, therefore, the actual amount of any loss
may prove to be larger or smaller than the amounts reflected in our consolidated financial statements.
RAL LITIGATION – We have been named in multiple lawsuits as defendants in litigation regarding our refund
anticipation loan program in past years. All of those lawsuits have been settled or otherwise resolved, except for
one.
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, 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,
68 H&R BLOCK 2011 Form 10K