HR Block 2012 Annual Report Download - page 88

9 of these lawsuits and involving approximately 25 securitization transactions collateralized in whole or in part
by loans originated by SCC. Because we are not the servicer for any of these securitizations, are not party to
these lawsuits (with the exception of the Federal Home Loan Bank of Chicago v. Bank of America Funding
Corporation case discussed above), and do not have control of this litigation, we do not have precise
information regarding the current aggregate unpaid principal balance of the mortgage loans that SCC sold in
those transactions, nor, in many cases, the portion of any unpaid balance that is subject to litigation. Additional
lawsuits against the underwriters or depositors may be filed in the future, and additional indemnification
requests from underwriters or depositors may be received by SCC with respect to existing or new lawsuits. We
believe SCC has meritorious defenses to these indemnification claims and intends to defend them vigorously,
but there can be no assurance as to their outcome or their impact on our consolidated financial position, results
of operations and cash flows. We have not concluded that a loss related to any of these indemnification claims
is probable, nor have we accrued a liability related to any of these claims.
American International Group, Inc. has threatened to assert claims of various types, including violations of
state securities laws, common law torts and fraud, and breach of contract, in the approximate amount of $650
million in connection with the sale and securitization of SCC-originated mortgage loans. We believe SCC has
meritorious defenses to these threatened claims and will defend them vigorously if a lawsuit is filed asserting
these claims, but there can be no assurance as to the outcome of such suit or its impact if filed on our
consolidated financial position, results of operations and cash flows. We have not concluded that a loss related
to these threatened claims is probable nor have we accrued a liability related to either of these threatened
claims.
On April 3, 2012, the Nevada Attorney General issued a subpoena to SCC indicating it was conducting an
investigation concerning “the alleged commission of a practice declared to be unlawful under the Nevada
Deceptive Trade Practices Act.” A majority of the documents requested in the subpoena involve SCC’s lending
to minority (African American and Latino) borrowers. No complaint has been filed to date. SCC plans to
continue to cooperate with the Nevada Attorney General.
EMPLOYMENT-RELATED CLAIMS AND LITIGATION – We have been named in several wage and hour class
action lawsuits throughout the country, including Alice Williams v. H&R Block Enterprises LLC, Case No.
RG08366506 (Superior Court of California, County of Alameda, filed January 17, 2008) (alleging improper
classification and failure to compensate for all hours worked and to provide meal periods to office managers in
California); Arabella Lemus, et al. v. H&R Block Enterprises LLC, et al., Case No. CGC-09-489251 (United
States District Court, Northern District of California, filed June 9, 2009) (alleging failure to timely pay
compensation to tax professionals in California); Delana Ugas, et al. v. H&R Block Enterprises LLC, et al.,
Case No. BC417700 (United States District Court, Central District of California, filed July 13, 2009) (alleging
failure to compensate tax professionals in California for all hours worked and to provide meal periods); and
Barbara Petroski, et al. v. H&R Block Eastern Enterprises, Inc., et al., Case No. 10-CV-00075 (United States
District Court, Western District of Missouri, filed January 25, 2010) (alleging failure to compensate tax
professionals nationwide for off-season training).
A class was certified in the Lemus case in December 2010 (consisting of tax professionals who worked in
company-owned offices in California from 2007 to 2010), in the Williams case in March 2011 (consisting of
office managers who worked in company-owned offices in California from 2004 to 2011), and in the Ugas case
in August 2011 (consisting of tax professionals who worked in company-owned offices in California from 2006
to 2011). In Petroski, a conditional class was certified under the Fair Labor Standards Act in March 2011
(consisting of tax professionals nationwide who worked in company-owned offices and who were not
compensated for certain training courses occurring on or after April 15, 2007). Two classes were also certified
under state laws in California and New York (consisting of tax professionals who worked in company-owned
offices in those states).
The plaintiffs in the wage and hour class action lawsuits seek actual damages, pre-judgment interest and
attorneys’ fees, in addition to statutory penalties under state and federal law, which could equal up to 30 days of
wages per tax season for class members who worked in California. A portion of our loss contingency accrual is
related to these lawsuits for the amount of loss that we consider probable and estimable. The amounts claimed
in these matters are substantial in some instances and the ultimate liability with respect to these matters is
difficult to predict. We believe we have meritorious defenses to the claims in these cases and intend to defend
the cases vigorously, but there can be no assurances as to the outcome of these cases or their impact on our
consolidated financial position, results of operations and cash flows, individually or in the aggregate.
74 H&R BLOCK 2012 Form 10K