Confidential relationships between tax preparer H&R Block and 600,000 of its customers are too individualized for the members' claims to be litigated in a class action, the state Supreme Court has ruled.
In Basile vs. H&R Block, class counsel had pointed to the presence of confidential relationships as the common issue of material fact requiring class-action treatment of the claims of breach of fiduciary duty by H&R Block.
But it was that very argument that formed the basis of the justices' reasoning in decertifying the class.
The high court, in its fourth consideration of the case -- which was filed nearly two decades ago -- ruled this month that confidential relationships are "not amenable to class treatment."
In Basile, class members complained that, in advertising its "Rapid Refund" program, the tax preparer had targeted lower income groups and specifically avoided informing them the "quick refund" was in fact a loan with a high interest rate.
That advertising campaign created an "overmastering influence" on the part of H&R Block over the class members, resulting in a confidential relationship that created commonality among the class members, the plaintiffs had argued.
The Pennsylvania Superior Court had previously agreed.
But in his opinion for the six-justice majority, Justice Thomas G. Saylor found the Superior Court gave too much weight to the power of advertising. He said it was not appropriate to assume H&R Block's marketing strategies had the same impact on each putative class member.
"While Block may very well have desired to assert strong influence in the marketplace, and it may have possessed information reflecting vulnerability across a wide segment of its clientele, nothing in the record presented demonstrates an actual, class-wide, homogeneous effect on 600,000 of Block's customers in the nature of 'overmastering influence,' " Justice Saylor said.
"In other words, the Superior Court's decision fails to account for the inherently discrete and subjective aspects of marketing and customer-relations impact."
The Philadelphia Court of Common Pleas had initially certified the class -- which means that the separate complaints were authorized to proceed as a single class-action suit -- but after an earlier round of appeals, decertified the class on remand.
The trial court ultimately found there was a need for individualized inquiries as to whether each class member placed its trust in H&R Block before agreeing to enter the Rapid Refund program. The Superior Court then reinstated the class.
On appeal, H&R Block argued the Superior Court improperly presumed the class members were "overmastered" by the advertising based solely on their socioeconomic level. While Justice Saylor acknowledged that high-interest refund loan programs have garnered intense criticism from consumer advocates, the court cannot alter a procedural remedy to fix the problem.legalnews