'Peace of mind' case against H&R Block remanded to Madison County

By Steve Korris | Jan 2, 2009

EAST ST. LOUIS – U.S. District Judge Michael Reagan has remanded a Lakin Law Firm class action against H & R Block Tax Services to Madison County.

Reagan couldn't swallow a novel argument that a judge's order turned an old case into a new one for purposes of the national Class Action Fairness Act.

Reagan's Dec. 17 order denied an award of attorney fees, however, finding that Block did not act unreasonably in removing the suit to federal court.

Lakin clients Lorie Marshall and Debra Ramirez sued Block entities in 2002, claiming they fraudulently sold "peace of mind" guarantees covering the cost of errors.

In 2003, Associate Judge Ralph Mendelsohn certified three classes.

The first included customers who paid a separate peace of mind fee, the second included those who bought peace of mind from businesses without licenses to sell insurance, and the third included those who had charges posted to their bills.

The biggest class included 30 states.

Mendelsohn also certified a defendant class of Block entities.

Block moved to decertify the classes in 2006, in light of an Illinois Supreme Court decision in Avery v. State Farm.

The decision overturned a $1.2 billion class action verdict from Williamson County.

Mendelsohn held a hearing on decertification last July, after which Lakin lawyers asked him to narrow the class to 13 states.

In August, Mendelsohn certified the first and third classes in Arizona, California, Colorado, Connecticut, Florida, Illinois, Massachusetts, Michigan, Missouri, New Jersey, New York, North Carolina and Pennsylvania.

He omitted Florida, Michigan and Missouri from the second class.

He also decertified the defendant class.

Block removed the suit to federal court, arguing that changes in the classes and decertification of the defendant class triggered the Class Action Fairness Act.

Marshall and Ramirez moved for remand in September, arguing that the act didn't apply because Mendelsohn's order related back to the original complaint.

In granting remand, Reagan wrote that he had not located any other action that was removed to federal court in this context.

"It is evident that Judge Mendelsohn found that his modification of the definition of the plaintiff classes and decertification of the defendant class related back to plaintiffs' amended complaint," he wrote.

"Judge Mendelsohn clearly believed that he was eliminating Avery-barred claims and making the action more manageable rather than commencing a new suit," he wrote.

He wrote that changes occurred "not as a result of plaintiffs' amending their complaint but because Block moved for decertification."

He wrote that Mendelsohn added no new transactions to the case.

"Block, as the parent company and franchiser, established and imposed the policies and procedures for peace of mind transactions," he wrote.

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