MADISON - ST. CLAIR RECORD

A federal lawsuit over delayed tax refunds appears to be on track for a June 2015 jury trial.

Ursula Millett and Jeanine Sanlorenzo sued H&R Block Inc., HRB Tax Group Inc. and HRB Technology LLC in late March, claiming the provider’s erroneous preparation of tax returns with forms for education credits delayed their refunds by nearly two months.

Millett, an Illinois resident, and Sanlorenzo, a Pennsylvania resident, brought the suit on behalf of themselves and more than 100 potential class members who had federal income tax returns including Form 8863 for the year 2012 prepared by the defendants and filed before Feb. 22.

Form 8863, according to the complaint, “is a document that can be completed by a taxpayer to claim ‘education credits’ based upon eligible student expenses paid during the taxable year.”

The lines determining eligibility for these credits previously could be left blank and still indicate qualification, but the suit states that the Internal Revenue Service (IRS) started to require that certain information be entered into these lines at the start of the 2012 tax season.

H&R Block’s tax software, however, “continued to permit the lines to be left blank, which has resulted in the delay of thousands of refunds,” according to the suit that goes on to note that the provider’s CEO issued a public statement that acknowledged the mistake and apologized.

In June, the defendants filed a stipulation of dismissal that the stated the court lacked personal jurisdiction over H&R Block and that the plaintiffs agreed to dismiss it, leaving HRB Tax Group Inc. and HRB Technology LLC as the remaining named defendants.

The defendants last month also filed a motion to compel Sanlorenzo to arbitration and a motion to stay the case, as well as an answer and affirmative defenses to the complaint as they apply to Millett.

While they admit that the court has subject-matter jurisdiction over Millett’s claims, the defendants assert that Sanlorenzo’s claims are required to be heard in arbitration based on a Client Service Agreement (CSA) she signed.

In their motion to compel, the defendants contend that when Sanlorenzo met with an H&R Block tax professional to have her 2012 taxes prepared in January, she executed the CSA and agreed to resolve any disputes through individual arbitration.

Among other explanations, the agreement notes that customers can reject arbitration by opting out within 60 days of signing the CSA.

While Sanlorenzo claims she opted out, the defendants assert in a memorandum supporting their motion to compel that she did not do so under the terms of the agreement.

Sanlorenzo, the memo states, submitted an opt-out request on April 3, a few days after the 60-day period expired. If she wanted to opt out, the defendants assert she would have had to do so by March 31.

“Under this arbitration agreement, this Court is not the appropriate forum for resolution of Plaintiff’s claims,” the defendants assert. “The Court therefore should stay this case and compel individual arbitration.”

In their recently-filed answer to the complaint, the defendants assert that the suit is not appropriate for class action treatment. They also took issue with the plaintiffs’ proposed class.

The class definition, the defendants contend, improperly includes taxpayers whose returns were prepared by independently owned and operated businesses doing business as H&R Block franchises, as well as those who used online or software services and then prepared their own taxes.

In addition, the defendants offered 10 affirmative defenses in their answer to the complaint.

Among others, they argue that the complaint fails to state a claim upon which relief can be granted and that the plaintiffs’ claims are barred, in whole or part, because there is no cognizable legal injury.

U.S. Chief Judge David Herndon in April stayed the plaintiffs’ motion to certify a class until the completion of relevant discovery. A scheduling and discovery conference has been set for July 26 before U.S. Magistrate Judge Philip Frazier.

As of late today, Herndon had not issued orders on the defendants’ motion to compel Sanlorenzo to arbitration or to stay the case.

W. Jason Rankin, an attorney with HeplerBroom in Edwardsville, represents the defendants.

Edward Wallace, Kenneth Wexler and Amy Keller of Wexler Wallace LLP in Chicago and Sherrie Savett and Eric Lechtzin of Berger & Montague in Philadelphia represent the plaintiffs.