Rapid Refund case back before Pa. SC

HARRISBURG, Pa. (Legal Newsline) - The Pennsylvania Supreme Court has again agreed to hear an appeal in a long-running class action lawsuit against H&R Block Inc.

The Court, in a two-page order May 25, granted H&R Block's petition for allowance of appeal, limited to the following two questions:

- Whether the Court should accept the appeal to consider whether the Superior Court erred for the fourth consecutive time, by failing to apply the proper standard and scope of review when it reversed the trial court's decertifcation of a 600,000-member class, disregarded the Court's instruction to review the trial court's decision on the merits, misconstrued the significance and holding of the Superior Court's prior decision in the case, and made no finding of abuse of discretion but simply substituted its own view of the facts for that of the trial court?

- Whether the Court should accept the appeal to consider whether, contrary to its decision in Frowen v. Blank, plaintiffs in a consumer class-action case may demonstrate the level of "overmastering influence" sufficient to establish a confidential relationship solely with general information about a corporation's advertising campaign -- without any evidence that indivisdual class members were influenced by the campaign, let alone showed "weakness" or "dependence" or "trust, justifiably reposed" based on information they saw or heard?

At issue is H&R Block's Rapid Refund program.

On April 23, 1993, Sandra Basile filed a lawsuit against Block, alleging that, among other things, it breached its fiduciary duty in connection with the program. The Rapid Refund program allowed individuals to receive their income tax refund within days after electronically filing their income tax return by receiving a short-term loan from Mellon Bank.

Basile alleged that Block deceived customers because they did not know they were receiving a short-term loan from a bank and the fees imposed by Block were actually extremely high interest rates on the short-term loan. Basile sought certification of a class of individuals with similar claims.

On Jan. 17, 1996, the trial court entered an order that it would presume that Block was an agent of any person for whom it prepared a tax return. On May 30, 1997, the trial court, by relying on the January presumption order, granted class certification on the issue of breach of fiduciary duty only. Block did not seek to file an immediate interlocutory appeal at this time. Instead, Block and the newly certified class filed cross motions for summary judgment.

On Dec. 31, 1997, the trial court granted Block's motion for summary judgment and denied the plaintiff class' motion for summary judgment. The trial court held that Block did not have an agency or confidential relationship with the class and, therefore, there was no breach of fiduciary duty.

The class filed an appeal, claiming the trial court should have granted their motion for summary judgment because Block owed them a fiduciary duty based on an agency and/or confidential relationship. On Feb. 13, 1998, Block filed cross-appeals, challenging the trial court's January 1996 presumption order and the May 1997 class certification order.

On appeal, the superior court held Block's cross-appeal challenge to the January 1996 presumption order was waived for failure to preserve its objection to this presumption order in the trial court. The superior court also held that an agency relationship existed between Block and the class. The court did not discuss whether a confidential relationship existed.

Based on the existence of an agency relationship, the superior court reversed the grant of summary judgment and remanded the case to the trial court.

Block then filed a petition for allowance of appeal to the superior court, seeking to challenge its determination that an agency relationship existed. The court granted review and held that the superior court erred in holding that an agency relationship existed. The case was remanded to the superior court to address whether a confidential relationship existed.

On remand, the superior court held that the record established a prima facie case that a confidential relationship existed between Block and the class, and remanded the case back to the trial court.

In the trial court, Block filed a motion for decertification of the class, which was granted on Dec. 20, 2003. The trial court ruled that individualized evidence was necessary to prove breach of a fiduciary duty based on a confidential relationship and, therefore, the case could not be tried as a class action.

The class filed an appeal from the decertification order and on March 1, 2006, an en banc panel of the superior court reversed the decertification. The court held that Block had waived its right to challenge the class certification because it did not do so during the first appeal to the superior court in 1998. Block again filed a petition for allowance of appeal to the superior court.

On Sept. 26, 2006, by per curiam order, the superior court granted allowance of appeal and remanded the case to the superior court with specific instructions to address Pennsylvania Rules of Appellate Procedure 501 and 511, and related case law. On remand, the en banc superior court again did not reach the merits of the trial court's decision regarding class certification but instead held only that Block had waived its challenge to class certification.

The court granted allowance of appeal on March 25, 2008 to determine whether the superior court misapplied the aggrieved party doctrine by requiring Block to appeal from an earlier class certification order even though summary judgment was entered in Block's favor.

The state Supreme Court then reversed the superior court's decision concluding that Block had not waived its right to seek decertification of the class by its post-certification conduct. The Court remanded the case back to the superior court for consideration of the merits of the trial court's decision to decertify the class.

The superior court, in an opinion filed Oct. 7, 2010, reversed the trial court's decision decertifying the class and remanded the case to that court.

In its order last month, the Supreme Court also granted H&R Block's application for leave to file a reply brief in further support of petition for allowance of appeal, but denied the application to strike portions of plaintiff's answer to the petition for allowance of appeal and the application for leave to file post petition communication.

From Legal Newsline: Reach Jessica Karmasek by e-mail at jessica@legalnewsline.com.