Marshall v. H & R Block Tax Services, Inc.

• Decision Date: 30 April 2009
• Docket Number: No. 09-8002.,09-8002.
• Citation: 564 F.3d 826
• Parties: Lorie J. MARSHALL and Debra Ramirez, individually and on behalf of all others similarly situated, Plaintiffs-Respondents, v. H & R BLOCK TAX SERVICES, INC., Defendant-Petitioner.
• Court: U.S. Court of Appeals — Seventh Circuit

564 F.3d 826

Lorie J. MARSHALL and Debra Ramirez, individually and on behalf of all others similarly situated, Plaintiffs-Respondents, v. H & R BLOCK TAX SERVICES, INC., Defendant-Petitioner.

No. 09-8002.

United States Court of Appeals, Seventh Circuit.

Submitted February 21, 2009.

Decided April 30, 2009.

Robert M. Thompson, Bryan Cave, St. Louis, MO, for Defendant-Petitioner.

Amanda Frame, Attorney, Coughlin Stoia Geller Rudman & Robbins LLP, San Diego, CA, for Respondent.

Before EASTERBROOK, Chief Judge, and POSNER and TINDER, Circuit Judges.

POSNER, Circuit Judge.

H & R Block Tax Services, Inc. (TSI) removed this suit to federal court under the Class Action Fairness Act of 2005, but the district court concluded that it was not removable and so remanded the case to state court. TSI has asked our leave to appeal, 28 U.S.C. § 1453(c), which we grant.

The suit was originally filed in state court against a defendant class of related companies. The suit named H & R Block, Inc. and H & R Block Group, Inc. as representatives of the class. The suit charged that in violation of Illinois's Consumer Fraud Act, the defendants and the members of their class, all of which were affiliates or franchisees of the class representatives, had used deceptive practices to sell "Peace of Mind" insurance against mistakes by H & R Block that increased customers' tax liabilities. An amended complaint added TSI and H & R Block Eastern Tax Services, Inc. as additional named defendants and class representatives. The court dismissed the two original named defendants, H & R Block, Inc. and H & R Block Group, Inc. for lack of personal jurisdiction and granted the plaintiffs' motion to voluntarily dismiss H & R Block Eastern Tax Services, Inc. That left TSI as the only representative of the defendant class.

Eventually the state court certified three plaintiff classes, comprising all people in the 50 states and the District of Columbia who had been victimized by members of the defendant class — which the court also certified, defining it to include "any entity with the names `H & R Block' or `HRB' in its name, or otherwise affiliated or associated with [TSI], and which sold or sells the [Peace of Mind] product." Subsequently, however, the court decertified the defendant class at TSI's request, leaving TSI, which already was the only defendant, with no class-representative status since there was no longer a defendant class. TSI had asked the court to decertify the plaintiff classes as well, and while the court refused to do so, it did narrow the classes to residents of 13 states.

TSI then removed the case to federal district court on the ground that the decertification of the defendant class had made the case removable under the Class Action Fairness Act because the decertification occurred after the Act's effective date, and had increased TSI's potential liability notwithstanding the elimination of claims by residents of 37 states. Despite the deletion of those claims, TSI may face greater liability as a result of the decertification of the defendant class — unless, as the plaintiffs argue, TSI was from the outset jointly and severally liable for all the alleged misconduct of its affiliates and other "associates" (franchisees either of TSI or of any affiliate of TSI) — and hence for the alleged misconduct of all the members of the defendant class.

TSI is the franchisor of the H & R Block franchised (as opposed to owned) retail tax offices, but it does not operate any of them. As the sole defendant against certified plaintiff classes that include victims of alleged statutory violations by any entity affiliated or associated with it, TSI complains that it is now potentially liable for violations for which it had not been potentially liable before decertification. It estimates its additional potential liability at approximately $60 million, and notes that a ruling that increases a defendant's potential liability may make a case originally filed before the effective date of the Class Action Fairness Act removable if the ruling comes after that date, unless the alteration in the scope of the plaintiff's claim "relates back" to the original claim. Santamarina v. Sears, Roebuck & Co., 466 F.3d 570, 573 (7th Cir.2006); Knudsen v. Liberty Mutual Ins. Co., 435 F.3d 755 (7th Cir.2006), 411 F.3d 805 (7th Cir.2005). The district judge thought that only a formal amendment of the complaint could commence a new action for CAFA purposes, but that would place too much weight on form; if decertifying the defendant class altered the plaintiffs' claims adversely to the defendant (the shrinkage of the plaintiff classes did not), it is a detail that the plaintiffs did not file an amended complaint with a suitably altered caption.

If, when it was a class representative, TSI would have been jointly and severally liable for the unlawful acts of all members of the defendant class, decertifying the class and leaving TSI as the sole defendant did not increase its potential liability. We do not understand the plaintiffs to be contending, however (or to be suggesting that the state court had ever ruled), that merely by being named as a defendant TSI would have been jointly and severally liable for the acts of its codefendants. For although many of them are its corporate affiliates, the doctrine of limited liability ordinarily insulates a corporation from the tort or other liabilities of its affiliates. Browning-Ferris Industries of Illinois, Inc. v. Ter Maat, 195 F.3d 953, 959-60 (7th Cir.1999).

Nor would TSI's status as the representative of the defendant class have created such...