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On The Case

Mass arbitration firm scrambles to keep 125,000 clients out of $40 million Intuit class action

The financial software company Intuit Inc reached a proposed $40 million settlement last week with millions of consumers who claim they were steered into paying for Intuit tax preparation services instead of receiving free services. Class counsel from Girard Sharp and Stueve Siegel Hanson told U.S. District Judge Charles Breyer of San Francisco in their motion for preliminary approval that the proposed class action will deliver substantial refunds to class members who file claims and, as importantly, will notify millions of people that they’re entitled to use a free Intuit product to file their taxes. Judge Breyer has scheduled a preliminary approval hearing for Dec. 17.

But the mass arbitration plaintiffs firm Keller Lenkner is determined to keep 125,000 Intuit customers out of the class – and to keep Intuit on the hook for tens of millions of dollars in arbitration fees. Keller Lenkner’s Warren Postman told Judge Breyer at a hearing last Friday that it wants a say on the proposed settlement because the deal would temporarily block Keller Lenkner clients from proceeding with arbitration against Intuit.

The mass arbitration firm has also moved in Los Angeles Superior Court for an injunction to bar Intuit from including Keller Lenkner clients in the class action settlement. Its motion contends that Intuit is trying to force Keller Lenkner clients to participate in the “burdensome process” of opting out of the proposed settlement. Intuit’s own contract, Keller Lenker said, requires customers to waive their right to bring a class action, yet now that the company is facing mass arbitration, it wants to use that very device to block customers from asserting claims in the forum Intuit specified contractually. L.A. judge Terry Green is scheduled to hear Keller Lenkner’s motion on Friday.

Intuit, meanwhile, contends Keller Lenkner is trying to undermine the class action settlement to protect its own financial interests, not those of its clients. Intuit’s brief opposing the state-court injunction argued that Keller Lenkner has invested $8 million in a mass arbitration campaign against Intuit in the expectation that Intuit will agree to a settlement with the firm’s clients to avoid paying tens of millions of dollars in arbitration fees. (Intuit said it has already paid $13 million to AAA and is looking at exposure of “potentially hundreds of millions more” in fees.) Intuit asserted that Keller Lenkner’s attempt to keep its clients out of the class action raises “serious ethical concerns” about whether the firm is truly looking out for the people it purports to represent.

Postman of Keller Lenkner told me Intuit’s thesis is plain wrong. “Every lawyer who represents a client on a contingency basis will make more money if the client recovers more money,” he said. “There is nothing unethical about that or our representation of our clients. Intuit’s claims to the contrary are desperate and irresponsible.”

Nor has Keller Lenkner filed “frivolous” demands, Postman said. “We have consistently been willing to confer with Intuit where it has evidence that claims should not go forward, and we have paused or withdrawn certain claims to allow for that process to take place without Intuit incurring additional arbitration fees. There is nothing improper about that process, which shows that we have always approached these claims in good faith.”

Intuit lawyers from Fenwick & West and Wilmer Cutler Pickering Hale and Dorr referred my request for comment to an Intuit spokesman who did not immediately respond. Intuit has denied consumers’ allegations of improper charges, emphasizing that the company “has a long-standing commitment to free tax preparation, including more than 70 million completely free tax returns filed over the last six years.”

Class counsel Daniel Girard of Girard Sharp said by email that Keller Lenkner’s clients can simply opt out of the proposed settlement before Judge Breyer. Once they’re no longer in the class, he said, the injunction ends and their arbitration can resume (or begin, if it’s not already launched). Girard also said that the proposed requirements for opting out, such as class membership ID numbers and signatures of individual class members, rather than their lawyers, have been approved in hundreds of other cases. “The settlement achieves the objectives of the litigation and we look forward to presenting it to Judge Breyer on December 17,” Girard said.

The background of the Intuit class action dispute is complicated, as is usual in these mass arbitration cases. The class action was first filed in May 2019 before Judge Breyer. Intuit moved to compel arbitration. Judge Breyer denied the motion (444 F.Supp.3d 1086) last March but was overturned (823 Fed.Appx. 482) by the 9th U.S. Circuit Court of Appeals in August. Plaintiffs in the class still had a live classwide claim under California’s Private Attorney General Act. They filed for AAA arbitration of the classwide PAGA claim. At the same time, class counsel and Intuit held settlement talks with a mediator. Those talks produced last week’s proposed class settlement.

As the class action was under way, Keller Lenkner was signing up tens of thousands of Intuit customers to bring individual claims in arbitration. The firm paid their clients’ share of the AAA fees in an initial wave of 40,000 cases – thus the $8 million “investment” referenced in Intuit’s brief before Judge Green – and has filed arbitration demands for more than 80,000 additional clients.

Intuit, like many other companies targeted in Keller Lenkner mass arbitration campaigns, has cast doubt on the legitimacy of the firm’s client relationships. It argued, for instance, that after Intuit paid AAA fees in the first wave of Keller Lenkner cases, the plaintiffs’ firm withdrew more than 8,000 “patently frivolous” demands.

Intuit also attempted to short-circuit the mass arbitration by invoking an AAA rule that allows either side to send consumer cases to small claims court. As I’ve reported, that’s an increasingly common tactic for mass arbitration defendants. It didn’t work for Intuit. Last month, Judge Green in L.A. Superior Court ruled that Intuit’s consumer contract gives only its customers, not the company, the right to opt for small claims court. Intuit has appealed that decision, which put it on the hook for about $30 million in arbitration fees.

Keller Lenkner was aware last month that Intuit was negotiating a class action settlement with Girard Sharp and Stueve Siegel. It actually filed its motion for a preliminary injunction to keep its clients out of the settlement on Oct. 28, two weeks before class counsel notified Judge Breyer that they had reached a deal with Intuit. Almost as soon as the motion for preliminary approval hit the class action docket, Postman filed a letter to Judge Breyer, arguing that the proposed settlement’s injunction – which would apparently halt ongoing arbitrations and bar new ones – impacted his clients’ due process rights. He also told Judge Breyer that the company agreed to the class action settlement because it’s hoping his clients get sucked into the deal.

Intuit counsel Rodger Cole of Fenwick seemed to confirm Keller Lenkner’s suspicion at the hearing before Judge Breyer. If Judge Green, the L.A. Superior Court judge, grants Keller Lenkner’s motion to exclude its clients from the class action deal, Cole said, “then we are unlikely to have a settlement.”

Judge Breyer has called for briefs on whether Keller Lenkner should be permitted to intervene in the class action on behalf of its clients. Judge Breyer also said he’s waiting to see what Judge Green has to say about Keller Lenkner’s request in state court to exclude its clients from the class settlement. That decision could come as soon as Friday’s hearing.

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