A federal district judge in Chicago has dealt a blow to a proposed $25 million settlement in a class-action lawsuit against H&R Block, Inc. U.S. District Judge Elaine Bucklo rejected the proposed deal and also removed six plaintiff lawyers from the case, claiming that they had failed to obtain evidence that could have helped their clients' case.
The Illinois lawsuit was filed three years ago on behalf of 18 million plaintiffs. The suit claims that Block and a unit of Household International Inc. had charged as much as 100 percent interest on loans issued in advance of tax refunds.
This is the second time that a settlement for the Illinois lawsuit has been squashed. Last year, a federal appeals court reversed the proposed $25 million settlement, saying that the federal district judge in the case had not ensured the settlement was "fair, adequate, and reasonable, and not a product of collusion." The 7th U.S. Circuit Court of Appeals then sent the case to Ms. Bucklo for review.
Ms. Bucklo claimed the $25 million was not a sufficient amount in the case, citing a similar lawsuit in Texas with a settlement that could reach more than $300 million. In November, a Texas judged ordered H&R Block to pay $75 million in damages for failing to inform customers of fees it had received for issuing refund anticipation loans in the 1990s. A week after the ruling, Block agreed to settle the case for $282 million in coupons and $49 million in legal fees. Last month, the plaintiffs' lawyers in the Texas case asked that $26 million of their fees be given to their clients.
In addition to the Illinois and Texas cases, H&R Block still has outstanding lawsuits in Maryland, Pennsylvania, and New York.