Arbitration hangs in balance in H&R Block appeal
With Missouri businesses already struggling to enforce arbitration agreements, an important case was heard in Kansas City that threatens do even more damage.
In the case, Manuel Lopez is suing H&R Block over $2 and $4 compliance fees he was charged for tax return preparation services in 2011 and 2012.
The case is noteworthy because Lopez is seeking to sue H&R Block despite the fact he agreed to arbitration when he used the company’s services in 2011.
A circuit court decision sided with Lopez, giving him the ability to sue, despite the arbitration agreement. On Feb. 17, the Western District Court of Appeals met at the University of Missouri-Kansas City School of Law to consider an appeal of that decision.
In explaining H&R Block’s appeal, attorney Robert Adams noted that more than 100 H&R Block customers had successfully utilized arbitration since 2008. Therefore, the company’s process works and Lopez should be required to honor the arbitration agreement he signed in 2011.
“We believe that not only does this agreement provide a practical, viable means for dispute resolution, as reflected by the number of arbitrations done, but it actually makes arbitration easier, faster and better than filing a case in circuit court,” Adams said.
However, an attorney for Lopez, argued that the case should go to court. He said the arbitration agreement was difficult for consumers to understand.
“Even if the opt out was fairly delivered both in terms of substance and execution it would not mean that it wipes away the unconscionability of the rest of the agreement,” said Norm Siegel, attorney for Lopez.
Watch highlights from the appeal hearing:
While the attorneys were discussing the specific language of H&R Block’s arbitration agreement, the case could impact agreements being used statewide. The Missouri Camber Legal Foundation filed a brief in the case in support of H&R Block.
The legal foundation contends that arbitration agreements are a beneficial system for settling legal claims without costly litigation. The arbitration process has advantages for both consumers and businesses in that it allows issues to be settled quickly and cost-effectively.
However, due to adverse decisions in state courts, the arbitration agreements used by businesses may already be on shaky legal ground in Missouri. This current case could make matters worse.
The Missouri Chamber Legal Foundation’s brief states: “If the circuit court’s decision stands, businesses and consumers can no longer be confident that their arbitration agreements will be enforced, despite the many advantages arbitration provides. Instead, arbitration agreements knowingly and willingly entered into by the parties will be subject to being invalided based on a court’s public policy preferences.”
The foundation also notes that the arbitration agreement mentioned in the H&R Block judgment is similar to agreements used by many of the state’s businesses and meets all relevant legal requirements.
The Missouri Chamber Legal Foundation’s brief states:
“It is critical for businesses to be able to use inexpensive dispute-resolution mechanisms like arbitration. Civil litigation takes too long for resolution of consumer disputes, and the pendency of such disputes is itself bad for consumer relations. Moreover, particularly for small businesses, the cost of civil litigation is prohibitive—threatening the viability of some businesses, producing extortionate settlements, and putting Missouri and American businesses at a disadvantage to exporters in other countries.”
As the business community awaits a decision in Lopez v. H&R Block, the Missouri legislature is also discussing measures to strengthen arbitration agreements between employers and employees. These proposals include House Bill 1718, sponsored by Rep. Kevin Corlew, a Republican from Kansas City, contained in Senate Bill 746, sponsored by Sen. Gary Romine, a Republican from Farmington.
The Missouri Chamber Legal Foundation is closely monitoring this and other lawsuits in the state and will continue advocating for sound legal decisions that work in favor of faster growth and making Missouri a more welcoming place to do business.