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Basile v. H&R Block

June 22, 2009

SANDRA J. BASILE AND LAURA CLAVIN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, APPELLEES
v.
H&R BLOCK, INC.; H&R BLOCK EASTERN TAX SERVICES, INC., & MELLON BANK (DE) NATIONAL ASSOCIATION, APPELLANTS



Appeal from the Order of Superior Court entered June 4, 2007 reversing the Order of the Court of Common Pleas of Philadelphia County entered January 21, 2004 926 A.2d 493 (Pa. Super. 2007).

The opinion of the court was delivered by: Madame Justice Greenspan

CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, GREENSPAN, JJ.

ARGUED: September 9, 2008

OPINION

We decide whether the Appellants, H & R Block, Inc. and H & R Block Eastern Tax Services, Inc. (collectively referred to as "Block"), properly preserved their right to challenge certification of a class represented by Appellee Sandra Basile. Here, the Superior Court held that Block waived its right to seek decertification of the class because it did not timely challenge the order granting class certification, even though Block ultimately won a later motion for summary judgment on the merits of the dispute. Our careful review of the facts and law reveals the Superior Court erred and we therefore reverse.

On April 23, 1993, Sandra J. Basile filed a lawsuit against Block, alleging that, among other things, Block breached its fiduciary duty in connection with its "Rapid RefundÔ" 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 thus deceived customers because the customers did not know they were receiving a short-term loan from Mellon Bank and the fees imposed by Block were actually extremely high interest rates on the short-term loan. Basile specifically alleged that she believed she received an expedited refund because she electronically filed the return and was not aware it was actually a short-term loan.

Basile sought certification of a class of individuals with similar claims. On January 17, 1996, the trial court entered an order that, for purposes of determining the class certification request, 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 17, 1996 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.*fn1 Instead, Block and the newly certified class (Appellees) filed cross motions for summary judgment. On December 31, 1997, the trial court granted Block's motion for summary judgment and denied Appellees' motion for summary judgment. The trial court held that Block did not have an agency or confidential relationship with Appellees and, therefore, there was no breach of fiduciary duty.

Appellees 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 February 13, 1998, Block filed cross-appeals, challenging the trial court's January 17, 1996 presumption order and the May 30, 1997 class certification order.

On appeal, the Superior Court held Block's cross-appeal challenge to the January 17, 1996 presumption order was waived for failure to preserve its objection to this presumption order in the trial court. Basile v. H & R Block, Inc., 729 A.2d 574, 587 (Pa. Super. 1999). The Superior Court also held that an agency relationship existed between Block and Appellees. Id. The Superior Court did not discuss whether a confidential relationship existed. Id. 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. Id. at 588.

Block filed a petition for allowance of appeal to this Court, seeking to challenge the Superior Court's determination that an agency relationship existed. This Court granted review and held that the Superior Court erred in holding that an agency relationship existed. This Court remanded the case to the Superior Court to address whether a confidential relationship existed. Basile v. H & R Block, Inc., 761 A.2d 1115 (Pa. 2000). On remand, the Superior Court held that the record established a prima facie case that a confidential relationship existed between Block and Appellees, and remanded the case back to the trial court. Basile v. H & R Block, Inc., 777 A.2d 95 (Pa. Super. 2001). In the trial court, Block filed a motion for decertification of the class, which was granted on December 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.

Appellees filed an appeal from the decertification order and on March 1, 2006, an en banc panel of the Superior Court reversed the decertification. Basile v. H & R Block, Inc., 894 A.2d 786 (Pa. Super. 2006). The Superior 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. Id. at 790. Block again filed a petition for allowance of appeal to this Court. On September 26, 2006, by per curiam order, this Court granted allowance of appeal, vacated the Superior Court's order, 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.*fn2

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. Basile v. H & R Block, Inc., 926 A.2d 493, 500 (Pa. Super. 2007). This 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 Superior Court's holding that Block waived its right to challenge the class certification is not only contrary to the law of Pennsylvania, but also undermined by the record. A thorough review of the extensive fifteen-year record in this case reveals that Block did indeed file Notices of Cross-Appeal from the January 17, 1996 presumption order and, more importantly, from the May 30, 1997 class certification order. In addition, Block briefed those two issues in the Superior Court and requested, "that the Court reverse Judge Avellino's January 17, 1996 Order, as well as the class certification order issued May 30, 1997." Block's August 28, 1998 Brief at 45. Block's two cross-appeals apparently were given separate docket numbers, both of which appeared in the caption of the Superior Court's 1999 opinion. Basile, 729 A.2d at 574. But the Superior Court addressed only the cross-appeal from the January 17, 1996 presumption order and, as previously stated, held that the presumption issue was waived. Id. at 587. The Superior Court did not address Block's cross-appeal of the May 30, 1997 class certification order at all. Id.*fn3

In addition, the Superior Court incorrectly applied Pennsylvania law by holding that Block was required to file a cross-appeal on the class certification issue. Pennsylvania Rule of Appellate Procedure 501 permits any "aggrieved party" to file an appeal. Pennsylvania case law also recognizes that a party adversely affected by earlier rulings in a case is not required to file a protective cross-appeal if that same party ultimately wins a judgment in its favor; the winner is not an "aggrieved party." See Hospital & Healthsystem Ass'n of Pa. v. Dept. of Public Welfare, 888 A.2d 601 (Pa. 2005) (holding that DPW was not an aggrieved party, as the prevailing party, and it did not need to file a cross-appeal).*fn4 Our holding is further supported by the Note to Pennsylvania Rule of Appellate Procedure 511 which states, "An appellee should not be required to file a cross appeal because the Court below ruled against it on an issue, as long as the judgment granted Appellee the relief it sought." Pa.R.A.P. 511, Note.*fn5 Here, Block was the ultimate ...


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