Intuit Asks for Arbitration in TurboTax Class Action Lawsuit

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Intuit Inc., the defendant in a class action lawsuit alleging the company failed to protect customer data from a massive data breach that hit Intuit’s TurboTax and lead to the filing of fraudulent tax claims, asked a federal judge to send the case to arbitration.

Lead plaintiffs Christine Diaz and Michelle Fugatt alleged in their class action complaints filed in California federal court in April of last year that Intuit negligently failed to protect private data from TurboTax consumers.

This week, Intuit filed a motion with the court asking the judge to dismiss the consolidated class actions. Intuit argues that all of the class action plaintiffs agreed to arbitrate the disagreement when they agreed to TurboTax’s Online Terms of Service or End User License Agreement. “Arbitration Plaintiffs’ claims fall within the scope of their broad, valid and enforceable Dispute Resolution Agreements with Intuit and they have presented no grounds on which to otherwise invalidate them,” argues Intuit in its motion.

Intuit further states that litigation is barred from being heard in federal court under the terms of their arbitration agreement. “If there were any doubt as to whether the … claims fall within the scope of their arbitration agreements with Intuit — which there is not — federal law requires any such doubt be resolved ‘in favor of arbitration,’” says Intuit in its motion.

The class action stems from the alleged increase in fraudulent tax returns in recent years. In their class action, the plaintiffs allege that Intuit was aware of the problem, but failed to take any measures to correct it or report fraudulent tax returns to the IRS.

According to Intuit, the U.S. Department of Justice and the Federal Trade Commission began investigating reports of fraudulent returns submitted using TurboTax in the Spring of 2015. Additionally, the tax agencies in Utah, Minnesota, and Alabama announced that they flagged returns submitted using TurboTax due to fraudulent activity; Intuit said that it halted TurboTax’s state electronic filing return program in response by February of 2015.

In their motion to move the class action to arbitration and out of federal court, Intuit argues that the alleged increase in fraud is not due to the massive data breach, but third parties attempting to use stolen identities to file fraudulent tax returns.

Intuit also states that any remaining claims that the court determines cannot go into arbitration, should be stayed pending the arbitration proceedings. “Left in this Court’s discretion is whether any non-arbitrable claims (i.e., their request for injunctive relief under the UCL) should be stayed until their arbitrable tort claims are resolved,” admits Intuit in their motion. “Assuming their UCL class claims are not dismissed outright, a stay of their entire proceedings is warranted here.”

The plaintiffs are represented by Richard D. McCune of McCuneWright LLP, Michael Sobol of Lieff Cabraser Heimann & Bernstein LLP, Joha A. Yanchunis of Morgan & Morgan, Steven W. Teppler of Abbott Law Group PA and Joel R. Rhine of Rhine Law Firm PC.

The Intuit TurboTax Tax Fraud Class Action Lawsuit is Christine Diaz, et al. v. Intuit Inc., Case No. 5:15-cv-01778, in U.S. District Court for the Northern District of California.

UPDATE: On Oct. 4, 2018, an Intuit class action settlement has been preliminarily approved, resolving claims related to hacker access on the TurboTax filing platform which affected about 915,000 victims.

UPDATE 2: December 2018, the Intuit TurboTax class action settlement is now open. Click here to file a claim.