Jackson Hewitt Tax Refund Fraud Class Action Lawsuit Is Dismissed

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Last week, a California federal judge dismissed a class action lawsuit that accused a Jackson Hewitt Inc. and Tax Services of America Inc. franchisee of manipulating customers’ tax returns and keeping the resulting fraudulent tax refund. However, the judge will allow the plaintiffs to file an amended complaint.

In his Oct. 19 order, U.S. District Judge Otis D. Wright II found that plaintiff Luis Lomeli’s claims depended on franchisee JJF & AC Inc., which is run by Juan Flores, acting as an agent of Jackson Hewitt and Tax Services of America.

Judge Wright found that recent California Supreme Court precedent in a case called Patterson v. Domino’s Pizza required Lomeli to establish in his tax refund fraud class action lawsuit that Jackson Hewitt and Tax Services of America held a high degree of control over JJF & AC and Flores to hold them accountable for their alleged tax refund scheme.

“Lomeli does not allege the requisite degree of control in the day-to-day operations of JJF & AC, Inc. because he does not allege any degree over the hiring, firing, or fraudulent conduct of the employee who is the allegedly bad actor – Flores,” Judge Wright says in his order.

“Here, Lomeli does not allege that JH Inc. or TSA instructed, or otherwise controlled employees, such as Flores, in a way that required or allowed manipulating tax returns to include unauthorized write-offs.”

Lomeli initially filed the Jackson Hewitt class action lawsuit in April 2017, claiming that a Jackson Hewitt location in South Gate, Calif., manipulated his tax returns and kept the resulting tax returns. He asserted claims for fraud, conspiracy and negligence under federal and state law.

The claims pending in the tax refund class action lawsuit include claims under the Racketeer Influenced and Corrupt Organizations Act, negligence, fraud, violation of California’s Unfair Competition Law, violation of the California Consumer Legal Remedies Act and other California laws.

According to the Jackson Hewitt class action lawsuit, Lomeli compared his 2014 tax return with the IRS transcripts for that return and found that the one submitted by the Jackson Hewitt franchisee was different than the one for which he provided his authorization.

The tax return submitted by the Jackson Hewitt franchisee submitted hundreds of thousands of dollars in business-related expenses that Lomeli never intended to claim, the Jackson Hewitt class action lawsuit alleges.

Judge Wright found that the allegations of fraud against the defendants were “hollow” and found that Lomeli could not “simply lump all defendants together” without explaining each of their roles in the alleged scheme.

However, the judge noted that Lomeli may be able to proceed if he amends the Jackson Hewitt class action lawsuit and “parses his allegations out as to each defendant’s role in the fraudulent scheme, adequately alleges an agency relationship, or provides statements of fact supporting his group allegations of fraud.”

Lomeli is represented by Dylan Ruga, Paul A. Traina, Ji-In Lee Houck and Ian P. Samson of Stalwart Law Group.

The Jackson Hewitt Tax Refund Fraud Class Action Lawsuit is Lomeli v. Jackson Hewitt Inc., et al., Case No. 2:17-cv-02899, in the U.S. District Court for the Central District of California.