TurboTax Class Action Saved From Forced Arbitration

UPDATE 2: On Dec. 17, 2020, a federal judge rejected the proposed $40 million settlement between Intuit, the company behind TurboTax, and a Class of consumers suing the company for allegedly directing them away from the TurboTax free edition even though they were eligible to use it.

UPDATE: On Nov. 12, 2020, a $40 million settlement has been reached in a TurboTax class action lawsuit that claimed the company falsely advertised its services as being free.

A California federal judge recently ruled that Intuit’s TurboTax customers are not bound by an arbitration provision in their terms of service, preserving a class action lawsuit filed by customers who claim that the tax preparation company falsely advertised that their services were free.

U.S. District Judge Charles R. Breyer stated in his order that the terms were too inconspicuous to give customers constructive notice that they were agreeing to be bound by an arbitration agreement every time they signed into TurboTax.

The judge opines that the hyperlink to the terms and conditions was blue but not underlined, which falls short of the “gold standard” of how the terms of service needs to be displayed to the user.

In addition, the judge notes that the notice on Intuit’s sign-in and account recovery pages contain multiple, confusingly similar hyperlinks. The links on both pages note that clicking “Sign In” or “continue” would bind users to the Turbo Terms of Use which contain the arbitration provision at issue in this case.

However, the judge states that the Turbo Terms of Use are different hyperlinks linked to two different agreements, with only the latter containing the arbitration agreement that the defendant is seeking to enforce.

In addition, the judge opines that the confusing presence of two nearly identical named hyperlinks might have prevented the consumer from knowing that the second hyperlink existed at all, whether or not the user clicked on the first one or not.

“A reasonable user might well find this arrangement confounding. He or she might not realize the notice contained a second hyperlink,” the court opinion asserts.

Also, the court notes that the fact that only 0.55 percent of users clicked on the terms supports the argument that many users didn’t notice it.

Based on these conclusions, the judge denied Intuit’s arbitration motion.

Plaintiffs Andrew Dohrman, Joseph Brougher, and Monica Chandler claim that Intuit fooled consumers into paying for their tax preparation services when they were entitled to the free version.

The judge’s recent opinion notes that Intuit and other tax preparation services entered into an agreement with the IRS in 2002 which would allow low-income taxpayers and military members the option to file their taxes at no cost.

The agreement with the IRS states that Intuit and the other tax preparation services have to cumulatively offer 70 percent of U.S. taxpayers the option to file their taxes for free, according to the class action lawsuit that was filed in May 2019.

The TurboTax class action lawsuit claims that Intuit permits free state and federal tax filings for those taxpayers who have an adjusted gross income under $34,000, are eligible for Earned Income Tax Credit, or are an active military member with a gross income of $66,000 or less.

One of the plaintiffs in this case, Joseph Brougher, claims that he makes a gross income of $6,000 per year as a college student and therefore qualified for the free filing program. 

He argues that he went through the steps to prepare his taxes for free but was told by Intuit that he would owe $85.58 in order to file his taxes.

The plaintiffs also claim that less than 2.5 percent of eligible taxpayers actually utilize the program, which is in large part due to Intuit’s deceptive practices to prevent lower income taxpayers from using its free program in lieu of its fee-based program.

The plaintiffs claim that Intuit instead “misleadingly channeled” these customers to their paid services instead.

“Indeed, TurboTax has gone to great lengths to protect the viability of its business by eliminating the threat of a free government-sponsored program that would drastically threaten the industry’s profits, while at the same time actively disclaiming its obligations under the IRS Free-Filing Agreement in order to maximize its own profits at the expense of the country’s most vulnerable citizens,” the TurboTax class action lawsuit states.

The plaintiffs argue that Intuit violated this agreement by purposely diverting qualified taxpayers away from the “free filing” program in favor of its free-based offerings.

According to the TurboTax class action, the company was able to do this by separating its “free file” webpage from its primary webpage and then altering the code on the “free file” website so that it wouldn’t get picked up by search engines like Google.

“According to the Complaint, Intuit lured consumers in with promises of free filing, only to direct them to paid offerings while hiding the actual free filing option,” the judge recently wrote.

Prospective Class Members in the TurboTax class action lawsuit include: “All residents of the United States who qualified to file their taxes for free pursuant to the IRS Free-Filing Program for the 2018 tax season and satisfied TurboTax’s eligibility requirements but nevertheless were charged by TurboTax a sum of money to file their tax returns.”

Did you file your taxes with Intuit TurboTax thinking that you could do so at no cost? Leave a message in the comments section below.

The plaintiffs are represented by Daniel Girard, Jordan Elias and Simon Grille of Girard Sharp LLP and by Norman E. Siegel, J. Austin Moore and Jillian Dent of Stueve Siegel Hanson LLP.

The TurboTax Free Filing Class Action Lawsuit is Brianna Sinohui, et al. v. Intuit Inc., Case No. 5:19-cv-02546, in the U.S. District Court for the Northern District of California. 

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