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H&R Block v. Lopez

Manuel Lopez III filed a class action complaint against H&R Block in a Missouri state court, challenging H&R Block’s imposition of what it misleadingly billed as a “compliance fee” on its clients in 2011 and 2012. Mr. Lopez had signed Client Service Agreements with H&R Block for both 2011 and 2012. Both had arbitration provisions, and Mr. Lopez properly opted out of the 2012 arbitration agreement. Not realizing that Mr. Lopez had opted out, Block nonetheless moved to compel arbitration under the 2012 agreement, which it acknowledged superseded the 2011 agreement. When it realized its mistake, it argued that the 2011 agreement required arbitration. The state trial court eventually held the arbitration clause unconscionable, and Block appealed. The court of appeals affirmed on a different ground: that there was no applicable arbitration agreement because the 2012 agreement, which Mr. Lopez had opted out of, superseded the 2011 one. H&R Block unsuccessfully sought review by the Missouri Supreme Court, and then filed a petition for certiorari in the U.S. Supreme Court. Block’s petition argues that by considering whether there was an applicable arbitration agreement before reviewing the trial court’s unconscionability ruling, the court of appeals had shown “hostility” to arbitration, and that its decision was therefore preempted by the Federal Arbitration Act (FAA). PCLG entered the case as cocounsel in the Supreme Court and assisted in drafting a brief in opposition pointing out that because the FAA itself does not permit arbitration in the absence of an applicable agreement, the state court’s decision carries out its policies and is not preempted. The Supreme Court denied the petition