In Perras v. H&R Block, No. 14-2892 (8th Cir. June 18, 2015), the Eighth Circuit issued an opinion regarding an issue that has yet to be addressed by the Missouri Supreme Court – to what extent does the Missouri Merchandising Practices Act (MMPA) apply to transactions outside of the state?
In 2011, the IRS promulgated new regulations requiring tax professionals, at their own cost, to pass a certification exam and obtain a tax-preparer ID number before being authorized to submit federal tax returns. H&R Block, the Kansas City-based “world largest tax services provider,” decided to pass this cost onto its customers in the form of a nominal “Tax Preparer Compliance Fee.”
California resident Ronald Perras paid for his local H&R Block office to prepare his taxes in 2011 and 2012. He subsequently sued the company in a Missouri federal court under the MMPA seeking to represent a nationwide class (with the exception of Missouri) based on the theory that the amount H&R Block collected from the compliance fee exceeded the actual costs of complying with the new IRS regulations and was therefore a deceptive trade practice under the statute.
On the motion for class certification before the district court, Judge Phillips agreed that the proposed class met the Rule 23(a) requirements but ultimately concluded that Perras failed to meet the predominance requirement of Rule 23(b)(3) based on choice-of-law conflicts because each potential class member’s claim “would be governed not by the laws of Missouri but by the laws of the class member’s home state, where the fee was paid and where the class member would expect to file a claim.” Perras slip op. at 5. The court based its conclusion after analyzing the claims under the Due Process and Full Faith and Credit Clauses of the U.S. Constitution.
On a Rule 23(f) appeal, the Eighth Circuit upheld the denial of class certification but took a different approach in its analysis to avoid “unnecessarily deciding constitutional issues.” Id. Instead, the court examined the scope of the MMPA to determine whether the tax-return services performed and paid for by Mr. Perras in California constituted “trade or commerce ‘in or from the state of the Missouri'” as required the statute. See Mo. Rev. Stat. § 407.020.1. While the court recognized that the Missouri Supreme Court has previously described the MMPA as “unrestricted, all-encompassing and exceedingly broad;” as a matter of first impression, the court held that there were “no ties between the allegedly fraudulent transactions and Missouri.” Id. at 7. Although H&R Block is based in Missouri, the court found that “every part of the transactions – the activity for which the class action seeks relief – occurred in each class member’s home state,” including the communication between the putative class member and the local H&R Block office, the contract for services, and where the payment for compliance fee was made. Accordingly, the circuit court agreed with the district court that the law applicable to each class member’s claim would be the consumer protection statute of that person’s state.
In the absence of a contrary Missouri Supreme Court opinion on the matter, this opinion may significantly curtail the use of MMPA in potential nationwide consumer class actions. Interestingly, this case attracted significant amici attention from a number of organizations, including the Attorney General for the State of Missouri (supporting a broad interpretation of the statute) and the U.S. Chamber of Commerce and the Product Liability Advisory Council. While the court acknowledged Missouri’s “interest in policing the corporations located within its borders” the court pointed to the Chamber’s amici brief that “other states also have an interest in protecting their local consumers in transactions.” Id. at 8 n.6.