Intuit Inc. v. H&R Block, Inc.

Background

Intuit sells online tax-preparation products under the TurboTax brand. HRB Digital LLC, identified as “Block” in the opinion, alleged that Intuit’s advertising falsely suggested that TurboTax Live Assisted automatically included a final review by a tax expert and that the review would be a comprehensive, line-by-line examination. According to the counterclaims, customers generally had to take affirmative steps to connect with an expert, and a complete line-by-line review might require an upgrade to TurboTax Full Service.

Intuit’s amended complaint asserted claims under the Lanham Act, California’s Unfair Competition Law, California’s False Advertising Law, and Missouri common law. HRB Digital later asserted counterclaims against Intuit that mirrored those claims. Intuit moved to dismiss the counterclaims under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), and moved to strike portions of the counterclaims.

Standing and dismissal

The court held that HRB Digital had not adequately pleaded Article III standing. Article III standing requires a concrete and particularized injury that is fairly traceable to the challenged conduct and likely to be remedied by a favorable decision. The court explained that direct competition alone was insufficient for a false-advertising claim.

Although HRB Digital alleged that Intuit’s statements caused and would continue to cause damage through lost profits, the court found that allegation conclusory. The counterclaims did not provide enough facts connecting Intuit’s advertising to harm HRB Digital experienced beyond the fact that the companies competed. The court stated that HRB Digital needed to allege facts supporting at least two links in the chain of reasoning showing how Intuit’s advertising could harm its business.

Because the court found no adequately pleaded standing, it concluded that it lacked subject-matter jurisdiction and did not decide whether the counterclaims sufficiently stated claims under the Lanham Act, California’s Unfair Competition Law, California’s False Advertising Law, or Missouri common law. It also did not decide the parties’ arguments under Rule 9(b), which requires fraud allegations to be stated with particularity. The court offered observations about those issues as guidance but expressly did not rule on them.

Motion to strike

Intuit sought to strike allegations concerning statements in Elizabeth Berger’s declaration and statements made by the court during a January 22, 2024 temporary-restraining-order hearing. The court granted the motion to strike. It found that the allegations about the court’s hearing statements were unnecessary after HRB Digital’s counsel clarified that HRB Digital did not intend to make the court a trial witness. It also found that the allegations about Berger’s declaration had no essential relationship to whether Intuit’s advertisements were false or likely to mislead consumers.

Leave to amend and order

The court granted HRB Digital leave to amend because it found that HRB Digital could conceivably allege facts establishing standing and claims that could survive a motion to dismiss. The court rejected Intuit’s arguments that amendment would be futile, untimely, undertaken in bad faith, or prejudicial, except that keeping the scheduled September 30, 2024 preliminary-injunction hearing would prejudice Intuit’s ability to respond to amended counterclaims through briefing.

The court therefore vacated that hearing without prejudice to HRB Digital seeking a new hearing. The order granted Intuit Inc.’s motion to dismiss HRB Digital LLC’s counterclaims, dismissed the counterclaims with leave to amend for failure to allege sufficient facts showing Article III standing, granted Intuit’s motion to strike, and allowed HRB Digital to file amended counterclaims by September 9, 2024.