TurboTax attorneys argue proposed class must arbitrate fee complaints

SAN FRANCISCO -- Intuit sufficiently notified users they waived their right to sue the company when they signed in on its website to access tax preparation services, attorneys representing the company argued Friday before a federal judge who did not appear entirely convinced people could properly access the online contracts.

U.S. District Judge Charles Breyer questioned whether Intuit's arbitration agreements with millions of low-income TurboTax customers are enforceable because it did not issue "any instructions on the document for them to follow."

Intuit and other tax preparation companies are required to offer 70% of taxpayers the option to file for free under an agreement with the IRS. The lawsuit alleges TurboTax intentionally steered customers away from complimentary services in favor of paid offerings.

Attorneys representing a proposed class of millions of users argued Intuit employed an array of deceptive practices, including misleading them into believing they were using a free version and making them pay at the end, sometimes after hours of work.

Intuit has maintained the plaintiffs are bound to arbitration, which they agreed to when they signed in on the TurboTax site.

Breyer was skeptical users could understand they have to click the hyperlink to access terms of use and if it was noticeable enough to see given how it was presented.

Defense attorney Roger Cole argued every court in the Northern District recognizes users understand how hyperlinks work. He said, "No court has rejected a click wrap agreement like this because a user did not know a blue, italicized hyperlink is in fact a hyperlink."

Plaintiffs' attorney Norman Siegel disputed the claim, explaining it's not universally understood that italicized phrases are hyperlinks.

Even if users understood they were hyperlinks, Breyer indicated Intuit may have been deceptive because not all of the links led to the terms of use indicating they waived their right to sue pursuant to arbitration agreements.

"They haven't seen the whole thing," he said. "They've only seen a portion of it."

Appellate courts have recognized that courts have to examine the "design and whether it puts reasonable consumers on notice" that they agreed to certain provisions, according to Siegel. He said the hyperlink leading to the arbitration agreement is in the "faintest type, not bolded and doesn't instruct folks they're going to be bound."

Although the data is under seal, Siegel added there is evidence Breyer has reviewed of how few people clicked on the hyperlink leading to the agreement.

Breyer also considered plaintiffs' attorneys request for injunctive relief to require Intuit to comply with its contractual obligations with the IRS to more transparently offer its free tax filing services.

Cole again pointed to the arbitration agreement, arguing the arbiter must first find a violation of state unfair competition law for plaintiffs to pursue relief.

While more than 100 million taxpayers were eligible to file for free through Intuit and other tax preparation companies, fewer than 2.5 million actually did so, according to the lawsuit. In re: Intuit Free File Litigation, 19-CV-02546 (N.D. Cal., filed May 12, 2019).

Intuit files more than 35 million tax returns annually.