Faced with a class-action suit filed on behalf of customers who claim they were tricked into paying to file their taxes, TurboTax-maker Intuit knocked the case down. The company insisted its customers had agreed to forego their right to take their grievances to court and were required to use the private arbitration system instead.
But even as Intuit was winning in the class-action case, that very arbitration system was being weaponized against the Silicon Valley company.
A Chicago law firm is using a novel legal strategy by bankrolling customers bringing tens of thousands of arbitration claims against Intuit. Win or lose, this strategy could cost Intuit tens of millions of dollars in legal fees alone — a threat that could prod the company to be more open to a giant settlement.
Nearly three years after ProPublica first reported on how many customers wound up paying for TurboTax when they could have filed their taxes for free, Intuit is fighting a complex set of legal battles to stop consumers from trying to recover money.
Besides the huge number of consumer claims that have been filed, federal regulators and state-level prosecutors are also advancing efforts against the deep-pocketed company, which made $2 billion last year.
The most unusual front in the fight is the strategy to bring tens of thousands of individual consumer claims in arbitration, the alternative to the public court system that has historically been considered friendly to business.
The so-called mass-arbitration tactic was pioneered in recent years as the legal terrain became less friendly to class-action lawsuits, the traditional tool used to recover money for consumers through the court system.
The tactic is akin to using guerilla warfare rather than having soldiers mass on the battlefield and face each other in lines. The law firm pursuing Intuit, Keller Lenkner of Chicago, has generated attention for successfully using the strategy on behalf of delivery workers for DoorDash and Postmates.
