Reynolds v. Beneficial National Bank

Beneficial National Bank (Beneficial) and H&R Block (defendants) worked together to make high-interest, short-term loans to 17 million H&R Block customers who were expecting tax refunds. This type of loan was known as a refund-anticipation loan (RAL). Several class actions were filed alleging violations relating to the RALs. Initially, the lawsuits were unsuccessful. However, one Texas class action gained traction, survived several motions, and was scheduled for a trial on the class’s approximately $2 billion in claims. At that time, Beneficial met with three solo plaintiff’s attorneys, who did not have pending RAL actions, to discuss settling the RAL claims against it. The selected attorneys then filed a new RAL class action in Illinois but did very little to litigate the case before agreeing to settle the class’s claims for $15 per member, up to a maximum of $25 million for the class, and $4.25 million in attorney’s fees. H&R Block would also be allowed to join the settlement without paying anything additional to the class, merely contributing to the already agreed payments. In exchange, all the class’s claims would be released against both Beneficial and H&R Block, including the claims in the Texas action. The court let the parties hide the pending Texas action when sending opt-out notices to the class. Further, the attorney-fee request was made under seal, with class counsel’s actual work hours and other information hidden from the class. The district court convinced the parties to increase the class payment to $30 for some members who had multiple RALs and then approved the settlement. Objecting class members appealed the settlement’s approval to the Seventh Circuit.