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Tasha Smith, Et. Al v. Intuit Inc

September 10, 2012


The opinion of the court was delivered by: Edward J. Davila United States District Judge

United States District Court For the Northern District of California


Pending before the court is Defendant Intuit Inc.'s ("Intuit") motion to dismiss Plaintiff Tasha Smith and Plaintiff Frederick Smith's (collectively "Plaintiffs") Complaint. For the reasons 19 discussed below, Intuit's motion is GRANTED with leave to amend. 20


A. Factual Background

On March 19, 2012, Plaintiffs filed the Complaint alleging violations of California's refund 23 anticipation loan ("RAL") statute, Cal. Bus. & Prof. Code § 22250 et seq.; California's False 24 Advertising Law ("FAL"), Cal. Bus. & Prof. Code § 17500 et seq.; California's usury laws, Cal. 25 Const., art. XV, § 1 and Cal. Civ. Code. § 1961-1 et. seq.; and California's Unfair Competition 26 Law ("UCL"), Cal Bus. & Prof. Code § 17200 et. seq. In support of these claims, Plaintiffs allege 27 the following factual allegations.

Intuit is the nation's leading provider of electronic tax preparation and filing services.

Compl. ¶ 15. Among Intuit's primary revenue generating products is tax preparation software 3 called "TurboTax." Id. TurboTax consists of two basic components: a user interface which prompts 4 users to provide relevant information and an underlying tax engine which processes the 5 information. Id. ¶ 10. Consumers access TurboTax either by purchasing the software and installing 6 it on their computers or online via Intuit's website. Id. ¶ 11. Those who use TurboTax Online 7 choose between two forms of payment: (1) paying immediately with a credit card or (2) deferring 8 payment and deducting the cost from their federal income tax refund. 9

This latter payment option is called the Refund Processing Option ("RPO"). Id. ¶¶ 41-42. Plaintiffs utilized TurboTax Online's electronic tax preparation software for the 2008, 2009, and 2010 tax years. Id. at 48-55. In each instance they also chose the RPO as the method for paying their tax preparation fees and receiving their refunds. Id. 13

The RPO entails the establishment of a deposit account at a participating bank ("Deposit Account"). Id. ¶ 43. The Deposit Account is a non-interest-bearing account established for the sole 15 purpose of receiving the customer's federal tax refund and dispersing those funds. Id. The bank, 16 upon receiving the customer's tax refund, deducts the TurboTax fees and a $29.95 Refund 17

Processing Service Fee ("RPO fee") for creating and administering the bank account and providing 18 other bank services. Id. ¶ 45. The bank then disburses the balance of the refund to the customer via 19 the customer's choice of a prepaid debit card or direct deposit to a checking or savings account. Id. 20

With the RPO, Intuit defers payment for its TurboTax service for approximately eight to fifteen 21 days (the time needed to receive the tax refund). Id. ¶ 46. The RPO's deferral of payment 22 constitutes a loan, and Intuit provides no disclosure of the interest rate or finance charge for the 23 RPO. Id. 24

26 the RAL statute, FAL, California Usury Law, and UCL. Id. On March 19, 2012, Intuit filed a 27 motion to dismiss for failure to state a claim. ECF No. 32. On April 13, 2012, Plaintiff filed an 28

B. Procedural Background

The Complaint was filed on January 13, 2012. ECF No. 1. Plaintiffs alleged violations of opposition. ECF No. 50. On April 27, 2012, Defendant filed a reply. ECF No. 54. On May 29, 2 2012, the court took the motion under submission without oral argument. See Civil L.R. 7-1(b).

5 state a claim upon which relief can be granted. In deciding whether to grant a motion to dismiss, 6 the court generally "may not consider any material beyond the pleadings." Hal Roach Studios, Inc. 7 v. Richard Feiner & Co., 896 F. 2d 1542, 1555 n. 19 (9th Cir. 1990). However, "material which is 8 properly submitted as part of the complaint may be considered." Id. 9


Under Federal Rule of Civil Procedure 12(b)(6), a complaint may be dismissed if it fails to

In considering a motion pursuant to Rule 12(b)(6), the court must accept as true all "well-

10 pleaded factual allegations." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009). The court must also construe the alleged facts in the light most favorable to the plaintiff. Love v. United States, 915 F. 2d 1242, 1245 (9th Cir. 1988). Even so, "courts are not bound to accept as true a legal conclusion 13 couched as a factual allegation." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). 14

"[T]o survive a motion to dismiss, a complaint must contain sufficient factual matter, 15 accepted as true, 'to state a claim to relief that is plausible on its face.'" Iqbal, 129 S. Ct. at 1949 16 (internal citations omitted). "A claim has facial plausibility when the plaintiff pleads factual 17 content that allows the court to draw the reasonable inference that the defendant is liable for the 18 misconduct alleged." Id. at 1949. "While legal conclusions can provide the framework of a 19 complaint, they must be supported by factual allegations." Id. at 1950. A complaint "does not need 20 detailed ...

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