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Basile v. H&R Block, Inc. - 563 Pa. 359, 761 A.2d 1115 (2000)


Under Pennsylvania law, the three basic elements of agency are: the manifestation by the principal that the agent shall act for him, the agent's acceptance of the undertaking, and the understanding of the parties that the principal is to be in control of the undertaking. Agency results only if there is an agreement for the creation of a fiduciary relationship with control by the beneficiary. 


H&R Block, Inc., (BlocK) provided tax preparation services nationwide through a network of retail offices operated through subsidiaries, one of which is H&R Block Eastern Tax Services. As part of its service, Block offered a program known as "Rapid Refund," which involved electronic filing of tax returns with the Internal Revenue Service (IRS), resulting in quicker refunds than a taxpayer filing a paper return would receive. Block also arranged for Mellon Bank (DE) National Association (Mellon Bank) to provide a refund anticipation loan (RAL) program to Block's qualified Rapid Refund customers. Under the RAL program, Mellon Bank advanced to the customer the amount of the customer's anticipated tax refund, less a financing charge, within days of Block's filing of the return.

Sandra Basile applied for, and received a RAL in 1993. Basile and Laura Clavin then filed a class action against Block and Mellon Bank alleging that Mellon Bank, acting as a consumer lender providing RALs, participated with Block in practices designed to deceive consumers as to the true nature of the loans. They also filed an amended class action complaint asserting claims under the Truth in Lending Act, the Pennsylvania Unfair Trade Practices and Consumer Protection Law and the Delaware Legal Rate of Interest, as well as a claim that Block breached its fiduciary duty on theories of agency and existence of a confidential relationship by failing to disclose that the RAL was a loan and that Block had a financial interest in arranging the RAL program. Block and Mellon Bank filed motions for summary judgment. The Superior Court concluded that an agency relationship existed between Block with Basile and Clavin and that Block breached its fiduciary duties to them.


Did an agency relationship exist between a national tax preparation service with its individual clients?




The court held that the parties' limited relationship for purposes of tax filing did not make defendant plaintiffs' agent for purposes of obtaining loans. There was no showing of plaintiffs' intent to appoint defendant their agent to bind them in legal relationships to third parties. A mere referral by a seller of goods or services to a financing source was common enough in commerce for plaintiffs to have understood what they were doing. Since defendant had not appealed the issue of fiduciary duty based on confidential relationship, the court remanded for further proceedings on that issue. The court reversed the intermediate court's order.

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