H&R Block is urging a federal appeals court to reverse a decision that refused to enforce its arbitration agreement, letting a data privacy class action over the alleged sharing of tax return data with Meta and Google proceed in court. (Rios v. HRB Digital LLC, No. 25-7199, opening brief filed 7/20/2026)
In its opening brief to the 9th U.S. Circuit Court of Appeals, the tax preparer argues the district court erred in declining to compel arbitration, chiefly by refusing to follow binding circuit precedent it says controls.
Suit centers on data shared with Meta, Google
The underlying lawsuit, brought by Pedro Rios, Jr. and Christian Marquez, claims H&R Block’s online tax software used tracking pixels that transmitted confidential return data to Meta and Google without users’ consent. The plaintiffs allege the information included taxpayers’ names, income, and details about tax credits and dependents, and they bring claims under the federal Electronic Communications Privacy Act and several California privacy and consumer-protection laws for a putative nationwide class.
To use the platform, customers must agree to H&R Block’s Online Services Agreement, which requires binding individual arbitration but lets them opt out within 30 days. Central to the appeal, the agreement also imposes a staged bellwether procedure: when 25 or more claimants represented by the same or coordinated counsel raise similar claims, only a limited number of test cases may proceed at a time.
Rios and Marquez filed their putative class action on April 22, 2025, and H&R Block moved to compel arbitration. On October 27, 2025, U.S. District Judge Edward M. Chen of the U.S. District Court for the Northern District of California denied that motion, finding the agreement both procedurally and substantively unconscionable and declining to sever the disputed terms. H&R Block appealed on November 13, 2025.
H&R Block says opt-out right defeats procedural claim
H&R Block’s central argument is that the district court erred on procedural unconscionability. According to the brief, Judge Chen acknowledged the arbitration clause was “well flagged” but still found the agreement unconscionable, reasoning that an ordinary consumer would not expect its staging scheme. The company counters that customers had 30 days to opt out, a right it says was “clearly and conspicuously disclosed,” so the agreement cannot be procedurally unconscionable under California law.
The company leans on Mohamed v. Uber Technologies Inc. , 848 F.3d 1201, in which the 9th Circuit held an arbitration agreement is not procedurally unconscionable when a party can opt out. The appeals court had reversed the same judge on that point in Mohamed, the brief says, yet he declined to follow it, instead urging the 9th Circuit to overturn its own precedent. The company calls that refusal “patently wrong” and says the reasoning “rested on defiance of this Court’s precedents.”
H&R Block also disputes the judge’s reliance on “purportedly intervening decisions by California state courts” to set Mohamed aside, arguing they are “inapposite” because in them the opt-out right was practically impossible to use or undercut by how it was presented. That “palpable error on procedural unconscionability,” the brief maintains, is by itself enough to require reversal.
Staging rules mirror federal courts, brief argues
On substantive unconscionability, H&R Block defends the staged bellwether process as modeled on the procedures federal courts use to manage multidistrict litigation, in which test cases are resolved first to guide the remaining claims. Borrowing an approach courts use routinely, the company argues, cannot be so harsh or one-sided as to be unconscionable.
The brief says the district court faulted the staging for imposing unreasonable delays and a related tolling provision for leaving claimants’ deadlines uncertain. The company responds that the agreement defines what a complete notice requires and leaves any dispute to a court. It casts the staging rules as a response to what it calls widespread mass arbitration abuses, in which law firms file large numbers of unvetted claims to pressure companies into fee-based settlements regardless of merit.
According to the company, a review of the notices filed for the claimants showed the assertion that the person used its online services during the relevant period was “false for nearly 40% of the notices.” More than one in five claimants, the brief says, were “either never H&R Block clients at all or never used H&R Block’s online tax filing services.” It cites one notice for a “John Doe” at “Test, California,” signed “No Agreement,” and contends the court ignored this evidence while faulting the company for “reserving all rights” in accepting service.
Company points to rulings enforcing the same terms
H&R Block argues the decision is an outlier and points to other courts that have enforced the same agreement. In Hunt v. Meta Platforms Inc. , 729 F. Supp. 3d 964, another judge in the U.S. District Court for the Northern District of California compelled arbitration, relying on Mohamed and finding the opt-out provision defeated the procedural unconscionability claim.
Federal courts in Pennsylvania and New York reached the same result, the brief notes. In Caimano v. H&R Block, 2024 WL 3295589, the U.S. District Court for the Eastern District of Pennsylvania held the agreement gave customers a simple, clearly disclosed way to opt out. And in Pabon v. HRB Digital LLC, 2025 WL 2254008, the U.S. District Court for the Eastern District of New York found the 30-day opt-out substantially undercut any procedural unconscionability challenge.
The brief also argues the Federal Arbitration Act preempts the district court’s reasoning, which it says singles out arbitration for disfavored treatment and reflects the hostility to arbitration the law was meant to prevent. Taken together, the company contends, these decisions show a growing consensus that its agreement is enforceable and that the ruling should be reversed. It has asked the appeals court to hear oral argument.
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