In the

United States Court of Appeals

For the Seventh Circuit

No. 09-8002

LORIE J. MARSHALL AND DEBRA RAMIREZ,

individually and on behalf of

all others similarly situated,

Plaintiffs-Respondents,

v.

H&R BLOCK TAX SERVICES, INC.,

Defendant-Petitioner.

Appeal from the United States District Court

for the Southern District of Illinois.

No. 08-CV-591-MJR—Michael J. Reagan, Judge.

SUBMITTED FEBRUARY 21, 2009—DECIDED APRIL 30, 2009

Before EASTERBROOK, Chief Judge, and POSNER and

TINDER, Circuit Judges.

POSNER, Circuit Judge. H&R Block Tax Services, Inc. (TSI)

removed this suit to federal court under the Class Action

Fairness Act of 2005, but the district court concluded that

it was not removable and so remanded the case to state

court. TSI has asked our leave to appeal, 28 U.S.C.

§ 1453(c), which we grant.
2 No. 09-8002

The suit was originally filed in state court against a

defendant class of related companies. The suit named

H&R Block, Inc. and H&R Block Group, Inc. as representatives of the class. The suit charged that in violation of

Illinois’s Consumer Fraud Act, the defendants and the

members of their class, all of which were affiliates or

franchisees of the class representatives, had used deceptive practices to sell “Peace of Mind” insurance against

mistakes by H&R Block that increased customers’ tax

liabilities. An amended complaint added TSI and H&R

Block Eastern Tax Services, Inc. as additional named

defendants and class representatives. The court dismissed

the two original named defendants, H&R Block, Inc. and

H&R Block Group, Inc. for lack of personal jurisdiction

and granted the plaintiffs’ motion to voluntarily dismiss

H&R Block Eastern Tax Services, Inc. That left TSI as

the only representative of the defendant class.

Eventually the state court certified three plaintiff classes,

comprising all people in the 50 states and the District of

Columbia who had been victimized by members of the

defendant class—which the court also certified, defining it

to include “any entity with the names ‘H&R Block’ or

‘HRB’ in its name, or otherwise affiliated or associated

with [TSI], and which sold or sells the [Peace of Mind]

product.” Subsequently, however, the court decertified

the defendant class at TSI’s request, leaving TSI, which

already was the only defendant, with no class-representative status since there was no longer a defendant class.

TSI had asked the court to decertify the plaintiff classes

as well, and while the court refused to do so, it did

narrow the classes to residents of 13 states.
No. 09-8002 3

TSI then removed the case to federal district court on

the ground that the decertification of the defendant class

had made the case removable under the Class Action

Fairness Act because the decertification occurred after the

Act’s effective date, and had increased TSI’s potential

liability notwithstanding the elimination of claims by

residents of 37 states. Despite the deletion of those

claims, TSI may face greater liability as a result of the

decertification of the defendant class—unless, as the

plaintiffs argue, TSI was from the outset jointly and

severally liable for all the alleged misconduct of its affiliates and other “associates” (franchisees either of TSI or

of any affiliate of TSI)—and hence for the alleged misconduct of all the members of the defendant class.

TSI is the franchisor of the H&R Block franchised (as

opposed to owned) retail tax offices, but it does not operate

any of them. As the sole defendant against certified

plaintiff classes that include victims of alleged statutory

violations by any entity affiliated or associated with it,

TSI complains that it is now potentially liable for violations for which it had not been potentially liable before

decertification. It estimates its additional potential

liability at approximately $60 million, and notes that a

ruling that increases a defendant’s potential liability may

make a case originally filed before the effective date of the

Class Action Fairness Act removable if the ruling comes

after that date, unless the alteration in the scope of the

plaintiff’s claim “relates back” to the original claim.

Santamarina v. Sears, Roebuck & Co., 466 F.3d 570, 573 (7th

Cir. 2006); Knudsen v. Liberty Mutual Ins. Co., 435 F.3d 755

(7th Cir. 2006), 411 F.3d 805 (7th Cir. 2005). The district
4 No. 09-8002

judge thought that only a formal amendment of the

complaint could commence a new action for CAFA purposes, but that would place too much weight on form;

if decertifying the defendant class altered the plaintiffs’

claims adversely to the defendant (the shrinkage of the

plaintiff classes did not), it is a detail that the plaintiffs

did not file an amended complaint with a suitably

altered caption.

If, when it was a class representative, TSI would have

been jointly and severally liable for the unlawful acts of

all members of the defendant class, decertifying the

class and leaving TSI as the sole defendant did not

increase its potential liability. We do not understand the

plaintiffs to be contending, however (or to be suggesting

that the state court had ever ruled), that merely by

being named as a defendant TSI would have been jointly

and severally liable for the acts of its codefendants. For

although many of them are its corporate affiliates, the

doctrine of limited liability ordinarily insulates a corporation from the tort or other liabilities of its affiliates.

Browning-Ferris Industries of Illinois, Inc. v. Ter Maat, 195

F.3d 953, 959-60 (7th Cir. 1999).

Nor would TSI’s status as the representative of the

defendant class have created such derivative liability.

Defendant classes are certified in order to facilitate the

economical resolution of common issues rather than to

alter the substantive rights of parties or class members.

2 Alba Conte & Herbert B. Newberg, Newberg on Class

Actions § 4:50 (4th ed. 2008). Class actions in federal courts

are authorized by Rule 23 of the Federal Rules of Civil
No. 09-8002 5

Procedure, and those rules “shall not abridge, enlarge

or modify any substantive right.” 28 U.S.C. § 2072(b);

see Ortiz v. Fibreboard Corp., 527 U.S. 815, 845 (1999). True,

that is the federal rule, and the class action suit in this

case was brought in state court. But the Illinois statute

that authorizes class actions in Illinois, 735 ILCS 5/2-801

et seq., is similar to Rule 23 and contains no hint that a

class action alters substantive rights.

The original and amended complaints do assert “joint

and several, if not ultimate, liability” by “Block” for all the

violations alleged in the complaints, many of which were

committed by affiliates or franchisees. But “Block” is

defined as the two (or, in the amended complaint, the

four) defendants named in the complaints, one of which

is TSI and the others are affiliates of it. For all that

appears, while those four may, among them, be liable for

the acts of still other affiliates and of the franchisees, it

cannot be assumed that, with three of them gone from

the case, TSI’s status is unchanged. Illinois law requires

that conspiracy or other concerted action be pleaded

specifically. Oliveira-Brooks v. Re/Max Int’l Inc., 865 N.E.2d

252, 260 (Ill. App. 2007); Connick v. Suzuki Motor Co.,

675 N.E.2d 584, 592 (Ill. App. 1996).

Suppose that one of the original H&R Block defendants

was liable for the misconduct of its affiliates and franchisees but others, including TSI, which may have had no

dealings with those affiliates and franchisees and therefore never created a situation that would permit piercing

the corporate veil, were not liable. Then TSI’s potential

liability would have been limited. But now, having lost
6 No. 09-8002

the other defendants, the plaintiffs want to pin the

entire liability of all the former members of the defendant

class on TSI. They may, for all we know, be able to do

so, but that will, so far as appears, enlarge TSI’s liability;

the plaintiffs have presented no evidence to the contrary.

But we must decide whether the change in the scope

of the plaintiffs’ claim relates back to the original claim,

for only if it does not may the defendant remove. In

federal law “the criterion of relation back is whether

the original complaint gave the defendant enough notice

of the nature and scope of the plaintiff’s claim that he

shouldn’t have been surprised by the amplification of the

allegations of the original complaint in the amended one.”

Santamarina v. Sears, Roebuck & Co., supra, 466 F.3d at 573.

The plaintiffs do not claim that Illinois’ criterion (remember that this is a state case that the defendant is trying

to remove) is any different; they are right not do so.

Porter v. Decatur Memorial Hospital, 882 N.E.2d 583, 591-93

(Ill. 2008) (adopting the federal approach); Frigo v. Silver

Cross Hospital & Medical Center, 876 N.E.2d 697, 712-14

(Ill. App. 2007). And if we are right that the liability

asserted in the original claim was significantly less extensive than the liability now claimed as a result of the

decertification of the defendant class, there is no relation back; from the standpoint of the original claim, the

expansion of potential liability was a surprise.

The plaintiffs place great weight on TSI’s having

moved to decertify the defendant class. But TSI made that

motion as part of a package in which it sought to

decertify the plaintiff classes as well. It failed in that
No. 09-8002 7

endeavor, and so ended up worse off, as far as potential

liability was concerned, than before. Or so at least the

record suggests. We can imagine a situation in which a

defendant deliberately increases its potential liability in

an attempt to be allowed to remove the case under the

Class Action Fairness Act; but that is not argued.

The case should not be sent back to state court. The

district court’s order is therefore

REVERSED.

4-30-09