defendant moots claim by ending activity in a way that would require gov't consent to restart

Snarr v. HRB Tax Gp., Inc., 2021 WL 4499416, No. 19-cv-03610-SK (N.D. Cal. Aug. 24, 2021)

Snarr alleged that HRB violated the usual California statutes by creating a “bait and switch” program to lure customers into paying for defendants’ services to file tax returns. Unfortunately, instead of creating its own free file system, the IRS engaged with private, for-profit companies to develop online tax services and to make them available for free to certain taxpayers. Defendants are part of Free File, Inc., a company formed to offer those services; FFI entered into agreements with the IRS about the services.  The then-current agreement (just expired) provided specific guidelines for members’ services.

Defendants allegedly advertised Free File widely “but then used a variety of methods to divert potential customers into Defendants’ own programs, which charged a fee.” For example, “Defendants purposely made it difficult to find” the free part of the system “by placing a ‘noindex’ tag on the webpage for the free part of the system, with the result that the search engines did not go to that page but instead to Defendants’ system which required payment of fees”—allegedly a classic bait and switch.

Defendants mooted the case—which requested public injunctive relief to get around an arbitration agreement—because the allegedly violative conduct “ceased and cannot reasonably be expected to recur.” Defendants terminated their membership in the IRS’s Free File Program. They purportedly had no intention of seeking readmission to the Free File Program or participating in the Free File Program in the future. To restart, they’d be required to petition the IRS to reapply for admission and would have to agree to the IRS requirements (though those requirements only vaguely refer to usability and not to deceptive marketing). Because defendants couldn’t by their own choice simply resume the complained-of conduct, the voluntary cessation exception to mootness didn’t apply.

Although defendants allegedly continued to market other “free” services of their own, outside the formal Free File Program with the IRS, and would use the same bait and switch approach, the claim for public injunctive relief was limited to the confusion that defendants created between the Free File Program with the IRS and their own paid programs. They no longer possessed the bait. “To the extent that Defendants now market other ‘free’ services in a misleading way, another lawsuit against them may be possible. But the case currently before the Court is moot.”