(AIDING AND ABETTING FRAUD)   (AIDING AND ABETTING CONVERSION)   (BREACH OF CONTRACT)   (MONEY HAD AND RECEIVED)   (NEGLIGENT PERFORMANCE OF UNDERTAKING)   (NEGLIGENCE)   (UNJUST ENRICHMENT/RESTITUTION)   (UNFAIR COMPETITION LAW, CAL. BUS. & PROF. CODE § 17200)   (VIOLATION OF CAL. CIV. CODE § 1689(b)(2) – Material Failure of Consideration)   (VIOLATION OF CAL. CIV. CODE § 1689(b)(2) – Defendant’s Fault)   10.  According to the FTC, tax-related identity theft was the most common form of identity theft  reported to the FTC in 2014. The FTC received 332,646 identity theft complaints, nearly a third of  which were tax-related identity theft complains. According to the FTC, tax identity theft has been the  largest ID theft category within the last five years.    11.  Fraudulent tax filings have been on the rise since 2010, according to data from the FTC, which  is attributed to the rise in the use of electronic tax filings. According to the United States Government  Accountability Office, fraudulent tax filings occur when fraudsters use stolen information of  individuals to file income tax returns and divert tax refunds.   1 http://www.washingtonpost.com/news/get-there/wp/2015/03/04/unprecedented-surge-in-online-tax- scams-raises-questions-about-turbotax/ (last accessed May 18, 2015).  Case5:15-cv-02287   Document1   Filed05/21/15   Page4 of 18 1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  4  36.  Plaintiff brings this action on behalf of himself and all other similarly situated individuals as a  class action pursuant to Federal Rules of Civil Procedure Rule 23, and seeks to represent the following  Class (collectively, “Class”):  All persons in the United States who purchased TurboTax Online, TurboTax Mobile, or  TurboTax Desktop tax preparation software and whose TurboTax accounts were accessed by  fraudsters and used to file fraudulent tax returns through TurboTax.    37.  Excluded from the proposed Class are governmental entities; Defendants, officers, directors,  and employees of Defendant; the Judge assigned to this action; and putative Class Counsel.    38.  This action has been brought and may properly be maintained as a class action under Rule 23  because it satisfies the class action prerequisites of numerosity, commonality, typicality, and adequacy:   a.  Numerosity:  Individual joiner of the Class members would be wholly  impracticable.  TurboTax is estimated to be used by 30,000,000 individuals annually to file their taxes.   In 2014, the FTC reportedly received approximately 109,000 (1/3 of 332,646) tax ID fraud complaints.    Case5:15-cv-02287   Document1   Filed05/21/15   Page8 of 18 1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  8  39.   Plaintiff repeats and re-makes every allegation above as it set forth herein in full.  Case5:15-cv-02287   Document1   Filed05/21/15   Page10 of 18 1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  10  43.  Plaintiff incorporates the allegations in each above numbered paragraph.   44.  As a consequence of the above-alleged wrongful acts of Defendant, Plaintiff and members of  the class are entitled to rescind their contract on the ground that the consideration to Plaintiff and class  members for Defendant’s TurboTax tax preparation software has failed in a material respect, in that  Plaintiff’s account with Defendant and accounts of all class members with Defendant were accessed by  fraudsters and used to file fraudulent state and/or federal tax returns using Plaintiff’s personal  information and personal information of each class member.  As a result, Plaintiff and members of the  class have been deprived of a material aspect of the benefit of the bargain of the contract of completing  and filing electronically their state and federal tax return using the TurboTax tax preparation software.   Accordingly, Plaintiff contends that the contract is rescinded pursuant to California Civil Code §  1689(b)(4) and is of no force or effect.    Case5:15-cv-02287   Document1   Filed05/21/15   Page11 of 18 1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  11  46.  Plaintiff incorporates the allegations in each above numbered paragraph.   47.  Intuit entered into a written contract with consumers – Plaintiff and class members, in which it  promised to safeguard the confidential personal and tax return information entrusted to it by Plaintiff  and class members.    48.  Intuit encouraged customers to “file with confidence.”   49.  However, Intuit breached the promise to safeguard the confidential personal and tax return  information of Plaintiff and class members when, although well aware of the frequency of tax fraud  incidents, especially of those filed through its TurboTax system, it failed to implement reasonable and  adequate security measures and allowed fraudsters to either access Plaintiff and class members’  accounts or to create new accounts using their personal information, without flagging as suspicious or  investigating these filings.    50.  As a proximate result of Defendant’s breach of its contractual promise, Plaintiff and class  members have suffered direct and measurable economic losses, threat of future losses as a result of  being placed an increased risk of fraud in the future, emotional injury, and other damages as allowed  by law.  51.  Plaintiff incorporates the allegations in each above numbered paragraph.   52.  Plaintiff and class members conferred upon Defendant an economic benefit in the form of  monies paid for the purchase of TurboTax software.   53.  Part of the monies paid by Plaintiff and class members should have been spent by Intuit for  implementing and maintaining reasonable and adequate security measures to protect their personal  information.   Case5:15-cv-02287   Document1   Filed05/21/15   Page12 of 18 1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  12  57.  Plaintiff incorporates the allegations in each above numbered paragraph.   58.  In maintaining Plaintiff’s account and accounts of class members, Intuit owed them a duty to  exercise reasonable care in safeguarding and protecting that information. This duty included, among  other things, maintaining and testing TurboTax software and system and taking reasonable security  measures to protect and adequately secure personal information and customer accounts from  unauthorized use or access.  Intuit was aware of the fact that tax fraud was the most common form of  fraud and that tax fraud was frequently perpetrated through its system.    59.  Intuit breached that duty of care by failing to adequately secure and protect Plaintiff’s and class  members’ personal information from theft and/or misuse by third parties.   60.  It was foreseeable that if Intuit did not take reasonable and adequate security measures, the data  of Plaintiff and class members would be stolen or misused.  Fraudulent tax filings were the highest  form of identity fraud for the past five years and Intuit itself identified many fraudulent or suspicious  filings, but allegedly refused to implement stronger security measures proposed by some of its  employees.    61.  As a direct and proximate result of Intuit’s failure to take reasonable care and use adequate  security measures to protect personal information placed in its care, Plaintiff and class members had  Case5:15-cv-02287   Document1   Filed05/21/15   Page13 of 18 1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  13  68.  Plaintiff incorporates the allegations in each above numbered paragraph.   69.  Intuit undertook for consideration to performance tax preparation services for Plaintiff and  class members for consideration.  As part of the tax preparation services, Plaintiff and class members  Case5:15-cv-02287   Document1   Filed05/21/15   Page14 of 18 1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  14  7.  Intuit is an American software company that develops financial and tax preparation software  and related services for small businesses, accountants and individuals.  Intuit makes the personal  finance programs Quicken and TurboTax, as well as the small business accounting program  QuickBooks.  The Company also produced professional tax solutions ProSeries and Lacerte, among  other things.    72.  Plaintiff incorporates the allegations in each above numbered paragraph.   73.  Defendant received money belonging to Plaintiff and all others similarly situated when it sold  them TurboTax tax preparation software.  Defendant benefitted from the receipt of their money and  retained it.  Defendant is obligated to make restitution to Plaintiff and all others similarly situated for  their purchase of TurboTax tax preparation software.   74.  Plaintiff seeks relief as prayed for below.  75.  Plaintiff incorporates the allegations in each above numbered paragraph.   76.  On information and belief, Plaintiff alleges that Intuit had knowledge of the fact that fraudulent  tax returns had been filed and that there was a high likelihood that they would continue to be filed  using information of individuals and businesses similarly situated to Plaintiff and class members.    77.  Intuit substantially assisted in the advancement of fraud by failing to implement reasonable and  adequate security measures that would prevent fraudsters from accessing accounts of Intuit’s existing  customers and/or from creating new accounts using other individuals’ personal information and by  failing to flag suspicious filings.    78.  Intuit also substantially assisted in the advancement of fraud by transmitting the fraudulent tax  returns to the I.R.S. and state tax authorities.    79.  As a result of Defendant’s actions and/or inactions, Plaintiff and class members suffered  economic and emotional injury.   8.  Intuit has more than $4 billion in annual revenue and a market capitalization of more than $10  billion.   80.  Plaintiff and class members seek relief as prayed for below.     Case5:15-cv-02287   Document1   Filed05/21/15   Page15 of 18 1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  15  81.  Plaintiff incorporates the allegations in each above numbered paragraph.   82.  Fraudsters’ actions in filing fraudulent tax returns and diverting tax refunds to their own  accounts constituted conversion.    83.  On information and belief, Plaintiff alleges that Intuit had knowledge of the fact that fraudulent  tax returns had been filed and tax refunds had been fraudulently diverted and that there was a high  likelihood that fraudulent tax returns would continue to be filed using information of individuals and  businesses similarly situated to Plaintiff and class members and that tax returns would continue to be  wrongfully converted.    84.   Intuit substantially assisted fraudsters in converting Plaintiff and class members’ funds by  transmitting fraudulent income tax returns to the I.R.S. and/or state tax authorities and by allowing  fraudsters to use TurboTax to divert the tax refund to prepaid debit cards or fraudsters’ accounts.    85.  As a result of Defendant’s actions and/or inactions, Plaintiff and class members suffered  economic and emotional injury.   86.  Plaintiff and class members seek relief as prayed for below.   87.  Plaintiff incorporates the allegations in each above numbered paragraph.   88.  Cal. Bus. & Prof. Code §§ 17200, et seq. prohibits unfair competition in the form of any  unlawful, unfair, or fraudulent business act or practice.  Bus. & Prof. Code § 17204 allows “any person  who has suffered injury in fact and has lost money or property” to prosecute a civil action for violation  of the UCL.  Such a person may bring such an action on behalf of themselves and others similarly  situated who are affected by the unlawful, unfair, or fraudulent business practice.   89.  Defendant failed to take reasonable and adequate security precautions, such as implementing a  two-factor authentication process, to protect TurboTax accounts of Plaintiff and class members from  being hacked and accessed by fraudsters, and has refused and/or failed to issue a refund for the  purchase price of TurboTax software to Plaintiff and class members upon learning that their TurboTax  accounts were hacked by fraudsters and used to file fraudulent tax returns and Plaintiff and class  Case5:15-cv-02287   Document1   Filed05/21/15   Page16 of 18 1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  16  9.  Intuit maintains offices abroad and in the United States, but sells most of its products within the  United States.  It currently employs approximately 8,000 individuals in their national and international  offices combined.   B. Spike in Fraudulent Tax Filings In the Recent Years   A. Defendant and its Business  