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COURT WATCH

BY ALM Staff
September 16, 2003

Franchisor's Internet Sales Do Not Violate Exclusive Territory

An American Arbitration Association Panel in Minneapolis, MN, has ruled that H&R Block, Inc., a tax preparation service franchisor, did not violate a franchise agreement by offering tax preparation services over the Internet, even though some customers were within the franchisee's exclusive territory. In the Matter of Arbitration Between Franklin 1989 Revocable Family Trust, Claimant, and H&R Block, Inc., Respondent (AAA, Minneapolis, Minnesota, Case No. 16114005401) (2002). The case is summarized in the CCH Business Franchise Guide. Bus. Franchise Guide (CCH) 12,473.

According to CCH's summary opinion, an H&R Block franchisee moved for injunctive relief to preclude its franchisor from servicing customers in the franchisee's exclusive territory. The franchisee claimed that under its franchise agreement with H&R Block, H&R Block was prohibited from 'operating from a location' in the franchisee's exclusive territory. The panel interpreted that provision to mean that H&R Block's Internet services could not 'unreasonably intrude on the franchisee's operations.' According to the summary opinion, 'so long as the franchisor's Internet services did not unreasonably intrude on the franchisee's brick-and-mortar operations, the franchisor was not operating in violation of the franchisee's territorial exclusivity.'

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