Court Watch

In H&R Block Tax Services, LLC v. Judy Strauss, Bus. Franchise Guide (CCH) '15,593 (USDC, N.D. New York, July 7, 2015), a former H&R Block franchisee was held in contempt of court for not complying with a restraining order issued by the court enforcing the post-termination non-competition covenants in her expired Franchise Agreement. The agreement required, among other things, that for one year after the agreement ended, the franchisee would not solicit her former clients, engage in a competing business within 45 miles of her former H&R Block office, or allow her former office to be used for tax preparation services. In February 2015, Block obtained an order from the court restraining Strauss from violating those provisions. In the instant action, Block sought to hold Strauss in contempt for violating that order.

After the Franchise Agreement ended, Judy Strauss, the former franchisee, set up shop in a town less than 45 miles from her former office, retained her original office and did not modify its sign, which still advertised “tax services.” She ran a newspaper advertisement where her former office was located, promoting her tax-preparation services, and collected material from clients at her former office that she processed at her new location. In her defense, she claimed she exercised good faith in trying to comply with the original order, since her new office was 42.5 miles away from her old office, the weather had been too bad for her to change her sign, and that the newspaper advertisement was prepared weeks before the court's order and she could not control when it was published. She admitted she was receiving tax work at her original office, but was not processing it there. Needless to say, the court was not pleased.