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ST. LOUIS RECORD

Friday, March 29, 2024

Insurance salesman told he must follow H&R Block franchise license agreement

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KANSAS CITY — A federal judge for the Western District of Missouri has granted H&R Block's motion for a temporary restraining order against a franchisee in New York City. 

The order was issued on Feb. 15 by Senior District Judge Ortrie D. Smith.

Background information in the ruling states that defendant William Thomas entered into a franchise license agreement with H&R Block in 2011, which contained nonsolicitation and noncompetition covenants that stipulated he would not divert former clients and directly or indirectly operate a competing business in or within 25 miles of his territory for two years after he was no longer a franchisee.

It also states that as of last April, Thomas had been in arrears to H&R Block in the amount of $112,903 in royalties on tax preparation fees earned and supplies he purchased. After Thomas failed to satisfy what he owed the company, H&R Block terminated his franchise license agreement last December.

The company also filed a breach of contract complaint, claiming, among other things, that Thomas is operating a tax preparation business at his former franchise office in New York City. H&R Block claims Thomas has been diverting customers, and has been divulging and using information and knowledge concerning customers as well as H&R Block’s methods and operations, according to court documents. 

A hearing was held on Feb. 14, and Thomas was ordered to fulfill all of his contractual obligations.

The order restrains Thomas and anyone associated with his operation from directly or indirectly violating terms of the franchise license agreement, using information concerning H&R Block customers, using any of its property, using H&R Block signs or emblems, and refusing to transfer the lease of his New York office.

"It is further ordered that, under the circumstances of this case, including the financial position of H&R Block and the fact that the terms of the injunction do not pose a material risk of any injury to Thomas, no security is necessary," Smith wrote. "Nevertheless, a bond in the amount of $10,000.00 would be more than adequate to pay the costs and damages sustained by any party found to have been wrongfully enjoined. A bond in that amount shall be filed by H&R Block within fourteen days of the entry of this Order.

"It is further ordered that this Order shall take effect immediately, and absent further Order of this Court, will remain in effect until a hearing is held on Plaintiff’s Motion for Preliminary Injunction. The parties are directed to meet and confer, and within seven days of this Order, file a joint proposed plan and schedule for limited, expedited discovery necessary for the preliminary injunction hearing, and a mutually agreeable date for the preliminary injunction hearing. To the extent the parties cannot agree on a discovery plan and schedule, the parties shall file separate proposals by no later than February 22, 2018."

The ruling states that Thomas had consented to Missouri law as the choice of law and to personal jurisdiction in federal court at Western District of Missouri.

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