Antitrust Law Daily Wrap Up, ADVERTISING—DSC: Discovery Will Precede Decision on Whether Tax Service Was in Contempt of Court in Airing Commercial Subject to Restraining Order, (Feb 11, 2013)

By Tobias J. Gillett, J.D., LLM.

The federal district court in Greenville, North Carolina, has granted a motion for discovery prior to ruling on whether an income tax service must show cause why it should not be held in contempt of court for continuing to air television commercials subject to a temporary restraining order in a false advertising case (JTH Tax, Inc. v. M&M Income Tax Service, Inc., February 6, 2013, Anderson, G.).

JTH Tax, Inc., doing business as Liberty Tax Service (Liberty), sued M&M Income Tax Service, Inc. asserting that M&M had committed false advertising in violation of the Lanham Act and the South Carolina Unfair Trade Practices Act through a series of television commercials with statements regarding M&M’s ability to provide income tax refunds. The court grant Liberty a temporary restraining order against the commercials, but the commercials still appeared on television following the order.

The court issued an order for M&M to show cause why it should not be held in contempt of court. Following a hearing, Liberty moved for further discovery prior to a preliminary injunction hearing and a decision on the order to show cause, and M&M consented to the order.

The court granted the motion. The court observed that under Federal Rule of Civil Procedure 26(d)(1) “a party may not seek discovery from any source before the parties have conferred as required by Rule 26(f), except . . . when authorized by these rules, by stipulation, or by court order.” The court noted that courts apply a reasonableness standard to request to commence discovery prior to a Rule 26(f) conference.

Here, both parties believed that taking some depositions and performing some other discovery would aid the court in ruling on the preliminary injunction. Moreover, that discovery would also serve the interests of the court and assist the court in determining whether M&M was in contempt of its restraining order.

The case is No. 6:13-cv-00265-GRA.

Attorneys: J. Theodore Gentry (Wyche Law Office) for JTH Tax Inc. Beattie B. Ashmore for M&M Income Tax Service, Inc.

Companies: JTH Tax, Inc.; M&M Income Tax Service, Inc.

Cases: Advertising StateUnfairTradePractices SouthCarolinaNews