Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—E.D. La.: H&R Block unable to sidestep breach of contract claims, (Nov 4, 2014)

By Greg Hammond, J.D.

H&R Block, Inc. (Block) could not obtain dismissal of breach of contract claims arising out of the aborted purchase of a Louisiana franchise. Despite Block’s arguments that it has no connections to Louisiana or to the transaction in dispute, the federal district court in New Orleans granted plaintiffs the opportunity to conduct jurisdictional discovery (CG & JS Enterprises, LLC v. H&R Block, Inc., October 31, 2014, Zainey, J.).

CG & JS Enterprises, LLC and others filed suit against Block for damages, arising out of the aborted purchase of an H&R Block franchise located in Metairie, Louisiana. The plaintiffs alleged that they reached a purchase agreement, subject to Block’s right of first refusal, that Block initially approved the sale, and that Block later reneged after the parties executed the sale. Consequently, the plaintiffs argue that Block’s withdrawal from the deal constituted a breach of contract, and—alternatively—that Block’s withdrawal constituted a tortious interference with the contract between the purchasers and the franchise owners.

Block removed the suit to the federal district court in New Orleans, and moved to dismiss on jurisdictional grounds, arguing that it has no connection to Louisiana or to the transaction that forms the basis of the action.

In support of its motion to dismiss, Block submitted a report from the Louisiana Secretary of State’s website, demonstrating Block is not a Louisiana corporation, along with a declaration from the company’s Vice President and Secretary, attesting that Block was never a party to the franchise agreement with any party in the lawsuit, and was not involved in the process of reviewing, approving, and disapproving the plaintiffs as potential franchisees. Block noted that the correct defendant-entity is H&R Block Tax Services, LLC. According to the court, if Block’s assertions are found true, specific jurisdiction will most likely be found lacking.

However, the plaintiffs submitted correspondence from individuals who appear to be employees of “some H&R Block entity.” Specifically, the court noted that the plaintiffs received emails and letters from individuals from a Block entity, but the letter head did not specify which entity or any office address to refute the suggestion that the employees are located in Block’s Missouri office. Consequently, the court denied Block’s motion to dismiss and allowed the plaintiffs to conduct jurisdictional discovery, finding that it “would be unfair to allow Block’s self-serving assertion regarding the role of its employees to control in light of the foregoing record evidence.”

The case number is 14-1322.

Attorneys: Matthew P. Chenevert for CG & JS Enterprises LLC. Brent A. Talbot (Chaffe McCall LLP) for H&R Block, Inc. and H&R Block Tax Services, LLC.

Companies: CG & JS Enterprises LLC; H&R Block, Inc.; H&R Block Tax Services, LLC

Cases: FranchisingDistribution LouisianaNews