Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Jackson Hewitt franchisee alleges contract breaches by franchisor, (Jan 14, 2016)

By Linda O’Brien, J.D., LL.M.

Jackson Hewitt, franchisor of tax preparation services franchises, breached a franchise agreement by failing to provide necessary updated software, requiring participation in an optional promotional program, and attempting to enforce a non-competition provision against a former franchisee, according to a complaint filed in the federal district court in San Francisco (Shah v. Jackson Hewitt, Inc., January 13, 2016).

The complaint states that, in May 2002, accountant Ibrahim Shah entered into a franchise agreement for the operation of a Jackson Hewitt franchise. The agreement was for a period of ten years and expired by its terms, without renewal, in May 2012. The agreement also contained various non-competition provisions. After the expiration of the agreement, the parties continued the relationship on a month-to-month basis until January 2016.

Shah alleges that, in January 2016, Jackson Hewitt breached the franchise agreement by refusing to provide him with up to date tax software so he could perform tax return services for clients. Jackson Hewitt also allegedly demanded that he participate in an optional promotional program, falsely declared that the program was mandatory, and falsely declared him in default of the agreement for failure to participate in the optional program.

The complaint also states that the non-competition provisions in the agreement are unenforceable under California law. Further, Shah alleges that Jackson Hewitt owes him a duty not to engage in illegal, fraudulent and unfair trade practices and that the attempted enforcement of the non-competition provisions constitute unfair competition.

The plaintiff asserts claims for breach of contract and the covenant of good faith and fair dealing, and unfair trade practices in violation of California’s Unfair Competition Law. The action seeks declaratory and injunctive relief, damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 3:16-cv-00212-MEJ.

Attorneys: Robert S. Boulter for Ibrahim Shah.

Companies: Jackson Hewitt, Inc.

News: FranchisingDistribution CaliforniaNews