Gordon Rees Scully Mansukhani New Jersey attorneys Peter G. Siachos and JoAnna Doherty, Philadelphia attorney Catherine Slavin, and Virginia attorney Bryan Healy obtained complete dismissal of a multi-count lawsuit filed against their client, one of the largest tax preparation franchisors in the country, in the Eastern District of Virginia. The case, Robinson v. JTH Tax, LLC d/b/a Liberty Tax Service, 2:21cv66 (E.D.Va.), was brought by a Liberty Tax Area Developer alleging various contract and tort claims as a result of his non-renewal after the expiration of his ten-year Area Developer Agreement (“ADA”).
In his Complaint, the plaintiff, a former Area Developer in Arkansas, asserted four counts against Liberty stemming the non-renewal of the ADA: ” (1) breach of contract – wrongful termination and failure to pay franchise fees; (2) breach of contract – failure to provide renewal agreement under the same terms; (3) fraud; and (4) declaratory judgment (seeking a declaration that the plaintiff should be provided an opportunity to renew his ADA upon the same terms).
With respect to his first claim, the court rejected that the ADA’s renewal clause provided for three separate “pathways” for renewal—one providing for renewal of this agreement, one providing for renewal of future agreements, and one providing for new agreements—as the plaintiff claimed. Instead, it interpreted the renewal clause as a whole, requiring as at least one condition precedent to renewal: the provision of written notice to Liberty of an intent to renew at least 180 days prior to expiration. With this in mind, the court acknowledged the plaintiff's admission that any notice of an intent to renew was oral only. It then proceed to reject argument that strict enforcement of this provision was waived because the plaintiff failed to allege facts that such a waiver occurred in compliance with the ADA’s “amendment and waiver clause, which required any amendment be in writing and signed by authorized representatives of each party. In doing so, the court explicitly recognized that this clause specifies wavier cannot be inferred from a party’s conduct. Ultimately, the court concluded that Virginia law treats contractual expiration and termination differently. It held, therefore, that the plaintiff could not succeed on his “wrongful termination” claim because the agreement was expired and non-renewed.
Next, the court dismissed the plaintiff’s claims insofar as he sought payment of e-filing fees under the ADA because he failed to provide any facts supporting that they were to be considered “royalties.”
Third, the court rejected the plaintiff’s argument that he was permitted to renew his ADA on the same terms. Simply put, the court dismissed this claim because no language in the ADA supports it. Here, the court noted provisions expressly outlining terms that could not be changed upon any renewal directly contradicted the claim that all of the provisions implicitly had to remain identical in perpetuity. Having come to this conclusion, the court likewise dismissed the claim for declaratory judgment based on the same theory.
Finally, the court dismissed the plaintiff’s allegations of fraud because they were predicated on the assumption that Liberty falsely informed the plaintiff it was renewing his ADA when it in fact was not. That, however, was directly contradicted by exhibits attached to his complaint, wherein Liberty employees informed him that his ADA had expired.
This matter is one of several substantially similar matters brought against Liberty Tax. Liberty Tax already has obtained complete victories on similar claims in federal court in Illinois (Rocci v. JTH Tax) and before the American Arbitration Association (Pitcairn Franchise Development v. JTH Tax).