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H&R Block Enterprises, Inc. v. Short

November 29, 2006

H&R BLOCK ENTERPRISES, INC., PLAINTIFF,
v.
MARY SHORT AND AAA TAX SPECIALISTS, INC., DEFENDANTS.



The opinion of the court was delivered by: Joan N. Ericksen United States District Judge

ORDER

H&R Block Enterprises, Inc. (H&R Block), brought this action against Mary Short and AAA Tax Specialists, Inc., (collectively, Defendants) alleging breach of contract against Short and tortious interference with contractual relations and misappropriation of trade secrets against Defendants. By Order dated March 2, 2006, the Court granted in part and denied in part H&R Block's motion for a preliminary injunction on its breach of contract claim. H&R Block now moves for summary judgment on its breach of contract claim. For the reasons set forth below, the Court grants in part and denies in part H&R Block's motion.

I. BACKGROUND

H&R Block provides tax preparation and related services to companies and individuals throughout the United States. Short was employed as a tax preparer for H&R Block in its St. Paul district for approximately twenty-four years. During her employment, Short executed a Premium Tax Service Tax Professional Employment Agreement (Employment Agreement).*fn1

The Employment Agreement contains covenants restricting Short's ability to compete with H&R Block, solicit H&R Block clients, and solicit H&R Block employees after departure from H&R Block.

On December 31, 2004, Short resigned from H&R Block. Less than one month later, on January 26, 2005, she formed AAA Tax Specialists (AAA). Days or weeks after she left H&R Block, Short created a list of clients that she had serviced while working at H&R Block. From that list, Short created approximately 170 mailing labels. On or about February 9, 2005, she sent postcards to some of her former H&R Block clients. The postcards stated:

After being involved in your personal finances for these years, I wanted to let you know that I have ended my relationship with H&R Block.

I am sorry for any inconvenience to you.

I had too many problems with policies and pricing, as well as personal issues, which caused me to find employment elsewhere.

If you have any questions or need help, please feel free to call me at 651-489-6939.

Mary Short

In 2005, at least 90 out of 127 tax returns prepared at AAA were for Short's former H&R Block clients. In 2006, over half of Short's clients were former H&R Block clients. After the Court issued an injunction restraining Short from soliciting or providing services to certain H&R Block clients, Short turned away approximately forty to forty-five former H&R Block clients. She referred these clients to another tax return preparer, not H&R Block.

II. DISCUSSION

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In determining whether summary judgment is appropriate, a court must look at the record and any inferences to be drawn from it in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The moving party "bears the initial responsibility of informing the district court of the basis for its motion," and must identify "those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party satisfies its burden, Rule 56(e) requires the nonmoving party to respond by submitting evidentiary materials that designate "specific facts showing that there is a genuine issue for trial. " Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

A. Breach of Contract

1. Client Covenants

Section 11 of the Employment Agreement provides: Non-competition Covenant.

Associate covenants that for two (2) years following the vo luntary or involuntary termination of Associate's employment (such period to be extended by any period(s) of violation), Associate shall not, directly or indirectly, provide any of the following services to any of the Company's Clients: (1) prepare tax returns, (2) file tax returns electronically, or (3) provide bookkeeping or any other alternative or additional service that the Company provides within the Associate's district of employment. Company clients are defined as (i) every person or entity whose federal or state tax return was prepared or electronically transmitted by the Company in the Associate's district of employment during the 2003 or 2004 calendar year, and (ii) every person or entity for whom the Company provided bookkeeping or other alternative or additional services within the Associate's district of employment during the 2003 or 2004 calendar year. For purposes ...


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