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H&R Block Tax Services LLC v. Frias

United States District Court, W.D. Missouri, Western Division

January 26, 2018

JUAN FRIAS, Defendant.



         Now before the Court is Plaintiff H&R Block Tax Services LLC's (“H&R Block's”) Motion for Temporary Restraining Order and Preliminary Injunction (doc. 3), as well as H&R Block's Suggestions in Support of that Motion (doc. 4). On January 26, 2018, the Court heard oral arguments on H&R Block's Motion for Temporary Restraining Order. After review of the Motion for Temporary Restraining Order, all briefing and argument of counsel, the Verified Complaint, the record, and applicable law, the Motion for Temporary Restraining Order is hereby GRANTED. The Court will hold a hearing on H&R Block's Motion for Preliminary Injunction on February 9, 2018 at 3:00 p.m.


         Personal jurisdiction over a non-resident defendant may be obtained by consent or by waiver. Whelan Sec. Co. v. Allen, 26 S.W.3d 592, 595 (Mo.Ct.App. 2000). Personal jurisdiction is an individual right, and that right may be waived in advance through a forum selection clause contained in a contract between the parties. Id. Under Missouri law, contractual choice-of-law provisions are enforced. PVI, Inc. v. Ratiopharm GmbH, 253 F.3d 320, 329 (8th Cir. 2001) (citing Rheem Mfg. Co. v. Progressive Wholesale Supply Co., 28 S.W.3d 333, 339 (Mo.Ct.App. 2000)).

         Paragraph 27 of the Franchise License Agreements (“FLAs”) between the parties, attached as Exhibits 1 and 2 to the Verified Complaint, specify that Missouri law applies and further provide for jurisdiction and venue in this forum. Thus, Defendant has stipulated and consented to Missouri law as the choice of law and to personal jurisdiction in this Court.


         The following four factors are properly considered when determining whether a temporary restraining order should issue: (1) the probability that the movant will succeed on the merits; (2) the threat of irreparable harm to the movant; (3) the state of the balance between this harm and the injury that granting the injunction will inflict on other parties; and (4) the public interest. Chevron U.S.A. v. 11500 Manager, LLC, 2009 U.S. Dist. LEXIS 58330, at *6 (W.D. Mo. July 7, 2009); see also Dataphase Sys. Inc. v. C L Sys., Inc., 640 F.2d 109, 113 (8th Cir. 1981) (en banc). Here, every one of the relevant factors supports H&R Block's request for entry of a temporary restraining order to preserve the status quo and to protect H&R Block from ongoing irreparable injury attributable to the conduct of Defendant.

         A. Substantial Likelihood of Success

         H&R Block has shown a substantial likelihood of success on the merits of its breach of contract claim against Defendant. The evidence presented in H&R Block's Verified Complaint demonstrates that Defendant has violated and is actively violating the FLAs' reasonable, enforceable noncompetition and nonsolicitation covenants (collectively, the “Covenants”), by which he has agreed to be bound.

         1. The FLAs and Their Covenants Are Enforceable.

         Under Missouri law, “[n]on-compete agreements are typically enforceable so long as they are reasonable.” Healthcare Servs. of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604, 610 (Mo. 2006) (en banc). The Missouri Supreme Court has found that a noncompetition agreement is valid and enforceable if it: (1) “is no more restrictive than is necessary to protect the legitimate interest of the employer”; and (2) can be “narrowly tailored geographically and temporally.” Id.; see also Osage Glass, Inc. v. Donovan, 693 S.W.2d 71, 74 (Mo. 1985) (en banc) (“Covenants against competition must serve a proper interest of the employer in protecting the good will of a business, and must be reasonably limited in time and space.”).

         Reasonable restrictions are enforceable to protect “the employer's trade secrets or customer contacts.” Healthcare Servs., 198 S.W.3d at 610; see also Superior Gearbox Co. v. Edwards, 869 S.W.2d 239, 247 (Mo.Ct.App. 1993) (“[A] covenant restricting an employee's right to compete must be reasonably necessary to protect the employer's legitimate interests and reasonable as to time and geographic scope.”). The post-termination Covenants in the FLAs protect interests that Missouri recognizes as legitimate and are protectable as a matter of law, including: H&R Block's investment in the parties' transactions; H&R Block's established brand, goodwill, and confidential business information; and H&R Block's interest in preventing Defendant from unfairly using such assets to compete with H&R Block, diverting away its clients, and obtaining an undue advantage for his competing business. See, e.g., Safety-Kleen Sys., Inc. v. Hennkens, 301 F.3d 931, 937 (8th Cir. 2002) (“The Missouri courts have frequently held that . . . substantial and individualized customer contacts are a protectable interest warranting injunctive relief enforcing a covenant not to compete.”); Kessler-Heasley Artificial Limb Co. v. Kenney, 90 S.W.3d 181, 186 (Mo.Ct.App. 2002) (“Stock in customers, also referred to as customer contacts, are a legitimate protectable interest.”). H&R Block also has a legitimate and protectable interest in protecting its client information and client relationships from use by a competitor. See Mid-States Paint & Chem. Co. v. Herr, 746 S.W.2d 613, 617 (Mo.Ct.App. 1988) (“The employer has protectable interests in trade secrets and customer contacts.”); see also Naegele v. Biomedical Sys. Corp., 272 S.W.3d 385, 389 (Mo.Ct.App. 2008) (“In Missouri, the courts have identified two protectable interests of employers: customer contacts and trade secrets.”).

         In this case, the Covenants are also appropriately narrow in both time and geographic reach. First, the noncompetition and nonsolicitation provisions are limited to two years after the termination of the FLAs, subject to tolling for periods of noncompliance. Furthermore, the geographic area of the noncompetition provision is limited to Defendant's former franchise territories and an area within twenty-five miles of those territories. See, e.g., H&R Block Tax Servs. LLC v. Clayton, No. 4:16-cv-00185, 2016 WL 1247205, at *3 (W.D. Mo. Mar. 24, 2016) (Bough, J.) (upholding 2-year, 25-mile non-competition agreement in a franchise agreement); H&R Block Enters. LLC v. Ascher, No. 4:15-cv-00178, 2015 WL 12746197, at *2 (W.D. Mo. Apr. 3, 2015) (Bough, J.) (upholding three- or five-year, 50-mile non-competition agreement under an asset purchase agreement); Kessler-Heasley, 90 S.W.3d at 188 (upholding five-year limit within a 50-mile radius); Watlow Elec. Mfg. Co. v. Wrob, 899 S.W.2d 585, 587-88 (Mo.Ct.App. 1995) (upholding five-year time limit); Champion Sports Ctr., Inc. v. Peters, 763 S.W.2d 367, 368-70 (Mo.Ct.App. 1989) (enforcing a restrictive covenant barring the seller of a business from competing with it for eight years in three counties). The Covenants are also appropriate under Missouri law because they were agreed to as part of a business transaction. See Orthotic & Prosthetic Lab, Inc. v. Pott, 851 S.W.2d 633, 643 n.4 (Mo.Ct.App. 1993) (explaining that “Missouri courts have long recognized a distinction between covenants ancillary to a sale of a business and covenants merely ancillary to an employment contract, showing substantially greater liberality in enforcing the former”).

         The Covenants are valid under Missouri law and will be enforced against Defendant. They are reasonably tailored to protect H&R Block's legitimate interests and are ...

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