APPELLATE DIVISION DENIES LIBERTY TAX SERVICE APPEAL

Alexia Agnant v. JTH Tax, L.L.C., D/B/A Liberty Tax Service, Index No: 22-1229-cv

The Firm represents Defendants, Alexia Agnant and her wholly-owned New York corporation, Demetress Corporation (together “Agnant”), former franchisees of Plaintiff JTH Tax, L.L.C., D/B/A Liberty Tax Service (“Liberty”).  In March 2022, Liberty terminated Agnant’s franchise agreements, claiming that Agnant had violated tax laws.  Shortly thereafter, in April 2022, both Agnant and Liberty brought lawsuits against the other in the Eastern District of New York, with Liberty being designated the Plaintiff after the cases were consolidated.  In the District Court, Liberty moved for a preliminary injunction, seeking, among other things, to bar Agnant from operating her tax businesses within twenty-five miles from her former franchise locations, to bar Agnant from providing tax services to her former clients, and to compel Agnant to give Liberty the leases to her tax businesses.  The matter went to an evidentiary hearing, and after the hearing, the trial court denied Liberty’s motion for a preliminary injunction, holding that Liberty was required to show a clear and substantial likelihood of success on the merits and make a strong showing that it would suffer irreparable harm if the injunction were not granted.  The District Court ruled that Liberty satisfied neither requirement, finding that Liberty failed to make a strong showing that it had grounds to terminate the franchise agreements, and therefore that it failed to show the was likely to succeed on the merits, and also failed to show that it would suffer irreparable harm without the injunction.

Subsequently thereafter, the Liberty appealed to the United States Court of Appeals for the Second Circuit (the “Appeals Court”), which affirmed the trial court’s decision.  Finally, on March 13, 2023, the Appeals Court AFFIRMED the decision of the trial court, ruling that the trial court did not exceed its discretion in denying the injunction, and noting that Liberty “failed to submit a single return prepared by Agnant that violated the ‘requirements of the law or of the franchise agreement,’” and that Liberty did not present any evidence that Agnant’s businesses would cause it irreparable harm.  The Appeals Court further rejected Liberty’s argument that there is a “general rule” that breach of a non-compete agreement compels a finding of irreparable harm, making it clear that there is no “automatic assumption” of irreparable harm, but that it “depends on the factual particulars in each case.” (citing Tom Doherty Assocs., Inc. v. Saban Ent., Inc., 60 F.3d 27, 38 (2d Cir. 1995) and Baker’s Aid, Inc. v. Hussmann Foodservice Co., 830 F2d 13, 15 (2d Cir. 1987)).  Michael J. Borrelli, Alexander T. Coleman, and Sharan R. Abraham handled the appeal on behalf of the firm.