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Reed v. JTH Tax

August 20, 2007

JEROME REED, PLAINTIFF,
v.
JTH TAX, INC D/B/A LIBERTY TAX SERVICE, DEFENDANT.



The opinion of the court was delivered by: Dennis M. Cavanaugh, U.S.D.J.

OPINION

This matter comes before the Court upon motion by JTH Tax, Inc. d/b/a Liberty Tax Service ("Liberty") to transfer venue pursuant to 28 U.S.C. § 1404(a). No oral arguments were heard pursuant to Rule 78 of the Federal Rules of Civil Procedure. After carefully considering the submissions of the parties and for the following reasons, the motion to transfer venue is granted.

I. Background

A. Procedural History

Jerome Reed ("Plaintiff") filed a complaint in the Superior Court of New Jersey, Middlesex County, on November 20, 2006. Plaintiff served the complaint by certified mail on March 29, 2007, and Liberty removed the case to this Court on April 17, 2007. On April 12, 2007, Liberty commenced an action in the United States District Court for the Eastern District of Virginia seeking affirmative relief from Plaintiff.

B. Factual History

Liberty is a Delaware corporation that grants franchises under the Liberty Tax trademarks for the preparation and filing of tax returns on behalf of taxpayers. (Declaration of Cory Hughes ("Hughes Decl."), ¶ 3.) Liberty's principal place of business is Virginia Beach, Virginia. (Hughes Decl., ¶ 3.) Plaintiff entered into a franchise agreements with Liberty and commenced operation of a Liberty Tax Service in New Jersey. (Declaration of Bonnie Via, ("Via Decl."), ¶ 3.)

Before entering a franchise agreement, Liberty gives a Uniform Franchise Offering Circular ("UFOC") to prospective franchisees. (Declaration of June Montalbano, ("Montalbano Decl."), ¶ 5.) The UFOC begins with a note from the Federal Trade Commission to prospective franchise owners telling them to study and read the information in the packet carefully. (Montalbano Decl., Exh.1, 1). In Item 17 of the UFOC, there is a choice of forum provision that states "[a]ll suits must be tried in Virginia (except as modified by Addenda to this Offering Circular)." (Montalbano Decl., Exh 1, 27.) Item 17 also contains a choice of law provision stating "Virginia law governs (except as modified by Addenda to this Offering Circular)." (Montalbano Decl., Exh 1, 27.) Plaintiff returned to Liberty an Acknowledgment of Receipt of UFOC on Februrary 14, 2004. (Montalbano Decl., ¶ 8, Exh. 2.)

Liberty also sends prospective franchisees a franchise agreement and requires them to keep the agreement for five business days before returning a signed copy. (Montalbano Decl., ¶ 6.) The franchise agreement contains a "Governing Law" section which reads, in pertinent part, as follows:

b. Jurisdiction and Venue. In any suit brought against us, including our present and former employees and agents, which in any way relates to or arises out of this Agreement, or any of the dealings of the parties hereto, venue shall be proper only in the federal court located near our National Office (presently the U.S. District in Norfolk, Virginia). . .

(Montalbano Decl., ¶ 11, Exh. 4, 14.) Plaintiff returned to Liberty two Acknowledgment of Receipt of Completed Franchise Agreement on April 1, 2004. (Montalbano Decl., ¶ 8, Exh. 3.)

Plaintiff entered into his first franchise agreement with Liberty on April 26, 2004. (Montalbano Decl., ¶ 10, Exh. 4.) Plaintiff entered into similar franchise agreements with Liberty between 2004 and 2005. (Montalbano Decl., ¶ 10.) After entering his initial franchise agreement, Plaintiff traveled to Virginia Beach for a week long Effective Operations training to learn how to start and run his Liberty Tax Service office. (Hughes Decl., ¶ 7.)

Pursuant to the terms of the Franchise Agreement, Plaintiff opened a Liberty Tax Service Office in Clifton, New Jersey. (Via Decl., ¶ 3.) As a franchisee, Plaintiff "submitted regular reports to Liberty's corporate office in Virginia, corresponded with Liberty's employees in Virginia, received technological, tax, and operational support from Liberty's employees in Virginia and made payments under the Franchise Agreement to Liberty's corporate office in Virginia." (Hughes Decl., ¶ 7.)

On April 4, 2006, Liberty sent a notice to Plaintiff because he allegedly violated the terms of his Franchise Agreements by owing money to Liberty which was more than 30 days past due. (Via Decl., ¶ 4.) Plaintiff did not reconcile his debt that amounted to $10, 626.80. (Via Decl., ¶ 5); (Declaration of Juan Gundran, ("Gundran Decl."), ¶ 5.) Due to this debt, Liberty terminated Plaintiff's Franchise Agreements. (Via. Decl., ¶ 6.) Liberty sent Plaintiff a letter notifying him of the termination and his post-termination obligations. (Via. Decl., ¶¶ 6, 7.) Plaintiff alleges, in his ...


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