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Fastax, Inc. v. Jackson Hewitt, Inc.

United States District Court, D. New Jersey

March 20, 2014

FASTAX, INC., Plaintiff,
JACKSON HEWITT, INC., et al. Defendants.


WILLIAM J. MARTINI, District Judge.

Defendant Jackson Hewitt, Inc. filed a motion to dismiss Plaintiff's Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiff FasTax, Inc. opposed and filed a competing motion for declaratory judgment pursuant to Federal Rule of Civil Procedure 57. Specifically, FasTax seeks a declaration that a certain Release agreement is not valid. For the reasons set forth below, Jackson Hewitt's motion is granted in part and denied in part. Plaintiff's motion is denied.


Plaintiff FasTax, Inc. and Defendant Jackson Hewitt, Inc. have a longstanding relationship as franchisee and franchisor, respectively. FasTax has operated Jackson Hewitt income tax return preparation business franchises in Oregon, Idaho, and California.

Jackson Hewitt's franchisees enter into agreements that give the franchisees license to operate Jackson Hewitt locations within a particular geographical area. (Complaint at ¶ 19) These areas are designated as "territories." ( See Complaint at ¶ 19) This case arises out of a dispute over FasTax and Jackson Hewitt's franchise rights and responsibilities regarding several "territories" in Idaho (the "Idaho Territories"). The dispute began in 2009. In short, FasTax alleges that Jackson Hewitt owes FasTax over $1.1 million for acts relating to the Idaho Territories. ( See Opposition Br. at 4)

In the midst of the dispute over the Idaho Territories that began in 2009, Jackson Hewitt filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware on May 24, 2011. (Bankruptcy Petition No. 11-11587-MFW (D. Del)) FasTax appeared as a creditor on the Consolidated List of Creditors. Its address was correctly displayed on that list. (Certification of Eric Blaha, Esq., Exhibit B) Jackson Hewitt sent FasTax proper notices about the filing of the Chapter 11 Bankruptcy. ( See Bankruptcy Dkt. No. 81-1 at Exhibit A, pgs. 301-02) The notices informed Plaintiff that the Bankruptcy Plan ("the Plan") would not give unsecured creditors a right to recovery. (Bankruptcy Dkt. No. 81-1 at Exhibit B) Jackson Hewitt served Plaintiff with actual notice of the Effective Date of the Confirmed Plan. (Bankruptcy Dkt. No. 401 at pg. 295) Plaintiff did not object to the confirmation of the Plan or appear at the hearing. (Jackson Hewitt's Reply at 4)

Jackson Hewitt and its secured lenders agreed to modify the Bankruptcy Confirmation Plan to create a trust to hold a certain amount of cash and estate causes of action for the benefit of the unsecured creditors (the "Trust"). (Moving Br. at 3)

The Bankruptcy Plan became effective on August 16, 2011. (Bankruptcy Dkt. No. 396) The Bankruptcy Confirmation Order precluded all claims arising before the effective date of the Bankruptcy Plan. All of FasTax's claims arose before the effective date of the Plan. ( See Jackson Hewitt's Reply at 6)

Meanwhile, in August 2011, Jackson Hewitt presented FasTax with a new franchise agreement to replace one that had expired in 2009. (Affidavit of Calvin Phillips at ¶ 58) In connection therewith, Jackson Hewitt asked Plaintiff to execute certain release agreements ("The Release"). The Release would extinguish any claims Plaintiff had against Jackson Hewitt independently of the bankruptcy proceedings. Plaintiff placed hand-written notes on the Release, stating that it "ONLY PERTAINS TO OREGON BASED TERRITORIES." (Complaint at ¶ 133) On October 6, 2011, five individual FasTax owners and guarantors sent this modified Release back to Jackson Hewitt.

Thereafter, the Complaint alleges, Jackson Hewitt fraudulently removed FasTax's handwritten notes on the Release so that the Release would pertain to all FasTax's territories. (Complaint at ¶ ¶ 143-146; Affidavit of Calvin Phillips at ¶ ¶ 71-75) Jackson Hewitt admits that it told FasTax via e-mail that the handwritten notes limiting the Release to the Oregon Territories were unacceptable. (Jackson Hewitt's Reply at 5; Reply Affidavit of James Coons ("Coons Reply Aff"), Exhibit A) It is undisputed that Jackson Hewitt sought FasTax's authorization via e-mail to remove the hand-written notes. ( See Jackson Hewitt's Reply at 4-5) Fastax's only reply to this request was an e-mail from a FasTax representative that said, "So just say ok? Or are you going to fax me something to sign?" (Coons Reply Aff., Exhibit A) Jackson Hewitt responded via e-mail, "Your consent via e-mail is sufficient, as we already have the signature pages you previously submitted." ( Id. ) Jackson Hewitt received no further communication from FasTax. Apparently, Jackson Hewitt replaced the pages containing handwritten notes with "clean" copies and sent an executed copy of an unmarked Release back to FasTax. ( See Jackson Hewitt's Reply at 4-5; Opposition Br. at 2) FasTax alleges that it promptly contacted Jackson Hewitt officials to dispute Jackson Hewitt's actions. (Complaint at ¶ 144)

On December 21, 2011, the Trust filed a motion to establish a bar date for filing proofs of claim. (Jackson Hewitt's Reply at 4) On January 18, 2012, the Bankruptcy Court entered an order (the "Bar Date Order"), establishing a February 26, 2012 bar date for filing proofs of claim. (Bankruptcy Dkt. No. 520) The Bar Date Order required Jackson Hewitt to notify all Trust Creditors of the bar date. (Bankruptcy Dkt. No. 520)

On February 6, 2012, twenty days before the bar date, FasTax's counsel sent a letter via certified mail accusing Jackson Hewitt of illegally taking FasTax's business assets in the Idaho Territories as of summer 2010. (Certification of Eric Blaha, Esq., Exhibit P) In spite of the Bar Date Order and the February 6, 2012 letter, Jackson Hewitt sent FasTax no Notice of Bar Date. FasTax filed no notice of claim.

On May 14, 2013, Plaintiff filed a nine-count Complaint. Count 9 sought a declaration that the Release is invalid. Count 5 contained a cause of action under the New Jersey Franchise Act. The other seven ...

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