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H&R Block Franchisee Wins Noncompete

A room is lit up at the Holiday Inn Express & Suites in Elizabethtown, Kentucky
A lit Holiday Inn Express room below signage at Elizabethtown, Kentucky

Creative legal thinking didn't impress the Kentucky Court of Appeals.

Marilyn Klee Bradley bought an H&R Block franchise in 2007. Beth Sammet was an employee of the old franchisee, and she stayed on with Bradley until December 2009.

After leaving Bradley's employ, Sammet set up her own office, and sent a letter to clients of Bradley's franchise stating:

I will not be able to prepare or file income tax returns from my Pewee Valley office during the calendar year 2010. Therefore, I have also opened an office in Elizabethtown from which I am available, by appointment, to perform full accounting services, including the preparation and filing of income tax returns.

Sammet then took documents from clients at her Pewee Valley office and mailed them to a post office box in Elizabethtown, KY.  Sammet booked a room at the Holiday Inn Express Elizabethtown, where she would prepare the tax returns using her laptop.

The reason Sammet went to such lengths was to get around a geograpic non-compete which she had signed back in 2007. The non-compete provided for the longer of:

  1. a 2-year period from Bradley's purchase of the franchise (and that time had expired) or
  2. a 1-year period: 'from the date of Covenantors termination of employment with Marilyn Klee Bradley."

The trial court found that Sammet's actions would have violated the terms of the non-compete, but...

The trial court noted that Sammet had been employed by "Marilyn Klee Bradley Inc" and not by Marilyn Klee Bradley. As such, the trial court granted summary judgment in favor of Sammet.

On appeal, the 3-judge panel unanimously reversed the trial court.

Acknowledging that non-compete agreements are to be strictly construed, the appellate court noted the efforts Sammet had made to evade the geographical restrictions, and the court also pointed out that:

Under the trial court's interpretation, Sammet would have never been employed with Bradley, making the language in question extraneous to the contract. We do not believe this was the intention of the parties and we, therefore, disagree with the trial court's interpretation of the noncompetition agreement.

The court went on:

A noncompetition agreement which is admittedly interpreted against the intention of the parties illustrates the presence of an ambiguity... Therefore, if the phrase at issue is ambiguous, summary judgment would still be inappropriate.

It was a taxing ordeal, but Marilyn Bradley will be getting some income from Beth Sammet.

_____________________________

Marilyn Klee Bradley v. Beth Sammet, Ct. App. Ky, September 23, 2011

For Marilyn Bradley: Pence & Ogburn (Louisville KY)

For Beth Sammet: Thomas Roma (Louisville KY)

AttachmentSize
Bradley v Sammett OPN 23 Sept 2011.pdf91.33 KB
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