PLAINTIFFS’ MOTION FOR ENTRY OF TEMPORARY RESTRAINING ORDER AND PRELIMINARY 

INJUNCTION AND MEMORANDUM OF LAW IN SUPPORT THEREOF- Page 1

UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TEXAS

WACO DIVISION

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

JTH TAX LLC d/b/a LIBERTY TAX SERVICE,

and SIEMPRETAX+ LLC,

Plaintiffs,

v.

MICKEY WHITE, 

 

And 

NATTY’S TAX SERVICE, 

Defendants.

Case No: 6:20-cv-140-ADA

PLAINTIFFS’ MOTION FOR ENTRY OF TEMPORARY

RESTRAINING ORDER AND PRELIMINARY INJUNCTION 

AND MEMORANDUM OF LAW IN SUPPORT THEREOF

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Plaintiff JTH Tax LLC (f/k/a JTH Tax, Inc.) d/b/a Liberty Tax Service (“Liberty”) and 

SiempreTax+ LLC (“SiempreTax”) (collectively, “Plaintiffs”) move the Court to enter a 

temporary restraining order and preliminary injunction against their former franchisee, Defendant

Mickey White (“White”) and his business Natty’s Tax Service (“Natty’s”) to prevent them from 

continuing to cause irreparable harm to Plaintiffs’ business and goodwill.

I. PRELIMINARY STATEMENT

White operated Liberty and SiempreTax locations in Temple and Killeen, Texas pursuant 

to four franchise agreements (the “Franchised Businesses”). Exs. A-D; Decl. Chelliah ¶¶ 20-23. 

During his time as a franchisee, White breached his Franchise Agreements by, among other things,

operating a competing tax preparation business under the name “Natty’s Tax Service” at the 

principal place of business of his former Liberty franchise at 1400 W Adams Street, Temple, 

Texas, 76504 (TX044). Id. ¶¶ 43-50. After White failed to cure several material breaches of his 

Franchise Agreements, Liberty terminated the Franchise relationship on February 5, 2020. Ex. G. 

In spite of his post-termination obligations under the Franchise Agreement, White

continues to operate the same business out of the same location; use Liberty’s confidential 

information, know-how, goodwill, and intellectual property; solicit former Liberty customers in 

connection with Natty’s; and has failed to turn over all customer lists, files, records, and Plaintiffs’

confidential Operations Manuals. Decl. Chelliah ¶¶ 43-50. These actions violate the Franchise 

Agreement, the Mutual Termination Agreement, and Virginia and Texas law.

Pursuant to Section 10(h) of the Franchise Agreements, Defendant White agreed Liberty 

would have the right to entry of a preliminary injunction enforcing the provisions of the Franchise 

Agreements. See Ex. A §§ 9-10. Thus, Plaintiffs seek preliminary injunctive relief to prevent 

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Defendants from causing further irreparable harm by using Plaintiffs’ trade secrets and 

confidential information in operating a competing business.

II. STATEMENT OF FACTS

A. The Parties

Liberty is a franchisor of Liberty Tax Service® income tax preparation service centers 

located throughout the United States, including the State of Texas. Decl. Chelliah ¶ 5. SiempreTax 

is a wholly owned subsidiary of Liberty, which focuses on providing bilingual tax preparation 

services to Latino customers. Id. ¶ 6. Liberty has grown to be one of the largest tax preparation 

franchises in the United States. Id. ¶ 18. Liberty plays an important role in the local Killeen and 

Temple, Texas economies, as well as nation-wide, with a network of over 12,000 tax preparers.

Id. ¶ 19. Plaintiffs’ busiest time of year is January through April, during which the majority of 

returns are prepared. Id. ¶ 20. 

Liberty grants licenses to franchisees to use its federally-registered trademarks, services, 

marks, logos, and derivations thereof (the “Marks”) and participate in its confidential and 

proprietary business system pursuant to written franchise agreements, which are reasonably tailored 

to protect Liberty’s valuable trade secrets, reputation, goodwill, and other legitimate business 

interests. Id. ¶ 14. Liberty’s Marks include the iconic Liberty Tax logo, the Lady Liberty logo, and 

the phrase “cash in a flash.” Id. ¶ 8; Exs. J-P. The Marks have become associated in the minds of 

consumers with uniform goods and consistently high quality services provided only to persons 

following Liberty’s approved sales, operating methods, and procedures. Id. ¶ 16.

Liberty discloses certain confidential information, including methods of franchise 

operation, customer information, and marketing information, to franchisees through its Operations 

Manual, training manuals and programs. Decl. Chelliah ¶ 15. To protect its confidential information 

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and trade secrets, Liberty requires that its franchisees agree that upon expiration, termination, or 

nonrenewal of a franchise agreement, the former franchise will: (1) never use, disclose, or permit 

the use or disclosure of its confidential information in any manner whatsoever, (2) stop using all 

literature and forms received by Liberty, and (3) deliver to Liberty all customer information, along 

with copies of its Operations Manual and any updates thereto. Id. In order to protect the integrity 

of the confidential information disclosed to its Franchisees, Liberty’s Franchise Agreements 

require the Franchisee to protect confidential information during their term and refrain from using 

it for any other purpose after their term is over. Ex. A § 12 (c).

1

White is a former Liberty franchisee pursuant to three Franchise Agreements2(collectively, 

the “Franchise Agreements”), pursuant to which he owned the Franchised Businesses. Decl.

Chelliah ¶¶ 21-24. White operated the TX044 Franchised Business from 1400 W Adams Street, 

Temple, Texas, 76504 (the “TX044 Franchise Location”) and TX468 from 1103 W Veterans 

Memorial Blvd., Killeen, TX 76541 (the “TX468 Franchise Location). Id. ¶¶ 21, 23. In or before 

January 2020, Natty’s began operations at 1400 W Adams Street, Temple, Texas 76504 and, as a 

result, Defendants are soliciting business from former Liberty customers. Id. ¶¶ 46-49.

B. The Franchise Agreements

The Franchise Agreements are for territories in Texas known as TX044, TX466, and 

TX468 (collectively, the “Territories”). Exs. A-C at Schedule A. Each Franchise Agreement had 

 

1 For the purposes of this instant Motion, Liberty shall refer to provisions in Ex. A when 

citing to the Franchise Agreements. However, the terms, conditions, and provisions of the 

Franchise Agreements which governed Defendants’ ownership and operation of the respective 

Franchise Businesses, are the same in all material respects. See generally Exs. A-C.

2 A copy of the TX044 Franchise Agreement (09/26/2016) is attached as Ex. A; a copy of 

the TX466 Franchise Agreement (04/28/2017) is attached as Ex. B; a copy of the TX468 Franchise 

Agreement (01/14/2019) is attached as Ex. C.

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a five-year term and contained specific terms for renewal. See Ex. A § 2(a), (b). Pursuant to the 

Franchise Agreements, Plaintiffs provided Defendant White with training in related to its franchise 

operation, marketing, advertising, sales, and business systems. Id. § 1; Decl. Chelliah ¶ 26. In 

exchange for Liberty’s grant of a franchise that allowed Defendant White to “operate a tax return 

preparation business using Liberty’s system and Liberty’s Marks within the Territory,” Defendant 

White agreed to certain in-term and post-term obligations set forth in the Franchise Agreements.

Id. ¶¶ 23-39.

Defendant White was required, pursuant to Section 6(g) of the Franchise Agreements, to 

“use the software Liberty provides [and] not use, install or allow to be installed any other federal 

or state personal income tax return preparation or electronic filing software on any computer used 

in the Franchised Business, without Liberty’s prior written consent.” Decl. Chelliah ¶ 28.

Defendant White acknowledged and agreed the non-compete provision of Section 10 of 

the Franchise Agreements are “reasonable, valid and not contrary to the public interest and [that 

he waives] all defenses to the strict enforcement thereof.” Id. ¶ 36; Ex. A § 10(h). Indeed, these 

covenants are necessary to protect Liberty’s legitimate, protectable interest in its franchise 

business, including but not limited to: 

A. Maintaining and protecting Liberty’s goodwill and customer loyalty;

B. Retaining customer relationships;

C. Liberty’s customer lists, customer identification, tax returns, and other confidential 

and trade secret information; and

D. Preserving Liberty’s ability to facilitate the operation of Liberty franchises where 

the Franchise Location is currently located.

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Id. ¶ 35. Defendant White further agreed that “Liberty is entitled to a temporary restraining order, 

preliminary and/or permanent injunction for any breach of duties under any of the non-monetary 

obligations of Sections 9 and 10.” Ex. A § 10(h). 

In pertinent part, White’s post-trial obligations included the following: 

1. To returns all copies of documents, confidential information, and intellectual 

property Id. § 9(g)-(h).

2. To not solicit Liberty customers within 25 miles of the Territory “for a period of 

two (2) years following the termination[] of the Franchised Business.” Id. § 10(b). 

3. To not disclose any of Plaintiffs’ confidential information. Ex. A § 12(a)-(c).

4. To not compete with Plaintiffs within 25 miles of the Territory “for a period of two 

(2) years following the termination[] of the Franchised Business.” Ex. A § 9(k).

Pursuant to the Franchise Agreements, a violation of any of these provisions should be 

enjoined. Ex. A § 10(h).

C. Termination of the Franchise Agreements

Pursuant to Sections 8(c)(i) and 8(c)(ii) Liberty is allowed to terminate the Franchise 

Agreements upon seven days’ notice and opportunity to cure, which includes, inter alia, violations 

of the Franchise Agreements, any other agreement with Liberty or the Operations Manual, or

failure to pay amounts owning that are more than thirty days past due. Decl. Chelliah ¶ 44.

Eventually, Liberty discovered that White had created a new EFIN with Natty’s and had 

been preparing tax returns at the Former Franchise Location. Id. ¶¶ 46-49. Notably, White and 

Natty’s were continuing to use old and altered Liberty Marks, vestiges for Liberty’s trade dress, 

and slogans and programs mimicking Liberty and SiempreTax. Id.; Ex. R. 

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On January 22, 2020, Liberty sent Notices to Cure Default to Defendant White and 

identified the operation of Natty’s as one of several breaches of the Franchise Agreements. Ex. F; 

Decl. Chelliah ¶ 44. Liberty informed Defendant White that he was in violation of, inter alia,

Sections:

 6(s) of the Franchise Agreements for operating an unapproved business;

 8(b)(v) for discontinuing the active operation of the Franchised Business at the franchise 

location; 

 8(c)(ii) for failing to pay monies to Liberty when due; and

 6(h) for failing to maintain a telephone number and/or answering machine.

Ex. F. The Notices specifically reminded Defendant White to cure his breaches of the Franchise 

Agreements, to pay amounts due and owing to Liberty, and to maintain an operational telephone 

and/or answering machine. Id. ¶ 41; Exs. F, G. 

On February 5, 2020, after providing the requisite notices and opportunities to cure, Liberty 

terminated the Franchise Agreements (the “Termination Notice”). Ex. R; Decl. Chelliah ¶ 44. The 

Termination Notice reminded White of his post-termination obligations, inter alia ̧ to: (i) refrain 

from any further use of any of Liberty’s licensed marks, (ii) not identify himself as a current or 

former Liberty franchisee, pay all amounts due and owing to Liberty, (iii) surrender all client files 

and the Operation Manuals, (iii) assign the phone numbers used by and associated with the 

Franchise Location, and (iv) comply with the covenants not to compete and not to solicit for a 

period of two-years. Ex. I; Decl. Chelliah ¶ 45.

D. Breaches of the Franchise Agreements

White’s multiple breaches, include but are not limited to, in-term competition, failure to 

continue active operations, post-term covenant not to compete, and failure to pay amounts due and 

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owing to Liberty, of which $55,194.18 was more than thirty-days past due at the time of 

termination. Ex. G. Despite his post-termination obligations, White’s breaches include 

individually, and in concert with Natty’s, preparing and/or continuing to solicit and prepare tax 

returns for Liberty customers for whom Defendant prepared returns while operating his former 

Franchise Businesses. Decl. Chelliah ¶¶ 43-49. Specifically, White breached the Franchise 

Agreement in several material ways. 

After Liberty terminated the Franchise Agreements, White failed to deliver the original and 

all copies of lists and other sources of Liberty client information containing the names, addresses, emails, or phone numbers of customers who patronized the Franchise Businesses. Id. ¶ 43. White also 

failed to deliver the original and copies of customer tax returns, files, and records, and Liberty’s 

confidential Operations Manual. Id. In doing so, he breached Sections § 9(g)-(h).

Since at least January 2020, Defendants have been offering tax preparation services using 

Liberty’s trade secret and confidential information. Decl. Chelliah ¶¶ 43-49. White unlawfully 

disclosed to Natty’s and Natty’s unlawfully obtained access to and possession of Liberty’s trade 

secrets and confidential information, including but not limited to, Liberty’s customer contact 

information, tax records and files, Operations Manual, and business know-how to establish a 

competing tax preparation business at the TX044 Franchise Location. Decl. Chelliah ¶¶ 46-48.

Additionally, since at least January 2020, Defendants have operated a competing tax 

business and solicited tax preparation business from former Liberty customers at the former 

Franchise Location (within the borders of the territory). Id. ¶¶ 43-49; Ex. H. In doing so, 

Defendants have also used Plaintiffs’ marks. Ex. S. As result, they have violated Sections 9(k) and 

10(b) of the Franchise Agreements and caused Plaintiffs irreparable harm. Decl. Chelliah ¶ 51.

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III. ARGUMENT

The standard for obtaining a temporary restraining order and the standard for obtaining a 

preliminary injunction are, in essence, the same. Pizza Hut, Inc. v. White, Civil Action No. 3:02-

CV-0790-L, 2002 U.S. Dist. LEXIS 19930, at *4 (N.D. Tex. Oct. 18, 2002) (citing Canal Auth. of 

the State of Florida v. Callaway, 489 F.2d 567, 572 (5th Cir. 1974) (en banc)). A preliminary 

injunction under FED. R. CIV. P. 65(a) requires the Plaintiff to establish the following factors: “(1) 

there is a substantial likelihood that it will prevail on the merits; (2) there is a substantial threat that 

irreparable harm will result if the injunction is not granted; (3) the threatened injury outweighs the 

threatened harm to Defendant; and (4) a preliminary injunction or temporary restraining will not 

disserve the public interest.” Pizza Hut, 2002 U.S. Dist. LEXIS 19930, at *5; Janvey v. Alguire, 647 

F.3d 585, 595 (5th Cir. 2011). Plaintiffs’ evidence establishes all of the relevant factors. Accordingly, 

preliminary injunctive relief is appropriate.

A. Liberty is Likely to Succeed on the Merits of Its Claims. 

1. Breach of the Franchise Agreements and Mutual Termination 

Agreement (Counts I, II, and III)

Liberty is likely to succeed on the merits on its contract-based claims, including for 

breaches of the Franchise Agreements and its post-termination provisions. To succeed on a breach 

of contract claim, Virginia law3requires: (1) a legally enforceable obligation of defendant to

 

3 Virginia law governs all claims that relate to or arise out of the Franchise Agreements or 

any of the dealings of the parties hereto. Ex. A § 17(a). Virginia recognizes choice of law and 

forum selection clauses bargained for between parties. Paul Bus. Sys., Inc. v. Canon U.S.A., Inc., 

240 Va. 337, 342, 397 S.E.2d 804 (1990) (stating “where parties to a contract have expressly 

declared that the agreement will be construed as made with reference to the law of a particular 

jurisdiction, we will recognize such agreement and enforce it, applying the law of the stipulated 

jurisdiction”).

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plaintiff; (2) defendant’s violation or breach of that obligation; and (3) injury or damage to plaintiff 

caused by the breach of that obligation. Filak v. George, 267 Va. 612, 619, 594 S.E.2d 610 (2004).

Defendant White signed valid and enforceable Franchise Agreements, and expressly 

agreed to, inter alia, its non-competition, non-disclosure, and non-solicitation covenants. Exs. AD; Decl. Chelliah ¶¶ 21-24. Despite Liberty’s termination of the Franchised Business, Defendants

continued to violate its agreed-upon obligations pursuant to the Franchise Agreements. Exs. E, F; 

Decl. Chelliah ¶¶ 43-49. Following the Mutual Termination Agreement (Ex. E), Defendants have

been soliciting Liberty’s customers whom White served at the Franchise Business(es) and 

preparing and electronically filing income tax returns within twenty-five miles of the Franchised 

Businesses. Decl. Chelliah ¶¶ 43-49.

Specifically, the undisputed evidence will show that White breached the following 

provisions of his Franchise Agreements and Mutual Termination Agreement in five notable ways.

First, White retained customer lists, original and all copies of client files, tax returns, and Liberty’s

confidential Operational Manual. Id. ¶ 41; see also Ex. A § 9(g), (h). Second, White has solicited 

and continues to solicit tax preparation business from former Liberty customers in association with

Natty’s. Decl. Chelliah ¶¶ 43-49; see also Ex. A § 10(d). Third, White has shared Liberty’s 

confidential information, including client lists as part of his operation of Natty’s. Decl. Chelliah 

¶¶ 47-49; Ex. A § 12(a), (c). Fourth, by doing the above, White has continued to compete in 

violation of the Franchise Agreement’s noncompetition clause. 

White may argue that the non-compete clause is void; however, it is not. Consistent with 

the laws of Virginia and this Circuit, the non-competition provisions in the Franchise Agreements 

are narrowly tailored and are necessary to protect Liberty’s goodwill and reputation. Courts have 

repeatedly enforced the post-termination duties contained in Liberty’s franchise agreements and 

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recognized the reasonableness of its non-competition and non-solicitation covenants. See e.g., JTH 

Tax, Inc. v. Fein, No. 2:08cv21, slip op. at 14-15 (E.D. Va. Dec. 22, 2008) aff’d, No. 09-1321, 352 

Fed. Appx. 766 (4th Cir. Nov. 18, 2009) (applying Virginia law in its determination to uphold post 

termination duties in Liberty franchise agreement and two-year, 25-mile non-compete and nonsolicit clauses); Capital One Fin. Corp. v. Kanas, 871 F. Supp. 2d 520, 534-35 (E.D. Va. 2012) 

(upholding five-year non-compete); Fein, No. 2:08cv21, slip op. at 14-15, aff’d, 2009 U.S. App. 

Lexis 25286 (upholding two-year, 25-mile non-compete and non-solicit clauses); Lee, 514 F. 

Supp. 2d at 825 (same); Donofrio, 2006 U.S. Dist. LEXIS 73692, at *13 (same); See Alex 

Sheshunoff, 209 S.W.3d 644, 656 (Tex. 2006) (covenant prohibited employee from providing 

consulting services to employer's clients for one year and from selling competing product for two 

years); Amey v. Barrera, No. 13-01-00130-CV, 2004 Tex. App. LEXIS 360, 2004 WL 63588 (Tex. 

App.--Corpus Christi Jan. 15, 2004, no pet. h.) (covenant prohibited flower shop seller from doing 

any floral business in city where shop was located or in surrounding area for five years); Stone v. 

Griffin Commc’ns and Security Sys., Inc., 53 S.W.3d 687 (Tex. App.--Tyler 2001, no pet. h.) 

(covenant prohibited employee from competing in territory in which employee worked during his 

employment for five years). Courts have also upheld limited duration agreements that “[prohibit] 

competition by persons with access to another business’ confidential information, goodwill, 

customer relationship or competitive business advantage.” JTH Tax, Inc. v. Fein, No. 2:08cv21, 

slip op. at 14-15 (E.D. Va. Dec. 22, 2008) aff’d, No. 09-1321, 352 Fed. Appx. 766 (4th Cir. Nov. 

18, 2009). 

Notwithstanding Liberty’s good faith adherence to the terms of the Franchise Agreements, 

White has been violating his contractual obligations by soliciting Liberty’s customers and 

competing with Liberty within 25 miles of the TX044 and TX466 Territories and White has 

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continued to violate his contractual obligations. Decl. Chelliah ¶¶ 43-49. As such, Liberty will 

succeed on its claim for breach of the Franchise Agreements and its post-termination duties, and 

thus injunctive relief should be granted.

2. Trademark Infringement & Dilution (Counts VI and VII)

Although the Lanham Act establishes separate causes of action under Section 32 and 

Section 43(a), “‘[t]he same tests apply to both trademarks and trade dress to determine whether 

they are protectable and whether they have been infringed, regardless of whether they are 

registered or unregistered.’” Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 236 (5th 

Cir. 2010) (quoting Pebble Beach Co. v. Tour 18 I Ltd., 155 F3d 526, 536 (5th Cir. 1998)). To 

succeed in an infringement claim under the Lanham Act, Plaintiffs must first “establish ownership 

in a legally protectable mark, and second . . . show infringement by demonstrating a likelihood of 

confusion.” Amazing Spaces, 608 F.3d at 235-36 (quoting Bd. of Supervisors for La. State Univ. 

Agric. & Mech. Coll. v. Smack Apparel Co., 550 F.3d 465, 474 (5th Cir. 2008); citing Am. Rice, 

Inc. v. Producers Rice Mill, Inc., 518 F.3d 321, 329 (5th Cir. 2008)).

In this case, White failed to return materials with Plaintiffs’ Marks after Plaintiffs 

terminated the Franchise Agreements on February 5, 2020. Decl. Chelliah ¶ 43. Plaintiffs have 

valuable rights associated with their protected Marks and White not only failed to return all such 

Marks, but he continues to use the Marks at the Franchised Location for his own benefit and that 

of Natty’s in flagrant violation of Section 32 of the Lanham Act at 15 U.S.C. 1114. Specifically, 

White continued to use a Liberty sign, confusingly similar images of the statue of Liberty, and 

slogans and marketing materials that mimic Plaintiffs’ materials. Ex. S; Decl. Chelliah ¶ 8. The 

Defendants have no lawful claim to the Marks and the continued unauthorized use necessarily 

causes unlawful dilution. 

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“Common sense” indicates the continued use of a terminated mark results in confusion.

Ramada Franchise Sys. v. Jacobcart, Inc., Civil Action No. 3:01-CV-0306-D, 2001 U.S. Dist. 

LEXIS 6650, at *7 (N.D. Tex. May 17, 2001) (citing Burger King Corp. v. Mason, 710 F.2d 1480, 

1492 (11th Cir. 1983)). Here, common sense shows that White used materials that were either 

identical to Plaintiffs’ or would confuse customers into believing that they were doing business at 

a Liberty location. See Ex. S.

White used Liberty’s goodwill and reputation, along with its proprietary materials and 

franchise system to lure Liberty’s customers to Natty’s. Decl. Chelliah ¶ 46. Natty’s is not and was 

never a Liberty franchisee. Id. ¶ 47. Natty’s improper use of Liberty’s Marks in the operation of 

Natty’s will likely cause current and prospective customers to become deceived and/or confused 

into believing that the services rendered by Defendants were those of Liberty. It is well settled law, 

especially in franchise relationships, the terminated franchisee cannot continue to operate the same 

type of business as the franchise, using the Marks and indicia of the franchisor, at the former 

franchise location and avoid confusing the public with regard to the products or services offered. 

Pizza Hut, 2002 U.S. Dist. LEXIS 19930; Petro Franchise Sys., LLC v. All Am. Props., Inc., 607 

F.Supp.2d 781, 797 (W.D. Tex. 2009). By failing to return Liberty’s intellectual property,

Defendants intentionally attempted to deceive customers for their own business reasons. As such, 

Liberty submits that it will succeed on the merits of its Lanham Act claims against Defendants.

B. Liberty Suffers Irreparable Harm Without Injunctive Relief.

Plaintiffs have suffered and will continue to suffer irreparable harm if Defendants are

allowed to engage in their pattern of unlawful behavior. A showing of irreparable injury is the sine

qua non of injunctive relief. Tex. First Nat’l Bank v. Wu, 347 F. Supp. 2d 389, 398 (S.D. Tex.

2004). Irreparable harm is neither speculative nor remote, but is actual and imminent. See United

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States v. W. T. Grant Co., 345 U.S. 629, 633 (1953). Although economic losses alone do not justify

a preliminary injunction, the loss of customers and goodwill is an irreparable injury. See Ruscitto

v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 777 F. Supp. 1349, 1354 (N.D. Tex.) (Fitzwater,

J.), aff’d, 948 F.2d 1286 (5th Cir. 1991) (per curiam). Because Defendants’ refusal to adhere to

other post-termination obligations is likely to cause confusion and deception, there is a strong

presumption of irreparable harm. See Lorillard Tobacco Co. v. S&M Brands, Inc., 616 F. Supp.

2d 581, 587 (E.D. Va. 2009) (citing Scotts Co. v. United Indus. Corp., 315 F.3d 264, 273 (4th Cir.

2002)) (“In Lanham Act cases involving trademark infringement, a presumption of irreparable

injury is generally applied once the plaintiff has demonstrated a likelihood of confusion.”). Where,

as here, there is a real possibility of permanent loss of customers to a competitor or the loss of

goodwill due to Defendants’ behavior, the irreparable injury prong is satisfied. Multi-Channel TV

Cable Co. v. Charlottesville Quality Cable Oper. Co., 22 F.3d 546, 552 (4th Cir. 1994); Olivo,

2016 U.S. Dist. LEXIS 17857, at *10 (E.D. Va., Feb. 12, 2016); JTH Tax, Inc. v. Donofrio, 2006

U.S. Dist. LEXIS 73692, at *14 (E.D. Va. 2006); JTH Tax, Inc. v. Lee, 514 F. Supp. 2d 818, 825

(E.D. Va. 2007). See also ServiceMaster Residential/Commercial Servs., L.P. v. Westchester

Cleaning Servs., Inc., 2001 WL 396520, at *3 (S.D.N.Y. Apr. 19, 2001); Jiffy Lube Int’l, Inc. v.

Weiss Bros., 834 F. Supp. 683, 692 (D.N.J. 1993) (allowing the operation of a competing franchise

“at the very site” of former franchise location, “even without” the franchisor’s mark, “would

greatly impair plaintiff’s ability to establish another franchise in the area.”).

It is impossible for Plaintiffs to control their reputation and goodwill when rogue former

franchisees, like Defendants, operate competing businesses using Plaintiffs’ business system

without regard for the terms and conditions of the franchise agreement. Without a preliminary

injunction, Defendants will continue to capitalize on the training, operating system, tools, and the

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knowledge Plaintiffs gave White for the sole purpose of building up his client base and operating

a successful Franchised Businesses. Defendants’ actions will result in the permanent loss of

Plaintiffs’ customers and goodwill. Molex, Inc. v. Nolen, 759 F.2d 474, 478 (5th Cir. 1985)

(“irreparable harm may be shown in customer theft situations.”); Alliantgroup, L.P. v. Feingold,

No. H-09-0479, 2009 U.S. Dist. LEXIS 40140, at *4 (S.D. Tex. May 11, 2009) (“The use of an

employer’s confidential information and the possible loss of customers is sufficient to establish

irreparable harm.”). Any misuse by Defendants of their access to Liberty’s highly confidential, 

sensitive, and lucrative data and information, results in immediate, irreversible harm that damages the 

integrity of Liberty’s franchise system and reputation, which cannot be remedied by money damages.

Decl. Chelliah ¶ 51. Defendants are not only misleading the public by suggesting that they are still 

associated with the Liberty franchise system, but they are also depriving Liberty of the opportunity 

to control the quality of services associated with its franchise. Id. at ¶¶ 42, 51.

Liberty has suffered and will continue to suffer irreparable harm to its franchise system as 

a whole should Defendants be permitted without consequence to operate a competitive business in 

violation of the non-competition and non-solicitation provisions in the Franchise Agreements. The 

value of a Liberty franchise would decline if a franchisee knew that others could, without adverse 

consequence, simply take advantage of Liberty’s franchise system without abiding by the terms of 

a valid franchise agreement. Id. at ¶ 51; TGI Friday's, Inc. v. Great Nw. Rests., Inc., 652 F. Supp. 

2d 763, 772 (N.D. Tex. 2009) (“when a former franchisee continues to pass itself off as a licensed 

franchise, there is usually a substantial threat of irreparable harm to the franchisor.”). In fact, 

franchisees expect that they and other franchisees will uphold their obligations pursuant to their 

respective franchise agreements to protect the goodwill associated with the Liberty brand and 

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business opportunities inherent in operating within the Liberty franchise system.4 Decl. Chelliah 

¶¶ 42, 51. In short, allowing a franchisee to profit from the fruits of a franchisor’s goodwill without 

consequence threatens to undermine and even destroy the franchise model. Id. Liberty suffers 

irreparable harm to its ability to protect its confidential information and customer goodwill through 

Defendants’ violation of the non-competition and post termination provisions in the Franchise 

Agreements, which irrevocably harms Liberty and necessitates injunctive relief. Id.

Without a preliminary injunction, Defendants will continue to capitalize on the training, 

operating system, tools, materials, and knowledge Liberty gave White for the sole purpose of 

operating successful Liberty franchises in Texas. Petland, Inc. v. Hendrix, Case No. 2:04-cv-224, 

2004 U.S. Dist. LEXIS 32591, at *18, 2004 WL 3406089 (S.D. Ohio Sep. 14, 2004) (granting 

preliminary injunction because former franchisees were “operating the pet store in the exact same 

location as the Petland store” and “thus serving customers who, but for the presence of [their] 

store, might otherwise shop at a Petland franchise”). Continuing to hold out as a Liberty franchisee

and soliciting business from former Liberty customers undoubtedly diverts customers to Natty’s.

Decl. Chelliah ¶ 46. Further, White’s retention of Liberty’s confidential Operations Manual and 

other proprietary information allows Defendants to use Liberty’s competitive business model and 

techniques resulting in the permanent loss of Liberty’s customers and goodwill. Id. Defendants’ 

actions will result in irreparable injury which cannot be repaired, retrieved, or atoned for by 

monetary compensation. Thus, injunctive relief should be granted.

C. The Injury to Liberty Outweighs the Threatened Harm. 

 

4 The goodwill generated by a franchise agreement belongs to the franchisor, not its 

franchisees. When a franchise agreement is terminated, goodwill reverts back to the franchisor. 

Economou v. Physicians Weight Loss Centers, 756 F. Supp. 1024, 1032 (N.D. Ohio 1991). The 

sale of a franchise, including attendant customer goodwill, is a protectable interest held by Liberty 

and is not something Defendants have authority to convey to Natty’s or anyone else.

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A court need not balance hardships when the defendant's conduct has been willful. United 

States v. Marine Shale Processors, 81 F.3d 1329, 1359 (5th Cir. 1996). Defendants acted willfully 

by breaching provisions that they repeatedly agreed to abide by, using confidential information, and 

holding themselves out as Liberty-branded shop after their rights to the Marks have been revoked. 

See supra § II. Defendant took these actions with the specific intent to capture the benefits of being 

a franchisee and the attendant national recognition without paying for the right or abiding by the 

terms of the Franchise Agreements. Decl. Chelliah ¶ 46. Therefore, the Court need 

not balance hardships in this case.

Even if the Court were to balance hardships, the harm that Plaintiffs are currently suffering, 

and will continue to suffer if the preliminary injunction is not granted, far outweigh the harm that 

might be caused to Defendants by the granting of the temporary restraining order and preliminary 

injunction. Requiring White to abide by his contractual obligations is necessary to protect Plaintiffs’ 

legitimate, protectable interest in their franchise businesses. The denial of an injunction will 

adversely affect Plaintiffs’ other franchisees that play by the rules and abide by the terms of franchise 

agreements. Bad Ass Coffee Co. of Haw., Inc. v. JH Nterprises, L.L.C., 636 F. Supp. 2d 1237, 1249 

(D. Utah 2009) (“If the non-compete clauses at issue are not upheld in this case, it would be 

reasonable to think that other BACH franchisees might be emboldened to follow in Defendants' 

footsteps.”); Quizno's Corp. v. Kampendahl, No. 01 C 6433, 2002 U.S. Dist. LEXIS 9124, at *22 

(N.D. Ill. May 20, 2002) (a franchisee’s “willful violation of the Agreement sends a message to other 

franchisees that the Agreement does not protect [the franchisor] and may be disregarded at will.”). 

Licensed franchisees have placed their trust in Plaintiffs to protect their substantial investment in the 

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system, and have a significant interest in preventing former franchisees from operating without 

following the franchise’s established policies and procedures. Decl. Chelliah ¶ 47.

A preliminary injunction enjoining Defendants from using Liberty’s confidential 

information, and wrongfully competing with Plaintiffs would not be a significant burden. 

“Generally, a franchisee that has breached the terms of its franchise agreement cannot then complain 

of harm from an injunction preventing further violations of the agreement.” Winmark Corp. v. 

Brenoby Sports, Inc. 32 F. Supp. 3d 1206, 1224 (S.D. Fla. 2014) (finding in favor of the 

Plaintiff/Franchisor because it has “established that [Defendants’] violation of the post-termination 

non-compete agreement will impair its goodwill and reputation in the community, impair its ability 

to maintain a market presence, and erode the pattern and practice of uniform contract interpretation 

and performance within [its] franchised system”); see also Jackson Hewitt Inc. v. Madan, 83 Fed. 

App’x. 417, 420 (3d Cir. 2003) (balance of harms favored granting a tax preparation franchisor's 

motion for preliminary injunction against former franchisee to enforce non-compete duties); 

Jiagbogu v. Popeyes Famous Fried Chicken Corp., 1994 U.S. Dist. LEXIS 10343, at *7 (E.D. La. 

July 22, 1994) (the harm sustained by franchisor should a preliminary injunction not issue 

outweighed harm that might result to former franchisee by issuance). In contrast to the irreparable 

harm suffered by Plaintiffs, any harm to Defendants is self-inflicted and thus cannot be deemed 

irreparable as a matter of law. Caplan v. Fellheimer Eichen Braverman & Kaskey, 68 F.3d 828, 839 

(3d Cir. 1995) (self-inflicted harm cannot be deemed “irreparable”); Winmark Corp., 32 F. Supp. 3d 

at 1224 (no harm where “refus[ed] to abide by their contractual obligations”).

Defendants were aware of the post-termination obligations and restrictions in the Franchise 

Agreements and the Mutual Termination Agreement. Exs. A-E; Decl. Chelliah ¶¶ 21-24. 

Defendants forced Liberty to invoke the restrictive covenants set forth in the Franchise Agreements 

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because of White’s continuing violations of the post-termination obligations. Id. at ¶¶ 43-50.

Defendants cannot in good faith claim that an injunction preventing them from engaging in 

unlawful actions and omissions would be a hardship to them. Defendants will not suffer cognizable

harm if injunctive relief is granted because Liberty’s disclosure of trade secrets and confidential

information harms its ability to compete in the Territories with Defendants. Henkel Corp. v. Cox,

386 F. Supp. 2d 898, 904 and n.2 (E.D. Mich. 2005).

White freely accepted the restrictions under the Franchise Agreements in exchange for the 

benefits received at the time the Franchise Agreements were executed. An injunction compelling 

Defendants to comply with the post-termination covenants would not be a significant burden. It 

would merely be enforcing contractual terms White agreed to in the Franchise Agreements, 

bringing the parties back to the status quo ante. Indeed, Defendants are free to operate a different 

type of business or offer an income tax preparation business anywhere outside the 25-mile radius 

between February 5, 2020 and February 5, 2022. Ex. A § 10(b). After that, they are free to offer 

income tax preparation services anywhere they please. Liberty respectfully submits the balance of 

harms weighs decisively in favor of granting its request for injunctive relief. 

D. Granting Injunctive Relief Does Not Disserve the Public.

The public interest factor also weighs in favor of granting Liberty’s request for injunctive 

relief. Here, the public has dual interests in enforcing restrictive covenants that protect legitimate 

business interests and maintaining the integrity of a franchise system. Henkel Corp., 386 F. Supp. 

2d at 904 (“The public interests in protecting confidential information and in enforcing valid [] 

contracts and the non-confidentiality agreements within weigh in favor of issuing the preliminary 

injunction.”). It is in the public’s best interest to enforce restrictive covenants that protect 

legitimate business interests and maintain the integrity of the franchise system. N. Am. Prods. 

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Corp. v. Moore, 196 F. Supp. 2d 1217, 1231 (M.D. Fla. 2002); Winmark Corp., 32 F. Supp. 3d at 

1224 (finding that “the public interest in the enforcement of contracts weighs in favor of enjoining 

[Defendants] from any further violation of the non-compete provision of the Franchise 

Agreement”); Petro Franchise Sys., LLC v. All Am. Props., Inc., 607 F.Supp.2d 781, 797 (W.D. 

Tex. 2009) (public interest is served by granting franchisor’s application). Indeed, it is in the 

public’s best interest to support contractual enforcement and to prevent competition in violation 

of a valid restrictive covenant. Consumer confusion has occurred and will continue to occur in 

light of the fact that Defendants continue to operate an income tax preparation business at the 

Franchise Location, in direct competition with Plaintiffs. Accordingly, the final factor also weighs 

in favor of granting Liberty injunctive relief. 

E. Defendants Waived the Rule 65(c) Bond Requirement. 

Although Fed. R. Civ. P. 65(c) generally requires the moving party to post bond in order 

to obtain an injunction, a party may waive the right to bond. Gordon v. City of Hous., 79 F. Supp. 

3d 676, 695 (S.D. Tex. 2015) (citing Kaepa, Inc. v. Achilles Corp., 76 F.3d 624, 628 (5th Cir. 

1996)). Additionally, it is within the sound discretion of this court to determine the amount of 

bond, if any. Kaepa, 76 F.3d at 628. A Court may order no bond in appropriate situations. 

ODonnell v. Harris County, 251 F. Supp. 3d 1052, 1159 (S.D. Tex. 2017) (“A federal court may 

waive the bond requirement.”).

In this case, White waived any requirement that Liberty post bond in Section 10(g) of the 

Franchise Agreements. Ex. A § 10(g). In as much as it appears White is directing the activities of 

Natty’s, Plaintiffs submit they should not be required to submit a bond. Since, at least, January 

2020, Defendants have been operating one or more tax preparation services in the TX044 Territory 

and within 25-miles of the TX466 and TX468 Territories. Decl. ¶ 44. White utilizes Natty’s as the 

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vehicle through which he violated and will continue to violate his post-termination obligations.

Defendants should not be allowed to renege on provisions in valid and enforceable agreements.

Accordingly, Liberty should not be required to post bond, especially as this Motion is unlikely to 

result in wrongful enjoinment. 

IV. CONCLUSION

For the foregoing reasons, Liberty respectfully requests application for a Temporary 

Restraining Order and Preliminary Injunction be granted and the Court order the following relief: 

1. Enjoin Defendants from continuing to operate a tax preparation business out of any 

previous Franchise Businesses;

2. Enjoin Defendants from using any telephone number of any former Franchise 

Businesses;

3. Enjoin Defendants from preparing or electronically filing income tax returns and 

offering Financial Products within the Territories or within 25-miles of the Territories set forth in 

the Franchise Agreements; 

4. Enjoin Defendants from providing tax preparation services to any customers served 

by the former Franchise Businesses;

5. Enjoin Defendants from using any confidential information from manuals or 

system provided by Liberty; 

6. Order Defendants to remove any internet references to tax preparation in the 

Territories;

7. Order White to return to Liberty, at his own expense, all materials provided by 

Liberty to Defendants, including, without limitation, all manuals, customer lists, advertising 

material, stationery and printed forms and all other matters relating to the operation of the 

Franchises and/or bearing the Marks;

8. Order White to deliver to Liberty, at its own expense, any original and all copies, 

including electronic copies and media, of lists and other sources of information containing the 

names, addresses, e-mail addresses, or phone numbers of customers who patronized the Franchised 

Businesses, and any original and all copies, including electronic copies and media, containing 

customer tax returns, files, and records; and

9. Order White to transfer the telephone number for the former Franchised Businesses 

to Liberty. 

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Respectfully submitted this May 1, 2020

GORDON REES SCULLY MANSUKHANI, LLP

By: /s/ Kirstie Simmerman

Kirstie Simmerman, Lead Counsel

Texas Bar No. 24083858

ksimmerman@grsm.com

Nathan D. Pearman

Texas Bar No. 24074872

npearman@grsm.com

2200 Ross Avenue, Suite 3700

Dallas, Texas 75201

214-231-4660

214-461-4053 (Facsimile)

Attorneys for Plaintiffs

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CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on May 1, 2020, the foregoing Motion, and Memorandum in 

Support was filed with the Clerk of Court using the CM/CMF system, and copies sent (Including 

a copy of the Proposed Order) via U.S. Mail to the following: 

Mickey White

212 CR 206A

Cameron, TX 76520

Defendant

/s/ Kirstie Simmerman

Kirstie Simmerman

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