2003 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit
11-24-2003 

# J a ck son H ewitt I nc v

. M a d a n P r e c e de n t i al or N on-P r e c e de n t i al : N on-P r e c e de n t i al D ocke t N o . 02-3635

F o l lo w thi s a nd a dd it ion al w ork s at : h tt p://d i g it alc ommon s .l a w . v i l l a no va . e du/thir dc ir c uit_2003

Thi s de c i sion i s br ou gh t t o you for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i l l a no va U nive r sit y S choo l of L a

w Di g it al Re posit or y

. It h as be e n a c c e pt e d for inclusion in 2003 D e c i sion s b y a n author i z e d a dmini s tr at or of V i l l a no va U nive r sit y S choo l of L a

w Di g it al Re posit or y

. F or mor e infor m at ion, p le as e c on t a ct Be n j a min . C a rl s on@l a

w . v i l l a no va . e du . Re c omme nde d C it at ion

" J a ck s on H ew itt I nc v

. M a d a n " (2003). 2003 D e cisio n s . P ape r 97. h tt p://d i g it alc ommon s .l a

w . v i l l a no va . e du/thir dc ir c uit_2003/97NOT PRE CEDENT IAL UNITED STATES COURT OF APPEALS FO R T HE TH IRD CIR CU IT
Nos. 02-3635 & 02-3804
JA CK SO N H EW ITT IN C., a Virgini a Corporati on

v. GOBI ND L. MADAN, an ind ividua l, Appellant

in 02-3635
JACKSON HEWI TT INC, a Virgini a Corporati on Appellant

in 02-3804

v. GOBI ND L. MADAN, an indivi dual App eal from th e Un ited States District Co urt for the Dis tri ct of New Jersey (D.C. Civi l No. 01-cv- 02981) Distric t Judg e: Ho nora ble W illiam H . Wa lls

Argued October 2, 2003 Be for e: R EN DE LL , W EIS and GA RT H, Circu it Judges
.

(Fil ed November 24, 2003)2 Jeffrey A. Zucker Dan ie l L . F io re [ARGUE D] FISHER & ZUCKER 121 Sou th A venu e of th e A rts Suite 1200 Philadelphia, PA 19107 Counsel for

Appellant

/Cross Appel lee Gobind L. Madan Den ni s R. LaF iu ra[ARGUE D] PIT NEY, HARDI N, KI PP & SZUCH P.O. Box 1945 Morristown, NJ 07962 Counsel for

Appellee/

Cross Appellant Jackson Hewitt

Inc.
OPINI ON OF THE COURT
RE ND EL L, Circuit

Judge
. Jackson Hewitt , Inc. (“JHI”) i s a tax pr eparation busi ness that provi des soft ware, electro nic filing , bank prod ucts, eq uipm ent, ad vertising , and p rom otion s ervice s to its fran chis ees , wh o in turn pro vid e tax serv ices to in div idu als u nde r the JH I trad e na me . JHI will not

grant fr anchises to indi viduals who operate other busi nesses t hat offer the
sam e types of servic es as a re pro vided by JHI f ranch ises, and its franc hise ag reem ents customari ly contai n prohibi tions in thi s regar d. Between S eptember 1997 and Jan uary 1999, JHI entered into 16 franchise ag re eme nt s wi th Gob in d L. Mada n ( “Mad an ”) , a ll owi ng Ma da n t o op er at e 1 5 J HI franchi ses in Georgi a and one in Alabama. In September 2000, JHI and Madan entered1 The agreements de fine “Competi ng Tax Business” as “any bus iness t hat offer s tax return preparat

ion, e lectronic fi ling, bank products or other servi ces offere d by Ja ckson He wit t Ta x S erv ice O per ating Syste m.” 3 into fr anchise a greements renewing Madan’s 16 exist ing franc hises and adding two new franchi ses in Georgi a. Each of these agree ments included: (a) a specif ic representat

ion by Mad an that he did not have an interest i n any “Competing Tax B usiness” 1 at the time he entere d into t

he agreement; (b) a covena nt barring Madan from having anydirect or indirect i nteres t in any

Competing Tax Business during t he term of the agreement ( “the In-Term Covenant”) ; (b) a covenant bar ring Madan from preparing indi vidual t ax returns and f rom deve loping any intere st in any C om peting Tax Bu siness w ithin 10 miles o f his franc hise territo ry for a p eriod o f 24 mo nths a fter term ination of the agree men t (“the P ostTerm Covenant”); (c) a pr ovisi on stating that JHI could t erminat e the agr eement if Madan made any “material misrep resentation on ... any written report” or violated the In-T erm Co vena nt; and (d) an expr ess ch oice-o f-law prov ision, statin g that N ew Jersey law wo uld apply in a ny action arising out o f or re lating to the fra nchis e agre eme nt. In May 2001, J HI terminated the fr anchise a greement after an audi t duri ng which JHIal le ge s i t d is co ve re d tha t Ma da n ha d vi ol at ed th e a gr ee men t. Spe ci fi ca ll y , J HI allege s: (a) that w hen M adan entere d into th e initial fra nchis e agre eme nts in 1 997 , he did not dis close hi s int erest in SpeedyTax Refund Loans (“Speedy Tax”), a Competi ng Tax Business; (b) that when Madan added two franchis es to t he existing agree ment in 1999, he repres ented t o JHI that he had sold Speedy

Tax to Robert Fendrick and Vij ay Sl ehria,4

but actuallymaintained an interest in Speedy Tax; and (c) that when the franchise agree men t was renew ed in 2 000 , Ma dan c ontinu ed to a ssert tha t he ha d no interest in Spe edy Ta x, w hen h e did, in fact, ha ve su ch an interest. Madan continued to ope rate t he franchi ses, and JHI fil ed a complaint assert ing that Madan (a) had breached t he In-Term Covenant, which was the pri mary r eason the agreement had be en termi nated, (b) was brea ching the Post-Term Covenant, and (c ) was violat ing the Lanham Act byusing JHI’ s tra de names and servi ce marks without authorizati on. On O ctober 9, 2001, the Distri ct Court granted Madan’s m otion to dismiss with out p rejudic e, hold ing tha t, despite the ch oice-o f-law prov ision, G eorg ia law wo uld applyto the I n-Term Covenant, and the In- Term Covenant was unenforceabl e under Georgia la w because it

did not i nclude anygeographic restrictions. The court permitt ed JHI to ame nd its co mp laint. JHI amended its complaint so as to ba se it s clai ms on Madan’s violation of the franchi se agreement

by hi s materi al misrepresent ations regardi ng his i nteres t in a Competing Tax Business , his breachi ng of the Post -Term Covenant, and his continuing violat ion of the Lanham Act. Madan filed a countercla im for a decl aratory j udgment that he did not breach the fr anchise a greement, clai med breach of contract a gainst JHI, and sought t o dismis s the complaint on t he ground that

the In- Term Covenant was unenf orceable u nder G eorgia law . Both parties filed a pplications for p reliminary injunctions.2 Further , in l ight of J HI’s amendment of i ts Complai nt, we i nquired at oral ar gum en t wh ethe r a ny as pe ct of th e o ri gi na l C omp la in t e ve n s ur vi ve d f orour re vi ew. 5 On N ovem ber 17, 20 01, the D istrict Court denied M adan’s ap plication for a preli minaryinjunct

ion, a nd granted t

he injunc tion s ought by JHI, fi nding that it had establ ished a s ubstantial l ikeli hood of success on the meri ts base d on the mis rep rese ntati ons ma de b y Ma dan . Th e inju nctio n ba rred M ada n fr om , inter alia , usi ng the JHI trade names and service marks, and engaging in any Comp eting Tax Business within 10 miles of his former franchise territori es. Madan appeals the e ntryof the i njuncti on, cont ending that there was insuffi cient evidence of t

he all eged misrepresentat ions and t

hat the Distri ct Court e rred i n enforci ng the Post-Term Covenan t because it i s controlled byGeorgia law. JHI cross-appeals, arguing t hat the Distri ct Court e rred i n its dismis sal of t he In-Term Covenant c laim base d on G eo rg iala w. We have jurisdictio n of M adan ’s app eal un der 2 8 U .S.C. § 129 2(a)(1 ) insof ar as it cha lleng es th e D istrict Co urt’s entr y of th e pr elim inar y injun ction on N ove mb er 1 7, 20 01. However, because t

he dismis sal of t

he In-Term Covenant c laim byentryof the orde r of October 9, 2001 was a non- final order, and it i s not i nextri cablyinter twined with t

he appealabl e order, we do not have jurisdi ction to rule on t his aspe ct of the case, and thus JH I’s cr oss -ap pea l wi ll be d ism issed
. See E.I. DuPont de Nemours & Co. v. Rhone Poule nc Fib er & Resi n Int ermedi ari es, S.A.S. , 269 F.3d 187, 203 (3d Cir. 200 1). 26

We review a decisi on to grant or deny a preli minaryinjunct ion for abus e of disc retio n. See Dam Things from Denmark v. Russ Berri e & Co. , 290 F.3d 548, 556 (3d Cir. 2002) . The factual fi ndings underly ing the de cisi on are revi ewed for clear error , and the fi ndings of l aw are revi ewed de novo
. Id. The establish ed fo ur-pro ng tes t in orde r to dete rmine wh ether to gran t a prelim inary injun ction is: (1 ) wh ether th e mo ving party has show n a rea sona ble prob ability of su ccess on th e me rits; (2) w hethe r the m ovin g par ty wou ld be irre parab ly injured by a de nial of

the prel iminary

reli ef requested; (3) whether grant ing the preli minaryreli ef would resul t in eve n greate r harm to t he non-moving part

y; and (4) wh ethe r gra ntin g th e pr elim inar y relief wa s in th e pu blic i nter est. Dam Things , 290 F.3d at 556. After consi dering document ary evidence s ubmitt ed by J HI and the te sti mony of witnesse s, the District Court concluded that the evidence demonst rated t hat Madan had not divested himself of his interest in Speedy Tax before entering the 2000 franchise agreements , and that SpeedyTax had prepared i ndividualtax ret urns after Madan had entere d the agre ements. Accordingly , the Distri ct Court de termine d that J HI had demonstrated a li kelihood of success on t

he misrepresentat

ion claim. Moving on to t he other f actors , the co urt fou nd th at the h arm th at JH I wo uld su ffer b y having its clientele
con ti nue to be d iv er te d byit s s upp ose d fr anc hi se e ou twe ig hed anyharm th atwoul d co me to Madan from granti ng JHI’s appl ication. Furthermore, the court found that

granti ng JHI’s appl ication would be in t he public interest, as it

would help the public de termine7

wh o w as pre paring tax retu rns fo r it. Bas ed up on o ur rev iew, w e can not sa y that the D istrict Co urt clea rly erred in its findin gs reg arding the m isrepre sentatio n claim . The re is am ple ev idenc e in the record to support t he findi ng that Madan maint ained an i nteres t in Speedy Tax, an organi zati on that fits the fra nchise agreements’ de finit ion of a Competing Tax Busi ness, when he entered into t he agreement, thus committing a materialmisrepr esentat ion. We als o cannot fi nd fault with the Dis tri ct Court’ s conclus ions re garding t he balanci ng of the harms and the public i nteres t. As a r esult , we will affirm the entry of the i njuncti on. M adan also u rges th at in its N ovem ber o rder th e D istrict Co urt imp rope rly enforced the Post-Terminati on Covenant sinc e, havi ng found that the In- Term Covenant
was co ntrolled by Geo rgia law an d unen forceab le, it should have f ound th e Post-Te rm Co vena nt’s “n on-c om pete” clause similarly pro blem atic. Th e D istrict Co urt app arently had little d ifficu lty enforc ing the “non -com pete” clause . It did no t allude to the “ conf lict” issue, and this w as clearly not the focal po int of the injunction hearing. B ut we a re content with the Distri ct Court’s enforcement of this provision, as these ty pes of clauses, limi ted in t

ime and scope, are routinely accepted, and Madan has failed to convince us that any “confl ict” of laws exis ts that would require us t o hold otherwise. Acco rd in gl y , we wil l a ffi rm.8

TO THE CLERK OF COU RT: Please fi le the foregoing opi nion.
/s/M arjorie O . Ren dell Circuit Judge Dated: November 24, 2003