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JTH Tax Inc. v. Aime

United States District Court, E.D. Virginia, Norfolk Division

August 4, 2016

JTH TAX, INC., d/b/a LIBERTY TAX SERVICE, et al. Plaintiffs,
GREGORY AIME, et al. Defendants,


          Henry Coke Morgan, Jr. Senior United Slates District Judge.

         This matter is before the Court on Plaintiff JTH Tax, Inc. d/b/a Liberty Tax Service and SicmpreTax LLC's ("Plaintiff[1]") Motion for a Temporary Restraining Order and a Preliminary Injunction Should Not Issue ("the Motion").[2] Doc. 7. In a Report and Recommendation ("R&R"). the Magistrate Judge RECOMMENDED that the Motion be GRANTED IN PART. Doc. 16. Defendants Gregory Aime, Aime Consulting, LLC, Wolf Ventures, Inc.. and Aime Consulting, Inc. ("Defendants") object to the R&R. Doc. 18. For the reasons below, the Court OVERRULES Defendants' objections and ADOPTS the Magistrate Judge's R&R. Doc. 16.

         I. BACKGROUND

         A. Facts[3]

         Plaintiff is a lax preparation company. R&R al 2. Defendants have been franchisees of at least nine (9) Liberty Tax and SiempreTax locations since about 2011. Id. In about January 2016. Plaintiff learned that the Internal Revenue Service ("IRS") revoked the Electronic Filing Identification Number ("EFIN") for Defendants' franchise locations as a consequence of Defendants" activities. Doc. 8 at 3. Defendants were required to maintain the EFIN under their franchise agreements with Plaintiff, Id.; see Doc. 6, Exs. A, B, C, D, E, F, G, H. I. Plaintiff could have terminated the franchise agreements under the terms of the contract, but instead executed a Purchase and Sale Agreement ("PSA") with Defendants and gave them until May 8, 2016 to regain their EFIN and buy back the locations. Doc. 6. Ex. L ¶ 4.

         Plaintiff seeks a temporary restraining order, alleging that Defendants:

(1) refused to assign leases for the franchise locations to the Plaintiff. (2) refused to return confidential proprietary tiles and records, including customer lists. related to the operation of the franchise locations, (3) refused to transfer the franchise assets to Plaintiff (4) failed to return Plaintiffs confidential operations manual and other business information, and (5) indicated their intent to operate a competing tax preparation business using Plaintiffs confidential information.

R&R at 2. Plaintiff also seeks a preliminary injunction. Doc. 7 at 2.

         B. Procedural History

         On June 9, 2016, Plaintiff filed a Complaint in this Court. Doc. 1. On June 22. Plaintiff filed an Amended Verified Complaint to add Aime Consulting. Inc. as a Defendant. Doc. 6. Plaintiff also tiled the Motion on June 22. Hoc. 7. On June 30. 2016. Defendants filed a Response in Opposition to the Motion. Doc. 13. On July 1. Plaintiff filed two declarations in support of the Motion. Docs. 14. 15. Also on July 1. Judge Leonard held a hearing on the temporary restraining order ("TRO") and filed an R&R RECOMMENDING that the Court GRANT IN PART Plaintiffs Motion for a 'PRO as to six (6) of the nine (9) Liberty Tax and SiempreTax franchise locations in Defendants' control. R&R at 6-8; see Id. at 2.[4] The R&R also required objections to be filed within seven (7) days and responses to objections to be filed within seven (7) days. Id. at 9. On July 8. Defendants filed five (5) objections to the R&R. Doe, 18. On July 15, Plaintiff filed a response to Defendants objections. Doe. 20. On July 15. Defendants* counsel waived service for all Defendants.[5] Doc. 22.


         A. Review of the R&R

         On a motion for injunctive relief, the Magistrate Judge may make only a recommendation to the Court. 28 U.S.C. § 636(b)(1)(A). The recommendation has no presumptive weight, and the Court is responsible for making a final determination. Owens ex rel. Metcalf v. Barnhart. 444 F.Supp.2d 485, 488 (D.S.C. 2006) (citing Mathews v. Weber. 423 U.S. 261. 269 (1976)). The district court "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge. The judge may also receive further evidence or recommit the matter lo the magistrate judge with instructions." 28 U.S.C. § 636(b)(1)(C).

         The Court reviews de novo any part of a Magistrate Judge's recommendation to which a party has properly objected. Fed.R.Civ.P. 72(b)(3); Little v. Colvin. No. 2:15cv47, 2016 WL 778026, at *2 (H.D. Va. Feb. 24. 2016). If the Court finds that substantial evidence exists to uphold the Magistrate Judge's findings, the Court must uphold them, even if evidence also exists to support contrary findings. Little. 2016 WL 778026. at *2. When a Court conducts a de novo review, it reexamines all relevant evidence previously reviewed by the Magistrate Judge to determine whether any particular findings of fact raised in the objections are supported by "substantial evidence." 42 U.S.C. § 405(g); Coffman v. Bowen, 829 F.2d 514, 517 (4th Cir. 1987); see also Richardson v. Parales, 402 U.S. 389, 390 (1971). Substantial evidence is "more than a mere scintilla of evidence but may be somewhat less than a preponderance." See Laws v. Celebrezze. 368 F.2d 640. 642 (4th Cir. 1966). Substantial evidence is evidence that a reasonable mind might accept as adequate to support a conclusion and sufficient to withstand a directed verdict were the case before a jury. See Teague v. Califano. 560 F.2d 615. 618 (4th Cir, 1977), overruled by Hyatt v. Heckler. 807 F.2d 376, 378 (4th Cir. 1986).

         B. Preliminary Relief

         Temporary restraining orders and preliminary injunctions are extraordinary equitable remedies, Micro Strategy Inc. v. Motorola. Inc., 245 F.3d 335, 339 (4th Cir. 2001): Eagle On Alliance v. Jewell. No. 2:13ev371. 2013 WL 6188998, at *4 (E.D. Va. Nov. 22. 2013). A temporary restraining order ''may be issued without full notice [to the other parties], even, under certain circumstances, ex parte." Fed.R.Civ.P. 65(b); Hoeehst Diafoil Co, v. Nan Ya Plastics Corp.. 174 F.3d 411, 422 (4th Cir. 1999). Unlike preliminary injunctions, temporary restraining orders are of limited duration, usually lasting fourteen (14) days. Fed.R.Civ.P. 65(b)(2). But cf. Hoecake. 174 F.3d at 422 ("[I] fa temporary restraining order is continued indefinitely, it will be evaluated on appeal as if it were a preliminary injunction."). To receive a temporary restraining order, a plaintiff must show through "specific facts in an affidavit or a verified complaint. . . that immediate and irreparable injury, loss, or damage will ...

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