JTH Tax, Inc. v. Noor et al, No. 2:2011cv00022 - Document 44 (E.D. Va. 2012)
Court Description: MEMORANDUM OPINION AND ORDER - the court FINDS that Danoo Noor, Naiyana Noor, and Mary Esposito are, in part, in violation of the court's May 11, 2011, Order for failing to return the Plaintiff's files, lists, etc. The court ORDERS Defenda nts Danoo Noor, Naiyana Noor, and Mary Esposito to comply immediately with all provisions of the May 11, 2011, Order. The court GRANTS the Defendants ten (10) days to purge the contempt. Defendants are ordered to submit to the court, within ten (10) days of the date of this Memorandum Opinion and Order, evidence that they have complied with all aspects of theMay 11, 2011, Order. If they have not complied within that time, the court will assess a fine of $100 per day, per Defendant, until t hey do so. JTH is also on notice to notify the court once the Defendants achieve full compliance.In the interest of equity, and to prevent the Defendants from benefitting from their period of non-compliance with the May 11, 2011, Order, the court EXT ENDS the non-compete injunction as it applies to the Bayonne, New Jersey, territory,and within twenty-five (25) miles of that territory, for a period of one year and seven months from April 2, 2012. Accordingly, the Defendants are ENJOINED from prepa ring or filing income tax returns, offering bank products, andsoliciting the patronage of former Liberty customers, within the Bayonne, New Jersey territory and within twenty-five (25) miles of the boundaries of that territory, as specified in paragr aphs (1) and (2) on pages 6 and 7 of the May 11, 2011, Order, until November 2, 2013. The court ORDERS the Defendants to payreasonable attorney's fees to JTH for willfully violating the May 11, 2011, Order. JTH has fourteen (14) days in which to submit evidence of reasonable attorney's fees incurred subsequent to the entry of the May 11, 2011, Order. Signed by District Judge Rebecca Beach Smith and filed on 9/26/12. Copies mailed as directed on 9/26/12.(jcow, )
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FILED UNITED STATES DISTRICT COURT EASTERN DISTRICT OF VIRGINIA Norfolk Division JTH TAX, SEP 26 2012 CLERK. US DISTRICT COURT INC., NORFOLK, VA Plaintiff, ACTION NO. v. 2:llcv22 DANOO NOOR, NAIYANA NOOR, AND MARY ESPOSITO, Defendants. MEMORANDUM OPINION AND ORDER This matter comes To Show Cause Why Fred Olson before Danoo Noor, Should Not Be the court Olson responded to the Naiyana Noor, Held in Civil Tax, Inc. ("JTH") on April 27, 2012. Fred on JTH's Motion for Order Mary Esposito, Contempt, and filed by JTH Neither the Defendants nor motion, and the Defendants have failed to appear, answer, or file any other responsive pleadings during the course of this case. On May 24, 2012, Judge Robert G. Doumar1 ordered Danoo Noor, Naiyana Noor, and Mary Esposito to show cause why they should not be held in civil violating the court's order entered on May 11, 2011, Order"). (ECF No. 21.) On August 31, contempt for 2011 ("May 11, 2012, this court held a Show Cause Hearing on the issue of whether the Defendants 1 Judge Doumar recused himself by Order of June 19, which point the case was reassigned. 2012, at are in violation of the May 11, 2011, Order, under advisement. FINDS that part, For Danoo Noor, the reasons and took the matter discussed Naiyana Noor, The business JTH, Liberty agreements with terminated the is Tax Naiyana Noor franchise breaches. In operating a competing Services, in franchise agreements. violation tax Mary and entered Esposito in January 2011, preparation of The the in also the franchise 2004. for JTH various Defendants business, non-compete and into 2010, the Defendants returns, franchisor doing It agreements tax data, Order. a tax preparation Service. contractual customer court Factual and Procedural History Plaintiff, as the and Mary Esposito are, in in violation of the court's May 11, 2011, I. below, began Pinnacle covenant failed Operations in to Tax the return Manual, as required by the franchise agreements. JTH filed a Complaint on January 22, of Franchise Agreement, Business Conspiracy, and a permanent Tortious and Civil injunction. 2011, alleging Breach Interference with a Contract, Conspiracy. On March 28, It sought damages 2011, the Clerk of Court entered default against the Defendants for failure to file an answer. On May 11, 2011, the court granted default judgment in the amount of $55,066.78, the Plaintiff and enjoined the Defendants from conducting operations in contravention of their contractual obligations. On April 27, 2012, JTH filed a Motion for Order To Show Cause Why the Defendants and Fred Olson (a third-party employee of in the Defendants) Should Not Be Held violating the court's May 11, 2011, Support of the Motion, preparing tax returns patronage of former customer lists returns, files, JTH Operations and court May 25, 2012, Pinnacle Liberty records, Manual alleged and that Tax all for the Defendants are Service, soliciting the retaining and copies, Contempt In its Memorandum in customers, information, May 11, 2011, Order. The at Order. Civil retaining Liberty Liberty customer tax and retaining the all updates, Liberty violation of the Motion, and on in Mem. Supp. at 8. held issued a an hearing order on that directing Danoo Noor, Naiyana Noor, and Mary Esposito to show cause at a hearing to be held on June 19, 2012.2 Because of Judge Doumar's recusal, cause hearing was rescheduled. held the Defendants Show are Cause hearing in violation Defendants did not appear. of On August on the the May 31, issue 11, 2012, of 2011, the show the court whether the Order. The The court found that proper notice of the Show Cause hearing was given to all Defendants, and took the matter under advisement. 2 Fred Olson was omitted from Judge Doumar's June 19, 2012, Show Cause Order. Accordingly, Olson in contempt. this court declines to find Fred II. Civil Contempt Standard of Review The proceeding criminal at contempt. issue "The is basic one for civil, difference rather between than civil and criminal contempt sanctions is that civil contempt sanctions are intended orders *to or coerce to the compensate contemnor the into compliance for complainant with sustained,' losses while criminal contempt sanctions are intended court *to vindicate the authority of the court by punishing the contemnor and deterring future litigants' misconduct . . . .'" Bradley v. Am. Household, Inc., 378 Bait. Cnty., added). F.3d A 373, 913 finding 378 F.2d of (4th Cir. 2004) (quoting Buffington v. 113, (4th Cir. 133 1990)) be (emphasis civil contempt must established by clear and convincing evidence, Bradley, 378 F.3d at 378, but the court need not make a finding that the defendant's actions were willful in order to find him in contempt of court, Jacksonville Paper imposing civil Co., 336 U.S. contempt sanctions, 187, the 191 court McComb v. (1949). Before should afford the alleged contemnor notice and the opportunity to be heard. Union, (1994); Va. United Mine Workers of Am. In re Computer Dynamics, v. Bagwell, Inc., 253 512 U.S. B.R. 693, Int' 1 821, 699 827 (E.D. 2000). To establish civil contempt, by clear and convincing evidence: JTH must prove the following (1) the existence of alleged contemnor knowledge; (2) . . a valid decree of had actual or . that the decree which the constructive was in the movant's 'favor'; (3) . . . that the alleged contemnor by its conduct violated the terms of the decree, and had knowledge (at least constructive knowledge) of such violations; and suffered harm as a Ashcraft v. Conoco, (4) 1397, Inc., (4th Cir. 1405-6 . . 218 (E.D. F.3d 288, Found, v. Va. 1992), finding of contempt, The court to has coerce injunction. 756 301 broad discretion compliance with United States v. (4th Cir. The Cir. 2000) Kittinger Co., aff'd, 38 F.3d 133, 792 136 1989) . enter sanctions Int'l Union, to the fashion terms of Mine Workers, 512 U.S. at an appropriate the permanent Darwin Constr. Co., 873 F.2d 750, If the court elects to impose a fine, fine can be either compensatory or coercive. United movant (4th the court may in the form of a fine or imprisonment. remedy [the] 1994)). Upon a 828. that result. (quoting Colonial Williamsburg F. Supp. . 330 U.S. 258, 303-04 the United States v. (1947). A fine is appropriate "to impress upon the defendants the need to take all steps necessary to carry out all facets of the Court's order." Landman v. Royster, 354 F. Supp. 1292, 1301 (E.D. Va. 1973). The court may grant the contemnor a period of time within which he may fine. purge See, the e.g., contempt SEC v. before Dunlap, beginning 253 F.3d to assess 768, 771 a daily (4th Cir. 2001); JTH Tax, Inc. v. Lee, 540 F. Supp. 2d 642, 647 (E.D. Va. 2007). Ill. Analysis A. Notice of the Show Cause Hearing Prior provide to the hearing. 512 alleged Int'l U.S. B.R. holding a person Union, United 821, 827, (1994); 699 (E.D. Va. 693, FOUND that the re 2000). Defendants and Mine In bench during the August 31, contempt, notice contemnor in Workers Computer the court opportunity of Am. v. Dynamics, must for a Bagwell, Inc., 253 For the reasons stated from the 2012, Show Cause Hearing, received sufficient notice the court regarding the hearing to comport with due process. B. Civil Contempt Motion as to the Defendants As first to the stated from the bench, and second Ashcraft first knowledge of factor, the the May JTH factors has have been met. Defendants 11, 2011, demonstrated had at Order, that With least the regard constructive because they were personally served at the commencement of this lawsuit, and both the court and JTH mailed a copy of the May 11, 2011, Order to the Defendants at their last known mailing addresses.3 As to the second factor, the decree was unquestionably in JTH's favor: court JTH granted money damages and the requested 3 The notices the court mailed were not returned. 6 the equitable relief, including an injunction against the Defendants. See May 11, 2011, Order. Additionally, JTH has met fourth Ashcraft factor. its burden with competing data, tax and prior preparation irreparably injurious to By to the In issuing its May 11, 2011, Order, the court found that the Defendants' information, respect "failure to turn over tax returns] service the operation of a utilizing such records is May 11, 2011, Order at 4. Plaintiff." any continued breach of and [customer post-termination agreement, the harm to JTH clearly remains. Thus, the only issue remaining for the court to decide is whether each of the Defendants knowingly continues to breach the court's orders. that the 2011, JTH has shown by clear and convincing evidence Defendants knowingly continue to breach the May 11, Order in that they have not returned to JTH all customer lists and information, copies, or the Simons, Sept. factor is files, lists, However, Liberty 11, met customer tax returns, 2012, with Operations at 1t 4. respect to Manual. Therefore, the files, records, Decl. and Nannette the third Ashcraft Defendants' retention of etc.. the Plaintiff has failed to meet its burden with regard to the alleged continued violation of the May 11, 2011, Order's injunction to cease tax preparation services within the Bayonne, New Jersey, and Perth Amboy, New Jersey, territories, and within twenty-five (25) miles of each of those territories See May 11, 2011, Order, at 6-7, for one year and seven months. ffl 1-2. JTH not that evidence has demonstrated the Defendants are by presently preparation services within twenty-five Bayonne, New Jersey, territory or territory. At point violations with no regard has clear the JTH and convincing engaged in tax (25) miles of either the Perth Amboy, offered to the Perth JTH has offered New evidence Amboy, New Jersey, of any Jersey, territory. The only Defendants the evidence are Bayonne, still New engaged Jersey, in that he August 6, 2012, business. visited and 350 that Decl. Donald DelPrete, the that September Bayonne, Pinnacle Sept. New Tax 14, 2012, the operations 14, In that declaration, Broadway, observed prove preparation territory is declaration of Donald DelPrete.4 stated tax to in 2012, DelPrete Jersey, on open for at flfl 3-5. He was further stated that he visited the office on September 13, 2012, but at DelPrete 4 At that time attached the office to his was not declaration the Show Cause hearing open. a at flf 6-7. photograph of the on August 31, Id. 2012, the court questioned an earlier declaration by Donald DelPrete filed on August, 28, 2012, which stated that DelPrete visited 350 Broadway, Bayonne, New Jersey on August 6, 2012, and that he observed that Pinnacle Tax was open for business. For the reasons stated from the bench, the court declined to accept this declaration as evidence of the Defendants' ongoing engagement in tax preparation services. 8 exterior of the office and a photograph, showing the inside of the office. Although the the photograph Defendants might countervailing in fact, not Id., Exs. presence of the of the be facts in strongly is tax some suggest 2011, evidence operations that currently engaging in tax violation of the May 11, 1, 2. Pinnacle Tax Service sign in exterior engaged taken from the window, Order. the at that this the time, Defendants are, preparation services For instance, in the store was not open for business at 2:30 P.M. on a Thursday afternoon, Decl. at SISl 6-7, a Donald DelPrete, "For Sale" sign September 13 visit, Sept. in 14, 2012, the id., window Ex. 1. at the time Moreover, and there was of DelPrete's the picture showing the inside of the office does not depict a situation of ongoing operations. Id., Ex. 2. In short, JTH has not proved by clear and convincing evidence that the Defendants are still preparing tax returns at the 350 Broadway, contravention of the May 11, Bayonne, 2011, New Jersey office in Order, or at any other location covered by the May 11, 2011, Order. In Ashcraft summary, the Plaintiff factors by clear and to the May 11, has established each of the convincing evidence with respect 2011, Order's directive to return JTH's customer lists and information, customer tax returns, copies, or the Liberty Operations Manual, violations of the May 11, files, records, and but not for continued 2011, Order's injunction to cease tax preparation operations. Accordingly, the court FINDS Defendants Danoo Noor, Naiyana Noor, and Mary Esposito in civil contempt of the for May files, 11, 2011, lists, Order failing Mary to 2011, (4th Cir. could purge the Plaintiff's Sanctions Defendants Danoo Noor, comply immediately with Order. to purge days 771 court ORDERS Esposito May 11, return etc.. IV. The to the all Noor, provisions See SEC v. Dunlap, 253 and of The court GRANTS the Defendants ten the contempt. 2001) Naiyana the (10) F.2d 768, (granting contemnor one week during which he contempt May 11, 2011, time, the Defendant, have Order. If court until will complied they assess they do so. with have a the all not fine JTH to a court, daily days of the date of this Memorandum Opinion and Order, they submit assess ten that to to Defendants evidence ordered beginning fine). (10) are before aspects complied of $100 within of within per day, the that per is also on notice to notify the court once the Defendants achieve full compliance. A. Extension of Injunctive Relief Finding an extension of a non-compete covenant necessary to prevent numerous a defendant courts have from reaping granted an the extension period, as a form of equitable relief. Co. Rosenbaum, v. 290 S.E.2d 882, 10 profits of of the a breach, protected See Roanoke Eng'g Sales 886-87 (Va. 1982) (holding that prospective enforcement of a non-compete covenant was a proper remedy where the three-year protected period had expired before the court entered judgment in the case); Fein, No. 2:08cv21, an extension "benefit Serv. of the from his Co. v. (affirming slip op. at 16-17 injunction 941 court's F.2d Overholt 1371-72 that 2009) defendant also 1361, decision (Oct. 7, the misfeasance") ; see Travis, trial so JTH Tax, Inc. v. the (8th (granting would not Crop Ins. Cir. 1991) injunction should begin from the date of the jury verdict) ; Premier Indus. Corp. v. 1971) Tex. Indus. (affirming grant the beyond TEKsystems, LEXIS Fastener 9651, of Co., injunction termination Inc. at v. 450 that date Bolton, *28-29 F.2d (D. 448 extended of No. 444, the restricted period original RDB-08-3099, Md. Feb. (5th Cir. 4, 2010 2010) covenant); U.S. Dist. (extending the covenant's period for a period of time equal to the duration of defendant's non-compliance). In the instant case, covenant not to compete. Franchise Agreement, years Decl. an following from the of the the May 11, signed a 2011, termination Jan. 11, of Mem. Order at 2. 25-mile Under the the 2011, injunction so Supp. at 12. 11 franchised business. Ex. 1, JTH that date the Defendants begin to contempt order. two-year, the non-compete covenant was to run for two June Montalbano, extension Defendants it at runs 11. seeks prospectively comply with this court's JTH sought similar relief from the court Default Judgment. Mot. Default J. at 3 in its Motion for (requesting that the non-compete and non-solicitation covenants extend for two years from the date of the entry of the injunction order) . on that motion, covenant two years, for injunction court full a the declined a period to electing of extend the instead one year to and In ruling non-compete grant seven JTH an months. May 11, 2011, Order at 5.5 The Defendants period from August at 5. did that violate the injunction through December 2010. Furthermore, satisfaction not JTH the has failed Defendants to are May 11, 2011, to the prove presently however, that the Defendants injunction in March and April of 2012. April 27, 2012; Decl. Donald DelPrete, were Decl. April court's the The court violating Sarah L. 12, the Order violating injunction by operating a tax preparation service.6 finds, during 2012. the Bosko, Given the court's earlier finding that the Defendants were engaged in 5 The court reasoned that since Defendants did not engage in tax operations during the period from August through December 2010, enjoining Defendants for two years from date of entry of the default judgment "would give Plaintiffs the benefit of a non compete for a term longer than provided for under the Franchise Agreements." Id. 6 JTH has simply not offered sufficient evidence to persuade the court of the veracity of Donald DelPrete's allegation that he visited 350 Broadway, Bayonne, New Jersey on August 6, 2012, and observed that Pinnacle Tax Service was open for business. See supra note 4. 12 tax preparation the services injunction, continued May, to the May 2011, court engage 10, 2011, in is in when it satisfied tax initially issued that the preparation at least through April 2012, Defendants services from in violation of the Court's May 11, 2011, Order. In the interest of from benefitting from May equity, Order, 11, 2011, their and period the to of court prevent within period of Accordingly, filing twenty-five one year the income (25) and seven Defendants tax miles EXTENDS returns, of months are Defendants non-compliance injunction as it applies to the Bayonne, and the that territory, territory, from April from bank the non-compete New Jersey, ENJOINED offering the with for 2, a 2012.7 preparing products, or and soliciting the patronage of former Liberty customers, within the Bayonne, (25) of (1) New Jersey territory and within twenty-five the boundaries of and (2) that territory, as miles specified in paragraphs on pages 6 and 7 of the May 11, 2011, Order, until November 2, 2013. B. Attorney's Fees In fashioning a remedy court enjoys broad discretion, for civil contempt, the district which includes the power to award 7 April 2, 2012, is the most recent date for which the Plaintiff has offered evidence sufficient to sustain a finding that the Defendants were engaged in tax preparation services at the Bayonne, New Jersey, location in contravention of the May 11, See Decl. Sarah L. Bosko, April 27, 2012, at SI 6. 2011, Order. 13 reasonable 256, 259 attorney's (4th prevailing attorneys' Cir. fees has In 1995) . litigant district "the contemner's rise at least Corp., 61 F.3d "the "American Rule" not entitled to loser," Alyeska 240, an 247 Id. in to refusal level the comply Pipeline (U.S. exception courts to the Motors the disobedience of a court order," contempt, Gen. Under 421 U.S. recognized re ordinarily is from the Wilderness Soc'y, Court fees. 1975), where at Serv. Co. is "willful In the context of Fourth Circuit have held that with of obstinance a court's order Omega World Travel, Omega 169, Inc., 710 F. (citing Wright v. Jackson, aff'd, Fein, 905 F.2d 1530 No. 2:08cv21, slip op. The v. 199 (D. Md. evidence in non-compliance was World Travel, 173 522 F.2d 955, (4th Cir. Gas Transmission Corp. 964 F. Supp. Supp. 1990)); (E.D. (E.D. 957-58 Oct. Manqione Enters, 7, records, updates. to 1989), (4th Cir. 1975), 2009); case not merely 710 F. Supp. copies, and Despite Inc. v. Columbia of Turf Valley, L.P., 1996) . this return v. Va. indicates "negligent at 173. that and Rather, the Liberty the being customer Omega the Defendants have tax Liberty Operations notified numerous 14 Defendants' careless." completely and continuously disregarded the May 11, directive Inc. see also JTH Tax, Va. must or recalcitrance before the willful exception is invoked." Travel, v. but the Supreme there 258. collect 2011 Order's returns, Manual times files, and of all their violations, the Defendants come into compliance. the have As such, made no attempt the Defendants' whatsoever to conduct rises to level of "obstinance or recalcitrance." The court, reasonable May 11, submit therefore, attorney's 2011, fees Order. evidence JTH of ORDERS to JTH has the for willfully fourteen reasonable Defendants (14) pay violating days attorney's to in which fees the to incurred subsequent to the entry of the May 11, 2011, Order. V. Conclusion For the foregoing reasons, Noor, Naiyana court's May Plaintiff Noor, 11, and Mary 2011, customer returns, files, records, Manual. The court ORDERS and Mary Esposito to the May (10) 11, days 2011, to for lists in civil failing and to Danoo court contempt. the to the customer tax return Noor, comply immediately with the of and the Liberty Operations Defendants The contempt information, and copies, Order. purge Esposito Order all the court FINDS Defendants Danoo GRANTS If they Naiyana Noor, all provisions the Defendants have not of ten complied within that time, the court will assess a fine of $100 per day, per Defendant, notify the until they do court once the so. All parties are on notice to Defendants achieve full compliance The court EXTENDS the non-compete injunction as it applies with this Memorandum Order. to the Bayonne, New Jersey, territory, 15 and within twenty-five (25) miles of that territory, will ORDER reasonable May 11, the attorney's 2011, attorney's Defendants to fees Order. until November 2, 2013. to JTH pay, JTH jointly willfully submit must for evidence fees incurred subsequent to within fourteen (14) days, and/or the May The court severally, violating of 11, the reasonable 2011, Order if it wishes the court to award these fees. The court DIRECTS the Clerk to forward a copy of this Memorandum Opinion and Order to all parties. IT IS SO ORDERED. 1§L Rebecca Beach Smith United States District Judge £@SREBECCA BEACH SMITH CHIEF UNITED STATES Norfolk, Virginia September ^jg , 2012 16 DISTRICT JUDGE
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