H&R Block Tax Servs. LLC v. Acevedo-Lopez

• Decision Date: 12 February 2014
• Docket Number: No. 13–1387.,13–1387.
• Citation: 742 F.3d 1074
• Court: U.S. Court of Appeals — Eighth Circuit
• Parties: H & R BLOCK TAX SERVICES LLC, Plaintiff–Appellant v. Lutgardo ACEVEDO–LOPEZ, Defendant–Appellee.

742 F.3d 1074

H & R BLOCK TAX SERVICES LLC, Plaintiff–Appellant

v.Lutgardo ACEVEDO–LOPEZ, Defendant–Appellee.

No. 13–1387.

United States Court of Appeals,

Eighth Circuit.

Submitted: Sept. 24, 2013.

Filed: Feb. 12, 2014.

Peter J. Klarfeld, argued, Washington, DC (Douglas M. Weems, Kansas City, MO., Barry L. Pickens, Overland Park, KS., David M. Kight, Kansas City, MO., Iris Figueroa Rosario, Washington, DC, on the brief), for Plaintiff–Appellant.

John Jackson Miller, argued, Kansas City, MO, for Defendant–Appellee.

Before LOKEN, COLLOTON, and BENTON, Circuit Judges.

LOKEN, Circuit Judge.

This is a diversity action between H & R Block Tax Services LLC (“Block”), a Missouri company headquartered in Kansas City, and a Puerto Rican franchisee, Lutgardo Acevedo–Lopez. Block appeals a district court order denying Block's motion for a preliminary injunction requiring Acevedo–Lopez to comply with post-termination covenants in the franchise agreement. The district court denied a preliminary injunction because Block “has not demonstrated that it will suffer irreparable harm if the Court does not issue an injunction.” We have jurisdiction to review “orders ... refusing ... injunctions.” 28 U.S.C. § 1292(a)(1). We conclude the district court's failure to make specific findings and explain its ruling, as Fed.R.Civ.P. 52(a)(2) requires, results in a record that does not “sufficiently inform[this] court of the basis for the trial court's decision on the material issue.” Finney v. Ark. Bd. of Corr., 505 F.2d 194, 212 n. 16 (8th Cir.1974). Accordingly, we vacate the order and remand.

I.

The record on appeal provides only limited background facts, primarily in the pleadings and in contract documents attached as exhibits to Block's Complaint. In August 2007, Block paid $1,000,000 for the client lists of Acevedo–Lopez's existing tax preparation business in Puerto Rico; Acevedo–Lopez agreed to convert his existing office locations into “Block branded franchise offices” operating under a standard Block Franchise License Agreement, as modified by the parties' Conversion Agreement. The Conversion Agreement provided that Block licensed the client lists to Acevedo–Lopez for use “pursuant to” the Franchise License Agreement. Like the parties' documents, we will refer to that latter agreement as the FLA.

In January 2012, Block loaned Acevedo–Lopez $800,000 to acquire client lists and other assets of a tax advisor doing business at four locations that became additional “Approved Locations” under the FLA. On August 21, 2012, Block sent Acevedo–Lopez a Notice of Breach declaring that he owed $531,405.46 “in overdue royalty payments and other charges” and $30,000 under a prior settlement agreement. The Notice stated that, if Acevedo–Lopez did not cure this breach by September 6, “your franchise agreement(s) will be immediately terminated.” On September 11, Block sent Acevedo–Lopez a Notice of Termination stating that, as the overdue amounts remained unpaid, “your FLA is terminated effective as of the date of this letter.” The Notice demanded payment of the January 2012 loan and “all sums due and owing,” immediate delivery to Block of all client lists and data, and compliance with the post-termination covenants in Section 12 of the FLA. Those covenants include a provision that Acevedo–Lopez and his associates shall not for two years “engage in any business which offers any product or service the same as or similar to any Authorized Service in or within 25 miles of the Franchise Territory.”

On November 1, 2012, Block filed this action in the Western District of Missouri, asserting five breach of contract causes of action and seeking compensatory damages and preliminary and permanent injunctive relief. Less than one week later, Block filed its motion for a preliminary injunction ordering Acevedo–Lopez to deliver the client lists and other materials he had wrongfully retained and “to refrain from operating any tax return preparation business within 25 miles of his formerly franchised locations.” Following service on November 30 and brief extensions granted Acevedo–Lopez to hire local counsel and respond, Acevedo–Lopez filed an answer, counterclaim, and opposition to the motion for preliminary injunction. These pleadings (i) denied that he had breached the FLA because he had complied with “verbal instructions” by named “Executive Officers” of Block to prepare “set-off” calculations; (ii) asserted that Block owed him $350,000 under the January 2012 loan agreement; and (iii) argued that Block would not likely suffer irreparable injury because Acevedo–Lopez was still a franchisee and was available “to perform services as a Block Franchisee until the case was resolved.” Eleven days later, without holding an evidentiary hearing, the district court entered the one-page Order being appealed, which stated:

The Court finds that plaintiff is not entitled to a preliminary injunction after carefully considering the Dataphase factors. See Dataphase Sys., Inc. v. CL Sys., Inc., 640 F.2d 109 (8th Cir.1981). Specifically, plaintiff has not demonstrated that it will suffer irreparable harm if the Court does not issue an injunction.

II.

A. On appeal, Block first argues that the district court's Order must be reversed because the court failed to find facts with the particularity required by Rule 52(a)(2). Though the Rule is stated categorically—“the court must ... state the findings and conclusions that support” its grant or denial of a preliminary injunction—we measure compliance by a practical, not a formalistic, standard: “the [district] judge need only make brief, definite, pertinent findings and conclusions upon the contested matters; there is no necessity for over-elaboration of detail or particularization of facts. Merely indicating the factual basis for the ultimate conclusion will suffice in most cases.” Osthus v. Whitesell Corp., 639 F.3d 841, 845 (8th Cir.2011) (quotations and citations omitted). The findings required are not jurisdictional. “An appellate court may render a decision in their absence if it feels that it is in a position to do so. [But] it may not make its own findings of fact.” Finney, 505 F.2d at 212 n. 16.

Applying this permissive standard, the question is whether the district court's cursory statement that Block failed to demonstrate “that it will suffer irreparable harm” absent a preliminary injunction “sufficed.” The court clarified that it had properly considered the four “Dataphase factors,” which are threat of irreparable injury to the movant, the balance between this harm and harm the injunction would inflict, the movant's likelihood of success on the merits, and the public interest. See, e.g., Home Instead, Inc. v. Florance, 721 F.3d 494, 497 (8th Cir.2013). Without question the court then focused on an essential part of that test. “Issuing a preliminary injunction based only on a possibility of irreparable harm is inconsistent with our characterization of injunctive relief as an...