A recent case, H&R Block v. Taxes Latino Americanos LLC, demonstrates the importance of venue selection and choice of law provisions. 

Taxes Latino was a Colorado company that offered tax preparation services at five locations in Colorado, including an office on East Colfax in Aurora. In 2012, Taxes Latino sold the business to H&R Block. Pursuant to the purchase agreement, Taxes Latino and its principals agreed not to compete with H&R Block anywhere within a 50 mile radius of the five Colorado offices. In addition, the parties consented to personal jurisdiction in Missouri, agreed that Missouri would be the location of any lawsuit and agreed that Missouri law would govern any dispute.

H&R Block subsequently concluded that Taxes Latino had breached the noncompete and on February 5, 2014 it sent a cease and desist letter to Taxes Latino and its principals advising them that it intended to file a lawsuit if they remained in breach of their noncompete obligations. The lawsuit was filed in the federal district court for the western district of Missouri on February 10. A hearing was held on February 14 on H&R Block’s motion for preliminary injunction. On February 19, the court issued its order granting H&R Block’s motion for preliminary injunction.  

The court’s order is noteworthy for several reasons.

First, the court didn’t hesitate in finding that Taxes Latino and its principals had waived any objection to personal jurisdiction in Misssouri. The opinion doesn’t describe any contact between Taxes Latino and Missouri and it’s possible that the only connection was the purchase contract for the business.

Second, the court didn’t hesitate to enforce the forum selection clause that called for the action to be filed in Missouri. Nor did the court hesitate in enforcing the Missouri choice of law provision. 

Third, the court wasn’t troubled by the fact that it was enjoining conduct in another state. The defendants were enjoined from engaging in competitive activity within 50 miles of the five Colorado locations. There may be times when there are issues about the geographic reach of an injunction but those issues were not considered. 

The case is yet another example of the importance of the venue selection and choice of law provisions often included in noncompete agreeements. Within a few days after the lawsuit was filed, defendants were compelled to travel to another state and defend claims that were to be decided under another’s state’s laws.