April 10, 2026|Franchise Frontlines
April 10, 2026 | U.S. District Court, W.D. Missouri | Unpublished Opinion
Executive Summary
In an unpublished decision, Judge Roseann A. Ketchmark of the U.S. District Court for the Western District of Missouri granted summary judgment in favor of H&R Block, upholding the franchisor’s immediate termination of two Franchise License Agreements (“FLAs”) based on the franchisee’s handling of confidential information. The franchisee alleged that the termination was wrongful, retaliatory, and procedurally improper because it was not afforded an opportunity to cure. H&R Block maintained that the agreements expressly permitted immediate termination under the circumstances presented. The court agreed with the franchisor, concluding that the record established a violation of the agreements’ confidentiality provisions and that the agreements unambiguously allowed termination without notice or cure. The court further rejected the franchisee’s claims for breach of the implied covenant of good faith and unjust enrichment, emphasizing that express contractual rights governed the outcome.
Relevant Background
The dispute arose from two Franchise License Agreements executed in 2019 and 2020, under which Colorado Tax Specialists Co. operated several H&R Block franchised businesses. The agreements permitted the franchisee to provide tax preparation services and certain ancillary offerings within the H&R Block system, subject to defined operational controls, including restrictions on competition and detailed confidentiality obligations.
The FLAs required the franchisee to safeguard “Confidential Information,” which was broadly defined to include client data, system materials, and operational information associated with the franchised business. The agreements further required that any individuals given access to such information—whether employees, agents, or contractors—execute confidentiality agreements in a form prescribed by the franchisor. In addition, disclosure of confidential information to third parties required prior written consent from H&R Block.
The franchisee engaged a third-party entity to assist with bookkeeping services associated with its franchised operations. In connection with that relationship, the franchisee communicated with individuals affiliated with the third party and shared client-related and operational information. It was undisputed that those individuals had not executed the required confidentiality agreements and that the franchisee had not obtained written consent from H&R Block before providing access to that information.
In October 2024, H&R Block terminated the FLAs, citing, among other things, violations of the confidentiality provisions. The franchisee filed suit asserting breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment, and argued that the termination was improper and motivated by retaliatory considerations.
Decision
The court granted summary judgment in favor of H&R Block, concluding that the franchisee could not establish the essential elements of its claims in light of the contractual language and the undisputed facts.
With respect to the breach of contract claim, the court first determined that the franchisee failed to demonstrate that it performed its obligations under the agreements. The court emphasized that the confidentiality provisions were clear and required both execution of appropriate agreements by any individual with access to protected information and prior written consent before disclosure to third parties. The record showed that confidential client data and related materials were provided to individuals who had not executed such agreements and without the franchisor’s written authorization . The court rejected the argument that these individuals were in the process of being onboarded, noting that the agreements contained no exception for preliminary or incomplete onboarding activities.
The court then addressed whether H&R Block breached the agreements by terminating them without notice or an opportunity to cure. It concluded that the termination fell within the express terms of the FLAs. The agreements permitted immediate termination upon certain specified events, including conduct that violated the confidentiality provisions. Because the court found that such a violation occurred, it held that the franchisor was entitled to exercise its contractual right to terminate without further process . The court declined to consider other asserted grounds for termination, finding that a single valid basis was sufficient to support the decision.
The court also rejected the franchisee’s claim for breach of the implied covenant of good faith and fair dealing. Although the franchisee argued that the termination was retaliatory and designed to deprive it of the benefit of its bargain, the court explained that the implied covenant cannot override express contractual rights. Where a contract clearly authorizes a particular action, the exercise of that right does not, standing alone, constitute bad faith. The court concluded that H&R Block acted within the scope of the authority granted by the agreements and that the franchisee had not presented evidence sufficient to establish otherwise.
Finally, the court dismissed the unjust enrichment claim, holding that such equitable remedies are unavailable where an express contract governs the parties’ relationship. Because the FLAs addressed the subject matter of the dispute, the court found that the franchisee could not pursue an alternative quasi-contractual theory.
Looking Forward
This decision underscores the importance of aligning contractual language, system standards, and operational practices in a manner that preserves the franchisor’s ability to enforce brand and system protections. Courts continue to focus on whether the parties’ agreements clearly allocate rights and responsibilities, particularly in areas such as confidentiality, data handling, and third-party access to system information. Where agreements expressly address these issues and are applied consistently, courts are more likely to enforce termination provisions as written.
The case also highlights the operational risks associated with engaging third-party vendors in franchise systems. Even where a franchisee characterizes such relationships as subcontracting or support functions, the relevant inquiry will often turn on whether system controls—such as confidentiality safeguards and approval requirements—were followed. Franchisors may view this decision as reinforcing the importance of clear contractual mechanisms governing access to client data and system materials, particularly where third parties are involved in day-to-day operations.
At the same time, the decision reflects a fact-specific application of the agreements at issue. The court relied on undisputed evidence concerning the franchisee’s conduct and the precise language of the FLAs. As a result, the outcome should be understood in the context of the particular contractual framework and record presented, rather than as establishing a categorical rule applicable to all franchise relationships. Careful drafting and consistent enforcement remain central to managing risk and preserving flexibility in addressing potential system violations.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Partner at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
