The Tax Authority, Inc. v. Jackson Hewitt, Inc.

Attorney Eric H. Karp (Karp) represented 154 individual franchisees (plaintiffs) in a breach-of-contract action against Jackson Hewitt, Inc. (defendant). Each franchisee signed an identical retainer agreement providing that any settlement in the matter would be approved by a weighted majority of franchisees. Karp filed a single complaint naming all 154 franchisees as plaintiffs. Four franchisees, including Kenneth Leese, the owner of The Tax Authority, Inc. (Tax Authority) (plaintiff) were selected to form a steering committee to represent the interests of all the franchisees. Karp and the steering committee reached a preliminary settlement agreement with Jackson Hewitt. The steering committee members signed the preliminary agreement, which was conditioned on approval by a weighted majority of the franchisees. Leese subsequently resigned his position on the steering committee and, along with 19 other franchisees, opposed the final settlement agreement. After the final settlement agreement was approved by a weighted majority of franchisees, the trial court granted Jackson Hewitt’s motion to enforce it against all franchisees. Tax Authority appealed, and the appellate division reversed. The New Jersey Supreme Court granted Jackson Hewitt’s petition for certification. At oral argument, Jackson Hewitt informed the court that the terms of the settlement agreement had been satisfied as to all franchisees except for Tax Authority.