JTH Tax Inc v. M&M Income Tax Service Inc

Filing 30

ORDER for Discovery guidelines and Discovery Hearing set for 2/28/2013 09:30 AM in G Ross Anderson Jr Court House, 315 S McDuffie St, Anderson before Honorable G Ross Anderson Jr. Signed by Honorable G Ross Anderson, Jr on 2/6/2013. (pbri, )

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH CAROLINA
GREENVILLE DIVISION
JTH Tax, Inc., d/b/a Liberty Tax Service, )
)
Plaintiff,
)
)
v.
)
)
M&M Income Tax Service, Inc.,
)
)
Defendant.
)
________________________________ )

C/A No.: 6:13-cv-00265-GRA

ORDER
(Written Opinion)

This matter comes before the court upon the motion of Plaintiff JTH Tax, Inc.,
d/b/a Liberty Tax Service (“Liberty Tax”) made at a hearing before this Court on
February 6, 2013 to conduct discovery prior to the Rule 26(f) conference of the
parties. Defendant M&M Income Tax Service, Inc. (“M&M Tax”) consented to this
motion. For the reasons stated herein, Liberty Tax’s motion is GRANTED.
Background
Plaintiff Liberty Tax is a corporation organized under the laws of the State of
Delaware with its principal place of business in Virginia Beach, Virginia. Defendant
M&M Tax is a corporation organized under the laws of the State of South Carolina
with its principal place of business in Greenville, South Carolina. Both parties are in
the business of tax return preparation and are competitors in that industry.
In its Complaint, Liberty Tax accuses M&M Tax of false advertising in a series
of television advertisements in violation of the Lanham Act, 15 U.S.C. § 1125(a)(1);
the South Carolina Unfair Trade Practices Act, S.C. Code § 39-5-10 et seq.; and the
common law theory of Unfair Competition. As summarized in Liberty Tax’s Complaint

Page 1 of 5

and motion, the following advertisements run by M&M Tax are at issue and allegedly
contain false or misleading statements:
Advertisement 1
On or about January 10, 2013, M&M Tax ran a television advertisement
(“Advertisement 1”) that contained the following narration:
Tired of waiting on your W-2? M&M Tax can download W-2s from
thousands of companies like yours. With their special process
they may be able to access your W-2 directly from your employer
and get your full refund in as little as three days.
Additionally, the following caption was displayed in large yellow letters during the
narrative portion of Advertisement 1.
• FULL REFUND IN AS LITTLE AS 3 DAYS
Advertisement 2
On or about January 19, 2013, M&M Tax ran a television advertisement
(“Advertisement 2”) that contained the following narration:
M&M Tax is not waiting on the IRS. They’re sending tax returns
now. They have a special way of sending your return, so you’ll be
first in line when the IRS delay is over. Be one of the first through
the gates. With M&M Tax you can get your full refund in as little as
three days.
Additionally, the following captions were displayed in large yellow letters during the
narrative portion of Advertisement 2.
• M&M IS Sending Returns NOW!
• FULL REFUND IN AS LITTLE AS 3 DAYS
Advertisement 3
On or about January 25, 2013, M&M Tax ran a television advertisement
(“Advertisement 3”) that contained the following narration:
With M&M Tax get your full refund in as little as three days with no
credit check and no upfront fees. The IRS is sending out money
and M&M is printing checks up to $9,999. Take your W-2 to M&M
Tax for the biggest and fastest refund allowed by the IRS.

Page 2 of 5

Additionally, the following caption was displayed in large yellow letters during the
narrative portion of Advertisement 3.
• Get A Full Refund in As Little As 3 DAYS
On January 31, 2013 at 10:30 a.m., the Court issued a temporary restraining
order against Defendant M&M Tax, restraining them from continuing to broadcast
these advertisements or any of the representations made within them. See ECF No.
17. However, on February 1, 2013, the Court was informed that one of the prohibited
advertisements appeared on WYCW-TV, local channel 9 after the temporary
restraining order went into effect the day before. The Court issued an order for
Defendant M&M Tax to show cause why they should not be held in contempt of court.
ECF No. 13. A hearing was held on February 6, 2013 at which both parties were
present. Prior to this hearing, the Court received further information that the
commercials were continuing to air. See Decl. of David Moore, ECF No. 19.
At the hearing, after presenting the evidence currently available to both parties,
both parties consented that further discovery may be needed before the pending
preliminary injunction hearing and before any decision is made on the Rule to Show
Cause.
Discussion
According to the Federal Rules of Civil Procedure, “[a] party may not seek
discovery from any source before the parties have conferred as required by Rule
26(f), except ... when authorized by these rules, by stipulation, or by court order.”
Fed.R.Civ.P. 26(d)(1). The Court has discretion when deciding matters related to the
timing and scope of discovery. See Fed.R.Civ.P. 26(b) & (d). When presented with a
motion to commence discovery prior to the Rule 26(f) conference, courts generally

Page 3 of 5

apply a reasonableness or good-cause standard, taking into account the totality of the
circumstances in which the motion is presented. See Dimension Data N. Am., Inc. v.
NetStar–1, Inc., 226 F.R.D. 528, 531 (E.D.N.C.2005); 8A Charles Alan Wright, Arthur
R. Miller & Richard L. Marcus, Federal Practice and Procedure § 2046.1 (3d ed.
2010). Factors considered under the reasonableness test include: “(1) whether a
preliminary injunction is pending; (2) the breadth of the discovery requests; (3) the
purpose for requesting the expedited discovery; (4) the burden on the defendants to
comply with the requests; and (5) how far in advance of typical discovery process the
request was made.” Disability Rights Council of Greater Washington v. Washington
Metro. Area Transit Auth., 234 F.R.D. 4, 6 (D.D.C.2006).
Here, the court finds that the request for expedited discovery is reasonable
under the circumstances and good cause exists for granting the motion. A
preliminary injunction hearing is pending before the Court, and both parties believe
taking depositions and performing some discovery in this case will be beneficial to the
Court in making its determination on the preliminary injunction. Furthermore, further
discovery into the apparent violation of the Court’s temporary restraining order will
serve the interests of justice and aid the Court in deciding on whether Defendant
M&M Tax is in contempt of the Court’s order.
IT IS THEREFORE ORDERED that the motion for leave to conduct discovery
prior to the Rule 26(f) conference is GRANTED. The parties shall have leave to
immediately conduct depositions and serve written discovery regarding the issues
raised in the Rule to Show Cause and Motion for a Preliminary Injunction,and that the
parties shall be required to respond to any written discovery within five (5) calendar

Page 4 of 5

days of service thereof. The parties shall remain required to meet and confer
regarding the scheduling of depositions. However, they shall be entitled to notice of
the same upon five (5) calendar days’ notice. Discovery on these matters shall be
completed by Thursday, February 28, 2013. The parties are instructed to file notice
with the Court if an extension of time is needed.
IT IS SO ORDERED.

February 6, 2013
Anderson, South Carolina

Page 5 of 5