United States District Court, S.D. Georgia, Savannah Division
CATHY S. CONAWAY, individually and in her capacity as the CONSERVATOR of BETTY L. SANKS, and SANKS ENTERPRISES, INC. Movant,
H&R BLOCK EASTERN ENTERPRISES, INC., Respondent.
in the United States District Court for the Western District
of Missouri, 4:16-cv-206)
S. Conaway, individually and as conservator for her mother,
joins with Sanks Enterprises, Inc. (SEI) ~ her mother's
tax-preparation business -- in moving to partially quash
subpoenas arising out of H&R Block Eastern
Enterprises, Inc. v. Sanks, CV416-206 (W.D. Mo.)
("Sanks" litigation). MC416-011, doc. 1,
as amended, doc. 2. H&R Block (HRB), which filed
Sanks against her brother for defrauding it and thus
wants SEI-related documents from Cathy, opposes. MC416-011,
doc. 3. For the purpose of this Order, the Court accepts as
true facts taken from the parties' filings.
opposing HRB's subpoenas,  movants' factual recitation
generally dovetails with HRB's facts. Betty L. Sanks
founded SEI, at 5669 Ogeechee Road, Savannah, (the "5669
office") in 1988. She remains its sole shareholder. Doc. 1
at 2. Yet in 2011 Cathy's brother, Claude L. Sanks, Jr.,
represented to HRB that he owned SEI (d/b/a
"Sanks Income Tax and Business Services"). Doc. 3
at 5. Claude told that lie to secure a 2011 agreement with
HRB to convert "his" business into an HRB
franchise. Under that agreement, he also acquired a second
location across the street, at 5710 Ogeechee Road (the
"5710 office"). Id.
while HRB believed that he operated both locations as an HRB
franchise. Doc. 3 at 5. But at some point Cathy, after
noticing HRB trade dress showing up at the 5669 office, asked
Claude what he was doing. She challenged his ownership
assertions. He lied to her and claimed that he HRB-franchised
only the 5710 office. Id. at 6. He never disclosed
that lie to HRB, but instead relocated the 5710 office a few
miles away "to improve visibility." He assured HRB
that he would move the 5569 office as well, since that
building was being sold or demolished. Id. at 6. He
thus convinced HRB to pay him $1 million to sell the entire
business, operating from both offices, to it. Id.
Claude never moved the 5569 office, and that office never
closed. Doc. 3 at 6. HRB ultimately confronted Claude, who
further misled it by reassuring HRB that he would transfer
the rest (Betty's portion) of the business to it, but
never did. Doc. 3 at 7. HRB thus has received only a fraction
of what it paid Claude for (i.e., clients and
revenues), and has alleged that much of it remains under
Cathy's control. And Cathy continues to operate (in
competition with HRB) the 5569 office to this day.
Id. HRB thus sued Claude (Sanks) for fraud,
etc., and presses its subpoena against the movants.
Id. at 8-9.
asserts additional facts which, if they don't suggest
"familial collusion, " certainly demonstrate that
Cathy, who has continued operating the 5569 office as
"Sanks Income Tax and Business Services" (thus, an
HRB competitor), doc. 3 at 8-9, is in a position to assist
her brother's efforts by in bad faith stonewalling HRB.
HRB underscores the undisputed events timeline here:
[Cathy] amended the state registration for [SEI] to name her
mother as CEO and herself as CFO, replacing her brother, and
claimed to H&R Block that [Claude] had never owned the
Business at all. H&R Block subsequently filed suit
against [Claude] for, inter alia, defrauding H&R
Block, failing to deliver the Business as promised, and
breaching the parties' contracts ([Sanks]).
at 2-3 (footnote added). HRB also points out that
while [Cathy] is not named as a party to [its Sanks
case against Claude], she, the Business she is running, and
the entity through which she is operating (i.e.,
Sanks Enterprises d/b/a Sanks Income Tax and Business
Services) are central to the dispute being litigated.
Moreover, [Cathy] and Sanks Enterprises/Sanks Income Tax and
Business Services are in a unique position to provide
information and materials that are both directly relevant to
the Lawsuit and not available to H&R Block from other
sources. Accordingly, H&R Block served the Subpoenas to
obtain this discovery.
Id. at 3.
knows that HRB accuses Claude of lying to it about his sole
SEI-ownership claims that included the 5669 location. Doc. 1
at 3. She also knows that at some point he entered into an
"Asset Purchase Agreement" (APA) with HRB, and that
HRB understood the APA to mean that Claude was selling it
"the entire tax preparation business at the 5669
Ogeechee Road location where [SEI] maintains its offices.
..." Id. at 3. But she says she only learned of
this in January 2015, when she received a cease and desist
letter from HRB's counsel. Id.
this Court Cathy stands on her claim that Claude had no
authority to sell any of SEI to anyone, and that she was
unaware of such activity. Doc. 1 at 3-4. In fact, she claims,
she had her lawyer demand an explanation from Claude, and
further demand that he rectify the situation "to make it
clear to HRB that he had conveyed no assets of the Company
and was without the authority to do so." Id. at
4. She even asked to be part of Claude's attempts to
resolve the matter with HRB, but was excluded. I ...