Date: 06-24-2016

Case Style: Sari Blackburns Accounty & Tax Services, LLC d/b/a H & J Tax and Accounting, LLC and Sarleen Blackburn v. M & M Tax and Consulting, LLC and Matthew Smith

Case Number: CJ-2015-3509

Judge: Caroline Wall

Court: District Court, Tulsa County, Oklahoma

Plaintiff's Attorney: Grant Carpenter

Defendant's Attorney:

Joel LaCourse

Description: Tulsa, OK - Sari Blackburns Accounty & Tax Services, LLC d/b/a H & J Tax and Accounting, LLC and Sarleen Blackburn sued M & M Tax and Consulting, LLC and Matthew Smith on breach of fiduciary duty theories claiming:

1. Plaintiff, Sari Blackburn's Accounting & Tax Services, L.L.C., dba H & J Tax and Accounting, L.L.C. is an Oklahoma Domestic Limited Liability Company duly authorized to conduct business in the State of Oklahoma with its principal place of business located in Tulsa County, Oklahoma; Plaintiff, Sarlene Blackbum, is a resident of Tulsa County, Oklahoma.

2. Defendant, M & M Tax and Consulting, L.L.C. is an Oklahoma Domestic Limited Liability Company duly authorized to conduct business in the State of Oklahoma with its principal place of business located in Tulsa County, Oklahoma; Defendant, Matthew Smith, is a resident of Rogers County, Oklahoma.

3. All acts and omissions by said Defendants occurred in Tulsa County, Oklahoma.

- Historical Background -

4. On August 3, 2006, Plaintiff, Sarlene Blackburn (hereinafter "Blackburn"), formed Sari Blackburn's Accounting & Tax Services, L.L.C., dba H & J Accounting and Tax Service, L.L.C (hereinafter "H & J").

5. On January 2, 2010, Plaintiffs and Matthew Smith (hereinafter "Smith") executed an Amended and Restated Operating Agreement. Within this Agreement was a Memorandum of Gift, in which Smith was granted 5% interest in H & J in lieu of a pay raise.

6. By 2011, Smith had been gifted additional interest in H & J, bringing his total interest in H & J to 15%.

7. Plaintiff Blackburn went on medical leave starting June 2012, continuing off and on through January 2014, to begin her fight with cancer.

8. On October 8, 2013, Smith formed M & M Tax and Consulting, L.L.C (hereinafter "M & M") by filing the Articles of Organization with the Oklahoma Secretary of State. At this time, Smith was still an employee of H & J, and Blackburn was still on medical leave.

9. While Blackburn was out for medical leave for her fight with cancer, Smith began servicing H& J clients while using H& J assets to service said clients, but billing them through M & M.

10. While Smith was managing H & J during Blackburn's absence, Smith was responsible for doing payroll, but failed to pay payroll taxes to the Internal Revenue Service.


11. Due to Smith's actions, Plaintiffs have paid penalties to the Internal Revenue Service for the non-payment of payroll taxes and have suffered a loss.

12. Smith left employment on July 24, 2014.

COUNT I
Injunction

COME NOW Plaintiffs, Sari Blackburn's Accounting & Tax Services, L.L.C., dba H & J Tax and Accounting, L.L.C., a limited liability company, and Sarlene Blackbum, an individual, by and through counsel, and, for their cause of action in Count I against Defendants, M & M Tax and Consulting, L.L.C., a limited liability company, and Matthew Smith, an individual, state, allege and claim as follows:

13. Plaintiffs incorporate herein the allegations contained in Paragraphs One (1) through twelve (12) hereof as if set out in full at this point.

14. As stated herein, Smith continues to solicit clients of H & J through his company, M & M, under the guise that his company is an iteration of H & J.

COUNT II

Breach of Duty of Loyalty

COME NOW Plaintiffs, Sari Blackburn's Accounting & Tax Services, L.L.C., dba H & J Tax and Accounting, L.L.C., a limited liability company, and Sarlene Blackbum, an individual, by and through counsel, and, for their cause of action in Count II against Defendant, Matthew Smith, an individual, state, allege and claim as follows:

15. Plaintiffs incorporate herein the allegations contained in Paragraphs One (1) through Fourteen (14) hereof as if set out in full at this point.

16. Defendant is in breach of his Duty of Loyalty. Specifically:

A. Defendant has started M & M, a company in competition with H & J, while still an employee and part owner of H & J.

B. Defendant has used his knowledge of the H & J client list to solicit them for his own business, M & M.

C. Defendant used H & J assets and software to service and bill clients for his business, M & M, while employed at H & J.

COUNT III

Breach of Fiduciary Duty

COME NOW Plaintiffs, Sari Blackburn's Accounting & Tax Services, L.L.C., dba H & J Tax and Accounting, L.L.C., a limited liability company, and Sarlene Blackbum, an individual, by and through counsel, and, for their cause of action in Count III against Defendant, Matthew Smith, an individual, state, allege and claim as follows:

17. Plaintiffs incorporate herein the allegations contained m Paragraphs One (1) through Sixteen (16) hereof as if set out in full at this point.

18. Defendant Smith was a managing member of H & J during Blackburn's medical
leave.

19. Defendant Smith had a fiduciary duty to H & J due to his position and responsibilities.

20. On or before October 8, 2013, Defendant Smith has intentionally and maliciously breached his duty to H & J as described herein.

21. Defendant Smith's breach of fiduciary duty has caused and will cause H & J monetary damages, loss of competitive position, goodwill, lost profits, and other damages.
22. Defendant Smith breached his fiduciary duty to Plaintiffs by the following acts:

A. Defendant Smith failed to pay the payroll taxes to the Internal Revenue Service while Blackbum was on medical leave for cancer treatment.

B. Defendant Smith started his own company, M & M, to compete with H & J while remaining employed at H & J.

C. Defendant Smith was servicing H & J clients for the benefit of his own company, M & M, while using H & J equipment and software and diverting the revenue to M & M.

COUNT IV

Conversion

COME NOW Plaintiffs, Sari Blackburn's Accounting & Tax Services, L.L.C., dba H & J Tax and Accounting, L.L.C., a limited liability company, and Sarlene Blackbum, an individual, by and through counsel, and, for their cause of action in Count IV against Defendants, M & M Tax and Consulting, L.L.C., a limited liability company, and Matthew Smith, an individual, state, allege and claim as follows:

23. Plaintiffs incorporate herein the allegations contained m Paragraphs One (1) through Twenty-two (22) hereof as if set out in full at this point.

24. By reason of the conduct alleged herein, Defendants have converted H & J's property by taking H & J electronic client files.

25. By virtue of Defendants' conversion of H & J's property, Plaintiffs are and continue to be irreparably harmed.

26. Furthermore, Defendants' retention and use of H & J's property constitutes transgressions of a continuing nature for which H & J has no adequate remedy at law.

COUNT V

Tortious Interference with Contractual Relations

COME NOW Plaintiffs, Sari Blackburn's Accounting & Tax Services, L.L.C., dba H & J Tax and Accounting, L.L.C., a limited liability company, and Sarlene Blackburn, an individual, by and through counsel, and, for their cause of action in Count V against Defendants, M & M Tax and Consulting, L.L.C., a limited liability company, and Matthew Smith, an individual, state, allege and claim as follows:

27. Plaintiffs incorporate herein the allegations contained m Paragraphs One (1)
through Twenty-six (26) hereof as if set out in full at this point.

28. H & J enjoys valid contractual relationships with numerous clients, which Defendants have unfairly interfered with and wrongfully diverted and solicited.

29. By virtue of his position and dealing with clients while a managing member at H & J, Smith knew of said relationships and diverted them to his new company, M & M. Smith has used this knowledge to service and bill H & J clients through his own company, M & M.

30. Defendants have intentionally and maliciously interfered with H & J's contractual relationships in numerous ways, including but not limited to, mailing letters to current H & J clients and diverting their business to M & M.

31. By virtue of Defendants' tortious interference, H & J is, and continues to be, irreparably harmed.

COUNT VI

Tortious Interference with Business Expectancies

COME NOW Plaintiffs, Sari Blackburn's Accounting & Tax Services, L.L.C., dba H & J Tax and Accounting, L.L.C., a limited liability company, and Sarlene Blackburn, an individual, by and through counsel, and, for their cause of action in Count VI against Defendants, M & M Tax and Consulting, L.L.C., a limited liability company, and Matthew Smith, an individual, state, allege and claim as follows:

32. Plaintiffs incorporate herein the allegations contained in Paragraphs One (1) through Thirty-one (31) hereof as if set out in full at this point.

33. H & J enjoyed valid business relationships with numerous clients, which Defendant Smith has unfairly interfered with and wrongfully solicited.

34. By virtue of his position and dealing with clients while a manager at H & J, Smith knew of said relationships.

35. Defendant Smith has intentionally and maliciously interfered with H & J's business relationships in numerous ways, including but not limited to, his diversion and solicitation of current H & J clients through his company, M & M, while inferring that his company is an iteration of H & J.

36. By virtue of Defendants' tortious interference, H & J is, and continues to be, irreparably harmed.

COUNT VII

Declaratory Judgment

COME NOW Plaintiffs, Sari Blackburn's Accounting & Tax Services, L.L.C., dba H & J Tax and Accounting, L.L.C., a limited liability company, and Sarlene Blackburn, an individual, by and through counsel, and, for their cause of action in Count VII against Defendants, M & M Tax and Consulting, L.L.C., a limited liability company, and Matthew Smith, an individual, state, allege and claim as follows:

37. Plaintiffs incorporate herein the allegations contained in Paragraphs One (1) through Thirty-six (36) hereof as if set out in full at this point.

38. On July 10, 2014, Smith sent in his notice ofresignation from H & J, with his last day of employment being July 24, 2014. Nevertheless, Smith has continued to contact and solicit business from H & J clients, inferring that M & M is an iteration of H & J.
- Prayer for Relief -

WHEREFORE, Plaintiffs pray this Court enter judgment against Defendants, M & M Tax and Consulting, L.L.C., and Matthew Smith, and grant the following relief:

A. Entering a temporary restraining order, preliminary injunction, and/or permanent injunction requiring Defendants, and their agents, or other entities or persons acting on their behalf to immediately:

a. Return immediately all documents and information that are the property of H & J including, without limitation, all original and copied documents, electronic information or derivatives thereof relating in any way to H & J's confidential and proprietary information;

b. Cease any further misappropriation or use of H & J's confidential information;

c. Cease any further communications, interference, diversion or solicitation with H & J's customer relationships, while inferring that M & M is an iteration of H & J; and

d. File with the Court and serve on H & J within thirty (30) days after service on Defendants of such restraining order and/or injunction a report in writing, under oath, setting forth in detail the manner and form of compliance with each of the above and any other requirements.

B. Find in favor of Plaintiffs and Order Defendants reimburse their share (15%) of taxes, interest and penalties assessed against Plaintiffs, together with treble damages, attorneys' fees and costs;

C. Enter judgment against Defendants, M & M, and Matthew Smith, find that Defendant Matthew Smith breached his contract with Plaintiffs by failing to perform the duties set forth in the Operating Agreement and award Plaintiffs all damages incurred as a result of that breach in addition to attorneys' fees and costs;

D. Award Plaintiffs monetary damages for tortious interference m H & J's contractual relations;

E. Find that Defendant Smith tortiously interfered with business expectancies and award Plaintiffs treble damages therefor;

F. Find Defendants liable for the misconduct described herein and for such misconduct otherwise discovered;

G. Award Plaintiffs monetary damages for Defendants' misconduct in an amount to be determined;

H. Award Plaintiffs all exemplary damages allowed by law;

I. Award Plaintiffs all attorneys and other consultant fees allowed by law;

J. All costs of this proceeding and allowed by law; and

K. Award Plaintiffs all other relief this Court deems just and proper.

Outcome: Settled and dismissed.

Plaintiff's Experts:

Defendant's Experts:

Comments: