Judge dismisses lawsuit against Iowa City tax preparer, employer

Employee's contract under dispute

A lawsuit alleging a former employee of an income tax preparation service in Iowa City violated a two-year non-competition clause in her employment contract has been dismissed by a Johnson County District Court judge.

Ila Zimmerman was sued by Brux Inc., franchise owner of the H&R Block office, for going to work at Taxes & More LLC of Iowa City within months of leaving H&R Block as a part-time tax preparer. Taxes & More also was named as a defendant in the lawsuit.

Zimmerman signed an employment agreement with Brux on Jan. 5, 2011, and the termination date was April 18, 2011.

Zimmerman had worked for Brux in 2010 under a separate but similar contract. She also had been employed by H & R Block, rather than Brux, under previous and similar annual contracts from 2003 to 2009.

Based on the relevant case law, the record of trial evidence, and a review of the contract, Russell concluded the post-termination restrictive covenants and remedies provisions of the agreement are "unconscionable and void as against public policy' and he declined to enforce them.

Russell said the contract had no geographic limitation, meaning Zimmerman would be barred from preparing a tax return for a former Brux client who lives anywhere. Russell held it was an "unreasonable restriction on the future employment" of Zimmerman and was "not reasonably necessary to protect Brux’s business interest."

Brux claimed that Taxes & More had "intentionally and improperly interfered" with Zimmerman's contract. Russell ruled that Taxes & More's hiring of Zimmerman in January 2012 could be considered interference with her contract because her employment with Brux had ended in April 2011.

Judge Douglas Russell ruled the non-competition clause in Zimmerman's contract with Brux was not enforceable and found there was no evidence that Taxes & More has interfered with the Zimmerman's contract with Brux during her period of employment with Brux.

Russell also dismissed Brux's allegation of unjust enrichment against Taxes & More, saying the company never contacted Brux’s clients directly to solicit their business or the business of Zimmerman's previous clients.

"Given the retention rate of former customers of 80 percent for Brux and 65 percent for Zimmerman, the court does not conclude that Taxes & More received the benefit at the expense of Brux," Russell wrote in his ruling.

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