H & R Block Tax Services LLC v. Deanna Franklin
691 F.3d 941
8th Cir.2012Background
- H & R Block Tax Services LLC sought to terminate two California Franklin franchise agreements; Franklin challenged non-renewal.
- Franchise agreements dated back to 1975, assigned to Franklin in 1990, with identical duration provisions.
- Provisions: initial term five years, automatic five-year renewal terms, and Franklin could terminate at end of term with at least 120 days’ notice; Block could terminate only for cause.
- In 2010, Block gave notice of non-renewal when renewal terms expired; litigation ensued in federal court seeking a declaratory judgment.
- District court held the agreements were perpetual contracts under Missouri law, and Block had no right not to renew; the issue was certified for appeal.
- The Eighth Circuit reversed, holding the language did not unequivocally express perpetual duration under Missouri law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the contract language unequivocally express perpetual duration? | H & R Block argues lack of explicit perpetual terms means non-perpetual. | Franklin contends the terms imply perpetual renewals given unilateral termination right for Franklin and automatic renewals. | No; language did not unequivocally express perpetual duration. |
| Does automatic renewal imply perpetuity under Missouri law? | Block claims no perpetual intent; renewal terms contradict perpetuity. | Franklin argues renewal structure and exclusive termination right show perpetuity. | Not per se; not unequivocally perpetual. |
| Who bears the burden of the termination rights in a perpetual-like contract? | Block contends contract allows termination only for cause; perpetual implication favors Franklin. | Franklin contends no mutuality of termination rights; public policy not to rewrite contracts. | Court disallowed rewriting; not a perpetual contract. |
Key Cases Cited
- Armstrong Bus. Servs., Inc. v. H & R Block, 96 S.W.3d 867 (Mo.Ct.App.2002) (perpetual-duration not implied without unequivocal terms)
- Paisley v. Lucas, 143 S.W.2d 262 (Mo.1940) (perpetuity requires unequivocal expression)
- Preferred Physicians Mut. Mgmt. Grp., Inc. v. Preferred Physicians Mut. Risk Retention Grp., Inc., 961 S.W.2d 100 (Mo.Ct.App.1998) (automatic renewal not enough without clear intent for perpetuality)
- Diffenderfer v. Bd. of President, 25 S.W. 542 (Mo.1894) (perpetual duration may appear by express term or by implication)
- Southern Wine & Spirits of Nevada v. Mountain Valley Spring Co., 646 F.3d 526 (8th Cir.2011) (perpetual duration unless specified termination events)