In the consolidated Liberty Tax, Inc. Stockholder Litigation, what specific violation of the nominating committee charter was alleged, and how could this violation affect a Zoomin Groomin franchisee?
Zoomin_Groomin Franchise · 2025 FDDAnswer from 2025 FDD Document
On December 27, 2017, the two above referenced shareholder matters were consolidated with the caption In Re: Liberty Tax, Inc. Stockholder Litigation, (Case No. 2017-0883). The Complaint asserted claims for breach of fiduciary duty and breach of fiduciary duty by violation of the nominating committee charter. A mediation took place on November 12, 2018 but did not result in a resolution. On March 15, 2019, the parties entered into a stipulation of settlement of which the material terms of the settlement are as follows: (i) Liberty Tax agreed to implement an antiharassment policy; (ii) Liberty Tax will conduct yearly code of conduct training; (iii) Liberty Tax will terminate for cause any employee who violates the anti-harassment policy that has been substantiated as such; (iv) Liberty Tax will revise its audit committee charter to reflect that SEC filings must be pre-approved by the Audit Committee; (v) Liberty Tax will take reasonable steps to be listed on NASDAQ or NYSE; (vi) Hewitt agrees not to solicit company employees; and (vii) No party admits any liability. On June 28, 2019, the Court of Chancery approved a Derivative and Class Action Settlement. All issues have been resolved and the Delaware derivative actions were dismissed with prejudice in 2019 without any finding of liability on the part of the Defendants.
Source: Item 3 — LITIGATION (FDD pages 11–16)
What This Means (2025 FDD)
According to Zoomin Groomin's 2025 Franchise Disclosure Document, the consolidated Liberty Tax, Inc. Stockholder Litigation included claims for breach of fiduciary duty and breach of fiduciary duty by violation of the nominating committee charter. The FDD does not specify the exact nature of the violation. The case was settled with Liberty Tax agreeing to implement an anti-harassment policy, conduct yearly code of conduct training, terminate employees for cause who violate the anti-harassment policy, revise its audit committee charter to reflect that SEC filings must be pre-approved by the Audit Committee, and take reasonable steps to be listed on NASDAQ or NYSE.
While the litigation directly involved Liberty Tax and its shareholders, the outcome of such cases can have broader implications for related franchise systems. For a Zoomin Groomin franchisee, the settlement terms imposed on Liberty Tax, such as the implementation of anti-harassment policies and code of conduct training, reflect a commitment to ethical and compliant business practices. These types of policies and training programs could be adopted by Zoomin Groomin to ensure a positive and respectful work environment within its franchise network.
However, the FDD does not provide enough information to determine the specific impact of this litigation on Zoomin Groomin. A prospective franchisee should inquire with Zoomin Groomin about whether the company has adopted similar policies or training programs as a result of this litigation or other factors. Understanding the franchisor's approach to corporate governance and compliance can help a franchisee assess the overall risk and stability of the franchise system.
It is important to note that the litigation was settled without any finding of liability on the part of the defendants, and the derivative actions were dismissed with prejudice in 2019. This means that the court did not make a determination that the defendants were at fault, and the case cannot be brought again. However, the settlement terms still reflect a commitment by Liberty Tax to improve its corporate governance and compliance practices.