What is the scope of John Hewitt's agreement not to solicit company employees, and how does this relate to Zoomin Groomin?
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, John Hewitt, Chief Executive Officer and Chairman of Loyalty, agreed not to solicit company employees as part of a settlement in a shareholder derivative action, In Re: Liberty Tax, Inc. Stockholder Litigation. The settlement terms included several actions for Liberty Tax to take, such as implementing an anti-harassment policy, conducting yearly code of conduct training, and revising its audit committee charter. As part of the settlement, Hewitt agreed not to solicit company employees. All issues were resolved, and the Delaware derivative actions were dismissed with prejudice in 2019 without any finding of liability on the part of the Defendants.
This agreement is relevant to Zoomin Groomin because John Hewitt holds a leadership position within Loyalty, the parent company of Zoomin Groomin. As such, this disclosure is required in Item 3 of the Franchise Disclosure Document. The agreement restricts Hewitt from actively seeking to recruit employees away from Liberty Tax.
For a potential Zoomin Groomin franchisee, this information indicates that the company's leadership has been involved in past litigation and settlements related to business practices. While the specific agreement not to solicit employees relates to Liberty Tax, it reflects on the business conduct and potential legal risks associated with individuals in leadership positions within the broader organization. It is important to note that the agreement does not specify the duration or geographic scope of the non-solicitation clause, so a prospective franchisee may want to seek clarification on these details from Zoomin Groomin.