What specific violation of the nominating committee charter was alleged in the consolidated Liberty Tax, Inc. Stockholder Litigation, 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 the 2025 FDD, the In Re: Liberty Tax, Inc. Stockholder Litigation included a claim for breach of fiduciary duty by violation of the nominating committee charter. The document 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.
This information is disclosed because John Hewitt, the Chief Executive Officer and Chairman of Loyalty, is involved in litigation, and Loyalty is affiliated with Zoomin Groomin. The litigation history of individuals associated with the franchisor is relevant to potential franchisees as it provides insight into the business ethics, practices, and potential legal risks associated with the franchise.
While the FDD mentions the lawsuit and its resolution, it lacks specific details about the alleged violation of the nominating committee charter. A prospective Zoomin Groomin franchisee should seek clarification from the franchisor regarding the specifics of the alleged violation and how Loyalty and Zoomin Groomin ensure similar issues do not arise within their organizations. Understanding the measures taken to prevent breaches of fiduciary duty and violations of corporate governance can help a franchisee assess the stability and ethical standards of the franchise system.