FDD Items 3 & 4 · 2025 filing

Atax litigation history

What Atax disclosed about lawsuits, arbitrations and bankruptcy in the 2025 Franchise Disclosure Document. Item 3 lists the material legal actions a franchisor must report; Item 4 covers bankruptcy. This is the franchisor's own disclosure, not a court record, and not legal advice.

Items 3 (litigation) & 4 (bankruptcy) at a glance

What the filing discloses

Cases disclosed: 10; Item 3, as counted in the filing

Largest settlement, franchisor's own cases: $545K; As stated in Item 3

Bankruptcy (Item 4): None; Franchisor, parent, predecessor or officer

Filing year: 2025; Disclosures cover the prior ten years

Extracted from the 2025 Franchise Disclosure Document

Item 3: litigation

Item 3 discloses 12 matters: 2 pending (minority-investor suit against Hewitt/ATAX/Loyalty alleging fraud/breach of fiduciary duty; arbitration with Fortis Lux/Tutum re: joint venture breach) and concluded actions including ATAX v. Mercedes/Toro Taxes (trade secrets, $350,000 judgment), JTH Tax/Liberty Tax v. Hewitt et al (trade dress/trade secrets, settled $545,000), two Virginia Beach contract/employment suits (settled $50,000 each), Delaware shareholder derivative suits against Hewitt re: Liberty Tax (settled, no liability found), RSL Senior Partners derivative suit (settled), Shahabuddin v. JTH Tax/Hewitt (settled $775,000), a California DFPI consent order requiring Hewitt to disclose a prior federal Final Order, and the underlying DOJ action against Liberty Tax Service (settled via compliance-monitor order).

Item 3 (litigation) · 10 matters disclosed · 2 pending listed

Litigation cases

The franchisor

Pending (2)

Ira Lubert and John Martinson v. John T. Hewitt, ATAX, LLC, and Loyalty, LLC
pending
Brought by a third party · filed 2025-05-30 · Court of Common Pleas of Philadelphia County, Pennsylvania · 250503829
“… (Case No 250503829) filed May 30, 2025, in the Court of Common Pleas of Philadelphia County, Pennsylvania.”Page 13 of the 2025 FDD, Item 3
ATAX, LLC v. Annette Mercedes, Toro Taxes Franchise L.L.C., Tony Villalobos, LDTTAX NJ Corporation, LDM Union City Corporation, Yaely Mercedes, and Alba Villalobos
pending
Brought against a franchisee · filed 2023-12-08 · Superior Court of New Jersey, Law Division, Hudson County · L-004320-23
“… Docket No. L- 004320-23, filed December 8, 2023, in the Superior Court of New Jersey Law Division: Hudson County.”Page 13 of the 2025 FDD, Item 3

Concluded (1)

JTH Tax LLC d/b/a Liberty Tax Service v. John T. Hewitt, Loyalty LLC, ATAX LLC, ATAX Franchise, Inc. and Yneva Marte
settled
Brought by a third party · filed 2021-02-04 · U.S. District Court for the Eastern District of Virginia · 2:21-cv-00076-RBS-LRL
“… (Case No.2:21-cv-00076-RBS-LRL) filed February 4, 2021 in the United States District Court for the Eastern District of Virginia.”Page 15 of the 2025 FDD, Item 3
Outcome: “Under the Settlement Agreement, Defendants agreed to pay the Plaintiff $545,000 over 6 years, and to refrain from: (1) unfairly competing with Liberty Tax by tortiously interfering with its franchise agreements;”

Officers and directors (individuals, not the company)

Concluded (7)

United States of America v. Franchise Group Intermediate L 1, LLC d/b/a Liberty Tax Service
settled
Government or regulatory action · John T. Hewitt (referenced in the order; not a party) · filed 2019-12-03 · U.S. District Court for the Eastern District of Virginia · 2:19-cv-00653-RAJ-DEM
“Governmental Actions against Unrelated Entities: United States of America v. Franchise Group Intermediate L 1, LLC d/b/a Liberty Tax Service, (Case No. 2:19-cv-00653-RAJ-DEM) filed on or around December 3, 2019 in the United States District Court for the Eastern District of Virginia.”Page 18 of the 2025 FDD, Item 3
Bablu Shahabuddin v. JTH Tax, Inc., Siempre Tax, and John Hewitt
settled
John T. Hewitt (with JTH Tax/Siempre Tax, unrelated) · filed 2018-01-11 · U.S. District Court for the Eastern District of Virginia · 2:18-cv-00016-MDS-DEM
“… (Case No. 2:18-cv-00016- MDS-DEM) filed on January 11, 2018 in the United States District Court for the Eastern District of Virginia.”Page 17 of the 2025 FDD, Item 3
RSL Senior Partners, LLC, derivatively and on behalf of Liberty Tax, Inc. v. Brunot et al.
settled
Brought by a third party · John T. Hewitt (former Liberty Tax CEO) · filed 2018-03-07 · U.S. District Court for the Eastern District of Virginia · 2:18-cv-00127-HCM-DEM
“RSL Senior Partners, LLC, derivatively and on behalf of Liberty Tax, Inc. v Brunot et al, (Case No. 2:18-cv-00127-HCM-DEM), filed on March 7, 2018, in the United States District Court for the Eastern District of Virginia.”Page 16 of the 2025 FDD, Item 3
In Re: Liberty Tax, Inc. Stockholder Litigation (consolidated Asbestos Workers’ Philadelphia Pension Fund v. John Hewitt and Erie County Employees Retirement System v. John T. Hewitt)
settled
Brought by a third party · John T. Hewitt · filed 2017-12-12 · Court of Chancery of the State of Delaware · 2017-0883; 2017-0914
“Asbestos Workers’ Philadelphia Pension Fund, derivatively on behalf of Liberty Tax, Inc., v. John Hewitt. Defendant, and Liberty Tax, Inc., Nominal Defendant, (Case No. 2017-0883), filed on December 12, 2017 in the Court of Chancery of the State of Delaware.”Page 16 of the 2025 FDD, Item 3
K&A Publicidad, Inc. v. JTH Tax, Inc., d/b/a Liberty Tax Service, Liberty Tax, Inc. d/b/a Siempre Tax and John Hewitt
settled
John T. Hewitt (with JTH Tax/Liberty Tax, unrelated) · filed 2017-09-05 · Virginia Beach Circuit Court · CL17-4169
“… (Case No. CL17-4169), filed on September 5, 2017 in the Virginia Beach Circuit Court.”Page 15 of the 2025 FDD, Item 3
Kirke Franz Szawronski v. JTH Tax, Inc., d/b/a Liberty Tax Service, Liberty Tax, Inc., d/b/a Siempre Tax and John Hewitt
settled
John T. Hewitt (with JTH Tax/Liberty Tax, unrelated) · filed 2017-09-05 · Virginia Beach Circuit Court · CL17-4170
“… (Case No. CL17-4170), filed on September 5, 2017 in the Virginia Beach Circuit Court.”Page 15 of the 2025 FDD, Item 3
In the Matter of a Consent Order between The Commissioner of Financial Protection and Innovation and John T. Hewitt
concluded
Government or regulatory action · John T. Hewitt · California Department of Financial Protection and Innovation
“… before the Commissioner of Financial Protection and Innovation for the State of California.”Page 17 of the 2025 FDD, Item 3

Item 3 lists the litigation the franchisor must disclose; a matter against a parent, an affiliate or a named officer is not a matter against the franchisor, and pending claims are allegations, not findings.

Disclosure signals that moved the score

How this shows up in the verdict

Multiple concurrent litigation categories including investor claims, IP disputes with Liberty Tax Service, shareholder derivative suits, and governmental consent orders indicate systemic governance and compliance failures
Historical litigation with former CEO John Hewitt and governmental consent orders indicate past compliance/transparency violations that may recur

The verdict grade is FranchiseVerdict's editorial assessment across SBA loan performance, unit growth, revenue and disclosure signals. It is not investment advice.

Before you weigh a lawsuit

How to read Item 3

A franchisor must disclose pending actions and any material civil action involving the franchise relationship, plus convictions or civil judgments for fraud, unfair or deceptive practices, or franchise-law violations, going back ten years. A case the franchisor brought against a franchisee counts too. Item 3 does not include every dispute: settled claims below the materiality line and matters resolved in private arbitration can be absent.

Questions worth asking current and former franchisees, using the contact list in Item 20:

Were you, or anyone you know in the system, party to a dispute with the franchisor?
Was it resolved by settlement, arbitration or a court, and on what terms?
Has the number of disputes gone up or down since you signed?

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