FDD Items 3 & 4 · 2025 filing

Ledgers litigation history

What Ledgers 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: None stated

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

Multiple cases involving John T. Hewitt (CEO of parent Loyalty, LLC): 2 pending arbitration/litigation cases (investor fraud claims and joint venture fraud claims directly naming the franchisor); multiple concluded cases related to Liberty Tax, shareholder derivative suits, employment disputes, and a DOJ settlement regarding tax compliance. A California consent order requires ongoing disclosure.

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

Litigation cases

The franchisor

Pending (1)

Fortis Lux Financial, Inc. and Tutum Strategies, LLC v. Loyalty Business Services, LLC a/k/a Ledgers USA, JSM Tax, Inc. d/b/a Ledgers, USA, and Loyalty, LLC d/b/a Loyalty Brands
pending
filed 2025-05-09 · American Arbitration Association (Virginia) · 01-25-0002-2722
“… filed May 9, 2025, before the American Arbitration Association for hearing in Virginia (AAA Case No. 01-25-0002-2722).”Page 12 of the 2025 FDD, Item 3

Parent, affiliates, master franchisor and subfranchisor

Pending (1)

Ira Lubert and John Martinson v. John T. Hewitt, ATAX, LLC, and Loyalty, LLC
pending
Brought by a third party · Loyalty, LLC (our parent); ATAX, LLC (affiliate); John T. Hewitt · 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 12 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 · Loyalty LLC (our parent); ATAX (affiliate); John T. Hewitt · filed 2021-02-04 · United States 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 13 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 · United States District Court for the Eastern District of Virginia · 2:19-cv-00653-RAJ-DEM
“… (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 15 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 · United States 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 15 of the 2025 FDD, Item 3
Outcome: “The parties reached a settlement of all claims whereby JTH Tax paid $775,000 and a portion of certain upcoming Net Revenue at offices previously owned by the plaintiff to him.”
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; our parent's CEO) · filed 2018-03-07 · United States District Court for the Eastern District of Virginia · 2:18-cv-00127-HCM-DEM
“… (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 14 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 13 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 13 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 13 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 16 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

Pending litigation alleging fraud and breach of contract raises serious governance and trustworthiness concerns
John Hewitt litigation history and Liberty Tax connection suggest pattern of legal and operational problems

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?

Back to the Ledgers verdict Risk analysis on the brand page Franchisee contacts for due-diligence calls