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Saying he believed a Gainesville tax preparation company willfully misappropriated trade secrets of H&R Block and ignored a court order not to use them, a judge fined Paramount Tax Services more than $12,000 on January 31st for contempt of court.

Paramount Tax Services owner Chris Hardy is expected to appeal the fine, but Judge David Burroughs told him he still expected the money to be paid to H&R Block by Friday.
"If that?s not done, then we?ll talk about incarceration," Judge Burroughs said.

H&R Block sued a former employee, Mary Squire, and Paramount Tax Services in January, alleging Squire made off with information on as many as 16,000 customers who did business with H&R Block in Hall County, Georgia. Squire subsequently went to work for Paramount, and the company sent out a mailer to several thousand people on Jan. 9. H&R Block officials said the mailing list was compiled from the bigger company?s protected database, and several of its customers called to complain.

On Jan. 21, Judge Burroughs issued a temporary injunction order from the bench barring Paramount from preparing the taxes of H&R Block customers. A written order for the injunction was filed Feb. 4. You can read it here: http://media.morristechnology.com/mediafilesvr/upload/gainesville/article/0401TAXDOC.pdf.

Attorneys for H&R Block claim Paramount continued to prepare taxes for former H&R Block customers after Burroughs told them to stop, with 131 such customers served by the smaller business between the time the judge first ruled from the bench and the time a written order was filed.

Mark Alexander, an attorney for Paramount, argued that he and his client misunderstood the scope of the judge?s order from the bench. Hardy believed the injunction only prohibited him from doing business with people who had received the original solicitation mailer.

"I didn?t understand that the court was prohibiting them from doing business with any of the 16,000 names on the list," Alexander said.

David Kight, an attorney representing H&R Block, said he believed the judge?s order was clear from the beginning.

"What we have here is textbook willful misconduct," Kight said.

The judge agreed. He fined the company $12,600, or $100 for each of the 126 instances in which he believed Paramount ignored his order.

"I find that (Paramount) engaged in a concerted effort to compete illegally against H&R Block," Burroughs said, adding that he was skeptical of some of the testimony Hardy and Squire gave in an earlier hearing.

Hardy testified he got the mailing list off the Internet and disposed of it afterward. Squire testified she was not an employee of Paramount but was a unpaid volunteer.

Paramount?s business slid dramatically after the judge?s injunction.

"Paramount has sacrificed its business and essentially shut down its tax preparation services as a result of its efforts to comply with the court?s order," Alexander wrote in a court filing.

Judge Burroughs said the issue was the conduct of Paramount officials.

"This is not about limiting competition," Judge Burroughs said. "This is about simply trying to provide a level playing field for all the competitors, including the big guy on the block like H&R Block."