SYLLABUS

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

The Tax Authority, Inc., et al., v. Jackson Hewitt, Inc., et. al (A-24-05)

Argued January 18, 2006 -- Decided May 31, 2006

WALLACE, J., writing for a unanimous Court.

The issue presented is whether our Rule of Professional Conduct 1.8(g) prohibits an attorney who represents more than one client from entering into an aggregate settlement of the clients’ claims without each client’s consent to the settlement after its terms are known. In this matter, Eric Karp, a Boston lawyer, agreed to represent 154 individual franchisee-plaintiffs in their claims against franchisor-defendant Jackson Hewitt, Inc. Jackson Hewitt is a nationwide tax preparation service with franchises throughout the United States. As part of their operations, franchisees make refund anticipation loans to individual taxpayers. The loans are repaid when the tax refunds are received. Prior to the 2000 tax season, Jackson Hewitt distributed rebates arising out of these loans to eligible franchisees. Beginning in the 2000 tax season, Jackson Hewitt discontinued issuing the rebates. The franchisees believed that Jackson Hewitt breached the franchise agreement by failing to issue the rebates. Because the franchise agreement prohibited the franchisees from filing a class action lawsuit, the franchisees collectively retained Karp to represent them in a mass lawsuit. Each of the 154 plaintiffs entered into an identical retainer agreement Plaintiffs agreed that the matter would be pursued on a collective basis with fees being shared by each plaintiff and that the matter could be resolved by settlement upon the vote of a weighted majority. The retainer agreement also provided that a Steering Committee would make the decisions regarding strategic and procedural matters. Kenneth Leese, the owner and president of The Tax Authority, was one of the members of the Steering Committee.