A Gainesville tax preparation company is free to do business with former customers of H&R Block after the Georgia Court of Appeals reversed a Hall County judge’s decision in a trade secrets dispute.

The court of appeals also overturned a $12,000 fine imposed by Judge David Burroughs against Paramount Tax & Accounting for what the judge said was contempt of court.

The appeals court reversed the contempt ruling in August. The decision was filed in Hall County Superior Court last week.

The underlying lawsuit filed by H&R Block against Paramount claiming misappropriation of trade secrets is still pending.

H&R Block filed suit against former employee Mary Squire and Paramount in January, alleging that Squire took trade secrets in the form of a database of customers in H&R Block’s Gainesville district office. H&R Block alleges that Squire provided the customer names and addresses to Paramount owner Chris Hardy for a mass mailing solicitation sent out to about 5,000 people.

Hardy denies he misappropriated trade secrets. H&R Block dismissed the breach of contract complaint against Squire in mid-September after the appeals court ruled a noncompetition clause in her contract was unenforceable.

In January, Burroughs granted an injunction that prevented Hardy’s company from preparing taxes for any former H&R Block customers, as many as 16,000 in the Gainesville area. The next month, the judge found the company in contempt of court for preparing taxes for 131
former H&R Block customers after he issued the injunction.

The Court of Appeals ruled that a noncompetition clause in Squire’s employment contract with H&R Block was invalid because it failed to "properly limit the territory to which it applies."

The clause prohibited Squire from leaving H&R Block and then going to work for any other tax preparation business that was located or solicited business in H&R Block’s "Gainesville district" or within 10 miles of the district’s borders. The appeals court found that language overly broad.

The Court of Appeals found the clause unenforceable because it overprotected H&R Block’s business interests at the expense of its former employee’s right to earn a living, according to Mark Alexander, an attorney with the Gainesville law firm of Stewart, Melvin & Frost who represents Paramount.

"This decision demonstrates that our legal system allows even a small company to stand up to a much larger corporation on issues of fair competition and the public’s ability to choose the professional services that they prefer," Alexander said. "For the employees of Paramount, as well as their customers, this decision is particularly rewarding in this difficult economy and on the eve of the approaching tax season."

A spokesperson with H&R Block’s corporate offices in Missouri did not immediately return a message seeking comment Thursday.

The company’s lawsuit against Paramount seeks compensatory and consequential damages for alleged misappropriation of trade secrets, an allegation Paramount denies.

"Our clients have always denied they received any trade secrets," Alexander said.