JTH Tax, LLC v. Bablu Shahabuddin ( 2023 )

USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 1 of 23
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 21-2031
JTH TAX, LLC, f/k/a JTH Tax, Inc., d/b/a Liberty Tax Services; SIEMPRETAX+,
LLC,
Plaintiffs − Appellants,
v.
BABLU SHAHABUDDIN,
Defendant – Appellee.
Appeal from the United States District Court for the Eastern District of Virginia, at
Norfolk. Rebecca Beach Smith, Senior District Judge. (2:20−cv−00217−RBS−DEM)
Argued: December 8, 2022 Decided: April 19, 2023
Before DIAZ and THACKER, Circuit Judges, and FLOYD, Senior Circuit Judge.
Affirmed by unpublished opinion. Judge Diaz wrote the opinion, in which Judge Thacker
and Senior Judge Floyd joined.
ARGUED: Amy Mason Saharia, WILLIAMS & CONNOLLY LLP, Washington, D.C.,
for Appellants. James Richard Harvey, III, WOODS ROGERS VANDEVENTER
BLACK LLP, Norfolk, Virginia, for Appellee. ON BRIEF: Dustin M. Paul, Gaela R.
Normile, VANDEVENTER BLACK LLP, Norfolk, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 2 of 23
DIAZ, Circuit Judge:
This case began with the termination of the franchise relationship between Bablu
Shahabuddin and his former franchisor, JTH Tax, Inc., d/b/a Liberty Tax Service, and
SiempreTax+, LLC (“Liberty”). As is often the case with commercial disentanglements,
there were loose ends, and each party now finds fault with the other’s later actions.
Liberty claims Shahabuddin breached his contractual obligation to assign leases for
certain properties where he had operated franchises. Shahabuddin claims Liberty shorted
him on a revenue-sharing payment due under a later agreement. The district court granted
summary judgment for Shahabuddin on both claims. We affirm.
I.
A.
Liberty offers tax-preparation services nationwide. Shahabuddin, Liberty’s former
franchisee, operated locations in New York, California, and Nevada before the parties
terminated their franchise relationship in 2016.
To manage their corporate breakup, the parties entered into a Purchase and Sale
Agreement (“PSA”). Shahabuddin agreed to sell Liberty the “assets, properties and rights”
of his Liberty franchises and to assign certain commercial leases upon Liberty’s request.
J.A. 402, 405–07. The PSA specifically contemplated the assignment of eighteen
properties in New York, listed in “Schedule C.” J.A. 416. But it also allowed Liberty to
seek assignment of other properties: Part 8(e) of the PSA stated that “to the extent any
leases associated with [Shahabuddin’s franchises] have not been assigned to [Liberty] and
2
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 3 of 23
[Liberty] requests such assignment, [Shahabuddin] agrees to assign such leases to [Liberty]
immediately.” J.A. 405–06.
The parties executed the PSA in June 2016, and their lawyers later exchanged
several emails related to lease assignment. The PSA contemplated that the assignments
would occur by the closing, 1 and the emails reflect that urgency. In the same message
delivering the executed PSA to Shahabuddin, Liberty’s counsel requested the
“lease[]agreements for those locations listed in Schedule C” so their team could review and
begin contacting landlords. J.A. 192. In another message, Liberty’s counsel noted they
were “working to get [the leases] assigned as quickly as possible,” emphasizing that doing
so was “in all of the parties’ interest.” J.A. 212.
Liberty, however, didn’t want all the properties in Schedule C. Its counsel informed
Shahabuddin’s in mid-July that Liberty was “not taking” the leases for two such properties.
J.A. 198. Shahabuddin’s counsel pointedly responded: “Are these decisions final, and
should [Shahabuddin] proceed to dispose of the leases?” J.A. 197. Liberty’s counsel
confirmed, “Yes, we are not moving forward with these,” and directed Shahabuddin to
transfer equipment and customer files from the two locations to Liberty. Id.
1
The representations and warranties in the PSA were “deemed to have been given
upon the execution of this Agreement and upon the Closing Date.” J.A 406. Liberty sent
Shahabuddin the fully executed agreement on July 1, 2016. And the PSA defined the
“Closing Date” as Liberty’s delivery to Shahabuddin “of an executed copy of this
Agreement . . . and Assumption and Assignment forms and [Liberty’s] acceptance in
Virginia by [Liberty’s] authorized officer.” J.A. 404.
3
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 4 of 23
A month later, Shahabuddin’s counsel wrote, “We understand that Liberty does not
want any of the other properties that were not on Schedule C, and that [Shahabuddin]
should dispose of them. Please let me know if there are any that [Liberty] is interested in
getting assignments on.” J.A. 202. Liberty’s counsel replied, “I am not aware of any other
leases Liberty wants to acquire, but will confirm with our leasing team.” J.A. 212. Nothing
in the record suggests Liberty followed up with any requests for non-Schedule C leases at
that time.
Finally, in mid-November, Liberty reaffirmed that it would not take the lease for
one of the properties it identified in July and informed Shahabuddin that it was also “not
taking” the leases for two more properties on Schedule C. J.A. 213–14.
That appeared to conclude the assignment process, but it wasn’t the end of the story.
B.
Under the PSA, Liberty agreed to make annual payments to Shahabuddin at the end
of fiscal years 2017, 2018, and 2019. Each annual payment would be 10 percent of “Net
Revenue,” defined as “gross fees received less all discounts, Cash-in-a-Flash, Send-a-
Friend, and uncollected fees for the offices in the Territories.” J.A. 402–03. 2 But when
the time came to make the 2017 and 2018 payments, Liberty reneged.
2
Cash-in-a-Flash and Send-a-Friend are incentive programs involving payments of
$50 from the franchisee to the customer. Uncollected fees occur when a customer elects
to pay for tax preparation services through a deduction from their refund, but the refund is
then withheld by the IRS.
4
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 5 of 23
Shahabuddin sued and the parties resolved his claims via a 2018 Settlement
Agreement. Liberty agreed to pay Shahabuddin $775,000 to satisfy the missed payments
and reaffirmed its commitment to pay 10 percent of Net Revenue for 2019. 3 The parties
also agreed that the Settlement Agreement generally “supersede[d] their prior agreements,
negotiations or understandings,” including the PSA. J.A. 420.
But certain provisions of the PSA survived “in full force,” id., and those provisions
sent mixed signals about whether Shahabuddin’s assignment obligations remained. On
one hand, the Settlement Agreement preserved all of Section 8 of the PSA, which set out
Shahabuddin’s “Representations and Warranties.” That included Subsection 8(e), which
detailed Shahabuddin’s promise to assign leases at Liberty’s request alongside warranties
that the leases were in full force and effect, clear of liens, and current on rent. But a
standalone provision promising to assign the leases in Schedule C, Subsection 10(e), didn’t
survive.
C.
The renewed resolution was again short-lived. Before the 2019 payment, Liberty
sent Shahabuddin a spreadsheet with Net Revenue calculations for the relevant locations.
The spreadsheet contained a column for “Electronic Filing Fees,” amounting to $430,332.
J.A. 228. These fees were included in the spreadsheet’s “Gross Fees” but were excluded
from its “Net Revenue” figure. Id. Thus, the proposed final payment of $311,993 didn’t
include 10 percent of these fees.
3
The new agreement defined Net Revenue by reference to the PSA.
5
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 6 of 23
Shahabuddin’s counsel objected via email to the deduction of “new items not
previously contemplated between the parties.” J.A. 1059. Liberty’s representative replied,
explaining that three of the contested items—Cash-in-a-Flash, Send-a-Friend, and
“Refunds”—had been deducted in prior years, and noting that the PSA provided for Cash-
in-a-Flash and Send-a-Friend deductions. J.A. 1058. Liberty’s response didn’t address the
deduction for Electronic Filing Fees. Even so, Shahabuddin’s counsel provided wiring
instructions “[b]ased on Liberty Tax’s representation that its calculation of Net Revenue is
in accordance with the agreement between the parties,” and Liberty wired the funds. J.A.
1055–58.
Once again, though, that wasn’t the end of the story.
D.
In December 2019—five months after Liberty made the final Net Revenue payment
and three years after the initial period of lease assignment—Liberty requested leases for
five properties still held by Shahabuddin. Three were properties listed in Schedule C that
Liberty said it was “not taking” in the 2016 emails. The remaining two weren’t listed in
Schedule C or mentioned in the emails.
Each of the five properties had been occupied in the interim by a new Liberty
franchisee who subleased the properties from Shahabuddin. It was the end of this new
franchise relationship that prompted Liberty to seek assignment of these properties in
December 2019.
6
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 7 of 23
Shahabuddin refused to assign the leases, but he did enter temporary licensing
agreements with Liberty, allowing Liberty to continue operating in the properties through
the 2020 tax season. The licensing agreements were set to terminate on April 30, 2020.
E.
Before the licensing agreements terminated, Liberty sued Shahabuddin in the
Southern District of New York, alleging breach of contract, unjust enrichment, and breach
of the implied covenant of good faith and fair dealing. Liberty sought damages and specific
performance of the PSA, including assignment of leases for the five properties. And it
moved for a temporary restraining order and preliminary injunction preventing
Shahabuddin from interfering with its ability to do business at the five properties when the
licensing agreements expired.
After Shahabuddin invoked the forum-selection clauses in the PSA and Settlement
Agreement, the district court transferred the case to the Eastern District of Virginia.
Shahabuddin then filed an answer, a partial motion to dismiss, and counterclaims for
tortious interference, defamation, and breach of contract (based on Liberty’s exclusion of
Electronic Filing Fees from the 2019 Net Revenue payment). After briefing, the district
court dismissed Liberty’s claim for unjust enrichment, denied its requests for injunctive
relief, and dismissed Shahabuddin’s counterclaims for tortious interference and
defamation.
Both parties then moved for summary judgment on Liberty’s remaining claims, and
Shahabuddin moved for summary judgment on his breach-of-contract counterclaim.
7
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 8 of 23
The district judge referred all motions to a magistrate judge, who held a hearing and
issued a Report and Recommendation. Shahabuddin argued Liberty hadn’t established it
requested assignment of the leases for the five properties in December 2019. But the
magistrate judge determined that even if Liberty had requested the leases, it did so only
after both expressly waiving its right to assignment and impliedly waiving that same right
by waiting “an unreasonably long period” of time to make its request. JTH Tax, LLC v.
Shahabuddin, No. 20-cv-217, 2021 WL 4352802, at *1 (E.D. Va. June 25, 2021), report
and recommendation adopted, No. 20-cv-217, 2021 WL 3704726 (E.D. Va. Aug. 20,
2021).
The magistrate judge next determined that “under the plain language of the parties’
agreements,” Liberty had to pay Shahabuddin 10 percent of the 2019 Net Revenue,
“including revenue received from Electronic Filing Fees.” Id. It recommended granting
Shahabuddin’s motions for summary judgment on all claims and denying Liberty’s.
Liberty objected, arguing the magistrate judge misapplied the summary judgment
standards, wrongly concluded Liberty waived its right to assignment under the PSA, and
erred in determining there weren’t material issues of fact as to whether Shahabuddin had
established his counterclaim for breach of contract. On the last point, Liberty raised—for
the first time—the defense of accord and satisfaction.
The district judge adopted the magistrate judge’s determination in full, adding two
“observations.” JTH Tax, 2021 WL 3704726, at *3. First, the court rejected Liberty’s
argument that Liberty couldn’t have expressly waived its assignment right in the 2016
emails because the 2018 Settlement Agreement “restated” and “reinforced” Shahabuddin’s
8
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 9 of 23
“promise to assign the leases upon request.” J.A. 873–74. The court concluded that the
Settlement Agreement didn’t create a “new contractual right[]” to assignment, and that it
didn’t retroactively “shed light” on whether Liberty expressly waived its assignment rights
in 2016. JTH Tax, 2021 WL 3704726, at *3.
Second, the court rejected Liberty’s contention that it could retract its prior waiver
because Shahabuddin hadn’t materially relied on it by the time Liberty requested
assignment in 2019. It distinguished cases finding retraction of waiver in the context of
ongoing obligations and the sale of goods, finding them inapplicable because the instant
contract “contemplate[d] a discrete, one-time performance at a time close to [its]
execution.” Id. at *3–4. The court didn’t address Liberty’s new defense of accord and
satisfaction.
This appeal followed.
II.
We review a district court’s grant of summary judgment de novo. Calloway v.
Lokey, 948 F.3d 194, 201 (4th Cir. 2020). We view the facts and draw all reasonable
inferences in favor of the nonmoving party, Liberty. 4 Ga. Pac. Consumer Prods., LP v.
Von Drehle Corp., 618 F.3d 441, 445 (4th Cir. 2010).
Liberty doesn’t challenge the district court’s denial of its motion for summary
4
judgment.
9
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 10 of 23
Our role isn’t to weigh the evidence or make credibility determinations, but to
decide whether there is a genuine issue of material fact for trial. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 249, 255 (1986); PBM Prod., LLC v. Mead Johnson & Co., 639 F.3d
111, 119 (4th Cir. 2011). A fact is “material” if “proof of its existence or non-existence
would affect disposition of the case.” Wai Man Tom v. Hosp. Ventures LLC, 980 F.3d
1027, 1037 (4th Cir. 2020). And a dispute is “genuine” if “the evidence offered is such
that a reasonable jury might return a verdict for the non-movant.” Id. But a mere “scintilla
of evidence” supporting the non-movant isn’t sufficient to defeat a motion for summary
judgment. Anderson, 477 U.S. at 252.
For Liberty’s claims against Shahabuddin, the issues are whether Liberty waived its
right to assignment before it requested the leases for the five properties in December 2019,
and if so, whether it later retracted that waiver. 5 The issues as to Shahabuddin’s
counterclaim are whether he was entitled to a share of the Electronic Filing Fees and
whether his claim is nonetheless barred by the defense of accord and satisfaction. We
consider each in turn.
A.
We begin with Liberty’s contention that the district court erred in holding Liberty
waived its right to assignment.
5
We don’t consider Liberty’s argument that the magistrate judge erred in holding
no reasonable jury could find Liberty demanded assignment of the disputed leases. Neither
the magistrate judge nor the district court relied on that conclusion—both instead held that
Liberty waived its assignment right before making any demand.
10
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 11 of 23
Waiver is the voluntary, intentional abandonment of a known legal right.
Bergmueller v. Minnick, 383 S.E.2d 722, 725 (Va. 1989). 6 It has two essential elements:
(1) knowledge of the facts basic to the exercise of the right, and (2) the intent to relinquish
the right. Id. A waiver may be express, or it may be implied through “conduct, acts, or a
course of dealing.” Woodmen of World Life Ins. Soc’y v. Grant, 38 S.E.2d 450, 454 (Va.
1946). The party relying on waiver has the burden to prove it by “clear, precise and
unequivocal evidence.” Va. Polytechnic Inst. & State Univ. v. Interactive Return Serv.,
Inc., 595 S.E.2d 1, 6 (Va. 2004).
The district judge adopted and approved the magistrate judge’s conclusion that “the
undisputed facts” established waiver “as a matter of law” on two alternative grounds: (1)
that Liberty expressly waived its right to assignment of the five disputed leases in the 2016
emails, and (2) that Liberty impliedly waived its right by “fail[ing] to request assignment
of the leases until at least December of 2019.” JTH Tax, 2021 WL 3704726, at *2–3. We
agree on both points. And we agree with the district court that retraction of waiver is
inapplicable.
1.
First, we conclude Liberty expressly waived its right to assignment of the leases for
the five properties.
6
The parties agree Virginia law applies, consistent with the choice-of-law clauses
in the PSA and Settlement Agreement. See J.A. 411, 420.
11
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 12 of 23
Three of the five properties at issue were on Schedule C of the PSA. The magistrate
judge found (and the district judge agreed) that Liberty expressly waived its right to
assignment for these three properties “when [it] repeatedly told Shahabuddin that [it] would
not be taking them and replied affirmatively that he was free to dispose of such leases.”
JTH Tax, 2021 WL 4352802, at *8.
For the remaining two properties, the magistrate judge pointed to Shahabuddin’s
counsel’s August 2016 email which sought to confirm that Liberty didn’t want any other
properties that weren’t on Schedule C, such that Shahabuddin could “dispose of them.” Id.At the time, Liberty’s counsel replied that they were “not aware of any other leases Liberty
wants to acquire,” but would confirm. J.A. 212. Despite continued communication with
Shahabuddin about lease assignment over the following months, Liberty never followed
up to request either property. The magistrate judge concluded that because Liberty “had
already reiterated that Shahabuddin was free to dispose of leases [it chose] not to take,”
this correspondence established waiver as to the remaining two properties. JTH Tax, 2021
WL 4352802, at *8.
Liberty argues the 2016 emails only show that it didn’t intend to take the leases for
the five properties “at that time.” Appellants’ Br. at 23 (emphasis omitted). But that
contention isn’t supported by the record. In emails, Shahabuddin’s counsel repeatedly
asked whether he could “dispose of” the leases for properties Liberty wasn’t taking, and
Liberty said yes. E.g., J.A. 197. Liberty’s responses contradict an expectation that
Shahabuddin would hold the properties in case Liberty wanted them later. And Liberty’s
counsel said it was in the parties’ interests to get assignments finalized “as quickly as
12
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 13 of 23
possible”—a sentiment backed up by the flurry of emails in late 2016, followed by silence
about assignment for the next three years. J.A. 212.
Shahabuddin also submitted an affidavit from John Hewitt, Liberty’s co-founder
and former CEO, who executed the PSA on Liberty’s behalf and had “personal knowledge
of Liberty’s decision to take assignment or decline to take assignment of the leases
associated with the franchises in the PSA.” J.A. 193. Hewitt stated that in 2016, Liberty
determined that it didn’t want the “ongoing financial liability associated with” leases for
the five properties. J.A. 194. And he explained that “[o]nce [Liberty] decided not to
request assignment of the leases . . . it did not expect [] Shahabuddin to keep them available
for assignment indefinitely.” Id.Hewitt also described the factors Liberty considered when determining whether to
assume the leases of former franchisees: “the quality of the location, the recommendation
of the leasing coordinator, relationship with the franchisee and the landlord, and whether
assuming the lease payment obligations and liabilities made financial sense.” J.A. 193.
This description matches the email exchanges from 2016, where Liberty’s counsel
repeatedly referenced the leasing coordinator and requested Shahabuddin’s help working
through issues with landlords.
Finally, the PSA itself shows that assignment was to occur quickly. The agreement
specified that Liberty would reimburse Shahabuddin for May rent at assigned properties.
That payment was to be made July 1, 2016, “contingent on delivery of executed assignment
documents by [Shahabuddin] of the Business leases, as requested by [Liberty].” J.A. 402–
03. Liberty also agreed to pay June rent for assigned properties directly to landlords. And
13
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 14 of 23
the PSA stated that its “Closing Date” would occur when Shahabuddin had delivered, and
Liberty had accepted, “an executed copy of this Agreement and all of the Assets via a Bill
of Sale and Assumption and Assignment forms.” J.A. 404 (emphasis added). That same
provision gave Liberty the option to withdraw from the PSA if it wasn’t executed by June
30, 2016.
Each of these terms suggests the parties contemplated finalizing assignment
decisions within a few months. They don’t support Liberty’s post-hoc contention that
when it said it was “not taking” the leases for the five properties in late 2016, it only meant
it wasn’t taking them “at that time.” Appellants’ Br. at 23.
In attempting to show a dispute of fact as to its intent to waive assignment in 2016,
Liberty relies primarily on the 2018 Settlement Agreement. While that agreement
generally superseded the PSA, it preserved Subsection 8(e), including Shahabuddin’s
obligation to assign “any leases associated with the Business” to Liberty upon its request.
See J.A. 405–06, 420. According to Liberty, “The parties would have had no need to
reaffirm that provision of the PSA if Liberty had already waived its [assignment] rights.”
Appellants’ Br. at 24.
Shahabuddin counters that the parties kept 8(e) for its warranties that the “leases
were valid, clear of liens, not in default,” and paid up on rent. Appellee’s Br. at 37; see
also J.A. 405. And he points out that the Settlement Agreement “expressly superseded the
most direct obligation in the PSA for Shahabuddin to assign leases to Liberty.” Appellee’s
Br. at 37. That is, it didn’t preserve Subsection 10(e), the standalone provision promising
14
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 15 of 23
to assign “the office real estate leases connected with the operation of the Business listed
in Schedule C.” See J.A. 407, 420.
The magistrate judge agreed with Shahabuddin that the Settlement Agreement
didn’t create a dispute of material fact as to express waiver. Likewise, the district judge
found that Liberty’s express waiver “was completed in 2016” and that “the Settlement
Agreement, executed in 2018, does not shed light on whether” there was a waiver two years
earlier. JTH Tax, 2021 WL 3704726, at *3.
We agree that Liberty expressly waived its assignment rights as a matter of law.
The 2016 emails show that Liberty both had “knowledge of” its right to assignment of the
five properties and “inten[ded] to relinquish” that right. Bergmueller, 383 S.E.2d at 725.
Liberty’s insistence otherwise is contradicted by its own statements at the time, the text of
the PSA, and the uncontroverted affidavit from its then-CEO. 7 The district court thus
correctly ruled that Liberty expressly waived its right to assignment of the five properties.
2.
If not “express,” waiver may be “implied” through “conduct, acts, or a course of
dealing.” Woodmen of World, 38 S.E.2d at 454. If we had any doubt that Liberty expressly
7
Liberty characterizes Hewitt as a disgruntled former CEO who was terminated by
Liberty and now operates competing tax-preparation businesses at the five properties
through a franchise relationship with Shahabuddin’s sister-in-law. But Liberty offers no
evidence to contradict Hewitt’s affidavit on its terms. And even if Hewitt’s current
business position were enough to create a dispute about his credibility, we’re satisfied that
any such dispute wouldn’t be material given the other evidence of Liberty’s express waiver.
15
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 16 of 23
waived its assignment right in the 2016 emails, we would still affirm because Liberty
impliedly waived its right by waiting more than three years to request assignment.
The closest issue as to express waiver concerns the two properties not on Schedule
C. These properties were addressed in the August 2016 email exchange, when
Shahabuddin’s counsel directly asked whether he could “dispose of” the remaining
properties not on Schedule C, and Liberty’s counsel stated they were “not aware of any
other leases Liberty wants to acquire, but will confirm with our leasing team.” J.A. 212.
Given that Liberty never followed up (at least before December 2019), we think this was
likely an express waiver. But we address implied waiver for completeness.
The magistrate judge concluded, and the district judge agreed, that even if the 2016
emails didn’t constitute an express waiver, Liberty “subsequently waived any right to the
[five properties] by failing to request assignment of the leases . . . within a reasonable
time.” JTH Tax, 2021 WL 4352802, at *9. “When a contract is silent regarding the time
of performance, the time of performance will be . . . a reasonable time after the execution
of the agreement.” F.L. Hall, Inc. v. Warehouse Landing Assocs., 38 Va. Cir. 181, 1995
WL 17044498, at *2 (1995). And “[i]n determining what is a reasonable time, the
circumstances to be considered . . . include the nature of the proposed contract, the
purposes of the parties, the course of dealing between them, and any relevant usages of
trade.” Id. (cleaned up).
The PSA doesn’t explicitly define the time for assignment, but as discussed above,
all indications are that it was to occur within a matter of months. The purpose of the PSA
was to transfer “assets, properties and rights used in connection with the Business” from
16
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 17 of 23
Shahabuddin to Liberty when their franchise relationship ended. J.A. 402. The parties
agreed that Liberty had the right to determine which properties it was interested in and to
demand assignment over the following months. But they didn’t agree that Shahabuddin
would hold the properties until such undefined future time as Liberty determined it was in
its interest to take them.
The contours of the assignment right are clear from the PSA’s terms, the 2016
emails, and the Hewitt affidavit. They’re also apparent from Liberty’s failure to request
assignment for more than three years after signing the PSA.
Liberty argues that it didn’t take assignment of the five properties because it was
able to find a new franchisee, who sublet the locations from Shahabuddin and operated
Liberty franchises from 2016 to 2019. But the fact that Liberty found another franchisee
doesn’t change that it didn’t want to take financial responsibility for the properties in 2016.
For example, during the 2016 email exchanges, two of the properties were identified as
having “tax issues.” J.A. 212. Liberty may have concluded those locations were more
trouble than they were worth.
For three years, Liberty had the best of both worlds: It reaped the benefits of having
a franchisee in the properties while avoiding any of the risk or costs involved in assignment.
While Liberty’s financial calculation may have changed when its new franchisee left in
late 2019, by then it had waived its right to assignment.
The magistrate judge correctly recognized these dynamics, concluding that by the
time Liberty requested assignment in 2019, Shahabuddin “would have needed to otherwise
17
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 18 of 23
dispose of the leases that [Liberty] w[as] not taking or risk financial loss by holding onto
such leases indefinitely.” JTH Tax, 2021 WL4352802, at *11.
The district judge agreed, and we do as well. And while the issue of what constitutes
a reasonable time is usually for the jury, we agree that the three-year delay in this case was
unreasonable as a matter of law. See id. at *9 (citing Grossmann v. Saunders, 376 S.E.2d
66, 70 (Va. 1989) and Little v. Quin Rivers, Inc., No. 15-cv-20, 2015 WL 4363201, at *1
(E.D. Va. July 14, 2015)).
3.
Finally, we reject Liberty’s contention that it retracted any waiver when it demanded
assignment of the five properties in 2019.
Liberty admits that “Virginia case law does not address retraction of waiver” in this
context. Appellants’ Br. at 36. But, it argues, we must predict what the Supreme Court of
Virginia would do if faced with this issue. Liberty points to the Restatement (Second) of
Contracts, a treatise, and cases from other states to argue that “retraction of waiver is a
common-law principle applied routinely across many jurisdictions.” Id. at 39. It says
there’s no reason to think that Virginia’s highest court wouldn’t apply it here.
We disagree. To begin, we’ve already concluded that Liberty impliedly waived its
assignment right when it failed to request assignment within a reasonable time. It wouldn’t
make sense if Liberty’s implicit waiver could be retracted through the same (too late)
request.
Beyond that, none of Liberty’s sources persuade us that the Supreme Court of
Virginia would apply retraction of waiver here.
18
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 19 of 23
Liberty relies heavily on Municipal Authority of Westmoreland County v. CNX Gas
Co., which involved an ongoing and continuous contractual relationship between a
Pennsylvania municipality (the plaintiff) and those who had leased land from the county
for oil and gas production (the defendants). 380 F. Supp. 3d 464, 466–67 (W.D. Pa. 2019).
The lease agreement required the defendants to pay royalties, but permitted deduction of
post-production costs, such as those required for processing, treatment, and transportation.
Id. at 467. At first, however, the defendants paid royalties without deducting post-
production costs. Id. at 467–68. When they later began deducting those costs, the plaintiff
argued that the defendants had waived their contractual right to do so. Id. at 469.
The court rejected the plaintiff’s argument. It determined that while the defendants
had “impliedly waived their right to deduct post-production costs” when they didn’t do so,
that waiver wasn’t “necessarily permanent.” Id. at 470 (emphasis omitted). And it found
retraction of waiver was permissible because the county hadn’t established detrimental
reliance; it was aware of and had budgeted for the later post-production deductions. Id. at
471.
We aren’t persuaded by Liberty’s reliance on Westmoreland County. To begin with,
the case involves a Pennsylvania federal court applying Pennsylvania state law, which of
course isn’t binding on Virginia courts. Second, the court emphasized that retraction of
waiver is “particularly applicable when the contract in question has a recurring or periodic
obligation.” Id. at 470 (emphasis added). But here, Shahabuddin had a one-time obligation
to assign leases to Liberty at its request. Thus, even assuming the Supreme Court of
19
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 20 of 23
Virginia would apply Westmoreland County, there’s no basis to think it would extend it to
the facts here.
Liberty also cites Bristol Metals, LLC v. Messer, LLC, 498 F. Supp. 3d 840 (E.D.
Va. 2020). Like Westmoreland County, Bristol Metals involved a long-term commodities
contract governed by Pennsylvania law. Id. at 845. At first, the plaintiff in Bristol Metals
paid more than the contractual price cap, but like the defendants in Westmoreland County,
it eventually sought to strictly enforce the contract’s terms. Id. at 845–46. On those facts,
the district court found the plaintiff successfully retracted its waiver. Id. at 856–57. But
after briefing here concluded, we reversed the relevant portion of Bristol Metals, finding
no valid contract existed at the time the district court found retraction of waiver. Bristol
Metals, LLC v. Messer, LLC, Nos. 21-1244, 21-1245, 2022 WL 17222216, at *5 (4th Cir.
Nov. 23, 2022). So Bristol Metals doesn’t help Liberty.
We also agree with the district court that none of the cases Liberty cites involved a
situation “where one party purports, years later, to retract its waiver of a right pursuant to
a contractual provision that contemplates a discrete, one-time performance at a time close
to the execution of the contract.” 2021 WL 3704726, at *4. The closest candidate, Caro
v. Hansen, involved a one-time obligation to transfer a security interest. 875 P.2d 512, 513
(Or. Ct. App. 1994). But that obligation wasn’t conditional on the plaintiff’s request, and
the gap between the contract execution and the plaintiff’s demand was less than one year.
Id. at 513–14.
While Liberty relies on cases from other jurisdictions, at least one decision from a
Virginia trial court favors Shahabuddin. In F.L. Hall, Inc. v. Warehouse Landing
20
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 21 of 23
Associates, the court considered a contract giving the plaintiff-buyers the option to demand
a refund (plus interest) from the defendant-seller if the defendant didn’t make agreed-upon
improvements to several land parcels by a certain date. 38 Va. Cir. 181, 1995 WL
17044498, at *1 (1995). The improvements were completed 10 months late, but the
plaintiffs didn’t demand a refund for another 20 months, attempting to resell the properties
in the meantime. Id. at *2.
Under those circumstances, the court held that the plaintiffs had waived their right
to demand a refund. Id. at *3. It described the plaintiffs as having sat on their right for
years while speculating in the real estate market, knowing they faced little risk as they were
accruing interest on any eventual refund. Id. And it concluded that granting specific
performance to the plaintiffs so long after their rights became active would be inequitable.
Id.
The same is true here. Content to have its new franchisee operate with none of the
risk associated with assignment, Liberty waited an unreasonable amount of time to request
leases for the five properties. We don’t think the Supreme Court of Virginia would reward
Liberty by recognizing retraction of waiver and we won’t do so here.
B.
We next consider Liberty’s contention that the district court erred in finding
Shahabuddin is entitled to 10 percent of the Electronic Filing Fees for fiscal year 2019.
“Where the terms in a contract are clear and unambiguous, the contract is construed
according to its plain meaning.” TM Delmarva Power, L.L.C. v. NCP of Va., L.L.C., 557
S.E.2d 199, 200 (Va. 2002). We must “not insert by construction, for the benefit of a party,
21
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 22 of 23
a term not express[ed] in the contract.” Lansdowne Dev. Co. v. Xerox Realty Corp., 514
S.E.2d 157, 161 (Va. 1999).
The district court correctly held that the definition of “Net Revenue” unambiguously
included Electronic Filing Fees. In the 2018 Settlement Agreement, Liberty agreed to
“make payment to Shahabuddin of 10% of the 2019 Net Revenue.” J.A. 419. The
Settlement Agreement used the PSA’s definition of “Net Revenue”—“gross fees received
less all discounts, Cash-in-a-Flash, Send-a-Friend, and uncollected fees for the offices in
the Territories.” J.A. 402, 418. It didn’t allow for the deduction of Electronic Filing Fees. 8
Liberty breached the Settlement Agreement when it did just that. The spreadsheet
Liberty sent Shahabuddin before the 2019 payment included “Electronic Filing Fees” as
part of the “Gross Fees” figure. J.A. 228. Liberty also admits the fees were “a revenue
stream for Liberty Tax and its franchisees.” J.A. 989. But when Liberty calculated final
Net Revenue for 2019, it deducted the fees. Id.To rule for Liberty, we would need to ignore the agreement’s plain text. Liberty
says that it could properly deduct Electronic Filing Fees from Net Revenue because the
former didn’t exist when the PSA was signed, and because the fees were generated by
Liberty rather than its franchisees. But neither the PSA nor the Settlement Agreement
specifies that fees collected by Liberty in the first instance are excluded, and neither
excludes fees for new products.
8
If there were any doubt, Liberty’s Vice President of Treasury clarified in his
deposition that Electronic Filing Fees are not “cash in a flash, send a friend or uncollected
filing fees.” J.A. 1001.
22
USCA4 Appeal: 21-2031 Doc: 38 Filed: 04/19/2023 Pg: 23 of 23
The parties’ agreement is unambiguous, and we decline to modify it after the fact
for Liberty’s benefit.
Nor will we consider Liberty’s argument that Shahabuddin’s counterclaim is barred
by the affirmative defense of accord and satisfaction. Liberty raised this defense for the
first time in its objections to the magistrate judge’s Report and Recommendation, and the
district court judge had ample discretion not to consider it in that posture. Samples v.
Ballard clarifies that a district court needn’t consider new issues raised for the first time in
objections, even if it must consider new arguments related to existing issues. See 860 F.3d
266, 271–273 (4th Cir. 2017) (discussing United States v. George, 971 F.2d 1113 (4th Cir.
1992)). Samples also clarifies that an “issue” corresponds to a “ground for relief,” while
an argument is a “position [] taken in support of or against” that ground. Id. at 273–74.
We think an affirmative defense, like a “claim,” is best characterized as an issue rather than
an argument.
III.
In sum, Liberty waived its right to assignment of the five properties when it
expressly declined to take the leases in 2016 and then waited three years to request
assignment. Under the circumstances, retraction of waiver is inapplicable. Separately, the
plain text of the parties’ agreement didn’t permit Liberty to deduct Electronic Filing Fees
from the 2019 Net Revenue figure. The judgment of the district court is therefore
AFFIRMED.
23