H&R Block and RSM McGladrey file suit against McGladrey & Pullen

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On the heels of the announcement that McGladrey & Pullen has terminated its administrative service agreement with RSM McGladrey, H&R Block, Inc. and RSM McGladrey, Inc. have filed a lawsuit against McGladrey & Pullen (MP). They contend that McGladrey & Pullen have no intention of honoring the noncompetition agreement.

While all of the specifics of the noncompete agreement are not known, it has been reported that it includes contractual noncompetition provisions limiting the future activities of both M&P and certain individual M&P partners. The further entanglements of shared office space and employees could certainly complicate the rules of the termination. The current relationship also includes a significant line of credit to MP from RSM McGladrey for financing receivables and working capital, and capital investment from H&R Block affiliates for various business development and expansion projects.

H&R Block, Inc. and RSM McGladrey have been unavailable for comment since issuing their original statement regarding the termination. In that statement, Block CEO Russ Smyth warned, “We believe the path proposed by certain of M&P's leaders is fraught with significant business and financial risk and is not in the best interest of M&P partners, employees, or clients. Whether the full M&P partnership is willing to assume these immense risks remains to be seen.”

From earlier statements, MP has reiterated that this was a business decision on behalf of their firm and their clients and that they are committed to respecting their legal obligations. A spokesperson from MP stated that "MP is confident it is following all protocols carefully and is not going to discuss the issue at advice of counsel."

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