RSM McGladrey, a wholly owned subsidiary of H&R Block, filed a suit against McGladrey & Pullen last week and alleged that the firm does not intend to abide by a contractual noncompetition provision.
Through the services agreement, which was signed in 1999, RSM provided various services to M&P. M&P received a line of credit from RSM to finance its receivables, working capital and office space. M&P also received capital investments from H&R Block affiliates to assist in acquisitions of professional services firms to develop software and other technology.
"This arrangement made sense in 1999," Dave Scudder, an M&P managing partner said in a statement on the firm's Web site, www.mcgladrey.com. "However, that operational and financial model does not serve us well as we address our future goals of client service, opportunity for our partners and continued growth. We are taking this action because we believe it to be in the best interest of our partners, our employees and our clients. We see great opportunities for success and growth for McGladrey & Pullen as a traditionally structured firm able to provide full service across all industry segments."
H&R Block President/CEO Russ Smyth said in a statement on RSM's site, www.rsmmcgladrey.com, before the lawsuit was filed that he feels the decision is not in the best interest of M&P partners, employees or clients and that he would prefer to continue working cooperatively with M&P. He also stated that if M&P terminates the agreement, RSM and H&R Block will enforce all extensive rights they have under all agreements with M&P, which includes the noncompetition provision.
RSM filed the suit against M&P two days later.
In a statement to Credit Union Times, RSM said, "We do not comment on ongoing litigation. We continue to believe that the successful relationship we have shared for the past 10 years with M&P is a proven framework for high-quality client service worth preserving. We are open to productive discussions with M&P to do so and realize the attractive opportunities we see ahead."
"At the same time, we are taking all appropriate actions to protect the value of this relationship and to preserve the status quo in accordance with McGladrey's & Pullen's existing contractual obligations while we seek to resolve our differences," the statement said. "We remain hopeful that we will ultimately reach an agreement with M&P that is in our mutual best interest. If not, we are intent on continuing to provide excellent service to our clients and meaningful careers for our people."