Antitrust Law Daily Wrap Up, ANTITRUST—W.D. Mo.: RICO, Sherman Act claims between former business partners proceed, (Sep 23, 2025)

By Donielle Tigay Stutland, J.D.

The court rejected the argument that the tort claims were barred due to the economic loss doctrine and found the claims were plead with specificity.

The federal district court in Springfield, Missouri arising from the breakdown and alleged misappropriation of funding of a joint business dealings. The complaint alleged that Jim Morris and Paul Freeman diverted money and assets through inflated and/or false invoices through companies such as Royal Lawn Care, RLC and Chase Erectors, which was sufficient to show criminal/illegal activity amounting to racketeering. There was also sufficient evidence to move forward on the Sherman Act claims. Further, the court rejected the former business partner defendants’ arguments that the tort claims were barred due to the economic loss doctrine (Sandford v. Morris, No. 6:24-cv-03124-MDH (W.D. Mo. Sept. 22, 2025)).

Background. David and Drew Sanford own multiple LLCs together along with defendant Jim Morris. Defendant Paul Freeman, through his company TRock holdings, LLC also owns membership in companies with the Sanford Plaintiffs and Defendant Jim Morris. In 2022, The Sanfords became aware that Paul Freeman was found liable in a fraud and deceptive trade practices case for $2,000,000 in damages. The business relationship deteriorated after plaintiffs’ knowledge of Defendant Freeman’s past fraud. The plaintiffs allege that defendants Freeman and Morris began planning to take the LLCs and the assets of the LLCs from plaintiffs with no compensation.

The plaintiffs allege that defendants Freeman and Morris formed 4050 Penn KC, LLC without David Sanford’s knowledge and forged his signature on the 4050 Penn KC, LLC Operating Agreement using a stamp that defendant Freeman stole. The plaintiffs also allege that defendant Morris refused to sign loan renewals or guaranties in order to starve the shared LLCs of cash. Next, the plaintiffs allege the defendants stopped construction and diverted money from the shared LLC construction companies in order to require individual shared LLCs to pay to fix and compete construction defects and force the LLCs to operate in incomplete buildings, requiring the shared LLCs to expend more cash and borrow from the plaintiffs. The plaintiffs also allege that the defendants formed their own companies and stole trade secrets and intellectual property from the shared LLCs, sold shared LLC assets and inventory to the defendants’ companies at below-market rates, and operated their own companies using intentionally similar names to compete with the shared LLCs, and destroy the shared LLC businesses. Lastly, the plaintiffs allege the defendants coordinated to use PBack Holdings to purchase the debt of the shared LLCs in order to acquire the assets of the shared LLCs without payment to the plaintiffs and to force the plaintiffs to pay loan deficiencies created by the defendants’ destruction of the shared LLCs.

The plaintiffs complaint brought alleged seven counts based on their allegations: Count I – Breach of Fiduciary Duty; Count II – Fraud; Count III – Tortious Interference; Count IV – Violation of the Racketeer Influenced and Corrupt Organization Act (18 U.S.C. § 1962) – Mail (18 U.S.C. § 1341) and Wire Fraud (18 U.S.C. § 1343); Count V – Violation of the Racketeer Influence and Corrupt Organizations Act 18 U.S.C. § 1962(D) --- Conspiracy; Count VI – Violation of Federal Antitrust Law, 15 U.S.C. § 1; and Count VII – Civil Conspiracy.

Economic Loss Doctrine. The defendants argue that tort claims are barred as matters of law because of the economic loss doctrine. The court rejected this argument, indicating that the economic loss doctrine does not pertain to this particular type of loss. The court noted that the economic loss doctrine prohibits a buyer of goods from seeking recovery in tort, not a fraud claim based upon the alleged dereliction of duty owed by a member of an LLC to another member.

Fraud Pleadings. The defendants next argued that the plaintiff’s allegations of fraud fail as a matter of law because Plaintiffs fail to plead their allegations with the requisite level of detail as required by Federal Rule of Civil Procedure 9(b).

The court found that the plaintiffs met the fraud pleading standard under Federal Rule of Civil procedure 9(b). The court pointed to the following specific allegations in the complaint of fraudulent misrepresentations:

• Defendant Jim Morris made written representations that he would sign guaranties and loan renewals for each of the LLCs;

• Every year the LLCs renewed the loans, Jim Morris represented he would sign guaranties and loan renewals for each of the LLCs;

• Jim Morris and PBack Holdings represented it would renew the loans to the LLCs in writing on or about January 2, 2024;

• Jim Morris and PBack Holdings represented they would use commercially reasonable means to sell assets in order to pay down and retire the debt and satisfy the personal guarantees of plaintiffs;

• Jim Morris and PBack Holdings represented they would apply monies received from the sale of assets in a commercially reasonable manner in order to pay down and retire the debt and satisfy the personal guarantees of plaintiffs;

• Plaintiffs have provided the operating agreements in the shared LLC’s with defendant Morris and PBack Holdings asserting the written representations that those specific defendants would sign guaranties and loan renewals for each of the LLCs.

Tortious Interference. The court found that the plaintiffs sufficiently plead the necessary facts to state a claim for tortious interference under Reyna Hotel Corp. v. Lotus Hosp. Mgmt. The complaint alleges that “Jim Morris and PBack Holdings purchased the Southern Bank and/or Legacy Bank Loans made to the LLCs on or about December 22, 2023. Neither Jim Morris nor Paul Freeman nor PBack Holdings had justification for their interference.” Additionally, the plaintiffs alleged that “Defendants coordinated to use PBack Holdings to purchase the debt of the LLCs in order to acquire the assets of the LLCs without payment to Plaintiffs and to force Plaintiffs to pay loan deficiencies created by Defendants’ destruction of the LLCs.” The court found that the plaintiffs have sufficiently alleged the necessary facts to state a claim for tortious interference. Plaintiffs have alleged that Defendants purchased the debt of the LLCs in order to acquire the assets of the LLCs without payment to Plaintiffs and to force Plaintiffs to pay the loan deficiencies. As such, the court denied the motion to dismiss.

RICO. The defendants argue that the RICO count fails as a matter of law because none of the defendants’ alleged actions constituted criminal activity or illegal activity amounting to racketeering. The court found that the plaintiffs sufficiently alleged criminal/illegal activity amounting to racketeering. The complaint alleges that Jim Morris and Paul Freeman diverted money and assets through inflated and/or false invoices through companies such as Royal Lawn Care, RLC and Chase Erectors. This allegation is sufficient to show criminal/illegal activity which may amount to racketeering. The court also highlighted that the plaintiffs allege a list of claims including the defendants Morris and Freeman using their LLCs to take money from the shared LLCs of the parties; the use of attorneys to pressure and threaten plaintiffs; and telling existing customers of the shared LLCs the companies were going out of business, among other claims.

The court also found that that the complaint was sufficiently specific in its allegations of mail and/or wire fraud. The complaint alleged the use of e-mail, text and telephone in Jim Morris and Paul Freeman alleged scheme to take money from the LLCs, require the other LLCs to complete the Spaces construction work, and limit the ability of the LLCs to operate their businesses. Additionally, the plaintiff alleges the following use of wire communications by defendants Morris and Freeman: using Baitworkx, LLC and Ozark Shores, LLC to take money from the LLCs; communicated with customers of MS Propane to tell the customers of MS Propane that the company was going out of business; communicated allegations to business associates and customers of the Sanford Plaintiffs and the LLCs among other allegations. The court concluded that these allegations were sufficiently specific to survive at this stage of the litigation.

Sherman Act. The defendants argue that the plaintiffs did not plead a legitimate claim for relief under the Sherman Act because defendants Morris, Freeman and PBack Holdings are not separate economic actors pursuing separate economic interests.

The court again rejected the defendants argument. The court stressed that the complaint alleges that defendants Morris, Freeman and PBack Holdings “are not, together, a legal entity.”The complaint also alleged that defendants Freeman, Morris and PBack Holdings obtained credit facilities, trade secrets and confidential information from MS Propane, Boat Worx, LLC, and other shared LLCs to lessen the competition in the marketplace for those respective businesses. The court found that defendants Freeman, Morris and PBack Holdings are legally distinct entities and defendants Freeman and Morris are considered independent centers of decision making. The court acknowledged that defendant PBack Holdings is wholly owned by defendant Morris and thus is not considered an independent center for decision making for the purposes of the analysis. However, even with defendant PBack Holdings being an extension of defendant Morris, the court’s analysis, at this stage of the litigation, remains unchanged. The court concluded that defendants Freeman and Morris were pursuing their own economic interests compared to those of the shared LLCs with Plaintiffs. The court found the plaintiffs adequately pled antitrust violations.

Civil conspiracy. The court again rejected the defendants’ defense of the economic loss doctrine. The court also found that the plaintiffs have plead fraud with the requisite specificity and denied the motion to dismiss this claim.

The Case is No. 6:24-cv-03124-MDH.

Judge: Harpool, D.

Attorneys: Gregory M. Bentz (Wallace Saunders Austin Brown and Enochs) for David Sanford. Brian K. Asberry (Neale & Newman, LLP) for Jim Morris.

Cases: Antitrust RICO MissouriNews