The opinion
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
SOUTHERN DIVISION
MATTHEW GOFORTH, an individual, )
MALINDA GOFORTH, an individual, )
MG MANAGEMENT CO., LLC, a )
Missouri limited liability company, and )
MALINDA’s SUGAR AND SPICE, LLC, )
a Missouri limited liability company, )
)
Plaintiffs, )
)
vs. ) Case No. 6:23-cv-03167-MDH
)
TRANSFORM HOLDCO LLC, )
a Delaware limited liability company, )
HOMETOWN MIDCO, LLC, )
a Delaware limited liability company, )
ESL INVESTMENTS, INC., )
a Delaware Corporation, and )
ESL PARTNERS, L.P., a Delaware )
limited Partnership, )
)
Defendants. )
ORDER
Before the Court is Defendants’ Motion to Dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6). For reasons herein, Defendants’ Motion is DENIED.1
BACKGROUND
Plaintiffs’ allegations generally concern whether enforcement of a noncompete agreement
violates Section One of the Sherman Act.2 Plaintiffs Malinda and Matthew Goforth own MG
1 Also before this Court are Plaintiffs’ unopposed motion for judicial notice of two relevant arbitration
awards, which this Court GRANTS, and motion for extension of time for amended pleadings, which this
court finds as MOOT, since Defendants’ motion to dismiss is hereby denied.
2 This background section derives wholly from factual allegations in Plaintiff’s Complaint. Nothing herein
reflects a finding of fact on the part of this Court.
Management Co., LLC and Malinda’s Sugar and Spice, LLC. Malinda’s Sugar and Spice owns
and operates a retail business selling home appliances in Bolivar, Missouri under the name of
Goforth Home and Lawn. MG Management Co., LLC operated a Sears Hometown Store in Bolivar
until 2019. Defendant ESL Investments, Inc. owns approximately forty-seven percent of non-
parties Sears Hometown Stores, Inc. and Sears Authorized Hometown Stores, LLC (“SAHS”).
ESL also wholly owns Defendant Transform Holdco, LLC, Transform in turn owns Hometown
Midco, LLC, who owns approximately forty-five percent of non-party Sears Hometown Stores,
Inc. Sears Hometown Stores, Inc. wholly owns non-party Sears Authorized Hometown Stores,
LLC.
Sears Hometown Stores began operating around 1993 with the purpose of selling home
appliances to people in rural areas, who often lacked direct access to big-box stores in more
populated markets. Sears Hometown Stores were independently owned and operated. The Dealer
Agreement was a contract that helped define the relationship between SAHS and those individual
owners of Sears Hometown Stores. Pursuant to the Dealer Agreement, SAHS owned and supplied
merchandise to the store owner who received a commission for the sales.
Sometime around 2012, SAHS, at the direction of non-party Eddie Lampert, who wholly
owns and controls ESL, added a post-expiration noncompete clause to the Dealer Agreement. The
specific intent behind the addition of this clause, Plaintiffs allege, was to reduce future competition,
in anticipation of an increased rate of closures among Sears Hometown Stores. Defendants wanted
to protect their own business interests against the threat of Sears Hometown Store owners closing
their Sears-affiliated stores and then reopening their own home appliance stores. The expectation
of additional Sears Hometown Store closures was based on Lampert and Defendants’ knowledge
that Sears Holding Corp. was likely heading for bankruptcy. The noncompete clause at issue
appeared in Section 18.5 of the Dealer Agreement and, in effect, prohibited any former store owner
and their family members from competing with Sears Hometown Stores and Sears Holding Corp.
for a period of at least two years anywhere in the United States.
Plaintiff Matthew Goforth purchased a Sears Hometown Store in Bolivar, Missouri during
2016. The Dealer Agreement between Matthew Goforth and SAHS included the noncompete
clause at issue. Mattthew Goforth’s Dealer Agreement with SAHS was scheduled to expire July
6, 2019. During the months leading up to that expiration, Matthew Goforth was planning to open
his own home appliance business—Goforth Home and Lawn—in Bolivar. On June 7, 2019, SAHS
commenced an arbitration proceeding against Matthew Goforth to enforce the post-expiration non-
compete agreement and prevent the opening of Goforth Home and Lawn. While arbitration was
pending, Goforth Home and Lawn opened on November 8, 2019. On November 20, 2019, SAHS
was granted emergency interim relief to enforce the noncompete agreement and Goforth Home
and Lawn closed. The interim award was affirmed on March 16, 2020. On September 23, 2020 a
final arbitration award was entered, enforcing the noncompete agreement. On January 14, 2021,
an appellate arbitrator reversed, finding the noncompete agreement unenforceable. Goforth Home
and Lawn reopened in April 2021.
Plaintiffs’ Complaint seeks damages corresponding to the time Goforth Home and Lawn
was closed, alleging violations of the Sherman Act, Section One.
STANDARD
A complaint must contain factual allegations that, when accepted as true, are sufficient to
state a claim of relief that is plausible on its face. Zutz v. Nelson, 601 F.3d 842, 848 (8th Cir. 2010)
(citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The Court “must accept the allegations
contained in the complaint as true and draw all reasonable inferences in favor of the nonmoving
party.” Coons v. Mineta, 410 F.3d 1036, 1039 (8th Cir. 2005) (internal citations omitted). The
complaint’s factual allegations must be sufficient to “raise a right to relief above the speculative
level,” and the motion to dismiss must be granted if the complaint does not contain “enough facts
to state a claim to relief that is plausible on its face.” Bell Atl. Corp v. Twombly, 550 U.S. 544, 545
(2007). Further, “the tenet that a court must accept as true all of the allegations contained in a
complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice. Ashcroft, 556 U.S. at 678 (citing
Twombly, 550 U.S. at 555). Further, Eighth Circuit courts are particularly reluctant to dismiss an
antitrust suit at the pleadings stage, as “proper market definition can be determined only after a
factual inquiry into the commercial realities faced by consumers.” Double D Spotting Serv., Inc.
v. Supervalu, Inc., 136 F.3d 554, 560 (8th Cir. 1998) (citations omitted).
DISCUSSION
Defendants make six arguments in support of their motion: 1) Plaintiffs failed to allege
impact on interstate commerce; 2) Plaintiffs failed to allege harm to competition; 3) no named
defendant was party to the noncompete agreement and no named defendant enforced such the
noncompete agreement; 4) Plaintiffs fail to allege the existence of an agreement among
competitors; 5) Plaintiffs failed to adequately plead a relevant product and geographic market; and
6) Plaintiffs’ claim is barred by the statute of limitations. This Court will address each argument
in turn.
I. Plaintiffs sufficiently alleged an impact on interstate commerce
Defendants argue that Plaintiffs failed to sufficiently allege the requisite impact on interstate
commerce. To establish a violation of Section 1 of the Sherman Act, “a plaintiff must demonstrate
(1) that there was a contract, combination, or conspiracy; (2) that the agreement unreasonably
restrained trade; and (3) that the restraint affected interstate commerce.” Wholesale All., LLC v.
Express Scripts, Inc., 366 F. Supp. 3d 1069, 1076 (E.D. Mo. 2019). To establish a nexus with
interstate commerce, a plaintiff must “allege the relationship between the activity involved and
some aspect of interstate commerce …or, if it is local in nature, that it has an effect on some other
appreciable activity demonstrably in interstate commerce. McLain v. Real Est. Bd. of New Orleans,
Inc., 444 U.S. 232, 232–33 (1980). To establish such an impact, it is sufficient “for petitioners to
demonstrate a substantial effect on interstate commerce generated by [the complained-of activity].
Petitioners need not make the more particularized showing of an effect on interstate commerce
caused by the alleged [violations].” Id. at 242-43. The Complaint satisfies this element in several
ways, notably, and perhaps most directly, because the non-compete agreement at issue allegedly
prevented Plaintiffs from selling home appliances anywhere in the United States for a two-year
period. (Doc. 1 at ¶¶ 28-31). Additionally, the noncompete clause appeared in boilerplate Dealer
Agreement language that became standard around 2012. (Doc. 1 at ¶¶ 27, 28). This is a sufficient
allegation of interstate commerce impact.
II. Plaintiffs have sufficiently pled an antitrust injury
Defendants next contend that Plaintiffs have failed to allege a relevant antitrust injury. To
successfully plead a Sherman Act violation, plaintiffs must allege “injury of the type the antitrust
laws were intended to prevent and that flows from that which makes defendants’ acts unlawful.
The injury should reflect the anticompetitive effect either of the violation or of anticompetitive
acts made possible by the violation.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477,
489 (1977). Put differently, “The antitrust laws…are designed to redress the injuries of consumers
when an entire market is unlawfully constrained.” Haines v. VeriMed Healthcare Network, LLC,
613 F. Supp. 2d 1133, 1139 (E.D. Mo. 2009). Plaintiffs Complaint alleges the following.
[The] post-expiration noncompete restriction ensured that SAHS could “hold the markets
open” and keep them free from competition by former store owners as SAHS’ stores began
closing because of SHC’s future bankruptcy. The restraint of trade was designed to prevent
SAHS from losing rural market share until Lampert could reacquire SAHS and combine it
with SHC under Transform’s ownership. The post-expiration non-compete appeared in
Section 15.8 of SAHS’s store contracts during the time that Goforth was operating a
Hometown Store in Bolivar. The post-expiration noncompete restriction effectively
prohibited any former store owner along with their family from competing against SHOS
or SHC anywhere in the United States for at least two years. (Doc. 1 at ¶¶ 27, 28).
Plaintiffs argue that “a competitor’s exclusion from the market ‘is a conventional form of antitrust
injury’, Brunswick Corp. v. Riegel Textile Corp., 752 F.2d 261, 271 (7th Cir. 1984),
that would result from a defendant’s enforcement of an agreement not to compete on the basis of
products and markets.” (Doc. 30 at 31). Defendants, on the other hand, contend that Plaintiffs have
misunderstood the nature of an antitrust injury, arguing Plaintiff has alleged only a personal injury.
This Court agrees that Plaintiffs’ allegations in this regard remain thin, but the contention in
paragraph twenty-eight of the Complaint makes sufficiently clear that the noncompete agreement
at issue appeared in boilerplate language in SAHS’s Dealer Agreements starting around 2012,
indicating Plaintiffs have pled an anticompetitive injury sufficient to survive at the pleadings stage.
III. Plaintiffs have sufficiently alleged liability on the part of Defendants
Defendants next contend that Plaintiffs have failed to allege any specific acts on the part of
Defendants that caused enforcement of the noncompete agreement. More specifically, Defendants
argue that the arbitrator, not Defendants, enforced the noncompete agreement, suggesting absence
of causation. This Court disagrees. While the arbitrator may have played a role in enforcement,
the parties involved in formation and execution of the noncompete agreement are at least arguably
responsible for any antitrust violations. Additionally, Plaintiff’s Complaint makes clear SAHS
sought enforcement through arbitration.
IV. Plaintiffs adequately pled Defendants restrained trade
Defendants’ fourth argument is that none of the four named Defendants is party to the Dealer
Agreement, which involves only Plaintiffs and SAHS. Though this Court agrees that Plaintiff’s
allegations on this issue are general and, at times, cumbersome, the Complaint adequately alleges
an agency relationship between SAHS and named Defendants that could conceivably make
Defendants liable. The Complaint sufficiently alleges, at least for the 12(b)(6) stage, Defendants’
dominion and control over SAHS, an agency relationship between Defendants and SAHS, and
Defendants’ direct role in the alleged restriction of trade. (Doc. 1 at ¶¶ 17-37). This Court likewise
disagrees with Defendants’ contention that Plaintiffs failed to allege a constraint on competition
within the meaning of Section 1 of the Sherman Act. Plaintiff has adequately pled that the
noncompete agreement restricted future competition by preventing Goforth Home and Lawn from
competing with Sears and Transform. (Doc. 1 at ¶¶ 46-60).
V. Plaintiffs adequately pled product and geographic market
The parties disagree about whether the alleged restraint on trade—enforcement of the
noncompete agreement—should be treated as vertical or horizontal. A vertical restraint typically
involves parties at distinct points in the production process, while horizontal restraint occurs
between firms that compete at similar points in production. New Orleans Ass'n of Cemetery Tour
Guides & Companies v. New Orleans Archdiocesan Cemeteries, 56 F.4th 1026, 1035 (5th Cir.
2023). The distinction is relevant because it impacts the court’s analysis and, depending on the
circuit, pleading standards.
A horizontal restraint on trade, which creates a plainly-discernable anticompetitive impact and
possesses no apparent redeeming quality, commands a per se analysis, which “does not allow
inquiry into the intent behind the restraint, its pro-competitive justifications, or its actual effect on
competition.” Craftsmen Limousine, Inc. v. Ford Motor Co., 363 F.3d 761, 773 (8th Cir. 2004)
(citations omitted). On the other hand, a vertical restraint has a less clear anticompetitive effect
and requires a more searching rule of reason analysis, whereby “the factfinder weighs all of the
circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing
an unreasonable restraint on competition.” Cont'l T. V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49
(1977). In the middle are those cases that command a “quick look” approach, “in which the
restraint is sufficiently threatening to place it presumptively in the per se class, but lack of judicial
experience requires at least some consideration of proffered defenses or justifications.” Craftsmen
Limousine, Inc. v. Ford Motor Co., 363 F.3d 761, 773 (8th Cir. 2004).
In the instant case, Plaintiffs advocate for a quick look approach based largely on a Seventh
Circuit opinion finding, “a covenant not to compete following employment does not operate any
differently from a horizontal market division among competitors—not at the time the covenant has
its bite, anyway.” Polk Bros. v. Forest City Enterprises, Inc., 776 F.2d 185, 189 (7th Cir. 1985).
At the same time, however, other circuits have declined to apply a per se analysis to some
noncompetition agreements. See, e.g., Aydin Corp. v. Loral Corp., 718 F.2d 897, 900–01 (9th Cir.
1983); Lektro-Vend Corp. v. Vendo Co., 660 F.2d 255, 264–65 (7th Cir.1981); Bradford v. New
York Times Co., 501 F.2d 51, 59–60 (2d Cir.1974).
Plaintiffs contend that “there is no requirement under the rule of reason to define the
relevant market when a horizontal restraint of trade has no procompetitive justification.” (Doc. 30
at 39). For support, Plaintiffs cite a Supreme Court finding that, “we have never required proof of
market power in [cases that involve a naked restraint on price and output].” Nat'l Collegiate
Athletic Ass'n v. Bd. of Regents of Univ. of Oklahoma, 468 U.S. 85, 110 (1984).
Plaintiffs’ position, however, appears to conflate “proof of market power” and the need for
a plaintiff to “define a market and its participants.” Double D Spotting Serv., Inc. v. Supervalu,
Inc., 136 F.3d 554, 558–59 (8th Cir. 1998). In the Fifth Circuit at least, it appears plaintiffs who
allege a horizontal restraint are not necessarily required to define a relevant market. New Orleans
at 1036. In contrast, Eighth Circuit courts appear to require all plaintiffs to define a market and its
participants, regardless of whether the restraint is vertical or horizontal. Double D at 558-59 (“a
plaintiff alleging a horizontal restraint must at least define the market and its participants”). A
market definition normally includes reference to a specific product and geographic area. Double
D at 560.
This Court finds that Plaintiffs’ allegations sufficiently define a market in terms of product
and geography. Plaintiffs allege the relevant product is “major home appliances,” which they
claim, “can be categorized into four groups based on the function of each appliance: dishwashers,
laundry, cooking, and refrigerators.” (Doc. 1 at ¶ 41). Plaintiffs further allege that major home
appliances prove distinct from small home appliances, “because a vacuum or toaster is not
reasonably interchangeable with a dryer or refrigerator.” (Doc. 1 at 41). Importantly, contrary to
Defendants’ claim, it is not fatal to Plaintiffs’ Complaint that Plaintiffs’ product market includes
several individual products (i.e. dishwasher and oven) that are not interchangeable amongst
themselves. Indeed, the relevant concern is whether Plaintiff has sufficiently alleged a product
market that accounts for all reasonably interchangeable alternatives. “The boundaries of the
product market can be determined by the reasonable interchangeability or cross-elasticity of
demand between the product itself and possible substitutes for it.” HDC Med., Inc. v. Minntech
Corp., 474 F.3d 543, 547 (8th Cir. 2007) (citing Brown Shoe Co. v. United States, 370 U.S. 294,
325, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962). Here, because the product market of major home
appliances is, as Plaintiff alleges, not reasonably interchangeable with other products, Plaintiffs’
pleadings on the issue are sufficient.
Similarly, Plaintiff’s geographic market is satisfactorily pled. Plaintiffs allege, “the
relevant geographic market is local and in this case encompasses Bolivar, Missouri…Consumers
shopping for major home appliances overwhelmingly prefer local retailers....This is particularly
true for consumers living in smaller rural markets like Bolivar, who value local businesses and
prefer to avoid shopping for big ticket items out of town.” (Doc. 1 at ¶ 42). Contrary to Defendants’
argument, this is not impermissibly narrow and its exclusion of retailers in Springfield appears
strategic and adequately reasoned.
VI. Plaintiffs’ allegations survive the applicable statute of limitations
The parties appear to agree that the Sherman Act’s four-year statute of limitations applies. 15
U.S.C. §15b. The parties disagree, however, as to when the clock started ticking: at the 2016
signing of the Dealer Agreement that includes the noncompete agreement or the earliest moment
at which the agreement could have been enforced, namely July 6, 2019, the day on which the dealer
agreement expired. The Eighth Circuit does not appear to have addressed this narrow issue
directly. The Supreme Court has held, however, that “a cause of action accrues and the statute
begins to run when a defendant commits an act that injures a plaintiff’s business.” Zenith Radio
Corp. v. Hazeltine Rsch., Inc., 401 U.S. 321, 338 (1971). Accordingly, this Court finds that
Plaintiff’s Complaint sufficiently alleges a violation within four years of the earliest date upon
which the noncompete agreement could have conceivably been enforced, July 6, 2019, when
Plaintiff alleges the dealer agreement expired.
CONCLUSION
For foregoing reasons, Defendants’ Motion to Dismiss is DENIED.
IT IS SO ORDERED.
Dated: July 18, 2024 /s/ Douglas Harpool______
DOUGLAS HARPOOL
United States District Judge