Updated: First Watch business partner sues another for breach of fiduciary duty, fraud

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Last edited 4:22 p.m., April 29, 2024 [Editor’s note: Comment from the Tillmans’ attorney has been added.]

One business partner in a portfolio of First Watch restaurants and commercial property has sued the other over allegations that include breach of fiduciary duty and fraud.

Joseph Hulston on April 19 filed suit in Greene County Circuit Court against business partner James Tillman and Tillman's wife, Lisa. The suit alleges, in part, that Tillman acted on business endeavors, paid increased salaries and misused funds without the knowledge or permission of Hulston. The Tillmans have denied the allegations through their attorney.

Hulston and Tillman in 2017 formed Ozark Endeavors LLC for the purpose of managing seven franchised First Watch restaurants and a development property located at the southeast corner of Kansas and Kearney streets, according to the lawsuit. Their first location of First Watch opened at 2946 S. National Ave. in 2017, according to past reporting.

Hulston and Tillman are 50% business partners in Ozark Endeavors, among other LLCs tied to First Watch operations, according to the lawsuit. The petition also points to Kansas & Kearney LLC, indicating Hulston is 70% owner and manager, and Tillman is 30% owner and manager for the business created to hold development property.

The suit alleges Tillman made business decisions involving Ozark Endeavors without the consent of Hulston, sometimes representing a conflict of interest related to Tillman's other business operations.

The suit points to a 2019 incident in which Tillman allegedly made the decision, without Hulston, to move Ozark Endeavors' headquarters within Springfield to a property Tillman controls. Rent for the headquarters increased to $9,750 from $1,710 per month with the move, according to the allegations presented in the lawsuit.

"Tillman’s unilateral decision to move the headquarters from 610 E. Battlefield to 1840 S. Ingram Mill Road was done without the consent, permission or agreement of Hulston," the lawsuit reads. "Further, Tillman had a conflict of interest and was not authorized to vote on or make any decision related to new rental space that he had a personal financial interest in."

Hulston also alleges in the lawsuit that Tillman increased salaries related to the business partners' holdings for himself, his wife and their daughter, Jamie, without Hulston's permission.

Included within the allegations presented in the lawsuit are claims that Ozark Endeavors’ credit cards were used by James and Lisa Tillman for personal use, such as movie purchases and travel expenses, and for unrelated business ventures.

"Hulston has demanded of Tillman that he provide all credit card statements and a business justification for all suspicious charges on the Ozark Endeavors’ credit cards. Tillman has refused," the lawsuit reads.

Related to Kansas & Kearney LLC, the lawsuit alleges Tillman represented to a real estate agent that he was the sole owner and negotiated and signed an $825,000 letter of intent to sell the property without disclosing those actions to Hulston.

The suit seeks damages and for the court to remove Tillman as the manager of the plaintiff LLCs.

"Tillman has instructed employees not to provide business information to Hulston; not divulge transaction information; and withhold business documents," the lawsuit alleges. "He has attempted to misappropriate additional funds by creating fictitious invoices for another of his businesses and demanding plaintiffs pay them. He makes demeaning, disparaging and unprofessional statements to Hulston and other employees about Hulston."

Evans & Dixon LLC attorney Kevin Dunaway, who is representing the Tillmans, denied the allegations against his clients in an interview with Springfield Business Journal.

"We'll staunchly defend and deny those allegations in court," Dunaway said.

Dunaway said Hulston, who he classified as a "trust fund plaintiff" and "passive management investor," has had "unfettered access" to reports involving business activity at the ventures.

"There were better ways to go about resolving disagreements between equal business owners," Dunaway said. "The plaintiff hasn't offered any resolution as to management alternatives for the businesses, despite multiple requests to his counsel."

News of the lawsuit was first reported by the Springfield News-Leader.