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Market Basket cousin fails to prove board member is not independent

Third-gen Market Basket chief executive Arthur T DeMoulas has suffered a blow in the latest round of the longstanding feud with his cousin Arthur S over the running of the multi-billion-dollar family business – a supermarket chain based in Massachusetts, US.

Arthur T had argued that a board member, who had voted in favour of a large dividend pay out, was not independent and his votes should be nullified.

Market Basket, founded initially as a small grocery store in 1917, has annual revenues of more than $4 billion and employs 18,000.

Following several decades of family feuding, a 1998 court order ruled at least three of the seven-member Market Basket board should be independent – representing both the A-class shareholders of Arthur S's faction and the B-class shareholders of Arthur T's supporters.

Keith Cowan was appointed chairman in 2012 representing A-class shareholders, but in June he was designated independent after a reshuffle of the board, and therefore obliged to equally represent the interests of both parties.

Arthur T said in the lawsuit that Cowan's role had only been "rebranded", and he was continuing to act purely in the interests of A-class shareholders.

But Judge Judith Fabricant ruled that Arthur T was unable to offer enough proof that Cowan failed to meet Market Basket benchmarks for the independence of its directors.

Cowan had been the deciding vote in favour of a $300 million (€222.5 million) dividend payment to family shareholders. He had also voted in favour of employing an executive recruitment firm – presumed to be a move aimed at finding a replacement for Arthur T.

Arthur T has not spoken with media in the wake of the most recent court decision, but has previously said that the dividend would remove 60% of the cash on hand from the company, and would forever change how it operated and grew.

Arthur T is popular in the local community and among Market Basket employees, who have been vocal supporters while his family feud plays out in public.

A Facebook page called "Save Market Basket", which has more than 17,000 fans, said the ruling was “disheartening” and that the justice system could not be relied on.

“For us to think that we will win this fight in the courts is a wildly optimistic hope," the administrators posted to the Facebook page after the ruling. "The only way this is going to go our way is for us, the people, to rise up and win it in the stores and the warehouses. No Judge, board or shareholder can control us."

The feud at the family business has been running since the 1970s following the death of George DeMoulas.

Along with his brother Mike, George bought the family grocery shop from their parents in 1954, and rapidly expanded the family business into a supermarket chain.

They had both agreed to provide for the other’s family in the event of their deaths.

But in 1990 George’s heirs – Arthur S’s side of the family – brought a lawsuit against Mike claiming he had cheated them out of all but 8% of the company's stock by dividing the chain's assets into a web of shell corporations and arguing these companies were separate from the main Market Basket company.

In 1994 a judge finally ruled Mike DeMoulas had defrauded his brother's heirs out of nearly $500 million and transferred 51% of Market Basket's stock to George's family.

Mike died on 2003 at the age of 82 and his son, Arthur T, was elected chief executive of the company in 2008.

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