A bid by the second-gen chief executive of a US family-controlled supermarket chain to block a $300 million (€222.5 million) dividend payment to family shareholders has failed.
A judge at Suffolk Superior Court ruled yesterday that the payment could go ahead, after deciding CEO Arthur T DeMoulas’s grounds for contesting the payment were unfounded. Arthur T said the board was biased in favour of shareholders and the payment would be damaging to Market Basket.
Arthur T has been locked in a long-running feud with his cousin Arthur S DeMoulas over the management of the chain and the distribution of assets, but a succession of court rulings has maintained the peace at the company.
A 1998 court order ruled at least three of the seven-member 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.
One board member, 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.
Judge Judith Fabricant decided, however, that Cowan was acting independently, and not acting against the best interests of Market Basket.
Following the ruling, Artur T said in a statement: “Taking out 60% of the cash on hand from the company will break Market Basket’s proven business model, and forever change how the company operates and grows.”
The feud at the $4 billion-a-year family business has been running since the 1970s following the death of George DeMoulas, one of the founding brothers.
Founders Mike and George DeMoulas had 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, but his heirs have been making sure the feud is kept alive and well. Mike's son, Arthur T DeMoulas, was elected chief executive of the company in 2008.