Market Basket board files motion to sanction Artie T
The board of the Market Basket grocery store chain filed a motion for sanctions against the company’s former CEO Arthur T. Demoulas, claiming that a former employee loyal to Demoulas willfully avoided a subpoena.
Both sides have been fighting a legal battle over Demoulas’ status as head of the company in the Delaware Court of Chancery, where Market Basket is incorporated.
The board fired Demoulas in September and immediately filed a suit to uphold its decision.
Demoulas then filed a countersuit, claiming that the termination was “unlawful” and “not motivated by any rational business purpose or to advance the Company’s best interests.”
A judge heard three days of testimony in the case starting Dec. 16.
In court documents made public last week and filed the day before the trial began, the plaintiffs accused Joseph Schmidt, a former Market Basket executive who worked under Demoulas, of not complying with a subpoena.
Schmidt was fired by the company in July while Demoulas was on suspension and spoke publicly in defense of his former boss to the media.
The plaintiff in the case said that wanted to serve Schmidt a subpoena to get information related to burner phones Schmidt may have used to communicate with Demoulas and others, “all toward intimidating Market Basket employees into staging a walkout.”
Demoulas has denied that he tried to orchestrate a walkout or boycott in several court filings.
In a response to the motion to sanction, Demoulas’ counsel argued that “forensic examination of both of Defendant’s alleged ‘burner phones’ — including Plaintiffs’ own examination — revealed only sparse contact with Mr. Schmidt and no evidence of any loss or deletion of data by Defendant.”
Demoulas’ counsel described the motion “a last-minute litigation tactic designed to distract from the merits of this case.” According to the response, the board’s motion was filed “at 10:23 p.m. on the night before trial.”
“Filed late on the eve of trial, the Motion seeks to manufacture a discovery dispute with Defendant where none exists, attempting to impute to Defendant responsibility for the actions of a third-party (Joseph Schmidt) over whom Defendant has no legal authority or control,” Demoulas’ counsel said. “Delaware law is clear: sanctions are reserved for parties who fail to comply with their own discovery obligations, not for alleged noncompliance by third-parties.”
The plaintiff argued that Demoulas did have sway over Schmidt, who they said avoided their subpoena for six weeks.
In their motion, the plaintiffs said that a person who tried to serve Schmidt twice on the second occasion came into contact with Schmidt’s wife, who “became verbally aggressive and attempted to have her dog attack the server,” according to an affidavit.
A sheriff’s deputy then attempted to serve Schmidt two times until the subpoena was eventually left in Schmidt’s mail box on Dec. 8, the plaintiff said.
After serving Schmidt the week before the trial, plaintiffs said that they were “met with frivolous objections including that the subpoena was served too close to trial.”
A lawyer for Mr. Schmidt could not be reached before press time.
According to Demoulas’ response, Schmidt opposed the subpoena in part because “evidence upon which the subpoena relied was illegally obtained by Plaintiffs.”
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In addition to asking for court fees associated with trying to serve Schmidt, counsel for the board asked the court to draw “adverse inferences” against Demoulas, including that Schmidt obtained a burner phone to spur an employee walkout and/or customer boycott.
A decision from the court on the case will likely arrive some time next year.
Arthur T. Demoulas (Caley McGuane/Lowell Sun, File)
