A Delaware judge on Monday upheld Market Basket’s decision to suspend Arthur T. Demoulas last May and fire him in September, ruling that the grocery chain’s board did not act in bad faith when it removed the longtime chief executive.
Vice Chancellor J. Travis Laster said Demoulas “proved to be an excellent operator, but an imperious leader,” a line that captured the divide at the center of the fight over one of New England’s most closely watched family companies. The ruling came after a December trial and keeps in place the board’s move to install chief financial officer Don Mulligan as interim chief executive.
The case mattered well beyond a boardroom dispute because Market Basket operates 90 stores and has a history of employee and customer loyalty that makes its leadership battles unusually public. The company’s board sued in Delaware to protect its decision to remove Demoulas, while Demoulas countersued and argued the directors acted in bad faith. The company’s bylaws allow the board to fire the chief executive without cause, a point board chair Jay Hachigian stressed when he testified that Demoulas was removed without cause but “for good reasons.”
The ruling also lands against a long and bitter family backdrop. Market Basket’s holding company is incorporated in Delaware, and Demoulas’s three sisters — Frances, Caren and Glorianne — together own just over 60 percent of it, while Demoulas owns 28 percent. Over recent years, the sisters had gradually replaced allies of his on the board, and by the time of his termination the three remaining directors had all been appointed by them without his endorsement. There was also a separate legal dispute between Demoulas and his sisters over his management of a trust holding shares for the siblings’ children.
The board’s decision was driven by concerns that Demoulas was not taking direction properly from directors or sharing financial information, and the judge’s ruling leaves that account intact. Demoulas, who regularly walked the aisles of Market Basket stores to greet employees and customers, had already been fired once before, in 2014, a move that caused major disruption inside the company and around its stores.
In a statement after the ruling, the board said, “With this behind us, we’re looking forward to continuing to focus on everything that makes Market Basket so important to communities.” A spokesperson for Demoulas said the case had cleared “high hurdles,” but the decision leaves the company’s current management structure in place as the family and board continue to live with the fallout from one of the most consequential corporate breakups in the region.