Market Basket board had authority to remove Artie T. Demoulas, despite being a good CEO, judge rules

The firing of Arthur T. Demoulas, the now-former Market Basket CEO popularly known as “Artie T,” was upheld by a Delaware court Monday morning.

Board members of the New England grocery giant, with its three locations in Concord, concluded rationally, reasonably and fairly, “that the CEO’s longstanding resistance to board oversight, imperious manner, and refusal to compromise with his sisters threatened the company,” wrote judge J. Travis Laster.

Market Basket’s board of directors suspended Demoulas last May and fired him in September, after a law firm’s investigation and failed mediation. The company’s chief financial officer, Don Mulligan, has been serving as the head of the company on an interim basis since. The board filed a lawsuit in Delaware, where the holding company is based, to back up its decision and Demoulas counter-sued. The case went to trial in December.

Demoulas built a reputation as the flag-bearer for the company’s longstanding practices of paying workers decent wages and giving shoppers lower-than-average prices, which generated loyalty among employees and customers alike. More recently, prices have been rising, perhaps the result of new leadership, inflation, or tariffs, or a combination of all three.

The board, in a collective statement on Monday, pledged to stay the course, even without Demoulas at the helm:

“As the board has said repeatedly, the company is not for sale. Market Basket will continue to be a family-owned and operated business, offering the lowest prices and best value for customers, creating good jobs with profit sharing for associates, and supporting its customers and communities—well into the future.”

Demoulas said he knew he had an uphill battle to get his job back, according to his spokesperson, Justine Griffin.

“As his father before him, the late Telemachus A. Demoulas, Arthur T. has devoted his entire working life to building and growing Market Basket in a way that has brought benefit to all stakeholders – its associates, its customers, the communities that Market Basket serves, and its shareholders,” Griffin said in a statement.  

The legal dispute grew from long-brewing tension between Demoulas and his three sisters, who together bought out the company from their extended family in 2014, amid months-long boycotts and walkouts after Demoulas was first sidelined. The three of them together – Frances Demoulas Kettenbach, Glorianne Demoulas Farnham and Caren Demoulas Pasquale – own 60% of the company, while Demoulas owns 28%.

Demoulas “ran the business profitably as CEO for nearly two decades, but he stubbornly resisted board oversight and excluded his sisters and their families from the business,” per the judge’s account.

His sisters appointed new members over time to Market Basket’s board, hoping for more cooperation and transparency between the popular CEO and the company’s broader leadership and ownership.

Demoulas wouldn’t bend, resisting demands from the board that he provide them with financial information for the company.

The judge determined that the board members had a reasonable suspicion that Demoulas was planning to try and rouse a similar employee walkout and customer boycott as the one that saved his job in 2014. They were genuinely worried that such a walkout would damage the business, the ruling stated.

“They rationally concluded that the CEO was getting ready for a fight,” Laster wrote. “Believing in good faith that another walkout and boycott would be disastrous for the company, they took action.”

While appointed by Demoulas’ sisters, the board members did not act solely to advance their interests, according to the ruling.

“The CEO sought to prove that the directors breached their duty of loyalty by acting in bad faith to benefit his sisters and their families. He failed to carry his burden,” Laster wrote. “The record does not support a finding that the directors were beholden to the
sisters.”

The judge affirmed that Demoulas had been a successful helmsman of the grocery chain.

“That, however, is not the only dimension of a CEO’s job,” he concluded. “Nor is it all that directors can consider.”