"Mr. Demoulas' authoritarian regime" is one way Market Basket's board of directors describes recently ousted CEO Arthur T. Demoulas' management of the Tewksbury-based grocery store chain in a new lawsuit.
The board's four-word description encapsulates much of its reasoning for placing Demoulas on paid leave back in May and then unanimously voting to fire him during a board meeting Tuesday night.
"Mr. Demoulas forced the Board to choose between accepting his autocratic control of Market Basket or terminating him in order to protect a vibrant and growing business that cannot flourish over the long-term under the leadership of a dictator," the lawsuit reads.
The board's decision marked the second time in less than 15 years that Demoulas has been removed from his position at Market Basket for insubordination — despite the enduring support he's received from many of the grocery store chain's customers and approximately 30,000 employees.
Now, Market Basket's board is simply asking a judge to uphold their decision to fire Demoulas while he legally contests his ousting. The former CEO also continues to argue publicly that the board is part of a "hostile takeover" of the nearly $8 billion, 90-store grocery chain by his majority-shareholder sisters who want to change the direction of the company.
"The Board's actions are a farcical cover up for a coup," Demoulas' spokesperson, Justine Griffin, said in a Wednesday statement. "...they took a company that was operating at peak performance and recklessly threw it into turmoil and did so in a needlessly public manner and on baseless grounds fabricated from the start."
Griffin Demoulas did not respond to a request for comment on the lawsuit Wednesday afternoon.
Why the board and CEO were at odds
In the lawsuit, Market Basket's board of directors paints a clear narrative of what led to Demoulas' firing.
"Arthur T. Demouas had a long-standing history of exercising his own unfettered discretion as to virtually every important decision at the Company — while ignoring and stonewalling the Market Basket Board," the lawsuit reads.
After joining, the three current board members decided to end previous board members' modes of operation — "capitulating" to Demoulas' "bullying tactics" or "willingly doing Mr. Demoulas' bidding" — so that they could fulfill their responsibility to oversee management of the company, according to the lawsuit.
"This did not sit well with Mr. Demoulas, who fought the Plaintiff Directors every step of the way," the lawsuit reads.
Years of disputes
For years, Demoulas continued to act as if he were the sole owner of Market Basket and "rejected any form of even the most basic oversight by the Board," according to the lawsuit.
The board accuses the former CEO of repeatedly, unlawfully and irresponsibly refusing to "provide the Board with basic information about the Company and its plans," such as giving them an annual company budget.
Demoulas also would not comply with the board's directives, allow other Market Basket executives to meet with the board, or even allow them to enter the company's headquarters in Tewksbury, according to the lawsuit.
Of particular contention was Demoulas' insistence that he select his successor. He told the board he would "unilaterally install his children into the top positions in the C-suite following his eventual departure — without regard for the Board's views on the matter," according to the lawsuit.
The board accuses the former CEO of refusing to discuss the issue with them or even let them meet his children to assess their fitness to hold positions in the company, instead expecting the board to "rubber stamp" whatever succession plan he ultimately decided on.
"A company of Market Basket's size, operational structure, and importance to so many stakeholders simply cannot tolerate the risks of consolidating all decision-making authority and power in a single individual — particularly one who outright refuses any attempt at oversight," the lawsuit reads.
The breaking point
In August 2024, the board formally ordered Demoulas to comply with a list of demands, including that he regularly give them basic financial information about Market Basket and work with them on a mutually acceptable succession plan, according to the lawsuit.
"When Mr. Demoulas saw the proverbial writing on the wall — that he would not be able to continue skirting the Board's directives and just get his way — he apparently began plotting with his closest lieutenants to sabotage the Company in an effort to pressure and exert leverage over the Board," the lawsuit reads.
The board does not say how it learned of Demoulas' alleged "secret plan" or provide evidence to substantiate their claims, simply citing "credible sources." It nonetheless accuses the former CEO of plotting to "instigate through his closest lieutenants a disruptive employee work stoppage and customer boycott."
Rather than cooperate with the board, Demoulas intended to let it discipline him, then recreate the scenario in which he was reinstated as CEO after being fired from the position in 2014, according to the lawsuit.
At the time, Demoulas was feuding with another wing of his family. But his ousting sparked two months of protests by Market Basket employees , and ultimately led to him and his sisters buying the other family members out of the company .
The boycott cost Market Basket hundreds of millions of dollars, but Demoulas seemed ready to start another such work stoppage despite this, according to the lawsuit.
The board, however, was determined to prevent this kind of damage to Market Basket, and upon learning of these plans, put Demoulas and two top company executives they viewed as his "closest lieutenants" on leave in May, according to the lawsuit. The executives were later fired in July.
The final straw
"Since that time, Mr. Demoulas, directly and through various proxies, has engaged in a scorched-earth campaign to disrupt Company operations, threaten and intimidate Company associates to stay loyal to him, and smear the Board and the other stockholders of the Company in the media — all in his own self-interest to return to power," the lawsuit reads.
The board criticized the media campaign carried out by Demoulas and his supporters over the summer, calling many of their statements false. It also accuses the two newly fired top executives of trespassing at over two dozen Market Basket stores and sneaking into the company's headquarters to intimidate employees at the behest of the former CEO.
"No company, no matter how successful, can tolerate this type of behavior from a corporate officer, let alone the President and CEO," the lawsuit reads.
Despite meeting with Demoulas and a mediator on Sept. 3 and 9, the parties could not come to an agreement. After the second meeting, the board voted to fire Demoulas.
"Mr. Demoulas revealed his true colors, that he cared more about getting his own way than about the Company and its constituents' best interests and future — just the opposite of the carefully cultivated public persona that Mr. Demoulas portrays to the outside world," the lawsuit reads.
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