Dive Brief:
- Market Basket’s board of directors acted in good faith when it decided to fire then-CEO Arthur T. Demoulas last summer, a judge ruled Monday.
- Delaware Court of Chancery Vice Chancellor J. Travis Laster said Demoulas failed to prove his claims that the board’s directors breached their fiduciary duties when they suspended and then fired him.
- “Arthur had the burden at trial to prove that a majority of the Current Directors acted in bad faith. He failed to carry his burden,” Laster wrote in the ruling.
Dive Insight:
The court’s ruling caps off a messy, generation-spanning power struggle over control of the family-owned New England grocery chain.
The ruling noted that the first round of family disputes stemmed from the founders’ sons, George and Telemachus Demoulas. After George’s sudden death, his side of the family went to court alleging that Telemachus’ side was trying to take over the company. As a result, the two family branches set up a power-sharing arrangement.
Arthur T. Demoulas, Telemachus’ son, became CEO and president in 2008. His clashes with the board led to one family member who traditionally supported Arthur T. to switch to George’s branch, which then led to George’s branch replacing two directors to create a new board majority, the ruling noted. In 2014, Arthur T. championed a weeks-long worker protest and customer boycott, and the massive protest helped him and his sisters buy out their cousins in a $1.6 billion deal.
Arthur T. “stubbornly resisted board oversight and excluded his sisters and their families from the business,” and over approximately five years, the sisters replaced Arthur T.’s allies on the board with three independent directors, the ruling noted.
“When the three directors made specific requests, [Arthur T. Demoulas] took a hardline, passive-aggressive approach,” Laster wrote. “The boardroom environment became toxic.”
Last spring, the board heard rumors of another employee walkout and customer boycott and “rationally concluded that the CEO was getting ready for a fight,” Laster wrote. The three independent directors formed an executive committee that decided to suspend Arthur T. and close members of his team as well as to probe his actions through a law firm investigation.
Laster said that the three directors “rationally concluded — one could say reasonably or fairly concluded — that the CEO’s longstanding resistance to board oversight, imperious manner, and refusal to compromise with his sisters threatened the company.”
Laster added that Demoulas “proved that he was a good operator and that the directors did not suspend or terminate him because of problems with the business. That, however, is not the only dimension of a CEO’s job. Nor is it all that directors can consider.”
After mediation attempts failed, the board fired Arthur T. in September 2025 and filed suit in the Delaware court to confirm the validity of its actions. Demoulas counterclaimed for reinstatement.
The judge’s decision followed a three-day trial with testimony from roughly a dozen witnesses.
The law firm investigation “did not exonerate” Arthur T., Laster noted.
“With this behind us, we’re looking forward to continuing to focus on everything that makes Market Basket so important to our communities,” Market Basket’s board said in a statement. “As the Board has said repeatedly, the Company is not for sale.”
The board noted that the grocer will continue to operate as a family-owned business, adding that it “thanks Mr. Demoulas for his many years of service and anticipates working with him productively into the future as one of the company’s important shareholders."
Last September, Market Basket’s board named Donald T. Mulligan, the grocer’s CFO and company veteran with more than four decades of service, as the grocer’s interim CEO.
