BOSTON -- Telemachus (Mike) Demoulas, president of Demoulas SuperMarkets here, and members of his family have been ordered by a Superior Court judge to restore hundreds of millions of dollars in assets to the family of his late brother George Demoulas. Demoulas SuperMarkets, or DSM, reportedly will appeal the decision. Chain officials could not be reached for comment. Primary among the assets to be restored is Market Basket, the 43-store New England chain owned and operated by Market Basket Inc., a separate corporation set up by DSM. DSM operates 12 stores under the Demoulas banner. The assets also include several real-estate companies -- established with DSM funds and controlled by Telemachus Demoulas and his family -- that own some of the shopping centers in which the Market Basket units are located.
In her ruling earlier this month, Superior Court Judge Maria I. Lopez said she agreed with the plaintiffs that DSM had usurped corporate opportunities and diverted assets by opening Market Basket stores through a separate corporation. She ordered DSM to restore the assets and liabilities of Market Basket to the main corporation, along with assets controlled by the Telemachus Demoulas family in the separate real-estate companies. The value of those assets is at issue, with attorneys for the George Demoulas family putting them at $600 million to $800 million and DSM putting them at a lesser amount. Lopez also ordered Telemachus Demoulas and his family to reimburse DSM by Aug. 24 for individual legal fees incurred by the company in fighting the lawsuit. Lopez's rulings came as a result of a shareholder derivative action filed against DSM by Arthur S. Demoulas, George Demoulas' son, against Market Basket and Market Basket's shareholders (Telemachus Demoulas and members of his family). The shareholder derivative suit followed a lawsuit last summer in which a jury found Telemachus Demoulas guilty of fraud, breach of fiduciary duty and conversion (the civil equivalent of theft) between 1971 and 1987. The remedy portion of that trial was put on hold while the court heard the shareholder derivative lawsuit. The George Demoulas family will ask the court to restore the 50-50 stock distribution in DSM that existed between the two sides of the family at the time of George Demoulas' death in 1971, said Robert Gerrard, an attorney with Davis Malm & D'Agostine, Boston.
He said DSM's books show the current ratio to be 92-8 in favor of the Telemachus Demoulas family. The George Demoulas family also will seek payment of past dividends, Gerrard added.