Massachusetts Business Ownership Dispute Rocks Embattled Lobster Distributor

The Bangor Daily News reports that a U.S. District Court magistrate in Massachusetts has recommended a former Live Lobster official and minority partner be awarded $235,000 from one of the company’s owners.

It’s the latest in a rash of legal setbacks for the New England lobster distributor, which is based in Chelsea. Boston business attorneys know the stakes are high when dealing with an ownership dispute. Having a general counsel attorney can often protect a business, as well as the interests of owners, by providing a number of legal services, including: 1266923_untitled.jpg

-Business formation -Employment contracts -Partnership documents -Incorporation -Contracts -Contract Disputes -Non-compete contracts
As we reported back in April on our Massachusetts Employment Lawyer Blog, Live Lobster is facing several lawsuits from banks and a former business partner. In dispute is $4 million, including a claim by TD Bank that the company defaulted on a 2008 loan. The financial problems have idled plants in Stonington, Phippsburg, Rockland and Spruce Head and there remain unanswered questions about whether those facilities will resume operations.

The company ships Atlantic lobster to restaurants on the West Coast.

The former general manager says he was a minority owner from 2003 to 2009, when he was “frozen out” of the company. He agreed to a $460,000 settlement and received $225,000. He claims TD Bank is blocking the remaining $235,000 payment. But he has pursued a claim against the existing owners.

The company has also come under fire for bouncing checks to lobstermen.

Unfortunately, times of financial challenge are often when ownership disagreements arise. Whether a disagreement on the direction of a company, or contentious issues involving owners and financial interest, having a strong foundation is critical to a company’s ability to survive such upheaval.

The parties agreed to have the magistrate make a recommendation to presiding judge Patti B. Saris. The recommendation is for a default judgement against one of the company’s owners, who is living in Italy and has not responded to the lawsuit. The case against the other owner is still being pursued.

A default judgment can occur when a party to a lawsuit does not cooperate with the court process, does not respond to official correspondence from the court, misses court dates, or otherwise draws the court’s ire. In some cases, ignoring a legal proceeding can result in a default judgment, so it’s important to consult with an attorney at the earliest sign of litigation.

TD Bank claims the company has defaulted on a $3.4 million note and had been making deposits in another bank to keep funds from being seized, in violation of the security agreement. A Massachusetts business foreclosure action may result. In such cases, a Chapter 11 bankruptcy, or re-organization bankruptcy, can sometimes give a business the breathing room it needs to re-group, address debt, and continue as an ongoing concern.

The Brown Law Firm, LLC, has offices in Belmont and Boston. For a free, confidential consultation, call our legal team at 617-489-0817 or contact us through this website.

Additional Resources:

Judge recommends $235,000 award in Live Lobster lawsuit,
By Bill Trotter, Bangor Daily News, July 16, 2012.

Boston Business Litigation Troubles Lobster Distributor, Massachusetts Employment Lawyer Blog, April 23, 2012.

Photo credit: Colin Broug via Photo credit: stock.xchng

Boston Bar Assosiation