Arbitration panel favors Lees in ongoing dispute

By

James Wright, Senior Editor

Published on
September 26, 2014

On 19 September, a three-judge arbitration panel issued an award in favor of John Lees, a New Bedford, Mass., USA, seafood entrepreneur in litigation brought against him by Julius Numavicius, a Lithuanian businessman who purchased 80 percent Mar-Lees Seafood from Lees for USD 22 million (EUR 17.3 million) in September 2010.

In December 2012, Mar-Lees brought suit against Lees in the Superior Court for the Commonwealth of Massachusetts, asserting 16 causes of action against Lees including violations of the federal Racketeering Influenced and Corrupt Organizations Act (RICO).

Numavicius’ actions, concluded the panel, transformed Mar-Lees from a USD 70 million (EUR 55.1 million) scallop supplier with a 70,000-square-foot processing facility into a “highly unprofitable” business since 2011, losing nearly USD 5 million (EUR 3.9 million) in 2013.

“After the Asset purchase, Mar-Lees’ new managers brought to the business an entirely different culture of doing business that did not auget well for the success of the business,” the panel ruling stated.

According to the ruling of the Boston-based panel, Numavicius “drove a highly successful business into the ground” through “gross mismanagement,” including firing Lees shortly after the acquisition, which the panel described as one of the “most significant blunders” that harmed the company. Lees was rehired in June 2011 but fired again in December 2012 after Lees complained about non-payment of commissions he had earned.

The 26-page panel ruling sent to SeafoodSource by Lees’ attorney John Daukas of New York-based law firm Goodwin Proctor included that in filing his lawsuit against Lees, Numavicius asked Lees to come by the Mar-Lees plant to receive a “Christmas present” that was actually the service of the lawsuit by a sheriff in front of company employees.

The state court ordered portions of the lawsuit referred to arbitration, and the remainder of the case stayed pending the outcome of arbitration. Despite the stay, in October 2013, Mar-Lees filed a RICO lawsuit in federal court against Lees, his attorneys and others, wrongfully accusing Lees of engaging in bribery, kickbacks and racketeering activity with Mar-Lees CEO Zeke Shahin.

Mar-Lees falsely claimed Lees took kickbacks from Shahin’s company, TAF Enterprises, then a new customer of Mar-Lees. Lees maintained these transactions were innocent loans Lees personally made to TAF to allow it to continue to do business with Mar-Lees when Mar-Lees lacked the resources to do so, and that Mar-Lees profited through his loans. Despite the allegations, Mar-Lees kept Mr. Shahin as its CEO until June 2014.

Lees “worked diligently for Mar-Lees after he sold the company and his efforts benefitted the company even though some of them were in technical violation of his obligation not to assist others. [Lees] always exceeded his sales targets and earned a bonus for his successful sales efforts,” read the panel ruling.

Mar-Lees this week voluntarily dismissed its suit against Lees and Blue Sea Products, LLC of New Jersey and its CEO Thomas Jacob, who contested the allegations from the beginning, calling the lawsuit “meritless.”

However, Gregg Perry, president of public relations firm The Perry Group in Providence, R.I., which is representing Mar-Lees, said that the company has not waived its ability to refile the claim in the future.

"Meanwhile, we focus on further discovery and fact finding in the case currently pending against Mr. Lees in the Superior Court of the Commonwealth of Massachusetts," said Perry. "Depositions of individuals and a review of documents that had not previously been a part of the federal, state or arbitration cases will be undertaken as part of this process. The additional discovery and investigation we believe will strengthen the company’s complaint when it is taken to trial at the state level, and when the complaint is refiled in Federal Court."

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