TRENTON — The firing of the former CEO of Lobster 207, a fishing cooperative, was upheld in arbitration last week, possibly indicating how a federal racketeering lawsuit against the former CEO and his family might play out in court.
On Aug. 23, an arbitrator found that Warren Pettegrow broke his contract with Lobster 207 – stating that it was clear that Pettegrow was competing with his employer to the benefit of his family’s lobster pound – and ordered him to pay his former employer $1.021 million in damages.
“The company and its membership are gratified that the arbitrator ruled in our favor in recognizing that our former CEO was properly discharged based on the facts and circumstances presented to our board,” said Lobster 207 CEO Michael Yohe in a statement. “Lobster 207 remains committed to our mission of protecting the interests of Maine’s lobstering men and women. We look forward to presenting our federal court case before a Maine jury.”
Pettegrow’s attorney Jason Barrett said they have received the decision from the arbitrator and are reviewing it carefully.
Lobster 207 is a Trenton-based lobster wholesale co-op owned by members of the Maine Lobstering Union. In 2017, the company bought the Trenton Bridge Lobster Pound’s wholesale lobster business and its Lamoine wholesale facility for $4 million.
The company took on Pettegrow, who ran the wholesale business for the lobster pound, and made him its CEO. Pettegrow’s family continued to operate the lobster pound’s restaurant in Trenton.
The Trenton Bridge Lobster Pound signed a noncompetition clause with Lobster 207 agreeing it would not be in the wholesale business anymore but could still operate its lobster-buying station for the restaurant. All unused lobsters would contractually be sold to Lobster 207. There was also a similar agreement for Pettegrow’s smack boat.
In 2019, Lobster 207 filed a lawsuit against the Trenton Bridge Lobster Pound, claiming that the family had swindled the new company and created an enterprise to embezzle and cheat them out of money by continuing to work in the wholesale business.
The company alleged that the Pettegrow family directed Lobster 207 trucks to unload high-quality lobster at the lobster pound so they could be sold back to Lobster 207 at a higher price, sold “phantom” lobsters that were never actually sold or delivered, and pocketed a 10-cent-per-pound premium that Lobster 207 decided to pay its members.
Lobster 207 also said that Pettegrow put an unjust $100,000 markup on tubed lobsters that were sold to Lobster 207 through the lobster pound because Pettegrow claimed that the pound had a better line of credit and would be able to carry the cost, even though Lobster 207 had a larger credit line, according to the arbitration decision.
In 2020, Pettegrow filed for arbitration, arguing that he was terminated without warning or cause. The arbitrator didn’t see it that way.
Quoting John Adams, arbitrator Frederick Connelly wrote “facts are stubborn things; and whatever may be our wishes, our inclinations or the dictates of our passion, they cannot alter the state of the facts and evidence.”
The facts in the Pettegrow/Lobster 207 case do not support Warren’s claims and “after reviewing all the evidence, this was not a close decision,” the arbitrator wrote.
From “day one” following the sale of the lobster pound’s wholesale business to Lobster 207, it was clear that the intent of the lobster pound was to continue making money in the wholesale lobster market, according to the decision.
Pettegrow breached the offtake agreement from the start by not buying the lobsters from fishermen as he was contracted to do and by not selling all the lobsters from his smack boat to Lobster 207, but instead sold them to the lobster pound who then sold them to Lobster 207 at a profit, according to the decision.
The arbitrator wrote that Pettegrow was hired to get rid of the middleman but inserted the Trenton Bridge into sales anyway. Pettegrow should have been well aware of his mission to save lobstermen money by “avoiding the middleman as much as possible and bringing transparency to the prices received,” Connelly wrote.
Although he was prohibited from being connected to the lobster pound after he was employed by Lobster 207, Pettegrow received daily financial reports, continued to sign checks and managed the lobster pound’s employees, according to the decision.
After the initial lawsuit, the Pettegrow family filed a counterclaim, claiming that Lobster 207 had got in over its head and, with business going poorly, blamed the family and made them scapegoats.
The court case is ongoing and Lobster 207 has asked the judge to confirm the arbitration award.
The arbitration hearing took eight days and included 10 witnesses and more than 300 exhibits.