Live Lobster sued for more than $3.5 million

ELLSWORTH, Maine — Live Lobster officials have said little about why money flow problems have prevented the company from operating since March 23, other than to blame TD Bank for freezing its checking accounts.

But two lawsuits filed against the company in federal court in Massachusetts shed more light on the situation. In separate complaints, a former Live Lobster employee and TD Bank claim the company has failed to live up to contractual agreements and owes them $235,000 and $3.4 million respectively.

The lawsuits raise the question of whether the Chelsea, Mass.-based firm, which operates in Maine as Lobster Web Co., will be able to resume operations in Phippsburg, Rockland, Spruce Head and Stonington, where it has buying stations, or in Gouldsboro, where last year it purchased the former Bumble Bee sardine cannery.

Several attempts to contact Live Lobster officials at the company’s Chelsea, Mass., headquarters since March 23 have been unsuccessful. Voice mail messages left with Live Lobster official Thad Reece have not been returned. Live Lobster president Antonio Bussone has not answered several calls placed by the Bangor Daily News to his cellphone.

No one answered phone calls placed to Live Lobster’s Chelsea offices on Thursday.

The company has employed between 80 and 90 people at its distribution facilities in Maine and Massachusetts, not including its new lobster processing facility in the Gouldsboro village of Prospect Harbor. Last summer, Live Lobster employed 70 people at the plant, which operated seven days a week. As of last month, 10 people were working at the seasonal facility.

One lawsuit was filed against Live Lobster by Alan Brown, the company’s former general manager, in February. The other was filed by TD Bank last week.

In his lawsuit, Brown claims that he was a minority owner and worked as the company’s general manager from 2003 through 2009, at which point he was “frozen out” of the operations of the company and its subsidiaries. He sued Bussone and Allesandro Verrini, another partner in the firm, for breach of contract and fiduciary duty. In December 2010, he reached a settlement with Bussone and Verrini that called for Brown to be paid a total sum of $460,702.

In his latest lawsuit, Brown claims he was paid $225,000 in an initial payment that was stipulated in the agreement but that Bussone and Verrini have refused to pay him the remaining $235,702, which also was stipulated in the agreement. He claims the agreement was approved by TD Bank but that the bank now is preventing the second payment from being made. He is suing for the remaining $235,702 he says is owed to him, plus interest, legal fees and other costs.

In its lawsuit, filed on April 12, TD Bank claims it loaned $4 million to Live Lobster in June 2008. As part of that loan agreement, Live Lobster promised the bank that it would have a “first-priority security interest in substantially all of its business assets … including without limitation, its inventory and accounts and the proceeds thereof,” according to the complaint.

TD Bank accuses Live Lobster of failing to make loan payments and of depositing some of its proceeds with another bank, Century Bank and Trust Co. of Medford, Mass., which TD Bank claims is a violation of the security agreement. TD Bank claims Live Lobster still owes TD Bank $3,403,811.26 in principal and $4,413.93 in interest.

Attempts on Thursday to contact some attorneys involved in the lawsuits also were unsuccessful.

Last December, many Maine lobstermen complained that Live Lobster was bouncing checks it had written to them for their catch.

At the time, Bussone said that “not that many” checks bounced and that the company was having to adjust to new payment schedules associated with its Gouldsboro processing operations. Before it purchased the former Bumble Bee cannery, Live Lobster had functioned solely as a dealer and distributor, buying lobster in Maine and Massachusetts and flying the live creatures to Europe and the West Coast.

Bussone said last December that the company had made good on the bounced checks and ironed out its cash flow problems with the bank.

Toni Lilienthal, Live Lobster’s vice president of operations for the Gouldsboro plant, said Thursday that she found out on April 13 about the TD Bank lawsuit and has not been involved with the company’s interactions with the bank. She said the company wants to sort through its problems and resume operations in Gouldsboro sometime this spring or summer.

“We’ve really, really, really worked hard at this,” she said.

Live Lobster received federal Community Development Block Grant funding last fall, more than a year after it first sought the town’s approval for the funding. The company received $400,000 in CDBG funds to put toward the plant’s renovation and equipment costs.

Gouldsboro selectmen had balked at endorsing Live Lobster’s grant application, which the program requires, because it was concerned about intervening in the area’s competitive lobster dealer market.

Gouldsboro Selectman James Watson said Thursday that he and others on the municipal board were justified in their reluctance to endorse Live Lobster’s project. He said the company seemed to be taking on more than it could handle when it arranged to buy the former Stinson plant.

“I had a concern about the amount of money being borrowed,” Watson said. “You need a certain amount of capital to pull this off.”

When the sardine cannery closed, 128 people who were working there lost their jobs. When Live Lobster announced in the summer of 2010 that it intended to buy the plant, it said it hoped to employ 40 people at the renovated lobster processing facility within the first year and as many as 120 by this summer.

Watson expressed doubt that Live Lobster will be able to free up enough funds to resume processing lobster in Gouldsboro this summer. He said if Live Lobster ends up losing or otherwise disposing of the facility, it might still one day be viable as a lobster processing plant but probably would sit idle for some time.

“The red tape is probably going to be enormous to go through,” he said.

Watson, a local business owner, said Bussone will deserve much of the blame if its new processing venture folds, but he said former Gov. John Baldacci and his administration also are worthy of criticism.

He said he is not sure why it became a political issue in Augusta, but that Baldacci pushed hard for Live Lobster to take over the plant. He even got a call at home from the governor at one point, he said.

Watson said that though he supports the CDBG program generally, he does not think its $400,000 local investment in Live Lobster was money well spent. He said the former governor and his staff did not do enough to make sure that a stable firm was taking the cannery over from Bumble Bee.

“I think he was pushing this and pushing this and pushing this,” Watson said of Baldacci.

The company also was approved last year for a separate loan from the Finance Authority of Maine, but the company has not received the $750,000 it was approved for.

Officials at FAME said recently that Live Lobster never completed and submitted the necessary paperwork to close on the loan and that, given the company’s situation, FAME likely would reconsider its approval if the paperwork is submitted.

The Gouldsboro plant, where Live Lobster installed lobster storage, cooking and processing equipment last year, had been the last operating sardine cannery in the United States when Bumble Bee shut it down in April 2010. Bumble Bee said at the time that federal limits on herring catches made it financially impractical to continue operating the facility.

Follow BDN reporter Bill Trotter on Twitter at @billtrotter.