A federal arbitrator has awarded a fishing cooperative more than $1 million in the cooperative’s lawsuit against its former CEO, whom the co-op accuses of defrauding and stealing from the group.
The arbitrator’s award allows the cooperative’s federal lawsuit to go forward against the former CEO and his parents, who own a Hancock County lobster pound.
Lobster 207 LLC sued Warren Pettegrow and his parents, who own and operate the Trenton Bridge Lobster Pound, in December 2019 in U.S. District Court in Bangor. The lawsuit alleged that the family members defrauded and stole from the group after they sold their wholesale lobster business to it in 2017.
Pettegrow’s attorneys did not immediately respond to a request for comment on Friday.
Pettegrow ran his parents’ wholesale business prior to its March 2017 sale to the Maine Lobstering Union. At the time, the union hired Pettegrow to run the newly acquired wholesale operation, Lobster 207.
Last summer, U.S. District Judge Lance Walker ordered the Pettegrow family to set aside more than $1.4 million, the amount Lobster 207 was expected to be awarded in the case. That figure was provided by certified public accountants in Portland hired by the lobstermen’s co-operative to estimate its losses in the business arrangement, according to court documents.
Pettegrow requested the employment allegations included in the lawsuit be decided through a binding arbitration process rather than at a trial. Earlier this week, the arbitrator found that Pettegrow had breached his employment agreement and fiduciary duties to Lobster 207 by committing acts of “gross misconduct,” the arbitrator concluded in a 22-page decision filed Tuesday in federal court in Bangor.
The arbitrator found that “as Lobster 207’s CEO, Warren Pettegrow should have been well aware of [the cooperative’s] mission to save lobstermen money by avoiding the middleman as much as possible and bringing transparency to the prices received,” Lobster 207 said Thursday in a statement.
Pettegrow was in breach of his agreement with Lobster 207 “from the beginning,” the arbitrator said.
Pettegrow didn’t buy lobsters from fishermen he was obligated to buy under contract. In addition, he didn’t sell all lobsters from his boat to Lobster 207, according to the arbitrator. He sold them instead to his parents’ lobster pound, which then resold them to Lobster 207 at a profit.
The arbitrator’s decision still must be approved by U.S. Magistrate Judge John Nivison but it would be highly unusual for a federal judge to reject it before the remaining allegations can be resolved either through a settlement or a trial.
The Maine Lobstering Union was founded as a co-operative in 2013 following a sharp drop in the price paid to fishermen for their catch as a way to give members a greater financial stake in the wholesale distribution of lobster.
Though technically not a union, as its members all are self-employed, the co-operative is affiliated with the International Association of Machinists and Aerospace Workers union. It added the wholesale business in 2017, when it bought it from the Pettegrows.