Lobster 207 Llc vs. Pettegrow et al

Case Background

On December 4, 2019, Plaintiff Lobster 207, LLC, filed the lawsuit in the United States District Court, District of Maine, Bangor Division (Case number: 1:19cv552). This case, involving allegations of fraud and contract violation, was assigned to Judge Lance E. Walker and referred to Magistrate Judge Karen Frink Wolf. The lawsuit stemmed from claims of fraudulent activities and breach of contract by the defendants, including falsifying invoices, embezzlement, and violations of the non-compete and employment agreements. Lobster 207 sought legal remedy for the financial and operational damages caused by the defendant’s misconduct, which included overpayments, misrepresentation of inventory, and the diversion of resources for personal gain.

Cause

In March 2017, Lobster 207, LLC, a cooperative of Maine lobstermen, purchased the wholesale lobster business of Trenton Bridge Lobster Pound, Inc. The business was owned by Anthony and Josette Pettegrow. The transaction was valued at $4 million. As part of the deal, the Pettegrows and their business were prohibited from competing in the wholesale lobster market until March 2020. Lobster 207 also hired Warren Pettegrow, the son of Anthony and Josette, as its CEO. Warren was hired to oversee operations and ensure compliance with the agreements.

Despite these contractual obligations, Anthony, Josette, Warren, and other associates engaged in a series of fraudulent and deceptive schemes. They systematically exploited their access to Lobster 207’s operations and resources for personal enrichment. These activities included falsifying invoices, embezzling funds, and operating a competing wholesale lobster business under the guise of compliance. The defendants also sold lobsters to Lobster 207 at inflated prices, diverted inventory, and misrepresented essential details about the purchased business.

The defendants used their established connections and inside knowledge of Lobster 207’s operations to carry out their schemes. They manipulated Lobster 207’s inventory and billing systems, rerouted shipments, and created false records to conceal their misconduct. These actions violated the terms of their non-compete and employment agreements, breaching trust and causing significant harm to Lobster 207 and its members.

Injuries

Lobster 207 suffered extensive injuries due to the defendants’ actions. The company overpaid for lobsters, incurred unexpected costs, and experienced disruptions in its supply chain. The defendants’ fraudulent practices caused financial harm to Lobster 207’s members, who relied on fair and honest operations for their livelihoods. The misrepresentation of inventory, including the nonexistent lobster crates, left Lobster 207 unable to fulfill its operational needs, forcing it to lease additional resources at high costs. The defendants also damaged the company’s reputation within the lobster industry, undermining its relationships with suppliers and customers. These injuries extended beyond financial losses, creating operational challenges and diminishing the trust Lobster 207 worked to establish as a cooperative for Maine lobstermen.

Damages

The damages incurred by Lobster 207 were both direct and consequential, amounting to millions of dollars. The “Phantom Lobster Scheme,” orchestrated by Warren Pettegrow and Stephen Peabody, defrauded Lobster 207 of $55,269 by invoicing the company for lobsters that were never delivered. Additional fraudulent schemes, such as the “Poseidon Scheme,” caused Lobster 207 to overpay by more than $835,000 for lobsters purchased through manipulated invoices. The defendants charged Lobster 207 inflated prices for lobsters, including instances where prices were increased by $0.20 to $0.40 per pound above agreed rates. Misrepresentations about inventory, particularly lobster crates, resulted in $335,000 in damages due to the need to lease additional equipment. Furthermore, the embezzlement of funds and manipulation of customer data led to lost business opportunities and diminished profits. Collectively, these damages significantly impaired Lobster 207’s ability to operate profitably and effectively.

Key Arguments and Proceedings

Legal representation

  • Plaintiff(s): Lobster 207 LLC
    • Counsel for Plaintiff: Alfred Cecil Frawley, IV | Daniel P. Keenan | Jay P. McCloskey | Thimi R. Mina | Charles M. King | John Evans
  • Defendant(s): Warren B. Pettegrow | Anthony D. Pettegrow | Josette G. Pettegrow | Stephen M. Peabody | Poseidon Charters, Inc. | Trenton Bridge Lobster Pound, Inc.
    • Counsel for Defendants: Callan Stein | David P. Ginzer | Mia S. Marko | Molly S. Dirago | Robert Austin Jenkin II | Donald Ethan Jeffery | Humphrey H. N. Johnson | Jana L. Kenney | Jason C. Barrett | John S. Whitman | Leah Anne O’Farrell | Matthew Adler | Randy J. Creswell | Barry S. Pollack | Lauren A. Riddle | Phillip Rakhunov | Donald F. Brown

Claims

Lobster 207 filed multiple claims against the defendants, citing violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), breach of contract, fraud, and unjust enrichment. The company alleged that the defendants engaged in coordinated racketeering activities, using deception, forgery, and embezzlement to defraud Lobster 207.  Specific claims included the creation of false invoices, misrepresentation of costs, and the diversion of inventory and resources for personal gain. The defendants’ actions constituted a clear breach of their contractual obligations. This included violations of non-compete agreements and the employment agreement signed by Warren Pettegrow. Lobster 207 also accused the defendants of unfair competition. The defendants continued to operate a competing wholesale lobster business despite contractual restrictions. The claims sought monetary compensation for financial losses. They also requested injunctive relief to halt ongoing violations and punitive damages to deter similar misconduct in the future.

Defense

The defendants denied the allegations brought by Lobster 207, LLC, asserting that the claims were unfounded and misrepresented both the contractual agreements and the events surrounding the case. They maintained that they had fully complied with all contractual obligations, including the non-compete agreements and the Asset Purchase Agreement. According to the defendants, Lobster 207’s financial losses were not due to any misconduct or fraud on their part, but rather the result of Lobster 207’s own mismanagement and operational failures.

The defendants argued that the “tubed lobster” transactions were legitimate and conducted in good faith, with invoices accurately reflecting costs. They denied any involvement in fraudulent activity and contended that Lobster 207’s allegations of fraud, overpayment, and conspiracy lacked factual basis. In the defendants’ view, these claims were mere attempts by Lobster 207 to deflect blame for their own operational inefficiencies. The defendants also raised affirmative defenses, including the doctrines of waiver, estoppel, and unclean hands, asserting that Lobster 207’s own breaches and misrepresentations invalidated their claims of contract violation.

Furthermore, the defendants highlighted that Lobster 207 failed to mitigate its damages and had not provided sufficient evidence to substantiate the allegations of fraud or embezzlement. They argued that any financial losses experienced by Lobster 207 were instead due to external market conditions, rather than any intentional fraud or contract violation on their part.

Settlement

On January 3, 2025, Lobster 207, LLC and the defendants, reached a $5 million settlement to resolve the legal disputes between them. The settlement followed extensive litigation involving allegations of fraud, breach of contract, and mismanagement of the wholesale lobster business sold to Lobster 207. Both parties agreed to the terms of the settlement, which included financial compensation by the defendants to Lobster 207.

Court Documents:

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