Marsh Supermarkets, former CEO spar over attorney fees

The years-long legal spat between Don Marsh and the company he once led appeared to have concluded this summer, but has now turned to attorney fees and who’s paying the million-dollar bills.

In court documents, attorneys for Marsh and Marsh Supermarkets Inc. each have submitted expenses totaling roughly $1.7 million and are seeking reimbursement from the other. The requests have drawn sharp rebukes from both sides.

“Neither the court nor the company can determine without discovery the extent to which Mr. Marsh’s request is over-inclusive,” lawyers for Marsh Supermarkets wrote in a Sept. 3 court document. “But the fact that it is over-inclusive is apparent on the face of the request.”

The argument over attorney fees marks the latest dispute in the four-year federal court battle in which Don Marsh won a partial victory.

In July, Judge Sarah Evans Barker issued an order allowing him to keep nearly $2.2 million in severance paid by Marsh Supermarkets, which had attempted to recover the payments from its former CEO.

However, Marsh ended up losing nearly the same amount on another issue. Barker's order followed a two-week civil trial in February after which a federal jury ordered Marsh to pay the local grocery chain $2.2 million, finding that he used company money to finance global travels to entertain mistresses and other unnecessary personal expenses.

Many of the arguments presented by both sides involved the Employee Retirement Income Security Act, or ERISA, a federal law governing pension plans. Marsh’s victory on his ERISA claim for his severance also is at the crux of the fight over attorney fees.

Barker found that Marsh can recover attorney fees relating to his ERISA claims. But she also determined that the company can recover fees relating to non-ERISA claims.

Lawyers for Don Marsh argue that because the ERISA- and non-ERISA-related issues flow from the same set of facts presented at trial, “all fees and expenses in this case are ERISA-related.”

Marsh Supermarkets strongly disagrees.

“It was not his prerogative to say, ‘Here is just about everything’ and then leave it to the court and the company to try to determine from his supporting records what was attributable to ERISA and what was not,” company lawyers wrote.

Conversely, Marsh Supermarkets is asking Marsh to pay its $1.7 million attorney bill for costs relating to only the non-ERISA claims that it succeeded in proving during the trial.

Marsh argues that there’s no legal basis to award the company attorney fees.

“The plain language of the ERISA plan leaves the court with a ‘straightforward’ task that is ‘not a matter of discretion’ when it grants Mr. Marsh his attorneys’ fees, litigation expenses, and costs but makes no provision for the company,” Don Marsh’s lawyers wrote in a Sept. 9 court filing.

Marsh Supermarkets is represented by David Herzog of Faegre Baker Daniels and Don Marsh by Andrew McNeil of Bose McKinney & Evans LLP. Both declined to comment on the fee dispute.

The fight between the two erupted in 2009, when Marsh Supermarkets sued Marsh in federal court. He countersued, asserting the company improperly withheld his post-retirement payouts in 2008 and still owed him about $2.1 million.

Marsh left the company he had led since the late 1960s following its purchase in September 2006 by Sun Capital Partners, a Florida private equity firm.

Marsh Supermarkets stopped the severance payments after it said an Internal Revenue Service audit found “disallowed deductions” for personal expenses he racked up from April 2004 to September 2006. The company ultimately paid the IRS a $616,000 penalty.

The nine-member jury in February found that Marsh committed breach of contract and fraud, but stopped short of delivering Marsh Supermarkets a total victory.

Although the grocery chain asked for $1.6 million to cover expenses and penalties related to the IRS audit, the jury awarded the company half that amount on its fraud claim, saying it shared responsibility. The jury also awarded the company $1.4 million on its breach-of-contract claim.