Opinion ID: 1970127
Heading Depth: 1
Heading Rank: 5

Heading: Change in Borden's Management

Text: Around the time Borden attempted to install the equipment on the Jessica Lori, it had some changes in its corporate structure that had a major impact on DeMusz's contracts. First, Booker left Borden on October 1, 1985, and was replaced by William Gallant, who was named Group Operations Manager on May 1, 1986. Gallant testified that he was unaware of Borden's contract with Sons of Thunder when he came on the job in late 1985. Second, in May 1986, Southwell retired and was replaced by Robert Culver, who eventually became General Manager in August 1986. Culver testified that he never read the Sons of Thunder contract, and that based on information provided by Gallant, he believed that the contract gave Borden a right to first refusal. He did not know that Borden was obligated to purchase a minimum amount until the day before the trial. During the spring of 1986, Gallant supported DeMusz's proposal to the bank for a loan that would finance the rerigging costs for the Jessica Lori. The proposal contemplated that the loan would be made to Sea Labor, DeMusz's management company. The proposal outlined Sea Labor's income streams, which included the contract between Borden and Sons of Thunder, management fees, and catches made from the Jessica Lori. Southwell approved the proposal, and Gallant, who was aware that the loan proposal included the contract with Sons of Thunder, signed it on behalf of Borden on May 15, 1986. The bank agreed to loan Sea Labor $150,000, which left Sea Work $200,000 short of the rerigging cost. Gallant testified that he first became aware of the contract with Sons of Thunder during that application. He told DeMusz that he did not intend to honor the contract and would not purchase the specified minimum in the contract. DeMusz testified that he showed Gallant the contract in the early spring of 1986 because Borden was not purchasing the amount required by the contract. DeMusz also testified that Gallant said that he was unaware of the contract and did not intend to abide by it. Despite Borden's failure to honor the contract with Sons of Thunder, DeMusz continued to pursue a loan that would finance the rerigging of the Jessica Lori. In November 1986, DeMusz, with Borden's knowledge, obtained a $200,000 loan for Sea Work from Sons of Thunder, which had borrowed the money from First Jersey National Bank. To secure the loan, Sons of Thunder had to guarantee every loan Sea Work had undertaken for the Jessica Lori. That guarantee exceeded $750,000. In conjunction with its own loans, Sons of Thunder had loan guarantees in excess of $1,000,000, and DeMusz was personally liable for over $800,000. In addition, DeMusz, Gifford, Dempsey, and their spouses had to personally guarantee the $200,000 loan. Finally, the bank required that there be unity of ownership between the different corporations. Thus, Gifford and Dempsey bought out DeMusz's other two partners in Sea Work. After the rerigging was completed in November 1986, the Shuck-at-Sea project got off to a successful start. However, the success was short-lived because Borden acquired Doxsee, a Delaware seafood company, at the end of 1986 and brought Robert Nicholson from Delaware to Cape May to replace Dempsey as the plant manager. Dempsey was demoted to Boat Manager. Nicholson extorted kickbacks from independent suppliers, and Borden later fired him for that reason. Nicholson tried to get Dempsey to cooperate in the kickback scheme, but Dempsey refused and disclosed his interest in the Sons of Thunder. In the meantime, DeMusz told Gallant about Nicholson's propensity for taking kickbacks. Nicholson reprimanded DeMusz for going over his head. Nicholson, like Gallant, also told DeMusz that he would not honor the contract with Sons of Thunder. In fact, after Nicholson arrived, Borden's purchases of shell stock from the Sons of Thunder and meat from the Jessica Lori decreased. Moreover, Borden lowered its price for clams caught by the Sons of Thunder. Borden acquired two additional boats from Doxsee, and it appears that its need for independent harvesters diminished. In fact, Dempsey testified that the overall need for clams was declining. Finally, Doxsee brought along environmental technology that placated Borden's concern about the land-based shucking operation. Shortly after the Shuck-at-Sea project got under way, Borden started charging Sea Work for the salt and carbon dioxide that the Jessica Lori used in conjunction with the shucking equipment. In addition, Borden stopped purchasing the processed clam meat from the Jessica Lori. When DeMusz tried to sell the clam meat to other suppliers, Borden charged Sea Work a rental fee for using the shucking equipment. None of those fees were included in the original contract with Sea Land. More importantly, Borden paid Sea Work sixty cents per pound for clam meat on only two occasions. In contravention of its written agreement, Borden paid only fifty cents per pound. Thus, the status of the advance had been altered. Gallant stated that the advance was invalid and that he would not honor it. At the same time, Gallant began to pressure DeMusz to obtain outside financing to pay back the $125,000. By 1987, Borden sent the Sons of Thunder out only in bad weather. Nicholson believed that he could receive kickbacks if he made limited use of the Sons of Thunder. Therefore, Borden was purchasing less than the contract required. In February 1987, Nicholson informed management of Dempsey's interest in Sons of Thunder. Dempsey was fired. DeMusz testified that Gallant told him that the contracts would not be affected by Dempsey's dismissal. However, from February to April, Borden bought less clam meat from the Jessica Lori and the Sons of Thunder.