Marsh filed his complaint yesterday in U.S. District Court in what is turning into a bitter dispute with the supermarket chain he once led.
"Unfortunately, the out-of-state venture capitalist group that acquired Marsh has attacked me personally with false and flagrant accusations and has refused to honor the terms of my employment agreement with the company," Don Marsh said in a written statement. "I have no choice but to fight back."
Florida-based Sun Capital Partners took the formerly publicly traded company private in 2006. Marsh Supermarket's current CEO, Frank Lazaran, subsequently ended Marsh's employment in October 2006 "without cause," according to a notice Lazaran sent to Don Marsh. The stipulation allowed Marsh to begin receiving salary and benefits payments.
In his countersuit, Marsh claims the agreement he entered into was breached on April 25, 2008, the last day he received any compensation. To date, the company has failed to make 14 salary-benefit payments, Marsh said in his suit.
In its lawsuit filed in March, Marsh Supermarkets is asking the court for millions of dollars in damages from Marsh, the son of company founder Ermal Marsh. It also is seeking payment of the more than $1 million per year in the salary continuation benefits, lifetime medical insurance and other perks it had been paying him.
Marsh Supermarkets alleges Don Marsh treated the company like "a personal checkbook" to bankroll extravagant trips, maintain vacation homes and hide personal relationships with female employees.
The company claims he shredded documents before he left it in 2006 to hide his "inappropriate activities" - including personal use of petty cash and a so-called executive-voucher system outside the company's normal accounting system. Those payments, along with Don Marsh's frequent use of a company plane for personal trips, have drawn the attention of the IRS.
"Unfortunately, this action became necessary after months of unsuccessful attempts to settle this matter with Mr. Marsh," Lazaran said in a statement e-mailed to IBJ after Marsh Supermarkets brought its suit in March.
The complaint, filed in Hamilton Superior Court, since has been moved to federal court.
The attorney who filed the case for the company, David K. Herzog of Baker & Daniels LLP, said he expected the counterclaim, but declined to comment on it.
Marsh began his tenure as CEO in 1978. The company was founded in 1931 in Muncie and went public in 1953.
In his written statement, Marsh said he is concerned that the charges leveled against him will divert attention from the real issue - store closings, employee layoffs and reductions in community involvement.
In response to those allegations, Marsh Supermarkets issued another statement from Lazaran: "We disappointed this matter has progressed to this point, as we have made every effort to resolve the issues with Mr. Marsh. This is not a personal issue toward him. However, we continue to stand by our claims.
"Since the acquisition of Marsh by Sun Capital Partners in September of 2006, we have strengthened our commitment in the communities we serve by investing substantial capital and resources to renovate 80 percent of our store base in addition to opening two new stores. Our customers and employees have noticed the improvements in our stores. These investments, along with the hard work and dedication of our employees, have significantly improved our profitability to financially position us for future growth."