What Davis alleges he found were longstanding fraudulent dealings by Lovely against him, according to a civil lawsuit filed Monday in Augusta District Court. Lovely would take money out of the company in several ways, using company resources as collateral for loans taken out on his own behalf and on behalf of Lovely’s construction company when that collateral had been pledged for other loans, the lawsuit alleges.
Davis also alleges among other things that Lovely has claimed equipment owned by Central Maine Meats as his personal property, withheld critical information and quitclaimed property occupied by the meat business to his own construction company that he previously pledged to Davis as collateral for loans totaling more than $450,000 that Davis had made to the company.
Davis is seeking a judgment of $1.9 million plus damages from Lovely and Lovely’s construction company, A.B.J. General Contractor Inc.
The move comes just over a month after Central Maine Meats, under Davis’ ownership, sought bankruptcy protection under Chapter 12, which allows farming and fishing businesses to reorganize and craft a plan to pay back creditors over a relatively short period of time.
The bankruptcy and lawsuit reveal deep fractures in a partnership that was one of the mainstays of Gardiner’s food hub strategy that focused on attracting food producers to the city and promoting them.
On Monday, Lovely said he was unaware that the lawsuit had been filed.
“I can only tell you that I am 100 percent not aware of it, and I am 100 percent not a bit surprised,” Lovely said.
Davis said Monday the claims in the lawsuit speak for themselves.
Central Maine Meats is the only USDA-inspected slaughterhouse in Maine, which means its meat can be sold out of state.
The company also leases space to Common Wealth Poultry, the state’s only USDA-inspected poultry processor, at its facility in the Libby Hill Business Park in Gardiner.
Davis and Lovely opened Central Maine Meats in 2015, with Davis as majority owner and Lovely as minority owner.
Two years before that, Lovely, with a different business partner, had opened Northeast Meats. At that time, Lovely owned the processing plant building and property with his wife and leased it to Northeast Meats. The Lovelys were also shareholders in the company.
When Central Maine Meats started, Davis said in his lawsuit, it was with the understanding that the business would not take on the debts of Northeast Meats, and that Northeast Meats’ equipment would be Lovely’s capital contribution to the new company.
As the company took off and expanded both near the company’s Brunswick Avenue facility and at the Libby Hill Business Park, Davis said in his lawsuit, Lovely was in charge of the day-to-day operations and Davis worked to secure contracts.
Some of the company’s accomplishments were detailed in the public realm.
Central Maine Meats secured $1.3 million in grants from the Community Development Block Grant program for both economic development and job creation, and the company satisfied the requirements for those grants.
In 2016, USDA Rural Development announced a $2.6 million loan guarantee package in partnership with Machias Savings Bank to allow Lovely and his wife to refinance some debt and provide working capital for the company.
In the months afterward, the company pursued an aggressive track of expanding its capabilities through adding a flash freezer, a smoker and branching out into the specialized area of halal slaughter for the state’s growing Muslim population.
Out of the public eye, Davis’ lawsuit details claims that include breach of contract, breach of duty as a member of a limited liability company, unjust enrichment, interference with an advantageous business opportunity, negligent misrepresentation and fraud.
Davis claims that Lovely and his wife as landlords and Lovely and Central Maine Meats as tenants paid $30,000 monthly in five different lease payments from the business without Davis’ knowledge, and Lovely and his company had borrowed money from Central Maine Meats, promising to repay it, but did not.
According to the lawsuit, Davis notified Lovely on March 26 that Lovely’s shares in the company transferred to Davis under the terms of the company’s unit pledge agreement and terminated Lovely’s interest in the company.
Two days later, the lawsuit states, Lovely transferred ownership of the property at 563 Brunswick Ave. to his construction company and used it to secure a loan for $600,000 along with all the equipment and fixtures in the building, without disclosing to Coastal Realty Capital the demand note and security agreement executed with Davis in 2017 or the 2015 Coastal Enterprises Inc. security agreement and loans. According to the lawsuit, that property is collateral for Davis’s loans.
The lawsuit claims Lovely declined to use any of the borrowed money to pay his 40 percent share of the debt to the company or repay loans Davis made to the company or Lovely.
In mid-April, Central Maine Meats filed for bankruptcy protection.
Jessica Lowell — 621-5632