Mercado Central Cooperative sued by angry shareholders

Fourteen shareholders are unhappy with Mercado Central's business practices.
Lake Street's Mercado Central is meant to support Latino business owners, but an ongoing lawsuit alleges that it's treating them unfairly and bringing their businesses down.

Fourteen of Mercado Central's 48 shareholders filed a lawsuit earlier this year against the co-op detailing a number of grievances. The shareholders claim that the board played favorites with members and engaged in shady business practices.

"My clients believe the board was concealing documents that should have been available to all shareholders and diverted funds to benefit some shareholders more than others," Douglas E. Nepp, the 14 shareholders' attorney, says.

The board has also been unresponsive when his clients bring forward concerns about other tenants selling products they don't have the right to sell, according to Nepp. 

"The same people on the board are always in control and know the financials. This creates an air of mistrust because there's no free flow of information," Nepp says. "There is a disparity in treatment [of shareholders]."
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Douglas E. Nepp is representing the shareholders.

Some of the shareholders claim the board threatened to revoke their membership and evict them from Mercado Central.

The shareholders also allege that the co-op's board violated its bylaws. The co-op's annual meeting must be held within four months of the end of their fiscal year at the end of December, but last year's meeting was held Dec. 1.

In its defense, Mercado Central claims in court filings that the cooperative held their annual meeting in November or December in 2008, 2009, and 2010. During this time, some of the plaintiffs currently suing the co-op were on the board that set those dates. 

"Many of the plaintiffs in this case are former board members and followed the exact same procedure during their respective tenures on the board," the defense's memorandum reads. Defense attorney Keri A. McWilliams says her firm's policy is not to comment on ongoing litigation. Co-op President Rodrigo Cardozo did not return a message seeking comment.

According to Mercado Central, the shareholders only became aware that this meeting time was against the bylaws when it was brought up by the cooperative's counsel while they were present at a members's meeting. At that point, the plaintiffs voiced their objection to the date of the meeting and walked out.

The 14 shareholders also filed for a temporary restraining order to prevent the board from enforcing any termination of membership or eviction notices. 

But Mercado Central's memorandum claims the co-op was justified in giving eviction notices to some of the plaintiffs, particularly Rogelio Onofre. Onofre was responsible for about 25 percent of the $40,000 in back rent that was owed to the co-op as of early January. He was almost two years behind on rent, Mercado Central claims. 

The co-op says these shareholders's leases expired and became month-to-month by the individuals's free will. The cooperative claims they were justified in giving Onofre an eviction notice because he was late on rent, three people associated with the co-op had obtained orders of protection against him or called the police about his conduct, and he had failed to maintain his insurance.

Mercado Central also claims the shareholders have no proof that the board concealed documents or diverted funds.

However, Nepp says the eviction hearings moved forward and the judge says the board didn't have reason to evict the plaintiffs.

The two sides have agreed to settle their dispute through mediation. Nepp said they have started to talk with mediators.

The fourteen shareholders who are suing Mercado Central are Jose Ariel Aguirre, Medardo Clemente, Enriqueta Cruz, Reyna Cruz, Gerardo Mora, Filiberto Onofre, Rogelio Onofre, Ernesto Payan, Jose Antonio Sanchez, Laura Sanchez, Miguel Sanchez, Jeronimo Valtierrez, Ayde Vasquez, and Alfonso Zendejas.

We'll have to see how the two parties resolve their issues in mediation, but it sure seems the cooperative is lacking in cooperation. 

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