Hello,

We would like to hear from you!  We have been publishing our newsletter for nine years now.  We try to bring to your attention legal developments that will be useful, as well as interesting.  If there are any areas that you would like us to add to our focus list, please let us know.  We will be glad to cover them.  If you have any suggestions about our format, the size of our font or anything at all, please let us know.  We would appreciate your feedback.

In this edition, we are covering several areas we don't usually cover - cellular tower strategies, elder law, protecting your commercial real estate from a tenant's bankruptcy proceedings, workplace religious discrimination and a new twist on real estate financing - "shared appreciation promissory notes."  As always, please feel free to call us with any questions that you may have.

One of the most persistent and difficult problems we encounter in assisting our estate planning clients is planning around the possible expense of extended nursing home care.  As you probably know, the average nursing home in this area charges approximately $7,000 per month.  These bills add up quickly because nursing home stays are often lengthy.  The government does not pay for nursing home care unless you have exhausted almost all of your liquid assets.  Moreover, the government has the right to place a lien on your home to obtain reimbursement for the monies it pays to the nursing home for your care.  Most people do not want to transfer their assets out of their control in order to protect them, and the government will ignore a transfer without fair consideration if it occurs less than three years prior to the date of application for government financial assistance. 

Conflicts abound: People want to have control over their assets.  They want to give their assets to their children when they pass.  They also want to make sure that they receive the right health care when necessary and preferably at home.  And, as you would expect, the government would prefer not to pay for nursing home expenses for people who have assets. 

This is a very complicated area of the law.  There are ways of resolving the conflicts that are appropriate to each family, their assets and their life situations.  Most people are not aware of the techniques available to resolve these issues.  One of the most effective tools is long term care insurance.  It often eliminates the need to transfer assets and also the possible exhaustion of assets.  And in many instances, a corporation can deduct the premium paid as a benefit.   But it is not always available or affordable.    Other strategies and tools are available, but each must be very carefully designed to fit each family=s unique situation and values.

We are increasingly faced with the responsibility of assisting our clients in this area.  The sooner a family faces them, the easier it is for us to create effective solutions.  Please call if we can be of assistance.  Planning before a health crisis develops is essential.

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As cellular companies strive for better reception, you may receive a notice from your town=s zoning board that a cell company is seeking a permit to install a cellular tower near your home.  Most people would not like to have a tower near their property, because it decreases property values and especially because it spoils views. 

It is essential to provide the zoning board with reasons to deny the permit request.  Some of the factors to consider when opposing a permit for construction of a tower are:

1.            Whether there is in fact a service area gap around the proposed cell site;

2.            Whether the town has an area zoned for tower installation that would service

                the needs of the carrier;

3.            Whether there are existing towers that the carrier could use;

4.            Whether the tower would be more effective if placed at another location;

5.            The impact on property values; and

6.            The impact on views.

Prevailing at the zoning board hearing is almost essential, as the next step would be appealing to the courts.  AThe decision of the zoning board >cannot be disturbed unless it is based on a legally untenable ground, or is unreasonable, whimsical, capricious or arbitrary.=@ Also, the federal law in this area is complex and a full trial on appeal can be very expensive.  The goal needs to be a full court press for an early victory.

We are experienced in helping homeowners ensure that towers are constructed in their towns in a way that has minimal impact on residential, rural and historic areas.  We also have experience in negotiating tower leases.  Please let us know if we can assist you in this area.

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         A non-paying tenant is bad enough.  When he or it files for bankruptcy protection, disaster is often close behind.  To avoid possible entanglement with the bankruptcy process, a landlord should terminate the lease as soon as it appears the tenant is experiencing serious difficulties.  Prolonging the situation only increases the risk of even greater losses.

         The case of In Re: Tiny=s Café recently confirmed, AUnder Sections 362 and 541 of the Bankruptcy Code, a lease that has been terminated prior to the filing of bankruptcy is not property of the estate, and is thus not protected by the automatic stay.¿ 

The Tiny=s Café court discusses the ways in which a lease may be kept out of bankruptcy and what happens when the landlord fails to properly terminate a lease before a bankruptcy filing.  The essential elements required to keep a lease out of bankruptcy are:

       1.  The tenant is in breach of the lease;

       2.  The landlord terminates the lease before the

             tenant files for bankruptcy protection; and

3.    The landlord has not breached the lease in

      a way that justifies the tenant=s breach.

By acting quickly, landlords may avoid the expenses, delay and income loss of having their properties tied up in bankruptcy.  Failing to do so also subjects the landlord to losing control of tenant selection.  Rule of thumb:  cut your losses quickly and terminate immediately.  If the tenant wants to stay and has the means, negotiate a resolution after termination to better protect yourself.

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Pursuant to Massachusetts law, a homeowner may file a homestead declaration, which protects up to $500,000 of equity in his or her home.  The protection also covers the declarant=s spouse and children, if properly worded.

However, certain transfers made after filing a homestead can terminate the homestead protection.  In the recent case of  In re Hildebrandt, an unmarried couple purchased a home and one of the two filed a homestead declaration.  Thereafter, the spouse who did not file the homestead transferred her interest in the property to her husband who had filed it.  The Massachusetts Bankruptcy Court ruled that the deed terminated the earlier homestead.  The family lost its protection and house.

Another way in which homestead protection may be lost is during estate planning changes.  Property held in trust is not eligible for homestead protection.  Also, the transfer of  jointly owned property to just one of the spouses without specific mention of the previously filed homestead will terminate an earlier homestead.

In sum, a filed homestead declaration may be terminated by:

$      Transferring of the property;

$      Selling or transferring the declarant=s interest in the property;

$      Acquiring a new interest in the property, as was done in the Hildebrandt 

         case;

$      Deeding the property without reserving the homestead exemption;

$      Releasing the homestead; or

$      Filing a new homestead declaration. (Intervening liabilities could become  

        a problem.)

You are no longer required to release your rights under a recorded homestead when refinancing.  A statement in the mortgage itself waiving your rights in the homestead with respect to that mortgage does not cancel your homestead.  The homestead remains enforceable against any other creditors.

Given the protection provided by a homestead declaration, we urge you to consider filing one, and check with us when you are dealing with your title to make sure that you are not inadvertently terminating your homestead.  In this regard, we can assist you in ensuring that you have the fullest homestead protection.

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If you or your business suffers what you believe to be an insured loss but your carrier denies coverage, the decision to pursue a claim against your carrier can be difficult.  One of the key factors is the value of the loss in relation to the attorneys= fee you will incur.  However, this factor may be less important, because a Massachusetts Superior Court has determined that insureds who pursue such claims and prevail may be entitled to their attorneys= fees.  The critical factor in the decision is now the likelihood of success.

In Wilkinson v. Citation Ins. Co., a fire in the plaintiffs= residence caused a personal property loss of nearly $50,000.  Their insurance carrier denied the claim.  The court granted judgment for the plaintiffs in June 2004.  Based on their judgment, the plaintiff requested that they be awarded the attorneys= fees they incurred.  In the first judgment of its kind in Massachusetts, the court agreed with the plaintiffs and awarded them their attorneys= fees.  We need to wait to see if this new rule is made applicable statewide.

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The Massachusetts Supreme Judicial Court (SJC) has recently clarified the law regarding non-competition agreements.  In Boulanger v. Dunkin= Donuts, Inc., the SJC ruled that restricting an former franchisee=s ability to work with a five-mile limit of any Dunkin= Donuts store for two years was Areasonable, not only because a number of our cases have held larger geographic areas to be reasonable, but also because Y the covenant not to compete was protecting the defendant=s franchise system.@ 

Although the Boulanger case involved a franchise relationship, it has important consequences for all non-competition agreements, especially regarding geographic limitations.  In effect, the holding prohibited the former employee from competing virtually anywhere in New England because of the omnipresence of Dunkin= Donuts stores in our region. 

The SJC also noted that the plaintiff Awas represented by counsel@ when he signed the non-competition agreement.  This is one reason we recommend that, at least with respect to key employees, employers strongly recommend that employees with whom they are negotiating seek the advice of counsel.  By doing so, the employer will almost certainly defeat any subsequent claim that the employee did not understand the restriction.   If there is a dispute, the employee will likely hire any attorney who will defeat an overreaching agreement in any event.

In another restrictive covenant case, the Massachusetts Superior Court in WordWave, Inc. v. Owens refused to enforce a non-competition.  However, the court did enforce the non-solicitation component of the agreement. 

What makes this case interesting is the fact the non-competition and non-solicitation covenants had the same geographical scope (i.e., all of New England).  Yet, the court, in refusing to issue a preliminary injunction regarding the non-competition agreement, stated that it was doing so because the covenant=s Aoverly-broad substantive and geographic scopes are likely to render [it] unenforceable.@  However, in enforcing the non-solicitation covenant, the court stated, Acourts may nonetheless enforce overly-broad covenants to the extent reasonable and feasible. ... In such cases, courts have >saved= covenants by decreasing their scope.@  The court went on to limit the geographic scope of and enforce the non-solicitation covenant.

Confidential information is a vital aspect of business and employer=s should take all reasonable steps to protect it.  They are many twists and turns when drafting and enforcing non-competition and non-solicitation agreements.  However, one consistent thread in the case law is that courts do not favor restrictive covenants.  Another common thread, important to employers, is that the Massachusetts courts are increasingly amenable to non-competition agreements in large geographic areas, so long as the employer does business in that area.  

We are available to discuss with you effective ways to preserve your confidential information and your customer relationships, including the use of non-competition agreements.  We can assist you in drafting reasonable restrictive covenants so that, when you need to enforce one, the covenant will be more likely to be enforced.

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A corporate financial officer may be personally liable for his company=s failure to pay federal withholding taxes, even if the corporation=s president instructs him not to pay the taxes.  In Lubetzky v. United States, the First Circuit Court of Appeals affirmed a jury verdict finding that a corporation=s CFO was personally liable for back taxes and interest of over $90,000.  The court relied on the Internal Revenue Code section establishing Aa penalty for such a failure [to pay taxes] equal to the unpaid tax can be collected from >any person= who was >required= but >willfully= failed to pay over the withheld taxes.@  The court found that the CFO was a Aresponsible person@, because he (i) was the sole signator on Apayroll checks as well as checks to suppliers, subcontractors and others@ and (ii) prepared and signed the corporation=s federal employment tax returns.

The compelling aspect of this case was the undisputed fact that the CFO repeatedly told the corporation=s president and its parent=s president that the taxes needed to be paid.  He was told that the taxes Awould be paid when money was available, but that suppliers had to be paid now so the company could remain in business.@ 

In this situation, the CFO had to choose between offering his resignation and personal liability for the company=s employment taxes.

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In Gordon v. Millivision Holdings, LLC,  the Superior Court ruled that an employee could not sue his employer and its president for unpaid wages where the employee had signed a release of his rights under the state=s Wage Act. 

In Gordon, the employer was a start-up company.  Due to financial difficulties, employees, including the plaintiff, worked without receiving full pay.  After receiving financial backing, the employer offered plaintiff and other employees stock options to compensate them for the wages that were owed.  The offer of stock options was contingent on the employees agreeing to Arelease any claims for compensation that it had against Millivision, Inc. and its members, officers, employees or agents.@  The plaintiff agreed to this condition by signing an employment agreement.  The plaintiff=s employment ended less than one year later.

The court rejected the plaintiff=s reliance on an earlier case, Dobin, which held that a wage deferral agreement was void as contrary to the specific language of the Wage Act.  AThis court agrees ... that such a waiver is unlawful; however, a waiver is very different from a release.  The law prohibits a waiver of the employee=s rights under the Wage Act; it does not prohibit releasing those rights after the claim has been established.@

A valid release requires that the employee release his wage claim after it matures (i) for good consideration and (ii) without duress.  While the court did not provide specifics as to what would constitute good consideration, it implied that alternative arrangements, such as offering stock options and taking a note, would be acceptable. 

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             Given expanding Areligious@ practices affecting the workplace, employers are struggling to address what Areasonable accommodations@ can or should be made for employees.  In Cloutier v. Costco Wholesale Corp., the employee alleged that her employer failed to offer her a reasonable accommodation where the employer=s Ano facial jewelry@ policy conflicted with the employee=s religious practice as a member of the Church of Body Modification.  The First Circuit Court affirmed the District Court=s grant of summary judgment on the ground that the employee=s desired accommodation B a complete waiver of the Ano facial jewelry@ policy B represented an undue hardship on the employer.  The Court found that a complete exemption from the Ano-facial-jewelry@ policy would impose an Aundue hardship@ on the employer=s efforts to present a professional public image.

This case is remarkable in many obvious respects.  Suffice it for us to say that for practical reasons these matters must be taken seriously by an employer confronted by this kind of situation.  The legal expense of taking a case through trial and the federal appeal process is considerable.

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The federal District Court in Massachusetts recently ruled that sending a general, mass e-mail notice to inform employees of a new, mandatory arbitration policy was insufficient notice for the arbitration policy to be enforceable.  In Campbell v. General Dynamics, an employee sued for disability discrimination.  The employer moved to stay the court proceedings and to compel arbitration, because it had implemented an arbitration policy.  The court addressed the issue of whether Aunder general principles of state contract law and under the language of the [federal disability discrimination statute],@ the employer gave sufficient notice to bind the plaintiff to the arbitration agreement.

The court found that employer did not provide the minimal level of notice, because: 

a.   The employer Adid nothing but send the email@ to inform employees of the new arbitration policy;

b.   Employees were not required to send a return e-mail indicating that they had read the email or the attachments, or understood and accepted the contents;

c.   Employees were not asked to sign any paper document stating that they had read and understood the new arbitration policy;

d.   The employer did not send any paper announcements of the new policy; and 

e.   The employer did not hold a meeting announcing the policy, where it could have had a sign-in sheet to verify who attended. 

The court held that a minimal level of notice would have included addressing some, but not necessarily all, of the foregoing.  These considerations will probably apply to other employment policy modifications.

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The criminal usury statute, G.L. c. 271, ' 49, prohibits the charging of interest greater than 20% per annum, unless the lender first informs the Attorney General of his intent to charge a higher rate.  Even so, ' 49 may not apply to a loan having a 2,000% rate of return.  Dealing with Aa question of first impression in Massachusetts,@ the Superior Court in Comstock v. Steinbergh addressed the issue of A[w]hether a loan can be rendered usurious by an agreement that the lender shall receive a share in the net proceeds received from the sale of a premises, Y.@

In Comstock, the plaintiff bought a condominium from the defendants.  Pursuant to the sale, the plaintiff (i) assumed two mortgages by executing a promissory note to the defendants, (ii) made a 20% down payment, and (iii) borrowed the remaining amount needed for the purchase from the defendants pursuant to a Shared Appreciation Promissory Note, which was secured by a wrap-around mortgage.  The Promissory Note had an annual interest rate of 10% for a three-year term and provided that:

Upon the sale of the premises Y the Maker shall pay to the Holder, in addition to the principal and interest set forth above, 48 percent of the net proceeds received from the resale of said premises.

The plaintiff filed an action requesting that the Promissory Note be declared usurious because he realized that, if he sold the condo, which had drastically appreciated in value, the defendants would receive over $100,000.  However, the court stated:

Aside from his claim that the terms of the defendants= loan were usurious, the plaintiff does not offer any legal or equitable reasons to invalidate the Promissory Note and Wrap-around Mortgage, which were the product of a good faith, arm=<