Doug Cornelius .com

Last week I noted the story and decision of City of Springfield Code Enforcement v. Concerned Citizens for Springfield, Inc., et al. in which Housing Court Judge William H. Abrashkin ordered the individual manager (Shalom Segelman) of the property owning limited liability company to pay $1.3 million in relocation costs for the tenants in the sub-standard apartment complex.

After reviewing the case, it is not clear whether the judge was piercing the liability shield of the LLC or carving an exception to the liability shield.

M.G.L. C. 156C s. 22 provides that no “. . . member or manager of a limited liability company shall be personally liable, directly or indirectly, including, without limitation, by way of indemnification, contribution, assessment or otherwise, for any such debt, obligation or liability of the limited liability company solely by reason of being a member or acting as a manager of the limited liability company.” This is the liability shield for a limited liability company.

Judge Abrashkin looks to the definition of owner under the State Sanitary Code (105 CMR 400) that imposes obligations on the owner. The code has a very broad definition of owner:

“Owner means every person who alone or severally with others:

(1) has legal title to any dwelling, dwelling unit, mobile dwelling unit, or parcel of land,vacant or otherwise, including a mobile home park; or
(2) has care, charge or control of any dwelling, dwelling unit, mobile dwelling unit or parcel of land, vacant or otherwise, including a mobile home park, in any capacity including but not limited to agent, executor, executrix, administrator, administratrix, trustee or guardian of the estate of the holder of legal title; or
(3) is a mortgagee in possession of any such property; or
(4) is an agent, trustee or other person appointed by the courts and vested with possession or control of any such property; or
(5) is an officer or trustee of the association of unit owners of a condominium.

Each such person is bound to comply with the provisions of these minimum standards as if he were the owner. Owner also means every person who operates a rooming house.”

My reading of Judge Abrashkin’s decision is that this definition of owner is an exception to the liability shield of M.G.L. C. 156C s. 22.

I disagree with a statement in the Judge’s analysis: “Had this complex gone in the other direction Mr. Segelman would, rightly, have insisted upon reaping the rewards. With the benefits go the burden, and this one falls unavoidably, upon Mr. Segelman.”

One the basic paradigm’s of investing in real estate (and any business) is being able to limit your losses. If I went out and bought a share of Boston Properties, Inc. (BXP) I would pay the $104.37 that it costs (as of this morning). I have unlimited upside. The stock could triple in value and pay out enormous dividends. My downside is limited to the $104.37 that I paid for the share. As a shareholder, I would never expect to get a bill to contribute more capital to Boston Properties because one of their buildings is in disrepair.

I expect the same treatment if I were an individual investor in a limited liability company that directly owned an apartment building. I know my initial capital is at risk, but I should not have to put additional capital in (unless I agreed to under the limited liability company agreement). I could lose all of my investment. But I should not have to lose more than my investment.

That being said, there are some exceptions to this liability shield. In real estate, there is CERCLA’s ability to look through entity for liability due to environmental contamination. (You can read this article by Daniel M. Darragh of Buchanan Ingersoll & Rooney PC on Indirect Owner/Operator Liability Under CERCLA). There is also the equitable remedy of piercing the corporate veil.

In his order, Judge Abrashkin did not discuss any of the factors for piercing the corporate veil. So I am left to assume that the Massachusetts state sanitary code is an exception to the limited liability of an entity.

There have been many stories in the press about Faceblocking: firms trying to block Facebook and concerned about its impact on productivity.

Firms are now starting to embrace Facebook and its ability to develop and nurture firm culture and communities of practice. In a prior post I noted many US law firms have formed groups in Facebook.

Myles Wearring published an article on news.com.au:
Is Facebook good for the workplace? Mr. Wearring notes that several companies are embracing the responsible use of Facebook.

Although Facebook lumps all of your connections as “friends.” I think there are three types of relationships: professional colleagues (inside and outside the enterprise), friends and family, and clients. The Facebook platform is really designed around the friends and family relationships. No surprise there. Facebook was designed and first deployed for college students.

Yes, there is a lot of junk on Facebook and lots of ways to waste time. I was so excited about the Patriots victory over the Chargers that I went into my Football Fan application in Facebook and added the offensive line of the Patriots as my favorite players. I “wasted” 5 minutes. But my network of friends can now see my excitement.

Facebook can be a platform to aggregate and display professional background and experience. I pull together my LinkedIn profile, my blog, my educational background, my professional background and lots of information about me a person onto my Facebook profile.

That helps people see me as a person. If one of my colleagues on Facebook runs into me, he knows he can ask about my recent trip to New Orleans or the Patriots win or the book I just finished reading. That is way more interesting than: “Are you busy?” or staring at that horrible news screen in the elevator.

All businesses, including law firms, are about relationships and the network of professional colleagues (inside and outside the enterprise), friends and family, and clients. Facebook is great way to develop, nurture and inform those relationships.

Facebook is great way for a lawyer to develop a personal brand. A lawyer could note her recent victories or transactions. Potential clients would be interested in your travels, personal interests and professional background. You can use Facebook as virtual resume for potential employers.

Thanks to Stephen Collins of AcidLabs for pointing out this story. He has been waging war against the Australian press for their negative coverage of Facebook.

Ken Adams, author of A Manual of style for Contract Drafting, published this article in The Practical Lawyer: Understanding Best Efforts and Its Variants.

I particularly liked his chart of the different “effort” phrases used in contracts filed with the SEC in 2004:

I just got back from a weekend in New Orleans and thought I would share my thoughts on this recovering city.

You should plan a trip to New Orleans. The food in great, there is lots to do in the city and plenty of places to have a great time. I had dinner Thursday night at the Commander’s Palace in the Garden District, breakfast at Camellia’s Grill, lunch at Bayona in the French Quarter and a dinner Friday night at Antoine’s Restaurant in the French Quarter. The food, service and accommodations were all wonderful. All four of these places have recently re-opened.

The French Quarter, Canal Street, and other tourist areas were not as damaged as other parts of the city, are re-opened and waiting for you to come and visit.

The bad part of the story is that the city’s housing stock was badly damaged across the economic spectrum.

We drove through some affluent areas that were badly damaged. There were a few signs of the damage. But the areas are now mostly rebuilt. People with money were able to line up contractors quickly and rebuild before getting their insurance money.

In the middle class areas, you could see the bathtub ring across the front of the buildings in the neighborhoods. This ring marks the level of the waterline where the floodwaters sat for weeks waiting for the levees to be fixed and the pumps turned on. The debris is gone, but few houses have been re-built. Most of the people are just gone. They fled from Katrina, settled down in a new community and have stayed there. Similarly, the commercial infrastructure has not been rebuilt in these areas because the customers are not there. The supermarkets have no desire to rebuild if there are no longer customers in the neighborhood. Schools are still closed because the population of students is gone, as are the teachers.

In the poorer areas there are still FEMA trailers and little rebuilding. There is no capital to rebuild. Unlike the middle class areas, the people did not have the resources to flee and start over in a new community.

The population of New Orleans is currently 33% to 50% smaller than it was was pre-Katrina. It seems like a big chunk of this missing population is the middle-class.

The city is alive and vibrant, just smaller than it used to be. New Orleans will come back as the small business and employers come back to the city. It will take years.

Hopefully, over those years the government and the people will not forgot how important it is to build and maintain the levees and pumps that allow New Orleans to exist. Another hurricane will come some day. That is inevitable. New Orleans needs to make sure it has the defenses to withstand the next hurricane.

new orleans

Robert Ambrogi has an article in Law Technology News reviewing the recruiting sites of the AmLaw 100: Recruiting Sites That Draw Thumbs Down. (Free registration required.)

I posted previously on his article on the good law firm recruiting websites. My firm did not make his good list. Unfortunately, it did make his bad list:

“Its breezy creativity could easily have put it on my list of favored sites. But after much discussion with myself, I concluded it was just too over the top for a recruiting vehicle.

The site uses a series of Flash-style videos, characterized by exaggerated text and images, to portray themes such as passion, flexibility, confidence and courage. One partner seems to turn somersaults through the air. A mike-in-hand litigator adopts a rock-star pose. A real estate partner appears to bungee jump. A litigator leans back at a precarious 45-degree angle without visible support.

Everyone appears to be defying gravity and having way too much fun. Even the firm’s managing partner and hiring chair are shown shoulder-to-shoulder, smiling broadly and gesturing in poses that suggest a musical comedy duet. All this is no doubt great if you are recruiting astronauts. For recruiting attorneys, however, it strikes me as just too much.”

Update: I failed to mention earlier that I happen to like the firm’s recruiting site. (I had no involvement in it.)

When browsing through Massachusetts Lawyers Weekly, I came across Kowalczyk, et al. v. Estate of Smiarowski (Lawyers Weekly No. 14-087-07) (6 pages) (Sands, J.) (Land Court) (Misc. Case No. 245456) (July 31, 2007) (subscription required).

It cited M.G.L.c.240, section 15, which provides for a discharge of a mortgage that is 20 years past its expiration date. I had not run across this statute before, but it looks like a useful method to discharge old mortgages. The 20 years is a long time frame. With a typical 10 year commercial mortgage or 30 year residential mortgage, the old, undischarged mortgage would have to be very old to fall under the statute.

M.G.L.c.240, section 15 states:
(b) If the record title of land or of easements or rights in land is encumbered by an undischarged mortgage or a mortgage not properly or legally discharged of record, and the mortgagor or the mortgagor’s heirs, successors or assigns do not have actual or direct evidence of full payment or satisfaction of the mortgage but the mortgagor, or the mortgagor’s heirs, successors or assigns have been in uninterrupted possession of the land or exercising the rights in easements or other rights in the land, either: (1) in the case of a successor or assign who is a bona fide purchaser for value or who is an heir, successor or assign of the bona fide purchaser for value, for any period of 20 years after the recording of a deed from the mortgagor or his heirs or devisees to the bona fide purchaser, which deed did not evidence that title was taken subject to the mortgage or that the purchaser assumed or agreed to pay the mortgage; or (2) in the case of the mortgagor, or the mortgagor’s heirs, devisees or successors by operation of law, for any period of 1 year after the expiration of the time limited in the mortgage for the full performance of the condition thereof, or for any period of 20 years after the date of a mortgage not given to secure the payment of money or a debt but to secure the mortgagee against a contingent liability which has so ceased to exist that no person will be prejudiced by the discharge thereof, the mortgagor, or the mortgagor’s heirs, successors or assigns, or any person exercising the rights in easements or any person described in section 11, may file a petition in the land court or, except in the case of registered land, in the superior court for the county in which the land is located; and if, after such notice by publication or otherwise as the court orders, no evidence is offered of a payment on account of the debt secured by the mortgage within the relevant period of uninterrupted possession or of any other act within the time in recognition of its existence as a valid mortgage, or if the court finds that the contingent liability has ceased to exist and that the mortgage ought to be discharged, it may enter a decree discharging the mortgage, which decree, when duly recorded in the registry of deeds for the county or district where the land lies or, in the case of registered land, when duly noted on the memorandum of encumbrances of the relevant certificate of title, shall operate as a discharge of the mortgage and no action to enforce a title under the mortgage shall thereafter be maintained.

I recently switched from using Bloglines as my feedreader to using Google Reader. I liked the ability to publish shared items on Facebook. As the number of my feeds has exploded past 150, it has gotten harder to manage the feeds. I found this especially true when I was on “vacation” at my in-laws in Missouri two weeks ago. After a few days off-line, I had several hundred unread items.

Jack Vinson got me thinking about organizing feeds by priority instead of content. I really liked being able to view my feeds by subject, but also wanted to make sure I saw very important items very quickly.

I very pleased to find that Google Reader allows you to organize your feed BOTH ways. Feeds can be in multiple organizational folders.

As you can see from this screenshot of my feed list, I have given my feeds a ranking of 1, 2, 3, or 4. Each feed is placed into one of these ranking folders and one of the subject matter folders.

I used numbers because the folder list is alphabetical. My first attempt was using “high” and “low” but they got buried in the folder list.

I can focus on the “1″ feeds when I am busy, dismiss the “4″ feeds when I fell overwhelmed by the number of unread items and focus on a particular subject when I am in the mood.

Its great when software allows you to have it both ways.

I will speaking as part of the seminar: Real Estate Development From Beginning to End in Massachusetts in Dedham on November 16, 2007.

Agenda

construction mortgage

Monroe Horn of Bromberg & Sunstein LLP published the article in ILTA’s Peer to Peer magazine: Promoting Internal Collaboration with an Enterprise Wiki.

The money quote about their use of Confluence as their wiki platform:

It provides a single place for team members to post information; it makes it easy to create and update system documentation as systems are developed; and it gives us a single place to go for all of our internal documentation and policies.

The technology itself, however, does not create collaboration. It just makes it easier. It is still necessary to foster a culture of knowledge sharing and communication so people are constantly thinking not only about doing their work, but also about documenting it. Developing that collaborative culture requires what I call “wikEvangelists,” people who post prolifically and encourage others to do so. They have contributed to our successes with Confluence by always asking one question: “Is it on the wiki?”

Thanks to James Dellow for pointing out this story: ChiefTech: Bromberg & Sunstein LLP Wiki Case Study

Kevin O’Keefe of LexBlog Blog put together a great of list of points to consider as part of a law firm blog policy: Law firm blog policy : Points to consider.

With “blawgs” the big issue to consider is the ethical limitations imposed on lawyer expression. Most states have vague policies on blogs, whether they constitute advertising and the implications of getting unsolicited information from clients and parties adverse to your clients.

Kevin is a great evangelist for lawyers blogging. I drank his Kool-Aid and created my own legal blog: Real Estate Space [http://realestatespace.blogspot.com].