Category Archives: Business

Online Business Defamation and Public Forum Websites — Part II

By on October 9, 2017

            Part I of this series on Online Business Defamation and Public Forum Websites briefly touched on Section 230 of the Communications Decency Act (“Section 230”), a federal law that limits whom businesses can hold legally responsible for defamatory postings.   As previously discussed, Courts have consistently interpreted Section 230 as providing close to blanket immunity to public forum websites where the content in question is generated by a third party.  Thus, as a practical matter, claims against the Googles, Yelps and Facebooks of the world face significant legal barriers and businesses are currently better served by focusing on claims against the actual author of the posted defamatory comments, rather than the forum on which the comments were published.

            Section 230 was codified as law in 1996, right as the modern Internet came into being. It has not faced significant alteration since, even though the Internet landscape of today bears little, if any, resemblance to the landscape of 1996.  In no uncertain terms, Section 230 states, “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”  It is that language that has afforded modern websites (and their affiliated companies) enormous legal protections- legal protections that many of those same websites  (and affiliated companies) have lobbied extensively to keep in place as they have allowed the companies to flourish and have fostered an Internet environment where free speech is clearly protected.

            Section 230, however, has recently come under intense public scrutiny due to its rigid application creating harsh legal realities and unintended consequences, specifically with regard to the cover Section 230 has provided websites that host user-generated content that promotes and facilitates illegal activity.  Public pressure is currently mounting in favor of lessening the protection Section 230 provides to such websites (and companies) and a hotly contested bill has been introduced in Congress that would accomplish just that.  Thus, there is real potential that the momentum exists to shift the Section 230 paradigm away from the historically stringent protections afforded to companies and websites and toward allowing some form of recourse against pubic forum websites for offending hosted-content.  Regardless of the merits of such potential shift, such reform stands to have a significant impact on the potential viability of future online defamation claims.  Accordingly, business owners are well-advised to monitor the changing landscape carefully.  Should you find your business interests harmed by false or misleading statements on the Internet, consult with an attorney concerning the potential rights and remedies available to you.

Do More:  Prevent Your Neighbor from Taking Your Land Through Adverse Possession

By on September 26, 2017

            Does your neighbor’s fence fall on your side of the property line?  Did that garage get built on your land?  If your neighbor encroaches on your land, you may be subject to losing that portion of your property by adverse possession. 

            Adverse possession is a common law doctrine through which ownership to property can be acquired by an unlawful possessor exercising possession for twenty years of adverse, continuous, exclusive and uninterrupted use of land such that the lawful landowner has notice that the possessor claims title to the property.

            This little-known legal doctrine frequently affects densely populated residential areas where neighbors come and go and property surveys are the exception to the rule.  Recently, the New Hampshire Supreme Court had occasion to review its adverse possession jurisprudence in the case of O’Malley v. Little.

            In that action, an adverse possessor permanently acquired title to a strip of real estate in Hampton Beach, in a densely packed area of valuable homes near the beach.  In 1993, the plaintiff installed a chain link fence between her lot and her neighbor’s lot.  As it turned out, the fence was installed across the property line on to the neighbor-defendant’s land.  After installing the fence, the adverse possessor-plaintiff frequently used the encroaching area for parking cars, gardening, and other ordinary uses incidental to ownership of land. 

            In 2010, new neighbors learned that the fence encroached on their land.  In response, they called the plaintiff and informed her that her fence encroached and needed to be removed.  The plaintiff refused to move the fence.  The defendant asserted that he took other action to demonstrate to the plaintiff where the property boundary existed and that the plaintiff’s fence encroached on his land.  Nothing else occurred until 2013, when the defendant emailed the plaintiff again and requested the fence be removed.  In correspondence, the defendant offered the plaintiff a license to use the encroaching area.  Again, the plaintiff refused.  Accordingly, the defendant threatened to take action to relocate fence if the plaintiff did not do so herself.  The defendant never took such action.

            In December of 2013, the plaintiff filed suit to “quiet title,” or officially take legal possession of the encroaching area inside the fence line.  In that suit, the defendant asserted that it “ousted” the plaintiff from possession of the disputed land, and thus terminated the adverse possession, through the repeated assertions of ownership from 2010 to 2013.  The court disagreed.

            Instead, the New Hampshire Supreme Court quieted title in the encroaching plaintiff, finding that “ousting” an encroaching adverse possessor effectively requires more than mere assertions of title.  Rather than asserting title, the original owner must take affirmative steps to put the adverse possessor on notice that the lawful owner intends to reassert control or dominion over the disputed area.  Having failed to take any such actions, the original owner lost legal title to the disputed area.

            While little-known and infrequently asserted, losing title by adverse possession is risk property owners should be aware of, particularly in densely settled areas where unlawful encroachment by neighbors presents a significant risk to property.  If you’re concerned that your neighbor encroached upon your land, do your homework.  Review your plot plan and deed.  Engage a surveyor if you’re unclear whether an encroachment occurred.  Then take steps to reassert control over the land encroached upon by your neighbor.  If you’ve found that your neighbor encroached on your land, do not let time pass you by.  Instead, contact an attorney to help preserve your rights in your land.        

 

 

Foreclosures, Commercial Leases and the “First in Time, First in Right Rule”

By on September 18, 2017

Imagine that your company rents space in a commercial building and just found out that your landlord stopped paying the mortgage.  The building is in foreclosure, your lease isn’t ending soon, and it doesn’t address a foreclosure.  What happens to your commercial lease if the building is sold in a foreclosure auction?

When a commercial property owner defaults on its mortgage and the lender forecloses, a tenant should determine whether its lease was entered into before the foreclosed mortgage was recorded, as tenants retain interests in leased property if a lease predates a foreclosed mortgage.  Generally, the “First in Time, First in Right Rule” recognizes agreements respecting real estate with effect given to the “first in time” agreement.  In other words, a prior recorded mortgage that predates a lease, will permit the mortgagee to foreclose on the property and terminate the tenant’s lease, irrespective of the otherwise enforceable agreement between the defaulting landlord and the tenant.  On the other hand, a lease that predates a recorded mortgage will remain in effect after foreclosure, so long as the lease itself contains no contrary provision.

While the “general rule in Massachusetts is that entry by a mortgagee in possession under a mortgage granted prior to execution of a lease ousts the tenant and terminates the lease,” the inquiry doesn’t end there.  Tenants subject to a mortgagee’s title should consider whether the mortgagee exercised rights as a landlord over the tenant subsequent to the original landlord’s default on the mortgage.  Foreclosing mortgagees may acquire and exercise the landlord’s interest under a lease through an assignment of leases and rents from the debtor and demanding rent from the lessee as the landlord.  Similarly, the mortgagee may exercise rights as landlord through an attornment provision contained in the lease or through a separate attornment agreement with the tenant.  Attornment provisions can be found commonly in commercial leases, and express the tenant’s agreement to recognize mortgagees and/or subsequent purchasers as successor landlords to the tenant.  In the event that a tenant attorns to the mortgagee or a subsequent purchaser as its new landlord, or the mortgagee exercises rights under an assignment of the lease, the tenant will remain in possession of the leased space.

Absent such an assignment or attornment, the foreclosing mortgagee may terminate subordinate leases under the doctrine of paramount title.  Once asserted, paramount title requires entry, the demand rent be paid and actual or constructive eviction.  In to terminate a lease effectively, mortgagees acting in a dual capacity as both a mortgagee and landlord, must be cautious to articulate specifically its intended role so as not to afford subordinate tenants unintended rights permitting such tenants the right to carry on in prior existing leases.

In the rare instance that a commercial mortgage is subordinated to a lease, a lease would not be extinguished upon foreclosure of such a mortgage.  Instead, the purchaser of the commercial property would take possession subject to the tenant’s tenancy, and require the tenant to attorn to the purchaser as its new landlord, develop a new lease or vacate the premises.  

If your commercial space is sold at foreclosure, all is not lost.  The terms of your lease, along with timing of its execution in relation to the foreclosed mortgage will govern your rights and remedies as a tenant.   While it’s always a better course of action to address this issue when negotiating your lease it’s likely that you’ll retain some rights as a tenant despite a foreclosure.   In order to determine and preserve your rights under a commercial lease conclusively upon notice of a foreclosure, it’s important to consult with an experienced real estate attorney promptly.

Recent Ruling Emphasizes the “Sacred” Procedure of a Jury Demand

By on September 11, 2017

     Parties to a summary process (eviction) proceeding in Massachusetts are afforded the right to a trial by jury. Article 15 of the Constitution for the Commonwealth of Massachusetts declares that “parties have a right to a trial by jury; and this method of procedure shall be held sacred,” which applies to court rules and procedures for summary process governed by Massachusetts Rules of Civil Procedure, Rule 8 of the Uniform Summary Process Rules, and Section 21 of Massachusetts General Laws Chapter 185C.

     Recently, the Massachusetts Appeals Court overturned a ruling from the Housing Court and reemphasized the “sacred” right to a jury trial.  In Tchad Cort v. Alver Majors, a residential tenant appealed from judgment awarding possession and money damages to the landlord. The landlord filed a summary process action, to which the tenant responded with an answer, counterclaims, and a jury trial demand. At trial, the judge asked both parties if they were prepared for trial and the tenant acknowledged that he was prepared to proceed. After the landlord presented her case, the tenant provided testimony and stated that he would “like a jury.” The judge determined that trial was already underway and thus the tenant waived his right to trial. The tenant and the judge debated the tenant’s misunderstanding regarding waiver and the tenant presented his case. Thereafter, judgment entered against the tenant.

     On appeal, the Appeals Court reversed the judgment, holding that a passive waiver of a jury demand, by proceeding with trial without a jury after demanding a jury, is not sufficient to waive a prior plead jury demand. Instead, an effective waiver of a jury demand requires at least an oral stipulation waiving the demand. The Appeals Court emphasized the responsibility assigned to trial court judges to affirmatively investigate, prior to commencement of trial, whether to proceed with or without a jury, rather than starting trial and waiting for a party to object to the absence of a jury.

     Self-represented litigants in all courts are held to the same standards as attorneys. As a result, it’s crucial to understand and apply the rules of court and constitutional protections relevant to each action. More often than not, self-represented litigants are ill prepared to do so. In order to navigate litigation efficiently and effectively, engaging an experienced attorney to guide litigation prevents costly errors resulting from the failure to understand available rights and remedies. If you are involved in, or are considering filing a summary process claim, you’re well-advised to contact an experienced landlord-tenant attorney to achieve the best outcome.

Renting Apartments to Multiple College Students? Lodging House Requirements No Longer Apply

By on August 23, 2017

Massachusetts law distinguishes rented dwellings from lodging houses with regard to the requirements, rights, and remedies for the landlord or owner of the property and the tenants or lodgers. By statute, when a dwelling unit is occupied by “four or more persons not within second degree of kindred” to each other, that unit is considered “lodging,” and not a rental unit. In order to legally operate a lodging house, the owner of such units must obtain the necessary licenses, subject to fines or imprisonment for failure to comply.

The lodging house act was enacted during World War I as a reaction to concerns over immoral conduct and the spread of sexually transmitted infections. The Act divided persons who reside with their nuclear families, or are related within a second degree to the person owning the premises, from other, unrelated individuals who reside with each other. The Act applies to fraternity houses and dormitories for educational institutions, with the exception of dormitories for philanthropic institutions or nursing homes. Lodging houses have separate standards for complying with Massachusetts law, which are separate from standards set against apartment buildings and units. In addition to the licensing requirement, lodging houses must comply with the applicable building codes, they must provide kitchen facilities equal to or greater than 150 square feet in area and include a gas or electric plate or stove, a refrigerator, and hot and cold water, unless the city or town where the building is located has contrary regulations or bylaws. Lodging homes are also subject to the requirement that they not be used for any “immoral purpose” and the owner of the lodge must keep a register of all persons occupying units in the premises.

More recently, the Massachusetts Supreme Judicial Court (“SJC”) addressed the implications of the act in City of Worcester v. College Hill Properties, LLC, relative to private rentals to college students. In that case, the defendant property owners owned several two- and three-family properties and leased each unit to four unrelated college students under annual lease agreements. After investigating the units, the City of Worcester cited the defendants and ordered them to cease and desist from operating unlicensed lodging houses. The defendants refused to comply with the order and the City filed suit in the Housing Court. The Housing Court held that the units, as occupied, constituted “lodgings” under the law and ordered injunctions against the defendants. This ruling was upheld by the Massachusetts Appeals Court and the defendants ultimately appealed to the SJC. The SJC reviewed the historical differences between “lodgings” and apartments and analyzed the plain dictionary definitions to determine whether the defendants’ buildings were apartments or lodging. The SJC overturned the Housing Court’s ruling, finding that the City of Worcester’s interpretation of “lodging” (that the plain meaning of “lodging” and “let” suggested that the statute applies to “any place to live in any house”) was myopic and would “lead to absurd results and selective enforcement.” The SJC therefore refused to adopt the interpretation put forth by the City of Worcester and followed by the Housing Court, holding that the defendants were not operating “lodgings” within the meaning of the act.

The SJC’s interpretation in College Hill Properties has created a logical standard for distinguishing lodging houses from apartment buildings and has helped to facilitate the increased need for housing for college students in Massachusetts. If you are a property owner who rents to multiple unrelated persons or are considering renting in Massachusetts you should contact an experienced attorney to ensure compliance with all laws regulating rental apartments and lodging houses.

Airbnb Tax Dropped from Budget after House Negotiations

By on August 8, 2017

This post updates our previous post regarding proposed taxation of revenue generated by Airbnb rentals.  Despite prior consideration of an Airbnb tax as early as July 2017, the proposal was dropped from the fiscal year 2018 budget proposal. Earlier this year, the state Senate pushed to apply Massachusetts’ state hotel tax, and local levies, on private residences rented for short stays by Airbnb and its competitors, but lawmakers in the House could not agree on a budget measure.

Although the so-called Airbnb tax will not be included in the 2018 fiscal year budget, Representative Aaron Michlewitz, a leader in the efforts to install an Airbnb tax, remains confident that the legislature will institute a tax plan for short-term housing. It seems all parties concerned — from Governor Charlie Baker to industry leader Airbnb — agreed that short-term housing in Massachusetts should be subject to some taxation along the way.  Thus far, however, no consensus could be reached to keep the tax on the 2018 budget proposal.  Expect more updates on this matter as they develop in state government.

Jury Awards $1,000,000 For Business Defamation Claim

By on August 3, 2017

     In a recent decision in Dallas, Texas District Court, a jury awarded $1,000,000 in damages to a wedding photographer due to defamatory statements published in the media, and in particular on internet sites and social media. 

     Every business owner fears the damage that negative comments made online can do to their reputation. With the advent of social media and ratings websites, any post can take on a life of its own, making its way around the world. In many cases there’s not much a business owner can do to combat negative opinions. However, when the posts are actually false and defamatory there may be recourse.

     In this instance, an unhappy bride and groom went public with their dispute over a $125 fee with their wedding photographer. Instead of sticking to the facts, a jury found they went far beyond that. The jury’s opinion was that many of the statements, including that the photographer stole money and did this to many other customers, were malicious and defamatory. The photographer put on evidence of severe decline in revenue immediately following the statements. The jury compensated her $1,000,000 as a result.

      While the case remains subject to appeal, it gives hope to business owners that enraged customers might think twice before getting carried away with online retribution.  If false and defamatory statements are posted about your business online, you should consult with an attorney that practices online business defamation law to consider your options.

Online Business Defamation and Public Forum Websites

By on July 15, 2017

            All publicity is good publicity — or so the saying goes.  Nevertheless, it’s safe to assume that businesses saddled with false and misleading reviews on public forum websites, such as Google, Yelp, Angie’s List and other rating websites, would strongly disagree.

            People leave reviews on such sites for many reasons: to reward good service, to offer legitimate advice, to warn of a bad experience and for other reasons. While bad reviews may be rightly earned, what happens when that is not the case?  In other words, what can a business owner do when false and misleading reviews harm business?

            In Massachusetts, a business may have a claim for online business defamation.  An online business defamation claim contains five elements.  In order to prevail on such a claim, a business must prove, “(1) that the defendant published a written statement; (2) of and concerning the plaintiff; that was both (3) defamatory, and (4) false; and (5) either caused economic loss, or is actionable without proof of economic loss.” Noonan v. Staples, 556 F.3d 20 (1st Cir. 2009).  Further, a statement is considered defamatory when it, “may reasonably be read as discrediting [the business] in the minds of any considerable and respectable class of the community.” Clay Corp. v. Colter, 2012 Mass. Super. LEXIS 357 (Mass. Super. Ct. 2012).

            Who is responsible to the business for a defamatory review? While it is tempting to want to pursue the public forum website itself, federal law, specifically, Section 230 of the Communications Decency Act (“Section 230”) limits whom businesses can hold legally responsible for defamatory postings.  Courts have consistently interpreted Section 230 as providing close to blanket immunity to public forum websites where the content in question is generated by a third party.  As a practical matter, claims against the Googles, Yelps and Facebooks of the world present significant additional challenges and businesses are better served by focusing on claims against the actual author of the posted defamatory comments, rather than the forum on which the comments were published.

     Should you find your business interests harmed by false or misleading statements on the internet, you’d be well-advised to consult an attorney concerning the potential rights and remedies available to you.

Massachusetts Proceeds with Proposal to Impose Tax on Short-Term Rentals like Airbnb

By on June 19, 2017

As discussed in one of our previous posts , Massachusetts legislators have continued to discuss imposing a tax on short-term rental companies like Airbnb. Recently, the Massachusetts Senate decided to proceed with Governor Charlie Baker’s proposal to expand the room occupancy tax to include short-term rentals, but not without a few modifications. Back in January, Governor Baker proposed to expand hotel taxes to include users of services like Airbnb who rent out private rooms for more than five months (150 days) per year. The proposal stated that the 5.7% state tax – and up to 6% local tax – should apply to all providers of “transient accommodations.”

The Senate’s proposal, which was published in late May, adopts and expands upon Governor Baker’s initial proposal. Instead of only applying the room occupancy tax to private rooms that are rented out for more than five months per year, the Senate proposes imposing the tax on all “transient accommodations.” In contrast to Governor Baker’s proposal, which suggested encompassing long-term Airbnb providers under the definition of “hotels,” the Senate’s proposal introduces an entirely new category of housing that would be subjected to the room occupancy tax. “Transient accommodation” would encompass all “owner-occupied, tenant-occupied or non-owner occupied property . . . that is not a hotel, motel, lodging house or bed and breakfast establishment” where at least one room is rented to an occupant and all accommodations are reserved in advance. This new category of accommodation would expand the application of the room occupancy tax to all Airbnb-type services, regardless of their frequency. As a result of this proposed expansion, the state Senate’s proposal is projected to raise $18 million in 2018.

In a television ad Airbnb declared its support for the proposed rental tax in Massachusetts. Although similar ads ran last summer, the new ad reaffirms the company’s “commit[ment] to working with Massachusetts on new, common-sense home sharing rules. We want to collect and pay taxes for our hosts and protect affordable housing. Together, we can make sure all of Massachusetts benefits.” At this point it appears that at least some tax will be levied on companies like Airbnb in the very near future. The effect on hosts and customers remains unknown.  Strang Scott will continue to follow the progress of the proposed tax.

New Hampshire Supreme Court Denies Consumer Protection Act Claim in Real Estate Transaction Gone Bad

By on June 15, 2017

     In the recent case of Fat Bullies Farm, LLC, v. Lori Devenport et al., the New Hampshire Supreme Court had occasion to consider whether a series of less than truthful representations made by a prospective purchaser in the course of negotiating a real estate transaction gave rise to liability under NH RSA 358-A, New Hampshire Consumer Protection Act (the “Act”).

     After a trial in the matter, the Superior Court determined that the plaintiff and counterclaim defendants, Fat Bullies Farm and its principals, were liable for an award of enhanced damages – double attorney’s fees and double costs – pursuant to the Act.  On appeal, Fat Bullies Farm and its principals argued that the trial court erred in determining that the conduct underlying the award was sufficient to support liability under the applicable legal standard – that is, that the conduct was sufficiently unfair and deceptive to meet the “rascality test” for determining liability under the Act.

     The Act proscribes unfair and deceptive practices in commerce generally, and provides an inexhaustive list of specific types of conduct that give rise to liability under the Act.  For conduct not specifically listed, courts in New Hampshire consider the conduct complained of under the Act’s general proscription against unfair and deceptive conduct.  When considering whether any particular conduct not proscribed in the Act nevertheless supports liability, New Hampshire courts consider the conduct against the so-called “rascality test.”  Under the “rascality test” the conduct complained of must “attain a level of rascality that would raise an eyebrow of someone inured to the rough and tumble of the world of commerce.”  As a practical matter the court seeks guidance from the Federal Trade Commission Act (the “FTCA”) to determine whether such conduct runs contrary to the “rascality test” and offends the Act.

     The FTCA test considers whether the complained of activity offends public policy as embodied in other statutes, the common law or otherwise offends established norms of fairness, whether the conduct is immoral, unscrupulous, oppressive or unethical or whether it causes substantial harm to consumers.

      In the instant matter, the trial court found that Fat Bullies Farm’s conduct, which consisted of a course of unscrupulous behavior including misrepresenting their intentions for the future of the real property included in the proposed transaction, along with certain other selfish bargaining and business dealing tactics, was sufficient to establish liability under the Act. 

     The Supreme Court disagreed with the trial court’s decision, however, and held as a matter of law that misrepresentations concerning future uses of real property to be purchased could not give rise to liability under the Act if not contained in writing, because oral promises concerning real property are unenforceable under the Statute of Frauds.  The Supreme Court noted that even though Fat Bullies Farm’s misrepresentations encouraged property owner to sell the property to them, a course of misrepresentations of intent were not enough to support liability under the general proscription of the Act and the “rascality test” absent more.

     Each decision concerning liability under the general proscription of the Act and the related “rascality test” is inherently fact based, and therefore may not serve as strong precedent for future decisions of the Court.  Nonetheless, the Fat Bullies Farm decision further underscores the larger body of New Hampshire Supreme Court jurisprudence that demonstrates a pattern of restraint in its application of the Act to business dealings.  While other states with similar statutes apply the remedies offered by the Act liberally, the New Hampshire Supreme Court applies the remedy sparingly, and potential litigants should not be confident that, absent extraordinary circumstances, the Act provides redress for unscrupulous conduct in business dealings.  To consider whether the circumstances of your dispute merit consideration of a claim under the Act, litigants are well-advised to contact a New Hampshire litigator.