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THIS ISSUE'S HEADLINES
ÒFrustration of PurposeÓ Discharges Commercial TenantÕs Rent Obligation
Key Elements Every Family Business Succession Plan Should Include
Rhode Island Supreme Court Favors Employers in First Impression Whistleblowers Case
Stay Informed – PLDO COVID-19 Resource Library
ÒFRUSTRATION OF PURPOSEÓ DISCHARGES COMMERCIAL TENANTÕS RENT OBLIGATION
 While specificity is typically a good thing in contract drafting, sometimes, too much specificity can backfire. A commercial landlord in Boston discovered this recently when the Suffolk County Superior Court discharged rent otherwise owed by a cafe operator during the period when the Governor had issued an emergency order banning on-premises consumption of food and drink. Interestingly, the case was filed not by the tenant, but by the landlord, who was seeking payment of back rent, eviction of the tenant due to default, and attorneyÕs fees. In fact, the tenant had already quit the premises after receiving an eviction notice.
The lease at issue expressly limited the tenant to using the premises to operate a ÒCaffŽ Nero themed cafe,Ó and not for any other purpose. Because the tenantÕs cafŽ business was effectively shut down for several months by an executive order barring indoor or outdoor service of food and drink in response to the COVID-19 pandemic, the court found that the Òfrustration of purposeÓ doctrine excused the tenant from its obligation to pay rent during the period of that executive order.
The court cited to a 1991 decision by the Supreme Judicial Court (SJC) which held that the Òfrustration of purposeÓ doctrine excuses a party to a lease or other contract from performing its contractual obligations Òwhen an event neither anticipated nor caused by either party, the risk of which was not allocated by the contract, destroys the object or purpose of the contract, thus destroying the value of performance.Ó The court further noted that Ò[n]either the force majeure provision (which addresses impossibility but not frustration of purpose) nor the independent covenant provision bars this defense.Ó
While it is anticipated that this decision will be appealed, it was issued by a well-respected jurist of the Business Litigation Section of the Suffolk County Superior Court, and was directly tied to prior SJC case law. As such, many commercial tenants whose businesses were shut down by executive order may find that their obligation to pay rent for that period is excused. Moreover, since the Òfrustration of purposeÓ doctrine is not unique to Massachusetts, it should be expected that this issue will continue to be litigated for some time to come. For more information, please contact PLDO Partner Joel K. Goloskie at 866-353-3310 or email jgoloskie@pldolaw.com.
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KEY ELEMENTS EVERY FAMILY BUSINESS SUCCESSION PLAN SHOULD INCLUDE
 All professionals develop business plans to map out a strategy to target new opportunities. Businesses develop business plans for the purpose of defining who they are and how they will profile expertise or products to potential buyers. Succession plans are much different than business plans in that the purpose of a succession plan is to develop a strategy for changing leadership. Surprisingly, a significant percentage of family businesses fail to develop and implement a succession plan, justifying the failure as having no time, the process is too complex or the fear of creating conflict by and among family members. The undesirable result of not developing a succession plan is usually evidenced by the overwhelming difficulty to survive multiple generations.
While the succession planning process itself can be a major challenge for family businesses, other concerns that may impede survival are how nonfamily personnel will receive a successor and the perception of nepotism, the qualifications or ÒfitnessÓ of the successor, and the approach taken to clearly (or unclearly) communicate with employees regarding a transition in leadership, among others.
PLDO Managing Principal Gary R. Pannone addresses these concerns along with identifying the fundamental components of a plan in his insightful advisory entitled, 10 Key Elements of a Family Business Succession Plan. He also explains why the plan should be considered a living document and should remain fluid over time, how to inspire confidence among nonfamily employees as to a potential successor, and why an effective plan creates a path for the integration of generations and ultimate success for a family business. If you would like more information or assistance with your organizationÕs succession plan, please contact Attorney Pannone at 401-824-5100 or email gpannone@pldolaw.com.
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RHODE ISLAND SUPREME COURT FAVORS EMPLOYERS IN FIRST IMPRESSION WHISTLEBLOWERS CASE
 Recently, the Rhode Island Supreme Court addressed an important issue of first impression regarding Rhode IslandÕs WhistleblowersÕ Protection Act (the Act). The specific question the Court addressed was whether the Act protected an employee who reported illegal conduct allegedly committed by a previous employer. In a decision favorable to employers, the Court held that the Act would not protect whistleblowing activities against a former employer who lacked a Òclose nexusÓ to the current employer.
The Act prevents an employer from discharging, threatening, or otherwise discriminating against an employee under four circumstances:
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Because the employee, or a person acting on behalf of the employee, reports or is about to report a violation of law, regulation, or rule to a public body;
- Because an employee is requested by a public body to participate in an investigation, hearing, or inquiry held by that public body, or a court action;
- Because an employee refuses to violate or assist in violating a law regulation, or, rule; or
- Because the employee, or a person acting on behalf of the employee, reports or is about to report a violation of law, regulation, or rule to the employer or to the employee's supervisor.
In Crenshaw v. State, a college employee repeatedly told his employer heÕd previously been terminated by a police department in another state because he engaged in whistleblowing activities regarding that department. When the employee was later terminated from his position at the college, he brought an action under the Act, alleging that the college terminated him because he blew the whistle against his previous employer. Focusing on the ActÕs use of the present and future tenses, the Court determined that the employee was not engaged in protected conduct as defined under the Act, because the protected activity occurred while the employee was not employed by the college and Òinstead involved violations of law allegedly committed by a previous employerÑan entity that had no nexus with the employee's employment at [the college].Ó
This recent decision further clarified the Act, providing additional protections for employers. While this decision clearly prevents an employee from bringing a claim against his or her employer for unrelated actions that occurred prior to his or her employment, it is still critical that employers be diligent in their compliance with the Act. Employers should maintain a reporting and anti-retaliation policy and exercise care when addressing any reports of illegal activity made by an employee. For assistance in implementing a reporting and anti-retaliation policy or addressing a retaliation claim, please contact PLDO Attorney Katherine D. Bishop at 401-824-4100 or email kbishop@pldolaw.com.
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STAY INFORMED – PLDO COVID-19 RESOURCE LIBRARY
 PLDOÕs team of attorneys continue to add updates and advisories regarding the pandemic and its impact on families, businesses and organizations that are accessible in our online Resource Library. Among the featured articles include the following:
If you have questions and would like further information, please contact your PLDO attorney directly in our Rhode Island, Massachusetts or Florida offices or call our toll free number at 866-353-3310 to discuss your legal matter. We are here to help.
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