Category Archives: Blog

Local Officials Push for Sober Home Regulation

After a recent meeting in Delray Beach, it looks like the Federal government is considering stepping in to help local governments regulate sober homes. Attendees at the meeting, held on May 2nd, included the mayor of Delray Beach and other South Florida city and county officials, as well as U.S. Representative Lois Frankel (D- West Palm Beach) and Assistant Secretary of the Department of Housing and Urban Development (HUD) Gustavo Velasquez.

Local officials told Representative Frankel and Assistant Secretary Velasquez about the increasing “problems” from sober homes, including high numbers of calls to the fire department for overdoses. The local officials pushed for federal regulation. Although a change to the Fair Housing Act or the Americans with Disabilities Act is unlikely, HUD and the Department of Justice are expected to issue a joint statement by August 2016. According to Representative Frankel, the statement will make clear that cities and counties can “deny a request for public accommodation when it changes the character of a neighborhood.” Local officials could use this joint statement to limit sober homes.

With this news, it is clear that it is more important than ever for sober home operators to be vigilant at efforts to self-regulate the sober home industry. If local and federal officials see well-run and high-functioning sober homes dominating the industry, they will be less concerned and less likely to increase regulations. Sober home operators need to rally and work together to ensure that well-run sober homes are able to continue providing a supportive living environment and the sense of community that is essential to a successful recovery. If self-regulation leads to fewer poorly-run sober homes, the well-run homes will have a better chance at succeeding.

Learn more here.

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2015 Amendments to the Florida Revised LLC Act Brings Substantive Changes to Managers’ and Members’ Fiduciary Duties to the LLC and to the Members

The Florida Revised LLC Act (“Act”) was enacted in 2013 and took effect on January 1, 2014 for new Florida LLC’s and January 1, 2015 for all Florida LLC’s. However, in 2015, the Legislature further amended the Act with “clean-up” changes and “glitch” fixes as well as some important substantive adjustments. One of those substantive adjustments may cause members and managers of LLC’s to be subject to common law fiduciary duties in addition to the express statutory fiduciary duties previously found in the Act unless they take affirmative steps to amend their Operating Agreement.

The Legislature was concerned that judges had inconsistently interpreted the law as to whether common law principals relating to the fiduciary duties of loyalty and due care existed alongside the express statutory fiduciary duties set forth in Chapter 605 (“Default Duties”). In order to address this confusion the Legislature amended the law to expressly state that common law principals relating to the fiduciary duties of loyalty and due care continue to exist alongside the express statutory duties.

Prior to the 2015 amendments, section 605.04091 provided that members and managers of an LLC owe the fiduciary duties of loyalty and due care to the LLC itself as well as to members of the LLC. However, those duties were limited by the statute to certain stated situations. Specifically, this statutory section provided that the fiduciary obligations that managers and members had to the LLC itself and to the members were strictly limited to the following:

  1. Duty of Loyalty is limited to: (1) Accounting for profit, benefits, etc.; (2) not having adverse interests to the company; and (3) not competing against the company before dissolution.
  2. Duty of care is limited to: (1) refraining from engaging in grossly negligent or reckless conduct and willful or intentional misconduct or in a knowing violation of law.
  3. All duties under the LLC Act and Operating Agreement must be discharged consistent with the “obligation of good faith and fair dealing.”

The 2015 amendments made it clear that in addition to those specific situations, the managers and members were subject to common law principals relating to fiduciary duties. However, just as under prior law, the 2015 amendments allowed for those obligations to be somewhat limited by the LLC’s Operating Agreement.

Specifically, under prior law it was possible for Operating Agreements to specifically waive certain fiduciary obligations. If the waiver of these duties was ever question, the courts were required to decide as a matter of law whether those waiver provisions were appropriate pursuant to a “manifestly unreasonable” standard. Specifically, courts must consider only those circumstances which existed when the waiver became a part of the Operating Agreement and could only invalidate the changes if the objective of the change is unreasonable or the change was an unreasonable means to achieve an objective. Under no circumstances could an Operating Agreement be changed to exonerate a person for conduct involving bad faith, willful or intentional misconduct or a knowing violation of law.

The 2015 amendments included a provision in section 605.0111(2) allowing for all fiduciary duties to be restricted, expanded or eliminated except for those that are non-waivable under section 605.0105. Accordingly, this provision changes current law in that prior to the 2015 amendments every LLC automatically got the benefit of the limited fiduciary duties unless those duties were expressly expanded by the Operating Agreement. After the 2015 Amendments unless there is a broad waiver of fiduciary duties to the extent permitted by law, at least the common law fiduciary duties of loyalty and due care will supplement the express statutory duties and other fiduciary duties may be implied as well.

​ Accordingly, it is important for all LLC’s to ask their attorneys to examine their Operating Agreement to ensure that the issue of what fiduciary duty standard is applied to the managers and members of the LLC is addressed and reflects the understanding and intentions all parties.

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Second Circuit Court of Appeals Decision in New York State Psychiatrist Association, Inc. et al. v. United Health Group et al. Raises Hope that Mental Health Parity Law will Finally be Enforced

In a decision that could give hope to millions of Americans suffering from a substance use disorder or other mental illness, the Second Circuit Court of Appeals ruled recently that a lawsuit alleging violation of the Federal Mental Health Parity and Addiction Equity Act, 29 U.S.C. section 1185a (a)(3) (A) (“Mental Health Parity Act”) could go forward against United Health Group and its subsidiaries (“United Healthcare”). The Mental Health Parity Act, which was passed in 2008 requires group health plans and health insurance providers to ensure that the financial requirements i.e., deductibles and copays, as well as treatment limitations applied to mental health benefits be no more restrictive than the predominant financial requirements and treatment limitations applied to substantially all medical and surgical benefits covered by the plan or insurance.

The Plaintiffs in New York State Psychiatrist Association, Inc. et al. v. United Health Group, et al. (“Lawsuit”) alleged numerous violations of the Mental Health Parity Act including United Healthcare’s: (1) use of vastly different definitions of medical necessity for mental health care than it used for medical/surgical care; (2) requirement for pre-authorization and concurrent reviews for mental health coverage but not for the vast majority of medical/surgical coverage; (3) requirement of step therapy protocols a/k/a “fail first” policies which require the least expensive therapy to fail before the more expensive, but medically necessary, therapy will be approved; (4) disparate financial requirements to mental health and substance use disorders including prohibiting or restricting the use of appropriate evaluation management service codes by psychiatrist; and (5) use of restrictive policies that improperly limit access to psychotherapy for mentally ill patients in favor of drug therapy, thereby interfering with the practitioner’s ability to appropriately treat patients with mental illnesses or substance use disorders.

The ruling establishes two points that may be important in future claims against insurers in this developing area of the law. First, the Second Circuit recognized that the New York State Psychiatric Association (“NYSPA”) could represent its members and their patients in pursuing a claim under the Mental Health Parity Act through “associational standing.” An association has standing to sue on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests its seeks to protect are germane to the purpose of the organization; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. The Second Circuit addressed whether the NYSPA plausibly alleged that its claims did not require individual proof. The Second Circuit held that the NYSPA had met that burden by challenging United Healthcare’s systemic policies and practices insofar as they violate ERISA and the Mental Health Parity Act and because it was seeking only injunctive and declaratory relief.

Second, the Court recognized that United Healthcare could be sued even when it acted not as an insurer but as the administrator of a self-insured plan. This means that insurance companies are at risk under the Mental Health Parity Act whenever they exercise discretion in the administration of benefits and employees do not have to sue their employer in order to recover benefits.

The Mental Health Parity Act has been the law since 2008 and insurance companies have made cosmetic changes to their coverage in an attempt to appear to come into compliance. However, if the allegations set forth by the Plaintiffs in New York State Psychiatrist Association, Inc. et al. v. United Health Group, et al. are proven to be true, there is still a significant disparity between the insurance coverage provided for those with substance use disorders and other mental illnesses with that provided for regular medical and surgical services. With millions of Americans suffering from these types of illnesses, mental health parity is an issue whose time has come. Hopefully the Second Circuit’s decision in New York State Psychiatrist Association, Inc. et al. v. United Health Group, et al. will be the beginning of strict enforcement of the Mental Health Parity Act for the benefit of those who suffer from mental illness and their caregivers.

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Protecting clients’ intellectual property rights from cyber-gripers

In this increasingly “on-line” world, clients’ rights in their valuable trademarks are at risk from disgruntled customers or ex-employees who publish gripe websites on the internet. Today, anyone with a computer and ten dollars can purchase a domain name and publish a gripe website, in some cases using your client’s own trademarks to trash it on-line.

Use of its trademark to identify a gripe website implicate clients’ rights under the Lanham Act on the one hand, and the cyber-griper’s First Amendment right to free speech on the other. Therefore, it is important to understand how courts have balanced these competing interests, as well as knowing other steps which can be utilized to help a client avoid being the victim of a cyber-griper, or at least to minimize the impact if such an event happens.

In order to establish a claim for trademark infringement under the Lanham Act, (15 U.S.C. sections 1125(a) and 1114), a trademark holder must establish an unauthorized “commercial” use of the trademark, which is likely to cause confusion to potential customers about the source of goods and services. Accordingly, in order to implicate the Lanham Act, the defendant’s use of the trademark must be commercial. If the gripe website’s purpose is only to publish critical commentary about the trademark holder and not to sell goods or services associated with the cyber-griper, “fair use” may well defeat a Lanham Act claim. However, if the trademark holder can show that the cyber-griper intended to profit from the use of the trademark, the courts will find that the trademark holders’ rights in its intellectual property prevail over the cyber-griper’s First Amendment right to free speech.

Additionally, if a client’s trademark is “famous,” the trademark holder may have a claim under the Federal Trademark Dilution Act (15 U.S.C. section 1125(c)) which protects a famous mark from having its distinctive quality diluted. Similar to the trademark infringement claim, a plaintiff pursuing a claim for dilution must show: (1) its trademark has been used by the defendant for a commercial use in commerce; and (2) its trademark is famous. However, the requisite level of “fame” is extraordinarily high, and unlikely to be satisfied unless the goods or services are household names.

Finally, in cases where the cyber-griper has identified the offending website with a domain name which incorporates a client’s trademarks, a claim may arise under the Anti-cybersquatting Act (15 U.S.C. section 1125(d)). In an Anti-cybersquatting case the trademark holder must establish both that the domain name is identical, confusingly similar to, or dilutive of, a trademark, and that the cyber-griper has a bad faith intent to profit from the good will established by the trademark holder in the trademark. Text book examples of a bad-faith intent to profit are when the cyber-griper: (1) registers the domain name and offers to sell it to the trademark owner, its potential rivals, or the highest bidder; or (2) registers the domain name and erects a site with objectionable content to give the trademark owner a special incentive to buy the domain name from the cyber-griper quickly and at a high price.

However, thoughtful planning can at least prevent a cyber-griper from using the client’s trademarks to identify a gripe website. Clients who have trademarks should spend the few dollars necessary to register their trademarks as domain names and all reasonable “typos” of such trademarks with all of the applicable suffixes, i.e., .com, .org, .net, .info, .biz, etc. Once a gripe website has been published, clients can attempt to minimize the damage by bringing an administrative action against the cyber-griper under the Uniform Domain Name Dispute Resolution Policy (“UDRP”). The UDRP provides an expedited procedure for trademark holders in certain cases to force the registrar to transfer the offending domain registration to the trademark holder. Finally, if a client is stuck with the cyber-griping website being on-line and it is damaging enough, the client may consider setting up a rebuttal website.

Planning ahead and understanding the law can greatly assist clients in protecting their valuable intellectual property rights from cyber-gripers in the on-line world.

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Well-Meaning Law May Actually End Up Hurting Condo Owners

By Laurie Thompson

Before 2007, Florida’s Condominium Act provided that unless the condominium declaration stated otherwise, 100 percent of the owners had to agree to terminate a condominium. Accordingly, just one owner could halt the termination process even when it was in the community’s economic interest to do so, such as when a condominium needs significant repairs to meet building codes and regulations.

In 2007, the Florida Legislature amended Fla. Stat. Section 718.117 to make it easier to terminate a condominium by allowing termination if 80 percent of the owners vote for the change unless more than 10 percent objected. However, in 2008, the South Florida real estate market was hit by the Great Recession causing a glut of condominium units to be on the market. As a result no one was willing to rescue economically distressed condominiums. Accordingly, in 2010, the Florida Legislature passed the Distressed Condominium Relief Act which encouraged bulk buyers to rescue these failing condominiums.

However, another problem arose when the bulk purchasers realized that there was greater value in terminating the condominium and converting the buildings into rental units. This caused some unit owners to lose their homestead when they were forced to sell their unit at current market value which in some cases did not even cover the mortgage. This resulted in many homeowners losing their homes maintaining a mortgage.

The Florida Legislature recently passed, and the governor is expected to sign, a law which attempts to remedy this situation. Specifically, the law revises the requirements for the termination of condominiums and swings the pendulum back toward making it harder to terminate when bulk owners are involved. Specifically, the law provides that if 10 percent or more of the voting interests of a condominium reject a plan of termination, another termination may not be considered for 18 months. The law also creates certain conditions and limitations for the termination of a condominium if at least 80 percent of the total voting interests are owned by a bulk owner. A bulk owner is defined as the single holder of such voting interests or an owner together with a related entity or entities that would be considered an insider, as defined in section 726.102, who collectively hold such voting interests. To the extent a bulk owner is involved the following conditions and limitations apply:

  • Upon timely request, unit owners must be allowed to retain possession of units and lease their former units for 12 months after the effective date of the termination if the units are offered to the public.
  • Any unit owner whose unit was granted a homestead exemption must be paid a relocation payment equal to one percent of the termination proceeds allocated to the unit.
  • Unit owners other than the bulk owner must be paid at least 100 percent of the fair market value of their units as determined by one or more independent appraisers.
  • The fair market value for a unit of an owner who was an original purchaser from the developer and who dissented or objected to the plan of termination must receive at least the original purchase price paid for the unit.
  • The plan of termination must provide the manner by which each first mortgage on a unit will be satisfied in full at the time the plan is implemented.

While the attempt to address the problem of unit owners losing their homes while still owing a mortgage is laudable, as written, this law may result in going back to the bad old days when there was no viable way to address the problems of distressed condominiums without providing real assistance to the unit owners. The requirement that each first mortgage on a unit be satisfied in full in the plan of termination will cause a disincentive for bulk buyers to take the risk of buying up units in order to rescue an ailing condominium because this requirement will dramatically increase their costs and reduce profits.

While this provision will prevent unit owners from losing ownership to bulk buyers – because bulk buyers will likely no longer be interested in terminating the condominium – the owners will now likely be required to fund significant reserve requirements and to pay special assessments to improve the property to the level it should be. Accordingly, without a termination, these unit owners will be subject to substantial financial burdens and may be in a worse situation when the next real estate downturn arrives.

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