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December
2005
Joe Cavanagh and Karen Pelczarski
successfully represented St. Raphael Academy in its appeal of a Superior
Court decision which prevented this private, Catholic high school from
enforcing the hair length rule in its dress code. The opinion in this
matter, issued on July 15, 2004 and which is discussed below in the “Decisions
and Other Matters” section, is the first time the Rhode Island Supreme
Court addressed the issues of the right of the state to become involved
in the rule-making authority of a private school and the nature of the
contractual relationship between a private school and its students and
their parents.
Chambers USA has selected Blish & Cavanagh LLP as one of the leading
firms in Rhode Island in the area of General Commercial Litigation in
the 2004-2005 edition of its “Client’s Guide” to America’s
leading lawyers for business. Their guide singled out Joe Cavanagh as
one of Rhode Island’s legal luminaries, respected by both peers and
clients, and identified Karen Pelczarski as a “lawyer on the rise”. Click here to read the information in the Chambers USA Guide on-line.
Scott Spear represented Bess
Eaton Donut Flour Co., a regional coffee and doughnut shop chain, in
negotiating an agreement to sell the assets of the company to Tim Horton’s,
a Canadian-based company which is a division of Wendy’s International.
The multi-million dollar sale was recently completed, after approval by
the U.S. Bankruptcy Court in Rhode Island.
Karen Pelczarski was recently selected as a member of the First Circuit
Judicial Conference Advisory Committee. The committee, formed by Judge
Selya of the First Circuit Court of Appeals and Judge Torres of the U.S.
District Court for Rhode Island, is planning the annual First Circuit
Judicial Conference for 2005.
Joe Cavanagh and Kristin Rodgers have been representing Anheuser-Busch Inc. in litigation arising from the tragic fire in February, 2003 at The Station night club in West Warwick, R.I. DECISIONS
AND OTHER MATTERS
On July 15, 2004, the Rhode Island Supreme Court held a private school
had the right to institute and enforce a dress code which included a
hair length rule for male students. The case was brought by a student at
St. Raphael Academy, a Catholic high school in Pawtucket. The school’s
dress code prohibited any outlandish hair styles and colors and stated
that a boy’s hair could not be longer than the bottom of his shirt
collar. When the student was told he needed to cut his hair, which was
styled in a “mullet” that was six to eight inches below his shirt
collar, if he wanted to continue to attend the school, the student and
his parents filed a breach of contract action against the school. The
Superior Court granted a permanent injunction and restraining order that
prevented the school from instituting any disciplinary action against
the student based on his hair length. The school appealed this decision
to the Rhode Island Supreme Court, which reversed the Superior Court
decision.
The most significant finding made by the Rhode Island Supreme Court was
that it was error for the lower court to get involved with the
rule-making authority of a private school. As a private school, St.
Raphael Academy has wide latitude in making its own rules, regulations,
and codes of conduct and “it is not within the province of the court
to inject itself in the rule-making authority of a private school”
unless a rule violates some law or public policy. On the contract issue,
the court found that the contractual relationship between the
student/parents and the school is renewable annually by a distinct and
express contract; it specifically rejected the argument that acceptance
of a student as a freshman and signing necessary documents for the
freshman year created a four-year contract which precluded the school
from changing any of its rules during the student’s four years in high
school.
Joe Cavanagh and Karen Pelczarski
represented St. Raphael Academy during the appeal process. This decision
is reported as
Russell Gorman, Jr. vs. St. Raphael Academy. Click here to read this decision on line.
On July 1, 2003, the Rhode Island Supreme Court held that a parent company and its president were liable for paying a judgment against a subsidiary, despite the existence of two separate corporations. The case originated in a dispute over the renovation of a large Victorian style hotel. The plaintiff hotel owner was awarded over $230,000 in damages for delays and defective work by the contractor, a subsidiary of a larger corporation. The hotel owner was unable to collect the damage award from the contractor, because it had no assets, and subsequently sued the contractor’s parent company and the individual who was the principal of both companies. The Supreme Court decided that the parent company and the individual who served as president of both companies were liable for the arbitration award, based on the actions of the parent company and parent company president before, during, and after the renovation work. Prior to and during the renovations, the companys’ president assured the hotel owner that he could rely upon the parent company helping out if there were any problems with the subsidiary. When the subsidiary’s cash flow problems caused delays, the parent company did step in, replacing the subsidiary’s construction manager with one of its own construction managers, and providing sufficient financial backing to complete the work. Evidence also was presented on the close ties between the 2 companies, which were operating out of the same office and sharing the same computers, personnel, vehicles, and equipment. The parent company had also paid all the expenses of the arbitration proceeding between the hotel owner and the subsidiary company. Less than two weeks after the subsidiary lost the arbitration, all of its assets and current work were transferred to a newly created subsidiary which began operations in the same offices as the old subsidiary, and the existence of the this new subsidiary and the asset transfers was concealed from the plaintiff hotel owner when he tried to collect the arbitration award. The hotel owner eventually found out about the new subsidiary and the asset transfers and sued to collect the arbitration award from the parent company and the individual who was president of all 3 companies. Under these circumstances, where the defendants had engaged in an “iniquitous scheme”and there was “explosive proof of defendants’ intent to avoid payment of plaintiff’s judgment”, the Rhode Island Supreme Court held that it was appropriate to pierce the corporate veil and hold the parent company and its president liable to pay for the judgment against the subsidiary corporation which had the original contract for hotel renovations.
Bill Landry represented the successful plaintiff hotel owner. The case
is reported under the name
National Hotel Associates v. O.Ahlborg & Sons, Inc., A.2d (R.I. 2003).
Click here to read this Supreme Court decision online on the R.I. Judiciary Web site,
www.courts.state.ri.us.
On April 29, 2003, the First Circuit Court of Appeals upheld the decision of the U.S. District Court for Rhode Island, holding that defendant directors and officers of a closely held family corporation had breached their fiduciary duties to minority shareholders when they failed to make adequate disclosures to minority shareholders at the time the corporation offered to purchase minority shares.
Karen Pelczarski and Staci Kolb represented the minority shareholders. This decision is reported as
Judith A. Lawton v. Robert Nyman, 327 F.3d 30 (1st Cir. 2003).
Click here to read this decision online at the United States Court of Appeals for the First District, www.ca1.uscourts.gov.
In June, 2003, Joe Cavanagh and Karen Pelczarski settled a medical malpractice claim against two physicians and a hospital for $1.7 million. The Superior Court complaint had alleged that the defendants were negligent in providing pre-natal care to a young woman, whose child was born with severe physical and mental handicaps. RECENT
DEVELOPMENTS AFFECTING RHODE ISLAND LAW
See July 15, 2004 decision of the Rhode Island Supreme Court in Gorman v. St. Raphael
Academy, which is discussed under “Decisions and Other Matters” above, regarding the rights of a private school to institute and enforce rules and regulations for its student and the voluntary contractual relationship between a school and its students and their parents.
See July 1, 2003 decision of the Rhode Island Supreme Court decision in National Hotel Associates v. O.Ahlborg & Sons,
Inc., which is discussed under “Decisions and Other Matters” above, regarding the circumstances under which a corporate veil may be pierced.
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