When Michael P. Fiore died powerboat racing in August 2014, his boat-building company quickly started falling apart.
Outerlimits Offshore Powerboats Ltd., based in Bristol, owed millions to its creditors, and Fiore had failed to file corporate tax returns with federal and state authorities for the previous eight years.
“Suddenly, there was no CEO, no one at the helm, and a bunch of creditors and about 50 employees looking around asking: What’s next?” said Frank Sciacca, a Johnston attorney and general counsel to Outerlimits.
The predicament sent the remaining partners and lawyers – including Sciacca – scrambling to restructure assets and liabilities. It resulted in the layoff of approximately 40, according to court testimony.
Eventually Joe Sgro, a principal creditor, agreed to buy assets and assume certain liabilities of the company. But the involved parties wanted a plan for the outstanding debt and tax payments.
There was a lot at stake, including the potential liquidation of the business, if the deal wasn’t completed.
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STAYING AFLOAT: Humberto Lima is a laminator at Outerlimits Offshore Powerboats Ltd., in Bristol. The boat-building company successfully underwent a court-ordered receivership process, following the death of CEO Michael P. Fiore in 2014, after it was discovered he had failed to file corporate tax returns with federal and state authorities for the previous eight years. / PBN PHOTO/RUPERT WHITELEY[/caption]
The company turned to the “business calendar,” a division of R.I. Superior Court that deals with business-related legal matters, and petitioned the court to appoint a special master to shepherd the business through receivership.
The process ultimately saved the business, with the receivership case closing earlier this year.
Outerlimits again employs more than 40 people.
“If it had dragged out any longer, the company would have dissolved, filed for Chapter 7 [bankruptcy] and the company would have been done,” Sciacca said.
Associate Justice Michael A. Silverstein has presided over the business calendar since its inception in 2001. Associate Justice Brian P. Stern joined in 2011 to oversee cases in counties outside of Providence. Together, the duo presided over nearly 1,000 business-related legal disputes from Burrillville to Block Island in fiscal 2016.
Cases since the division’s inception have ranged from high-profile lawsuits involving poisonous lead-based paint, failed state investments and polarizing energy disputes, to lesser-known matters involving real estate disputes and family power struggles over estates.
“We can have a case involving 1,000 employees … and the very next case can involve two owners from the corner bodega,” Silverstein said.
And while the calendar was founded to streamline business-related legal proceedings so lawyers and owners could spend less time in courtrooms and more time in boardrooms, its creators couldn’t have predicted the impact it would have on the Rhode Island legal system and its economy.
“Is every case a success? Absolutely not,” Silverstein said. “But I think what we do is ultimately good for Rhode Island.”
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SWORN-IN: Associate Justice Michael A. Silverstein has presided over the business calendar, a division of R.I. Superior Court that focuses specifically on business-related cases, since its inception in 2001. Ronald J. Capraro Jr., foreground, is being sworn in and testifying under subpoena. / PBN PHOTO/MICHAEL SALERNO[/caption]
CRADLE TO GRAVE
When Silverstein, 84, started his legal career in 1959, he was the third lawyer to join a small firm in Woonsocket.
He practiced business-related law, mostly representing the interests of state-based banks, which at the time were abundant in Rhode Island.
In 1969, his firm helped usher the sale of one of its clients, a burgeoning pharmacy, to the New York Stock Exchange giant: Melville Corp.
“That was a little something called CVS,” Silverstein said with a laugh, referring to what’s known today as CVS Health Corp., the Woonsocket-based retail giant that reported
2016 profit of $5.3 billion.
Now an R.I. Superior Court associate justice, Silverstein has spent more than a decade and a half of his 23-year career on the bench presiding over the business calendar.
From contract disputes and real estate transactions to class-action lawsuits and receiverships, Silverstein hears cases from start to finish, or as some in the legal community call it, “from the cradle to the grave.”
The business calendar – one of the first such models in the country – became so popular in Providence, the state Superior Court decided to expand it to Kent, Newport and Washington counties and named Stern to oversee it. (Bristol County is considered a de facto part of Providence County for the business calendar.)
The judges’ decisions are published, and procedural guidelines are consistent, which gives litigants an opportunity to analyze precedents and apply them to new cases. The approach is attractive to business owners and lawyers who like predictability and efficiency in process.
“If you’re in the business community, and you’re on the good side of the case, you want it to be on the business calendar,” said Max Wistow, a prominent Providence lawyer at Wistow, Sheehan & Loveley PC.
Prior to the business calendar, business, civil and criminal cases were mixed together and assigned to different judges based on rotation. The system often resulted in days when multimillion dollar receivership cases would be heard in succession to requests for temporary restraining orders.
Both issues are important, Silverstein noted, but the disparate matters unnecessarily complicated and clogged daily calendars, making the process at times frustrating.
“Having sat in that position, I knew what that felt like, so when I was asked … [to] do a business calendar, I was all for it,” Silverstein said.
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PRESIDING: Associate Justice Brian P. Stern is one of two judges to preside over the business calendar in Rhode Island, a division of R.I. Superior Court. Stern began presiding over the business calendar in 2011 to oversee cases in counties outside of Providence. / PBN PHOTO/MICHAEL SALERNO[/caption]
Having judges – such as Silverstein and Stern – with backgrounds in business-related law is also advantageous.
“The problem with a general calendar, where a judge might have limited exposure to business dealings, is that so much time is spent bringing the judge up to speed,” said John J. Chung, law professor at Roger Williams University in Bristol. “And even when that happens, there still might be a limited grasp on what the problem is.”
Stern, who worked in the public sector before being appointed to the bench, says the business calendar is undoubtedly good for Rhode Island businesses. The evidence, he added, is spelled out in many of the now-resolved cases that he and Silverstein presided over.
“For the businesses, it’s all about time and money,” he said. “It’s about getting an answer or decision quickly, if possible, so they can spend more time running their businesses and hiring employees.”
THE SPOTLIGHT
Stern still presides over some criminal matters outside of the business calendar, including murders, which often draw more public attention than, say, a shareholder derivative matter.
But the business calendar also has had its share of high-profile cases.
At or near the top of the list was the long-running lawsuit involving
38 Studios LLC, the failed video game company that went bankrupt in 2012, leaving Rhode Island taxpayers on the hook to pay back more than $75 million.
Silverstein presided over the four-year case, which ended earlier this year after a string of settlements.
The state managed to recoup $49.7 million, net legal fees.
Ask Silverstein, however, what case sticks out most in his mind, and he immediately remembers back to 2006, when the state sued paint manufacturers over the damaging effects of lead-based paint.
A Superior Court jury found negligent three paint manufacturers, including Sherwin-Williams Inc., which were ordered to clean up lead-based paint throughout the state. The cleanup efforts alone would have
cost the businesses millions, and the trial – most of which was televised and covered as a national story – lasted nearly five months, marking the longest civil jury trial in state history, according to Silverstein.
“National reporters were here 24 hours a day camped out at the courthouse, and at the hotels where out-of-state lawyers were staying,” he said.
The R.I. Supreme Court ultimately overturned the jury’s decision.
“Our hearts go out to those children whose lives forever have been changed by the poisonous presence of lead,” stated the court in its unanimous opinion. “But, however grave the problem of lead poisoning is in Rhode Island, public-nuisance law simply does not provide a remedy for this harm.”
Many business-related issues, including the lead paint case, can last months and even years on the business calendar.
But Wistow, who was hired to represent the state’s interest during the 38 Studios case, said litigating such a high-profile case is “an exhausting experience” and takes time no matter what.
And there’s no doubt in his mind the business calendar did make the process quicker.
“It may sound like four years is a long time and – on some level – it is. But on a case as complicated as this one, it’s not a long time,” Wistow said. “If not for the business calendar, I feel that we would still be litigating.”
He paused, thought for a moment, and added: “No, I’m sure we’d still be litigating.”
HIGH STAKES
The business calendar continues to be at the center of contentious issues of the day.
Silverstein is currently deciding whether Invenergy Thermal Development LLC, a Chicago-based energy company, is legally allowed to buy water from Johnston.
“The issue being raised is based on an old piece of legislation, which may or may not permit Johnston to sell the water,” Silverstein said.
The decision carries a lot of weight in Rhode Island, as Invenergy is trying to build a 1,000-megawatt, gas-fired power plant in Burrillville. To do so, however, it must secure a water source, a key ingredient in the electricity-generating process.
Johnston in January
agreed to supply the water, but the legality of that contract is being challenged by Burrillville and the Conservation Law Foundation. The R.I. Energy Facility Siting Board, or EFSB, is separately charged with determining whether to allow the power plant, and is scheduled to hear final arguments this fall.
Having a secured water contract in place is important for Invenergy, which declined to comment for this story.
“If CLF wins the case, Invenergy would be obligated to file a new water plan with the EFSB and the [board] could not begin the final hearing until the new water plan is filed,” said Jerry Elmer, a CLF Rhode Island attorney leading the case against Invenergy.
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Associate Justice Michael A. Silverstein, who presides over the Business Calendar, a division of R.I. Superior Court that focuses specifically on business-related cases.
PBN PHOTO/MICHAEL SALERNO[/caption]
If Silverstein rules in favor of CLF, it could also create a new precedent for water-contract agreements throughout the state because it’s not unusual for municipalities to resell water to businesses and organizations after buying it wholesale.
Silverstein’s decision, which he hopes to make before the EFSB meets in October, will not necessarily make or break the company’s proposal to build a power plant. But a ruling for CLF could make it much more difficult for Invenergy to move forward.
The company would be required to find a new water resource, and it has already been rejected by the Pascoag Utility District, the Harrisville Water District and Woonsocket.
Many other cities and towns have passed resolutions denouncing the project, which opponents argue is unnecessary and potentially detrimental to the environment.
Silverstein was scheduled to hear arguments on Aug. 24 about whether to allow for discovery in the case.
“It’s going to be a major issue in determining whether the developer has a supply to the water they need,” he noted.
FAMILY FIGHT
Other issues on the business calendar are more parochial in nature, with the court acting as a referee between squabbling parties, including siblings.
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FAMILY DISPUTE: Ballard’s hotel and beach club on Block Island is at the center of a family legal dispute, in which Steven Filippi and his mother, Marion, have filed a lawsuit against Steven’s brothers, Paul and Blake Filippi, over control of a trust that owns various assets, including Ballard’s. / PBN PHOTO/K. CURTIS[/caption]
The Filippi family, well-known on Block Island, is currently locked in a legal battle for control over a trust that owns various assets, including the iconic Ballard’s hotel and beach club on the island.
Steven Filippi and his mother, Marion, in December filed a lawsuit against Steven’s two brothers: Paul and Blake Filippi. Blake is a Republican state representative and House minority whip.
Marion and Steven allege Paul and Blake used threats, duress and coercion to claim sole managing rights to various assets owned by the family trust. Paul and Blake subsequently filed a countersuit, claiming Marion and Steven improperly borrowed millions from Bank Rhode Island in 2014.
During an Aug. 3 hearing, the family members sat on opposite sides of the courtroom, not speaking and rarely looking in each other’s direction. The tension between the sides is clear in court documents.
“Marion and Steven’s inability to take responsibility for their actions, and their win-at-all-costs-and-deal-with-the-consequences-later mentality, permeates this litigation,” according to a filing by Paul and Blake.
Stern listened intently to arguments related to the case. He stopped at one point to remind attorneys to stick to the law and not to devolve into finger pointing.
“[These] are complex and sensitive issues,” Stern said during the hearing.
The legal dispute is emotionally charged, but also hangs over the family’s businesses. A separate lawsuit reveals Manisses Restaurant Inc., a hotel and restaurant also owned by the brothers, has intertwined legal issues.
Steven managed the business until earlier this year, when his brothers removed him after finding out he “unilaterally and secretly” withdrew nearly $93,000 to pay back funds borrowed from Shoreham Inc., a family entity that owns Ballard’s, among other interests.
Paul and Blake allege the withdrawal drained the Manisses bank account, and after lawsuits were filed, the trio agreed to the appointment of a special master, Stephen F. Del Sesto, to oversee operation of the family businesses.
The lawsuits detail how the disputes have resulted in lost profits, an irreparable loss of goodwill and substantial damages. And the parties involved are hopeful it can be resolved in the business calendar.
“This is a family,” reminded Marion’s and Steven’s lawyer, Jeffrey H. Gladstone, a partner at Providence-based Partridge Snow & Hahn LLP, during the hearing. “Some things happen that are ugly.”
NATIONAL MOVEMENT
When former Superior Court Presiding Justice Joseph F. Rodgers Jr. created the business calendar, Rhode Island was largely ahead of the curve in adopting the siloed approach.
The Ocean State was the sixth jurisdiction in the nation to start such a calendar, and one of the first in New England.
Today, more than 30 jurisdictions throughout the country have business calendars, or something similar, which Chung says signals effectiveness.
“I guess the proof is in the pudding,” he said.
The business calendar’s expansion in Rhode Island, however, has been in some ways possible because of its size and the hierarchy structure of its courts.
“Some states do not have a unified court system, as we do in Rhode Island, where the lower courts fall under the authority of the Supreme Court,” Stern said. “Where the authority is dispersed over 10, 20 or 50 counties, it can be very difficult politically to start a program like this.”
Stern is now a board member of the American College of Business Court Judges, a working group of business-court judges from throughout the country.
A New York City native, he says geographic size makes a business court unrealistic in some states, especially if there’s only one judge responsible for cases over hundreds of miles. He pointed to Alaska, where some judges have airplanes and need to fly to different courthouses.
“A specialized business court is very difficult to establish if you do not have a judge that can devote their time to hear mostly these types of matters,” he said.
In Rhode Island, the business calendar is seen by many in the private sector as a sign of progress in a legal system that’s slowly becoming more efficient.
“In Hamlet’s soliloquy he noted, ‘Laws delay,’ so we know it’s been going on for hundreds of years,” said Wistow. “The business calendar is an attempt to hasten the proceedings, and I think without a doubt it has.”
Correction: An earlier version of this story misidentified the Superior Court and the middle initial of Joseph F. Rodgers Jr.
Eli Sherman is a PBN staff writer. Email him at Sherman@PBN.com, or follow him on Twitter @Eli_Sherman.
