Bar Journal - March 1, 2002
By: Attorney Michael S. DeLucia
This issue contains a variety of articles on recent developments in the law and offers unique historical perspectives on two timely issues: judicial review and the state's obligation to fund public education. Two articles provide insight into the complexities of election law on both the federal and state levels - a timely topic with elections for statewide and congressional offices coming up this year. There are also useful and informative articles on New Hampshire's right-to-know law, on competency and litigation, as well as Charles DeGrandpre's Lex Loci column.
Marbury v. Madison. Among the most interesting pieces in this issue is the article on judicial review by a non-Bar member, Richard Lambert, a senior researcher with the Office of Legislative Services. In a unique and solid piece of scholarship, Lambert probes into New Hampshire's distinctive -and previously unknown or misunderstood- contribution to the roots of the landmark 1803 Supreme Court decision regarding judicial review. Eugene Van Loan III, who encouraged and assisted Lambert in converting a portion of his 1985 master's thesis research into this article, has written an introduction that provides additional context to Lambert's article. Both men deserve compliments for their research and thoughtful analysis in the development of this original research.
Marbury v. Madison was the cornerstone for the principle that the United States Supreme Court could review and find acts of the legislative and executive branches of government unconstitutional. In his search for the precedents underlying this principle, Lambert found that several courageous lower court judges in Rockingham County had established a legal precedent for this principle, prior to the establishment of the United States Constitution. Lambert's research centered upon the so-called "Ten Pound Act Cases." The Rockingham County judges kept to their guns, despite threats of impeachment by the legislature, and the courts ultimately prevailed when the legislature backed down and repealed the law that was found contrary to past judicial practices in New Hampshire. Prior to Lambert's work, the details of these cases had never been reported in historical literature-although the controversy was reported at the time in newspapers, including those read by the authors of the United States Constitution meeting in Philadelphia at the time. This article is a wonderful piece of historical digging.
The following legal developments during 2001-2002 were unique in many ways and merit attention, despite the fact that they are not covered in this issue.
Red Sox and Charitable Trusts. The most intriguing development during the winter months was the sale of the Boston Red Sox baseball team and the involvement of the Massachusetts Attorney General's Office in that sale. John Harrington, the chief executive of the Red Sox, announced early on that the sale of this prized asset would be an auction in order to sell the team to the "highest qualified bidder." As the sale proceeded, however, the winner was not the highest bidder but the second highest bidder. The public controversy that followed was intense, with concern over both the process and the outcome.
The assertion of jurisdiction by Attorney General Thomas F. Reilly came not on antitrust grounds (baseball is exempt from antitrust laws) but on charitable trust grounds. Because 53% of the proceeds from the sale of the Red Sox was to be conveyed to a trust established by Jean R. Yawkey to benefit Massachusetts charities, the Attorney General's Office asserted jurisdiction in order to protect the charitable interests involved. After prolonged negotiations, a settlement was reached, conveying an additional $30,000,000 to charities, thereby protecting the charitable interests in the transaction. The charitable trust established by Jean Yawkey will now have assets of approximately $410,000,000, making it the fourth largest foundation in New England.
The Lebanon/DHMC Settlement. A settlement in one of New Hampshire's high profile cases was entered into in January, resolving all outstanding issues. In 1998, Lebanon denied a property tax exemption to Dartmouth-Hitchcock Medical Center (DHMC), asserting that the medical complex did not provide sufficient community benefits to qualify for the tax-exempt status. Approximately $13,000,000 from DHMC was held in escrow while the litigation proceeded. The settlement provides for annual payments of $800,000 to Lebanon by DHMC for a 20-year period. In exchange, the City of Lebanon will recognize the nonprofit status of DHMC and will refund the $13,400,000 in taxes paid by DHMC, together with the income earned on those funds. The parties pledged closer cooperation in the future.
The litigation raised difficult issues for nonprofits statewide and was a much-watched case outside the state. Since nonprofit entities play such critical roles in healthcare, education, the arts and culture in New Hampshire, the issues raised should be of great concern to the general public as well. Two recent cases in the nonprofit arena bear upon the issue of charities and property tax exemption. In Taylor Homes (July 2001), the New Hampshire Supreme Court held that a nonprofit retirement home that cross-subsidizes is eligible for tax-exempt property status. In Appeal of Shallow River Properties, Inc. (January 3, 2002), the New Hampshire Supreme Court reversed an order of the Board of Tax and Land Appeals denying a property tax exemption to a nonprofit charitable entity. These recent decisions by the New Hampshire Supreme Court offer great comfort to nonprofit entities in this state.
Endowment for Health. The Endowment for Health, the private foundation created from the sale of Blue Cross Blue Shield of New Hampshire in 1999, recently announced its first grants. $87,000,000 in proceeds was conveyed to the Endowment when the sale was consummated, making the Endowment one of the largest foundations in New Hampshire.
The Endowment's charitable mission is broadly stated - to promote health among the citizens of this state. Dr. James Squires serves as its president; and he has ushered the Endowment through its initial period, bringing enormous credibility and skill to the position. The first grants totaled $2.8 million dollars and focused upon a number of healthcare priorities, including access to dental care and access to healthcare generally. The grants were made to all regions of the state and touched upon rural health needs as well as healthcare needs in our larger cities and towns. The second round of grant making is now underway; and those interested in applying for grants should contact the Endowment for Health, 14 South Street, Concord, New Hampshire 03301 (telephone: 228-2448).
Consumer Protection. In recent months, there have been important developments in New Hampshire on several major consumer protection issues, including settlements in the Firestone tire litigation and in the Mylan Laboratories case, among others. The recent settlement with Firestone Tire deserves comment, especially since it was the result of a multi-state action involving the Consumer Protection Bureaus across the nation.
Firestone Tire. The cases involving Firestone Tire and Ford Motor Corporation are well documented. Approximately 100 individuals died in accidents involving "tread separation" on Ford Explorers fitted with Firestone tires. The issues of liability have been hotly contested by both Firestone and Ford and this entire problem is a perfect case study for business schools. The accidents involved families, with tragic results for so many.
The impact upon Ford Motor Corporation has been profound. In 1998, Ford Motor Corporation had amassed a surplus of $6 billion, had crafted a strategic plan for global expansion and had assembled a leadership team headed by Jacques Nassar. Three years later, Ford has suffered severe financial losses, has replaced its leadership team, is rethinking its strategic plan, and has to deal with angry shareholders and a series of human tragedies. Experts have offered multiple explanations for the accidents involved, including defects in the Firestone tire, defects in the design of the Ford Explorer, and errors in the level of tire inflation. One expert believes that it would have cost an additional 90 cents per tire to wrap an additional layer around the tire, thus preventing tread separation. Others point to potential defects in the roof structure and design of the Ford Explorer. Firestone has settled a multi-state action with the state Attorneys General; and New Hampshire received $500,000 from that settlement from Firestone for alleged misrepresentations made concerning certain tires.
A special thank you is owed to Dan Wise of the Bar Association for the cover photograph of the 1786 Minute Book from the Rockingham County Inferior Court of Common Pleas. Dan's imprint is on every issue of Bar Journal that we publish and the time to acknowledge his work is overdue.
Attorney Michael S. DeLucia is the Director of Charitable Trusts at the New Hampshire Attorney General's Office. He is a past president of NASCO and serves on the governing board of NASCO, an affiliate of the National Association of Attorneys General (NAAG).