MGT394-Matthew Pasta Case Study – Law Assignment Help

Assignment Task

Task 

Matthew Pasta was born in 1977 in Rome, Italy. Matthew Pasta is the younger brother of Luigi Pasta a well-known car mechanic and entrepreneur that resides in Mississauga. Matthew studied to be a nurse in Italy. When he came to Canada in 2000, he completed the requirements to become a member of the Registered Nurses Association of Ontario (RNAO). For his first four years in Canada, Matthew improved his English language skills and worked in a variety of senior citizen residences. Like his brother, Matthew was an entrepreneur.

Matthew was very proud of being a Registered Nurse and member of RNAO. RNAO states as its values: 
We believe health is a resource for everyday living and that health care is a universal human right. We respect human dignity and are committed to diversity, inclusivity, equity, social justice, and democracy. We believe the leadership of every nurse advances individual and collective health. Matthew felt that these values could be leveraged by him to develop a unique business as set out below. In 2011, Matthew incorporated Lakeview Retirement Residences Inc. (“LRRI”). His vision was to develop a unique retirement residence that made the elderly with family feel “at home” and those without families feel that they lived in a safe and supportive environment. The plan was to develop a successful business model and then franchise the concept to other entrepreneurial members of RNAO that wanted to operate retirement or nursing homes. The marketing concept was, “Lakeview Retirement Residence – owned and operated by nurses who care.” The following transactions have taken place:

•  LRRI purchased a three-acre parcel of land adjacent to Lake Ontario in Mississauga from a real estate developer. The property is located on lands once habited by the First Nation people known as the Ojibwa tribe. This First Nation people continue to have close connections to the area. At the time of purchasing the three acres, LRRI entered into an agreement with the real estate developer that provided LRRI an option to purchase an adjacent two-acre piece of land at any time over the next 10 years. The two acres are currently a habitat for some rare birds and other wildlife. If LRRI acquired the land, the plan would be to add an additional 80 bed wing to the facility.
•  A local contractor built a 120-bed retirement home facility on the land. As payment for part of their work they took back a 40% share equity interest in LRRI.
•  LRRI borrowed $4,000,000 from the Canadian Imperial Bank of Management (CIBM). The loan was secured by a General Security Agreement (GSA). The GSA covered “all chattels, current and future.” Approximately $750,000 of kitchen, healthcare and laundry equipment was leased from Elite Leasing & Financing Corp. (“ELFC”).
•  The property began accepting residents in 2013 and reached 90% occupancy by late 2014. The success of LRRI was largely attributable to Matthew who became the “face of the business”. He worked long hours and was personally involved in ensuring the residents, all who were over age 70, “felt at home”. 
•  In 2016, Matthew on the advice of his accountant (a CPA) incorporated Pasta Management Limited (“PML”). The CPA advised Matthew that he could pay a much lower overall rate of income tax on his earnings if instead of him being an employee of LRRI, PML invoiced LRRI for the services he
• is providing as a director, officer and member of the LRRI management group. Canada Revenue Agency has recently expressed some concern about the validity of Matthew operating as an independent contractor through PML and their billing LRRI.

Everything went along well, until COVID struck. COVID suddenly resulted in a variety of issues coming up. Some likely old and some new. All which likely had legal implications and which Matthew did not understand given his background. Matthew connected with you, Bea Calm, through his niece Maria. Maria had explained how you took MGT 394. Matthew hired you to prepare a detailed memorandum that identifies and discusses the various legal issues and provides your practical advice on the likely outcome and remedy and a plan on how best to move forward. In addition to the above, you noted as follows:

1. When you arrived at LRRI, you took a tour. You noted that the building was 5 stories high. On each floor, there was an “attendant station” when you got off the elevator. At each station, there was a desk, a computer and a shelf that was full of file folders. When you asked, you were told that files contain resident health and financial information. This information may be needed by a doctor or administrator for discussions with a resident or their family and so it was convenient to have available on the floor for easy access. Given the building size and costs, only floors 2 and 5 had staff attached to the attendant station.

When you toured the facility, you noticed that most of the LRRI staff were men. When you asked your guide about that, they said, “Some of the residents are overweight. You must be strong to be able to help them into their beds, chairs etc. Men have that strength. In addition, we are worried about COVID. If you hire a woman, she gets pregnant, goes on paid leave and there is a chance that the baby may get infected with COVID. Matthew and his management team treat employees like family. They could not live with themselves if an employee had a baby that had a birth defect because their mother worked here. Better safe than sorry.” Dr. Greta Bailey, the nursing home physician has said on numerous occasions, “male nurses are better then female. They are stronger and more reliable.”

2. Several the residents have been at the building since it opened. For a few residents, their health, especially their mental facilities have declined. For several residents, Matthew had the individuals sign a Power of Attorney (“POA”) that he designed. Matthew’s POA does not comply with the Substitute Decisions Act – but is rather a simple document that states, “I, [resident] appoint, Matthew Pasta, CEO of LRRI, or an individual that he designates, to make all decisions regarding my assets and financial matters (e.g., taxes, banking, investing) on my behalf.” This POA has been used by Matthew and other LRRI employees to complete banking, paying bills (including LLRI billings) on behalf of the residents. LRRI has followed a pattern like banks and financial institutions, and charges an annual power of attorney fee equal to 5% of the average fair market value of assets managed. In addition, LRRI charge $250 per hour for time spent doing record keeping. This power of attorney service has become quite a significant revenue stream for LRRI. Revenue is important, especially given the plan to franchise.

3. As you further tour the facilities, you notice that most residents leave the door to their suites open and so it is easy to look into a resident’s room. When you pass one open door, you notice a large Confederate flag hanging on the wall. Your guide tells you that the suite resident, George Wallacer, grew up in Georgia, USA and that his distant relative fought in the Civil War. He has always flown the Confederate flag as a symbol of family pride, notwithstanding that most people in 2021 consider the flag a symbol of racism. Your tour guide goes on to explain that one of the suites adjacent to George’s is that of Lily Flower. Lily’s son, Hank Flower, is a member of the Mississauga municipal council. Recently when Hank came in to see his mother, he noticed the flag hanging in George’s room. The following week, Hank, in his capacity as an elected Mississauga Council Member, proposed a by-law  “Banning the display of the Confederate Flag”. The City of Mississauga municipal council passed this
by-law prohibiting the display of the Confederate flag “anywhere in Mississauga.

The facility guide goes on to say that shortly after the by-law was passed, a City of Mississauga by-law enforcement officer came to the building and broke down the door to the unit occupied by Wallacer and tore the flag off the wall. Wallacer was issued an Infraction Notice and fined $5,000. There was no where even to appeal it.

When you met with Matthew and mentioned this, he said, “Bea, I never liked that flag, but really, is what happened here even legal??” To me it does not make sense that they can do this. You, Bea replied, “I have some thoughts on how to challenge this and my memo to you will analyze and address this.”

4. Matthew says when you meet, that he has some employment related issues. He explains,

a. “A lot of my employees have been with me since the company started. They are all nice and good at what they do. Some of them are religious and/or are real naturalists. I told all my employees, that they must have the COVID vaccine as soon as it is available. Two of my employees who work in our groundskeeping crew (a father and daughter) said that vaccines make them nervous and are contrary to their value system. I told them – you do what I say, or you do not work here. I fired them on the spot. They have been here a long time. Will be difficult to replace.”

b. “We provide a lot of part time work for people. One of the people that works here part time is Sharon Stone. Sharon, because of what she has learned here, designed a special device that measures blood pressure and blood sugar levels at the same time. I heard that she built a prototype which she wants to sell to a medical device manufacturer. As far as I am concerned, the trademark, patent, secret or whatever it is belongs to us. LRRI provided the opportunity, time and support to Sharon. Should we sue her? How is this going to work? What do we get and who gets it?

5. Matthew says that he has a bit of a conundrum. He explains – “You know I am a single guy. With COVID, I find it hard to meet someone special and I want a family like my brother. Our staff recruiter recently hired a young female nurse named Florence. Shortly after Florence started working here I asked her out on a date. She got all stupid – and then seemed to avoid me. I then sent her a couple of text messages and told her how nice she looked and that probably she made a lot of the residents happy. She then sent me an email and asked how I got her cell number and could I leave her alone.
So, I did. I thought this is awkward and so I moved her to a permanent night shift. She works 11 pm to 7 am now.

Florence complained to someone in the government and to RNAO. I did not know this. On a Tuesday, I got an email from RNAO telling me that the RNAO Discipline Committee was holding a hearing on Friday morning of that week to deal with the complaint made by Florence. They said I broke the Code of Professional Conduct by not upholding RNAO values. I had no idea what Florence had said about me. The hearing was taking place via ZOOM. I was unable to attend and so I asked them to defer.

They declined. I said I wanted to send someone else, but they just declined this too. Later on Friday I received an email telling me that the hearing was held, and I was found guilty of professional misconduct and my penalty was a suspension of my Registered Nurse designation for three months.
Do you think what happened was right? Any recourse on this?
We are going forward with the franchising plan. I have a consultant working on this and the legal disclosure documents. There is a section in the disclosure document we are preparing on key franchisor management and it describes me as an outstanding member of the nursing profession and a long-time member of RNAO. The consultant is worried now. I told her, do not worry. What could happen. What do you think? We really need the cash flow that franchising could bring.”

6. Matthew continues, “We are planning to expand our facility here by purchasing the two-acre adjacent property and building another 80-bed expansion on it. We have been working on getting the required permits for the building, but we have run into some resistance. First, we received a letter from the lawyer representing the Oakville Rowing Club (“Club”). The Club states that for fifteen years they have walked over this property to get to Lake Ontario to put their “sculling boats or shells” into the water and therefore have acquired the right to continue. The new building would block their path. We also got a letter from a lawyer representing the Ojibwa First Nation people. The lawyer states that this land is part of a previous hunting and fishing settlement and must remain as that. Do you think we have anything to worry about? Please explain.”