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LEGISLATIVE PROCESSJanuary 30, 2012
The past year has been most interesting for a former social studies teacher turned lawyer. As Chair of the North Carolina Bar Association’s Construction Law Section, I found myself shepherding an effort to update the North Carolina Lien Law. Many do not realize that there have not been substantive changes to that portion of the general statutes since the 1960’s. There have been numerous patches to address specific cases, but each effort to review and revise the full statutory scheme to ensure that it addresses changes in the construction industry over the past 40 years has run into a brick wall. This effort may yet be no different, but this particular article is not about content, but about process.
What has fascinated me on a purely academic level is the realization that as legislators, our politicians are asked to become instant experts in so many different aspects of life, business, and the world. Those reading this who have occasion to dabble in or delve into the lien law will understand that there is nothing easy about understanding the full range and the minute details of Chapter 44A, Article 2. Add to that the public’s misperception that the legislature is filled with lawyers (it is not) and you are asking citizens who most likely have had no dealings with the construction industry to tease out the details and decide what is best for the industry. The next element to add to the mix involves the lobbyists who represent the myriad of different trade associations in the construction industry. These folks come from all walks of life. Some have experience in the industry while others are learning on the fly, but in all cases, they are paid to protect the interests of their group. While the term “lobbyist” generally brings to mind very negative thoughts, I have been impressed with the diligence I have witnessed as some of these folks work to learn the issues and to understand the various aspects of the problem. I may not always agree with their positions and I always wish for more willingness to give and take, but I have gained an appreciation for the homework many of these folks are willing to put in.
What I have learned and the purpose of this article is that knowledgeable public input truly can make a difference. The legislature has hundreds and probably even thousands of bills placed before them every year. They cull to some extent by how much real interest they perceive from the relevant constituencies – if the groups or industry involved are not willing to get actively involved in the process, why should the legislature care? Politics absolutely plays a role. I have seen the “if you’ll vote for my bill, I’ll vote for yours” deals come to fruition where clearly there is no effort to understand the import or possible impact of bills and we have all seen the parties put their weight and considerable influence behind certain hot button items. My keenest disappointment early in this process was to be told that the issue was “too complicated” for the legislature to tackle. I would hope that there is a mechanism within the legislative process to create a commission, committee or task force to spend the time necessary to handle the really hard questions. However, I have been heartened by the incredible work done by the staff attorneys in the Legislative Research Division who have done an amazing job in getting up to speed on the lien law in order to assist the legislators.
The moral of this story is that if you care about a piece of legislation, you need to be active and stay the course. Things can happen, but you matter. Your New Year’s Legal CheckupJanuary 23, 2012
The end of the year is often a busy time for business owners and other individuals. It is easy to let some seemingly less pressing business and personal legal updates get pushed aside until the new year. Of course, when the new year starts, different challenges and time commitments can cause people to forget about those basic, yet important, legal matters. So as 2012 begins, perhaps it is time for a legal checkup Some key items that should be periodically reviewed and updated include:
Corporate filings/meetings- Corporations and limited liability companies are required to file annual reports with the Secretary of State each year. The failure to make this simple filing probably causes more administrative suspensions and dissolutions than any other mistake. In addition, each corporate entity needs to hold an annual meeting, and minutes should be recorded and added to the corporate record book. Taking the time to make sure these items have been done will ensure that your corporation or limited liability company maintains its effectiveness and protects you from personal liability.
Wills/estate planning- A surprisingly substantial number of individuals have never had a will prepared or have one that is decades old and outdated. If there have been substantial changes in your income, assets or marital status, if you have added children, or if your children have reached adulthood, it is time to have your estate planning documents reviewed and updated. Otherwise, if something happens to you, the distribution of your estate, the disposition of your assets and even the custody of your children could be something other than you desire.
Other issues- Perhaps some of your company’s contracts are unfavorable or have expired. This may be an opportunity for you to negotiate in order to obtain more beneficial terms. Maybe your corporation has never adopted bylaws or your limited liability company has never adopted an operating agreement. If you have business partners, you may need a buy-sell agreement. The new year is an excellent time to make sure you are getting the most out of your business endeavors.
Making sure your legal matters are in order can help you position yourself and your business for a profitable 2012. The Start of 2012 Brings New Laws to North CarolinaJanuary 16, 2012
As we turned the calendar to January 1, 2012, certain news laws have come into effect here in North Carolina. These new laws have resulted in changes to the purchase of gas or certain medicines in the State, while others affect North Carolina’s teen drivers.
Gas Tax Increase: Commencing January 1, North Carolina’s state motor fuel tax grew an additional 3.9 cents per gallon to a record of 38.9 cents per gallon. This increase is in addition to July, 2011’s increase of 2.5 cents. The new law requires that the tax be recalculated twice annually based on a formula related to wholesale gas prices.
Cold Medicine Purchases: Beginning on January 1, North Carolina pharmacies and other retailers will be required to electronically submit a customer’s information to the National Precursor Log Exchange (NPLEx), administered by the National Association of Drug Diversion Investigators, before completing a sale of a product containing a pseudoephedrine product. North Carolina already requires that these products be kept behind the counter, that the purchaser show a photo ID, and that the retailer record the buyer’s information. The intent of this new law is to further track the sale of products which can be used in the manufacture of methamphetamine.
Revisions to Graduated License Program for Teens: As of January 1, before obtaining a driver’s license in North Carolina, teens with a learner’s permit are now required to log 60 hours of drive time under the supervision of a parent or experienced drive before advancing to a the next step in the graduated process . Teens must then log an addition 12 hours of driving time before obtaining their provisional driver’s license. Attorneys’ Fees in Federal Miller Act LitigationJanuary 9, 2012
Federal bond claims have recently increased as a result of construction spending at North Carolina military facilities. Previously, suppliers to federal projects could usually rely on prompt payment from the bonding companies after making a claim. Suppliers now experience a trend of delay tactics from numerous sureties on federal projects. These delay tactics force suppliers to initiate federal litigation in a higher percentage of bond claims than in years past. Additional federal bond claim litigation mandates that companies protect themselves by taking steps to recover attorneys’ fees in such cases. The Miller Act provides the ground rules for litigating federal bond claims. Unlike North Carolina’s payment bond scheme, the Miller Act is silent as to attorneys’ fees.
In the F.D. Rich Co. v. United States ex rel. Industrial Lumber Co. case, the United States Supreme Court applied the “American Rule” to federal Miller Act litigation. The “American Rule” provides that each party typically pays its own fees and costs. The court explained that federal courts should not incorporate state law to the federal cases as a national rule would “extricate the federal courts from the morass of trying to divine a ‘state policy’ as to the award of attorney’s fees.” Years later, the Fourth Circuit created an exception to the national rule for North Carolina’s federal courts. In U.S. ex. rel. Maddux Supply Co. v. St. Paul Fire & Marine Ins. Co., the court adopted the standard which provides that “interest and attorney’s fees are recoverable if they are part of the contract between the subcontractor and supplier.”
In short, North Carolina businesses may claim attorney’s fees in a federal Miller Act lawsuit if they originally included appropriate language within the project subcontract or credit application. Contractual attorney’s fees language is key.
Serving on Board of Directors for Non-Profit Organizations: Beneficial and CautiousJanuary 2, 2012
In previous years, serving as a board member for non-profit and/or charitable organizations was perceived as prestigious and a great way to give back to the community. Sure, you were expected to attend a few galas and a board meeting every now and then, but it was all doable, feasible, and most of all – monetarily sensible. Now however, in the midst of our nation’s significant economic downturn and sharp decrease in government funding to charity organizations, such organizations are relying on board members more than ever for their knowledge, contributions, and time. So before hastily accepting a board position for a non-profit or charitable organizations, there are a few things to consider. Below are some key points to ensure that such a decision is the right one.
Time: Charity organizations today generally require a greater amount of time from their board members. Given the economic and community decisions which need to be made, it generally requires more time to consider situations and options for the organizations. Most charity boards, on average, hold seven board meetings a year – each of which generally last three to four hours. On top of such meetings, other options for service of the board members includes responsibilities to attend auctions, fundraisers, galas, entertain people, serve as the face of the organization to the media, attend retreats, and the list goes on and on. While giving back to the community through such organizations is often rewarding, know that it is a tremendous investment in terms of time.
Money: Many non-profit organizations today share the common idea that board members should be leaders in the fundraising efforts for the non-profit. Thus, there could be a responsibility that their board members are to sponsor events, buy tables, and donate funds to the respective non-profit , etc. Additionally, non-profit groups often look to board members to share their personal contacts for fundraising, and even request that board members personally call their friends and colleagues to ask for money. This has proven beneficial for many organizations and is a great way to increase fundraising efforts. Just be sure to know the expectations ahead of time.
Liability: What many do not know is that in serving as a board member, you have a fiduciary duty to the organization and could become liable if funds or the organization is mismanaged. Depending upon the type of organization it is, how it is managed, how the by-laws are written are a few things to consider regarding potential liability. In order to avoid such liability, board members need to be aware of their fiduciary duty, and keep a close eye on the charity’s finances and accounting books. Likewise, purchasing insurance to cover any liability as a board member is also a wise decision.
If you should have any questions about your potential liability while serving in a board member capacity, please contact us.
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