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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.
“Going Legal”December 12, 2011
It is well publicized that the single most common complaint about lawyers is a failure to communicate. Communication is a two-way street and provides much fodder for contemplation.
Representing a number of different corporate entities provides an interesting view of the diverse policies corporations have once a case is sent to a lawyer. Some clients send us a case, but continue working the case as well. Other corporations have a policy that once the case is referred to “legal” then all communications with the debtor must run through the lawyer. And other entities somewhat split the baby – they do not actively chase the debtor, but will deal with a debtor who contacts them.
Is one policy better than another – probably not. The key remains communication between the lawyer and the client. If the client is going to continue active pursuit, then it is imperative that they keep the lawyer’s office in the loop when communications occur with a debtor.
Frequently we encounter confusion when clients continue sending statements to a debtor after referring the case to our office. Generally, once we make demand, we set the date from which interest will accrue so that the principal amount is fixed and interest accrues from a date certain. Clients’ statements essentially do the same thing except that they show the interest added each month which gives the impression of a shifting balance and can cause confusion, especially with less sophisticated customers. And, client’s statements do not show attorney’s fees or costs which might be recoverable.
The biggest problems often arise when a client accepts a payment but fails to inform their attorney. This can lead to documents being improperly filed with the court and grand confusion in the middle of a court case.
The moral of this story is simple: we as lawyers need to be diligent in checking and double-checking with our clients to make sure our information is current, but clients who have retained counsel need to be equally diligent in terms of keeping their attorney up to date. We are working towards the same goal – a successful outcome hopefully as quickly as possible. Foreclosing Deeds of Trust: Another Collection ToolNovember 7, 2011
Over the past couple of years, there has been a substantial increase in foreclosures in North Carolina and around the nation. Certainly, the poor economy has been a major reason for the increase. However, according to the Greater Wilmington Business Journal, foreclosures in North Carolina declined in September. Many of our clients make use of Promissory Notes secured by Deeds of Trust on real property as a means of securing past due balances and establishing a payment plan from delinquent customers. Despite the security given by the Deeds of Trust, our clients are often hesitant about seeking enforcement through foreclosure. Most would rather file suit for the unpaid Note in order to obtain a judgment. Often, this is a good approach as a lack of equity in the property securing the Note makes foreclosure an unappealing option. However, in certain situations, foreclosure may be the most effective option for recovering the debt. The foreclosure process is simple and clearly defined by statute. First, the creditor sends a letter providing notice to the debtor of default under the terms of the Note. If the debtor does not resolve the issues, the foreclosure proceeding is filed and the debtor is served with notice of the foreclosure hearing. At the hearing, the debtor has the opportunity to object to the foreclosure. If the clerk allows the foreclosure, the sale date is set and all interested parties are given notice. At the foreclosure sale, the trustee accepts bids and the highest bidder must deposit funds immediately with the clerk. After the upset bid period, where anyone can make a better bid, the sale is finalized and title passes to the high bidder upon delivery of the full amount of the bid. In the event the highest bid does not cover the full amount owed, the creditor is able to file a lawsuit to cover the deficiency. However, this option is not available in certain situations. Right of First Refusal; What Does It Mean?October 3, 2011
Often times, business owners want to include a provision for a right of first refusal to buy or sale a portion of a business interest or asset. There can be many variables of provisions for the right of first refusal to consider. In the recent North Carolina Court of Appeals case, Taylor v. Miller, the Court held that rights of first refusal may be enforceable, even if such provisions contain fixed price options. According to the facts in Taylor, Mr. Taylor and Ms. Miller were married in 1982 and separated in 1993. In 1994, they both executed a warranty deed to Mr. Taylor for a piece of property in Morehead City, NC which contained a provision giving Ms. Miller the right to repurchase the land should Mr. Taylor sell it. More specifically, the provision gave Ms. Miller the right to repurchase the property: (1) on the same terms and conditions as another bona fide offer; or (2) for the sum of $41,500 plus the costs of repairs and improvements made since the execution of the deed. In 2009, Mr. Taylor and his current wife filed a complaint seeking a declaration of rights under the deed and a determination of whether the 1994 warranty deed’s right of first refusal was enforceable. The term “right of first refusal” means that before a piece of property is sold, it must be offered to the person holding the right of first refusal. While rights of first refusal fall under the category of restraints on alienation (which are generally disfavored by the Court), rights of first refusal are not automatically void per se. However, to be enforceable, the right of first refusal must be shown to be reasonable. In making such a “reasonable” finding, the Court considers: (1) the duration of the right; and (2) the provisions for determining the price of exercising the right. In Taylor, Mr. Taylor argued that the right of first refusal failed the reasonableness test’s second prong, for the right of first refusal’s fixed price of $41,500 showed no relation to the property’s fair market value or what Mr. Taylor would have accepted from another buyer. The Court addressed this argument by holding that in determining whether a fixed price is reasonable, all circumstances that existed at the time the contract was entered into should be examined. In this instance, the 1994 warranty deed was actually part of Mr. Taylor and Ms. Miller’s separation agreement. As such, the $41,500 could be deemed a bargained for amount in relation to the terms of their separation, making the right of first refusal price reasonable and enforceable. This case helps us understand some of the issues to consider when drafting rights of first refusal. Many times, business owners include similar provisions. Knowing how a Court interprets this type of provision should be helpful. If you have any questions, please let us know. Electronic Information-Hacking for Business (Make it a Dream and Not a Nightmare)August 23, 2011
Our lives have been irrevocably changed by technology. We use technology every day and rely upon the usefulness of it. The technology which businesses utilize is normally designed to make work easier, more effective and efficient. As technology advances, so do the minds of those who want to use technology dishonestly or for the wrong purpose. An article in the Wall Street Journal pointed out how technology being used dishonestly can cripple your business. http://online.wsj.com/article/SB10001424052702304567604576454173706460768.html As a business owner, we all want to provide better and memorable service to our customers. Providing memorable service to our customers generally requires the use of software and/or digital information which often times saves and stores information about our customers electronically. This can and should be a dream come true as a business owner! If your business is collecting personally identifying information on your customers such as social security numbers, corporate EIN numbers, drivers license numbers, date of birth, credit card numbers, banking information, etc, North Carolina law and Federal regulations require you to take actions to safeguard that information. The North Carolina law was enacted to protect identity theft. The Federal regulations are referred to as “Red Flag” policy and was designed to identify activities, inquires, inconsistencies and information which should be considered “red flags” regarding customer information. Hacking into business data is no longer only for the big companies. Each and every small business needs to be proactive in protecting the information collected on behalf of your customers. If you have questions regarding the North Carolina law or Federal regulations, please feel free to contact us. Make the use of your technology a dream for your business! Franchisors Entitled to Lost Profits from Terminated FranchiseesAugust 16, 2011
Earlier this year, the United States Court of Appeals for the Fourth Circuit considered a case where a franchisor sought to recover lost profits from a franchisee it terminated for a breach of the franchise agreement. In Meineke Car Care Centers, Inc. v. RLB Holdings, LLC, the Court ruled that even though the franchise agreement did not specifically provide for damages for lost profits, the franchisor could recover them since the franchisee’s breach was the cause of the franchisor’s lost profits, the franchisor was reasonably certain to realize revenue absent the franchisee’s breach, the franchisor’s damages calculation was reasonable and the damages for lost profits were reasonably supposed to be within the contemplation of the parties. As a franchisee or a prospective franchisee, the important rule to take from this case is that if you are terminated by the franchisor, the franchisor can recover lost future profits from you to which the franchisor would have been entitled absent a breach of the franchise agreement. From a practical standpoint, there are some basic principles to apply to avoid the situation contemplated above. It is imperative that a franchisee or prospective franchisee carefully read and fully understand the franchise agreement. In particular, a franchisee must understand what constitutes a breach, when and how the franchisor may terminate the relationship and what are the franchisee’s options for terminating it. While disputes between franchisors and franchisees are sometimes unavoidable, knowing and understanding the franchise agreement and the related legal rights can go a long way in protecting a franchisee from severe financial penalties such as damages for lost profits. Lien Law Revision UpdateAugust 1, 2011
After a great flurry of activity early in 2011, the North Carolina Bar Association’s Construction Law Section shepherded suggested changes to Chapter 44A into the legislative process. We have taken to referring to House Bill 489 as “The Little Engine that Could” in that on several occasions the bill seemed to have lost momentum only to regain its footing. Finally, the House passed a modified version of the bill which would create a study commission made up of industry members who will take the original proposal and work it into something palatable to the industry as a whole. Location May Make A DifferenceJuly 26, 2011
We have all heard the phrase “location, location, location”. Well, according to a July 18, 2011 article in the Wall Street Journal the location of your pending lawsuit could make a difference in the outcome of consumer debt collections. http://online.wsj.com/article/SB10001424052702303365804576433763597389214.html
Consumer debt is different from commercial debt but many of the same type issues arise. Most of our cases are commercial or business debt recovery where we represent the business creditor.
We have found most Judges in North Carolina are fairly consistent in their rulings in applying the law. It has been our experience that Judges throughout do their very best to apply the law to each case as they understand the facts. Judges are individuals who have been shaped by life experiences and circumstances which could have an impact on how they perceive the facts of each case.
Selecting where you file your case may have an impact on your case due to many circumstances. Such circumstances may include travel expenses, whether you litigate your issue in your jurisdiction or the defendant’s, the court of jurisdiction and so on.
These are helpful ideas to discuss with your counsel. If you have questions, please feel free to contact us. North Carolina Allows Reciprocal Attorneys’ Fees Provisions in Business ContractsJuly 18, 2011
On June 27, 2011, Governor Perdue signed into law Senate Bill 414 making reciprocal attorneys’ fees provisions enforceable in business contracts. This is a significant change of law in North Carolina in that businesses can now contractually shift the burden of attorneys’ fees to the other side if forced to litigate their disputes. Under the so-called “American rule,” the general rule in the United States is that each side pays their own way in civil cases. This is in contrast to other countries where the losing party is required to pay the prevailing parties’ fees. This default allocation, however, can be modified by statute to allow for recovery of attorneys’ fees in certain contexts. The enactment of Senate Bill 414 (codified as N.C. Gen. Stat. § 6-21.6) effects such a modification, allowing businesses to contract for reimbursement of attorneys’ fees. The scope of the new law is limited to provisions in written contracts between businesses. “Business contracts” are defined as contracts entered primarily for business or commercial purposes. Consumer contracts, employment contracts and contracts with the government are specifically excluded. Notably, there is no limitation on the amount of fees recoverable, except that the amount cannot exceed the amount in controversy between the parties and must be “reasonable” in light of certain criteria. This is a departure from other statutes that cap recovery at a specified percentage of the amount at issue. There is also no automatic trigger for reimbursement under the new law, meaning the parties are free to define the conditions that trigger availability of attorneys’ fees. The only requirement is that the terms of the provision are reciprocal and applicable to all parties. The new law takes effect October 1, 2011 and applies to business contracts entered on or after that date. Businesses should consider whether a reciprocal attorneys’ provision is something to include in their contracts and also be on the look out for these provisions in contracts from other parties. |
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