Claims involving the "raising of capital" don’t fall within the scope of North Carolina’s unfair and deceptive practices statute. That was the basis for the dismissal of Chapter 75 claims yesterday in two cases, one decided by the North Carolina Court of Appeals and the other by the North Carolina Business Court.
In the Court
Get ready for changes in how to count the days for meeting deadlines under Rule 6 of the Federal Rules of Civil Procedure. The upcoming changes abandon the practice of excluding weekend days and holiday days in calculating a response date when the period for the response is less than eleven days.
On December
Eleven new cases were designated to the Business Court in September 2009, including a class action against the North Carolina Department of Revenue claiming that the taxation of retirement benefits paid to certain state employees is unconstitutional (Pendergraph).
Bankers Life and Casualty Co. v. Barnes (Mecklenburg)(Diaz): claims for misappropriation of confidential information and trade
Litigation between shareholders can be as unpleasant and messy as a divorce. That was the situation today in Koopman v. Koopman Dairies, Inc., a case which the North Carolina Business Court called a "corporate domestic dispute."
That analogy to family law led the Court to award attorneys’ fees for the defendants’ contempt of court
The Court sanctioned a pro se party for failing to appear at a scheduled mediation. The sanction included (1) requiring the party to pay her share of the mediation she did not attend, (2) being compelled to attend another mediation to be scheduled at the mediator’s discretion, and (3) requiring her to pay the total
If you are a secured creditor trying to sell off the collateral securing your loan in a "commercially reasonable manner" under North Carolina’s Uniform Commercial Code, it’s not a good idea to advertise the sale right before Christmas and have the sale right after Christmas.
That’s at least part of the lesson from the North Carolina Court of Appeals last week in Commercial Credit Group, Inc. v. Barber, where the Court ruled that the secured creditor’s Christmas-time sale had not been commercially reasonable, and denied its request for a substantial deficiency judgment.
The Facts
Barber had given his lender a security interest in a Peterson Pacific 5400 heavy duty waste recycler, a specialized piece of commercial equipment which grinds logs into wood chips.
The recycler broke down almost immediately after Barber bought it. The dealer wasn’t able to repair it, and Barber defaulted on his loan to Commercial Credit because he couldn’t generate any revenue from the recycler. The creditor took possession of the broken down recycler and gave Barber written notice that it would sell it at public auction on December 27, 2007.
Commercial Credit complied literally with the terms of its security agreement with Barber, which said that a public sale "will be deemed commercially reasonable" if (1) the Debtor had ten days notice of the sale, (2) the sale was advertised twice in at least one newspaper in the area of the sale, and (3) the terms of sale were 25% down plus the balance within 24 hours.
Commercial Credit gave ten days notice. It advertised the sale twice (on December 23rd and 26th) in general publication newspapers. It stated in the ads that 25% down would be required, but with a slight variation that turned out to be a problem, and said that the sale would be "as is," which also turned out to be a problem.
Only one bidder other than Commercial Credit showed up at the December 27th sale. Commercial Credit made the only bid of $100,000. Commercial Credit sold the recycler a few months later at a private sale for $90,000 more than its bid, but still sued to recover the full $128,000 difference between its auction bid and the outstanding balance on the loan.
The trial court ruled that the sale hadn’t been conducted in a commercially reasonable manner and rejected Commercial Credit’s claim for a deficiency judgment. The Court of Appeals affirmed, taking issue with the content of Commercial Credit’s advertising of the sale, and the timing of the advertisements about the sale.
Problems With The Timing Of The Advertisements
The Court of Appeals found fault with the timing of the ads run by Commercial Credit right before and after Christmas. Judge Robert N. Hunter said that a public sale was one where "the public has had a meaningful opportunity for competitive bidding," and that the advertisements by Commercial Credit were insufficient to generate that "meaningful opportunity":
The recycler at issue in this case has a narrow commercial use, and as a result, the pool of bidders potentially interested in this equipment was necessarily limited from the outset. This fact was then inexplicably exacerbated by Creditor’s decision to run advertisements for the auction in two general circulation newspapers just two days before and one day after the Christmas holiday. Obviously, scheduling a public auction for a highly specialized and expensive piece of inoperable machinery just two days after Christmas would almost certainly not enhance “competitive bidding” under N.C.G.S. § 25-9-610. Perhaps the best evidence of the result of Creditor’s decision was that only one other person in addition to Creditor attended the auction.
According to the Court, Commercial Credit "should have chosen a more appropriate date of sale, and tried considerably harder to market the recycler by targeting legitimate prospective buyers." It said "there is no excuse for putting forth clandestine advertisements that are misleading, obtuse, and targeted to no one during the busiest holiday season of the year."Continue Reading Secured Creditor’s Sale Of Collateral The Day After Christmas Wasn’t Commercially Reasonable
Order granting a preliminary injunction enjoining a foreclosure based on plaintiffs showing that “’there is a serious controversy’” as to default or the enforceability of the loan documents at issue."
Lawyers don’t have any obligation to disclose information harmful to their client’s position during settlement discussions, the North Carolina Court of Appeals ruled today in Hardin v. KCS International, Inc.
The parties in Hardin had settled an earlier lawsuit involving plaintiff’s claims over problems with his new yacht. Plaintiff then was dissatisfied with the repairs
Whether a furniture manufacturer’s marketing of a line of trademarked furniture for its licensor had been "commercially reasonable" was decided by the Business Court yesterday in favor of the manufacturer, in Lexington Furniture Industries, Inc. v. Bob Timberlake Collection, Inc., 2009 NCBC 22 (September 9, 2009).
The parties had entered into a License Agreement
The North Carolina State Bar has proposed an Ethics Opinion on whether a lawyer can look for and use metadata contained in a electronic communication from another party or that party’s lawyer. Proposed 2009 Formal Ethics Opinion 1, if approved, would place affirmative obligations on not only the recipient of the data, but also its sender.
[Note: On October 22, 2009, the State Bar Ethics Committee voted to withdraw this opinion and to send it to a subcommittee for further study.]
Metadata is "data contained within electronic materials that is not ordinarily visible to those viewing the information." Metadata might show information that a lawyer chose to delete, or a private comment that the lawyer didn’t mean the reader to see.
Obligations On Sending Lawyers
Those sending an email or electronic version of a document to an opposing counsel or party will be obligated to "use reasonable care to prevent the disclosure of confidential client information." That means being careful about using word processing software that tracks changes, allows the insertion of comments, or permits the saving of multiple versions of a document. The Opinion says that lawyers should use scrubbing applications that delete metadata, or avoid metadata altogether by sending fax transmissions or hard copies of documents.
Obligations On Receiving Lawyers
On the recipient side, the Proposed Opinion would prohibit a lawyer receiving electronic communications from searching for or using confidential information contained in the metadata in the document. And not only that, if the recipient unintentionally views hidden data, he or she must notify the sender of that fact.
The Proposed Opinion doesn’t apply, of course, to documents produced in response to a subpoena or a discovery request.
Other States
The issue of metadata has been confounding state bar ethicists for years. The Proposed Opinion references a number of other state bars which have issued ethics opinions on the subject, including Alabama, Arizona, Colorado, the District of Columbia, Florida, Maine, Maryland, New York, and Pennsylvania.
North Carolina, if it adopts the Proposed Opinion, will be lining up with Alabama, Arizona, Florida, Maine, and New York. Each of those states takes the position that a lawyer should not search metadata for confidential information belonging to an opposing party. There are a few with a contrary view or which don’t take a position on the subject, including the American Bar Association, Colorado, Maryland, and Pennsylvania.
The ABA has a good one page summary of the rules on metadata in these various jurisdictions, including a few additional jurisdictions not referenced by the NC State Bar in the Proposed Opinion.
If you have thoughts on this subject, you can address comments on the Proposed Opinion by September 30, 2009, to the NC State Bar Ethics Committee at P.O. Box 25908, Raleigh, North Carolina 27611.
The full text of the Proposed Opinion is below.Continue Reading Mining For Metadata In Communications From Opposing Counsel Would Be Prohibited Under Proposed Ethics Opinion From North Carolina State Bar