A Trustee in IRS Clothing

By Abigail Henderson

In addition to explicitly creating certain procedures and means of protection for debtors and creditors in bankruptcy, Bankruptcy Code provisions define the Trustee’s role and the extent of the Trustee’s powers in bankruptcy proceedings. The effect of the Code is twofold: it both equips the Trustee with the powers necessary to perform the Trustee’s role and, at least historically, has allowed North Carolina creditors and transferees to find some assurance that after four years, they are no longer exposed to the risk of an avoidance action. Recently, however, courts have increasingly adopted case law that expands the Trustee’s reach and undermines the four-year safe harbor for transferees.

Section 544(b) of the Bankruptcy Code provides the Trustee the authority to avoid any transfers to unsecured creditors by the debtor which are voidable under “applicable law by a creditor holding an unsecured claim.” Traditionally, this has meant that in cases in North Carolina the Trustees could avail themselves of the statute of limitations provided for in North Carolina’s Uniform Voidable Transactions Act—four years from when the transfer was made or, in certain circumstances, a year after the transfer was or reasonably should have been discovered.

However, as of late, Trustees across the country have begun to use section 544(b) to assume the benefits not just of the state law on voidable transfers, but also the those afforded to the IRS under both the Federal Debt Collections Procedures Act (“FDCPA”) and the Internal Revenue Code (“IRC”) in cases where the IRS has an unsecured claim against the estate. This adds several more means of recovery to Trustees, including but not limited to the ten-year look-back period for voiding transactions under the IRC or, as most recently applied in South Carolina, by avoiding transfer by disclaimer.

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Equifax and the Increasing Role of State Attorneys General in Data Privacy Regulation and Enforcement

By Will Quick

In June of this year, Alex Pearce and Sean Fernandes wrote on this blog about the increasing role of state AGs in data security enforcement actions.  Boy were they right!

Just a month later, on July 22, 2019, the attorneys general of fifty U.S. states and territories, including North Carolina, the Federal Trade Commission (FTC), and the Consumer Financial Protection Bureau (CFPB) announced a settlement with Equifax, Inc., following what has been reported as the largest-ever breach of consumer data in the U.S.[1]

The Equifax Breach

In September 2017, Equifax, one of the “big three” consumer reporting agencies, announced a data breach affecting more than 147 million consumers—a number that represents nearly half of the population of the United States.  The information reportedly exposed included consumers’ names, social security numbers, dates of birth, addresses, credit card numbers, and driver’s license numbers.

Attorneys general from the across the U.S. moved quickly to organize a coalition to undertake a multi-state investigation of the breach in conjunction with federal regulators.  The investigation found that Equifax had failed to implement adequate security measures to protect consumers’ sensitive personal information.[2]

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The Importance of Purchase Price Allocations in Asset Acquisitions

By John G. Hodnette

The maxim “don’t let the tax tail wag the business dog” is often bandied about in the business world.  Tax attorneys know, however, there are times, such as in Section 1060 allocations in asset acquisitions, when tax issues are an important part of the business negotiation.

Section 1060 applies when a business sells assets constituting its trade or business.  Asset acquisitions can be more attractive to a purchaser than stock acquisitions because of its concerns about hidden liabilities associated with the stock.  Additionally, purchasing assets directly increases the tax basis in the assets to a cost basis consistent with the purchase price.  This step-up in basis translates to larger depreciation deductions for the purchaser, resulting in long-term tax savings.  In contrast, a stock acquisition results only in an increased basis in the stock itself, not in the underlying assets of the company.  Since stock cannot be depreciated, this increased stock basis remains unused, for the most part, unless and until the stock is later sold.  If a purchaser and seller agree to an asset acquisition, how the purchase price is allocated among the purchased assets is important.  That is where Section 1060 comes into play.

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Micro-Lending with a purpose: A closer look at Kiva

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By Bryant Pernell

Kiva is one of several non-profit organizations helping to provide access to financing and outside investment through micro-lending for humanitarian purposes.

What is Kiva?

Organizations like Kiva, Heifer International, and Accion International, are leading the charge in the global effort towards financial inclusion.  These microfinancing organizations are helping to provide disadvantaged individuals and businesses with financial tools to improve their lives and their communities.

Officially launching in 2005, Kiva is a 501(c)(3) U.S. non-profit based in California.  As a person-to-person crowdfunding platform, Kiva connects everyday Americans who are willing to lend capital oversees to people needing small amounts of capital to start and grow their businesses.  Because so many people around the world lack access to financial institutions, Kiva is helping to expand interaction with underserved and impoverished communities.

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Shooting the Messenger: Villainizing Whistleblowers Makes Us All Less Safe

By Kevin Murphy

Retaliation subverts the aims of anti-discrimination laws, fair pay rules, safety regulations, accounting requirements, environmental safeguards, and many other laws. Employees cannot invoke the rights provided by these laws or help the government stamp out fraud if they know they will be retaliated against for speaking up or reporting misconduct.

Retaliation is deeply rooted in our culture. Since the Hammurabi Code, the rule has been that one should return whatever harm was done to them with equal vengeance. As the Old Testament decrees, “fracture for fracture, eye for eye, tooth for tooth, shall he repay. Whatever degree of blemish he has inflicted, so shall he be compelled to suffer.” Leviticus 24:19-20; see also Exodus 21:24 (“An eye for an eye, a tooth for a tooth, a hand for a hand, a foot for a foot”). The Greek historian Plutarch tells of kings beheading the bringer of bad news rather than facing the underlying issue itself.

Even the President has suggested executing those that report misconduct (“You know what we used to do in the old days when we were smart with spies and treason, right? . . . We used to handle it a little differently than we do now.”). Maggie Haberman and Katie Rogers, Trump Attacks Whistle-Blower’s Sources and Alludes to Punishment for Spies, New York Times, (Sept. 26, 2019).

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The Paralegal Certificate is Just the Start of Your Paralegal Training

By Ann Pearson

Indispensable paralegals know that their paralegal certificate is only the beginning of their paralegal training. If you’re like most, you probably spent a good sum of time and money to receive that paralegal certificate, so it’s not easy to immediately start thinking about more school or more courses.

If you’re already employed as a paralegal, it doesn’t take long to figure out that your paralegal certificate was just the start to your paralegal education.  That paralegal certificate was the base, or the foundation that you can build upon with additional training in your practice area.

Ask Any Experienced Paralegal:  How Well Did Your Paralegal Certificate Prepare You for that First Year?

Regardless of the practice area or experience level, all paralegals agree on one thing:  if you want a successful career, don’t ever stop looking for opportunities to attend paralegal training events (online or in person). Think about any skill or hobby that you are really good at – and you know – it takes more than an introductory video or course to get you to the point where you’re really good at it.

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Q&A With Fastcase CEO Ed Walters

By Catherine Sanders Reach
NCBA members have access to Fastcase, a robust 50-state legal research database, as a membership benefit. Soon Fastcase will be rolling out a new default version to all members. Fastcase 7 brings all sorts of new features and upgrades. We sat down with Ed Walters, CEO and co-founder of Fastcase, to talk about what’s new and the ever-expanding offerings from the platform.

Q: Ed, tell us a little about yourself
A: I’m a storytelling lawyer from Louisiana. After law school, I was a patent litigator in Washington, D.C., but my job really was to tell stories about science for judges with liberal arts backgrounds. My next-door neighbor at the firm (Phil Rosenthal) and I left Covington & Burling in DC almost exactly 20 years ago (!) to start Fastcase.

Up until last year, I got to be a soccer coach for my son, which was a delight!  I’ve also been teaching a class called The Law of Robots at the Georgetown University Law Center in the fall, and at Cornell Law School’s new campus in New York City in the spring. This fall I’m teaching The Law of Autonomous Vehicles at Georgetown Law.

Q: What are the enhancements to Fastcase in version 7 you are most excited about?
A: I like being able to search across cases and statutes at the same time, or across everything in a state. Type-ahead search is great, too, especially when you’re trying to look up a case by its name or citation, and the search engine just autocompletes it. We’re pretty excited about the hundreds of new expert treatises we’ve just launched. And we’re just about to roll out our gigantic briefs, pleadings, and motions database – a great place to find templates for state and federal litigation.

I also like the Cloud Linking feature – you drag a Word or PDF document into Fastcase, and we automagically find all the caselaw citations and link them to a public version of the case, then return the document back in the same format, but with all the citations hyperlinked. It’s great when sending a brief to a court, or a marketing e-mail to clients, and they don’t need to be Fastcase subscribers to view the linked cases.

Q: How can Fastcase be used beyond legal research?
A: We’re rolling out some new alert services that can be used for business intelligence or marketing. So you can pull all the briefs filed by your firm in state or federal courts; see what kinds of litigation prospective clients have been engaged in, or what firms typically represent them. Or you can set alerts to find out immediately when clients have been sued.

Fastcase is launching a legal news service this fall called Law Street Media, focused on the business of law. And now we’re publishing original books like Joshua Walker’s On Legal AI, as well as deskbooks from bar associations such as the North Carolina Bar Association. And now, with our recently announced acquisition of bankruptcy forms tool NextChapter, we’re looking forward to expanding into more forms and workflow tools. We’re growing all the time, and there’s a lot more to Fastcase than just legal research.

Q: How is artificial intelligence impacting legal research? In Fastcase?
A: AI is great at bulk data operations and in finding patterns in large libraries of documents, as we’ve seen in e-discovery. Now you can see companies using AI to find answers to research questions or to run smarter natural language searches, or to understand the arguments in briefs.

We’re using AI on a lot of projects at Fastcase and Docket Alarm. In our Docket Alarm group, we’re pulling hundreds of millions of documents from PACER and state courts, converting them to text so that they’re searchable, and then extracting things like the judges, lawyers, and parties. Now you can full-text search documents from multiple PACER courts at once, or search by law firm, party, lawyer, or judge, because of information we’ve extracted using AI.

We’re also using AI at Fastcase to upgrade Authority Check and its negative history service, Bad Law Bot. We’re using AI to identify cases that have been reversed or overturned, using the language that courts use in those opinions. Independent research benchmarks the incumbent citators at about 67% accuracy – it will be interesting to see if AI can achieve higher accuracy than our current gold standard in citators.

Q: What is next on the horizon for Fastcase for NCBA members?
A: Our team is really into analytics right now – we’ve been building out analytics in our new Docket Alarm service as a way of understanding judges, law firms, and parties in a case. We’re looking forward to making these analytics available to everyone. We’re also excited about the briefs, pleadings, and motions database. At large firms, lawyers will search their document management system for sample motions before a certain court – we’re working on a similar system for small firms. Watch for some innovations in Fastcase online forms soon, too! I suppose after that, it’s time for Fastcase 8!

Join Fastcase expert Erin Page on Wednesday, Oct. 16, at noon to find out how you can take advantage of AI enhanced searching, saved searches and jurisdiction defaults, and even tweaking the algorithm to get the best search results for you. Lots to learn and more to love with the new enhancements of Fastcase 7. Click here to register.

Catherine Sanders Reach serves as director of the NCBA Center for Practice Management.

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From Your Administrative Law Section Chair

By Brandon W. Leebrick

Dear Members of the Administrative Law Section,
I am honored and excited to be serving as the Chair of the Administrative Law Section for the 2019-2020 bar year. The section’s leadership (listed here) is prepared for a productive year full of quality CLE, social activities, and learning opportunities to make your administrative law practice better.

We encourage you to make the most of your NCBA and Administrative Law Section membership and participate in the many activities we will have this year. Additionally, we invite you to become active with our many committees as you will gain invaluable experience and develop lifelong friendships; please sign up here or contact me or anyone in leadership about becoming a committee member.

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Upcoming Events

By Alan Parry

Dear Members of the Litigation Section:
Our year is off to a great start, with enjoyable networking events in August (Chapel Hill) and September (Raleigh) that gave Section members an opportunity to catch up and socialize with other litigators, judges, and court staff. We plan to sponsor similar events in communities around the state and will keep you posted on upcoming opportunities for fun, fellowship, and CLE from the Litigation Section.

Next up, we will be back in the Chapel Hill-Carrboro area on Tuesday, Oct. 15, 2019, to host a casual evening social for our Superior Court Judges, who will be in town for the 2019 North Carolina Superior Court Judges’ Conference. Our social event will be at Vecino Brewing, located at 300 E. Main St. in Carrboro, and all Section members, judges, and significant others are invited. Please RSVP here to let us know you’re coming, and we look forward to seeing you there!

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Charlotte Volunteers Needed: October 18

NC LEAP Ask-A-Lawyer Day Pro Bono Clinic Seeks Volunteers
The North Carolina Bar Foundation is looking for attorney volunteers to meet one-on-one with passionate, local, low-wealth entrepreneurs who have legal questions related to their start-up or existing businesses.

This Ask-A-Lawyer Day Clinic will be held on Friday, October 18, from 1 p.m.-4:30 p.m. at the Latin American Chamber of Commerce of Charlotte. For more information and to sign up, click here.

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