By Christian Lunghi

Hello, everyone:

Below are some legal updates from your Communications Committee.

Big thanks are given to Zachary N. Layne at Hannah Sheridan & Cochran, LLP for providing much of the information used in this post.

If you see anything in need of correction, feel free to drop a reply below.

I look forward to seeing you all in Asheville this September!

Christian Lunghi
Anderson Jones, PLLC
(984) 344-9309

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eCourts Counties

To date, eCourts is live in 38 counties: Alamance, Beaufort, Buncombe, Camden, Chatham, Cherokee, Chowan, Clay, Currituck, Dare, Durham, Franklin, Gates, Graham, Granville, Guilford, Harnett, Haywood, Henderson, Hyde, Jackson, Johnston, Lee, Macon, Martin, Mecklenburg, Orange, Pasquotank, Perquimans, Person, Polk, Swain, Transylvania, Tyrrell, Vance, Wake, Warren, and Washington.

On October 14, 2024, the following 11 counties will go live on eCourts: Anson, Cabarrus, Cumberland, Hoke, Montgomery, Moore, Randolph, Richmond, Scotland, Stanly, and Union.

Roadway Construction Appropriations

There has been a significant increase in roadway construction in the current draft of the 2024 appropriations bill for FY 2024-2025, from $77,543,078 in 2023 legislation to $117,543,078 in 2024 legislation. The 2024 appropriations bill is making its way through the Senate.

NC State Bar Ethics Opinions Adopted in 2024

2023 Formal Ethics Opinion 3:

• Opinion provides that a lawyer may allow a third-party business to install a self-service kiosk in the lawyer’s office for the provision of ignition lock services but may not receive rent or referral fees, and further concludes that a lawyer may be included in the business’s advertising efforts upon compliance with Rule 7.4.

2023 Formal Ethics Opinion 4:

• Opinion rules that the intentional selection of another lawyer’s unique firm trade name in a keyword advertisement campaign is prohibited, but that prohibition does not apply when the trade name is also a common search term.

Legislative Bills in Progress/Vetoed

Senate Bill 767: Affects N.C.G.S. 6-21.2, attorneys fees in debt instruments.

• 14-day timeframe to pay without incurring attorney fees

House Bill 556: involved Tenancy in Common, e-Notary, and small claims court.

• Vetoed in early July by Gov. Cooper

Senate Bill 166: involved, among others, state building codes and regulations for contractors and design professionals.

• Vetoed in early July by Gov. Cooper

House Bill 957: Home Warranty Regulatory Reform.

• Consumer protections on home service agreements
• Rewriting G.S. 66-371
  • Proposed to change from “home appliance service agreement companies soliciting business” to “all home service agreements in use.”
  • Additions:
    • Agreements must include a list of covered items, types of loss or damages agreement covers, statement of purchasers’ rights.
    • A list of approved vendors should be given to the customer.
    • Repair, replacement, maintenance is completed or scheduled for completion with five business days of claim for any covered item that is necessary for heating, air-conditioning, or functioning of bathroom.

New Laws/Rules

Senate Bill 802/Session Law 2024-44

• Establishment of a statewide C-PACE (Commercial Property Assessed Capital Expenditure) Program that local governments may voluntarily join to allow willing owners of commercial, industrial, agricultural, nonprofit, and multifamily residential properties with five or more dwelling units to obtain low-cost, long-term financing for qualifying improvements, including energy efficiency, water conservation, renewable energy, and resilience projects, secured by an assessment and lien authorized by this Article.

Senate Bill 124/Session Law 2024-11

• Residential roof replacement or repair contracts subject to five business day cancellation period following insurance claim denial for the work to be performed; no work or payment until this period expires; exception for emergency work

Senate Bill 790/Session Law 2024-25

• Adds “vexatious complainant” designation.
  • Office of General Counsel and Chair of Grievance Committee may designate a person a “vexatious complainant if the complainant has initiated grievances to the North Carolina State Bar alleging attorney misconduct that even if proven, would fail to constitute a violation of the Rules of Professional Conduct, or if available evidence conclusively disproves the allegations, in a manner and volume that amounts to an abuse of the bar disciplinary process.”
  • Complainant can seek review of the designation.
  • “The Office of Counsel may decline to review and process any subsequent grievances from a person designated as vexatious, unless the grievance is submitted with a verification signed by the complainant that the allegations are true under the penalty of perjury, and the grievance is submitted on the complainant’s behalf by a member of the North Carolina State Bar . . .”
• Adds standing requirements to file grievance.
  • “To be considered by the North Carolina State Bar, a grievance must allege conduct that, if true, constitutes attorney misconduct by violation of this Chapter or under the Rules of Professional Conduct . . .”

House Bill 259/ Session Law 2023-134

• In NC, Privilege licenses for attorneys are no longer required.
• Effective July 1, 2024.
• Last license period – (July 1, 2023 – June 30, 2024).

Noncompetes

• Under the final Noncompete Rule, the FTC adopts a comprehensive ban on new noncompetes with all workers, including senior executives.
  • The final rule provides that it is an unfair method of competition – and therefore a violation of Section 5 – for employers to enter into noncompetes with workers.
• For existing noncompetes, the final rule adopts a different approach for senior executives than for other workers. For senior executives, existing noncompetes can remain in force. Existing noncompetes with workers other than senior executives are not enforceable after the effective date.

DBA and DBRA → DOL has enacted the “Final Rule”

• Changed definitions:
  • Contractor – applies to prime and subcontractors.
  • Subcontractor – “any contractor that agrees to perform or be responsible for the performance of any part of a contract that is subject wholly or in part to the labor standards provisions of any of the laws referenced in § 5.1.”
  • Prime contractor – cross-withholding now allowed when affiliates of prime contractor violate DBA.
  • Material supplier – excluded from the definition of contractor with some narrow exceptions and clarifies that material supplies are not covered by DBA and DBRA.
  • Building or work; Public building or public work – now includes installation of solar panels, wind turbines, broadband and electric car charging stations.
  • Site of the work – any location where a significant portion of building or work is constructed if the site is dedicated exclusively or almost exclusively to performance of a single DBRA contract for a specific period of time.
• Applies to prime contracts and subcontracts.
• Prime contractors and upper-tier subcontractors must pay back wages when lower-tier subcontractors violate the final rule.
  • Prime → responsible for back wages of subcontractor without a showing of intent
  • Upper-tier subcontractor → responsible for back wages if there is a showing of intent.
• Interest (compounded daily) now added to back wages and other monetary relief.
• Anti-retaliation provision for those reporting violations of DBRA
• Wage Determinations
  • General wage determinations for a particular geographic area are now the default.
  • Project wage determinations are the exception.
  • Wage determinations must be updated after award if construction is added that is not within the original scope of work.
  • Wage determinations must be updated annually for projects that extend over a period of time and aren’t tied to completion of a specific project.

• Prevailing Wages
  • If no majority wage rate → a wage rate is now considered prevailing if it is paid to at least 30% of workers in a particular classification (previously 50%)
  • If there is no prevailing rate → weighed average rate used
  • Can also count functionally equivalent wage rates for determining prevailing rate: zone rates, escalator-clause rates, night-shift differential and combined hourly-fringe rates.
  • Non-collectively bargained wage rates may be updated no more than once every 3 years.
  • Area unit → now includes circumstance-specific alternatives
    • Multi-county project – option to include counties’ data and issue single wage rate per classification.
    • Highway projects – can use state highway districts or other state geographic subdivisions instead of counties.
  • Can now mix rural and metropolitan data
    • If insufficient data at county level, surrounding counties data may be used.
    • Rural and metropolitan data can be combined at supergroup level or statewide (as last resort) prior to concluding no sufficient data exists.
  • State or local prevailing wage rates for highway and nonhighway construction may be used now.
• Litigation
  • Lawsuits have been filed to challenge the final rule in federal court in Eastern and Northern District of Texas.

By Mark Stewart, RRC CEI, and Jeffrey Martin, RRC, RRO, CEI, REWO, CDT

The construction industry has currently been running at a breakneck pace. This pace, combined with the advent of a pandemic, which brought us material shortages and delays, and a workforce shortage, put contractors in a tough spot to bring quality-built projects in on time and under budget. When the delays began, it forced contractors and designers to look for alternative material options that were more readily available. These new alternative materials, without intense scrutiny of their application, could affect the performance of the building envelope.

For example, in the case of wood-framed multi-family construction, the availability of polyisocyanurate (iso) rigid roof insulation was delayed due to shortages of raw materials. Iso was then replaced with a coverboard, and alternate insulation, such as fiberglass batt insulation, was used below the roof deck. This moved the dew point above the insulation, and thus, the interior moisture condensates on the underside of the membrane. The moisture then was at the deck level and began to saturate the wood deck. Over a short period of time, the deck fails prematurely and the increased levels of moisture in the attic space create the perfect environment for biological growth . . . mold. This is just one example of many instances of where the building envelope was compromised.

Read more

By Matt Bouchard

When Crescent University City Venture, LLC v. Trussway Manufacturing, Inc., 376 N.C. 54, 852 S.E.2d 98 (2020) was released in December 2020, the decision left some ambiguity about the scope of its intended reach. On the one hand, the North Carolina Supreme Court in Crescent reiterated that the purpose of the economic loss rule was to “prevent contract law from drowning in a sea of tort;” that the rule bars recovery in tort for the simple failure of a defendant to perform its contract; and that where a plaintiff has a bargained-for remedy, it must look solely to contract law when seeking recovery for purely economic losses. On the other hand, the Court more broadly concluded that “North Carolina’s state courts have consistently applied the economic loss rule to hold that purely economic losses are not recoverable under tort law, particularly in the context of commercial transactions.” That language arguably suggests a potentially more expansive application of the economic loss rule, one not dependent upon the existence or non-existence of a bargained-for exchange between the adversaries.

Read more

By Anthony Bradley (“Brad”) Eben, III

This year, North Carolina owners, developers, and contractors will need to read up on new legislation that could fundamentally affect their businesses. On January 26, 2022, Governor Roy Cooper signed Session Law 2022-1. This legislation, most of which is effective as of March 1, significantly changes North Carolina General Statutes applicable to in-state construction projects (except for Department of Transportation design-build projects). Overall, Session Law 2022-1: (1) clarifies and updates statutory provisions related to the design-build contracting process; (2) renders void any unenforceable provisions in construction and design-professional agreements requiring lien waivers or claims as a condition for progress payments, with limited exceptions; and (3) modifies attorneys’ fees provisions applicable in statutory lien actions.

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By Luke J. Farley

It’s commonplace for plaintiffs in construction cases, especially owners, to assert unfair trade practice claims. But those claims rarely succeed. Most construction disputes involve a breach of contract between two sophisticated parties. In those circumstances, North Carolina law requires a substantial aggravating factor to turn the breach of contract into an unfair trade practice under G.S. 75-1.1 But a new decision in Gilmore’s Farm, Inc. v. Herc Rentals, Inc. from the U.S. District Court for the Eastern District of North Carolina has recognized that wrongfully asserting a lien can be the basis for a claim under G.S. 75-1.1.

Read more