Food Bank Opportunities With the Legal Feeding Frenzy

Update: Register Legal Feeding Frenzy teams now at nclegalfeedingfrenzy.com.

Food banks across North Carolina are welcoming volunteers from the legal community this January and February, and you should be one of them.  Choose from among 11 dates and locations for the one (or more) that works best for you.  To learn more or sign up, contact Michele.Livingstone@gmail.com.

These events are gearing up the NCBA for its annual food-and-fund-raising contest, the Legal Feeding Frenzy or “LFF.”  The LFF is brought to you by the NCBA’s Young Lawyers Division, but the contest and volunteer events are not just for the “young” and are not just for lawyers.  Attorneys, paralegals, legal assistants, practice administrators, law professors, law students, and even their families are invited (note that most events are limited to ages 12, 13, or 16 and up).  While you’re there, sign up your law firm, law school, government/non-profit corporate counsel/in-house team (all sizes, from 1 to 100+) for the LFF contest and earn special contest bonuses.

The Legal Feeding Frenzy Food-and-Fund-Raising Contest runs March 1 – 30.

Volunteer Event Dates

See the table below this list and the LFF flyer here for more details on the upcoming volunteer events.

January 4, 2019 | Southern Pines – Sandhills | 9am – 12pm

January 5, 2019 | Durham | 9am – 12pm

January 5, 2019  | Raleigh | 1pm – 4pm

January 18, 2019  | Wilmington | 9am – 12pm

January 21, 2019  | Elizabeth City | 9am – 12pm

January 26, 2019  | Greenville – New Bern | 9am – 12pm

February 2, 2019  | Charlotte | 9am – 12pm

February 9, 2019  | Winston-Salem | 9am – 12pm

February 9, 2019  | Fayetteville | 9am – 12pm

February 16, 2019  | Durham | 9am – 11am

February 23, 2019  | Asheville | 9 am – 12pm

The Stages Of a Lawyer’s Vacation

Is there any day more relaxing than the Wednesday of vacation week? What if every day of vacation could be like that?

By Marc E. Gustafson

As we enter the post-Fourth of July dog days of summer, many of us are either just returning from vacation, leaving soon for a vacation or daydreaming about an upcoming vacation.  After recently returning from an annual “vacation” at the beach with my family and some friends (and I say “vacation” because we have 4- and 6-year-old boys), I spent some time thinking about the various stages of my time away.

Stage 1: Preparing to Leave Work Behind

The first stage begins even before vacation starts.  Undoubtedly, there is the mad rush of deadlines, scrambling to get projects to the stage where they can safely lie dormant for at least a week and trying to avoid calls/emails/incoming work that could completely upend your vacation plans.

If you can safely navigate away from the office without any major events, you can start to relax.  Well, maybe start to start to relax.  As most vacations begin on a Saturday or Sunday, there’s the rush of travel involving luggage, cars, airplanes, shuttles, boats and maybe all the above.

Read more

2017 Tax Act’s $11.2 Million Estate, Gift, and GST Tax Exemption Will Expire In 2025

By John G. Hodnette

The Tax Cuts and Jobs Act of 2017 doubled the unified exemption for the estate, gift, and GST taxes from about $5.6 million to about $11.2 million (adjusted yearly for inflation).  This dramatic change means for years after 2017, a married couple can gift during life or pass by their death up to $22.4 million of assets free of transfer taxes.  While many high net worth clients are aware of the doubled exemption, it is less well known that this doubled exemption is set to expire on December 31, 2025.

This is not the first time Congress has used a sunset schedule for the unified transfer tax exemption amount.  At the end of 2012, taxpayers faced a similar dilemma when it was uncertain whether Congress would act to prevent the automatic reversion of the unified transfer tax exemption from about $5.12 million to $1 million.  In that case, Congress did act to keep the exemption at $5.12 million.  It is unclear, however, if the same will occur in 2025, particularly given the rhetoric about “taxing the ultra-wealthy” from presidential candidates and Democratic Senators such as Bernie Sanders and Elizabeth Warren.  This uncertainty calls for tax planning designed to take maximum advantage of the Tax Act’s increased exemption regardless of what may happen at the end of 2025.

Read more

Gratitude: Chair Reflects On Her Year

By Leslie Pegram

Gratitude is defined as the quality of being thankful; readiness to show appreciation for and to return kindness. As my time as Paralegal Division Chair comes to an end, I want to express my gratitude for the opportunity to contribute to the success of the North Carolina Bar Association Paralegal Division.

I’m grateful to have been surrounded by so many amazing volunteers, leaders, mentors and friends. I am simply in awe of how our members share their time, talents and passions to the betterment of the community, profession, Division and Association. Our members are volunteers serving in various capacities including (but not limited to) Council Members, Committee Chairs, Section Liaisons, CPE planners, notaries/witnesses for Wills for Heroes, mentors, listserv participants and more. For each person who takes time to serve, thank you.

Read more

I learned one thing last week: Wellness is about balance.

During wellness expert Laura Mahr’s NCBA Annual Meeting CLE session, attendees physically embraced wellness techniques.

By Josh McIntyre

It’s hard to avoid the topic of wellness in the legal world these days. Whether it’s a new ABA initiative, an article in last month’s N.C. State Bar Journal, or our own North Carolina Bar Association Annual Meeting, the good news is that the legal community locally and at large seems to be embracing the reality that the stress of our profession is high and we have to take intentional, mindful steps to promote a healthy workplace and lifestyle.

This topic was front and center for me last week, when nearly 700 NCBA members and guests came to Biltmore for our 2019 Annual Meeting. My department is responsible for this event, and our staff spent countless hours over the past year finding speakers, booking activities and setting up dinners and luncheons, nearly all of which included some aspect of our overarching theme of Wellness: Work, Mind, Body, Life.

Read more

Business and International Law Issues Covered At Pinehurst Retreat

See Your Name in Print!  Folks, it’s been some time since we’ve posted.  Before you take a look at this edition, here’s a brief announcement:  The Business Law Section would love  your help with ideas and articles for future posts.  If you have an article you’re working on, thoughts about current developments in law practice management or attorney wellness, an internal firm analysis of a legal issue that you’d like to share (with permission, of course), or information about a recent conference, please let us know.  The circulation we get is quite broad – one of our blog posts this year has nearly 7,000 views at this time.  Please reach out to  abbie@bayneslaw.com with content and ideas.

The next few blog posts will catch you up on recent events around the Section.

By Russ Robinson

Business and international lawyers from across the state converged at the Pinehurst Resort earlier this spring for annual section meetings and CLE courses. The mid-February event for the Business Law Section has been an annual event for more than 30 years, and recently the International Law & Practice Section has joined forces as both sections focus on developments in business.

Key themes in this year’s session included technology and the 2018 changes to the North Carolina Business Corporation Act.

Read more

Book Review: The Life and Times Of a Union Organizer At a Tennessee Textile Mill

By Jonathan Harkavy

The Jackson Project
By Phil Cohen
The University of Tennessee Press, 2016

Phil Cohen’s memoir of his days as a union organizer at a troubled southern textile mill is a worthwhile read for any audience. The book’s subtitle, “War in the American Workplace,” is a pithy summary of the author’s main point about unionization in our country. Mr. Cohen traces a tortuous and (spoiler alert) ultimately unsuccessful battle to save the jobs and preserve the dignity of hundreds of mill workers in Jackson, Tennessee. On a deeper level, the book portrays Mr. Cohen’s own struggle to juggle his many roles as a relentless proponent of workplace justice, a trusted confidant of the workers he represents, an effective adversary of mill owners and management, a faithful employee of the Amalgamated Clothing and Textile Workers Union, and – not incidentally at all – a loving father to his pre-school daughter.

Read more

The Medical Informatics HIPAA Settlement: Implications for the Future of State Data Security Enforcement

By Alex Pearce and Sean Fernandes

Last month, the attorneys general (“AGs”) of sixteen states, including North Carolina, settled a multistate HIPAA enforcement lawsuit against Medical Informatics Engineering (MIE), a cloud-based electronic health records vendor.

The lawsuit was the first time that state AGs have joined together to pursue a HIPAA-related data breach case in federal court.

This post explores the case, State of Indiana v. Medical Informatics Engineering, and its potential implications for future state data security enforcement efforts.

The  Lawsuit and the Consent Judgment 

The breach in Medical Informatics took place during a roughly three-week period in May 2015, when hackers infiltrated and accessed MIE’s web-based electronic health records application and stole the electronic protected health information, or ePHI, of more than 3.9 million individuals.

The AGs sued MIE in December 2018 in an Indiana federal court, alleging that, as a business associate of its healthcare provider clients, MIE must comply with the HIPAA Security Rule.  MIE failed to do so, the AGs alleged, because it did not implement and maintain various technical and administrative safeguards that the Rule requires.

The complaint also alleged that MIE violated various state unfair and deceptive trade practices, data security, and data breach protection laws.

The parties settled the case before MIE filed a responsive pleading, agreeing to a Consent Judgment that requires MIE to make a $900,000 payment to the states and to comply with various injunctive provisions regarding its security practices.

The Consent Judgment is notable for at least two reasons.

Injunctive Provisions that Require Specific Security Measures: The LabMD Effect

First, the injunctive provisions are unusually prescriptive, and identify several specific security measures that MIE must implement, such as:

  • multi-factor authentication for access to any web portal it manages in connection with its maintenance of ePHI,
  • a security incident and event monitoring solution to detect and respond to malicious attacks;
  • a data loss prevention technology to detect and prevent unauthorized data exfiltration; and
  • annual training—documented by the company—for its employees on its information security policies.

That specificity reflects a shift away from the approach taken in some previous multistate data breach settlements, such as those with Hilton and Ashley Madison.  Those settlements required the defendants to implement security programs “reasonably designed” to protect personal information and/or to implement safeguards that were “appropriate” to the defendants’ operations and data, but largely left the choice of specific security measures to the defendants’ discretion

The reason for the shift may lie, in part, in last year’s LabMD v. Federal Trade Commission decision. In LabMD, the Eleventh Circuit vacated an FTC order that required the defendant to implement  a security program “reasonably designed” to protect personal information, on the ground that a court enforcing that order would have no reliable way to measure whether the defendant’s conduct met that standard.

The Medical Informatics Consent Judgment avoids that problem; its injunctive provisions include specific criteria to determine whether MIE is in compliance.

Beyond making it easier to judge MIE’s compliance, this aspect of the Consent Judgment also signals to other companies the specific measures the AGs would consider to be “reasonable” under similar circumstances.

State AGs: Leading the Data Security Enforcement Charge

Second, the Medical Informatics lawsuit and settlement exemplify the more aggressive role that state AGs are playing in data security enforcement—including here in North Carolina.  In particular, as the first multistate HIPAA enforcement action, the case suggests AGs are keen to wield the enforcement authority available to them under that statute—which overlaps with that of federal regulators.

To that end, take note that the monetary payment MIE agreed to make to the states dwarfs the $100,000 payment that it agreed to make in a parallel federal HIPAA enforcement action arising from the same incident.

The difference between those payments may be attributable—at least in part—to the AGs’ expanded enforcement toolkit.  While HIPAA caps the statutory damages available to each individual state at $25,000 per year, multistate actions allow AGs to increase the total penalty without any corresponding increase in the effort required to prosecute the case. State AGs can also increase the potential award through their ability to recover attorneys’ fees and to assert non-HIPAA claims, like the state-law claims asserted in Medical Informatics.

Conclusion

Businesses and their counsel should consider whether the security measures specified in Medical Informatics apply to their operations, lest they find themselves on the wrong side of the state AGs’ increasing interest in data security enforcement.

Exceptions to the Economic Loss Rule in North and South Carolina

In North Carolina, the economic loss rule will not bar recovery on a negligence claim when there is no contract between the parties. In Lord v. Customized Consulting Specialty, Inc., a general contractor contracted with the plaintiff owners to construct a home. The owners subsequently sued the general contractor for alleged defects in the home’s construction. The general contractor named as defendants the subcontractors with whom the general contractor had contracted with to provide the trusses for the home. These subcontractor defendants asserted that the economic loss rule should apply to bar the plaintiffs’ negligence claim against them. The court acknowledged that, “simply stated, the economic loss rule prohibits recovery for purely economic loss in tort, as such claims are instead governed by contract law.” However, the court recognized the economic loss rule is not fair to those plaintiffs who have suffered economic loss or damage from improper construction but “who have no basis for recovery in contract” in the absence of a contract between the parties. Therefore, the court held “that the [subcontractor defendants] had a duty to use reasonable care in performing its promise to provide reliable trusses to [the general contractor] for use in the construction of the [plaintiffs’] residence, and it further held that because there was no contract between the plaintiffs and the subcontractor defendants, the economic loss rule did not apply and therefore did “not operate to bar the plaintiffs’ negligence claims.”

The North Carolina Court of Appeals recently acknowledged in the 2016 case Buffa v. Cygnature Constr. & Dev., Inc., 796 S.E.2d 64 (unpublished) Lord’s holding that the economic loss rule does not bar a negligence claim where there is no contract between parties in a home construction case. However, the court qualified this holding by stating that “where a basis for recovery is available by warranty,” the economic loss rule will apply to prevent recovery for purely economic loss under a negligence claim. In this case, the plaintiffs sustained damage to their home as a result of defective windows. The seller of the windows did not have a contract with the plaintiffs, as the windows were purchased by the subcontractor who installed the windows. These windows were covered by the manufacturer’s express warranty. Because a basis for recovery was available by warranty, the court held that it was appropriate to apply the economic loss rule to bar negligence claims seeking to recover for purely economic loss.

However, it may be important to note that the Buffa case concerned an express warranty. A more detailed analysis may be required as to the issue of whether an implied warranty would bar a negligence claim per the economic loss rule, but the general rule in North Carolina is that a contract “is required to assert a claim for breach of an implied warranty involving only economic loss.” Energy Inv’rs Fund, L.P. v. Metric Constructors, Inc., 351 N.C. 331, 338, 525 S.E.2d 441, 446 (2000). Therefore, the economic loss rule will likely bar negligence claims if a court has recognized the existence of an implied warranty, because an implied warranty typically only exists when there is a contract between parties.

South Carolina law is complicated in that there are a number of uncoordinated opinions touching on the subject. However, similar to the Lord case above, the South Carolina Supreme Court has ruled that the economic loss rule will not bar a negligence action against a builder when a legal duty has been violated, “no matter the type of resulting damage. . . . But the economic loss rule will apply [to bar negligence actions] where duties are created solely by contract.” Kennedy v. Columbia Lumber & Mfg. Co. This case further emphasized that “privity of contract as a defense to an implied warranty action” has been abolished in South Carolina. So, unlike in North Carolina, the existence of an implied warranty is not likely to bar a negligence claim for economic loss in South Carolina where there is no contract between the parties. Further, in Beachwalk Villas Condo. Ass’n, Inc. v. Martin, the holding in Kennedy was expanded to architects in addition to builders, as the court stated that “architects may be held liable to home buyers for negligence in connection with home construction projects and breach of implied warranty where no contractual privity exists between the architect and the home buyer.” However, the South Carolina Supreme Court has since held that the principle set forth in Kennedy is limited to the residential real estate construction context. Sapp v. Ford Motor Co.

In sum, in both North and South Carolina the economic loss rule will not apply in certain instances to bar recovery for purely economic loss in tort, although the justification for such an exception may differ somewhat between the two states. Therefore, if a party seeks to recover for pure economic loss and does not have adequate recourse via typical contract law, it would be wise to explore the various exceptions in North and South Carolina regarding the economic loss rule when bringing a claim.

Read more

Demystifying Paralegal Credentials for Lawyers and Paralegals

,

By Alicia Mitchell-Mercer

Recently, I overheard a discussion regarding whether attorneys understand the content of paralegal programs and the meaning of the post-nominal certification credentials you increasingly see behind paralegals’ names. One person responded that many fledgling paralegals don’t understand the difference between being certified and having a certificate, so how can attorneys be expected to understand these distinctions. While these issues may not seem pressing, they are important.

Read more

Appellate Update

By Joe Murray

It’s our semi-regular roundup of appellate decisions, with two non-appellate highlights at the end.

McCaffery v. Chapman, No. 17-2198 (4th Cir. April 9, 2019) (1st Amendment): Why does anyone want to be a sheriff’s deputy? It seems to have all the negatives of being a government employee with even fewer benefits. McCaffrey supported Sheriff Chapman’s political opponent during an election campaign. After Sheriff Chapman won, he did not reappoint McCaffrey as a deputy sheriff. McCaffrey sued, alleging that Sheriff Chapman’s failure to reappoint him violated his First Amendment rights to freedom of political association and speech. The 4th Circuit upheld the dismissal of McCaffrey’s political association claim based on the Elrod-Branti doctrine, which allows public officials to terminate public employees who meet certain criteria for supporting a political opponent. The court easily dismissed McCaffery’s Pickering-Connick retaliation (political speech) claim since once the Elrod-Branti doctrine applied “the Pickering balance generally tips in favor of the government because of its overriding interest in ensuring an elected official’s ability to implement his policies through his subordinates.”

Read more