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Court of Appeals: A Guaranty is a Separate Contract No Matter What the Contracts Say

sheIn a divided opinion Tuesday, the Court of Appeals held that a lease and guaranty are separate contracts, even when the guaranty is incorporated into the lease. See Friday Investments, LLC v. Bally Total Fitness of the Mid-Atlantic, Inc.  For this reason, the court held, a guaranty might be discharged in bankruptcy – even where the tenant assumes the lease to which it is attached and incorporated. The lease at …Read More

Independent Auditors Do Not Owe Clients Fiduciary Duties After All

In an opinion that must have come as a relief to North Carolina accounting firms and the Chamber alike, the North Carolina Supreme Court held that, absent unusual circumstances, an auditor is not a fiduciary to its client. In Commscope Credit Union v. Butler & Burke, the Court reversed a Court of Appeals’ holding that the relationship between a client and its auditor is one that may give rise to …Read More

Buyer Beware: Winning the Race to the Courthouse Isn’t Always Enough when the IRS is Involved

Harkening back to your first year property class, you may recall that North Carolina is a “pure race” state – that is, the first person to record a deed wins even if he has notice of other unrecorded conveyances of land.  However, the Court of Appeals held Tuesday that this rule doesn’t always apply – particularly where federal law provides differently.  In Henkel v. Triangle Homes, Inc., the Court held …Read More

Business Court Designation Papers Are Now a Mandatory Part of the Record on Appeal

In yet another case highlighting potential pitfalls when appealing a decision of the Business Court, the North Carolina Court of Appeals dismissed a plaintiff’s appeal Tuesday for failing to provide specific information relating to the Court’s jurisdiction over the appeal.  In Grasinger v. Williams, the Court of Appeals held that the plaintiff-appellant “failed to confer jurisdiction” on the Court because the Record on Appeal did not contain anything that established …Read More

Court Enforces Exception to the American Rule on Attorneys’ Fees

It’s a rule familiar to all litigants – one that probably discourages some plaintiffs from pursuing well-founded cases where judgment is likely to be expensive and that frustrates many a defendant dragged into court with little or no basis: the so-called “American Rule” that each party to litigation pays its own attorneys’ fees.  (In contrast, the “English Rule” followed in most other countries requires the loser to pay the prevailing …Read More

Court Bolsters Strength of Medical Review Privilege

In an opinion released Tuesday, the Court of Appeals reinforced the difficulty plaintiffs face when asserting claims against hospitals or other medical providers alleging that the provider was negligent in allowing a physician the privilege of practicing at the hospital. In Estate of Ray v. Forgy (Ray IV), the Court reversed a trial court’s order requiring the hospital defendants to produce hundreds of documents relating to the defendant doctor and …Read More

Ethical Pitfalls in Alternative Fee Arrangements Exposed

When a client cannot pay in cash, may an attorney accept other forms of payment such as an equity stake in the client’s business? Isn’t this a classic “win-win” scenario? In a warning for attorneys looking at creative ways to implement alternative fee arrangements, the Court of Appeals held Tuesday that an attorney’s violation of the North Carolina Rules of Professional Conduct can, under appropriate circumstances, relieve a client from …Read More

Need Electronic Court Records? Get a License.

Last week, the Supreme Court held that electronically maintained court records are not subject to the Public Records Act, reversing a unanimous opinion of the Court of Appeals. While the Court’s opinion in LexisNexis Risk Data Mgmt. v. N.C. Administrative Office of the Courts does not protect the records from public disclosure, it requires private parties to enter into a licensing agreement with the Administrative Office of the Courts (AOC) …Read More

Supreme Court Decision Means School Voucher Program Is Likely Here to Stay

In what is sure to fuel an already vigorous political debate, the North Carolina Supreme Court upheld North Carolina’s school voucher program yesterday, dissolving the trial court’s injunction prohibiting disbursement of funds to private and religious schools on behalf of qualified students.  In Hart v. State of North Carolina, the Court ruled that the school voucher legislation was constitutional, stating that “the wisdom of the enactment is a decision for …Read More

When Is the Right Time to Seek a Rule 54(b) Certification?

A split decision of the Court of Appeals Tuesday provides a warning to litigators:  If you plan to take immediate appeal from an order that is final as to some but not all claims or parties under Rule 54(b), you need to speak up and have the certification of “no just reason for delay” included in the order itself.  A subsequent order retroactively certifying the earlier order will not satisfy …Read More