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Wednesday, September 28, 2011

Error Preservation in South Carolina: Beware the "Two Issue" Rule.

By Kirsten E. Small

Because I am an appellate lawyer, error preservation is the bane of my existence. I don't care if the trial judge excluded your evidence, kicked a puppy, or made the jury deliberate through the Clemson-Carolina game. If you don't preserve the error, I can't help you.

As of Monday, I no longer care if the judge awarded the plaintiff damages for breach of contract. We'll be appealing the unjust enrichment claim, too.

Monday, September 19, 2011

The Appellate Code: The Many Meanings of "Per Curiam"

By Kirsten E. Small

We all know that “per curiam” means “by the court.” But, to echo a 1960s hippie-type, what does “per curiam” really mean, man? What message, if any, is an appellate court conveying by issuing an opinion “per curiam”?

Fear not—I’ve got the super-secret decoder ring. Here, in a nutshell, are the various meanings of “per curiam.”

Monday, September 12, 2011

New Fourth Circuit Nominee Stephanie Thacker

By Kirsten E. Small

Just in time for "On the Docket" to return from its summer hiatus ("hiatus" sounds so much more deliberate than "holy cow, I've been busy lately," doesn't it?), President Obama has officially announced a new pick for the Fourth Circuit: Charleston, West Virginia attorney Stephanie Thacker.

On paper, Ms.Thacker looks to be a very good choice for the Fourth Circuit. She has a solid background in civil practice and has handled some very tough cases during her time with the United States Attorney's office and the Department of Justice. As I've said before, I think it's critically important that judges have "real world" experience with the practice of law. There seems to be something of a pattern for nominations out of West Virginia--like Ms. Thacker, Judge Robert King and the late Judge Blane Michael (for whose seat Ms. Thacker is nominated) spent time in private practice and in the U.S. Attorney's office before ascending to the bench.

I spoke with Charleston attorney Tom Hurney, who confirms that reality matches the résumé. "She's a great pick," he said, because of her experience in criminal law and complex civil litigation. He predicted that she will be a "lawyer's judge"--one who has a deep sense of the interplay between legal principle and practical reality.

Now, of course, begins the long slog toward confirmation.

Monday, August 15, 2011

Blame the Machines

By Kirsten E. Small

Civil Procedure was my favorite class of my first year in law school, primarily because my professor found the cases in the textbook far less interesting than the many stories he had accumulated over the years. (When it came time to study for the bar exam, I found myself less enamored of that particular teaching style.)

One thing that stuck with me from that class was my professor's theory that modern mass tort litigation was made possible by--and would not have occured without--the invention of the photocopier. Unless you can make many,  many copies of documents for many, many plaintiffs and their lawyers, litigating a mass disaster is effectively impossible.

I was reminded of this theory by the news on Friday that the Eleventh Circuit had issued a 304-page opinion striking down the individual mandate portion of the health care law.

Friday, July 22, 2011

The Importance of Spell-Checking Your Brief

By Kirsten E. Small

The interwebs have been abuzz this week with gleeful snarking about Sanches v. Carollton-Farmers Branch I.S.D., particularly the Fifth Circuit's dressing down of Sanches' attorney for "grammatical errors ... so egregious and obvious that an average fourth grader would have avoided most of them." Ouch.

Of course, checking your brief for spelling and grammatical errors is important, and not just so you can avoid having a federal court of appeals tell that you are approximately as literate as a 9-year-old. Much like having a run in your stockings (I hear nylons are making a comeback) or a stain on your tie, careless errors in your brief distract from the quality of your argument. Why slave for hours to craft a brilliant argument if the court is going to be too busy snickering over your failure to master subject-verb agreement to notice?

As if that's not enough, careless briefing can cost you money (I knew that would get your attention).

Tuesday, July 19, 2011

Is that a Statement of Facts, or a "Fact Dump"?

by Kirsten E. Small

A friend of mine practices Social Security disability, and hence files quite a few appellate briefs in the U.S. District Court. A while back, Leeds came up with the heretical idea of completely omitting the statement of facts from his brief. Instead, all discussion of the facts occurs in the context of the argument as to each asserted error in the ALJ's decision.

Heretical, maybe--but effective. One of our magistrate judges recently had this to say about a brief prepared in this style:

Wednesday, June 29, 2011

Effective Appellate Advocacy: Issue Framing

by Kirsten E. Small

In my inbox this morning was a great blog post by Kendall Gray, writing about the Supreme Court's decision this week in J. McIntyre Machinery v. Nicastro. He pointed out two wonderful examples of issue framing by Justice Kennedy, writing for the majority, and Justice Ginsburg, writing for the dissent.

See the magic for yourself, after the jump.

Monday, June 20, 2011

Jedi Mind Tricks in the Fourth Circuit

By Kirsten E. Small

Remember Obi-Wan Kenobi waving his hand at some baddie in the first Star Wars movie saying, "There is no droid"? Of course, there still was a droid, but the important thing was that the bad guy believed that there was no droid.

The Fourth Circuit employs its own Jedi-like powers in Grant Thornton, LLP v. FDIC, issued Friday. A truism of appellate litigation practice is that an appellate court is concerned not just about the case in front of it, but also about the rule that its decision will establish for future cases. In Grant Thornton, the Court affirmed a district court order finding an accounting firm liable for professional negligence, a ruling that has the potential of opening a few floodgates. So, the Court uses Force persuasion: it waves its hand (i.e., issues an unpublished opinion) and tells us there is no rule: The result is "driven by [the] unique facts" of the case, and "it should be well understood we do not announce any new rule of auditor liability and none should be implied."

So the question is, will potential litigants wander off in a haze muttering "there is no rule," or will they sneer back, a la Jabba the Hutt, "Your Jedi mind tricks will not work on me, court"?

Tuesday, May 24, 2011

Briggs v. Elliot and the Best CLE I Have Ever Attended

by Andrew Mathias

The South Carolina Supreme Court Historical Society conducted a Colloquium entitled “J. Waites Waring and the Dissent that Changed America” in Charleston on Thursday, May 19 and Friday, May 20, 2011. The Colloquium marked the 60th anniversary of the trial Briggs v. Elliot, South Carolina’s landmark school desegregation case arising out of Clarendon County that was consolidated on appeal with four other cases from around the country. The opinion issued by the Supreme Court of the United States in that consolidated appeal is known as Brown v. Board of Education.

The event kicked off Thursday night with a dinner at which Professor Charles Ogletree of the Harvard Law School delivered a wonderful speech concerning Briggs and the events leading up to the trial of the case.  I had the privilege of sitting next to Judge Matthew Perry and listened to him tell stories of attending the trial at the Federal Courthouse in Charleston. Judge Perry, along with hundreds of other interested onlookers, packed into the relatively small court room to watch Thurgood Marshall present ground breaking evidence. This trial was the very first time Professor Kenneth Clark took the stand and gave expert testimony based in his tests using dolls to identify psychological harm to school children. I will remember forever Judge Perry’s stories about the trial and count it a wonderful blessing that I got to hear them first-hand.

The group reconvened the following morning at the Federal Courthouse to hear from a great lineup of speakers at a day long CLE. Presenters at the CLE included Chief Justice Jean Toal; Federal District Judges Richard Gergel, Michelle Childs, and Matthew Perry; as well as several history professors. The most impactful address was delivered by Joe DeLaine, son of J.A. DeLaine. J.A. DeLaine was the minister of St. Marks AME Church in Summerton, South Carolina and helped organize the group of parents that eventually became plaintiffs in Briggs. Joe DeLaine told stories about the families involved in the law suit, the trial, and the real-life sufferings experienced by each of them as a result of their actions. The Charleston Post and Courier ran a short piece on Joe DeLaine’s speech. It provides a little more detail and I recommend that you read it.

I wish I had more time to share details of the event and the history that I learned as a result of my attendance. But, I will simply say this: the 2011 South Carolina Historical Society Colloquium was the best CLE I have ever attended and believe it will be hard to top.

Thursday, May 19, 2011

SCOTUS Justices on legal writing--A few tips, and proof that you can't please everyone.

By Kirsten E. Small

Courtesy of The Blog of Legal Times comes news that legal writing guru Bryan Garner has release the full transcripts of his 2008 interviews with various Supreme Court Justices. The BLT's article is here, and the transcripts are available through the Scribes Journal of Legal Writing (an excellent resource, by the way).

Before hightailing it over to the Scribes site to download and read the transcripts until my nerdy little heart is content, a couple of highlights from the BLT article: short briefs are better than long, avoid legalese (and the improper use of "which"), and cite the record and cases honestly. Justices Thomas and Alito think the summary of argument is important; Justice Scalia thinks its a waste of space.

Finally, be advised that Justice Kennedy does not like it when lawyers verb words.

Wednesday, May 4, 2011

Appeals in the digital age: Using [sic] when quoting a text message.

by Kirsten E. Small

This opinion by the Supreme Court of South Carolina caught my eye yesterday. The fact portion of the opinion involved the quotation of numerous text messages, which didn't phase me until I got to this one:

""Leav me tha f*k alone im nt gna txt u bak and I want nothng 2 do w u so jus get out mx [sic] life already."

My first thought was, "Why bother? The entire message is one long [sic]." But then I looked up the proper usage of [sic], and learned that "sic" is a word (not an abbreviation) derived from Latin that means "intentionally so written."  So, the SC Supreme Court used [sic] not to point out the unconventional (to put it mildly) spelling of the text message, but rather to indicate that an actual error ("mx" instead of "my") was original to the text message, not an error in transcription by the court.

In other news, an amendment to SC Appellate Rule 219 became effective yesterday. The amended rule clarifies the procedure for seeking initial hearing en banc by the S.C. Court of Appeals.

Monday, May 2, 2011

The Fourth Circuit goes (almost) live.

by Kirsten E. Small

New Fourth Circuit Internal Operating Procedure 34.3 takes effect today. Beginning with the upcoming May term of court, recordings of oral arguments will be available for free on the Court's website, two days after argument.

The new rule takes effect just in time for the arguments on the health care law, which are scheduled for Tuesday, May 10.

Wednesday, April 13, 2011

I'm not sure if Oscar Wilde would be amused or aghast.

By Kirsten E. Small

It's Wednesday, and in my household spring break is coming closer but is still three.whole.days away (my kids are certain they will not make it until Friday afternoon). So, it's time for a little levity, helpfully supplied by SCOTUS, the D.C. bar, and the D.C. Shakespeare Theater in the form of their annual mock trial, which this year is a send-up of "An Ideal Husband." You can read about it (and get a few laughs) here.

Friday, April 1, 2011

There Is A Need To Cross All Of The “T”s And Dot All Of The “I”s

by Stephen P. Groves, Sr.

Boyd v. Metropolitan Life Insurance Company, ___ F.3d ___ (4th Cir 2011)

(Case No. 10-1702, filed 31 March 2011) (

While this case is essentially directed to all of the Family Court practitioners out there, the basic premises apply to all attorneys. Make sure all of the “T”s are crossed and the “I”s are dotted. When your client or their opposition waives a right to something, such as insurance benefits, pension benefits, etc., make sure everyone who should know about the waiver does know – especially the plan administrator.

Emma Boyd lived in Charleston, South Carolina and worked for Delta Airlines. She participated in Delta’s ERISA-governed life insurance program administered by Metropolitan Life Insurance Company. Emma was married to Robert Alsager and he was her designated primary insurance beneficiary. Emma’s mother, Mary Boyd, was the contingent beneficiary. Sometime in 2007 or so Emma and Robert separated and, in April 2008, the Charleston County Family Court approved their separation and property settlement agreement. As part of the settlement, both Emma and Robert agreed to waive any of their respective rights to the other’s estate and/or property, including specifically any rights to life insurance proceeds. Emma did not, however, notify MetLife to change the policy beneficiary from Robert to either Mary or someone else.

Unfortunately, on November 8, 2008, Emma passed away suddenly. Mary Boyd and others filed a claim with MetLife for the insurance proceeds, noting Robert had previously waived any claim thereto, notwithstanding the settlement agreement. Robert also filed a claim with MetLife. Based upon the plan documents, MetLife determined Robert was entitled to the proceeds and ultimately paid the benefits to him.

Mary sent a letter to MetLife appealing the claim determination on the basis Robert had specifically waived his right to recover any of Emma’s insurance benefits. After the claim decision was upheld, Mary sued MetLife in Federal Court in Charleston. Senior United States District Judge C. Weston Houck granted MetLife’s motion to dismiss “concluding that MetLife had carried out its statutory obligations by disbursing benefits in accordance with the beneficiary designation form on file with the plan. (Slip Op., pp.4-5). Mary appealed to the Fourth Circuit.

Relying on Kennedy v. Plan Administrator for DuPont Savings & Investment Plans, ___ U.S. ___, 129 S.Ct. 865 (2009), the United States Court of Appeals for the Fourth Circuit affirmed the District Court. In Kennedy, the Supreme Court had concluded that ERISA required the plan administrator to disburse benefits “ ‘in accordance with the documents and instruments governing the plan.’ ” (Slip Op., p.5) (quoting 29 U.S.C. § 1132(a)(1)(D)). Furthermore, the Kenney Court concluded that “ ‘ERISA’s statutory scheme ‘is built around reliance on the face of written plan documents.’ ” (Slip Op., p.5) (quoting Kennedy, ___ U.S. ___, ___, 129 S.Ct. 865, 875) (quoting Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 83 (1995)).

In Kennedy, a case similar to this one, the ex-wife was a party to a divorce decree which divested her of any proceeds to her ex-husband’s retirement and/or pension benefits, but remained as the designated beneficiary on the plan documents for one of his pension benefit plans. After Mr. Kennedy passed, his estate’s executrix claimed the pension benefits for the estate based on the ex-wife’s benefit’s waiver. The Court rejected the argument and determined the plan administrator was statutorily required to pay benefits pursuant to the plan documents on file, regardless of any alleged waiver. Stated otherwise, “even though [the] ex-wife’s waiver was clear, the [Supreme] Court concluded it could not trump the plan documents.” (Slip Op., p.7) (citing Kennedy, ___ U.S. ___, ___, 129 S.Ct. 865, 874-875). See also Matschiner v. Hartford Life & Accident Insurance Co., 622 F.3d 885 (8th Cir. 2010) (similar case holding).

While this may seem a harsh result given Robert’s clear waiver of Emma’s insurance benefits in the settlement agreement, Emma’s (or her attorney’s) failure to actually have MetLife change the beneficiary is the real problem. To require a plan administrator to honor a beneficiary’s waiver as opposed to simply following the plan documents would clearly open the door to questions of whether the waiver was “voluntary”, “knowing”, “based upon adequate consideration”, and so on. This would be very time consuming, likely to engender significant litigation, and plainly unnecessary. A plan participant, like Emma, could easily avoid all of these machinations by changing the beneficiary designation to another person once the original primary beneficiary, like Robert, has waived his rights to the proceeds.

Wednesday, March 30, 2011

It Is Not Necessary To Show Damages To Make A Prima Facie Claim For Breach Of Contract

by Gary Beaver

On March 1, 2011, in Hodges v. Young, the N.C. Court of Appeals reversed a trial court's order granting defendants' summary judgment motion asserting plaintiff failed to prove any damages based on an alleged breach of contract.  The court pointed out that there are only two elements of a breach of contract:  the existence of a valid contract and a breach of the contract's terms.  No damages are required to be shown.  The Court of Appeals also affirmed the trial court's grant of summary judgment on plaintiff's Chapter 75 claims which tried to assert fraudulent acts based on "should have known" allegations.  We all see these efforts by creative pleaders to manufacture a Chapter 75 claim out of a breach of contract claim so this case may be one to keep in the drawer as an example of Chapter 75 allegations that are too thin.

Monday, March 28, 2011

In Most Cases, You Have To Be A Party To Seek Sanctions Or To Have To Pay Them

by Gary Beaver

A trial court order sanctioned a plaintiff company and its owner with dismissal of claims, striking of pleadings, and default on counterclaims due to multiple failures to make proper discovery responses.  On January 4, 2011, in Honeycutt Contractors, Inc. v. Otto, the N.C. Court of Appeals reversed the sanctions against the individual owner because, though the pleadings alleged piercing the corporate veil, the owner was never made a party to the case and, therefore, the court lacked jurisdiction over him.  The sanctions against the company stood.  On the other side of the coin, in Lucas v. R.K. Lock & Associates, filed on March 1, 2011, the same court held that a company lacked standing to move for and the court lacked jurisdiction to grant Rule 11 sanctions where the company was listed only as a "dba" in the plaintiff's Complaint, the trial court had ruled that insufficient to make it a party, and the named defendant did not appeal that ruling.

Monday, March 21, 2011

Update: Crossman Communities of North Carolina v. Harleysville Mutual Insurance Company

By Stephen P. Groves, Sr.

Crossmann Communities of North Carolina, Inc. v. Harleysville Mutual Insurance Company,

___ S.C. ___, ___ S.E.2d ___ (2011) (2011 WL 93716, filed January 7, 2011)

On January 11, 2011, I posted an entry to this blog addressing the South Carolina Supreme Court’s decision in the above-referenced case. As it turned out, my entry was only the tip of the iceberg. This case has created a firestorm of controversy in South Carolina and has been the subject of discussion around this country. Furthermore, the decision spurred action in the South Carolina Legislature with the introduction of various bills seeking, in essence to overturn Crossmann Communities and make sure that insurance companies doing business in South Carolina provide liability insurance coverage to contractors and subcontractors for unintentional defective construction and/or faulty workmanship.

The opinion, of course, elicited a Petition for Rehearing, as well as, numerous amicus briefs in opposition to and in support of the petition. The amici included the (a) Ledgestone Court Residents of York County; (2) Coastal Carolina University Student Housing Association, (3) American Subcontractors Association of the Carolinas, (5) Mechanical Contractors Association of South Carolina, (6) Riverwalk at Arrowhead Country Club Property Owners Association, (7) Medical University of South Carolina, (8) Home Builders Association of South Carolina, (9) National Association of Nome Builders, (10) Community Associations Institute, (11) South Carolina Chapter of the Community Associations Institute, (12) Associated General Contractors of America, Inc., (13) Carolinas AGC, Inc., (14) Cincinnati Insurance Company, (15) Charleston County School District, (16) School District of Greenville County, (17) Associated Builders and Contractors of the Carolinas, Inc., and (18) Leading Builders of America. In the spirit of full disclosure, I filed an amicus brief on behalf of the Property Casualty Insurers Association of America.

Apparently, based at least in part on the uproar, including the legislative action, on March 9, 2011, the Supreme Court granted the Petition for Rehearing and scheduled re-argument of the case for Monday, May 23, 2011. In addition to the unusual Monday scheduling, the Supreme Court has specifically granted all of the amici oral argument time. This should prove to be an interesting day.

Friday, March 18, 2011

No Magic In Internet Evidence

By Gary Beaver

The N.C. appellate courts have been slow to issue opinions on the subjects of e-discovery and the internet.  Practitioners in the N.C. trial courts have had to rely upon the existing rules and make arguments for those rules to be applied similarly to leading federal court decisions (such as the five Zubulake opinions) and or as suggested by authoritative sources like the guidelines issued by the Sedona Conference and the Conference of Chief Justices (for the state appellate courts).  The development of those areas of law in the N.C. courts will likely be incremental as the N.C. appellate courts typically do not engage in the comprehensive opinions providing treatise-type treatment of internet and e-discovery issues that some federal district court judges have entered.  The closest to such opinions in the N.C. state courts came from Judge Tennille, in the
N.C. Business Court,
when he provided two non-precedential but influential decisions on e-discovery issues back on November 1, 2006.  We have seen little guidance since then.  In Rankin v. Food Lion, decided March 1, 2011, the N.C. Court of Appeals had the opportunity to address the use of evidence found on the internet but limited its opinion to addressing the narrow issue before it without providing a lot of discussion about the methods for admitting such evidence.  The Rankin court affirmed the trial court's grant of summary judgment for the defendant.  In doing so, the court also affirmed the trial court's rejection of the plaintiff's evidence printed out from the internet due to the failure of the plaintiff to properly authenticate it.  The plaintiff had submitted printouts from internet websites -- a page from the N.C. Secretary of State and an internet posting about the ownership of Food Lion.  The plaintiff failed to provide any sworn testimony by affidavit or live witness or to use a means of self-authentication to identify and authenticate those internet printouts.  While this decision did not tell us anything new, it did remind trial lawyers that the internet does not magically make authentic or reliable information found on the internet; one must always comply with the rules for authenticating documents and establishing hearsay exceptions.  If you want extensive advice on admitting internet evidence, look at Lorraine v. Markel American Insurance Company, 242 F.R.D. 534 (2007) -- a 100-page opinion by Magistrate Judge Paul Grimm.

Gary Beaver is a member of Nexsen Pruet's Technology Law team. Visit to learn more about how ever-changing technology is impacting your business and how our attorney can help you solve problems that might arise.

Tuesday, March 15, 2011

Those 14 pages at the beginning of your brief? Yeah, they count.

By Kirsten E. Small

I do a CLE program called "The Ten Commandments of Appellate Brief Writing," in which I tell my audience that a key goal of an appellate brief (other than persuading the court, of course) is not to hack off the judges. (Depending on the crowd and the proximity of my presentation to cocktail hour, "hack off" may be replaced by a more colorful term, but you get the point.)

A case out of the Seventh Circuit gives us a sterling example of how not to achieve that key goal: exceed the word limit and then offer a flimsy excuse when you get caught.

Friday, March 11, 2011

Women's (Legal) History, Part 2: Where are we now?

By Kirsten E. Small

I had planned to do a timeline of female attorneys today--I'd done all my Googling and was all set to go. But I decided to go a diffferent direction after I got my morning feed from Law360. The feed included an article titled "Not So Sweet 16," by Patricia Gillette.

Why is 16 not so sweet? Because, as Pat points out, roughly 50 percent of law school graduates are women, but only about 16 percent of law firm partners are women. (Actually, the studies I've seen show that the number is more like 14.5 percent.) The percentage is about the same for female general counsels.

The numbers raise two questions: (1) Why? (2) What can/should we (meaning the legal communty writ large) do about it? Pat's article touches briefly on both subjects. As to the "why," Pat doesn't shy away from the reality that it's not all about the "old boys network." Female lawyers do, as she points out, engage in self-limiting behaviors: we tend not to claim credit where it is due, we don't like to make our demands known, we are, on the whole, a risk-averse bunch.

But none of us--men or women--can take comfort in the platitude that the lack of women partners and GCs is due to our own choices (having children, working part-time, not being interested in power). Bias, conscious and unconscious, is real and must be addressed.

Tuesday, March 1, 2011

Women's (Legal) History Month, Part One: Chief Justice Toal makes history (again!)

By Kirsten E. Small

Just as I was casting about for my first post about the history of female lawyers in this country, the South Carolina Bar's weekly e-newsletter arrived in my box with the news that South Carolina Supreme Court Chief Justice Jean Hoefer Toal has been named the first recipient of the Sandra Day O'Connor Award for the Advancement of Civics Education. The award, given by the National Center for State Courts recognizes Chief Justice Toal for her leadership in the SC Supreme Court's "long history of supporting civics education." The press release is here.

The civics programs sponsored by the Court are described here.

Of course, this is not the first time Chief Justice Toal has made history. She was the South Carolina Supreme Court's first female justice and currently serves as the first female Chief Justice. As her official bio notes, when she was admitted to the bar in 1968, fewer than one percent of the state's lawyers were women.

Monday, February 28, 2011

Builders Beware

by Gary Beaver

North Carolina law has long held that corporate officers could be held personally liable by piercing the corporate veil or for torts, including negligence, in which they personally participated.  Most commercial litigators have seen many cases in which the plaintiff stretches to allege a tort against the officer of a corporate defendant in order to use the specter of personal liability to drive a better result in the case (such as the in terrorem effect of personal liability to up the ante in settlement negotiations).  
Until now, there have been no reported N.C. cases applying individual tort liability on corporate officers in a construction context.  In January 2011, in White v. Collins Building, Inc., the N.C. Court of Appeals reversed the dismissal of negligence claims against a construction company president finding them adequate to survive pleading requirements.  Specifically, the plaintiff alleged that the president "oversaw and personally supervised the day-to-day construction of [plaintiffs'] residence and was negligent in "failing to properly supervise the construction of the residence, including, but not limited, failing to properly supervise the installation of the doors and windows, the flashing around the doors and windows, and the house wrap" and in "fail[ing] to properly supervise the design and installation of the plumbing system, including the hot water lines and other system components." 
One wonders if the plaintiffs actually have any evidence that the president did more than occasionally visit the worksite to check on progress.  In any event, builders should expect that if they are playing any role in on-site work, they will be named as defendants in lawsuits involving claims of negligent construction.  There are many aggressive lawyers who will provide a sufficient level of detail in the pleadings to get them into discovery whether or not they initially have any evidence to support those specific allegations.  It remains to be seen if the courts will allow similar allegations to pass if they are based only on "information and belief."     

Friday, February 25, 2011

Answer Up Or Face The Consequences

By Gary Beaver

The North Carolina Court of Appeals has addressed the sanctioning of parties for discovery failures in two recent cases. In December 2010, in Lovendahl v. Wicker, 702 S.E.2d 529, the court upheld sanctions ordered against a defendant in a civil case for failing to answer questions at a deposition. The sanctions were imposed under Rule 37(b) of the North Carolina Rules of Civil Procedure which are imposed only for failure to comply with a court order. Defendant had a criminal case pending and was trying to avoid answering questions while the criminal case proceeded. Defendant had asserted two affirmative defenses in the civil case -- contributory negligence and gross contributory negligence -- which the plaintiff had to investigate. Defendant argued that sanction were not appropriate because the plaintiff never moved to compel. However, she had sought a protective order and in denying that motion, the court had ordered her to "submit" to the deposition. Failing to answer questions violated that order and supported the sanction of striking the affirmative defenses.

In January 2011, in First Mount Vernon Industrial Loan Assovication v. Prodev XXII, LLC, the court affirmed a finding that a nonparty witness was in contempt of court for failing to appear for a deposition after being properly served with a subpoena. However, the court reversed the trial court's imposition of monetary sanctions based on Rule 37(d) of the North Carolina Rules of Civil Procedure because that rule applies to parties. The court noted that if the motions against the witness had been motions to compel, the trial court could have granted those motions and imposed attorneys' fees and expenses under Rule 37(a)(4). Rule 45(e)(2) provides for attorney fees against a witness who opposes a subpoena and the opposition is unreasonable or for improper purposes such as delay but the witness never objected to or moved to quash the subpoena. The court suggested that the General Assembly may want to address this situation to allow imposition of fees and expenses where a witness remains opposes only by not showing up for the deposition.

The courts will act with their full authority to require discovery but they will not exceed the specific authorization they have to impose sanctions.

Fourth Circuit rejects South Carolina's definition of "direct contempt"

By Kirsten E. Small

Last Friday, the Fourth Circuit affirmed a grant of habeas relief in favor of Donald Brandt. A South Carolina court summarily convicted Brandt of "direct" criminal contempt and sentenced him to six months' imprisonment, based on Brandt's use of a forged letter in a deposition. Brandt appealed his conviction, arguing that "direct" contempt applies only to conduct occurring in the presence of a judge. The South Carolina Supreme Court agreed with this proposition but held that the "presence" of the judge encompasses "all elements of the judicial system," including a deposition.

Not so much, says the Fourth Circuit. Y'all can do what you want as a matter of due process under the state Constitution, but the federal Constitution* allows a conviction for direct criminal contempt only when the judge actually sees the contemptuous conduct. Because that was not the case with Brandt (the contempt was proved to the court, in part, with expert testimony that the document was forged), direct criminal contempt was improper.

You might wonder if this decision is a hallmark of a more "liberal" Fourth Circuit, which one lawyer once referred to as a "black hole" of habeas jurisprudence. I don't think so. For one thing, the authoring judge (Agee) is a Bush appointee. For another, the decision was really a no-brainer. The law on what constitutes direct contempt is abundantly clear, and the South Carolina Supreme Court clearly applied the wrong definition.

*Any grammar gurus out there: what's the capitalization rule for the word "constitution" when combined with the modifiers "state" or "federal?" I know that constitution should be capitalized when referring to "the Constitution" (as in, the federal one), but beyond that, I'm lost. (Incidentally, Blogger's spell check seems to think that "constitution" should always be capitalized. Hmm.)

Tuesday, February 15, 2011

Great Moments in Appellate Advocacy

By Kirsten E. Small

132 years ago today, President Rutherford B. Hayes signed special legislation compelling the United States Supreme Court to admit Belva Ann Lockwood to its bar.

I'll be blogging more about the history of female attorneys in March (Women's History Month), but I thought I'd share that little tidbit today.

Tuesday, February 8, 2011

Appellate Ethics Tip of the Day: Quit While You're Ahead.

By Kirsten E. Small

So let's say you and your client decide to file a securities lawsuit even though the statute of limitations is way, way past. As in, it expired 15 years ago. When the district court sanctions you $95,000 for bringing a frivolous suit, what do you do?

The Second Circuit suggests that you do not bring a frivolous appeal. As reported here, that court imposed an additional sanction on plaintiff John Libaire and his attorney, Mitchell Stein, for filing a frivolous appeal.


Friday, January 28, 2011

Doing the removal two-step in the Fourth Circuit

by Kirsten E. Small

In an en banc decision yesterday, the Fourth Circuit adhered to the so-called "McKinney Intermediate Rule" for removal in cases involving more than one defendant. Barbour v. International Union (No. 08-1740).

Under the McKinney rule, the first-served defendant must remove (if at all) within 30 days of service, as required by 28 U.S.C. § 1446. Any later-served defendant must join the notice of removal (if at all) within 30 days of service on it.

Thursday, January 27, 2011

Exciting times in the Fourth Circuit

by Kirsten E. Small

Two items of note in my inbox this morning:

(1) South Carolina district court judge Henry F. Floyd has been nominated to the Fourth Circuit. Press release here. Once Judge Floyd is confirmed, the Fourth Circuit will have a full complement of judges, with all 15 of the available seats filled.

(2) The Fourth Circuit has granted expedited hearing in Virginia's challenge to the "minimum coverage" provision health care reform law (a/k/a the "individual mandate"). Argument will be during the court's May 2011 session, which runs from May 10-13. The panel (which is unknown and will not be announced until the morning of argument) will hear two cases back-to-back: Virginia v. Sebelius (No. 11-1057, Virginia's challenge to the minimm coverage requirement), and Liberty University v. Geithner (No. 10-2347, challenging both the employer mandate and the individual mandate).

Tuesday, January 11, 2011

Is It Flip-Flopping Or Flop-Flipping? Clarifying Construction Defects Law In South Carolina

By Stephen P. Groves, Sr.

Crossmann Communities of North Carolina v. Harleysville Mutual Ins. Co., ___ S.C. ___, ___ S.E.2d ___ (2011)
(Sup.Ct. Opinion No. 26909, filed 7 January 2011)

By 3:30 p.m. in the afternoon of Friday, 7 January 2011, many of the attorneys practicing construction defects law in this State had left their offices and headed home for what they thought would be a quiet weekend. Needless to say, it did not turn out to be as quiet as they anticipated. At approximately 3:44 p.m. that day the South Carolina Supreme Court issued its decision in Crossmann Communities v. Harleysville – the latest and, possibly the greatest, installment in the Supreme Court’s jurisprudence involving litigation over the application of commercial general liability insurance coverage to construction defect claims. All-in-all, things look a bit differently now than they did before Friday afternoon.

Harleysville issued a commercial general liability insurance policy (the “CGL Policy”) to Crossmann Communities providing liability coverage to several condominium projects in Myrtle Beach, South Carolina. As seems to be the norm, the condominiums suffered from significant faulty workmanship and negligent construction. Eventually the homeowners sued Crossmann Communities for negligence, breach of express warranties, breach of implied warranties; unfair trade practices; and breach of fiduciary duty. They sought actual and punitive damages, diminution in value, and loss of use. Crossmann Communities settled the underlying actions for approximately $16.8 million and then sought coverage under the CGL Policy. After Harleysville denied the claim Crossmann Communities filed an insurance coverage declaratory judgment action seeking coverage. Crossman Communities prevailed at the trial level but, on appeal, the Supreme Court reversed, concluding there was no "occurrence" under the CGL policy.

The Supreme Court first discussed the history of the standard CGL Policy, noting “CGL policies are not intended to insure business risks that are the normal, frequent, or predictable consequences of doing business . . .[and, therefore,] . . . the policies do not insure the work itself, but rather, they generally insure consequential risks.” Crossmann Communities v. Harleysville, Slip Op., p.3 (citing Century Indemnity Co. v. Golden Hills Builders, Inc., 348 S.C. 559, 565-66, 561 S.E.2d 355, 358 (2002) (quoting Rowland H. Long, LL.M., The Law of Liability Insurance, § 3.06[1] (2001)). Additionally, the Supreme Court recognized that the standard CGL Policy was revised in 1986 to include the so-called “subcontractor exception” to the “Your Work” Exclusion. Crossmann Communities v. Harleysville, Slip Op., p.3. This provision has been interpreted by a number of courts to provide liability insurance coverage to a general contractor for a subcontractor’s faulty workmanship and/or defective construction. See generally U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So.2d 871 (Fla. 2007); Lamar Homes, Inc. v. Mid-Continent Casualty Co., 242 S.W.3d 1 (Tex. 2007). See also generally Auto Owners Insurance Co., Inc. v. Newman, 285 S.C. 187, 684 S.E.2d 541 (2009).

While Crossmann Communities argued that the "subcontractor exception" applied to provide it coverage under the CGL Policy, the Supreme Court concluded the “ ‘subcontractor exception’ [wa]s relevant only if there [wa]s a finding of initial coverage. [Therefore], any property damage for which [Crossmann Communities sought] coverage must have been caused by an occurrence before the [CGL] [P]olicy [wa]s triggered.” Crossmann Communities v. Harleysville, Slip Op., pp.3-4.

In a candid appraisal of the struggles courts across this county have faced when interpreting CGL policies in general, and the "subcontractor exception" to the "your work" exclusion, in particular, the Supreme Court found that the several different approaches courts have used effectively “result[ed] is an intellectual mess.” Crossmann Communities v. Harleysville, Slip Op., p.4. Seeking to lend clarity to this muddled mess, the Supreme Court concluded any inquiry in this area must initially focus on the term "occurrence" in the CGL Policy.

The Court acknowledged that the term "occurrence" necessarily carries with it some important fortuity underpinnings, notwithstanding the fact the CGL Policy specifically defines the term “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Crossmann Communities v. Harleysville, Slip Op., p.4. Nevertheless, the Supreme Court noted this “fortuity” notion must be viewed through the lens of “faulty workmanship” in the construction defects context. The Supreme Court went on to discuss the “majority” rule (i.e.; claims of faulty workmanship and/or defective construction, standing alone, do not constitute occurrences which trigger coverage under a CGL policy, but damage to a third-party’s property triggered coverage) and the “minority” rule (i.e.; claims of faulty workmanship and/or defective construction constitute an occurrence, regardless of what property is damaged, as long as the insured did not expect or intend the resulting damage). Crossmann Communities v. Harleysville, Slip Op., pp.4-5. (As an aside, regardless of which “rule” is applied there is no coverage for the costs associated with replacing and/or repairing a defective component of the project since those claims do not constitute "property damage" under a CGL policy.).

After discussing general construction defects law, the Supreme Court acknowledged it had “recently addressed issues involving CGL coverage and faulty workmanship in L-J, Inc. v. Bituminous Fire and Marine Ins. Co., 366 S.C. 117, 621 S.E.2d 33 (2005)[,] and Auto Owners Ins. Co., Inc. v. Newman, 285 S.C. 187, 684 S.E.2d 541 (2009).” Crossmann Communities v. Harleysville, Slip Op., p.6. On the one hand, in L-J, the Supreme Court addressed a situation where the insured sought coverage solely for damages to repair faulty workmanship and defective construction. Conversely, in Newman, the insured’s claims involved damages for both the faulty workmanship and defective construction and for damages to other property resulting from the same faulty workmanship and defective construction. The Supreme Court concluded there was no coverage in L-J, but there was coverage in Newman.

Looking to the necessary “fortuity” underpinnings of the term “occurrence”, the Supreme Court unequivocally admitted that its finding of an “occurrence” in Newman “without regard to the fortuity component of an ‘accident’ was error.” Crossmann Communities v. Harleysville, Slip Op., p.7. Nevertheless, the Court concluded the “analytical framework of "property damage" in Newman remain[ed] sound, provided there [wa]s in the first instance an ‘occurrence’.” Crossmann Communities v. Harleysville, Slip Op., p.7. See generally National Underwriter Co., Fire, Casualty & Surety Bulletins, Public Liability, A 3-14 (2001) (providing examples of situations where faulty workmanship causes an "occurrence," which results in "property damage" only to the project itself).

Furthermore, the Supreme Court then revisited L-J and Newman, reaffirming its position from L-J that faulty workmanship does not constitute an "occurrence" in a CGL policy. The Court, however, looking to the examples cited the National Underwriter Company, concluded that “faulty workmanship can cause an ‘occurrence’ under a CGL policy.” Crossmann Communities v. Harleysville, Slip Op., pp.8-9. Given this basis, the Court faced the question: “When faulty workmanship directly causes further damage to non-defective components of an insured's project, does this necessarily constitute an occurrence?” Crossmann Communities v. Harleysville, Slip Op., p.8.

Recognizing the fortuity principles incumbent in an “occurrence”, as well as the CGL Policy’s stated definition of an “occurrence” ("an accident, including continuous or repeated exposure to substantially the same general harmful conditions."), the Supreme Court turned its attention to the term “accident”. The Court noted that while the CGL Policy did not define “accident”, the Court had long defined the term “ ‘as an unexpected happening or event, which occurs by chance and usually suddenly, with harmful results, not intended or designed by the person suffering the harm or hurt.’ " Crossmann Communities v. Harleysville, Slip Op., p.8 (citing Collins Holding Corp. v. Wausau Underwriters Insurance Co., 379 S.C. 573, 578, 666 S.E.2d 897, 900 (2008) (citing Green v. United. Insurance Co. of America, 254 S.C. 202, 205, 174 S.E.2d 400, 402 (1970)). The Court also cited other cases and authorities which noted an “unexpected” or “unforeseen” nature of an “accident”.

Applying this new definition of an "occurrence" to the homeowners’ various construction defect claims, the Supreme Court concluded the damages alleged therein were not caused by and/or the result of an "occurrence" under the CGL Policy. The Court concluded that:

The natural and expected consequence of [the subcontractor’s faulty workmanship] in negligently installing siding to [the] condominiums [wa]s water intrusion and damage to the interior of the units. There [wa]s no fortuity element present under this factual scenario. We hold that where the damage to the insured's property is no more than the natural and probable consequences of faulty workmanship such that the two cannot be distinguished, this does not constitute an occurrence.

Crossmann Communities v. Harleysville, Slip Op., p.9.

Additionally, the Supreme Court took the opportunity to clarify its holding in L-J, by finding that the term “work product” “encompasse[d] only the alleged negligently constructed component and not the non-defective components” (i.e.; not the entire building and/or project as some cases have held and as Justice Pleicones suggested in his Newman dissent). Crossmann Communities v. Harleysville, Slip Op., p.9.

In conclusion, the Supreme Court summed up its present view of the applicability of liability insurance coverage to construction defects claims as follows:

In . . . analyzing whether a claim is covered under a CGL policy, we first focus on whether there has been an "occurrence." Damage that does not arise from a fortuitous event is not an occurrence. Damages to the insured's project that are the natural and probable consequences of faulty workmanship do not constitute an "occurrence." For faulty workmanship to give rise to potential coverage, the faulty workmanship must result in an occurrence, that is, an unintended, unforeseen, fortuitous, or injurious event. If there has been an occurrence, then we will look to whether there has been "property damage" as defined by the policy.

Crossmann Communities v. Harleysville, Slip Op., pp.9-10. The Court overruled Newman “to the extent it permitted coverage for faulty workmanship that directly causes further damage to property in the absence of an "occurrence" with its fortuity underpinnings.