By Christian Lunghi 

Welcome to the future — where even serving pleadings requires a login screen.

. . .

In October of 2020, the North Carolina legislature gave Rule 5 of the North Carolina Rules of Civil Procedure a digital makeover. Rule 5, as amended, wholeheartedly embraces the electronic filing system and makes it the go-to method for serving applicable pleadings and papers. Gone are the days of sending opposing counsel an email containing your discovery requests and responses. Now, you need to log into eCourts, toss your pleading into the digital realm of Tyler Technologies, and cross your fingers.

Okay, put down your pitchforks. I know we should embrace a system that eases access to the courts.

Putting the electronic system’s quirks aside, I’d argue the primary method of communication for an attorney is email. It’s easy, creates a record, and it’s practically glued to our fingertips. For most pleadings, filing with the court is a given. Discovery is unique in that it’s generally kept off the record.

Rule 5 applies to “every paper relating to discovery required to be served upon a party unless the court otherwise orders,” which includes interrogatories, requests for production of documents, and requests for admission.

So, if I email opposing counsel to serve discovery, can they throw a curveball and claim it was improperly served? Let’s look at Rule 5.

Subsection (b) of Rule 5 tells us how service is made:

Service is made under this subsection if performed on an attorney through the court’s electronic filing or case management system at an email address of record with the court. Service is made under this subsection if performed on a party through the court’s electronic filing system or case management system at an email address of record with the court in the case if the party has consented to receive service through the court’s electronic filing or case management system and a copy of the consent is filed with the court by any party. Service through the court’s electronic filing or case management system must be sent by 5:00 P.M. Eastern Time on a regular business day. If the service is sent after 5:00 P.M., it will be deemed to have been sent on the next business day.

When service through the court’s electronic filing or case management system is not available, service may be made as follows:

(1) Upon a party’s attorney of record:

a. By delivering a copy to the attorney. Delivery of a copy within this sub-subdivision means handing it to the attorney, leaving it at the attorney’s office with a partner or employee, or sending it to the attorney’s office by a confirmed telefacsimile transmittal for receipt by 5:00 P.M. Eastern Time on a regular business day, as evidenced by a telefacsimile receipt confirmation. If receipt of delivery by telefacsimile is after 5:00 P.M., service will be deemed to have been completed on the next business day. Service may also be made on the attorney by electronic mail (e-mail) to an e-mail address of record with the court in the case. Such email must be sent by 5:00 P.M. Eastern Time on a regular business day. If the e-mail is sent after 5:00 P.M., it will be deemed to have been sent on the next business day.

b. By mailing a copy to the attorney’s mailing address of record with the court.

c. In the manner provided in Rule 4 for service and return of process.

(2) Upon a party:

a. By delivering a copy to the party. Delivery of a copy within this sub-subdivision means handing it to the party.

b. By mailing a copy to the party at the party’s last known address or, if no address is known, by filing it with the clerk of court.

c. Service may also be made on the party by electronic mail (email) if the party has consented to receive email service in the case at a particular email address, and a copy of the consent is filed with the court by any party. Such email must be sent by 5:00 P.M. Eastern Time on a regular business day. If the e-mail is sent after 5:00 P.M. Eastern Time, it will be deemed to have been sent on the next business day.

d. In the manner provided in Rule 4 for service and return of process.

Service by mail shall be complete upon deposit of the pleading or paper enclosed in a post-paid, properly addressed wrapper in a post office or official depository under the exclusive care and custody of the United States Postal Service.

N.C. Gen. Stat. § 1A-1, R. 5 (emphasis added).

Unless my statutory interpretation skills are rusty, Rule 5, as amended, mandates that we serve discovery on opposing counsel via the electronic filing system, provided that opposing counsel has an email address on record with the court.

If the electronic filing system is unavailable due to (1) eCourts not being live in your county yet, or (2) eCourts experiencing technical issues, you can send discovery to opposing counsel via email, provided they have an email address on record with the court. If eCourts is unavailable and they don’t have an email address on record, you will need to physically deliver, mail, or fax the discovery to them.

What if the electronic filing system is available, but opposing counsel does not have an email address on record with the court? Rule 5 does not appear to provide guidance. One could argue that the language “[w]hen service through the court’s electronic filing or case management system is not available” means that the electronic filing system is operational, but opposing counsel does not have an email address on record. However, the inclusion thereafter of “[s]ervice may also be made on the attorney by electronic mail (email) to an email address of record with the court in the case” doesn’t seem to support this stance.

Some conclusions result from this analysis.

1. If the electronic filing system is active in your county, and opposing counsel’s email address is on record with the court, you need to serve them through the electronic filing system.
2. If the electronic filing system is active in your county, but opposing counsel’s email address is not on record with the court, the rule does not tell you how to serve them. In this scenario, it is probably best to contact opposing counsel and ask how you can serve them to avoid an issue.
3. If the electronic filing system is not active in your county, and opposing counsel’s email address is on record with the court, you can shoot them an email.
4. If the electronic filing system is not active in your county, and opposing counsel’s email address is not on record with the court, you need to serve them through physical delivery, mail, or fax.

However, as we all know, much of what we do relies on self-regulation. If you send discovery via email, most attorneys probably won’t bat an eye or raise a fuss. On the flip side, we’re always on the lookout for leverage. Given that Rule 5 applies to more than just discovery, you might want to play it safe and follow the rule to the letter. It may feel unnecessary, but following the rule is easier than explaining to the judge why you didn’t.

Next up: mandatory service via blockchain.

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