By Attorney Edward Jesson
One of the questions we frequently get asked when we are advising clients about their options when contemplating entering into a lawsuit is: Can I make the other side pay for my attorney’s fee? The answer to this question is very fact dependent, but the general answer is “no”.
It is a common misconception that you are able to claim the money you pay your attorney to pursue a case in court as damages on top of the damages that you have actually suffered. While in many other countries it is commonplace to have a “loser pays” system, wherein the loser of the lawsuit is responsible for paying the other side’s legal fees, that is not the case in the United States. In fact, the general principal that each opposing party must pay their own legal fees regardless of who wins the lawsuit is known as the “American Rule.” For example, if you sue someone for $100,000.00 it costs you $20,000.00 in legal fees to win that lawsuit—at the end of the day under the American Rule, you are only entitled to $100,000.00, not $120,000.00. So in reality, after paying your attorney that $20,000.00, you are only netting $80,000.00.
However, the American Rule is just a general rule and, under North Carolina law, there are certainly exceptions to that rule. Generally speaking, in order for there to be an exception to the American Rule in North Carolina, there has to be a statute authorizing the award of attorney’s fees to the winning party in the lawsuit (usually referred to as the prevailing party in North Carolina’s General Statutes). For example, the winning party in a lawsuit brought under North Carolina’s Unfair and Deceptive Trade Practices Act, or North Carolina’s Wage and Hour Act, will generally be entitled to an award of reasonable attorney’s fees.
Another instance where questions regarding an award of attorney’s fees frequently arises is when there is a contractual provision stating that one party or the other is entitled to attorney’s fees should a lawsuit be brought based on a breach of the contract. In order for an attorney’s fee provision in a contract to be enforceable: (1) the contract must be a “business contract”, i.e. a contract entered into primary for business or commercial purposes and not a consumer nor employment contract; and, (2) the attorney’s fee provision must be reciprocal, meaning no matter who loses, the loser pays.
There are many other statutes in North Carolina that allow for the award of attorney’s fees. If you are considering litigation, the potential for an award (or lack thereof) of attorney’s fees can often be an important consideration. The attorneys at Jesson & Rains can help you evaluate your options in order to make the most informed decision possible.
By Attorney Edward Jesson
To the chagrin of many North Carolinians who believe they have been wronged, with very few exceptions, you need to have been actually “damaged” successfully bring a lawsuit against another party. While there are several types of damages available to litigants in North Carolina, in most cases, a plaintiff in a lawsuit will be seeking monetary damages.
Monetary damages are, for the most part, meant to be compensatory in nature. The money damages that you may eventually be awarded are meant to compensate you, or “make you whole,” for the loss you have suffered. For example, what if you find a dead mouse in your McDonald’s sandwich? While shocking, unless you ate it and suffered illness or medical expenses, you would not be awarded much in court other than the cost of the sandwich – and who wants to pay a lawyer for that?
Take an example where you believe that someone has made a slanderous or defamatory statement against you. Even if you could prove that the person made the statement and that it was false, that might not be enough to win your lawsuit. You would then need to prove that because of the defendant making that defamatory statement you were in some way monetarily damaged. It is very difficult to get non-economic damages, like emotional distress, in North Carolina.
A plaintiff can be awarded what are known as nominal damages in North Carolina. These are damages that acknowledge that a defendant violated the law (for example, making a defamatory statement) but also acknowledge that no actual loss was suffered by the plaintiff in that situation. An example of nominal damages could be awarding a plaintiff $1.00 when the defendant made a defamatory statement. Yes, a defamatory statement was made, but the plaintiff did not suffer any real harm from that statement being made. And again, who wants to pay a lawyer for that?
There are many other categories of damages that can be claimed in North Carolina, which are very dependent on the specific circumstances of the case. It is important, when discussing a lawsuit with an attorney, to discuss the damages portion up front to ensure that you have a reasonable expectation of what you may stand to gain (or lose) if the lawsuit does end up in front of a jury. It is not always enough that the potential defendant has violated the law if you cannot prove damages. The attorneys at Jesson & Rains can help guide you through what your options are if you feel that you may have a claim against another in a lawsuit.
By Attorney Edward Jesson
A Sheriff’s deputy has just showed up at your door and handed you a summons. Or you received a summons via FedEx or Certified Mail. Do you need to hire a lawyer to move forward with things? This is highly dependent on a lot of things, but often most importantly, whether the Defendant that has been sued is an individual or a business entity.
In North Carolina, an individual has the right to represent his or herself. So, if you have been sued in your individual capacity you have the right to represent yourself in court. This is known as proceeding pro se. Sometimes we even recommend our clients proceed pro se. For example, if an individual has been sued in small claims court for a small amount of money, often times the legal fees that might be incurred in defending that small claims action would exceed the damages that were being claimed. Moreover, small claims court is fairly well designed for those who wish to proceed pro se with a lot of the formalities that are present in District and Superior Court being relaxed.
However, if the summons is for District or Superior Court, while an individual is still permitted to represent themselves in those proceedings, generally we would advise against that. In District and Superior Court the North Carolina Rules of Civil Procedure, the North Carolina Rules of Evidence, and applicable Local Rules, and various other rules and regulations apply. The majority of the time we find that individuals proceeding pro se end up getting tripped up by these rules—often with serious long lasting financial consequences.
However, things are much different if the Defendant being sued is a business entity such as a corporation or a limited liability company. In North Carolina a business entity cannot represent itself nor can a member or owner of the business represent the business in court unless that individual is an attorney licensed to practice law in North Carolina (or has been admitted to practice in North Carolina on another basis).
If a business owner (that is not permitted to practice law in North Carolina) files a response on behalf of the business that they own, they are engaging in the unlicensed practice of law which is a Class 1 Misdemeanor in North Carolina. Any documents filed by an unlicensed attorney could be stricken by the Court which could result in a judgment being entered against the Defendant, even though the Defendant may have thought that they properly responded. Repeated violations of the law could result in financial sanctions being awarded by the Court or injunctions being sought by the local district attorney.
Generally speaking, if you receive a summons, regardless of what it is, it is in your best interest to at least consult with an attorney to see what your options are. Depending on the situation, it may be advisable to move forward and represent yourself. However, in a lot of circumstances the litigation can be a mine field for those who are not used to appearing in court on a regular basis.
If you receive a summons, or have any other questions about the litigation process, the attorneys at Jesson & Rains are ready to help.
In North Carolina, a Plaintiff (the party filing a lawsuit) can seek an “Order of Attachment” in certain circumstances. Generally, this means that any property in North Carolina that the Defendant owns, including bank accounts, can be seized by the County Sheriff to satisfy any eventual judgment pending the outcome of the lawsuit. This can be problematic for several reasons: first of all, the Plaintiff may lose the case and not be awarded any damages and the property was seized unnecessarily! Also, at the beginning of a lawsuit, the number that a Plaintiff claims he or she has been damaged may not be a realistic number and is based purely on their opinion of the case. Having large sums of money seized during the pendency of a case (which could take years to settle) could cause a business to go bankrupt.
Thankfully, an attachment order will only be issued in a few circumstances. The Defendant must be:
The Plaintiff must pay a bond to the Court which must be high enough to compensate the Defendant if the Defendant prevails in the lawsuit or is damaged by an improper attachment. Obviously that bond will greatly vary and is somewhat up to the discretion of the judge who is hearing the attachment order.
Fortunately, if you have received an attachment order, you do have options to dissolve or modify the order. To dissolve the order, you must show that something was done improperly in obtaining the order (for example, that you do not fall into one of the categories of people who can have their property attached). If you are unable to make that showing, you can try to have the attachment order modified—either the amount of the attachment, the bond, the terms, or both.
Attachment orders are just one more way that lawsuits can cause problems to the people involved. If you, or someone you know, receives a summons, attachment order, or notice of garnishment, the attorneys at Jesson & Rains, PLLC are ready to assist.
By Attorney Kelly Jesson
Creditors come in all shapes and sizes: ex-spouses, bankruptcy, personal and business debts, and claims involving real estate or professional malpractice. People in high risk professions or who deal with circumstances that are prone to litigation sometimes want to take steps to protect assets. However, this must be done before a dispute arises, because moving assets around afterwards can sometimes be deemed a fraudulent conveyance and voided by a court.
Unfortunately, there is no “magic wand,” and protecting assets oftentimes involves investing your earnings into protected accounts, such as life insurance and retirement. An individual’s retirement account is exempted from their own creditors (but not from a beneficiary’s creditors once the assets are inherited, which will be discussed in the next blog dealing with asset protection in estate planning). The cash value of a life insurance policy is also protected from the insured’s creditors, but again, not from a beneficiary’s creditors once the assets are inherited.
Additionally, the state of North Carolina exempts certain amounts of property from creditors:
One of the most important things you can do is title property as “tenants by entireties” (TBE). If a husband and wife purchase property together, by default, it is owned as TBE and is therefore protected from the creditors of just one of them, meaning a lien will not attach. However, if a creditor gets a judgment in both spouses’ names, a lien can attach. Also, if the spouses divorce or one passes away, a lien can attach if the remaining owner is the debtor. Another alternative or high-risk professionals is to have the low-risk spouse own the majority of assets because they will not be responsible for debts unless joint.
Another really important step is for self-employed people to form businesses and formalize businesses to protect assets. If you follow business formalities, business creditors cannot reach your personal assets for business debts. If you own investment properties, you are running a business. In fact, the definition of “operating a business” is pretty loose, and oftentimes people will move high-value assets over to LLCs for asset protection purposes. Again, you must follow business formalities (set up a tax identification number, maintain a separate bank account, have an operating agreement).
If you own a business but you have personal creditors, those cannot reach assets titled in the name of your business. They are limited to collecting only the distributions you receive from the business, which you control as the business owner. Distributions do not include your pay made through payroll, which is another reason to run your business like a business.
Finally, we’re often called by people to set up trusts to avoid creditors. General living trusts or revocable trusts are not protected from creditors of the grantor (the person who sets it up), although the funds could be protected from beneficiaries’ creditors after the grantor dies (the subject of our next blog). North Carolina residents have a few not-so-great options: First, they can set up an irrevocable trust for the benefit of others. For example, if you are married, you can create an irrevocable trust that benefits your spouse for his or her lifetime. Presumably, your spouse will take care of you while you’re married, so you will indirectly have access to the money you put into the irrevocable trust, although on paper it will no longer belong to you, so your creditors cannot reach it. This obviously has risks, but it is an option.
Another option is an asset protection trust. In an asset protection trust, the trustee has discretion to distribute money to the grantor as well as other beneficiaries. These trusts are not valid in North Carolina, although they are available in seventeen other states and other countries. However, North Carolina residents can pick the situs (jurisdiction) of their trust and where the trustee is located, meaning, for example, that you can state that Georgia law applies to your trust even though you live in North Carolina. However, lawmakers in North Carolina have questioned whether this practice is valid for asset protection trusts, and, therefore, there are some risks involved. Of course, transferring funds to another country is always risky.
If you are interested in implementing any of the above ideas in order to protect your assets, please give the attorneys at Jesson & Rains a call!
By Attorney Kelly Jesson
Business owners around the country are starting to reopen their businesses up to employees and customers. However, regardless of government announced “phases,” businesses owe a duty to their employees and customers to keep them safe while on the premises. Lawsuits are starting to pop up, according to Market Watch.
What can you do to limit your potential liability? Businesses should follow healthcare and government recommendations, such as wiping down surfaces, frequent hand washing, wearing masks, socially distancing, etc. These recommendations sometimes change, so business owners should stay abreast of updates. Keeping your employees from getting sick on the job in the first place is key: in a worker’s compensation case, all the worker has to do is prove they were injured on the job and there’s a causal connection between the two. For example, a grocery store cashier may have a claim due to exposure to the public. A worker’s compensation claimant does not need to prove that the business was negligent.
For businesses that don’t have a large volume of public traffic (such as law firms), owners may ask patrons to sign a document before coming into the premises stating that they do not have COVID-19, are experiencing no symptoms, and they have not been around anyone with COVID-19 or who has otherwise been experiencing symptoms. While patrons can, of course, lie on these forms, at least it’s one additional step that business owners can show that they are taking to
protect their employees and other customers. Showing that you are taking the necessary steps to keep people safe is important in defense of personal injury lawsuits, where the plaintiff has to show not only causation (that they caught COVID-19 at your business) but negligence (that you failed to act with reasonable care).
A defense to a negligence action is “assumption of risk.” Some business owners may ask patrons to sign waivers of claims, saying that the patron is “assuming the risk” of contracting COVID-19 by coming to their establish. For example, someone who voluntarily eats at a restaurant or goes to a nail salon knows that there is a risk that they may be infected, and a business is not guaranteeing 100% that they will not be infected, because there’s no way to do that.
Governor Cooper provided business owners with extra protection a couple of weeks ago when he signed the Coronavirus relief bill. The act provides for limited liability for businesses deemed “essential” under the Governor’s prior stay-at-home order. If an employee or customer gets COVID-19 from spending time at an essential business, the business is not liable for damages unless it is “grossly negligent” or worse. Gross negligence is a higher standard than simple negligence. Instead of a plaintiff showing the absence of reasonable care in a negligence lawsuit, a plaintiff would have to show the conscious disregard for reasonable care to prove that a business was grossly negligent.
While essential businesses should be comforted by this law, we are of the opinion that this should not change how they do business. In fact, if they consciously fail to abide by social distancing and cleaning protocols, they could arguably be grossly negligent.
If you have any questions about how to prepare your business for reopening, give Jesson & Rains a call!
Subscribe to our newsletter.