Public Records Act Does Not Apply to Work Product

The Court of Appeals held that trial court did not abuse its discretion by allowing the City of Charlotte to withhold 225 documents that were otherwise responsive to a public records request on the ground that they constituted "trial preparation materials." The case is Wallace Farm, Inc. v. City of Charlotte.

On September 30, 2008, Charlotte zoning inspectors searched property owned by Wallace Farm pursuant to an administrative warrant. Approximately two weeks after the search took place Wallace Farm mailed a public records request to the Charlotte City Manager requesting all public records from the preceding ten years that referred to its property. After exchanging some correspondence with the Charlotte City Attorney's office, Wallace Farm filed a motion to compel production of the requested public records in Mecklenburg County Superior Court on November 2, 2008.

Before the date of the hearing on the motion to compel production, the city produced 21,424 pages of documents to Wallace Farm. The City withheld 225 documents on the ground that they were trial preparation materials. Judge Richard D. Boner agreed with the City and determined that the withheld documents were not subject to the Public Records Act.

Judge Bryant, joined by Judges Jackson and Robert N. Hunter, Jr., determined that the trial court did not abuse its discretion by allowing the City to withhold the documents. Although the Public Records Act encourages liberal dissemination of public records, the Act contains an explicit exception for public records that qualify as "trial preparation materials." After conducting an in camera review of the documents at issue the court determined that the documents were not subject to disclosure under the Public Records Act because they "contain mental impressions, conclusions, opinions, or legal theories of city attorneys or other agents of the City in reasonable anticipation of litigation."

Wrongful Termination Does Not Give Rise to a UDTP Claim

In Combs v. City Electric Supply Company, the North Carolina Court of Appeals determined, among other things, that an employee's claim that he was wrongfully terminated did not give rise to a claim against his former employer under North Carolina's Unfair and Deceptive Trade Practices Act.

David Combs filed a complaint in Forsyth County Superior Court alleging that his former employer, City Electric Supply Company, terminated him "in retaliation for reporting that 'Defendant [was] stealing from its customers' accounts[.]" Combs' complaint contained three causes of action: wrongful discharge, tortious interference with Combs' contractual rights, and unfair and deceptive trade practices. At the close of plaintiff's evidence Judge Franklin F. Lanier granted the Defendants' Motion for a Directed Verdict and entered a judgment in favor of defendants.

In an opinion written by Judge Steelman and joined by Judges Robert C. Hunter and Geer, the Court of Appeals reversed the trial court's decision to grant a directed verdict on the wrongful discharge and tortious interference claims because Combs presented "more than a scintilla of evidence" in support of each element of these claims.

However, the Court of Appeals affirmed the lower court's decision to grant a directed verdict on the UDTP claim because the employment dispute between Combs and City Electric did not include "any conduct that would constitute activity 'affecting commerce[.]'" According to the Court of Appeals, a whistle blower claim is nothing more than "a simple employment dispute and does not fall within the perview of" the UDTP statute.

COA Opinions

Today, the North Carolina Court of Appeals issued 13 opinions. More on these cases later.

In the meantime, sign up to recieve posts from this blog in your e-mail using the box in the sidebar on the right hand side of the page.

NC SCt Opinions

The North Carolina Supreme Court issued six opinions today. Unfortunately, none of the opinions present any issues relevant to this blog.

COA Places Duty on Financial Company to Detect Identity Theft

In Credigy Receivables, Inc. v. Whittington, the North Carolina Court of Appeals held that a financial company that tries to recover a debt incurred on a customer’s credit card must first determine whether its customer was the victim of identity theft prior. Failure to make this determination prior to enforcing a judgment may expose the financial company to liability to pay the attorneys’ fees incurred by the identity theft victim in having the judgment set aside.

At some point in the late 1990s, Fleet Bank issued a credit card to Blanche Whittington of 107 Courtland Place, Goldsboro, North Carolina. In May 1999, the account opened under Whittington’s name fell into delinquent status. Fleet Bank transferred the delinquent account to First Select Corporation who filed suit to recoup the amount owed. In July 2001, First Select served the summons and complaint by certified mail. The certified letter was sent to the Goldsboro address listed on the account application and the signature on the return receipt read “Blanche Whittington.” When no answer was filed, First Select obtained a default judgment against Whittington for approximately $7,000.

After First Select unsuccessfully attempted to serve Whittington with a Notice of Right to Have Exemptions Designated (“Notice of Right”) at the Goldsboro address, it assigned the default judgment to Credigy Receivables, Inc. for $10.00. Credigy also attempted to serve Whittington with a Notice of Right at the Goldsboro address, but the Wayne County Sheriff’s Office returned the Notice of Right with a notation indicating that Whittington no longer lived at that address.

In February 2008, Credigy located Whittington in Kinston, North Carolina and began the process of enforcing the default judgment. It was at this point that Credigy learned that Whittington was a victim of identity theft. Whittington never lived in Goldsboro, never applied for a Fleet Bank credit card, and had spent the past several years attempting to resolve issues related to the theft of her identity by Mary E. Atkinson.

In April 2008, Whittington sought relief from the default judgment under Rules 6 and 60 of the North Carolina Rules of Civil Procedure. Whittington also sought to recover the attorneys’ fees incurred in having the default judgment set aside under North Carolina General Statutes Section 6-21.5. This provision authorizes an award of attorneys fees to a prevailing party if the losing party either was “reasonably … aware, at the time the complaint was filed, that the pleading contained no justiciable issue” or “persisted in litigating the case after the point where [the party] should reasonably have become aware that pleading [the party] filed no longer contained a justiciable issue.”

In a September 4, 2008 Order, Judge Timothy I. Finan set aside the default judgment and awarded Ms. Whittington over $26,000 in attorney’s fees on the ground that Credigy instituted a non-justiciable claim against Whittington. Credigy appealed the award of attorney’s fees arguing that (1) the default judgment was presumptively valid and presented a justiciable issue as to Whittington’s identity and indebtedness and (2) the company had suspended its enforcement efforts when it received competent evidence that Whittington was not liable on the judgment.

The Court of Appeals, in an opinion written by Judge Robert N. Hunter, Jr., found that the award of attorneys’ fees was proper because Credigy and its predecessors in interest instituted and pursued a non-justiciable claim against Whittington. The Court held that although the credit card was taken out in Whittington’s name and a default judgment entered against Whittington, First Select had not obtained a default judgment against Whittington. Instead, First Select had obtained a valid judgment against Mary Atkinson – an individual not named as a defendant in the underlying action.

Although there is no indication that anyone at Fleet Bank, First Select, or Credigy was aware of the identity theft issue until 2008, the Court of Appeals found that the claim was non-justiciable since the time the First Select filed its complaint in 1999. “Credigy never had the right to enforce its purchased judgment against Ms. Whittington, because it stepped directly into the shoes of Fleet Bank, who never had a claim against Ms. Whittington for the underlying debt.” The lack of a right to enforce the judgment meant Credigy had pursued a non-justiciable claim and, therefore, was liable for Whittington’s attorneys’ fees under Section 6-21.5.

The take away message from the Court of Appeals’ Opinion is that financial companies seem to have a duty to confirm that their customers have not been victims of identity theft prior to instituting collections proceedings. Failure to comply with this duty may expose the financial company to the possibility of being required to pay the attorneys’ fees incurred by the identity theft victim in setting aside the judgment.

COA: Incorrect Property Description On Deed of Trust Renders Deed Defective

Lenders should take care to ensure that details on their deeds of trust are correct, lest they lose priority if the borrower defaults. Today the COA held that a deed of trust with an incorrect description is defective. The case is Fifth Third v. Miller.

Miller executed a promissory note and deed of trust on his property in favor of Fifth Third. The Fifth Third deed of trust contained an incorrect description of the property and also failed to name a trustee. A few months later the Millers executed another promissory note and deed of trust on their property in favor of BB&T to secure an equity line of credit. The Millers defaulted on both notes.

Fifth Third claimed that it should be allowed to reform the deed to correct the errors and that its interest in the property was superior to BB&T's. It also claimed that BB&T was not a bona fide purchaser for value because it had constructive notice of the Fifth Third deed. The COA held that the deed did not meet the requirement of N.C. Gen. Stat. § 47-20(a) that a deed must have a sufficient property description in order to be properly registered, and thus the deed was defective and did not provide constructive notice to BB&T. The COA also denied Fifth Third's request to reform the deed because to do so would injure the rights of BB&T, who was an innocent bona fide purchaser.

COA Opinions

This morning the North Carolina Court of Appeals issued 16 opinions. We will have more on these cases later.