Have you ever heard of section 503(b)(9) of the United States Bankruptcy Code?  It was an addition as part of the 2005 overhaul/update to that Code.  As too often happens with legislation, it appears to be a good idea which was incompletely drafted.  However, for material suppliers, it is worth knowing about and keeping in your back pocket.  So, what is it?

In instances where a bankruptcy debtor went out in the week or two before filing and used credit to fill out its inventory ahead of a Chapter 11, 503(b)(9) provides a claim for the creditor to recover the value of those goods.  The problem can be found simply by reading the entirety of 503(b)(9): [After notice and a hearing, there shall be allowed administrative expenses, …, including] – “the value of any goods received by the debtor within 20 days before the date of commencement of a case under this title (chapter 11) in which the goods have been sold to the debtor in the ordinary course of such debtor’s business.”

That is it – the drafters provided no real guidance as to what they were thinking in terms of what constitutes “goods,” or when these claims should be paid, or how such claims interact with preference issues.  Bankruptcy and appellate courts across the country have faced a myriad of claims since enactment in 2005, but clarity has not yet resulted.  It appears “goods” are most likely items falling under the UCC definition for that term.  Some courts have allowed immediate payment of this type of administrative claim while others have held off in case there was a setoff question related to a potential preference claim.  

Since priority for an administrative claim falls between secured and general unsecured, giving notice of a 503(b)(9) claim and going through the hearing process has value if the claim is large enough (dollar value).  The key is the timing.  There seems some consensus that this provision might be a safety net for those who fall victim to the tight timelines of a reclamation claim.  Theoretically, it might be considered that the claim is valid if submitted anytime within the claims period, however, be mindful that it requires notice and a hearing, not the mere filing of a proof of claim.

If you have a customer come in and buy out the store only to file bankruptcy shortly thereafter, remember this provision and seek counsel as to whether you have a claim to be made and then strategically, whether it is advisable to assert that claim.

Tech Jobs & Pay Continue to Surge in North Carolina


Tech Jobs & Pay Continue to Surge in North Carolina

                According to CBRE Group, Inc., one of the world’s largest real estate investment managers, tech employment in Charlotte and the Triangle markets continue to grow at an impressive rate.  Charlotte has purportedly added nearly 22,000 tech jobs between 2011 and 2016, which represents a 77% increase.  Meanwhile, Raleigh-Durham remains a bigger tech market, having added almost 62,000 tech workers in the same time-period, representing growth of 51%.

Correspondingly, Indeed Hiring Research shows Raleigh-Cary as one of the top 8 metropolitan areas for tech jobs posting that pay over $100,000.00.  Indeed Hiring Research also finds Raleigh-Cary as the “No. 11 ‘tech hub’ in the U.S. as one of the ‘closet cousins to Silicon Valley’”.  For 2017, Raleigh has edged out San Francisco-Oakland for the 5th highest percentage of tech job openings.

Governor Cooper Signs New Business Contract Law Implementing Updated Choice of Law and Forum Selection Clause Standards


Business contracts often include choice of law and forum selection clauses which many consider boilerplate.  If the contract breaks down and litigation begins, these terms become very important in determining where the lawsuit will be tried and which state’s laws will apply.

The Business Law Section of the North Carolina Bar Association issued a thorough report discussing the need to update North Carolina’s outdated choice of law and forum selection standards:

Fair Debt Collection Practices Act: Time for an Amendment?


The Supreme Court of the United States (SCOTUS), in a unanimous opinion which was also the first opinion authored by the newest judge on the Court – Justice Neil M. Gorsuch, upheld lower courts’ decisions that certain businesses are not governed by the Fair Debt Collection Practices Act.  What does this mean?

In Henson v. Santander Consumer USA, the Court addressed situations in which a company buys debt at steeply discounted prices then works to collect from the debtor. It is not an unusual business model.  Over the past decade, companies like Santander which originally existed to assist a specific company or industry in traditional debt collection recognized an opportunity.  Many creditors are willing to package either past due accounts or judgments, which they deem uncollectable or not worth the cost of collection, and sell them to a third party.  That third party then becomes the actual creditor.

The position of a company like Santander matters because of the language of the Fair Debt Collection Practices Act (FDCPA) which was originally passed in 1977.  The collection model in existence at that time and to a large extent still in operation today involves a collection agency being retained by a creditor to undertake collection activities on behalf of the creditor.  Consumers got tired of the harassing phone calls at home, at work and at all hours, so Congress enacted the FDCPA to rein in such practices.  SCOTUS in its opinion determined that the FDCPA was not designed to deal with businesses or individuals collecting their own debt and declined the opportunity to use the powers of the court in a manner which would amend legislation.  In the opinion, the Court indicated that if Congress determines that new legislation or an amendment to existing legislation is necessary, then it can act.

For now, the take-away may well be to expect a proliferation of businesses like Santander.  If the model is lucrative enough and unrestrained, it seems a likely outcome.  And, that may well mean that there will be new legislation proposed in Congress, so stay tuned.





Changes Coming to Credit


Changes Coming to Credit Reporting

                Beginning July 1, 2017, TransUnion, Equifax, and Experian plan to stop collecting and reporting information related to civil judgments and tax lien information.  The change, which will affect millions of American consumers and their credit scores, is said to be in response to a 2016 settlement with 31 state attorney generals over alleged problems with credit reporting accuracy and the correction of errors on credit reports.  Once civil judgments and tax liens are removed, lenders and credit analysists will have a less complete picture on the credit-worthiness of applicants.  According to LexisNexis Risk Solutions, individuals with civil judgments and tax liens are “5.5 times more likely to end up in serious default or foreclosure compared with borrowers who don’t’ have such items in their files.”  Without this important information, lenders must be more diligent in researching potential borrowers and should consider seeking supplemental information outside the three national credit bureaus when vetting borrowers.



Politics and economics create interesting conundrums – this is not a news flash.  The Triangle Business Journal points this out in an article on the new Atlantic Coast Pipeline which is about to wind its way north to south across eastern North Carolina.  From the construction industry perspective (and without getting into either the politics or the economics), beware of this project.  As with anything that is long and underground, making certain you get paid for your work is difficult.  This is a private project so there may be a payment bond, but one is not required by law.  There may be “dirt” lien rights, but factoring those parcel by parcel will be nearly impossible.  So, a lien upon funds is the only relatively certain protection for subcontractors and suppliers.  Still, this project will provide a boon for the construction industry or at least those parts of that industry that install pipe.  Read the article here:




As a law firm which works with start-ups, we are excited to hear that the Triangle area of North

Carolina continues to be a leader on so many “best of” lists. Today, WRAL Tech Wire reports

that Durham in No. 6 and Raleigh No. 12 on the list of best places to start a new business. If

you know an entrepreneur who is thinking about starting a business or forming a corporate

entity, reach out to the lawyers at Hannah Sheridan Loughridge and Cochran for assistance in

launching on the correct foot. For more information on today’s report, go to: 3-ral- no-12- as-best- place-to- start-a- new-business-


Evaluating Employee Productivity in the Age of Millennials


Who is worth more to your business?

A)  Employee who sits at his/her desk for 8 hours per day and generates $800 in profit per day.
B) Employee who works 4 hours per day at the office, the rest at home, and generates $900 in profit per day.
C) Employee who rarely comes to the office, works almost entirely at home, and generates $1000 in profit per day.
Managers who strictly favor the traditional office model would select option A, emphasizing the benefits of office morale, longevity, etc.  On the other hand, millennial managers reject the notion that productivity is measured by time at your desk and would lean toward option C.  Millennials stress efficiency over time spent.  Efficiency is measured by a company’s metrics.
Is your business considering a move toward workplace flexibility?  If so, what are the state of your business’ metrics to evaluate productivity?  What are the repercussions for a remote employee who does not meet their metrics?
If you or your business are considering these types of changes, we hope you find this article helpful:

Proposed Changes to NC Lien Agent Statutes


On April 4, 2017, Senate Bill 602 was filed, proposing massive changes to the lien agent statutes of North Carolina.  The purported purpose of the revisions was to provide for the cancellation of a Notice to Lien Agent by the potential lien claimant.  Interestingly, the proposed changes seem to indicate that any such cancellation by a potential lien claimant would be permissive, as opposed to mandatory.    Additionally, the changes would modify the relation-back of a subsequently filed Notice to Lien Agent and would create a situation where a Notice to Lien Agent would be automatically cancelled after 5 years.  As currently drafted, it would seem that best-practice would simply be not participate in the permissive cancellation of a Notice to Lien Agent.  Stay tuned; we will continue to monitor this legislation and provide subsequent updates.Roof

How is the North Carolina economy doing?


The headline may have you thinking that this will be a political piece.  We hope not.  However, as we enter the last month of the first quarter of 2017, it seemed a good time to look at the numbers for the end of 2016 and the beginning of 2017 as provided by the Federal Reserve out of Richmond.  Overall, the economy appears to be holding its own, growing at a sustainable rate.

The good news is that the construction sector continues to grow.  The challenge may be finding enough skilled labor in the trades to keep up with the growth. It will be interesting to see how the industry responds in the coming year as the Federal Reserve adjusts interest rates to control inflation.  Also, watch to see if federal and state governments fulfill campaign pledges to undertake major infrastructure projects.  Such projects stand to be very beneficial to the construction sector.

If you want to see the detailed report from the Federal Reserve, open this link:

Wage Garnishment

North Carolina: From Landfills to Energy


Buncombe County is the latest to broadcast its plans to utilize a landfill site for purposes of a solar energy farm.  To lessen the economic impact of such a project, the County says that, although it will make an initial investment of $26,000.00 for engineering and feasibility studies, the plan will be to partner with Duke Energy to illustrate the viability of the project, in hopes of bringing in a private company to be a long-term tenant of the site.  Buncombe County is not the first municipality to use landfill sites for solar farms; similar projects have recently begun in Gaston County and Charlotte.  The 25-acre tract in Woodfin, North Carolina provides Buncombe County not only a large parcel of flat land in an otherwise mountainous area, but also one that has little monetary value due to the trash below the surface.  This otherwise unappealing piece of land, which is located less than 2 miles from an existing power station, has created a unique opportunity to provide Buncombe County with yet another alternate energy initiative.


Courts Revisited


Recently, Judge Marion Warren, the Director of the North Carolina Administrative Office of the Courts, addressed a civic group providing an overview of the North Carolina Court System and a preview of a much-anticipated report from the Chief Justices Commission on the Administration of Law & Justice (NCCALJ).  In his remarks, Judge Warren referred to the judicial branch as the “silent co-equal branch of government.”  Shortly thereafter, national issues shown a spotlight on the United States Constitution, the separation of powers, and the system of checks and balances the Founding Fathers wrote into the Constitution.

In the next few days, the NCCALJ will issue its final report after nearly two years of study, research, public meetings and forums in which the members of the Commission sought to thoroughly review and understand the judicial system of this state.  Though many citizens will remain oblivious to this report for any number of reasons, it is truly critical that the citizens of North Carolina take the time to review at least the executive summary of the report, if not read the full report.  More citizens directly encounter the judicial system in their day-to-day lives than encounter the other two branches of government.  While all three are critical to our system of government, the judicial branch is often misunderstood in terms of the fact it is designed to be the “non-political” branch and is tasked with reviewing the work of the other branches in terms of enforcing the rule of law and the tenets of both the state and federal constitution.

To find the full report upon its release and to review the work of the Commission to date, visit


North Carolina Court of Appeals Begins En Banc Hearings


In the closing days of 2016, the North Carolina General Assembly passed several bills during emergency legislative sessions.  One such bill created a new court procedure whereby a petitioner may now move a case before the entire Court of Appeals.  This is called an en banc hearing.  Typically, North Carolina Court of Appeals cases are decided by three judge panels.  The new law allows exceptional cases to now sit before the entire 15-judge court.  The rushed legislation left practical questions for North Carolina attorneys, such as how to mechanically petition for an en banc hearing.  The North Carolina Supreme Court issued rules to establish the procedure:  Attorneys also wonder where en banc hearings will take place as no one can identify a large enough North Carolina courtroom.  Rumblings amongst the judges suggest that a new courtroom is in the works.  Regardless of the location, the first en banc hearings should be interesting to say the least.



Google Fiber’s communal work space, Fiber Space Raleigh, opened its doors on February 3, 2017.  Located in the famed 518 West location, off Glenwood Avenue, the space is designed to showcase Google Fiber’s superfast Gigabit internet and TV, which is now available in select areas of Wake County, and provide a common work space for local entrepreneurs.  Already available in select portions of Raleigh and Morrisville, the upgrade of Google Fiber internet cabling is currently one of the largest infrastructure in the Triangle.




Ground was broken in December on a nearly $100m facility in Warsaw, North Carolina which will utilize swine waste and other byproducts to generate natural gas.  The process, known as Carbon Cycle Energy, will pump the methane gas to Duke Energy power plants throughout North Carolina.  In 2007, North Carolina became the first state in the Southeast to adopt a renewable energy mandate for electric utilities which included the utilization of hog waste and poultry droppings.  If all goes well, the new Duplin County plant should satisfy the 2007 mandate and provide approximately 2/3 of the hog waste natural gas required by its first-year goals.  Better late, than never.