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Week 18 (2018)

Week of April 30, 2018 through May 4, 2018

Sheehan v. Ash (King 5/4/2018): The Fourth Circuit held in chapter 7 bankruptcy proceedings, a state domiciled bankruptcy debtor is obliged to apply the domiciled state’s exemption scheme on out-of-state, or ‘extraterritorial’, property. This holding affirmed the district court, thus allowing a debtor to apply the Louisiana exemption scheme to West Virginia property, though at the time of proceedings the debtor was residing in West Virginia. This was permitted because the debtor was not domiciled in the same location for the 730-day period preceding bankruptcy filing and thus his domicile was determined to be located in the place he was domiciled for 180 days immediately preceding the 730-day period.  This approach is known as the ‘state-specific approach’ and is consistent with at least two other sister appellate courts. Full Opinion

Lara-Aguilar v. Sessions (Traxler 5/2/2018): The Fourth Circuit held that an alien subject to a reinstated order of removal may not apply for asylum on the basis of the “changed circumstances” provision of 8 U.S.C § 1158(a)(2)(D). The petitioner claims a prior ruling, which prohibited an alien subject to a reinstated order of removal from applying for asylum, is not applicable. Petitioner reasons this is inappropriate because the events giving rise to his asylum claim arose after the original order of removal was issued. Mejia The Fourth Circuit determined this reasoning was flawed both because of the wording in the statute and the Meja ruling. They thus affirmed the Board of Immigration Appeals and denied the petition for review of an order. Full Opinion

United States v. Saint Louis (Diaz 5/2/2018): Defendants unsuccessfully appealed conspiracy and hostage-taking convictions on the grounds that their due process rights were violated among other things. It was held when an imperfect photo identification procedure isn’t unduly suggestive and the witness’s identification shows evidence of reliability, the court is content to rely upon the judgment of the jury in determining the identification. Additionally, an inadvertent admission of potentially prejudice remarks occurs during testimony, the presumption is that juries are presumed to follow cautionary instruction from the court and no prejudice is ruled to exist if the jury could make guilt determinations by following the cautionary instructions. Finally, government may properly respond to a defendant’s argument that a failure to present evidence weakens the government’s case by noting that the defendant could also have presented the evidence.  Considering the proceeding, the defendant’s rights were not violated.  Full Opinion

Highlight Case

Legacy Data Access, Inc. v. Cadrillion, LLC, No. 17-1215

Decided: May 3, 2018

The Fourth Circuit emphasized the Economic Loss Rule and the distinct difference between tort and contract claims, by holding that a breach of contract claim did not give rise to a conversion claim for proceeds owed under a contract. The court held that for a tort claim to be appropriate the defendant must have breached some duty other than a contractual duty, such that the tort claim is “identifiable and distinct” from the breach of contract claim. Broussard

Legacy Data brought suit against Cadrillion and individuals associated with Cadrillion because of a failed contract in which Cadrillion was to purchase Legacy Data, grow the business and sell it within three to five years. In exchange for Legacy’s assets, Cadrillion contracted to pay two sums, first an initial $513,000 on the closing date of the contractual agreement and a second sum upon the occurrence of specified events, such as if Cadrillion sold Legacy.  The former owner of Legacy Data, Peters, agreed to act as an employee after the closing of the contractual agreement with Cadrillion. If, after three years, Peters wished to terminate her employment, Cadrillion had the option to buy the remaining interest in the company still retained by Legacy and Peters. The value of the remaining interest was to be determined by a complex equation enumerated in the contract. After three years, Peters indeed took steps to terminate her employment and Cadrillion opted to exercise its right to purchase the remaining interest. This dispute arises because of the amount Cadrillion valued and attempted to pay for the remaining interest in Legacy.

Plaintiffs claim that the failure to pay the appropriate amount was beyond a breach of contract and was conversion. They asserted they were thus entitled to compensation for the conversion and punitive damages in addition to the breach of contract damages. The lower court awarded these damages but the Fourth Circuit reversed. The Fourth Circuit held that the tort claim of conversion was inappropriate because the duty to pay the call price arose only because of the contractual agreement.  In order to have a tort claim the defendant must have breached some duty other than a contractual duty, such that the tort claim is identifiable and distinct from the breach of contract claim. The court held that this had not occurred. Because the conversion claim was reversed, Plaintiffs were left with only a breach of contract claim meaning that the punitive damages must also be reversed. This was held because under N.C. Gen. Stat. §1d-15(d), “punitive damages shall not be awarded against a person solely for breach of contract.

Additionally, Plaintiffs asserted the $256,500 they were originally awarded for breach of contract was insufficient. The court agreed ruling that the evidence was “clear, convincing and uncontradicted” that the breach of contract amount was insufficient. This was held because the amount rewarded was substantially below the range of credited testimony supplied by witnesses from both parties valuing the interest. Thus, the Court granted a partial new trial.

The contract also provided for attorneys fees to the prevailing party of any action arising out of the contract. Though Plaintiff’s did not prevail on all claims they prevailed on the breach of contract claim and are thus entitled to attorney’s fees. However, the court held fees must be reassessed because the fees are based on the results obtained. The results obtained in this trial are now different because the punitive damages and conversion claims were reversed and there was to be a partial new trial for the breach of contract claims.

Lastly, the court held the denial of Unfair and Deceptive Trade Practices Act claim was appropriate. The court regarded this business act as an “extraordinary event” and additionally occurred with an employer-employee relationship. Therefore these business actions do not affect the market at large and an Unfair and Deceptive Trade Practices Act claim was inappropriate

Sara E. Weathers

Full Opinion