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Both Subchapter K and S of the Internal Revenue Code (IRC) are pass-through tax structures in which the members of the entity are taxed for the entity’s income, gains, losses, and expenses on their individual tax returns. That is where the similarities end.

There are several differences discussed below that make Subchapter K seem more taxpayer friendly than Subchapter S. Much of the popularity of the LLC is attributable to the fact that LLCs offer limited liability to all investors combined with the more flexible partnership tax regime. In some situations, however, the goals of the business owners may be better achieved with an S corporation.

Subchapter S places very strict restrictions on the ownership and capital structure for S corporations.  S corporations are limited to 100 shareholders (although members of a “family,” broadly defined, are counted as one shareholder), and they may not have more than one class of stock.  Additionally, all shareholders much be individual U.S. citizens or residents and other corporations or partnerships cannot be shareholders of the company.  Anyone can be a member or partner of an entity taxed under Subchapter K.

Partnerships and LLCs taxed under Subchapter K may make special allocations of income and deduction items, while shareholders of an S corporation must include corporate income and loss on a pro rata share basis.  Thus, partners/members may agree to share certain income or deductions disproportionately, and the agreement will be respected for tax purposes if it reflects their economic business deal.  Additionally, in most cases, partnerships and LLCs taxed under Subchapter K, can distribute appreciated property in kind without immediate recognition of taxable gain.

In a business with only a few owners, an S corporation may be the entity of choice because the flexibility of Subchapter K is not needed.  S corporations are often used by owners that prefer to conduct their business as a state law corporation instead of a partnership or limited liability company because they are more comfortable with the corporate governance structure.  S corporations are also often used by service providers to minimize their exposure to employment taxes.  S corporations are not viable options in many situations – a business with foreign investors would not be able to make the S corporation election because foreign investors are not permissible S corporation shareholders.  Additionally, many institutional investors (e.g., tax-exempt pension funds and charitable organizations) are discouraged by the tax system from investing in any type of active business that is operated as a pass-through entity.  Venture capital funds, which provide a large source of capital for start-up companies, appear to be more comfortable using the familiar C corporation capitalized with several classes of stock, a structure not available in an S corporation.

For a complete analysis of the tax implications of C Corporations, Partnerships, and S Corporations click here for the Joint Committee on Taxation’s publication entitled “Choice of Business Entity: Present Law and Data Relating to C Corporations, Partnerships, and S Corporations.”

Contact us regarding your business law matter. Click here

Option 1: keep your South Carolina LLC open and register it with the State of North Carolina as a foreign business authorized to transact in North Carolina. You’d obtain a “Certificate of Good Standing” or similar from Florida. You then provide that to the Secretary of State for North Carolina as part of your North Carolina Application for Certificate of Authority (to conduct business in North Carolina). Assuming you are approved by NC, you’re now good to go to conduct business in both states, or either state, and you can have your principal place of business in either state. You will likely be required to pay annual fees to each state and file taxes in each state, which are important factors to consider.

Option 2: start an affiliated company or subsidiary in North Carolina. In certain specific instances, you may keep your South Carolina LLC open, and instead of registering it with North Carolina, you’d prefer to create and register a separate but related business entity in North Carolina. This is typically referred to as a “subsidiary” or an “affiliated company”. You will likely be required to pay annual fees to each state and file taxes in each state, which are important factors to consider.

Additional notes. Under any of the above options, you’ll have to have a registered agent with a “continuous presence” in NC. Many law firms (like mine) agree to provide that service for a small annual fee, but your company’s “RA” doesn’t have to be a business lawyer or law firm. Of course, we also provide the very services needed to transfer your business overall.

These actions can be accomplished without an attorney, but you should at least consider consulting with an attorney any time you make a significant change to your business entity. Good luck!

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Business law Attorney Jason McGrath shares some information about how much you should expect to pay in fees to an Arbitrator in this short video.

https://youtu.be/_mJseLaXzM0

Here are some of the key points contained in this informational video:

• Arbitrators typically charge fees similar to what lawyers charge.
• Does the Arbitrator require a minimum amount when the arbitration is scheduled? This may be called a cancellation fee or a retainer fee. The arbitrator may require this to offset a loss if the arbitration cancels.
• Arbitrators can sometimes be bargained with to lower fees but normally these are set fees.
• Arbitration fees (which are mostly made up of the Arbitrator’s fees) are often split evenly between the parties, but this can be altered by contract, law, or court order.

You should get advice from an attorney to assist in handling litigation issues like arbitration.

This is part of a continuing series of video blogs on contract law and arbitration – you can find the first part of this series on our blog or on our YouTube Channel.

If you need legal services in North Carolina, South Carolina, Georgia, Florida, Ohio, or Tennessee we invite you to fill out our confidential client form for possible legal assistance.

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Here are some of the key points contained in the video:

• If using a panel of 3 arbitrators: each party picks an arbitrator and then those two arbitrators pick the third one.
• If using only 1 arbitrator: one side presents a list of possible arbitrators to the other side and the other side picks from the list.
• You go back and forth and negotiate between the parties until a decision is made.
• You may wish to avoid attempting private conversations with potential arbitrators in order to avoid the appearance of impropriety.
• Consider all the information available to you to make an informed decision about your arbitrator.
• Arbitrators may also be appointed by the court.

If you need legal services in North Carolina,
South Carolina,
Georgia,
Florida,
Ohio,
or Tennessee we invite you to fill out our confidential client formfor possible legal assistance.

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At McGrath and Spielberger, PLLC, we represent many local and regional clients who own and operate many different types of businesses, including restaurants, gyms, retail stores, and other commercial businesses, throughout North Carolina, South Carolina, Florida, Georgia, Ohio and Tennessee. We are obviously hearing a lot from our clients right now regarding their issues and concerns in relation to the Covid-19 coronavirus pandemic. Overwhelmingly, most client inquiries relate to commercial leases in which our clients are tenants. Their main questions typically revolve around their requirement to pay rent and whether they can be held in default and/or evicted during the pandemic.

This article will focus on the answers to these question in relation to commercial leases in South Carolina specifically, but a lot of what is discussed may also apply in other states. As of now, without an explicit agreement with the landlord under the lease regarding payment of rent during this pandemic, there are “simple” answers and “practical” answers that either now exist or that will eventually reveal themselves. Please also note that the answers to the above questions are fluid and may be affected by forthcoming government relief programs and bailouts.

Do I have to pay rent?

Simple Answer: Yes.

Practical Answer: Still yes unless some sort of law is passed allowing commercial tenants to stop paying rent for a period of time, unless your landlord has specifically told you your rent will be abated, or unless your lease agreement has an applicable Force Majeure clause or other clause which would relieve your obligation to pay rent (Click here for a brief summary of what a Force  Majeure clause is). As of now, there have been no Federal or state orders issued or laws passed that currently allow tenants to stop paying rent or requiring landlords to provide any type of rent relief.

Can I be held in default and/or evicted during the Covid-19 coronavirus pandemic?

Simple Answers: Held in default, yes. Evicted, probably not for the immediate future.

Practical Answer: Again, still yes for default. As far eviction goes, though, when you can or will actually be evicted or ruled by a court to be in default is somewhat up in the air and it likely won’t be before May 1, 2020. On March 18, 2020, the South Carolina Supreme Court issued an order stating, in part, “. . . that all evictions currently ordered and scheduled statewide shall be rescheduled for a date not earlier than May 1, 2020.”  While this order does not specifically differentiate between commercial and residential leases, the lack of such differentiation bolsters an argument that the order applies to all leases, both commercial and residential. And despite some public perceptions to the contrary, the order does not state in any way whatsoever that tenants in commercial leases are excused from paying rent, that landlords cannot add late fees, penalties and interest to late or unpaid rent payments, or that landlords can’t hold tenants in default or file to evict them for not paying rent or otherwise violating their leases. It simply means that virtually no eviction hearings will be heard in court prior to May 1, 2020. It should also be noted that South Carolina law does not necessarily require a landlord to file an eviction action to remove a tenant – in some cases “self-help” evictions are allowed. However, they are rarely utilized because they pose many risks to and are wrought with pitfalls for landlords trying to utilize them. So, practically, if you fail to pay your rent or otherwise violate the terms of your lease, you are unlikely to be physically evicted or ejected from your leased space prior to May 1, 2020, and probably much later due to the backup of cases that will result from the order. But you can still be in default of your lease and may be liable for past due rent, penalties, late fees, interest and other damages suffered by your landlord due to your failure to pay rent or comply with other provisions of your lease.

So, if you cannot pay your rent due to the Covid-19 coronavirus pandemic, or for any other reason, we highly recommend you first discuss it with an attorney. It may be that approaching your landlord and reaching an agreement that works for both of you is the best approach, or it may be that your specific situation requires more complex and/or drastic steps. If you are located in one of the jurisdictions in which McGrath and Spielberger has licensed attorneys, please contact us and we would be happy to assist you analyze your situation and form a plan that will allow your business to survive during these unprecedented times. You can click here, email us at info@mcgrathspielberger.com, or call us at 800.481.2180.

McGrath and Spielberger, PLLC handles business law, contract law and commercial lease matters every day, and has lawyers who are licensed to practice in FL, GA, NC, OH, SC, and TN (if you are unsure as to what jurisdiction applies to your legal matter, we can help make that determination).

What contract controls the relationship between the National Basketball Association and its teams like the Boston Celtics on the one side and players like Kemba Walker on the other? The relationship between the NBA, the teams, and the players is generally governed by contract law, and specifically a business contract almost 600 pages long titled the “Collective Bargaining Agreement” (the “CBA”).

What key part of the CBA might largely control what happens in these coronavirus-induced circumstances? What immediately comes to mind is whether there is a “Force Majeure” clause somewhere in those many pages of fine legal verbiage. Click here for a brief recap of what a Force Majeure clause is; in essence, some unusual, significant condition beyond the control of a contractual party which interferes with that party’s ability to perform duties under the contract. Yep, on page 467 is “Section 5: Termination by NBA/Force Majeure”.

Is something like COVID-19 addressed in the CBA under the Force Majeure clause? Notably, the list of Force Majeure items in the NBA’s contract with the National Basketball Players Association [sic] does include “epidemics”. That term is not defined specifically in the CBA, which means we’d typically look to the standard definition, perhaps influenced by what definitions relevant courts of law have accepted over time. “Epidemic: a disease affecting many persons at the same time, and spreading from person to person in a locality where the disease is not permanently prevalent.” Very few reasonable minds would disagree that coronavirus is an epidemic in the United States right now (and in Canada to a certain extent, let’s not forget the reigning NBA champion Toronto Raptors).

You should also know that the Collective Bargaining Agreement – which, again, is a business contract – allows the NBA to terminate that contract after a Force Majeure event.

So does coronavirus mean that the NBA doesn’t have to pay the players while games are suspended? There may be an epic battle over that very question.  The CBA specifically states that if a Force Majeure event (like coronavirus – an “epidemic”) occurs and causes teams not to be able to play one or more games, and those games are not made up, each player who was part of that team shall have his overall compensation for that season reduced by 1.08%. (In the contract it’s actually expressed as a fraction – 1/92.6th, based on an agreement that for this purpose a season is made up of 92.6 games.)

Interestingly, this part of the CBA specifically states that neither the NBA nor the Players Association must terminate the contract even if it has the right to do so, including as to the NBA’s right to cancel the CBA due to this Force Majeure event. However, there is not similar language which specifically addresses whether the NBA has the option to reduce compensation to the players under a Force Majeure circumstance. Thus we are left with language mentioned in the previous paragraph (and in the CBA itself, the previous page) which says that the players’ compensation “shall” be reduced.

If I was arguing for non-payment, I’d argue that the contract doesn’t allow the teams to pay the players in these circumstances even if the teams wanted to. The players, presumably, would argue that a contractual party always has the right not to enforce one of its rights, and thus the teams could of course pay the players if they so choose. Also, there are certainly other aspects of this 598-page contract, governed by New York and/or Federal law, which influence these legalities, and this article is not attempting to engage in a detailed analysis of this issue and is not attempting to interpret or comment on New York law.

This NBA stuff is interesting, but what about my business? Can your lawyers help my company deal with contract issues? Yes, that’s what we do. We explore, we troubleshoot, we diagnose, we advise, we repair, we resolve, we combat, whichever is appropriate. If you want help and the subject matter and the jurisdiction (which state, etc.) match up with those of our Firm, reach out to us and ask for a consultation; one way to do so is by clicking here. Good luck and keep yourself – and your business – safe!

McGrath and Spielberger, PLLC handles business law and contract law matters every day, and has lawyers who are licensed to practice in FL, GA, NC, OH, SC, and TN (if you are unsure as to what jurisdiction applies to your legal matter, we can help make that determination).

Coronavirus (more formally known as COVID-19) is now impacting every part of life. Let’s start figuring out if and how it impacts your business law contract, initially by asking and answering these fundamental questions that are being posed.

1.     Practically, how might the coronavirus impact my business agreement?
2.     How could something like the coronavirus be covered in my business law contract?
3.     Are we talking about “Acts of God?”
4.     How do I know if the “Force Majeure” principle applies to my business agreements?
5.     What do I do if my business’ rights or duties are significantly impacted by COVID-19?
6.     Can your lawyers help my company deal with this now and make improvements for the future?

Practically, how might the coronavirus impact my business agreement? You’re probably paying for a product or service, or being paid for a product or service – or both being paid and paying. Supply chains are interrupted, resources are interfered with, money is short. This pandemic is devastating across the entire spectrum of the commercial world in addition to our personal worlds. You may suddenly not be able to fulfill your normal contractual duties to supply, not be able to pay, or not be getting paid.

How could something like the coronavirus be covered in my business law contract? Probably by way of what is usually called a “Force Majeure” clause. This type of provision, found in most well-drafted business law agreements, typically excuses a contractual party from performing its duties, in part or in whole, for a temporary time without being in breach of the contract, if the non-performance is due to the Force Majeure cause / event.

Are we talking about “Acts of God?” Yes, no, and/or maybe. (Great lawyer answer, right? In all seriousness, in some ways the answer to this question somewhat depends on one’s religious beliefs.) “Back in the day” Force Majeure contractual clauses were often referred to as “Acts of God” clauses. Now, many contracts which have Force Majeure clauses include in the list of possible events/causes the words “acts of God”. For example, you might be excused from performing your duties to the extent that you cannot reasonably perform them due to “hurricanes, labor strikes, power outages, acts of God…,” etc. But Force Majeure clauses, as you can see, typically include many more events/causes than “acts of God” alone.

How do I know if the “Force Majeure” principle applies – or could apply – to my business agreements? Could the Force Majeure principle apply to your contracts? If the contract has such a clause, then yes. The answer can somewhat be ‘yes’ even if you don’t have such a clause, but that’s a sub-topic for a different article. Does this principle apply to your business contract? If it has a Force Majeure clause and if there are Force Majeure type causes/events interfering with the performance of the contract, then yes it likely applies. (Please understand we aren’t saying that the clause applies in your exact situation, which is not known to us, and please understand we aren’t giving legal analysis about any specific situation – each specific situation depends on an analysis of the specific facts involved.)

What do I do if my business’ rights or duties are significantly impacted by COVID-19? For one thing, find out if there is a Force Majeure contract clause which may apply. If there is, ask a lawyer to analyze your situation. Even if there isn’t, ask a lawyer to analyze your situation. Practically, it also makes sense to consider communicating with your contractual partners to alert them to the challenging circumstances, whether those circumstances may cause you to be unable to perform or you fear that they may cause another party to fail to perform, or both, and see what cooperative measures can be agreed upon, or at least level-set expectations and confirm present-day realities.

Can your lawyers help my company deal with this now and make improvements for the future? That’s what we do. We explore, we troubleshoot, we diagnose, we advise, we repair, we resolve, we combat – whatever the situation calls for. If you want help and the subject matter and the jurisdiction (which state, etc.) match up with those of our Firm, reach out to us and ask for a consultation; one way to do so is by clicking here. Good luck and keep yourself – and your business – safe!

McGrath and Spielberger, PLLC handles business law and contract law matters every day, and has lawyers who are licensed to practice in FL, GA, NC, OH, SC, and TN (if you are unsure as to what jurisdiction applies to your legal matter, we can help make that determination). 
 

Watch here > https://youtu.be/rOPNhRSSLVE

Here are some of the key points contained in the video:

⬤  Arbitration: do you prefer arbitration or a formal court case if there is a dispute?

⬤  The intent of an arbitration provision in a contract is to avoid a formal court case.

⬤  Arbitration provisions are, in general, enforceable and typically will be binding in the same way that a civil court judgment can be enforced.

⬤  There are ways to appeal an arbitration decision but they are limited.

⬤  Arbitration is usually less expensive than a formal court case.

⬤  You should talk to an attorney for advice when considering including an arbitration provision to your business contract.

If you need legal services in North Carolina, South Carolina, Georgia, Florida, Ohio, or Tennessee we invite you to fill out our confidential client form for possible legal assistance.

Click this link to view on YouTube https://youtu.be/J23FU7EDFB0, or watch below.

Here are some of the key points contained in the video:

What do you do if the other party has already filed a formal lawsuit in the court system?

1. You go to the other side and point out that there is an arbitration clause in the contract and demand it be honored.
2. If the other side refuses to halt the lawsuit and go to arbitration, you file a motion asking the court to dismiss or stay the lawsuit and order arbitration.
3. This type of a motion needs to be filed before the case goes to far in the formal court system.
4. If the court believes the arbitration clause to be valid, it will typically order arbitration and halt the lawsuit in the meantime.
5. More often than not, arbitration clauses are enforced by courts.

You should get advice from an attorney to assist in handling litigation issues like arbitration.

If you need legal services in North Carolina, South Carolina, Georgia, Florida, Ohio, or Tennessee we invite you to fill out our confidential client form for possible legal assistance.

Attorney Jason McGrath explains “Interrogatories” during litigation and how they generally work in a lawsuit in this short video.

Click here to watch on YouTube  – https://youtu.be/s923VxHdLyE

If you need legal services in North Carolina, South Carolina, Georgia, Florida, Ohio, or Tennessee we invite you to fill out our confidential client contact form for possible legal assistance.

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This video contains helpful information for those going into business within the state of North Carolina including:

• Certificate of Existence from the N.C. Secretary of State
• Letter of Good Standing from the N.C. of Revenue

Business law attorney Jason McGrath discusses Letters of Good Standing and Certificates of Existence for North Carolina businesses in this informational video.

Click here to view on YouTube – https://youtu.be/EFhxSwkVy2E

If you are in need of legal assistance for your business in North Carolina, South Carolina, Tennessee, Georgia, Florida or Ohio, please fill out our confidential client intake form.

       Every mortgage loan servicer must comply with this statute on every loan it services in North Carolina. The law does not limit this notice to loans that are in default or borrowers that have filed a bankruptcy. Pursuant to the law, the mortgage loan servicer must:

• Assess any fee on the account within forty-five (45) days of it being incurred; and
• Send a clear and concise written statement to the borrower, at their last known mailing address, within thirty (30) days of assessing the fee

       Any failure by the mortgage servicer to comply with this law is deemed a waiver of the right to collect the fee from the borrower. This law is applicable to all fees assessed to a mortgage loan, including things like foreclosure fees, attorney’s fees, property inspections, property preservation fees, and any other fees permitted under the terms of the Promissory Note and Deed of Trust.

       Oftentimes, mortgage loan servicers include fees on the monthly statement mailed to borrowers. It is important that you view these statements to make sure you understand the fees and that everything assessed to your loan was done within the required timeframes. When borrowers have a loan go into default or file bankruptcy, mortgage loan servicers often stop sending periodic statements or notices to borrowers. Under North Carolina law, the mortgage servicer must still comply with this law or it waives the right to collect the fees. Please note that the waiver is only for fees that were not properly assessed and communicated, you will still be responsible for the principal, interest, and any escrow amounts due under the loan.

       A mortgage servicer’s failure to comply with this law can reduce amounts it claims you owe when trying to pay off a loan, or reinstate a loan that got behind on payments, or when you file bankruptcy. If you are struggling to pay your mortgage or are already behind, please feel free to contact our office for assistance.

      Key Excerpts from the statute are below.

N.C.G.S. § 45-91.  Assessment of fees; processing of payments; publication of statements. A servicer must comply as to every home loan, regardless of whether the loan is considered in default or the borrower is in bankruptcy or the borrower has been in bankruptcy, with the following requirements:

(1) Any fee that is incurred by a servicer shall be both:

       a. Assessed within 45 days of the date on which the fee was incurred. Provided, however, that attorney or trustee fees and costs incurred as a result of a foreclosure action shall be assessed within 45 days of the date they are charged by either the attorney or trustee to the servicer.

       b. Explained clearly and conspicuously in a statement mailed to the borrower at the borrower’s last known address within 30 days after assessing the fee, provided the servicer shall not be required to take any action in violation of the provisions of the federal bankruptcy code. The servicer shall not be required to send such a statement for a fee that either:

             1. Is otherwise included in a periodic statement sent to the borrower that meets the requirements of paragraphs (b), (c), and (d) of 12 C.F.R. § 1026.41.

             2. Results from a service that is affirmatively requested by the borrower, is paid for by the borrower at the time the service is provided, and is not charged to the borrower’s loan account.

(3) Failure to charge the fee or provide the information within the allowable time and in the manner required under subdivision (1) of subsection (a) of this section constitutes a waiver of such fee.

Attorney Jason McGrath shares some information about where you can expect an arbitration proceeding to physically take place in this short video and summarized in this blog post.

Understand the practical logistics of an arbitration that may arise from a dispute about your business contract.

Here are some of the key points contained in this informational video:

Where will the arbitration physically take place? What city or county? An attorney’s office? The courthouse? City hall?

• As far as city or county, arbitration often takes place where a related lawsuit would be (or is) taking place.
• Some arbitration agreements will dictate what city or county the arbitration must occur in.
• Arbitration can usually occur anywhere that the parties agree.
• The arbitration hearing could take place at a private law office or the arbitrator’s office.
• Arbitration doesn’t usually occur in the courthouse.

Occasionally a court will enter an order as to the logistical specifics of arbitration, such as the hearing location. You should get advice from a contract attorney to assist in handling litigation issues like arbitration.

If you need legal services in North Carolina, South Carolina, Georgia, Florida, Ohio or Tennessee, we invite you to fill out our confidential client form for possible legal assistance.

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Attorney Jason McGrath explains some things to consider when deciding whether to follow a contract’s arbitration clause or file a lawsuit in this short video.

Click here to watch on YouTube or watch the video below.

Here are some of the key points contained in the video:

• How do you end up in arbitration vs. in court?
• Typically, someone has to decide – do we follow the arbitration clause or just file a lawsuit?
• Parties usually just file a formal lawsuit as if there is no arbitration clause.
• There can be some negatives to ignoring the arbitration clause.

You should have your attorney take a look at the contract and then make a careful decision on how to proceed based on a through legal analysis of your case and the contract.

If you need legal services in North Carolina, South Carolina, Georgia, Florida, Ohio, or Tennessee we invite you to fill out our confidential client form for possible legal assistance.

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In this video, focusing on the North Carolina foreclosure process, attorney Jason McGrath discusses how a lost loan note can affect a foreclosure proceeding.

It is important to note that foreclosures can vary greatly depending on the smallest detail. An experienced real estate contract lawyer in Charlotte NC should be able to access your particular situation and guide you toward the best possible resolution.

If you are facing a foreclosure situation in North Carolina, please fill out our confidential client intake form for legal assistance. We have staff available to assist with real estate and mortgage matters in Tennessee, North Carolina, South Carolina, Georgia, Florida, and even Ohio.

In this video, business attorney Jason McGrath of McGrath & Spielberger PLLC discusses key points that should be considered when hiring a business lawyer for NC Corporations and other small business.

Business Law Attorney Jason A. McGrath provides the following three tips to selecting the best business law attorney in Charlotte NC.

Tip #1

Do they have a great reputation with their clients and their peers?

Tip #2

Are they willing to provide the level of service you want and need?

Tip #3

Is the attorney personable? Do you feel comfortable? Your comfort is important!

 

McGrath & Spielberger, PLLC Business Law Attorney focuses on General Business Law matters such as starting a business, expanding a business, analyzing contracts, resolving disputes, NC Corporations and much, much more! We encourage you to visit our website to learn more about our practice and lawyers serving Florida, Georgia, South Carolina, North Carolina, Tennessee, and Ohio.

As most of my friends are getting married or are recently married (myself included), I frequently get asked why anyone would want a prenuptial agreement. Prenups can get a bad reputation because many people assume signing a prenup means you are preparing for divorce in the future. However, this is NOT necessarily the case! There are many reasons (other than divorce) that future spouses may want to sign a prenup before getting married.

Here are my top 5 reasons for signing a prenup.

• A prenup promotes communication between future spouses so they are fully aware of the other’s financial situation and other issues prior to marriage. In North Carolina and South Carolina, each party must voluntarily provide a full and fair financial disclosure about his or her property and financial obligations (unless waived in writing).

• A prenup can establish how property matters will be handled in the future. If you are a person who has substantial individual or family assets, a prenuptial agreement may be a great way to specify how debt and other financial issues will be handled during the marriage.

• A prenup can determine the rights and obligations of each party with regard to the right to buy, sell, use, transfer, exchange, abandon, lease, or otherwise dispose of, control, or manage certain property. In North Carolina and South Carolina, property obtained during the marriage is generally treated as marital or joint property, but a prenup can change the general rule for property acquired during the marriage.

• A prenup can protect a person that has a professional practice or other service business. For all the entrepreneurs out there, this is a great way to protect your hard work, while still being able to provide for your new family.

• A prenup can be viewed as a proactive dispute resolution system, as it can simplify the divorce process. A prenup may reduce the chance of litigation upon divorce and, in addition, reduce those litigation costs. This may be beneficial for a party that is entering into a second marriage or those who have children from previous relationships.

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In this video attorney Jason McGrath discusses some options when negotiating legal judgments between opposing parties in a lawsuit.

https://youtu.be/JruiKGTNbts

If you are in need of legal assistance with a Legal Judgment in North Carolina, South Carolina, Tennessee, Georgia or Florida please fill out our confidential client intake form.

Whether mediation is court ordered, required by some prior contract/agreement, or occurs as a result of parties to a lawsuit agreeing to mediate, mediation is often an excellent opportunity to resolve a lawsuit. In his 19 years as trial lawyer, Jason McGrath has mediated many cases and in this video he explains how mediation works.

If you are facing a lawsuit in North Carolina please fill out our confidential client intake form for legal assistance.

As attorneys who provide a variety of real estate and mortgage related services, including foreclosures and post-foreclosure disputes, we know that many (most?) borrowers really don’t understand private mortgage insurance. Known as PMI, private mortgage insurance is to benefit the lender, not the borrower – even though the borrower is paying for it.

What makes it worse from the borrower’s perspective is that, in addition to being foreclosed on, a borrower can end up being sued by the mortgage insurance company in relation to the very same policy the borrower paid for. The highly technical terms we use to describe this include:

We’ve advised and defended borrowers in these cases. The most common fact scenario is this one:

• a foreclosure takes place (or sometimes even a short sale or a deed-in-lieu of foreclosure);

• the loan is not paid off in full;

• the creditor (lender / loan note holder) makes a claim against the private mortgage insurance policy;

• the mortgage insurance company pays the creditor to reimburse it for its losses on the loan;

• the mortgage insurance company sues the borrower / former homeowner, under the theory of “We only had to pay out on this policy because you didn’t pay the loan off in full, so you owe us”; and

• the borrower is shocked, comes to us for help.

We regularly assist small business owners, especially start-up businesses, walking them through the steps that need to be taken in order to make the business official and legal.  There are many ways a business can be organized and there are non-tax factors, tax factors, and state statutory requirements that need to be taken into consideration when embarking on this exciting journey of starting a business.

This article focuses on a few of the non-tax factors that need to be considered.  A follow-up article will discuss the tax factors of organizing your business.  Much of the information in this article relates to the laws in a majority of jurisdictions along with examples of specific instances where North Carolina law is different from the majority of jurisdictions.  The statutory requirements of starting a business are state specific, therefore it is important to seek the assistance of a professional who knows the law in your jurisdiction.  There are also state and local licensing as well as registration requirements that will need to be met depending on the jurisdiction your business will be located in.

In the tables below the entities are listed from the broadest/most flexible to the most restrictive.

Limited liability is probably the most sought after attribute of business owners forming a new business venture.  New business owners wish to protect their personal assets from the claims of business creditors.  This can usually be achieved by organizing the venture under a state law that limits the owners’ liability to the amount of capital the owner has invested in the entity.  Be very careful when capitalizing the business and applying for loans.  Some lenders may require that the owner(s) of the business provide a personal guarantee for the business obligations, thereby making the owner liable to those creditors of the business and defeating the purpose of the limitation of liability.

The business lawyers McGrath & Spielberger, PLLC assists clients with all sorts of tax, business, and estate planning matters in North Carolina.  Click here to contact us about your tax, business, or estate planning matter today.

Mortgage Loan Servicer / Foreclosing Bank: Wells Fargo; Wells Fargo Bank NA

Prosecuting Trustee / Law Firm: Shapiro & Ingle, LLP

Property Location: Charlotte, Mecklenburg County, North Carolina

Property Type: Primary Residence

Borrower’s Attorney: Jason McGrath, Esq.

Hearing Date: 11/2017

Actions Taken by McGrath & Spielberger on Behalf of Client in Relation to the Foreclosure Hearing: Mr. McGrath attended the foreclosure hearing with the client and negotiated a Motion to Continue to the court in order to help client avoid foreclosure.

Foreclosure Hearing Outcome: Mr. McGrath successfully moved to continue the hearing; foreclosure avoided.

If you are facing home foreclosure Charlotte NC or Mt Pleasant SC, seek assistance from McGrath & Spielberger today. Many homeowners do not know that foreclosures can often be avoided. Our attorneys are here to be your advocate through these tough times and will work to get you the best possible outcome.

Find related helpful resources on our website at
McGrathSpielberger.com/online-resources/helpful-resources/mortgage-loan-and-real-estate-related-resources/

Arbitration Provisions: Law & Venue

1.      Where is the arbitration to take place?
2.      What state’s laws apply?

Make sure that the arbitration clause in your contract provides that the arbitration will take place in a specified geographical area (city, county, even state). You’ll also want to have the arbitration clause specifically provide that the laws of a certain state will be applied.

Be careful to protect your interests when drafting the arbitration provisions in your contracts.

If you live in North Carolina (or you’re looking to move here), then a bill recently passed into law by the N.C. Legislature might give you some relief from taxes. The bill was vetoed by Governor Roy Cooper, but the Legislature overrode his veto to pass the bill on June 28, 2017. The new law makes three beneficial changes to the State’s current tax code that you will want to be aware of as a resident (or soon to be resident) of North Carolina. These three changes will become effective as of January 1, 2019, except for the corporate income tax rate as stated below. The bill also set forth a budget plan and created an incentive program to bring new jobs to North Carolina.

(1)    Personal Income Tax Rate

The personal income tax rate will drop to 5.25% for a taxpayer’s North Carolina taxable income. The 2017 personal income tax rate is 5.499%.

(2) Corporate Income Tax Rate

The corporate income tax rate will drop to 3% for every C corporation doing business in the State, effective as of January 1, 2017. The corporate income tax rate will drop even further to 2.5% for taxable years beginning January 1, 2019. The current corporate income tax rate is 4%.

New corporate tax rates may bring about a spring of new business in North Carolina.

(3)    Standard Deduction Increased

Additionally, each filing status will see an increase in the standard deduction.

• Married, filing jointly/surviving spouse    $20,000 (currently $17,500)
• Head of Household                                    $15,000 (currently $14,000)
• Single                                                         $10,000 (currently $8,750)
• Married, filing separately                          $10,000 (currently $8,750)

The following is a summary of a hearing on Partition of Real Property that McGrath & Spielberger assisted a client with, and is provided for informational purposes only. Each case, each client, each situation is different, and each matter may have a different outcome.

Basic Facts. The Petitioner is trying to force a sale of the real property at issue so she can receive a portion of the sale proceeds.

Basics of the Applicable Law. The default setting in North Carolina law is that an owner of real property (even a minority owner) has a right to force a partition of that property, whether a partition in kind (physical division) or partition by sale (sell the property and divide the proceeds).

The Challenge. To not have the case follow the default setting (a partition being ordered).

Owner 1. The Respondent (Brother) who owns 11/12 of the real property, lives on the property with his family, takes care of the property, pays the taxes, etc.

Owner 2. The Petitioner (Sister), who owns 1/12 of the real property, does not reside there, does not contribute to the care of the property.

Property Location. Charlotte, Mecklenburg County, North Carolina

Property Type. Primary residence

Who McGrath & Spielberger Attorney Jason McGrath Represents. Owner 2, the Respondent

Hearing Date. November, 2016

Actions Taken by McGrath & Spielberger on Behalf of Client in Relation to the Partition Hearing. Mr. McGrath filed Motions to Dismiss and Objections to the Petition for Partition and attended the hearing with the Client. The strategy to oppose the Petition for Partition was not revealed to the other side until necessary at the hearing itself.

Partition Hearing Outcome. Mr. McGrath successfully prevented an Order for Partition from being entered. The case remains pending, as do our Motions to Dismiss.

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Attorney Jason McGrath explains some things to consider when when considering the arbitration clause in a contract in this short video.

https://youtu.be/VaxZHXUP3PY

Here are some of the key points contained in the video:

• • How many arbitrators would you prefer?

• • Are you comfortable with the decision being in the hands of just one person? Keep in mind that trial level legal cases in the regular judicial system are handled by one judge.

• • Keep in mind that the more arbitrators involved, the more expensive arbitration will be.

• Does the arbitration clause in the contract address how many arbitrators there are going to be?

The arbitration provision in a contract doesn’t have to address the issue of how many arbitrators. You can leave the option open if you prefer.  You want to be mindful of this when crafting your contract and the arbitration provision.

If you need legal services in North Carolina, South Carolina, Georgia, Florida, Ohio, or Tennessee we invite you to fill out our confidential client form for possible legal assistance.

As a business attorney, one of the most frequent questions I am asked is some variation of “How do I transfer my out-of-state company to North Carolina?” I’ll address the most common scenarios and the reasonable options available. I’m using Florida as the other state just for example purposes (I also practice in FL), but the same general process is true regardless of which state your company originated in or currently exists in.

Scenario A: “I live in Florida, where my company was formed, but I’m moving to North Carolina and going forward I will be doing business out of North Carolina instead of Florida. What should I do and how do I do it?”

Option 1: convert your Florida company into a North Carolina company.  NC allows a company formed in another state to convert to become a NC LLC. The company would need to follow the law of the state it is coming from as far as winding down any business and otherwise wrapping up affairs in that state, and would typically need to have passed a resolution or similar approving the conversion to a NC company. The LLC can then file its Articles of Organization/Conversion with the NC Secretary of State.

Option 2: shut your Florida company down and start a new one in North Carolina. You would “wind up” your Florida LLC and dissolve it, such that it no longer exists. While the timing of the steps in North Carolina may vary to some extent, you’d go ahead and create a North Carolina LLC. The name would not have to be the same, but there are advantages to using the same name, if possible (this article does not attempt to address those issues).

Option 3: keep your Florida company open and register it with the State of North Carolina as a foreign business authorized to transact in North Carolina. You’d obtain a “Certificate of Good Standing” or similar from Florida. You then provide that to the NC Secretary of State as part of your North Carolina Application for Certificate of Authority (to conduct business in North Carolina). Assuming you are approved by NC, you’re now good to go to conduct business in both states, or either state, and you can have your principal place of business in either state. You will likely be required to pay annual fees to each state and file taxes in each state, which are important factors to consider.

Option 4: start an affiliated company or subsidiary in North Carolina. In certain specific instances, you may keep your Florida LLC open, and instead of registering it with North Carolina, you’d prefer to create and register a separate but related business entity in North Carolina. This is typically referred to as a “subsidiary” or an “affiliated company”. You will likely be required to pay annual fees to each state and file taxes in each state, which are important factors to consider.

Additional notes. Under any of the above options, you’ll have to have a registered agent with a “continuous presence” in NC. Many law firms (like mine) agree to provide that service for a small annual fee, but your company’s “RA” doesn’t have to be a lawyer or law firm. Of course, we also provide the very services needed to transfer your business overall.

These actions can be accomplished without an attorney, but you should at least consider consulting with an attorney any time you make a significant change to your business entity. Good luck!

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https://youtu.be/f6iMEvfSr_A

If you are dealing with a lawsuit in North Carolina please fill out our confidential client intake form for legal assistance.

https://youtu.be/GsyzuLaxDf0

If you are facing a lawsuit in North Carolina please fill out our confidential client intake form for legal assistance.

https://youtu.be/WuBeC-UVHew

If you are in need of legal assistance for your business in North Carolina, South Carolina, Tennessee, Georgia or Florida please fill out our confidential client intake form.

In this video attorney Jason McGrath explains ‘Claim and Delivery’ procedures for North Carolina under the rules of civil procedure.

https://youtu.be/wd84-SjQSbw

If you are in need of legal assistance with a Lawsuit in North Carolina, South Carolina, Tennessee, Georgia or Florida please fill out our confidential client intake form.

https://youtu.be/Xhua-sxbkLs

If you are facing a foreclosure situation in North Carolina please fill out our confidential client intake form for legal assistance.

Attorney Kelly J. Brown has earned her LL.M. (Master of Laws) in Taxation from Boston University School of Law. Kelly is licensed in both North Carolina and South Carolina. Her practice focuses on real estate matters, including closings; business law matters; and of course, tax matters.

https://youtu.be/xL-vJ3n7BYw

https://youtu.be/3sqK5FJes7o

If you are facing a lawsuit in North Carolina please fill out our confidential client intake form for legal assistance.

When you decide to start a business venture, there are a myriad of things to consider. We regularly assist small business owners, especially start-up businesses, walking them through the steps that need to be taken in order to make the business official and legal. There are many ways a business can be organized and there are both non-tax and tax factors as well as state and local statutory requirements that need to be taken into consideration when embarking on this exciting journey of starting a business.

I previously wrote an article regarding the non-tax factors that should be considered when starting a business. This article is one of a series of articles that focuses on the tax implications of certain business activities and things you should consider when choosing your business entity. The most prominent federal tax considerations in choosing a business entity include:

• Capital Contributions

• Ownership Restrictions

• Business Income and Loss

• Allocations of Income or Loss

• Basis Limitations and the Deductibility of Losses

• Distributions

• Employment Tax Considerations

• Tax Rates on Ordinary Income

This article discusses the tax rates for businesses and business owners.

Ordinary Income Tax Rates

For most C corporations that have significant taxable income, the corporate income tax rate is essentially a flat rate of 34-35%. Corporations with smaller amounts of income enjoy lower rates (15-25%) on their first $75,000 of taxable income. As you can see below, a very small number of small businesses will receive the lower tax rates of 15 and 25%.

Additionally, certain personal service corporations (i.e., lawyers, accountants, architects, and the like) are not entitled to graduated tax rates but receive a flat rate of 35%. Individuals pay tax at the graduated rates of 15%, 28%, 31%, 36%, and 39.6%.

With a presidential election fast approaching and presidential hopefuls throwing their hat in the ring, you can expect some campaign talk of tax reform. On the corporate side, Marco Rubio has talked about tax reform that would lower the tax rate for corporations and passthroughs to 25% (although many of the credits and deductions would be eliminated) and allow businesses to expense the cost of their investments 100% in the year of acquisition. On individual tax reform, Rubio proposes reducing the number of individual tax brackets from 7 to 2 (15% and 35%), eliminate the standard deduction and replace it with a refundable personal credit, and create a $2,500 child tax credit.

The relationships among these tax rates can greatly influence the choice of entity. At one time the maximum individual tax rate on ordinary income peaked at 70% and the top corporate tax rate was 46%, making forming a C corporation an attractive option to avoid the higher individual tax rates. The difference in rates prompted most business owners to organize their entities as a corporation rather than a pass-through entity because corporate income was taxed at much lower rates. During these high individual tax rate times, shareholders that wished to withdraw earnings created tax efficient strategies to avoid the double tax (e.g., owner-employees of a C corporation would distribute profits in the form of salary or fringe benefits, which are tax-deductible by the corporation and the fringe benefits are excludable from income of the employee in most situations). Shareholders also loaned money or leased property to C corporations and withdrew earnings from the corporation in the form of rent or interest payments that were tax deductible as well. The IRS began to crack down on these strategies and attacked payments of salary or interest as unreasonable compensation or disguised dividends. Congress fought back by enacting penalties to patrol against excessive accumulations or avoidance of the individual progressive tax rates. It wasn’t hard for a corporation with good tax planning to justify the payment of reasonable compensation and accumulation of earnings on the basis of reasonable business judgment and thereby avoid constructive dividends and the corporate penalty tax.

Now, individuals and corporations are subject to the same top tax rate and dividends and long-term capital gains are both taxed at relatively low rates, the C corporation earnings accumulation strategy is much less compelling. The parity in the individual and corporate tax rates, in conjunction with the prospect of two levels of tax when a C corporation is sold, provides a greater incentive to use a pass-through entity instead of a C corporation, particularly if the business intends to distribute its earnings currently, does not have owners who work for the firm, or holds assets that are likely to appreciate in value over a relatively short time frame. It would not be beneficial to organize a venture that invests in passive assets such as real estate or financial assets to operate as a C corporation because the costs of doing so would be prohibitive in light of the double tax. In some cases, however, C corporations still offer tax savings, especially for businesses able to pay out most of their earnings as compensation to their high-income owners.

For a complete analysis of the tax implications of C Corporations, Partnerships, and S Corporations click here for the Joint Committee on Taxation’s publication entitled “Choice of Business Entity: Present Law and Data Relating to C Corporations, Partnerships, and S Corporations.”

McGrath and Spielberger, PLLC assists clients with all sorts of tax issues, both federal and state (including but not limited to North Carolina and South Carolina). Click here to contact us about your tax matter.

 McGrath & Spielberger, PLLC provides legal services in Florida, Georgia, North Carolina, Ohio, South Carolina, and Tennessee, as well as in some Federal courts. The Firm offers full scale representation, as well as limited scope services, as appropriate for the situation. Please be advised that the content on this website is not legal advice, but rather informational, and no attorney-client relationship is formed without the express agreement of this law firm. Thank you.

https://youtu.be/kkxshCxt_Co

Is Canceled Mortgage Loan Debt Income that you are Taxed on?

As an attorney with specific tax law knowledge who also works with borrowers to avoid foreclosure and/or to otherwise resolve mortgage loan problems, I deal with short sales, deeds in lieu of foreclosure, loan modifications, and mortgage loan settlements on a regular basis. Borrowers are usually thrilled to be able to get rid of unwanted mortgage debt either through disposing of the property, as part of a discounted pay off which allows them to keep the property, or in the form of a principal reduction as part of a modification. However, the mortgage loan debt canceled as a result of these types of transactions can have negative future tax consequences for the borrower.

North Carolina and South Carolina have different approaches on these matters as far as state income taxes. In most recent years, North Carolina followed the Federal Government’s lead and enacted legislation to exclude Qualified Principal Residence Indebtedness from a taxpayer’s income for state tax purposes. The North Carolina state exclusion expired in 2013 (just like the Federal exclusion), but unlike the Federal Government, North Carolina has not yet extended the exclusion to cover 2014. Thus, as of the date of this writing, the exclusion currently applies to 2014 for purposes of South Carolina state income taxes but not for North Carolina state income taxes (but changes may be taking place within weeks).

The bill was subsequently rewritten by the NC House of Representatives to exclude forgiven debt from income and then passed by the NC House in early March 2015. As it currently stands, a Conference Committee with members from both the Senate and the House was appointed late last week to hash out whether North Carolina will follow the lead of the IRS and allow certain forgiven mortgage loan debt to be excluded from state taxation from the borrower side for certain debt canceled in 2014. Governor McCrory, of course, can sign or refuse to sign whichever version of the bill is presented to him.

In contrast, South Carolina closely resembles the Federal income tax laws with only a few modifications. South Carolina has simplified its tax scheme by deciding to follow the Federal government’s lead on tax laws with any differences expressly stated in the South Carolina statutes. In fact, § 12-6-40(c) of the South Carolina Code of Laws specifically states, “If Internal Revenue Code sections adopted by this State which expired or portions thereof expired on December 31, 2013, are extended, but otherwise not amended, by congressional enactment during 2014, these sections or portions thereof also are extended for South Carolina income tax purposes in the same manner that they are extended for Federal income tax purposes.” Qualified Principal Residence Indebtedness is not mentioned or excluded in the South Carolina Income Tax Act and thus, one can conclude that the retroactive extension of the Mortgage Forgiveness Debt Relief Act of 2007 by the Federal Government allows a borrower in South Carolina to exclude certain forgiven debt for South Carolina state income tax purposes.

In addition to the Qualified Principal Residence Indebtedness exclusion, borrowers, including those in both North Carolina and South Carolina may be able to exclude some or all of forgiven debt from Federal taxation under the IRS’ insolvency exemption. The insolvency exemption allows a taxpayer to exclude canceled or forgiven debt from income if the taxpayer is insolvent. A borrower is insolvent when the total of all the liabilities exceed the fair market value of all the assets immediately before the cancellation of the debt. However, a borrower can only exclude forgiven debt up to the amount he or she was insolvent. 

Whatever you do, just make sure you are fully aware of the potential consequences of your mortgage loan resolution; there’s nothing worse than a nasty tax surprise hitting you out of the blue. If you need advice regarding a tax situation, a distressed mortgage loan, or something similar, please don’t hesitate to contact us to speak to an attorney Charlotte NC and Mt Pleasant SC.

https://youtu.be/CQMZJjZAYPA

Law firms warned to be vigilant against cybercrime – The Charlotte Business Journal

Jan 30, 2015 – The N.C. State Bar released ethics opinions about cybersecurity, and … so they can be more efficient,” says Jason McGrath,  partner at McGrath & Spielberger . . . . (click link above for full story or read it below)

Law firms warned to be vigilant against cybercrime
LEGAL INC. SUBSCRIBER CONTENT: Jan 30, 2015, 6:00am EST
Bea Quirk, Contributing Writer

At the Mecklenburg County Bar’s recent monthly luncheon, the speaker, FBI Agent Colleen Moss, told attendees that although small and midsized law firms don’t regard themselves as targets for hackers, they are. As supervisor of the Charlotte Division’s Computer Intrusion Cyber Squad, she knows firsthand the firms’ vulnerability, no matter the size.

“Anytime there’s a large pot of money involved — escrow, a trust — you’re going to be a target,” Moss told the lawyers. “Criminals look for the fastest and quickest way to make the most money possible. If they find any other data that’s usable and sellable on the Internet, that’s fair game, too.”

Hackers aren’t always subtle in their attacks, as seen in a form of malware called ransomware that is gaining popularity. Hackers install a “cryptolock” on a company’s files and won’t provide access until a ransom is paid, says Clark Walton, an attorney at Alexander Ricks. He has a digital forensics consulting business and previously worked in cybersecurity at the Central Intelligence Agency.

Moss and Walton say regularly updating operating systems, firewalls and antivirus software is the best defense.

Email remains the entry point of choice for hackers. Moss says up to 85% of incidents stem from phishing emails — messages that look legitimate that ask the recipient to click on a link or open an attachment. That allows a hacker to install malware that infects the user’s computer — and an entire system.

“These criminals are good at socially engineering emails that look legitimate or are designed to pull at your heart strings,” Moss says.

One such effort surfaced last year, when hackers were found to have penetrated pharmaceutical companies and their outside advisers in banking and law. Emails were written in “flawless English” and tailored to recipients, who were duped into revealing information that allowed hackers to profit in stock trades, The New York Times reported.

Moss says information on a firm’s website and employee Facebook pages can be used to create credible email. Even though employees of law firms are generally aware of the danger, Moss says they still fall for scams offering financial rewards in exchange for providing access to a checking account.

But law firms have a difficult situation to balance. They are businesses and need to respond to emails. They can’t be ignored, even if they appear suspicious. Moss suggests employees contact their IT department, server host or a consultant. She also recommends reporting apparent scams to www.ic3.gov, an information clearinghouse for Internet crime.

If a law firm in North Carolina is hacked, the state’s Identity Theft Protection Act mandates that customers and clients be informed. Moss also hopes a firm will contact the FBI, which might be able to curb additional damage. Doing so also helps the agency track criminals and can increase the public’s awareness of current scams.

Both the state and national bars are aware of the growing problem. The N.C. State Bar released ethics opinions about cybersecurity, and the American Bar Association published a guide to security.

Moss says cybersecurity is often a matter of risk management. Law firms must consider the costs of security and their tolerance for risk. Small firms must do this kind of analysis as their work and communications are increasingly digitized.

“Smaller firms are moving more to technology so they can be more efficient,” says Jason McGrath, partner at McGrath & Spielberger and chair of the Bar committee that organized Moss’ presentation. “You have to invest in security once technology becomes your bread and butter. It’s just common sense.”

Former BofA workers claim they received bonuses for foreclosures… – WSOC tv

Charlotte-area Foreclosure Filings Decline 16%

By Showcase Realty On October 14, 2014

Attorney Jason McGrath of McGrath & Spielberger, who serves as the Chair of the City of Charlotte Civil Service Board, was recently reappointed to the Board for another three year term. The Board has certain quasi-judicial authority over Charlotte Mecklenburg Police Department and Charlotte Fire Department.

Investing in NASCAR: What Could Go Wrong?

SAM STURGIS  JAN 12, 2015

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Charlotte’s NASCAR Hall of Fame crashed hard. As the city preps for an $18 million debt-forgiveness vote, homeowners wonder where their bailouts are.

A beautiful disaster. (Flickr/Daniel Lobo)

We just rang in 2015, but the city of Charlotte, North Carolina, would love to see the calendar flipped back to 2005.

That was the year NASCAR cemented its position as one of the United States’ most popular sports. Fortune magazine drooled over the racing juggernaut a decade ago, proudly declaring NASCAR “the fastest-growing, best-run sports business in America—with the emphasis on businesses.”

But the financial viability of NASCAR has crashed in recent years amid plummeting race attendance and growing disinterest in car racing among Americans. And nothing symbolizes the sport’s tragic decline more than its Hall of Fame, which broke ground with great expectations in 2007 and officially opened in 2010—and is now hemorrhaging money for the city of Charlotte.

Monday night, Charlotte’s city council is expected to pass a loan-forgiveness deal that will eliminate nearly $18 million in debt the city owes on the NASCAR Hall of Fame. Opening the glitzy development cost the city $200 million, but the project was viewed as a crucial job creator for downtown Charlotte, undergoing noticeable revival. Today, to call the NASCAR Hall of Fame a financial disaster would be an understatement.

The NASCAR Hall of Fame, under construction in 2007, features a 278-seat theater, meeting halls, and a cafe. (Flickr/James Willamor)

Early projections had the city-owned Hall of Fame pulling in revenues of up to $1 million annually. Instead, according to Sporting News, the venue has lost over $5 million since opening. Attendance is abysmal. Developers expected at least 400,000 visitors annually, with the potential to attract up to 800,000. Over the past five years, however, only about 170,000 NASCAR fans have visited the venue each year, or 470 per day. One official representing the NASCAR Hall of Fame acknowledges some financial projections have not been met, but insists, “the Hall is doing well.” Tom Murray, CEO of the Charlotte Regional Visitors Authority, which overseas large city-owned assets, says the NASCAR Hall of Fame will earn money or break even if the debt deal is agreed upon.

City officials are framing today’s debt deal as a “restructuring” rather than a bailout. Yet, as highlighted by a recent Charlotte Observer editorial, the project’s downfall can’t really be spun:

It doesn’t camouflage that the Hall of Fame couldn’t survive on its own. It doesn’t change the fact that the city, when it bid for the hall, miscalculated everything from attendance projections to the arc of NASCAR’s popularity.

The failure of the deal becomes even more clear as cities struggle to pull out of the Great Recession. Charlotte was spared the crippling housing crisis that hit cities like Detroit and Las Vegas. Still, North Carolina’s largest metro was hit hard, according to the Brookings Institution. Single-family properties financed with a mortgage lost 23 percent of their value during the recession and, despite a marginal recovery, are still nowhere near pre-recession rates.

(Brookings)

Jason McGrath, a Charlotte attorney experienced in real-estate litigation, says the community’s support for the debt-forgiveness deal is “mixed.” Given how badly the venue has underdelivered, taxpayers naturally balk at wiping its financial slate clean so easily. However, McGrath says, residents know they are likely to benefit, at least indirectly, if the city’s debt toward the project is written off. (McGrath chairs a civil service committee for the city, but spoke to CityLab from the perspective as an independent lawyer).

“Of course, the folks that are facing foreclosure and have not been able to get help are looking at this and likely thinking to themselves, ‘Well, here we go again,’ where it’s always the big fish that seem to get the big breaks,” McGrath says.

Nearly 16,000 foreclosed properties in Charlotte are either for sale or auction, according to RealyTrac, an online housing database. Would the $18 million being written off for the NASCAR Hall of Fame have better served residential properties currently underwater?

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Tax-change renewal could hurt troubled homeowners in North Carolina

Strategic Thinking / What Does Your Attorney Advise You?

In this video, attorney Jason McGrath discusses how a business law attorney can – or should – handle mistakes and other problems found in contracts. The approach Mr. McGrath discusses is not the obvious one.

Does your business attorney think it through in depth, considering the bigger picture, and employ strategic thinking or just go with the standard, knee-jerk reaction when (s)he renders you advice?

If properly handled, negative reviews can provide a business with an opportunity to actually boost its reputation.

With the surge of digital media and the growing use of social media, it has become extremely easy for both businesses and consumers to reach a captive worldwide audience at little to no time or expense.  Social media has helped drive many protests, actions in support, and boycotts in just a small amount of time.  This ease of access and use of social media could severely damage a business’ livelihood if the reviews or messages are negative and not addressed appropriately.

There are several considerations that should be made when deciding whether to respond to a negative review.  For instance,

1. 1. Does the review contain opinion, “facts,” or both?

1. 1. Whether to contact the person who wrote the negative review.

1. 1. Communicating with the company or website which hosts or published the troublesome response.

1. 1. Publicly responding to negative online reviews.

1. Turn a negative into a positive, or at least an opportunity.

Another consideration offered by Yelp when deciding whether to respond is to determine if the review contains constructive criticism or is just undeniably negative.  The appropriate response for the business depends on this classification.  If the review is extremely negative and uses colorful language, it may be best to be left alone as nothing constructive could arise when emotions are involved.  When emotions are involved it will be difficult to change the person’s mind or sufficiently correct – in their subjective eyes – the problem.

It is also important to look at reviews of other customers.  If there are more positive reviews than negative, the negative may not affect whether a future customer decides to purchase the business’ product or service.  For example, when I am deciding whether to make a purchase, I examine the online reviews.  I look to both negative and positive reviews but I only give sufficient credibility to those reviews that provide constructive feedback instead of generalizations because I want to know if the reviewers’ standards are similar to my own.  Further, some persons are suspicious of any business which has, for example, 20 reviews, all of which are positive, or all of which are “5 out of 5 stars” – that does not seem realistic to many of us.

Once the business determines that the review warrants a response, then a very effective way to neutralize the negativity is to publicly respond to the review.  A public response shows that the business is concerned that the customer was not completely satisfied with the purchase and would like to remedy the situation.  This will show other present and future consumers that the business cares about customer satisfaction and is willing to go to significant efforts to remedy any dissatisfaction.  It also shows that the business knows about the deficiency and the deficiency should be remedied going forward.

In the public response, the business should never get defensive or place blame because no one is perfect and it is impossible to satisfy everyone.  There is always going to be criticism, it is how the business handles the criticism that affects its reputation and possibly its bottom line as well.  Reaching out and offering solutions to customers is a way to not only boost customer satisfaction but it is a way to boost brand loyalty and neutralize any negative reviews.

Additionally, to facilitate helpful reviews, the business could provide discounts, rewards, or other benefits to the reviewers that provide the most comprehensive or helpful information which may benefit future purchasers in making buying decisions.  One way that a business that I have dealt with personally has succeeded in encouraging reviews is by providing the product along with a free sample of other products they supply.  Then, they sent a separate request and asked that I provide an online review and if I was dissatisfied to contact the business immediately so that any problems could be resolved expediently.

All in all, the best way to respond to a negative is with something positive.  There is an old saying which states that “you can attract more flies with honey than vinegar.”  That rings true not only when trying to convince someone to do the things you want them to do, but also to neutralize negative experiences.  The best form of advertising is personal experience and word of mouth (whether verbal or via the internet).  If you can turn someone’s negative personal experience into a positive by remedying the situation, you may have just turned a loss into a gain.

As attorneys with a law firm which has a significant online presence, and as lawyers who represent small and medium businesses, we are very much aware of the power of the online review and/or rating given by consumers. In fact, in this day and age, the positive or negative nature of a company’s reputation as declared by the internet can make or break your business.

For many businesses, it is almost impossible to avoid at least the occasional negative comment or even merely a lukewarm review. Many times, the information posted online is not accurate, or at least is presented out of context and/or incomplete. All businesses which encounter this face the same question: what can we do about this negative online review?   Hopefully, after you have had a bit of time to think about it, one of your next questions is: what should we do about this negative online review? We have developed a list of 5 key considerations and here is the fifth.

(5) Turn a negative into a positive, or at least into an opportunity. This can’t work in all industries or all situations, of course, but what about turning the criticism into a promotional effort? For example, let’s consider the complaint of “I had to wait more than 30 minutes for my car to be cleaned at Acme Car Wash.” Perhaps the response from Acme is similar to this: “We regret you had to wait so long, but we were simply very busy that day with so many customers who know what a good job we do. Everyone should know that this month we have a 25% discount for our Premium Customer Club memberships, which allow you to make an appointment, among other benefits!”

This creative approach focuses on the positive, while still “apologizing” to the unhappy customer. It might even increase business. Find the silver lining.

As attorneys with a law firm which has a significant online presence, and as lawyers who represent small and medium businesses, we are very much aware of the power of the online review and/or rating given by consumers. In fact, in this day and age, the positive or negative nature of a company’s reputation as declared by the internet can make or break your business.

For many businesses, it is almost impossible to avoid at least the occasional negative comment or even merely a lukewarm review. Many times, the information posted online is not accurate, or at least is presented out of context and/or incomplete. All businesses which encounter this face the same question: what can we do about this negative online review?   Hopefully, after you have had a bit of time to think about it, one of your next questions is: what should we do about this negative online review? We have developed a list of 5 key considerations and here is the fourth.

(4) Publicly responding to the negative online review. Some business owners will post a response if the hosting website allows the same/has a mechanism in place. Again, you would want to be very careful in taking this approach, would want to take numerous deep breaths before writing the response, and would want to have at least one other rational person review your response before submitting. There is a definite split of opinions as to how to execute this approach, and of course each situation can be different. If you are going to respond:

1. should the response be general or detailed?
2. should the response be apologetic or more of a rebuttal or defense?
3. should the response contain the name, or at least the position, of the person writing it on behalf of the business?
4. should the response invite the complainer to call the business to further discuss?

In my personal experience, most of the responses I see written by business owners are fairly neutral and contain sort of a non-apology apology – you know, the kind that athletes’ public relations representatives write for them, something like “I am sorry if anyone was offended by . . . .”

The bottom line is that if you are going to respond, be very careful. Some of the folks out there, referred to as “trolls” in today’s internet world, will gleefully jump on any response, no matter how well-intentioned, just to up the ante and further stir the pot. Good luck.

As attorneys with a law firm which has a significant online presence, and as lawyers who represent small and medium businesses, we are very much aware of the power of the online review and/or rating given by consumers. In fact, in this day and age, the positive or negative nature of a company’s reputation as declared by the internet can make or break your business.

For many businesses, it is almost impossible to avoid at least the occasional negative comment or even merely a lukewarm review. Many times, the information posted online is not accurate, or at least is presented out of context and/or incomplete. All businesses which encounter this face the same question: what can we do about this negative online review?   Hopefully, after you have had a bit of time to think about it, one of your next questions is: what should we do about this negative online review? We have developed a list of 5 key considerations and here is the third.

(3) Communicating with the company or website which hosts or published the troublesome review. This can be productive and worthwhile and is unlikely to have negative consequences. In our experience most review sites do make an effort to act professionally, but understandably it is impossible to manage the hundreds, thousands or tens of thousands reviews that the website may ultimately contain. If you – or your representative/attorney try hard enough, you can likely get someone’s attention and perhaps even instigate an investigation of the review.

Some reviews violate the posting company’s terms of service. Others may end up being removed if the publishing website cannot verify the legitimacy of the review. Another common occurrence leading to a deletion is if the person writing the review cannot be identified or at least confirmed as having truly been a customer or client. Finally, sometimes the entity hosting the review’s content or publishing it will remove it if an investigation leads to a conclusion that the review is incorrect or unfair.

Oh, and we should mention one other scenario, since, after all, we are lawyers . . . the threat of legal action may make such a review go away, independent of the factors above.

As attorneys with a law firm which has a significant online presence, and as business lawyers who represent small and medium businesses, we are very much aware of the power of online reviews and/or ratings given by consumers. In fact, in this day and age, the positive or negative nature of a company’s reputation as declared by the internet can make or break your business.

For many businesses, it is almost impossible to avoid at least the occasional negative comment or even merely a lukewarm review. Many times, the information posted online is not accurate, or at least is presented out of context and/or incomplete. All businesses which encounter this face the same question: what can we do about this negative online review?   Hopefully, after you have had a bit of time to think about it, one of your next questions is: what should we do about this negative online review? We have developed a list of 5 key considerations and here is the second.

(2) Contacting the person who wrote the negative review. Be careful if you are contacting the person who made the negative review. While this can sometimes be effective, there are a number of reasons one should be hesitant to do this.

First, you have to consider whether you are going to be able to communicate politely and without expressed emotion, given the topic at issue and the likely hood that you feel wronged. Also, if the reviewer seems to have exaggerated or provided inaccurate information, how confident are you going to be that (s)he are going to respond to you in a reasonable fashion? Further, you always run the risk of the conversation not going well, or at least not going as planned. It’s even possible that you may think the conversation went well, but the complaining party did not appreciate it. This could result in the former customer updating/expanding the initial negative review.

We’re not suggesting that you should never reach out to a complaining customer or client. We’re emphasizing that if you are going to make contact with someone who has issued an online complaint against your business, make sure it’s done carefully and with some advance consideration. 

In some ways, as a trial lawyer, this makes me think of the debate within my profession about asking a judge to “Strike that from the record and instruct the jury to disregard it.” This objection and request happens all the time in trial (especially on TV, it seems). Many of us think that a jury being told to disregard the offending testimony/evidence will actually have the opposite effect – that information has been singled out for greater attention, and may end up being further cemented in the jurors’ minds. In other words, sometimes you are better of either ignoring such situations or handling them in a low-key manner as opposed to potentially aggravating the situation.

However you handle this – and hiring an attorney to deal with it is sometimes an option worth considering – be careful.

For many businesses, it is almost impossible to avoid at least the occasional negative comment or even merely a lukewarm review. Many times, the information posted online is not accurate, or at least is presented out of context and/or incomplete. All businesses which encounter this face the same question: what can we do about this negative online review?   Hopefully, after you have had a bit of time to think about it, one of your next questions is: what should we do about this negative online review? We have developed a list of 5 key considerations, and here is the first.

The answer to that question isn’t as straightforward as one may think.

Generally, there are two different paths to remove the former homeowner after being foreclosed upon: (1) formal eviction process, and (2) informal negotiations between former homeowner and new owner (usually the lender bank or the highest bidder at the foreclosure sale). The first option of formal eviction can be costly and requires additional involvement of the justice system. It is comparable to the process for evicting a tenant who has overstayed his/her welcome. The second route will generally take the form of the new owner making a monetary offer to the former owner in exchange for an agreement to vacate the premises peacefully and without causing any damage. This “cash for keys” option saves all parties from having to go through the hassle and costs of the eviction process.

Depending on the path chosen, a homeowner will be able to stay in his or her home for a short time period of perhaps a few weeks; others may continue to live in the foreclosed upon home for longer and even indefinite periods of time. Each case is different, and the length of time will depend on the laws of the state where the property is located, how aggressive the new owner is in ensuring the vacancy of the property, and any agreement entered into.

One of the most common questions that I and other lawyers in my firm are asked by borrowers is weather a foreclosure action will start or commence even if the borrower is supposedly being considered for a mortgage loan modification or other type of mortgage relief such as a forbearance plan, a short sale, or a deed in lieu of foreclosure. Of course a relevant and important follow up question is why lenders continue to foreclose even if a mortgage relief option is supposedly in the works.

Unfortunately, in almost every circumstance, a mortgage lender/servicer such as Bank of America, Citibank, Chase, GMAC, and Wells Fargo will commence or continue foreclosure activities even while representatives of such loan servicers continue to tell the borrower that they are being considered for a modification, or even on the verge of receiving a final mortgage relief offer. Many of our clients have expressed that they feel as though the lender is dangling a carrot out in front of them with the one hand, while whipping them with the other. Many borrowers have expressed that they feel as though lenders are intentionally leading them on about the possibility of a mortgage relief option, just so the borrower is lulled into a false sense of security while the lender continues to foreclose.
I have one very important suggestion for you. I have handled numerous cases in which the mortgage lender or servicer has actually, from its standpoint, halted or even dismissed a foreclosure action but has either failed to communicate that to its foreclosure lawyers or to the borrower or the attorney for the borrower.  If you are facing foreclosure, be sure to attempt to have direct contact with the entities who are prosecuting the foreclosure, or have your attorney do the same if you are represented.  It is important to – as best as you can – make sure that you are as well informed as possible. Yes, of course, getting information out of these lenders is almost impossible at times, but it is important that you keep making the effort.

In order to be fair, we have to consider the reasons why mortgage loan lenders and servicers may continue to foreclose even though mortgage relief options are being considered.  As in almost all legal matters which involve opposing sides, one side may wish to impose pressure on the other in order to get what it wants.  From a strategical perspective, an attorney advising the lender may very well advise the lender to keep the pressure on for a number of reasons.  Since some borrowers are unable to comply with the terms of a mortgage relief opportunity, and others simply turn down opportunities for mortgage relief, the bank may be best served by continuing a foreclosure action until a mortgage relief option is finalized.  Keep in mind that the banks can typically take a situation to the very edge of a foreclosure sale yet not execute that sale if some final resolution short of foreclosure can be reached.

Let me make one final comment on this topic.  You should be aware that there are numerous prohibitions against foreclosure under certain circumstances.  These prohibitions may be found in federal law, state law, federal government program guidelines, court orders, court settlements, etc.  Further information on this specific topic will be provided in on our website, including pages which discuss prohibitions against foreclosure contained within the Making Home Affordable program.

McGrath & Spielberger, PLLC provides assistance to borrowers in need of mortgage relief services, such as mortgage loan modification, foreclosure negotiation, refinancing, and deed-in-lieu or other negotiated settlement resolutions.

1. provide stability in the secondary market for residential mortgages;
2. respond appropriately to the private capital market;
3. provide ongoing assistance to the secondary market for residential mortgages (including for lower income families); and
4. to promote access to mortgage credit.

Freddie Mac does not loan money to would-be property owners the way that banks do. Rather, it participates in the secondary mortgage market by purchasing mortgage loans and mortgage-related securities for investment and by issuing guaranteed mortgage-related securities. The secondary mortgage market consists of institutions engaged in buying and selling mortgages in the form of whole loans (i.e., mortgages that have not been securitized) and mortgage-related securities.

Due to the housing/mortgage crisis in America, Freddie Mac currently focuses on “meeting the urgent liquidity needs of the U.S. residential mortgage market, lowering costs for borrowers and supporting the recovery of the housing market and U.S. economy.” Specifically, Freddie Mac states that it is working toward reducing the number of foreclosures; making homeownership and rental housing more affordable; and helping families keep their homes.

McGrath & Spielberger, PLLC provides assistance to borrowers in need of mortgage relief services, such as mortgage loan modification, foreclosure negotiation, refinancing, and deed-in-lieu or other negotiated settlement resolutions. These professional services may include dealing with mortgage loans owned or securitized by Freddie Mac.

Fannie Mae does not originate loans or lend money directly to consumers in the primary mortgage market because Federal law prevents it from doing so. However, it does purchase mortgage loans and mortgage-related securities. In other words, while you can’t get a loan from Fannie Mae, Fannie Mae might end up owning your mortgage loan.

Fannie Mae also often securitizes mortgage loans originated by lenders into Fannie Mae mortgage-backed securities (called Fannie Mae MBS)  and makes other investments which are intended to increase the supply of affordable housing.

McGrath & Spielberger, PLLC provides assistance to borrowers in need of mortgage relief services, such as mortgage loan modification, foreclosure negotiation, refinancing, and deed-in-lieu or other negotiated settlement resolutions. These professional services may include dealing with mortgage loans owned or securitized by Fannie Mae.

Did Atticus Finch Commit Malpractice? Did he get his client killed?

BY JASON A. MCGRATH, Esquire

On November 21, 1935, Tom Robinson raped 19-year-old Mayella Violet Ewell. So said the Maycomb County, Alabama jury, as written by Harper Lee in the classic novel To Kill a Mockingbird. Despite an admirable defense by court-appointed attorney Atticus Finch, Tom Robinson was convicted and sentenced to death by a jury which was most definitely not made up of his peers.

The book strongly implies that Mr. Robinson was innocent, that the primary prosecution witnesses lied throughout the trial, and that it was only Mr. Finch’s valiant efforts and relationship with the community which caused the jury to hesitate at all before the unfair conviction. What if, however, Atticus in fact made a terrible mistake during trial which eliminated any small chance his client had of acquittal, any chance of avoiding death?

Although I’m a fairly voracious reader for pleasure, I’d never gotten around to reading To Kill a Mockingbird. However, one recent weekend, desperately in need of a break from contract review and liability analysis, I grabbed it from the coffee table where my wife had deposited it a few days earlier. I’d never read a review or summary of the book (nor have I yet), but was still vaguely aware that it featured a lawyer named Atticus, a rape or murder, and a racial controversy. This makes it even more unlikely that I ended up reading the book, as I tend to avoid stories about lawyers, who in books and movies are almost always far too perfectly successful, far too naive, or far too evil to be realistic.

I grew up in an environment very dissimilar to Maycomb; nobody would confuse south Florida with south Alabama. Now that I’ve moved to North Carolina, however, explorations of southern culture seem more appropriate. Plus at least half of those running for judgeships and other positions within the justice system here seem to claim To Kill a Mockingbird as their favorite book. Thus I came to read it, in three different sittings within 36 hours. I enjoyed it, but I was at first puzzled, and then dismayed at the way the trial went, and not just due to the unjust outcome. I’ve litigated many cases, including sex crimes, violent felonies, wrongful death cases, business controversies, mortgage disputes, etc., and I just couldn’t fathom what happened — or rather didn’t happen. What went wrong, Atticus?

Toward the end of the trial, the father of the alleged victim, a disreputable white man named Bob Ewell, took the stand after being called by the prosecution. He described what he witnessed the night of November 21, 1935 as he returned home from the woods. “[J]ust as I got to the fence I heard Mayella screamin’ like a stuck hog inside the house—.” Mr. Ewell went on to point to the defendant, Tom Robinson, who was seated next to his attorney, Atticus Finch, and to exclaim, “I run up to th’ window and I seen…I seen that black nigger yonder ruttin’ on my Mayella!” The language used and the events described caused a disturbance in the packed courtroom.

Minutes later, Mr. Ewell’s testimony continued with a question by the prosecutor. “Mr. Ewell, did you see the defendant having sexual intercourse with your daughter?” The witness answered with certainty, “Yes I did,” and then stated that he had a clear view of the room as his daughter was being raped by the defendant. Finally, the angry father confirmed, “I sawed who he was, all right.”

Upon cross-examination, Atticus Finch established several points, the key being that Mr. Ewell was left-handed. This was potentially relevant, as other evidence showed or implied that Mr. Ewell was a mean and perhaps abusive drunk, and that his daughter’s injuries were largely on her right side — and thus arguably inflicted by a left-handed attacker.

The next witness to be called was the alleged victim herself, Mayella Violet Ewell. Other than being a member of the unpopular Ewell family, there was no indication in the book that Mayella herself was particularly disliked. Rather, she was presented as a young woman born into an unfortunate situation; into a family with no means, no motivation, and no role models.

Mayella agreed that she’d peripherally known the defendant for years, as they were neighbors. She testified that on November 21, Tom Robinson had been walking by her home when she asked him to assist her in chopping an old piece of furniture up to be used as firewood. Instead of helping her as asked, however, he attacked and raped her. “[A]n ‘fore I knew it he was on me….He got me round the neck, cussin’ me an’ sayin’ dirt—I fought’n’hollered, but he had me round the neck. He hit me agin an’ agin—.” “Then what happened?” the young Ms. Ewell was asked. She replied, “I don’t remember too good, but the next thing I know Papa was in the room a’standin’ over me hollerin’ who done it, who done it? Then I sorta fainted an’ the next thing I knew Mr. Tate was pullin’ me up offa the floor and leadin’ me to the water bucket.” (Mr. Tate was the sheriff.)

Tom Robinson later testified, denied that he had committed any type of crime or improper action, and reluctantly explained that it was he who had fended off Mayella’s sudden advances. Atticus Finch demonstrated to the jury that Mr. Robinson had a particular physical impairment of his left arm and hand, which made it less likely that he could have carried out the attack as described. During closing arguments, Mr. Finch emphasized to the jury that the evidence of guilt was unreliable, and implored the jurors not to assume guilt merely because of the color of the defendant’s skin. He also commented, “Her father saw it, and the defendant has testified as to his remarks. What did her father do? We don’t know, but there is circumstantial evidence to indicate that Mayella Ewell was beaten savagely by someone who led almost exclusively with his left.” Despite Mr. Finch’s efforts, Tom Robinson was found guilty after perhaps six hours of jury deliberations.

At first, I expected Atticus to pounce on it during cross-examination of Mayella, for that would be what most lawyers would do. However, some lawyers (this writer being one of them) prefer not to emphasize such “gotcha!” testimony during cross, but rather save it for closing argument. (Why bring it up during cross, which only gives the opposition the opportunity to try to completely correct the problem or at least minimize the damage with additional evidence?) Thus, I thought “Ahhh, the wise Atticus Finch will keep this nugget in his pocket, polishing and savoring it until the moment is absolutely right, until the jury is hanging on his every word, his every motion. Of course!” Although it was one o’clock a.m. when I read this part of the book, I folded page 206 in order to mark it, the way I’d have asked a court reporter to mark a piece of testimony during a real trial. I then read through closing arguments before going to sleep, a sleep literally troubled by what turned out to be missing from Atticus’ closing argument.

The next morning, I explained my thinking to my wife. She looked at me, trying to determine if I was actually being clever (for a change) or if I mistakenly thought I was being clever. Eventually she nodded in agreement, and her face took an expression of slightly puzzled thoughtfulness as she subconsciously continued to nod her head ever so slightly up and down.

Perhaps some of you reading this knew where I was going before you read more than a sentence of two of this commentary. Others may have picked up on it a few hundred words ago, while some of you, appreciated readers, are still waiting to hear what, to me, seems a blatant and damning error by the esteemed Atticus Finch. Well, let’s get to it.

Bob Ewell testified very clearly that he saw Tom Robinson attacking and raping his daughter. Further, he then watched as Mr. Robinson, his long-time neighbor, exited the Ewell house and ran off. We have Mr. Ewell’s own words that he “sawed who it was” and we know that he pointed to the defendant when he exclaimed, from the witness stand, “I seen that black nigger yonder ruttin’ on my Mayella!” That’s a perfectly straight forward and positive, first person, eyewitness identification, offensive language notwithstanding.

However, what did Mayella Ewell testify regarding her father and his words and actions at the time of the alleged crime? She made a general statement that she didn’t “remember too good” what happened immediately after the rape, but then testified with specificity as to what she did remember. “[B]ut the next thing I know Papa was in the room a’standin’ over me hollerin’ who done it, who done it?” (emphasis added)

That question mark means everything here. The father, who testified so emphatically that he was an eyewitness to the defendant’s rape of his daughter, was reportedly yelling and asking that very daughter who had raped her. This could have been, should have been, the moment, or at least should have led to the moment of the trial. The “gotcha” moment, the “now we all know you’re a liar” moment, the “not even you, ever-suspect jurors, can now mess this up” moment. Yet somehow, it was not. Atticus Finch missed the key bit of testimony and its significance. The otherwise competent, even inspiring, country lawyer let his client down and, we may even feel, let us down.

The Finch’s neighbor, Miss Maudie, reflected that it was impressive that Atticus had at least given the all-white, biased jury reason to pause on its way to unfairly convicting the defendant. “And I thought to myself, well, we’re making a step – it’s just a baby step, but it’s a step.” Well said, but under further consideration, we may be left to wonder if that baby step could have or should have been a leap.

I still can’t decide if I like Atticus Finch more now than I would had he been better, had he pulled off the miracle. At least he wasn’t perfect, as we surely are not. I dare say we are no better than Mr. Finch was, and we should remain thankful for him, stunning error and all.

Jason A. McGrath, along with Attorney Jim Spielberger, owns McGrath & Spielberger, PLLC, a small firm with a large geographical reach.  He spent five years as a criminal prosecutor, followed by eight years as a litigator in a private firm in which he was a partner. Mr. McGrath now focuses on business law matters (including disputes), and mortgage dispute / foreclosure cases. The Firm overall also handles tax issues, estate planning matters, and various other types of cases.  ⏹

https://www.ncbar.gov/media/121077/journal-16-1.pdf#page=6&zoom=page-fit,-323,792