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Checks and Imbalances: 2024 Local Government Case Law Update

24 Jun 2024 12:23 PM | Lynette Pitt (Administrator)

by Trey Ferguson1, Sumrell Sugg

We’re only half-way through 2024 and our courts have handed down numerous decisions hand-slapping local governments (“LGs”). Some of these cases are pretty straight forward while others are bit more perplexing, and most (all but one in this Article) rule against the LG. This Article briefly outlines the notable appellate decisions from the last six months that effect local governments and the attorneys representing them.

Pre-auditing LG contracts: Town of Forest City v. Florence Redevelopment Partners, LLC

To start off the year, the Court of Appeals shocked local government (“LG”) lawyers when it essentially said not all written contracts with LGs need to be pre-audited pursuant to N.C.G.S. § 159-28.

In Town of Forest City v. Florence Redevelopment Partners, LLC2, the Court refused to invalidate a contract between a developer and the Town of Forest City when the contract at issue lacked a pre-audit certification pursuant to N.C.G.S. § 159-289(a1).

Citing a case from 19993, the Court held the statutory pre-audit certification did not apply when a LG signs a contract in one fiscal year but does not actually incur an expense under the contract until the following fiscal year. The Court noted that it would not invalidate a contract for lack of a pre-audit certificate at the mere possibility of an expense in the first fiscal year but rather would look to whether an obligation actually occurred in that timeframe.

Zoning & Free Use of Property: Town of La Grange v. County of Lenoir

In the same month, the Court of Appeals reaffirmed the long-standing judicial canon that when zoning ordinances should be strictly construed in favor of free and uninhibited use of private property.

In Town of La Grange v. County of Lenoir4, a landowner proposed to use recently purchased land to store and sell vehicles at auction. Some of the vehicles had been wrecked and some only had minor damage. The landowner’s proposed use was not listed in the County’s table of permissible uses under its Zoning Ordinance. Rather, the use was a close call between a permissible use (auction sales) and a non-permissible use (junkyard).

In making the initial determination, the County Zoning Official aired on the side of permissible use, finding it dispositive that the cars were not being sold piecemeal for parts and scraps but were sold and transported off-site as a single unit. The neighboring landowner, the Town of La Grange appealed this determination, believing the proposed land use was an impermissible junkyard and would pollute one of the Town’s water source.

The Town appealed the official’s determination. The County’s Planning Board, Superior Court, and State Court of Appeals all agreed with that analysis, and the Court affirmed the official’s determination under a strict statutory construction analysis that favored the free use of private property.

Building Code trumps LG’s Ordinance: Currituck County v. Letendre

Months later, the Fourth Circuit looked to resolve a difference of statutory definitions between State law and a County’s zoning ordinance as it pertained to the construction of a beach front vacation home. Detailing the dense (and lengthy) procedural history of the case, the Court in Letendre5 struck down a County’s definition of “building” to the extent it was inconsistent with the North Carolina Building code’s definition.

Prior to the Fourth Circuit opinion, the North Carolina Court of Appeals had found that the property owner’s home construction was made up of three buildings and not one as required by the “single-family dwelling” zoning definition. As a result, the current construction violated the County’s ordinance. Simultaneously, on appeal of an insurance determination, the N.C. Building Code Council had determined the construction was a “one and two family dwelling” as defined by the North Carolina Residence Code. The two determination clearly contradicted one another.

While on appeal, the General Assembly passed the 160D overhaul to the state’s zoning laws, which specifically said LGs could not use a definition of “building” or “dwelling” that was inconsistent with any definition of the same under another statute or rule adopted by a State agency, including the State Building Code.

Based on that legislative amendment, the Fourth Circuit reasoned that the 160D statutory changes had abrogated the previous State Court of Appeals decision and found the Building Code Council’s definition applied to the property owner’s home construction—essentially striking down the County’s zoning determination and effectively vacating the prior state appellate decision.

The Court noted (but did not address) the retroactive application of the 160D changes, which may have altered the outcome in this case, however the County did not raise that issue on appeal.

Racial epithet is not “just cause” for termination: Ayers v. Currituck County Dep’t of Soc. Servs.

Currituck County had its share of appellate attention this year, appearing before the Fourth Circuit and the State Court Appeals (twice). Once on the County’s impermissible expenditures of its occupancy tax6, which is a good opinion on tax-payer standing but not addressed in this Article, and again in Ayers v. Currituck County Dep’t of Soc. Servs7.

In Ayers, the County DSS Director fired a DSS Supervisor for writing “NR” on an applicant’s paperwork after the Supervisor explained that the denotation stood for a racially derogatory remark and then laughed about it. The Supervisor appealed her termination, which ultimately ended up before the Court of Appeals.

Preliminary, it is important to understand that within county government there are some employees that are dual status employees meaning they are both county employees and agents of various State government agencies. The prime example of these types of dual status employees are those that work in a County’s Department of Social Services (“DSS”).

By virtue of their dual status, these types of employees are subject to the State Human Resources Act (“SHA”), meaning they may only be disciplined for just cause. N.C.G.S. § 126-34.02. With no clear litmus test of “just cause,” the Court employs a flexible concept, embodying notions of equity and fairness.

Now, in Ayers, the Court held that while the use of a racial epithet was wrong and harmful to the County, the use of the epithet itself was not “just cause” under the SHA for terminating the Supervisor. The Court looked to five factors: (1) the severity of the violation; (2) the subject matter involved; (3) the resulting harm; (4) the employee’s work history; and (5) the discipline imposed in other cases involving similarly violations.

After a fact-intensive inquiry into each factor, the Court did not believe the County DSS met it burden for termination but rationalized a lesser punishment would have been more appropriate. In her dissent, Judge Collins pointed out the potential liability to the County for a potentially fostering an abusive working environment had the Supervisor not been disciplined nudges the first three factors in favor of a “just cause” determination.

The County DSS has appealed the split decision to the Supreme Court.

Business regulations & Fruits of Labor (and Equal Protection?): North Carolina Bar & Tavern Ass’n v. Cooper

The same month as Ayers, the Court of Appeals struck down as unconstitutional Governor Cooper’s COVID-19 related executive order closing down bars but not bars in restaurant during the pandemic.

In North Carolina Bar & Tavern Ass’n8, the Court found the Governor’s distinction between bars and bars in restaurants was arbitrary and unreasonable, lacking a legitimate scientific basis. As a result, the Order violated the Fruits of Labor clause of the State constitution.

The Court then went on to analyze the Order under the State Constitution’s Equal Protection provision. In doing so, the Court explained that the Order affected the fundamental right of businesses to enjoy the fruits of their own labor and struck down the order under strict scrutiny. The Court reasoned the distinction was underinclusive for not allowing bars to reopen during the same phase as bars in restaurants.

As our courts have been more inclined in recent years to extend the Fruits of Labor provision in striking down business regulations9, this decision is the first time the Court has identified the Fruits of Labor provision as a fundamental right implicating the strict scrutiny analysis under the separate, equal protection constitutional provision. This is even more likely given a similar case, Howell v. Cooper (finding an Executive Order closing bars during the pandemic to violate the Fruits of Labor provision) is on review by the State Supreme Court.10

This could pose severe issues to LGs in passing ordinances regulating businesses; however, the N.C. Bar & Tavern Ass’n decision is on appeal to the State Supreme Court, which has diverging stances on the application of the Fruits of Labor provision (having just recently un published a Court of Appeals decision related to the provision’s applicability to LG employment policies).11 It also remains unclear how much of the legal analysis in these cases rests on the Fruits of Labor jurisprudence versus differing political views on the COVID-19 lock-down restrictions—so stay tuned.

Governmental Immunity Conundrum: Estate of Graham v. Lambert

Governmental immunity is the popular refrain of LG defense attorneys everywhere (much to the Plaintiff’s bar’s chagrin). However, the interplay between governmental immunity, public official immunity, waiver, and preservation can be a minefield of legal doctrine—as evidenced in the Supreme Court’s recent case of Estate of Graham.12

There, a police officer hit a pedestrian with his cruiser while the officer was responding to a domestic violence call without his lights and sirens activated. The Estate sued the City and Officer for negligence and gross negligence, and the City unsuccessfully moved to dismiss the Complaint on immunity grounds. After discovery, the City then moved for summary judgment on the same grounds.

In a split decision, the Court of Appeals conflated the motion to dismiss and summary judgment standards in addressing the City’s denial of summary judgment. The Court of Appeals found that the Estate had adequately plead a waiver of governmental immunity through the purchase of liability insurance and, thus, immunity was waived for the purposes of summary judgment. However, the Court of Appeals granted summary judgment for the City and the Officer on the grounds that there was no genuine issue of material of fact as to the Officer’s gross negligence, alleviating liability against the Officer and his employer, the City.

The Supreme Court reversed, pointing out that the Court of Appeals had confused the 12(b)(6) and summary judgment standards on the waiver of immunity issue and instructed the Court to reconsider whether the City had, in fact, waived immunity through the purchase of insurance.

Despite the City’s offer of proof that no insurance existed, the Supreme Court instructed the lower court to consider whether the Estate had sufficient evidence to raise a genuine factual dispute as to the City’s waiver of immunity.

The Supreme Court further rejected the Estate’s argument that N.C.G.S. § 20-145 (when speed limit not applicable) created a statutory waiver of governmental immunity because the statute contemplates personal liability of “the driver” of a vehicle and does not contain clear language withdrawing the City’s immunity.

Cost of red-light regime doesn’t violate Fines and Forfeitures Clause: Fearrington v. City of Greenville

Although most of the 2024 LG appellate decisions to date have hand-slapped LGs, the Supreme Court did offer a brief reprieve from the judicial rebukes by upholding the City of Greenville’s red-light ticket program as constitutional.

In Fearrington,13 the City had an interlocal agreement with the County Board of Education whereby the City would remit 100% of the proceeds from red-light tickets to the School Board but would then invoice the Board for the cost of operating the program (roughly 18% of the proceeds initially remitted).

Despite the net proceeds to the Board only amounting to 72%, the Court found that the program aligned with the core purposes of the State Constitution’s Fines and Forfeitures clause and that the interlocal agreement rested on valuable consideration, providing the School Board with a revenue stream it would not otherwise have. Thus, the Court upheld the City’s ticketing program. Despite the affirmation, Justice Berger offered a scathing (and at times humorous) dissent to the majority’s opinion.

In sum, the last six months have provided a wealth of appellate decisions for LG attorneys to consider whether defending LGs or advising them generally, and this Article is only intended to provide brief vignettes of the decisions handed down thus far.

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1Trey is an associate attorney at Sumrell Sugg, P.A. in New Bern, focusing his practice on local government defense. In addition to representing LGs in litigation, he works with a number of LGs on a general counsel basis and has presented on topics related to LG liability, law enforcement legal updates, and state constitutional issues.

2Town of Forest City v. Florence Redevelopment Partners, LLC, 896 S.E.2d 653 (N.C. App. Jan. 2024).

3Myers v. Town of Plymouth, 135 N.C. App. 707, 522 S.E.2d 122 (1999).

4Town of La Grange v. Cnty. of Lenoir, 897 S.E.2d 121 (N.C. App. Jan. 2024).

5Currituck Cnty v. Letendre, 2024 U.S. App. LEXIS 11978; 102 F.4th 252 (4th Cir. May 2024).

6See Costanzo v. Currituck Cnty, 899 S.E.2d 569 (N.C. App. Mar. 2024).

7Ayers v. Currituck Cnty. Dep’t of Soc. Servs., 900 S.E.2d 381 (N.C. App. Apr. 2024).

8N.C. Bar and Tavern Ass’n. v. Cooper, COA22-725 (N.C. App. Apr. 2024).

9See, e.g. Howell v. Cooper, 290 N.C. App. 287 (2023), discr. rev. granted, No. 252A23 (May 30, 2024); Kinsley v. Acer Speedway Racing, Ltd., 284 N.C. App. 664 (2022); King v. Town of Chapel Hill, 367 N.C. 400 (2014).

10See Howell v. Cooper, 290 N.C. App. 287 (2023), discr. rev. granted, No. 252A23 (May 30, 2024).

11Mole’ v. City of Durham, 384 N.C. 78 (2023).

12Est. of Graham v. Lambert, 385 N.C. 644 (Mar. 2024).

13Fearrington v. City of Greenville, No. 89PA22 (May 23, 2024).

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