Cedarbrook Residential Ctr., Inc. v. N.C. Dep't of Health & Hum. Servs. ( 2022 )

IN THE SUPREME COURT OF NORTH CAROLINA
2022-NCSC-120
No. 36A22
Filed 16 December 2022
CEDARBROOK RESIDENTIAL CENTER, INC. and FRED LEONARD
v.
NORTH CAROLINA DEPARTMENT OF HEALTH AND HUMAN SERVICES,
DIVISION OF HEALTH SERVICE REGULATION, ADULT CARE LICENSURE
SECTION
Appeal pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel of
the Court of Appeals, 281 N.C. App. 9, 2021-NCCOA-689, affirming an order entered
on 6 November 2020 by the North Carolina Industrial Commission denying
defendant’s motion to dismiss pursuant to Rules 12(b)(1), 12(b)(2), and 12(b)(6) of the
North Carolina Rules of Civil Procedure. Heard in the Supreme Court on 4 October
2022 in the Historic 1767 Chowan County Courthouse in the Town of Edenton
pursuant to N.C.G.S. § 7A-10(a).
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by Joseph A. Ponzi
and Howard L. Williams, for plaintiff-appellees.
Robinson, Bradshaw & Hinson, P.A., by Adam K. Doerr and Demi Lorant
Bostian; and Joshua H. Stein, Attorney General, by Amar Majmundar, Special
Deputy Attorney General, for defendant-appellant.
Disability Rights North Carolina by Lisa Grafstein and Kristine Sullivan, for
Disability Rights North Carolina, Friends of Residents in Long Term Care,
AARP, and AARP Foundation, amici curiae.
Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP, by John E. Harris
and James C. Wrenn, Jr., for North Carolina Senior Living Association and
North Carolina Assisted Living Association, amici curiae.
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Opinion of the Court
ERVIN, Justice.
¶1 This case arises from a dispute between plaintiffs Cedarbrook Residential
Center, Inc., an adult care home, and its owner, Fred Leonard, on the one hand, and
defendant North Carolina Department of Health and Human Services, on the other
hand, arising from certain regulatory actions taken by the department in response to
deficiencies that the employees of the department’s Adult Care Licensure Section had
identified during inspections of plaintiffs’ facility. After plaintiffs contested the
department’s actions by initiating a contested case before the Office of Administrative
Hearings, the parties reached a settlement pursuant to which the department agreed
to withdraw its allegations in exchange for plaintiffs’ agreement to take certain
remedial steps that were intended to address the alleged deficiencies. Subsequently,
plaintiffs filed a claim with the Industrial Commission pursuant to the North
Carolina State Tort Claims Act in which they alleged that departmental employees
had been negligent in the course of inspecting and exercising regulatory authority
over plaintiffs’ facility and sought to recover damages arising from increased
operating expenses, decreased revenue, and lost profits from a planned sale of the
facility that, in plaintiffs’ view, had been proximately caused by the department’s
negligence. Although the department sought dismissal of plaintiffs’ claims on the
grounds that they were barred by the doctrine of sovereign immunity, that the claims
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that plaintiffs sought to assert against the department were not cognizable under the
State Tort Claims Act, that plaintiffs had failed to plead a valid negligence claim
against the department, and that plaintiffs’ claims were foreclosed by the public duty
doctrine, the Commission denied the department’s dismissal motion, a decision that
a divided panel of the Court of Appeals affirmed. Cedarbrook Residential Ctr., Inc. v.
N.C. Dep’t of Health & Hum. Servs., 281 N.C. App. 9, 2021-NCCOA-689. The
department noted an appeal to this Court based upon a dissenting opinion at the
Court of Appeals. After careful consideration of the parties’ arguments in light of the
record and the applicable law, we reverse the decision of the Court of Appeals and
remand this case to that court for further remand to the Commission for additional
proceedings not inconsistent with this opinion.
I. Factual Background
A. Substantive Facts
¶2 Cedarbrook is an adult care home located in Nebo that is owned and operated
by Mr. Leonard. Cedarbrook “provid[es] a place of residence for disabled adults,
including those with historic mental illness who are primarily stable in their
recovery, though occasionally volatile,” and who “are a challenging population with a
distinct culture, for whom few housing options exist in North Carolina.” As an adult
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care home,1 Cedarbrook is subject to oversight by the department’s Adult Care
Licensure Section pursuant to Chapter 131D of the North Carolina General Statutes,
N.C.G.S. § 131D-1 et seq. (2021), which provides a comprehensive regulatory
framework governing adult care homes that is intended to “ensure that adult care
homes provide services that assist the residents in such a way as to assure quality of
life and maximum flexibility in meeting individual needs and preserving individual
autonomy,” N.C.G.S. § 131D-4.1.
¶3 The General Assembly has delegated numerous regulatory powers to the
department, including the authority to license and inspect adult care homes, N.C.G.S.
§ 131D-2.4, and to adopt rules relating to the monitoring and supervision of residents,
the quality of care provided to residents, and the staffing levels provided at such
facilities, N.C.G.S. § 131D-4.3. In addition, the department is required to assess
administrative penalties against any adult care home that is found to be in violation
of applicable state and federal laws and regulations, including any provision of the
“Adult Care Home Residents’ Bill of Rights,” N.C.G.S. § 131D-34, codified as Article
3 of Chapter 131D, N.C.G.S. § 131D-19 et seq., which embodies the General
1An adult care home is defined as “[a]n assisted living residence in which the housing
management provides 24-hour scheduled and unscheduled personal care services to two or
more residents, either directly or for scheduled needs, through formal written agreement
with licensed home care or hospice agencies,” including residents “with cognitive
impairments whose decisions, if made independently, may jeopardize the safety or well-being
of themselves or others and therefore require supervision.” N.C.G.S. § 131D-2.1(3).
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Assembly’s desire “to promote the interests and well-being of residents in adult care
homes and assisted living residences” so that “every resident’s civil and religious
liberties, including the right to independent personal decisions and knowledge of
available choices, shall not be infringed” and so that “the facility shall encourage and
assist the resident in the fullest possible exercise of those rights,” N.C.G.S. § 131D-
19. In support of this policy, the relevant statutory provisions set out an extensive
“declaration of rights” that are available to residents of adult care homes, N.C.G.S. §
131D-21, and charges the department and local social services agencies with the
responsibility for their enforcement, N.C.G.S. §131D-26.
¶4 In November 2015, the department conducted an inspection of Cedarbrook,
during which it identified numerous concerns about the manner in which the facility
was being operated, and reported those deficiencies to Cedarbrook in a “Statement of
Deficiencies.” As a result of these alleged deficiencies, the department suspended
new admissions at Cedarbrook on 19 November 2015 and issued a notice of its intent
to revoke Cedarbrook’s license on 17 December 2015. After a follow-up inspection
conducted in March 2016, the department issued another Statement of Deficiencies
in which it concluded that Cedarbrook had “failed to submit acceptable plans of
protection [for its residents] in compliance with [N.C.G.S §] 131D-34(a)” despite the
department’s repeated requests that it do so. In these two Statements of Deficiencies,
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which totaled more than 400 pages, the department described the problems that it
had identified at Cedarbrook, including, but not limited to,
i. Supervision and staffing issues, including a resident
who went missing and was later found near I-40,
around five miles away from Cedarbrook;
ii. Reports of residents performing sex acts for money or
sodas from the Cedarbrook commissary;
iii. Admitting and failing to discharge residents exhibiting
dangerous and aggressive behavior, including physical
aggression and arson;
iv. Smoking inside the facility;
v. Hoarding behaviors creating a safety hazard;
vi. Failing to protect residents’ privacy when
administering medication; and
vii. Issues with maintenance of medical equipment, such
as walkers and wheelchairs.
As a result of these two inspections, the department concluded that Cedarbrook had
committed five Type A1 violations, one Type A2 violation, and eight Type B
violations.2
2 A “Type A1 Violation” is “a violation by a facility of the regulations, standards, and
requirements set forth in [N.C.G.S. §] 131D-21 or applicable State or federal laws and
regulations governing the licensure or certification of a facility which results in death or
serious physical harm, abuse, neglect, or exploitation.” N.C.G.S. § 131D-34(a)(1). A “Type
A2 Violation” involves a violation that “results in substantial risk that death or serious
physical harm, abuse, neglect, or exploitation will occur.” N.C.G.S. § 131D-34(a)(1a). A “Type
B Violation” is a violation that “is detrimental to the health, safety, or welfare of any resident,
but which does not result in substantial risk that death or serious physical harm, abuse,
neglect, or exploitation will occur. N.C.G.S. § 131D-34(a)(2). The applicable statute
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¶5 Based upon these findings, on 18 March 2016, the department issued a
“Directed Plan of Protection,” which it believed to be necessary “to ensure the health,
safety, and welfare of the residents.” The Directed Plan of Protection required
Cedarbrook to address the problems that had been identified in the Statements of
Deficiencies by, among other things, increasing on-site staffing levels, assessing all
residents who had been diagnosed with a mental illness or an intellectual
developmental disability for the purpose of ensuring that they received appropriate
care and supervision, providing additional staff training, and reviewing and, to the
extent necessary, revising Cedarbrook’s policies concerning the use and suspected use
of illicit drugs and alcohol by Cedarbrook residents. On 16 May 2016, the department
withdrew its notice of intent to revoke the facility’s operating license and issued a
provisional license based upon its determination, in accordance with N.C.G.S. § 131D-
2.7, that there was a “reasonable probability” that Cedarbrook could remedy the
deficiencies that the department had identified.
¶6 Cedarbrook disputed the department’s regulatory findings and filed a petition
with the Office of Administrative Hearings in which it formally challenged the
validity of those findings and the lawfulness of the regulatory actions that the
department had taken. On 6 July 2016, the Office of Administrative Hearings stayed
authorizes the department to impose substantial financial penalties for each identified
violation. See generally N.C.G.S. § 131D-34.
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the department’s decision to suspend further admissions at Cedarbrook, a sanction
that the department formally lifted on 12 August 2016. Prior to the holding of a
formal contested case hearing before an administrative law judge, the parties reached
a settlement pursuant to which the department agreed to withdraw all the violations
that it had identified in the Statements of Deficiencies in return for Cedarbrook’s
agreement to take certain remedial actions.3
B. Procedural History
¶7 On 25 October 2018, plaintiffs filed an affidavit and verified claim for damages
with the Commission pursuant to the State Tort Claims Act, N.C.G.S. § 143-291 et
seq., in which they alleged that the department had abused its authority in
investigating and taking regulatory actions against Cedarbrook and that the
department had been “negligent,” with “its negligence [having] caused extensive
harm to Cedarbrook, its owner [Mr. Leonard], and, although not claimants here, its
residents.”4 More specifically, plaintiffs alleged that the department “owed
3 Although plaintiffs highlight the department’s withdrawal of the alleged violations
in their complaint and their briefing before this Court as evidence that the department’s
regulatory actions had been unjustified, plaintiffs’ counsel admitted during oral argument
that the withdrawal of the alleged violations had stemmed from the fact that the parties had
reached a settlement of their differences.
4 Most of plaintiffs’ affidavit and a significant portion of their brief to this Court is
devoted to a detailed discussion of the specific violations identified by the department and an
explanation of the basis for plaintiffs’ belief those alleged violations lacked any legal or
factual justification. Given that the truthfulness of these specific factual contentions is not
germane to the proper resolution of the legal questions that are currently before us in this
case, we will not discuss the validity of the department’s substantive allegations against
Cedarbrook in any detail in this opinion.
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[plaintiffs] a duty of reasonable care in the exercise of its authority to investigate the
facility and take licensure action against [Cedarbrook]” and that the department had
breached that duty by “(1) conducting the [inspections] of Cedarbrook; (2) writing and
publishing the Statements of Deficiencies; (3) issuing the Directed Plan of Protection
against Cedarbrook and leaving it in place for nearly five months; and (4) issuing the
[suspension of admissions], and leaving it in place for nearly eight months.” Plaintiffs
further alleged that, “[a]s a direct and proximate result of [the department’s]
negligence,” plaintiffs had suffered damages in the form of lost revenue stemming
from a decreased facility population, an increase in operating expenses stemming
from the Directed Plan of Protection, and the cancellation of an agreement to sell
Cedarbrook into which Mr. Leonard had entered prior to the suspension of
admissions.
¶8 On 8 January 2019, the department filed a motion seeking to have plaintiffs’
claim dismissed for lack of subject matter jurisdiction pursuant to N.C.G.S. § 1A-1,
Rule 12(b)(1); for lack of personal jurisdiction pursuant to N.C.G.S. § 1A-1, Rule
12(b)(2); and for failure to state a claim upon which relief could be granted pursuant
to N.C.G.S. § 1A-1, Rule 12(b)(6). N.C.G.S. § 1A-1, Rule 12. According to the
department, plaintiffs’ claims were barred by the doctrine of sovereign immunity,
plaintiffs’ claims were not cognizable under the State Tort Claims Act, plaintiffs had
failed to plead a valid negligence claim against the department, and plaintiffs’ claims
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were barred by the public duty doctrine. On 13 March 2019, Deputy Commissioner
James C. Gillen entered an order denying the department’s dismissal motion. After
the department sought an immediate appeal from the Deputy Commissioner’s order
to the Commission, the Commission authorized the department to take such an
appeal on the grounds that its invocation of the doctrine of sovereign immunity
implicated a substantial right, citing Viking Utils. Corp. v. Onslow Water & Sewer
Auth., 232 N.C. App. 684, 686 (2010), and Green v. Kearney, 203 N.C. App. 260, 266
(2010).
¶9 Following a hearing held on 10 September 2019, the Commission entered an
order on 6 November 2020 in which it affirmed the Deputy Commissioner’s decision
to deny the department’s dismissal motion. First, the Commission rejected the
department’s subject matter and personal jurisdiction arguments on the grounds that
the State Tort Claims Act worked a partial waiver of the State’s sovereign immunity
and that plaintiffs had complied with the statutory requirements for asserting a claim
against the department pursuant to the State Tort Claims Act by filing an affidavit
with the Commission and identifying multiple departmental employees who had
allegedly acted in a negligent manner. Second, the Commission concluded that the
department was not entitled to rely upon the public duty doctrine in responding to
plaintiffs’ claims on the grounds that the General Assembly had amended the State
Tort Claims Act in 2008 to limit the availability of the public duty doctrine for the
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purposes of the State Tort Claims Act to situations involving injuries resulting from
an allegedly negligent failure “to protect the claimant from the action of others or
from an act of God by a law enforcement officer” or from the actions “of an officer,
employee, involuntary servant[,] or agent of the State to perform a health or safety
inspection required by statute,” citing N.C.G.S. § 143-299.1A(a). Given that
plaintiffs’ claims “concern the alleged[ly] negligent performance of the inspection
(survey) process conducted by [the department],” which is not one of the exceptions
listed in the statute, the Commission determined that “the public duty doctrine d[id]
not apply” in this case. In addition, the Commission concluded that plaintiffs had
alleged sufficient facts to support the assertion of a viable negligence claim against
the department on the grounds that
[t]aking the allegations as true, the Commission finds and
concludes [that] there is sufficient showing that [the
department] breached its “duty of reasonable care in the
exercise of its authority to investigate the facility and take
licensure actions” and that [the department] negligently
issued statements of deficiencies, causing the suspension
of admissions and reducing the value of Cedarbrook and
causing loss of funds through the collapse of a prospective
sale and prospective income. Thus, [plaintiffs’] argument
is not that it is pursuing claims on behalf of the residents.
Rather, [plaintiffs’] standing argument is that it was
harmed by the loss of the prospective sale and income
caused by [the department’s] allegedly negligent issuance
of [a] statement of deficiencies.
Finally, the Commission rejected the department’s argument that plaintiffs were not
entitled to relief under the State Tort Claim Act on the grounds that the department’s
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agents had acted intentionally, rather than negligently, reasoning that “[p]laintiffs
did not allege that [the department had] intended to cause [p]laintiffs harm in
undertaking the various licensure actions against them” and that they had, instead,
“alleged that [the department’s] conduct was negligent in the inspection and
surveying process,” so that “[p]laintiffs’ claims under the Tort Claims Act are not
barred by the intentional nature of [the department’s] actions,” citing Crump v. N.C.
Dept. of Env’t & Nat. Res., 216 N.C. App. 39, 40 (2011). The department noted an
appeal to the Court of Appeals from the Commission’s order.
C. Court of Appeals Decision
¶ 10 In seeking relief from the Commission’s order before the Court of Appeals, the
department argued that the Commission had erred by failing to dismiss plaintiffs’
claims and “effectively recognizing a claim for ‘negligent regulation’ that permits a
regulated entity to sue its state regulator under the [State] Tort Claims Act[.]”
Among other things, the department contended that (1) the limited waiver of
sovereign immunity worked by the State Tort Claims Act did not allow the assertion
of plaintiffs’ claims against the department since the State Tort Claims Act only
permits a party to sue the State “where the State of North Carolina, if a private
person, would be liable” and “[p]rivate persons cannot be held liable for regulatory
actions;” (2) the Commission’s interpretation of the State Tort Claims Act authorized
an “end-run” around the process that the General Assembly created for the purpose
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of allowing aggrieved parties to challenge allegedly unlawful regulatory actions using
the North Carolina Administrative Procedure Act; (3) the public duty doctrine
operated to bar plaintiffs’ claims; and (4), even if the State Tort Claims Act did apply
to claims like the one that plaintiffs sought to assert, they had failed to plead a valid
negligence claim. (emphasis in original). In addition, the department argued that
plaintiffs’ claims should not be permitted to proceed as a matter of public policy given
that allowing a regulated entity to assert a claim sounding in tort against the entity
responsible for regulating its activities “could dissuade regulators from performing
their statutorily mandated dut[ies]” in an effective manner.
¶ 11 A divided panel of the Court of Appeals filed an opinion affirming the
Commission’s order, with a majority of the Court of Appeals having agreed that
plaintiffs should be allowed to pursue a claim against the department pursuant to
the State Tort Claims Act for acting negligently in the course of performing its
regulatory duties. Cedarbrook, ¶ 16; id., ¶ 35 (Dietz, J., concurring). According to
Judge Arrowood, writing for the court, the Commission had appropriately determined
that plaintiffs had complied with the requirements for invoking the State Tort Claims
Act by filing an affidavit with the Commission that contained the required
information. Id. ¶ 11. The Court of Appeals rejected the department’s contention
that “private persons cannot be held liable for regulatory actions” in an action brought
pursuant to the State Tort Claims Act on the grounds that the department’s
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argument “misconstrues the meaning of ‘private person’ under the [State Tort Claims
Act],” that the relevant legislation must “ ‘be construed so as to effectuate its purpose
of waiving sovereign immunity so that a person injured by the negligence of a State
employee may sue the State as he would any other person,’ ” and that “the ‘private
person’ language within the [State Tort Claims Act] pertains to the nature of the
proceedings but does not operate to bar waiver of sovereign immunity,” with the
department’s argument to the contrary resting upon a “fail[ure] to acknowledge that
many cases presented to the Commission and to [the Court of Appeals] on appeal
involve regulatory action.” Id. ¶ 12 (quoting Zimmer v. N.C. Dep’t of Transp., 87 N.C.
App. 132, 136 (1987)).
¶ 12 In addition, the Court of Appeals held that, “[a]lthough the General Assembly
has provided several remedies under the Administrative Procedure Act, the
availability of an administrative remedy does not preclude plaintiff[s] from seeking a
remedy under the [State Tort Claims Act].” Id. ¶ 14. In support of this proposition,
the court cited Nanny’s Korner Day Care Center, Inc. v. North Carolina Department
of Health and Human Services, 264 N.C. App. 71, appeal dismissed, disc. rev. denied,
372 N.C. 700 (2019), in which the department had taken regulatory action against a
daycare center and required the daycare center to notify its clients of an allegation of
sexual abuse of one of its children by a staff member, resulting in a loss of business
for the daycare center and its eventual closure. Id. at 73–75. The daycare center
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sought relief from the department under the State Tort Claims Act and,
subsequently, instituted a civil action in superior court in which it alleged that it had
been injured as the result of a deprivation of its due process rights. Id. at 75.
Although the Court of Appeals concluded that the daycare center’s claim under the
State Tort Claims Act was barred by the applicable statute of limitations, it also held
that the daycare center had no right to assert a direct constitutional claim against
the department on the grounds that it “had an adequate state remedy in the form of
the Industrial Commission through the [State] Tort Claims Act,” with the fact that
the daycare center had failed “to comply with the applicable statute of limitations not
render[ing] its remedy inadequate.” Id. at 79–80. In this case, the Court of Appeals
held that, in light of its prior decision in Nanny’s Korner, it was required to hold that
“a regulated entity has a state remedy under the [State Tort Claims Act].”
Cedarbrook, ¶ 16.
¶ 13 Moreover, the Court of Appeals agreed with the Commission that the 2008
amendments to the State Tort Claims Act relating to the availability of the public
duty doctrine as a defense in proceedings initiated pursuant to State Tort Claims Acts
precluded the department from invoking the public duty doctrine as an affirmative
defense in this case, id. ¶¶ 19–20, with the Court of Appeals having reached this
result based upon this Court’s decision in Ray v. North Carolina Department of
Transportation, in which we recognized that, even though the new statute
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“incorporated much of our public duty doctrine case law,” the General Assembly had
“also made clear that the doctrine is to be a more limited one than the common law
might have led us to understand,” 366 N.C. 1, 7 (2012). The Court of Appeals held
that, in light of the plain statutory language, the public duty doctrine is only available
as a defense in a proceeding held pursuant to the State Tort Claims Act if the alleged
injury “is the result of (1) a law enforcement officer’s negligent failure to protect the
plaintiff from actions of others or an act of God, or (2) a State officer’s, employee’s,
involuntary servant’s, or agent’s negligent failure to perform a health or safety
inspection required by statute.” Id. at 8 (citing N.C.G.S. § 143-299.1A(a)). As a result
of the fact that “plaintiffs’ claim is based on allegedly negligent licensure actions
taken after a series of inspections” rather than upon an “alleged[ly] negligent failure
to perform a health or safety inspection,” the Court of Appeals held that the public
duty doctrine did not operate to bar the assertion of plaintiffs’ claim against the
department in this proceeding. Cedarbrook, ¶ 23 (emphasis in original).
¶ 14 The Court of Appeals also rejected the department’s contention that plaintiffs
had failed to state a claim against the department sounding in negligence, concluding
that this aspect of the department’s argument was “intertwined with its
interpretation of the public duty doctrine” and that, since the department was not
entitled to invoke the public duty doctrine in bar of plaintiffs’ claims, its challenge to
the sufficiency of plaintiffs’ negligence claims necessarily failed as well. Id. ¶ 25. In
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addition, the Court of Appeals noted that “[the department’s] argument that it should
not be held liable for acting intentionally pursuant to authority granted by the
General Assembly ‘overlooks the fact that the focus is not on whether [the
department’s] actions were intentional, but rather whether [it] intended to injure or
damage [plaintiffs],’ ” id., ¶ 26 (quoting Crump, 216 N.C. App. at 44–45), so that, “[i]n
order for [the department’s] argument to succeed,” “a showing that [the department’s]
employees intended to cause harm to plaintiffs would be required,” with “[n]othing in
the record” tending to “suggest that [they] intended to” do so, id. ¶ 26.
¶ 15 Finally, the Court of Appeals observed that “[o]ur Courts have repeatedly
affirmed the Commission’s authority to make determinations of negligence where a
party alleges harm caused by an agency’s regulatory actions” and that it was “not
persuaded by [the department’s] concern that affirming the Commission here will
encourage regulators to abandon their statutorily mandated duties.” Id. ¶ 31. The
Court of Appeals pointed out that the General Assembly served as the policy-making
body in state government and that the department’s public policy concerns “would be
more appropriately directed to the General Assembly,” particularly given that “the
General Assembly [had] limited the applicability of the public duty doctrine through
legislative action.” Id. ¶ 32.
¶ 16 Judge Dietz filed a separate opinion in which he concurred in the logic adopted
by the court while emphasizing the binding nature of Nanny’s Korner and attempting
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to refute arguments that were advanced in the dissenting opinion by Judge Tyson.
Id. ¶¶ 35–37 (Dietz, J., concurring). Among other things, Judge Dietz observed that,
while the policy considerations raised by the department and in Judge Tyson’s dissent
“might be reasons for our Supreme Court to exercise its discretion to take this case
and examine the holding in Nanny’s Korner,” the Court of Appeals was required to
follow its own existing precedent. Id. ¶ 38.
¶ 17 In his dissenting opinion, Judge Tyson asserted that plaintiffs had “failed to
show any legal duty owed or breach thereof, or proximate cause in their putative
negligence action”; that “[c]laims challenging an agency’s regulatory actions are
properly heard under the North Carolina Administrative Procedure Act”; and that
the Court of Appeals’ decision “will lead to a stampede of nonjusticiable suits against
regulatory state agencies which are clearly barred by sovereign immunity except for
the limited waiver of that immunity under the [State Tort Claims Act].” Id. ¶ 39
(Tyson, J., dissenting). According to Judge Tyson, “[i]t has long been established that
an action cannot be maintained against [a state agency] unless it consents to be sued
or upon its waiver of immunity, and that this immunity is absolute and unqualified.”
Id. ¶ 47 (quoting Guthrie v. N.C. St. Ports Auth., 307 N.C. 522, 534 (1983)) (emphasis
in Guthrie, alterations added by Judge Tyson). As a result, Judge Tyson explained,
“[t]he State is immune from suit unless and until it has expressly consented to be
sued.” Id. ¶ 48 (quoting Guthrie, 307 N.C. at 534).
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¶ 18 Although Judge Tyson agreed with his colleagues that the State Tort Claims
Act constitutes a partial waiver of the State’s sovereign immunity, he concluded that
the “private person” clause constitutes “a substantive statutory limiting
requirement.” Id. ¶ 53 (citing Frazier v. Murray, 135 N.C. App. 43, 48 (1999)).
According to Judge Tyson, plaintiffs’ allegations “are wholly based on regulatory
actions and sanctions [that the department] cited plaintiff[s] for violating,” with “[n]o
‘private person’ [having] any right or authority to perform these exclusively state
regulatory actions or to inspect or sanction a licensee for violations of laws and
regulations.” Id. ¶ 54 (citing N.C.G.S. § 131D-2.4).
¶ 19 In addition, Judge Tyson concluded that plaintiffs had failed to properly plead
a viable negligence claim given their failure to establish that the department owed
them a “duty not to ‘negligently regulate’ ” Cedarbrook, that any breach of such a
duty had occurred, or that “the purported breach was the proximate cause of their
harm.” Id. ¶ 62. Judge Tyson distinguished this case from an earlier, unpublished
Court of Appeals decision in which the estate of an elderly adult care home resident
filed a claim against the department under the State Tort Claims Act after the
resident disappeared from the facility and was later declared deceased. Tang v. N.C.
Dep’t of Health & Hum. Servs., 2021 WL 5071898, 2021-NCCOA-611, ¶¶ 8–11
(unpublished). In that case, the Court of Appeals upheld the Commission’s
determination that the department owed a statutory duty of care to adult care home
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residents to ensure that the facilities in which they were living were operated safely,
that “[t]here was competent evidence for the Commission to find that [the
department] breached its duty to plaintiff in failing to properly assess [safety]
violations at [the facility] and in failing to take reasonable steps to address the
deficiencies,” and that the department’s violations of this duty proximately resulted
in the resident’s death. Id ¶ 27. In reaching this result, the Court of Appeals noted
that the Commission had found that “it was foreseeable that [the department’s]
failure to exercise its regulatory authority to address [nonoperational alarms on the
facility’s exit doors]—at a facility known for past deficiencies and non-compliance—
would result in [the resident’s] injury.” Id. ¶ 28.
¶ 20 After considering the Court of Appeals’ decision in this case in comparison with
the approach adopted in Tang, Judge Tyson concluded that his colleagues were
holding the department and other state regulatory agencies to “an impossible
standard” under which they would be “(1) liable for enforcing the statutory mandates;
and, (2) also liable for failing to enforce those very same statutory mandates with the
Industrial Commission sitting in judgment of their ‘reasonableness.’ ” Cedarbrook,
¶ 66. For this reason, Judge Tyson would have concluded that “[t]he limited waiver
of sovereign immunity under the [State Tort Claims Act] simply does not recognize
or permit plaintiff[s’] claim.” Id.
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¶ 21 Finally, Judge Tyson disputed the validity of his colleagues’ conclusion that
Nanny’s Korner constituted controlling precedent for purposes of this case on the
grounds that the language upon which the majority of the Court of Appeals had relied
was mere dicta. Id. ¶ 69. Instead, Judge Tyson would have held that, in the event
that the department “or its employee-agent did not act professionally or reasonably
during the scope of their investigation or in preparing its 400-page ‘Statement of
Deficiencies,’ ” the Administrative Procedure Act “provides an adequate and exclusive
state remedy for allegedly improper or unjustified regulatory action by a state agency
or employees.” Id. ¶ 71. According to Judge Tyson, “[i]f plaintiff[s] had continued to
pursue [their] claims before the [Office of Administrative Hearings] and won, [they]
could have pursued reversal of the administrative action, remedial actions, and an
award of attorneys’ fees in the contested case by showing [that the department]
‘substantially prejudiced’ its rights and acted ‘arbitrarily or capriciously.’ ” Id. ¶ 72
(quoting N.C.G.S. § 150B-33). The department noted an appeal to this Court based
upon Judge Tyson’s dissent.
II. Analysis
A. Standard of Review
¶ 22 Although an order denying a motion to dismiss based upon the doctrine of
sovereign immunity is interlocutory, such orders are immediately appealable because
they affect a substantial right. State ex rel. Stein v. Kinston Charter Acad., 379 N.C.
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560, 2021-NCSC-163, ¶ 23; N.C.G.S. § 7A-27(b)(3)(a) (2021). Appellate courts review
the denial of a motion to dismiss based on the doctrine of sovereign immunity utilizing
a de novo standard of review. White v. Trew, 366 N.C. 360, 363 (2013). The dismissal
of a pleading based upon a failure to state a claim for which relief can be granted
pursuant to N.C.G.S. §1A-1, Rule 12(b)(6) is appropriate when “(1) the complaint on
its face reveals that no law supports the plaintiff’s claim; (2) the complaint on its face
reveals the absence of facts sufficient to make a good claim; or (3) the complaint
discloses some fact that necessarily defeats the plaintiff's claim.” Wood v. Guilford
Cnty., 355 N.C. 161, 166 (2002). In reviewing the sufficiency of claims asserted
against state agencies pursuant to the State Tort Claims Act, “we treat [the]
plaintiff’s factual allegations contained in his affidavit before the Industrial
Commission as true.” Hunt v. N.C. Dep’t of Lab., 348 N.C. 192, 194 (1998).5
B. Sovereign Immunity and the State Tort Claims Act
¶ 23 In seeking relief from the decisions of the lower courts before this Court, the
department begins by arguing that it is shielded by sovereign immunity from tort
5 Although plaintiffs contend in their brief that, in asserting that its regulatory actions
were necessary to ensure compliance with the relevant laws and the applicable standards of
care, the department “ignores the appropriate standard of review” and “disregards the
operative facts entirely,” the extent to which the actions that the department took against
Cedarbrook were legally or factually justified has no bearing upon whether the claim that
plaintiffs have asserted against the department is cognizable under the State Tort Claims
Act. As a result, while the allegation set out in the claim and affidavit are assumed to be
true, the extent to which plaintiffs are or are not entitled to assert a negligence-based claim
for damages against the department and whether the department owes plaintiffs a legally
recognized duty does not hinge upon the nature or extent of the underlying facts.
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liability arising from the actions that it took in regulating Cedarbrook and that the
State Tort Claims Act does not effect even a partial waiver of its sovereign immunity
defense to such a claim. We find the department’s argument to be persuasive.
¶ 24 The common law doctrine of sovereign immunity is well-established in North
Carolina and “prevents a claim for relief against the State except where the State has
consented or waived its immunity.” Kinston Charter Acad., ¶ 21 (quoting Harwood
v. Johnson, 326 N.C. 231, 238 (1990)). Sovereign immunity is “absolute and
unqualified,” Guthrie, 307 N.C. at 534, and “so firmly established that it should not
and cannot be waived by indirection or by procedural rule” and can only be foregone
“by plain, unmistakable mandate of the lawmaking body,” Orange Cnty. v. Heath, 282
N.C. 292, 296 (1972). As a result, the State and its agencies are “immune from suit
unless and until [the State] has expressly consented to be sued,” Guthrie, 307 N.C. at
534 (quoting Great Am. Ins. Co. v. Gold, 254 N.C. 168, 173 (1961)), with statutes “that
permit suit in derogation of sovereign immunity [to] be strictly construed,” Stone v.
N.C. Dep’t of Lab., 347 N.C. 473, 479 (1998); see also Guthrie, 307 N.C. at 538.
¶ 25 The General Assembly enacted the State Tort Claims Act in 1951, in which it
constituted the Commission as “a court for the purpose of hearing and passing upon
tort claims against the State Board of Education, the Board of Transportation, and
all other departments, institutions and agencies of the State.” N.C.G.S. § 143-291(a).
The Industrial Commission shall determine whether or not
each individual claim arose as a result of the negligence of
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any officer, employee, involuntary servant or agent of the
State while acting within the scope of his office,
employment, service, agency or authority, under
circumstances where the State of North Carolina, if a
private person, would be liable to the claimant in
accordance with the laws of North Carolina.
Id. In the event that the Commission concludes that an officer, employee, involuntary
servant, or agent of the State acted negligently in the course of carrying out his or
her public duties and that those injuries proximately resulted in any injury to the
plaintiff, the Commission is required to determine the amount of damages to which
the plaintiff is entitled, subject to a statutory cap of $1,000,000 per person, per
occurrence. Id.; N.C.G.S. § 143-299.2. Thus, by enacting the State Tort Claims Act,
the State “partially waived its sovereign immunity by consenting to direct suits
brought as a result of negligent acts committed by its employees in the course of their
employment.” Teachy v. Coble Dairies, Inc., 306 N.C. 324, 329 (1982).
¶ 26 According to the department, the fact that the State Tort Claims Act operates
in partial derogation of the State’s sovereign immunity means that its provisions
must be strictly construed, citing Stone, 347 N.C. at 479. First, the department
argues that the “plain language and legislative history of the [State] Tort Claims Act
show that the General Assembly intended to waive sovereign immunity from
traditional tort claims, not regulatory action by the State.” Second, the department
contends that it cannot be sued by Cedarbrook based upon the regulatory actions that
it took against the facility given that the State Tort Claims Act “only permits parties
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to sue state agencies ‘where the [agency], if a private person, would be liable,’ ” with
private persons being unable to exercise regulatory authority, quoting N.C.G.S. § 143-
291(a) (alteration and emphasis added in brief). Third, the department argues that
the Court of Appeals “incorrectly construed the [State] Tort Claims Act to circumvent
the limited remedies the General Assembly established for challenges to regulatory
action,” which allow adult care homes to challenge penalties and suspensions in
accordance with the applicable provisions of the Administrative Procedure Act, citing
N.C.G.S. §§ 131D-2.7(d)(4), -34(e). In other words, the department argues,
“[a]lthough the General Assembly made clear that adult care homes may contest [the
department’s] regulatory actions [in the Office of Administrative Hearings], it did not
authorize such facilities to pursue a claim for damages” and that, “[e]ven when an
adult care home successfully contests a suspension or penalty, the legislature
provided no mechanism that would allow a facility to recover compliance costs it may
have incurred in dealings with its regulators.”
¶ 27 Finally, the department argues that Nanny’s Korner “cannot support the
weight the Court of Appeals majority placed on it” given that Nanny’s Korner arose
from a trial court’s decision to dismiss a constitutional due process claim rather than
a decision by the Commission under the State Tort Claims Act and given that the
Court of Appeals in that case “did not analyze the ‘private person’ standard under the
[State] Tort Claims Act, the elements of a negligence claim involving regulatory
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action, or the public duty doctrine.” According to the department, the issue before
the Court of Appeals in this case “was simply not the focus of Nanny’s Korner, and
the [Court of Appeal’s] indirect and unnecessary comments in that case, without
benefit of full briefing and argument, did not provide a sufficient basis for the Court
of Appeals to create a new cause of action against the State” that had not previously
been recognized. In any event, the department argues, this Court is not bound by
Nanny’s Korner.
¶ 28 In response, plaintiffs assert that “the [State] Tort Claims Act contains no
carve-out for agency exercise of regulatory authority” and, instead, “expressly
provides that a claim is available as a result of the negligence of any agency employee
‘acting within the scope of his office, employment . . . or authority,’ ” quoting N.C.G.S.
§ 143-291(a) (emphasis added in brief). According to plaintiffs, “[j]ust as driving a
bus is within a bus driver’s scope of employment, [the department’s] licensure actions
against Cedarbrook were within the scope of its employees’ authority” and, for that
reason, fall within the scope of the State Tort Claims Act. Plaintiffs argue that the
department “turns the meaning of the ‘private person’ clause on its head, as a
mechanism to assume away agency misconduct rather than an acknowledgement of
the waiver of sovereign immunity.” In plaintiffs’ view, the “private person” language
“merely serves to effectuate one of the [State] Tort Claims Act’s two purposes: waiving
sovereign immunity,” quoting Patrick v. N.C. Dept’ of Health & Hum. Servs., 192 N.C.
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App. 713, 719 (2008). As a result, plaintiffs contend that the department’s position
“is unsupported by the plain language of the [State] Tort Claims Act, its purpose as
a waiver of sovereign immunity, and the cases that address the ‘private person’
clause.”
¶ 29 A careful consideration of the record in light of the applicable law persuades
us that the department has the better of this dispute. As an initial matter, plaintiffs
have not cited, and our own research has not identified, any decision of either this
Court or the Court of Appeals in the more than seventy years since the enactment of
the State Tort Claims Act that suggests that an entity subject to regulation by a state
agency is entitled to assert a claim for damages against that agency predicated on the
theory that the agency regulated the entity in question in a negligent manner. The
absence of such authority is telling given that thousands of businesses, nonprofits,
and other entities have been subject to regulatory actions by state agencies, many of
which undoubtedly believe that they have suffered reputational and financial harm
as the result of misguided regulatory decisions. See, e.g., Ocean Hill Joint Venture v.
N.C. Dep’t of Env’t, Health & Nat. Res., 333 N.C. 318 (1993) (addressing a developer’s
administrative challenge to the imposition of civil penalties by the Department of
Environment, Health and Natural Resources stemming from alleged violations of the
Sedimentation Pollution Control Act); Parkway Urology, P.A. v. N.C. Dep’t of Health
& Hum. Servs., 205 N.C. App. 529 (2010) (addressing a hospital’s challenge to a
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decision by the Department of Health and Human Services to award a certificate of
need to a nearby hospital allowing it to purchase a piece of equipment used for cancer
treatment, in which the challenger alleged that the department’s decision would
reduce the number of patients that it could serve and substantially and adversely
affect its revenues). The absence of any authority indicating that the legal theory
upon which plaintiffs rely has any viability strongly suggests that it does not.
¶ 30 In the lengthy period prior to the enactment of the State Tort Claims Act, the
General Assembly addressed claims advanced by private citizens seeking
compensation for personal injuries arising from State action by enacting case-specific
pieces of legislation or delegating authority to various state agencies to adjudicate
the validity of such claims. See A Survey of Statutory Changes in North Carolina in
1951, 29 N.C. L. Rev. 351, 417 (1951). For example, in 1935, the General Assembly
enacted legislation authorizing the State Board of Education to settle personal injury
and wrongful death claims arising from accidents involving school buses, regardless
of the extent to which those actions stemmed from negligent conduct. Id. (citing
N.C.G.S. §§ 115-340 to -346 (now repealed)). Similarly, in 1947, the General
Assembly “lumped private claims in an omnibus bill, and authorized the state
agencies concerned, upon investigation, to pay claimants not in excess of the sums
listed therein.” Id. (citing An Act to Provide for the Investigation and Payment of
Certain Claims Growing Out of Motor Vehicle Accidents Involving Governmental
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Employees, ch. 1092, 1947 N.C. Sess. Laws 1640, 1640–46). Finally, the 1949 General
Assembly enacted legislation, which was something of a precursor to the State Tort
Claims Act, authorizing the Commission to hear and settle specific negligence claims,
most of which arose from accidents involving school buses, that had been asserted
against various state agencies. Id. (citing An Act to Authorize the North Carolina
Industrial Commission to Hear and Determine Certain Tort Claims Against State
Departments and Agencies, ch. 1138, 1949 N.C. Sess. Laws, 1360, 1360–74).
¶ 31 With the passage of the State Tort Claims Act in 1951, the General Assembly
created a “permanent machinery . . . to handle future negligence claims against the
state.” Id. As one contemporaneous law review article explained, the State Tort
Claims Act
provides for both administrative and judicial settlement of
claims against all departments, institutions[,] and agencies
of the state, resulting from a negligent act of a state
employee while acting within the scope of his employment
and without contributory negligence on the part of the
claimant. If not expressly, clearly by implication [the Act]
contemplates both personal injury and wrongful death
claims. Whether a claim may be filed for property injury is
not so clear.
Id. (emphasis added). As a result, the legislative history of the State Tort Claims Act
suggests that the General Assembly intended to create a formal mechanism to
address personal injury and wrongful death claims asserted against the State by
private citizens stemming from alleged negligence on the part of the relevant state
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employees in lieu of the ad hoc method for addressing such claims that had existed
until that point in time.6
¶ 32 At the time that it enacted the State Tort Claims Act, the General Assembly
“incorporated the common law of negligence,” Stone, 347 N.C. at 479, meaning that,
when such claims are brought before the Commission, “negligence is determined by
the same rules as those applicable to private parties,” Bolkhir v. N.C. State Univ.,
321 N.C. 706, 709 (1988); accord Barney v. N.C. State Highway Comm’n, 282 N.C.
278, 284 (1972). As we noted in Bolkhir, “[t]he essence of negligence is behavior
creating an unreasonable danger to others,” so that, in order to establish negligence
for purposes of the State Tort Claims Act, “[a] plaintiff must show that: (1) [the]
defendant failed to exercise due care in the performance of some legal duty owed to
[the] plaintiff under the circumstances; and (2) the negligent breach of such duty was
the proximate cause of the injury.” Bolkhir, 321 N.C. at 709.
6 The subsequent revisions that the General Assembly has made to the State Tort
Claims Act likewise demonstrate that the General Assembly primarily contemplated liability
arising from a state employee’s involvement in automobile accidents. For example, a report
submitted to the 1999 General Assembly by the Legislative Research Commission regarding
the estimated cost of raising the statutory cap on recovery under the State Tort Claims Act
from $150,000 to $500,000 focused on liability arising from automobile accidents. See
Legislative Research Commission, State Tort Liability & Immunity, Report to the 2000
Session of the 1999 General Assembly of North Carolina, 29–31 (2000),
https://www.ncleg.gov/files/library/studies/2000/st11064.pdf. According to the report, of the
$6,736,781 that the Commission had awarded pursuant to the State Tort Claims Act during
the 1998–1999 reporting period, $5,874,041, or 87%, stemmed from losses arising from
automobile and school bus accidents. Id. at 30.
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¶ 33 The history of litigation under the State Tort Claims Act clearly indicates that
it was intended to address traditional kinds of negligence claims, with this Court and
the Court of Appeals having routinely considered cases involving traditional
negligence-based torts under the rubric of the State Tort Claims Act. In Bolkhir, for
example, the plaintiff’s son was injured when he fell through the glass paneling of a
screen door at the entrance of the university-owned apartment in which the plaintiff
and his family were living. Id. at 708. The plaintiff sued under the State Tort Claims
Act, with the Commission ultimately “conclude[ing] that [the] defendant’s employee
negligently created an unsafe condition” by replacing the screen door’s mesh paneling
with glass paneling. Id.; see also Lyon & Sons, Inc. v. N.C. State Bd. of Educ., 238
N.C. 24, 25 (1953) (holding that a school bus driver employed by the State negligently
backed a bus into the plaintiff’s automobile); Brewington v. N.C. Dep’t of Corr., 111
N.C. App. 833, 834 (1993) (holding that an inmate incarcerated in a state correctional
facility had been injured in a fall resulting from negligent maintenance by the staff
of the facility in which the inmate was housed).
¶ 34 The claim that plaintiffs have asserted against the department in this case
bears no resemblance to the types of negligence claims for which the State Tort
Claims Act has traditionally provided a means for obtaining a recovery against a state
agency. A careful reading of the claim that plaintiffs have asserted against the
department indicates that it rests entirely upon discretionary actions that were taken
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in pursuit of the department’s statutory authority to regulate adult care homes. As
a result, even though their claim is not couched in such terms, plaintiffs are seeking
to recover damages from the department for what amounts to “negligent regulation,”
Cedarbrook, ¶ 44 (Tyson, J., dissenting), which is not the sort of claim that any North
Carolina court has previously recognized. On the contrary, this Court has held that,
when the General Assembly “has vested [a state agency] with broad powers to protect
the health and well-being of the general public,” the discretionary decisions that it
makes in exercising that authority “are not generally the type of decisions for which
the State is liable to private citizens in tort.” Myers v. McGrady, 360 N.C. 460, 468
(2006).
¶ 35 In addition, the plain language of the State Tort Claims Act forecloses claims
like those that plaintiffs have attempted to assert in this case. As has already been
noted, the Act only permits private parties to bring claims under the State Tort
Claims Act in situations in which “the State of North Carolina, if a private person,
would be liable to the claimant in accordance with the laws of North Carolina.”
N.C.G.S. § 143-291(a) (emphasis added). Put another way, “[u]nder the Act[,] the
State is liable only under circumstances in which a private person would be.” Stone,
347 N.C. at 478 (emphasis in original); see also Guthrie, 307 N.C. at 536–37 (holding
that claims “under the provision of [the State Tort Claims Act are] limited to the same
category with respect to tort claims against the agency covered as if such agency were
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a private person and such private person would be liable under the laws of North
Carolina”) (quoting Branch Banking & Tr. Co. v. Wilson Cnty. Bd. of Educ., 251 N.C.
603, 609 (1960)). Private persons do not, of course, exercise regulatory power and,
therefore, cannot be held liable for engaging in regulatory activities in a negligent
manner. See Stone, 347 N.C. at 478 (explaining that “[o]nly governmental entities
possess authority to enact and enforce laws for the protection of the public”). 7 As a
result, the plain language of the State Tort Claims Act precludes a finding that a
state agency is liable to a private party for what amounts to negligent regulation.
¶ 36 In allowing plaintiffs’ claims under the State Tort Claims Act to proceed, the
Court of Appeals concluded that “the ‘private person’ language within the [State Tort
Claims Act] pertains to the nature of the proceedings but does not operate to bar
waiver of sovereign immunity.” Cedarbrook, ¶ 12. The Court of Appeals did not cite
any authority in support of this statement, and it is not entirely clear to us what the
7 Stone was the first case to recognize that the State Tort Claims Act incorporated the
common law public duty doctrine, which “provides that governmental entities and their
agents owe duties only to the general public, not to individuals, absent a ‘special relationship’
or ‘special duty’ between the entity and the injured party.” 347 N.C. at 477–78 (citing
Braswell v. Braswell, 330 N.C. 363, 370–71 (1991)). Although the General Assembly
amended the State Tort Claims Act in 2008 for the purpose of limiting the circumstances
under which the public duty doctrine constituted a defense to claims against the State, see
An Act to Limit the Use of the Public Duty Doctrine as an Affirmative Defense for Claims
Under the State Tort Claims Act in which the Injuries of the Claimant are the Result of the
Alleged Negligent Failure of Certain Parties to Protect Claimants from the Action of Others,
S.L. 2008-170, § 1, 2008 N.C. Sess. Laws 690, 691 (codified at N.C.G.S. § 143-299.1A), the
2008 amendments did not disturb this Court’s understanding of the “private person”
provision of N.C.G.S. § 143-291(a).
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court meant in making it. If the Court of Appeals intended to suggest that the State
Tort Claims Act is merely intended to allow State agencies to be held liable under the
same procedures that could be used to hold private persons liable in tort, we are
unable to accept that logic for two reasons. First, tort claims against the State are
heard by the Commission, while tort claims against private persons are adjudicated
in the General Court of Justice. Compare N.C.G.S. § 143-291(a) with N.C.G.S. § 7A-
240. Second, the State Tort Claims Act provides that the State will be held liable
under “circumstances [i.e., a set of facts] where . . . a private person[ ] would be liable”
under North Carolina law rather than in accordance with the “proceedings” by which
a private person would be held liable. N.C.G.S. § 143-291(a) (emphasis added). As a
result, the Court of Appeals’ apparent understanding of the “private person” provision
found in N.C.G.S. § 143-291(a) finds no support in either our precedent or the relevant
statutory language.
¶ 37 In addition, the Court of Appeals’ understanding of the “private person”
provision cannot be squared with the relevant canons of statutory construction.
According to well-established North Carolina law, “when construing legislative
provisions, this Court looks first to the plain meaning of the words of the statute
itself” and, “when the language of a statute is clear and without ambiguity, it is the
duty of this Court to give effect to the plain meaning of the statute.” State v. Morgan,
372 N.C. 609, 614 (2019) (cleaned up). As we have already explained, the State Tort
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Claims Act permits an individual to sue the State when an agent or employee of the
State acts in a negligent manner and under circumstances in which liability in tort
would arise under North Carolina law if that agent or employee were acting in his or
her private capacity. See Frazier, 135 N.C. App. at 48 (observing that “[t]ort liability
for negligence attaches to the state and its agencies under the [State] Tort Claims
Act only ‘where the State of North Carolina, if a private person, would be liable to the
claimant in accordance with the laws of North Carolina’ ”) (quoting N.C.G.S. § 143-
291(a)). As a result, we agree with Judge Tyson that the “private person” language
contained in N.C.G.S. § 143-291(a) imposes a substantive, rather than a procedural,
limitation upon the types of claims that are cognizable under the State Tort Claims
Act. Cedarbrook, ¶ 53 (Tyson, J., dissenting).
¶ 38 In the event that, contrary to our reading of the relevant statutory language,
the “private person” provision contained in N.C.G.S. § 143-291(a) was deemed to be
ambiguous, we “must interpret the statute to give effect to legislative intent.” State
v. Curtis, 371 N.C. 355, 358 (2018) (cleaned up). As is demonstrated by even a cursory
examination of the Administrative Procedure Act, the General Assembly has enacted
a process by which regulated entitles are entitled to challenge the lawfulness of and
seek redress from allegedly unlawful regulatory actions. More specifically, N.C.G.S.
§§ 131D-2.7(d)(4) and 131D-34(e) provide that parties wishing to contest the validity
of a departmental decision to suspend admissions to an adult care home or to
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challenge a penalty that the department has sought to impose arising from
deficiencies in the operation of an adult care home are entitled to a hearing in
accordance with the Administrative Procedure Act. See N.C.G.S. § 150B-1 et seq.; see
also Empire Power Co. v. N.C. Dep’t of Env’t Mgmt., 337 N.C. 569, 594 (1994)
(recognizing that “[t]he primary purpose of the [Administrative Procedure Act] is to
confer procedural rights, including the right to an administrative hearing, upon any
person aggrieved by an agency decision”). We have difficulty concluding that the
General Assembly would create a specific process pursuant to which regulated
entities are entitled to challenge the lawfulness of a state agency’s regulatory
decisions while simultaneously waiving sovereign immunity so as to allow those
entities to assert a negligence-based claim for damages against the agency arising
from the same regulatory decision under the State Tort Claims Act, particularly given
this Court’s consistent recognition that statutes in “derogation of sovereign immunity
should be strictly construed.” Stone, 347 N.C. at 479; see also Guthrie, 307 N.C. at
538. As a result, basic principles of statutory construction suggest that any
uncertainty concerning the meaning of the “private person” language contained in
N.C.G.S. § 143-291(a) should be resolved against, rather than in favor of, a waiver of
sovereign immunity.8
8Plaintiffs cite Patrick for the proposition that the “private person” language does not
bar their claims because it “merely serves to effectuate one of the [State] Tort Claims Act’s
two purposes: waiving sovereign immunity.” 192 N.C. App. at 719 (citing Teachy, 306 N.C.
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¶ 39 The interpretation of the “private person” provision of N.C.G.S. § 143-291(a)
that we believe to be appropriate is consistent with the manner in which the federal
courts have interpreted the virtually identical provision that appears in the Federal
Tort Claims Act, with this Court having previously examined cases arising under the
Federal Tort Claims Act in interpreting the State Tort Claims Act. See, e.g., Lyon &
Sons, 238 N.C. at 32–33 (discussing interpretations of the Federal Tort Claims Act
and applying those interpretations in construing its North Carolina analogue).
According to the Federal Tort Claims Act, federal district courts have exclusive
jurisdiction over
civil actions on claims against the United States, for money
damages . . . for injury or loss of property, or personal injury
or death caused by the negligent or wrongful act or
omission of any employee of the Government while acting
within the scope of his office or employment, under
circumstances where the United States, if a private person,
would be liable to the claimant in accordance with the law
of the place where the act or omission occurred.
at 329). The issue in Patrick, however, was whether the plaintiff’s claim against the
department in that case was barred by public official immunity. Id. at 716. The Court of
Appeals rejected an argument advanced by the department that, because public official
immunity protected its individual employees as “private persons” from liability for
performing discretionary governmental duties absent evidence of malice or corruption, the
department could not be held liable under the State Tort Claims Act. Id. at 718. Thus, the
Patrick court’s discussion of the “private person” language merely indicates that the
department could not escape the limited waiver of sovereign immunity provided in the State
Tort Claims Act on the grounds that the employees whose alleged negligence gave rise to the
claim could not be held liable as individuals.
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28 U.S.C. § 1346(b)(1) (emphasis added). Federal courts have held that the reference
to a “private person” in 28 U.S.C. § 1346(b)(1) imposes a substantive limit upon the
types of tort claims that can be asserted against the United States that requires that
those claims be comparable to the types of claims that could be asserted against a
private person. See., e.g., C.P. Chem. Co. v. United States, 810 F.2d 34, 37 (2d Cir.
1987) (holding that “[t]he plain meaning of section 1346(b) is that the United States
cannot be held liable when there is no comparable cause of action against a private
citizen”); Jayvee Brand, Inc. v. United States, 721 F.2d 385, 390 (D.C. Cir. 1983)
(concluding that “quasi-legislative or quasi-adjudicative action by an agency of the
federal government is action of the type that private persons could not engage in and
hence could not be liable for under local law”).
¶ 40 In Jayvee Brand, a children’s sleepwear manufacturer sued the Consumer
Product Safety Commission under the Federal Tort Claims Act seeking monetary
damages that the manufacturer alleged to have been negligently caused by the
Commission’s regulatory actions. 721 F.2d at 387. After agreeing that the
Commission had acted unlawfully by failing to follow proper procedures in the course
of taking the challenged regulatory action and that these “wrongful acts” had been
committed by an “ ‘employee of the Government while acting within the scope of his
office or employment,’ ” the United States Court of Appeals for the District of
Columbia Circuit concluded that, since these actions were “of the type that private
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persons could not engage in and hence could not be liable for under local law,” the
federal courts lacked “jurisdiction to entertain a suit against the federal government”
under the Federal Tort Claims Act. Id. at 390 (quoting 28 U.S.C. § 1346(b)(1)). In
support of this determination, the court explained that
[a]ppellants ask us to make a major innovation in the law
by holding that the [Federal Tort Claims Act] provides
damage actions as an additional means of policing the
internal procedures of governmental agencies. They have
not, however, given us particularly good reasons for such
an extraordinary step, and everything we have seen
counsels against it. There is, in the first place, absolutely
no evidence that in enacting the [Federal Tort Claims Act]
Congress intended to police internal governmental law-
making procedures with damage actions. Appellants’
theory of governmental liability because of the
[Commission’s] failure to follow the procedures specified
by section 371(e) of the Federal Food, Drug, and Cosmetic
Act would seem to impose liability for any agency’s failure
to follow procedures prescribed by any regulation or
statute, including the Administrative Procedure Act.
Congress has provided elaborate mechanisms of judicial
review so that rules adopted by improper procedures may
be declared nullities. Nowhere, so far as we are aware, has
Congress stated that, in addition, the affected parties could
collect damages from the government. Surely, so striking
a mode of policing procedural regularity as the use of
damage actions for millions or hundreds of millions of
dollars would have been mentioned. Appellants have
drawn our attention to no language in any statute or any
legislative history that suggests a conscious intention by
any member of Congress to accomplish such a result. That
in itself would appear nearly conclusive of the issue before
us. It may also be significant that no plaintiffs before those
here have ever advanced such a theory. These are negative
reasons to doubt that Congress intended the government
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to be liable in damages for adopting a rule through
defective procedures.
Id. at 391.
¶ 41 Similarly, in analyzing the legislative intent underlying the enactment of the
Federal Tort Claims Act, the Supreme Court of the United States observed that “it
was not intended that the constitutionality of legislation, the legality of regulations,
or the propriety of a discretionary administrative act should be tested through the
medium of a damage suit for tort.” Dalehite v. United States, 346 U.S. 15, 27 (1953)
(cleaned up) (emphasis added). Instead, the Court concluded, the legislative history
of the Federal Tort Claims Act revealed that “[u]ppermost in the collective mind of
Congress were the ordinary common-law torts.” Id. at 28.
¶ 42 The same observations can be made about the State Tort Claims Act. As we
have already noted, plaintiffs have provided no support for a conclusion that the
General Assembly “intended to police internal governmental law-making procedures
with damage actions.” Jayvee Brand, 721 F.2d at 391. On the contrary, the General
Assembly enacted the Administrative Procedure Act, which provides a mechanism
for challenging allegedly unlawful actions taken by regulatory agencies such as the
department, for that purpose. Considering the existence of this remedy for unlawful
regulatory actions provided by the Administrative Procedure Act, it is difficult for us
to believe the General Assembly also intended for a plaintiff to be able to bring what
amounts to a damage claim for “negligent regulation” against a regulatory agency.
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Had it intended to make both such remedies available to parties adversely affected
by the regulatory actions taken by state agencies, we believe that the General
Assembly would have more clearly indicated that such suits were available than is
evident from an examination of the relevant existing statutory provisions.9 This is
especially true given the general principle that a waiver of sovereign immunity must
be explicit rather than implied. See Heath, 282 N.C. at 296. As a result, our review
of the relevant federal precedent and significance of that precedent for North Carolina
law strongly counsels against acceptance of the theory that plaintiffs have espoused
in this case.
¶ 43 In support of its decision to allow plaintiffs’ claim against the department to
proceed, the Court of Appeals relied upon its prior decision in Nanny’s Korner.
Cedarbrook, ¶ 16; see also id., ¶ 38 (Dietz, J., concurring). In Nanny’s Korner, a
daycare center filed an affidavit under the State Tort Claims Act against the
department’s Division of Child Development and Early Education in which it sought
to recover damages as the result of the department’s alleged failure to conduct an
independent investigation into the allegations of child sexual abuse that had been
9 In addition to the complete absence of any precedent for plaintiffs’ claim in the
jurisprudence of this Court, the Court of Appeals, or the federal courts, plaintiffs have failed
to identify, and we have not been able to find, a single decision in which the courts of any
other state have allowed a regulated entity to assert a damage claim against a state agency
stemming from the allegedly negligent exercise of that agency’s discretionary regulatory
authority.
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made against one of the daycare center’s staff members. 264 N.C. App. at 75. After
the Commission dismissed the daycare center’s claim pursuant to N.C.G.S. § 1A-1,
Rule 12(b)(6), on the grounds that the center’s claim was barred by the three-year
statute of limitations applicable to claims asserted under the State Tort Claims Act,
the daycare center argued that its claim was not time-barred and that it had “the
right to bring a direct constitutional claim since no adequate state remedy exists.”
Id. at 75, 80. In rejecting the daycare center’s argument, the Court of Appeals held
that the center “[did] not have a direct constitutional claim because it had an
adequate state remedy in the form of the Industrial Commission through the [State]
Tort Claims Act.” Id. at 80. However, the Court of Appeals continued, the
Commission had correctly determined that the center’s claim was barred by the
applicable statute of limitations, with the daycare center’s “failure to comply with the
applicable statute of limitations not render[ing] its remedy inadequate” on the theory
that, if the daycare center’s “claim under the [State] Tort Claims Act had been
successful, the remedy would have compensated [it] for the same injury alleged in the
constitutional claim.” Id.
¶ 44 Aside from the fact that Nanny’s Korner is not binding on this Court, we agree
with the department that the Court of Appeals did not fully examine the extent, if
any, to which the State Tort Claims Act permits the type of claim that the daycare
center pursued in that case and that is before us now. Instead, after concluding that
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any claim that the center might have been able to assert pursuant to the State Tort
Claims Act was time-barred, the Court of Appeals stated, without explaining or citing
any supporting authority, that the State Tort Claims Act would have provided the
daycare center with an adequate remedy sufficient to preclude the availability of a
direct action under the state constitution. In other words, while the holding in
Nanny’s Korner speaks for itself, the legal analysis that the Court of Appeals
conducted regarding the availability of the State Tort Claims Act under the
circumstances presented in that case was merely cursory. Although we do not fault
the Court of Appeals for relying upon Nanny’s Korner as binding precedent in the
present case, we also do not, following a more rigorous analysis of the pertinent legal
questions, find Nanny’s Korner to be persuasive, and for that reason overrule it to the
extent it conflicts with this opinion.10
C. Negligence
10 According to plaintiffs, Nanny’s Korner demonstrates that “the effect of disallowing
a claim under the [State] Tort Claims Act would be to create a constitutional claim where the
legislature has already provided an adequate statutory remedy” and that, “ ‘[w]here one of
two reasonable constructions will raise a serious constitutional question, the construction
which avoids this question should be adopted,’ ” quoting Long v. Fowler, 378 N.C. 138, 2021-
NCSC-81, ¶ 24). For the reasons that we have already provided, however, the interpretation
of the State Tort Claims Act upon which plaintiffs rely is not a reasonable one given that it
has no support in the language or history of the State Tort Claims Act and given that there
is no reason to believe that the General Assembly intended for the State Tort Claims Act to
provide the sort of remedy plaintiffs seek. If plaintiffs believe that they have a valid
constitutional claim against the department, they are free to pursue it in the appropriate
forum if they so choose, but no claim of that nature is before us in this appeal, and we express
no opinion concerning its legal or factual viability.
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¶ 45 In addition, the department contends that, even if plaintiffs’ claims are not
barred by the doctrine of sovereign immunity, they have failed to state a claim for
relief sounding in negligence as required by the State Tort Claims Act. According to
the department, “[p]laintiffs must plead duty, breach, causation, and damages—the
foundational elements of every tort claim—to survive a motion to dismiss,” but
“[d]espite over 250 paragraphs of allegations,” have failed to do so, citing Stone, 347
N.C. at 477. After careful consideration of the record in light of the applicable law,
we conclude that plaintiffs have failed to allege the existence of the sort of legal duty
necessary to support a negligence claim.
¶ 46 First, the department argues that plaintiff’s “allegations that [the department]
owes it a duty are conclusory assertions of law, unsupported by fact.” In the
department’s view, the Court of Appeals erred in determining that, by “fil[ing] an
affidavit containing five components required for all claimant affidavits asserting
liability under the [State] Tort Claims Act,” plaintiffs sufficiently stated a claim for
negligence given that mere compliance with the filing requirements “does not relieve
a plaintiff of its obligation to plead facts supporting its claim,” citing Cedarbrook,
¶ 11. In addition, the department contends that the Court of Appeals “erred in
conflating the public duty doctrine and the duty element of a negligence claim,”
reasoning that, even though these legal principles are related, the department’s
inability to rely upon the public duty doctrine as an affirmative defense has no
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bearing upon the extent to which the department owed plaintiffs a duty of care
sufficient to support the assertion of a negligence claim.
¶ 47 In the department’s view, the Court of Appeals’ decision “creates dueling tort
duties that [the department] cannot satisfy consistent with the statutory obligations
the General Assembly imposed on it.” According to the department, the Court of
Appeals’ decision in this case, when read in conjunction with its decision in Tang,
“would create an ‘impossible standard’ where [the department] would be liable for
both ‘enforcing [ ] statutory mandates’ and ‘for failing to enforce those very same
mandates,’ ” quoting Cedarbrook, ¶ 66 (Tyson, J., dissenting). The department
contends that, rather than placing it in “an untenable position that could endanger
the residents that [the department] is charged with protecting,” it “should be free to
hold adult care homes responsible for properly supervising residents . . . without
concern that a facility like Cedarbrook or its owner will sue [the department] in tort
if it disagrees.” The department claims that allowing the Court of Appeals’ decision
to stand “would be an unprecedented expansion of the [State] Tort Claims Act” given
that departmental employees charged with regulating adult care homes “have only
ever been charged with protecting the residents of those facilities, not the companies
that operate them,” and have never been held to “owe[ ] a duty to the owners of those
companies, such that Mr. Leonard could attempt to hold [the department] liable for
his lost profits on a planned sale of Cedarbrook.” (emphasis in original).
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¶ 48 Second, the department argues that plaintiffs’ claim rests upon “intentional
regulatory actions” in which its employees engaged and that “intentional,
discretionary acts taken pursuant to regulatory authority do not give rise to a tort
claim,” citing Williams v. N.C. Dep’t of Just., Crim. Standards Div., 273 N.C. App.
209, 212 (2020); Frazier, 135 N.C. App. at 48. According to the department, the
regulatory actions that its employees took in this case are similar to those at issue in
Williams and Frazier in that, “[a]lthough [plaintiffs] label[ ] them as negligence, they
are intentional actions by a state agency taken to administer and enforce laws passed
by the General Assembly.” In light of that fact, the department asserts that any
“attempt to apply tort concepts like breach in the regulatory context” would be
inappropriate given that constructs like the “reasonable person” standard are “ill-
suited to analyzing [plaintiffs’] proposed claim of negligent regulation.” As a result,
the department contends that “the issues in this case, and the exercise of regulatory
authority in general, present regulatory and policy questions that tort law was not
designed to answer,” with such questions being “best left to proceedings before an
administrative law judge with specialized expertise, as the legislature intended.”
¶ 49 Finally, the department argues that “[r]egulations do not proximately cause
damages to a regulated entity in tort, and a regulated entity’s compliance costs are
not recoverable as damages.” In the department’s view, plaintiffs’ alleged damages,
which take the form of increased operating expenses associated with compliance with
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the Directed Plan of Protection, lost revenue resulting from the suspension of further
admissions to Cedarbrook, and lost profits from a failed attempt to sell Cedarbrook,
“bear no resemblance to the kinds of damages recoverable in tort.” The department
argues that “it is the financial responsibility of business owners to run their
businesses in accordance with state health and safety laws” and that, “if there is any
question as to whether a certain cost should qualify as a business expense or a
misapplication of regulatory action, the legislature has designated an administrative
law judge as the arbiter of this decision.” In addition, the department claims that,
“[i]f individuals and businesses can bring tort actions against these agencies in the
Industrial Commission simply by alleging that the agency acted ‘unreasonably’ in
executing its regulatory duties[;] . . . the State’s liability would be unmanageable and
unprecedented.” For all these reasons, the department contends that, even if the
regulatory actions taken against Cedarbrook “were inconsistent with the law and
administrative regulations governing adult care homes, as [p]laintiffs claim, this is
not a tort.”
¶ 50 Plaintiffs respond that both this Court and the Court of Appeals have held that
agency personnel owe a duty of care in exercising their regulatory authority, citing
Multiple Claimants v. N.C. Dep’t of Health & Hum. Servs., 361 N.C. 372, 378 (2007);
Gammons v. N.C. Dep’t of Hum. Res., 344 N.C. 51, 63 (1996); Tang, ¶¶ 27–28; Haas
v. Caldwell Sys., Inc., 98 N.C. App. 679, 682–83 (1987); Zimmer v. N.C. Dep’t of
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Transp., 87 N.C. App. 132, 132 (1987). In plaintiffs’ view, an agency’s duty of care
“extends to the regulated party,” which is “the party most directly affected by that
exercise of authority,” in cases in which “it is reasonably foreseeable that an agency’s
negligence in the exercise of regulatory authority could harm the parties the agency
exercises that authority against.” According to plaintiffs, both this Court and the
Court of Appeals have endorsed awarding damages under the State Tort Claims Act
in situations involving claims “arising from the negligent exercise of regulatory
authority against the regulated party,” citing Watts v. N.C. Dep’t of Env’t & Nat. Res.,
182 N.C. App. 178, 181–85 ) (2007), aff’d 362 N.C. 497 (2008); Nanny’s Korner, 264
N.C. App. at 80; Crump, 216 N.C. App. at 46; Russell v. N.C. Dep’t of Env’t & Nat.
Res., 227 N.C. App. 306, 309 (2013); Strickland v. UNC-Wilmington, 213 N.C. App.
506, 511 (2011); Husketh v. N.C. Dep’t of Corr., No. COA09-411, 2010 WL 157557, at
*3 (N.C. Ct. App. Jan. 19, 2010) (unpublished).
¶ 51 In addition, plaintiffs argue that the statutory scheme governing the operation
of adult care homes imposes a legally enforceable duty on the department in favor of
both the facility and the facility’s residents. According to plaintiffs, “the statutory
scheme recognizes that [adult care] homes provide important services in their local
communities,” with the General Assembly having “appropriately and necessarily
balanced the needs of all actors in the adult care home industry—the residents; adult
care homes, their staff, supervisors, and administrators; local departments of social
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services; local management entities; physicians and other medical professionals; and
[the department].” As a result, plaintiffs claim, “the rights of residents do not displace
the rights of adult care homes themselves,” with the statutory scheme “recogniz[ing]
that [the department] owes duties to adult care homes like Cedarbrook.”
¶ 52 Plaintiffs further contend that the intentional nature of the department’s
regulatory actions does not preclude the assertion of a negligence claim against the
department on the theory that, even though the department “is correct that
[plaintiffs’] claims are based—at least in part—on intentional conduct of
[departmental] employees, the [c]omplaint does not allege that those employees
intended to cause harm to [plaintiffs].” (emphasis in original). According to plaintiffs,
the same argument upon which the department relies in this case was rejected in
Crump, in which the Court of Appeals explained that “the focus is not on whether
[the employee’s] actions were intentional, but rather on whether he intended to injure
or damage the [plaintiffs],” quoting Crump, 216 N.C. App. at 44–45. “In other words,”
plaintiffs explain, “ ‘[o]ne who undertakes to do something and does it negligently
commits a negligent act,’ ” quoting Jackson v. N.C. Dep’t of Crime Control & Pub.
Safety, 97 N.C. App. 425, 432 (1990) (emphasis added in brief).
¶ 53 Finally, plaintiffs argue that they are entitled to recover “direct and indirect
damages suffered as a result of [the department’s] negligence.” According to
plaintiffs, “[t]he harms suffered by [plaintiffs]—including what [the department]
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euphemistically terms ‘compliance costs’—are squarely within the sort of direct and
indirect damages allowed in tort,” citing Champs Convenience Store, Inc. v. United
Chem. Co., 329 N.C. 446, 463 (1991), including tort claims brought under the State
Tort Claims Act, citing Phillips v. N.C. State Univ., 206 N.C. App. 258, 266–67 (2010).
Plaintiffs contend that the damages that they seek to recover in this case represent
“the natural and probable result of [the department’s] actions against it,” making the
department “liable under the plain language of the [State] Tort Claims Act for the
compensatory and consequential damages caused by its negligence.” Plaintiffs
dismiss the department’s concerns about the “unprecedented and untenable” liability
that will allegedly result from the Court of Appeals’ decision by claiming that this
argument fails to recognize that the State Tort Claims Act waives sovereign
immunity for negligence claims, that recovery under the State Tort Claims Act is
limited to $1,000,000 arising from a single occurrence, and that “the State’s liability
for its negligence has not yet been so enormous that the General Assembly has seen
fit to revoke that waiver in the nearly 70 years the [State] Tort Claims Act has been
in existence.” On the contrary, plaintiffs argue, the General Assembly’s recent
decision to limit the availability of the public duty doctrine in proceedings brought
pursuant to the State Tort Claims Act may reflect a legislative determination that
“the risk of tort liability promotes better agency conduct and that the relatively rare
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occurrence of actionable (and thus compensable) agency negligence is a ‘price’ well
worth paying for improved agency accountability.”
¶ 54 After carefully evaluating the parties’ arguments, we hold that plaintiffs have
failed to show that the department owed them a legally recognized duty sufficient to
support a negligence claim under the State Tort Claims Act. According to well-
established North Carolina law, “[t]o establish actionable negligence, [a] plaintiff
must show that: (1) [the] defendant failed to exercise due care in the performance of
some legal duty owed to [the] plaintiff under the circumstances; and (2) the negligent
breach of such duty was the proximate cause of the injury.” Bolkhir, 321 N.C. at 706(emphasis added) (citing Hairston v. Alexander Tank & Equip. Co., 310 N.C. 227, 232
(1984)); accord Wood, 355 N.C. at 166; Mattingly v. N.C. R.R. Co., 253 N.C. 746, 750
(1961). “A duty is defined as an ‘obligation, recognized by the law, requiring the
person to conform to a certain standard of conduct, for the protection of others against
unreasonable risks.’ ” Davis v. N.C. Dep’t of Hum. Res., 121 N.C. App. 105, 112 (1995)
(emphasis added) (quoting W. Page Keeton et al., Prosser and Keeton on the Law of
Torts § 30, at 164–65 (5th ed. 1984)). The extent to which a particular defendant
owes a duty to a particular plaintiff constitutes a question of law, subject to de novo
review. Connette v. Charlotte-Mecklenburg Hosp. Auth., 382 N.C. 57, 2022-NCSC-95,
¶ 7.
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¶ 55 In the affidavit that they filed with the Commission in this case, plaintiffs’
allegation that the department owed them a legally recognized duty of care consisted
of nothing more than the following:
245. [The department] owed Cedarbrook a duty of
reasonable care in the exercise of its authority to
investigate the facility and take licensure actions against
it.
....
249. [The department] owed Mr. Leonard, as President and
owner of Cedarbrook, a duty of reasonable care in the
exercise of its authority to investigate the facility and take
licensure actions against it.
The allegations that plaintiffs have advanced in support of their contention that the
department owned them a duty of care sufficient to support a negligence claim are
completely conclusory in nature. See Sutton v. Duke, 277 N.C. 94, 95 (1970) (noting
that, for purposes of evaluating the validity of a motion to dismiss, “the well-pleaded
material allegations of the complaint are taken as admitted,” but “conclusions of law
or unwarranted deductions of fact are not admitted”). Despite the fact that plaintiffs
have failed to allege any facts or to cite any legal authority in support of their
contention that the department owed them a legally recognized duty of care, the
Court of Appeals appears to have failed to consider the extent, if any, to which such
a duty of care existed, having determined, instead, that the issue of whether the
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department owed a legally recognized duty to plaintiffs was “intertwined with its
interpretation of the public duty doctrine.”11 Cedarbrook, ¶ 25.
¶ 56 A careful review of the decisions upon which plaintiffs rely in support of their
contention that the department owed them a duty of care sufficient to support their
“negligent regulation” claim shows that each of those cases clearly indicate that the
relevant duty of care runs to the person or persons whom the agency’s regulatory
actions were intended to protect rather than to the entity being regulated. In
Multiple Claimants, for example, the estates of several inmates who died in a fire at
the Mitchell County jail filed suit against the department under the State Tort
Claims Act on the basis of allegations that a departmental employee had negligently
failed to inspect the fire safety equipment utilized in the jail. 361 N.C. at 373. The
duty of care upon which this Court relied in allowing the plaintiff’s claim to proceed
was not to the jail or the county that operated it, but rather to the prisoners whom
such fire safety regulations were designed to protect.12 Id. at 379; see also Gammons,
344 N.C. at 63 (concluding that the department, by means of its relationship with the
11 As we explain in greater detail below, the duty of care component of a negligence
claim is legally and conceptually distinct from the affirmative defense of the public duty
doctrine, with the Court of Appeals having erred to the extent that it reached a contrary
conclusion.
12 The primary issue in Multiple Claimants was whether the “special relationship”
exception to the public duty doctrine applied in that case, 361 N.C. at 372–73, with the Court
concluding that the plaintiffs had “properly alleged facts that establish the existence of a
special relationship between [the department] and the inmates” so as to preclude the
department from relying upon the public duty doctrine as a defense to the claims that had
been asserted against it, id. at 379.
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Cleveland County Director of Social Services, owed a duty to the residents of
Cleveland County to respond to reports of child abuse and could be held liable for
negligence in the event that it failed to do so); Tang, ¶ 28 (holding that the
department had breached its duty of care to the residents of a senior care facility with
a history of violations when the department failed to address certain deficiencies in
external door security and resident supervision); Haas, 98 N.C. App. at 682–83
(concluding that the Department of Human Resources and the Department of
Natural Resources and Community Development could be held liable to residents
living near a county-operated incinerator as the result of their allegedly negligent
exercise of “permitting, supervision, inspection and monitoring authority” that
resulted in the emission of harmful and noxious gasses from the incinerator); Zimmer,
87 N.C. App. at 135 (holding that the fact that decisions made by employees of the
Department of Transportation regarding the selection, design, and maintenance of
detour routes associated with a highway construction project were “discretionary
governmental functions” did not preclude a finding that the department was liable
under the State Tort Claims Act for injuries sustained by a truck driver who had been
injured in an accident that allegedly resulted from a negligently designed detour
route). Simply put, neither this Court nor the Court of Appeals has ever found that
a state agency owed a duty of care sufficient to support a claim sounding in negligence
to an entity that was subject to the agency’s discretionary regulatory authority (e.g.,
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the jail operator in Multiple Claimants, the senior living center in Tang, or the waste
disposal facility in Haas). This distinction is critical given that “the duty owed by
each defendant to [a] plaintiff is determined by the relationship subsisting between
them.” Kientz v. Carlton, 245 N.C. 236, 240 (1957).13
¶ 57 Similarly, plaintiffs’ argument that the statutory scheme applicable to adult
care facilities imposes a duty on the department that runs to the facilities themselves
lacks merit. A careful analysis of the statutory provisions upon which plaintiffs rely
in support of this argument indicates that those provisions are intended to protect
the residents of adult care facilities rather than the facility owners or operators. For
example, the various provisions governing training and licensing requirements for
individuals working in adult care homes, see N.C.G.S. §§ 131D-2.2; 131D-2.15; 131D-
13 The distinction discussed in the text of this opinion also explains why claims like
those at issue in Gammons and Tang were not foreclosed by the “private person” provision
contained in N.C.G.S. § 143-291(a), with the negligence claims at issue in those cases having
been premised upon an alleged failure on the part of the department to fulfill a duty to the
plaintiff that was imposed by statute. See Gammons, 344 N.C. at 63 (finding the department
liable on the basis of a respondeat superior theory stemming from a failure on the part of a
county social services director to fulfill his statutory obligation to protect minor children from
physical abuse); Tang, ¶ 16 (affirming a finding by the Commission that the department had
breached its statutory duty to an adult care home resident by failing to properly inspect the
facility in which the resident resided). According to well-established North Carolina law,
private persons can be held liable for failing to comply with statutory duties. See, e.g.,
Stikeleather Realty & Inv. Co. v. Broadway, 242 N.C. App. 507, 517 (2015) (discussing the
statutory duties owed to tenants by landlords under the Residential Rental Agreements Act,
N.C.G.S. §§ 42-38 to -39, for the purpose of ensuring that residential premises are fit for
human habitation); Mozingo v. Pitt Cnty. Mem’l Hosp., Inc., 101 N.C. App. 578, 585 (1991)
(noting that, when a patient procures the medical services of a physician, “a duty arises
requiring the physician to conform to the statutory standard of care”). Plaintiffs have failed
to identify any statutory duty that they were owed by the department.
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4.5B, 131D-40; 131D-45, are intended to protect the residents of those facilities, with
none of these statutory provisions containing any support for the notion that they are
intended to protect adult care facility owners or operators as well. Instead, the
General Assembly has clearly indicated that the purpose underlying the statutory
scheme for regulating adult care homes is “to promote the interests and well-being of
the residents in adult care homes and assisted living residences” licensed by the
department. N.C.G.S. § 131D-19 (emphasis added).14
¶ 58 Although plaintiff has argued that the Court of Appeals’ decision in Watts
supports a determination that an agency can be held liable for the “negligent exercise
of regulatory authority against the regulated party,” we do not find this argument to
be persuasive. In Watts, the plaintiff filed an affidavit with the Commission in which
it alleged that an agent of the North Carolina Department of Environment and
Natural Resources had negligently inspected and issued an improvement permit for
a parcel of land that was subsequently deemed to be unsuitable for the plaintiff’s
house construction plans. 182 N.C. App. at 180. Although the Department of
Environmental and Natural Resources sought dismissal of the plaintiff’s claim on the
basis of the public duty doctrine, the Court of Appeals held that the plaintiff’s claim
14 Additional support for our conclusion that the statutory scheme governing adult
care homes is intended to protect residents and not the facilities in which they live can be
found in the fact that residents, or the department acting on their behalf, may institute a
civil action against an adult care home to enforce the provisions of the Adult Care Home
Residents’ Bill of Rights. See N.C.G.S. § 131D-28.
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was entitled to proceed under the “special duty exception” given that the employee
who had performed the inspection had “made a promise to [the] plaintiff by issuing
the improvement permit warranting that [the] plaintiff could construct a three-
bedroom home on the property as described in the site plan,” that the plaintiff had
“relied on the permit in negotiating the purchase of the property,” and that the
Department of Environment and Natural Resources had subsequently revoked the
permit, “causing [the] plaintiff to incur additional expenses in order to use the lot as
he had planned.” Id. at 180–84. As a result, the Court of Appeals affirmed the
Commission’s decision to award compensatory damages to the plaintiff. Id. at 189.
¶ 59 We are not persuaded that Watts has any bearing upon the proper resolution
of the issues that are before us in this case. Aside from the fact that the specific issue
that was before the Court of Appeals in Watts was the availability of the public duty
doctrine as an affirmative defense to the claims that plaintiff had asserted rather
than whether the Department of Environment and Natural Resources owed a legally
recognized duty to the plaintiff, the claim at issue in Watts bears no resemblance to
the “negligent regulation” claim that plaintiffs have asserted in this case, which rests
upon a contention that a regulated entity is entitled to assert a negligence claim
against a state agency responsible for enforcing a complex regulatory scheme created
by statute. As a result, nothing in Watts supports the sweeping conclusion that a
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regulatory agency owes a duty of care sufficient to support a negligence claim in favor
of the entities that are subject to its regulation.15
¶ 60 The other decisions upon which plaintiffs rely are equally irrelevant to the
proper resolution of the issue that is before us in this case. See Crump, 216 N.C. App.
at 42 (recognizing the validity of a claim that had been asserted against the
Department of Environmental and Natural Resources by property owners who
alleged that the agency had negligently issued a permit authorizing the construction
of a septic system upon property that was not suitable for the installation of such a
system); Russell, 227 N.C. App. at 309 (same); Strickland, 213 N.C. App. at 511
(recognizing the validity of a wrongful death claim that had been asserted against the
University of North Carolina at Wilmington based upon an allegation that university
police officers had “negligently provided false, misleading, and irrelevant
information” to the New Hanover County Sheriff’s Office in connection with the
service of an arrest warrant upon the decedent, whom the officers accidentally killed
during the execution of the arrest warrant); Husketh, 2010 WL 157557, at *1
(upholding a claim asserted by inmate against the Department of Correction on the
15Although plaintiffs point out that this Court affirmed the Court of Appeals decision
in Watts, our per curiam opinion clearly indicates that our decision rested upon the
Commission’s finding that the Department of Environment and Natural Resources had
admitted that it had negligently issued the relevant permit, so as to have “effectively waived
its argument that it owe[d] no duty to [the] plaintiff under the public duty doctrine.” Watts,
362 N.C. at 498. For that reason, we “express[ed] no opinion [concerning the validity of] the
analysis of the public duty doctrine by the Court of Appeals.” Id.
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grounds that its employees had been “negligent in failing to apply the appropriate
sentencing statutes for his convictions”).16 As with Multiple Claimants and other
cases previously discussed, these cases all involved plaintiffs whose interests the
relevant regulatory regimes were designed to protect, rather regulated entities
impacted by the kind of complex, discretionary administrative decisions that are at
issue in this case.
¶ 61 Finally, we conclude that the public policy concerns raised by Judge Tyson and
the department, while by no means dispositive, counsel against a holding that
regulated entities are entitled to sue the agencies responsible for exercising
discretionary regulatory authority over those entities under the State Tort Claims
Act unless we are clearly required to do so. As Judge Tyson observed, upholding the
Court of Appeals’ decision in this case would subject those agencies to the risk of
liability for both overly aggressive and insufficiently aggressive exercise of their
regulatory authority, see Cedarbrook, ¶ 66 (Tyson, J., dissenting).17 The creation of
16 The only case in North Carolina that we have found that tends to suggest that the
department owes a legal duty to the entities that it regulates is Nanny’s Korner, which, as
we have already explained, is neither persuasive nor binding upon this Court.
17 The facts at issue in Multiple Claimants serve to illustrate the conundrum that
would be created for regulatory agencies under the approach advocated for by plaintiffs. In
the event that we were to accept the validity of the position that plaintiffs have espoused in
this case, Mitchell County would have been entitled to maintain an action against the
department under the State Tort Claims Act in the event that the department had conducted
a proper inspection of the jail, detected the problems with the fire safety equipment that led
to the fire that occurred at that facility, and ordered the County to address those deficiencies
in a manner that the County believed to be “unreasonable.” We decline to interpret the State
Tort Claims Act in such a way as to discourage state regulatory agencies from carrying out
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such conflicting duties of care is inherently problematic, see Koch v. Bell, Lewis &
Assocs., 176 N.C. App. 736, 740 (2006) (declining to recognize the existence of a duty
between an insurance adjuster and a claimant on the grounds that the recognition of
such a duty would “subject the adjuster to conflicting loyalties” given that the
adjustor “owes a duty to the insurer who engaged him,” so that the creation of “[a]
new duty [to the claimant] would conflict with that duty, and interfere with its
faithful performance” (quoting Sanchez v. Lindsey Morden Claims Servs., Inc., 72 Cal.
App. 4th 249, 253 (1999))), and it is particularly troublesome in situations like this
one, in which the principal concern motivating the creation of the relevant regulatory
regime was the protection of the residents of adult care homes rather than the entities
that own and operate them.
¶ 62 Admittedly, it is theoretically possible to find a middle ground between too
much regulation and no regulation at all. However, this middle ground is one that
the General Assembly, rather than the judicial branch, should be responsible for
identifying. See Mann Media, Inc. v. Randolph Cnty. Plan. Bd., 356 N.C. 1, 16 (2002)
(noting that, under the Administrative Procedure Act, a court reviewing an agency
their legislatively ordained functions in an effective manner. See State v. Jones, 359 N.C.
832, 837 (2005) (observing that, “[i]n construing statutes[,] courts normally adopt an
interpretation which will avoid absurd or bizarre consequences, the presumption being that
the legislature acted in accordance with reason and common sense and did not intend
untoward results,” (quoting State ex rel. Comm’r of Ins. v. N.C. Auto Rate Admin. Office, 294
N.C. 60, 68 (1978))).
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decision “does not have authority to override decisions within agency discretion when
that discretion is exercised in good faith and in accordance with law” (quoting Lewis
v. N.C. Dep’t of Hum. Res., 92 N.C. App. 737, 740 (1989))). In this instance, at least,
we believe that tort law principles are ill-suited to the identification of the proper
scope of regulatory activity. See Myers, 360 N.C. at 468 (holding that, when the
General Assembly “has vested [a state agency] with broad powers to protect the
health and well-being of the general public,” the discretionary decisions that it is
required to make in exercising that authority “are not generally the type of decisions
for which the State is liable to private citizens in tort”); see also United States v. Varig
Airlines, 467 U.S. 797, 820 (1984) (holding that “[j]udicial intervention in
[discretionary] decisionmaking through private tort suits would require the courts to
‘second-guess’ the political, social, and economic judgments of an agency exercising
its regulatory function”). In reaching this conclusion, we note that the exercise of
regulatory authority by state agencies generally requires a level of expertise and the
exercise of some amount of discretion that is difficult to evaluate using the
“reasonable person” standard. See Martishius v. Carolco Studios, Inc., 355 N.C. 465,
473 (2002) (noting that, to prevail in a negligence action, a plaintiff must show that
the defendant owed the plaintiff a legal duty and “fail[ed] to exercise the degree of
care that a reasonable and prudent person would exercise under similar conditions”).
Although the courts have had extensive experience applying the “reasonable person”
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standard in establishing liability for injuries sustained in automobile accidents and
other areas subject to traditional tort-based liability, in which the manner in which
the “reasonable person” standard should be applied is well-established, see, e.g.,
Hobbs v. Queen City Coach Co., 225 N.C 323, 331 (1945) (holding that, in the exercise
of ordinary care, “it is incumbent upon the operator of a motor vehicle to keep [the]
same under control, and to keep a reasonably careful lookout, so as to avoid collision
with persons and vehicles upon the highway”), we are not aware of any precedent
that could guide the Commission in determining how a “reasonable regulator” would
have exercised its discretionary authority in dealing with investigations like those
conducted at Cedarbrook.18
¶ 63 More importantly, however, the General Assembly has created a system for
the specific purpose of resolving disputes over the validity of regulatory actions by
state agencies like the department. In 1985, the General Assembly established the
Office of Administrative Hearings
to ensure that administrative decisions are made in a fair
and impartial manner to protect the due process rights of
citizens who challenge administrative action and to provide
18 In addition, the State Tort Claims Act requires the Commission to determine if the
plaintiff had been contributorily negligent, N.C.G.S. § 143-291(a), with such a determination
being subject to the “the same rules as those applicable to litigation between private
individuals,” Medley v. N.C. Dep’t of Corr., 330 N.C. 837, 840–41 (1992) (quoting Barney, 282
N.C. at 284). It is not at all clear to us how the Commission would evaluate the existence of
contributory negligence, which prohibits recovery where “the plaintiff’s own negligence
contributed to his injury,” Draughon v. Evening Star Holiness Church of Dunn, 374 N.C. 479,
483 (2020), under circumstances in which the plaintiff’s own conduct prompts the regulatory
actions that are the alleged cause of the plaintiff’s injury.
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a source of independent administrative law judges to
conduct administrative hearings in contested cases in
accordance with Chapter 150B of the General Statutes and
thereby prevent the commingling of legislative, executive,
and judicial functions in the administrative process.
N.C.G.S. § 7A-750; see also Empire Power, 337 N.C. at 594–95 (holding that, unless
otherwise provided by law, the Administrative Procedure Act controls the rights of
any party “aggrieved by an agency decision,” including the right to review of that
decision by the Office of Administrative Hearings). As we have already explained,
the Administrative Procedure Act provides a means by which adult care facilities can
seek relief from the department’s regulatory decisions. See N.C.G.S. §§ 131D-
2.7(d)(4), -34(e).
¶ 64 A decision on the part of this Court to allow an “aggrieved party” to challenge
those exact same decisions by both seeking relief pursuant to the Administrative
Procedures Act and by filing a tort claim with the Commission would subvert the
legislative framework that the General Assembly has created for such disputes. As
this Court held more than forty years ago:
[a]s a general rule, where the legislature has provided by
statute an effective administrative remedy, that remedy is
exclusive and its relief must be exhausted before recourse
may be had to the courts. This is especially true where a
statute establishes, as here, a procedure whereby matters
of regulation and control are first addressed by
commissions or agencies particularly qualified for the
purpose. In such a case, the legislature has expressed an
intention to give the administrative entity most concerned
with a particular matter the first chance to discover and
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rectify error. Only after the appropriate agency has
developed its own record and factual background upon
which its decision must rest should the courts be available
to review the sufficiency of its process. An earlier
intercession may be both wasteful and unwarranted. To
permit the interruption and cessation of proceedings before
a commission by untimely and premature intervention by
the courts would completely destroy the efficiency,
effectiveness, and purpose of the administrative agencies.
Presnell v. Pell, 298 N.C. 715, 721–22 (1979) (cleaned up). It seems incongruous to
us to allow plaintiffs, who challenged the validity of the department’s regulatory
decisions by seeking administrative relief from the Office of Administrative Hearings
before reaching a settlement with the department that involved the withdrawal of
the allegations that the department had made against plaintiffs, to have another bite
at the proverbial apple by asserting a damage claim before the Commission under the
State Tort Claims Act.19
¶ 65 After claiming that “[t]he remedies afforded under the Administrative
Procedure[s] Act and the [State] Tort Claims Act are not mutually exclusive” and
19 We do not wish to be understood as in any way faulting plaintiffs for their decision
to reach a settlement with the department or to suggest that their decision to do so, standing
alone, precluded them from seeking monetary relief from the department under the State
Tort Claims Act, particularly given that “[t]he law favors the settlement of controversies out
of court.” Penn Dixie Lines, Inc. v. Grannick, 238 N.C. 552, 555 (1953); see also N.C.G.S.
§ 150B-22(a) (providing that it is state policy that, as an initial matter, “any dispute between
an agency and another person that involves the person’s rights, duties, or privileges,
including licensing or the levy of a monetary penalty, should be settled through informal
procedures”). Instead, we simply hold that the remedy available to a party aggrieved by a
regulatory decision made by a state agency is the one provided for under the Administrative
Procedure Act or some similar statutory scheme.
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noting that the Administrative Procedure Act does not permit an award of
compensatory damages, plaintiffs argue that, unless they are also permitted to assert
a damage claim against the department pursuant to the State Tort Claims Act, they
will have been deprived of an adequate remedy for the department’s allegedly
unlawful action. We do not find this argument persuasive.
¶ 66 According to the Administrative Procedure Act, if an administrative law judge
finds that a regulatory action taken by a state agency has “substantially prejudiced
the petitioner’s rights” and the state agency “has acted arbitrarily or capriciously,”
the judge may order the agency to pay the petitioner’s attorney’s fees. N.C.G.S.
§ 150B-33(b)(11). In addition, when a petitioner seeks judicial review of the
administrative law judge’s decision in a contested case, the petitioner is entitled to
recover attorney’s fees if the reviewing court determines that “the agency acted
without substantial justification in pressing its claim against the [petitioner]” and
that “there are no special circumstances that would make the award of attorney’s fees
unjust.” N.C.G.S. § 6-19.1(a); c.f., Crowell Constructors, Inc. v. State ex rel. Cobey,
342 N.C. 838, 844 (1996) (holding that, to avoid having to pay attorney’s fees to the
petitioner, the agency need only demonstrate that its actions were “rational and
legitimate to such degree that a reasonable person could find it satisfactory or
justifiable in light of the circumstances then known to the agency”). Thus, it appears
to us that the General Assembly has concluded, in the exercise of its legislative
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authority, that the monetary relief available in the event of a successful challenge to
the lawfulness of a regulatory decision made by a state agency is limited to the
recovery of attorney’s fees and that, in the event that the General Assembly had
intended to make additional monetary relief available to a party that had successfully
challenged the lawfulness of such a regulatory decision, it would have said so in more
explicit terms. See Cabarrus Cnty. Bd. of Educ. v. Dep’t of State Treasurer, 374 N.C.
3, 14 (2020) (noting that the existence of proposed legislation addressing the subject
of the case that was before the Court “shows that, in the event that the General
Assembly wished to exempt the process of establishing a cap factor [for state
employee retirement benefits] from the rulemaking provisions of the Administrative
Procedure Act, it knows how to do so”). As a result of this set of circumstances and
the General Assembly’s clear authority to determine the nature and extent of any
non-constitutional remedies for unlawful actions by state agencies, we decline to infer
the existence of a right to recover compensatory damages under the State Tort Claims
Act arising from allegedly unlawful regulatory actions in the absence of explicit
legislative authorization for such an award.20
20Amici North Carolina Senior Living Association and North Carolina Assisted Living
Association cite Ivey v. North Carolina Prison Department, 252 N.C. 615 (1960), and Amos v.
Oakdale Knitting Co., 331 N.C. 348 (1992), to argue that interpreting the “statutory silence”
concerning the availability of compensatory damages for wrongful administrative actions
under Chapter 131D to foreclose the availability of such relief would be contrary “to [the]
North Carolina courts’ approach to statutory silence on exclusive and alternative remedies.”
The issue in Ivey was whether the 1957 amendments to the Workers’ Compensation Act had
eliminated the right that this Court had previously recognized for a prison inmate to recover
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¶ 67 Finally, our reluctance to endorse a claim for “negligent regulation” is
reinforced by a concern that, if we were to recognize the existence of such a claim, the
total dollar value of the tort liability obligations that the State would incur would be
increased and the workload of the Commission under the State Tort Claims Act
would, in all probability, be substantially affected as well. Even if most of those
claims were ultimately determined to be meritless, so that the amount of money paid
out in compensatory damages was not large, the resulting expenditure of time and
resources by the State would likely be significant. We are not inclined to believe that
the General Assembly intended to authorize such an imposition upon the public fisc
and the State’s non-monetary resources in the absence of some clear indication that
it intended to act in that fashion. See Corum v. Univ. of North Carolina, 330 N.C.
761, 785 (1992) (observing that the modern doctrine of sovereign immunity “seems to
damages under the State Tort Claims Act relating to injuries sustained as the result of the
negligence of a State employee, with this Court opining that, “[i]f the Legislature intended to
withdraw a prisoner’s right to pursue a tort claim, the logical procedure would be by
amendment to the section of the [State] Tort Claims Act which gives that right.” Ivey, 252
N.C. at 617–19. The issue in Amos was whether the existence of a statutory remedy under
the North Carolina Wage and Hour Act precluded the plaintiff from asserting a common law
wrongful discharge claim against the employer, with this Court noting that, when
“determining whether the state legislature intended to preclude common law actions, we first
look to the words of the statute to see if the legislature expressly precluded common law
remedies.” 331 N.C. at 358 (emphasis added). Nothing in Ivey or Amos suggests that the
General Assembly’s failure to provide a statutory right to compensatory damages under the
Administrative Procedure Act indicates that they intended such damages to be available
under the State Tort Claims Act, particularly given that such a determination would result
in a more expansive waiver of the State’s sovereign immunity than this Court has previously
recognized. See Stone, 347 N.C. at 479 (noting that statutes “that permit suit in derogation
of sovereign immunity should be strictly construed”).
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rest on a respect for the positions of two coequal branches of government—the
legislature and the judiciary,” and, therefore, “courts have deferred to the legislature
the determination of those instances in which the sovereign waives its traditional
immunity”).
¶ 68 In light of our determination that the department did not owe a legal duty to
plaintiffs in light of the circumstances that are before us in this case, we need not
address the parties’ arguments regarding breach and damages. See Stone, 347 N.C.
at 482 (noting that, “[a]bsent a duty, there can be no liability”). Nothing in the
applicable statutory provisions or prior caselaw recognizes the validity of a claim like
the one that plaintiffs have asserted in this case, and we hold that no such claim
exists. As a result, for all these reasons, we reverse the decision of the Court of
Appeals and remand this case to the Court of Appeals for further remand to the
Commission with instructions that plaintiffs’ claims against the department be
dismissed.
D. Public Duty Doctrine
¶ 69 Finally, the department argues that plaintiffs’ claims are barred by the public
duty doctrine “because [the department] owes a duty to the public, not adult care
home owners or operators.” As a result of our determination that plaintiffs’ claims
are barred by the doctrine of sovereign immunity and that plaintiffs have failed to
identify a legal duty that the department owed to them sufficient to support a claim
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for damages pursuant to the State Tort Claims Act, we need not address the extent,
if any, to which the public duty doctrine serves as a barrier to the claims that
plaintiffs have advanced in this case. On the other hand, we do believe that we need
to clarify the relationship between the public duty doctrine and the duty element of
a negligence claim to make it clear that the existence of a legal duty running from a
state agency to a tort claimant does not turn on whether the public duty doctrine
applies in a given case.
¶ 70 The public duty doctrine “provides that governmental entities and their agents
owe duties only to the general public, not to individuals, absent a ‘special relationship’
or ‘special duty’ between the entity and the injured party.” Stone, 347 N.C. at 477–
78. (citing Braswell v. Braswell, 330 N.C. 363, 370–71 (1991)). The public duty
doctrine was designed “to prevent an overwhelming burden of liability on
governmental agencies with limited resources,” id. at 481 (cleaned up), by making it
clear that a “governmental entity is not liable for negligence for failure to carry out
statutory duties,” Isenhour v. Hutto, 350 N.C. 601, 606–07 (1999). As a general
proposition, the public duty doctrine has been deemed applicable in situations
involving allegations arising from “the governmental entity’s negligent control of an
external injurious force or of the effects of such force.” Strickland, 213 N.C. App. at
512. See e.g., Myers, 360 N.C. at 461–62 (allegations that the Department of
Environment and Natural Resources had acted negligently in attempting to control
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a forest fire that caused injury to the plaintiffs); Wood, 355 N.C. at 163 (allegations
that Guilford County had negligently failed to provide adequate security at the
county courthouse where the plaintiff had been assaulted by a third party); Stone,
347 N.C. at 476–77 (allegations that the Department of Labor had negligently failed
to inspect a factory prior to a fire in which multiple workers were killed or injured);
Hunt, 348 N.C. at 194–95 (allegations that the Department of Labor had negligently
inspected an amusement park ride that later malfunctioned, resulting in injury to
the plaintiff); Braswell, 330 N.C. at 366–67 (allegations that a county sheriff had
negligently failed to protect the claimant’s mother and to properly supervise the
deputy sheriff who murdered her).
¶ 71 In Stone, we held that the common law public duty doctrine applied to claims
brought against the State under the State Tort Claims Act. 347 N.C. at 482. In 2008,
however, the General Assembly amended the State Tort Claims Act to formally codify
the public duty doctrine in the tort claims act context and to limit its application to
the following types of claims:
(1) The alleged negligent failure to protect the claimant
from the action of others or from an act of God by a law
enforcement officer as defined in subsection (d) of this
section.
(2) The alleged negligent failure of an officer, employee,
involuntary servant or agent of the State to perform a
health or safety inspection required by statute.
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N.C.G.S. § 143-299.1A(a). As we later recognized in Ray, while the General Assembly
had “incoporat[ed] much of our public duty doctrine case law into the [State Tort
Claims Act],” it had “also made clear that the doctrine is to be a more limited one
than the common law might have led us to understand.” 366 N.C. at 7.
¶ 72 The Court of Appeals in this case held that, because the department’s allegedly
negligent conduct did not fit within the contours of one of the exceptions enumerated
in N.C.G.S. § 143-299.1A(a), the public duty doctrine had no application to the facts
of this case. Cedarbrook, ¶ 23. In addition, the Court of Appeals rejected the
department’s argument that plaintiffs had failed to identify a legal duty running from
the department to plaintiffs sufficient to support a negligence claim on the grounds
that the argument to this effect was “intertwined with [the department’s]
interpretation of the public duty doctrine.” Id. ¶ 24. The Court of Appeals erred to
the extent that it equated the nature and extent of the public duty doctrine as applied
in proceedings conducted pursuant to the State Tort Claims Act with the nature and
extent of the legal duty that is necessary to support a negligence claim.
¶ 73 Unlike the duty of care, which is an element of any negligence claim that a
plaintiff must establish regardless of whether the claim is against a state agency
under the State Tort Claims Act or a private party under the common law, see Stone,
347 N.C. at 479, the public duty doctrine is an affirmative defense to an otherwise
valid negligence claim against the State, see Ray, 366 N.C. at 8; see also Myers, 360
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N.C. at 465 (describing the public duty doctrine as “a separate rule of common law
negligence that may limit tort liability, even when the State has waived sovereign
immunity”). For that reason, while the public duty doctrine protects governmental
entities from liability based upon a failure to carry out a statutorily created duty that
is designed to protect the public at large rather than a specific individual, Isenhour,
350 N.C. at 606–07, and “operates to prevent plaintiffs from establishing the first
element of a negligence claim—duty to the individual plaintiff,” Ray, 366 N.C. at 5,
the mere fact that the doctrine does not apply with respect to a particular set of facts
does not, without more, determine whether the duty of care necessary to support the
assertion of a negligence claim exists in the first place. Although the two legal
doctrines are related, they are not identical, and the absence of one does not prove
the existence of the other.
¶ 74 Assuming, without in any way deciding, that the Court of Appeals correctly
determined that the 2008 amendments to the State Tort Claims Act precluded the
department from successfully asserting the public duty doctrine in this case, that
determination does not automatically establish that the department owed a duty of
care to plaintiffs sufficient to support a negligence claim against the department
under the State Tort Claims Act. Instead, plaintiffs were still required to identify a
recognized legal duty owed to them by the department, see Pinnix v. Toomey, 242 N.C.
358, 362 (1955) (observing that “[a]ctionable negligence presupposes the existence of
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a legal relationship between parties by which the injured party is owed a duty by the
other, and such duty must be imposed by law”), with the Court of Appeals having
erred by concluding that the inapplicability of the public duty doctrine sufficed to
establish that the department owed plaintiffs a legal duty supporting a negligence
claim against the department under the State Tort Claims Act.
III. Conclusion
¶ 75 Thus, for the reasons set forth above, we hold that the Commission erred in
failing to dismiss plaintiffs’ claims given that plaintiffs’ claims are barred by
sovereign immunity and that plaintiffs failed to assert a viable negligence claim
against the department. As a result, we reverse the decision of the Court of Appeals
and remand this case to the Court of Appeals for further remand to the Commission
for additional proceedings not inconsistent with this opinion.
REVERSED.
Justice EARLS concurring in the result only.
¶ 76 Although I concur that “plaintiffs failed to assert a viable negligence claim
against the department,” I arrive at that result in this case for a fundamentally
different reason from my colleagues. In my view, the many allegations of the
complaint in this matter all involve intentional, not negligent, acts. Thus, rather
than engage in the judicial nullification of statutory rights by invoking an all-
encompassing sovereign immunity for regulatory agencies, this case is most
appropriately resolved by the normal function a court should perform in ruling on a
motion to dismiss. The court should examine the allegations of the complaint to
determine if they state a cause of action for negligence. Deminski v. State Bd. of Educ.,
377 N.C. 406, 2021-NCSC-58, ¶ 12.
¶ 77 Plaintiffs have a cause of action under the State Tort Claims Act (STCA) to sue
“departments, institutions and agencies of the State” when the claim “arose as a
result of the negligence of any officer, employee, involuntary servant or agent of the
State while acting within the scope of his office, employment, service, agency or
authority.” N.C.G.S. § 143-291(a) (2021). However, in this case, the conduct of the
Department of Health and Human Services (DHHS) employees that caused plaintiffs’
alleged injury was intentional conduct and thus does not meet the standard required
for negligence claims. See Bolkhir v. N.C. State Univ., 321 N.C. 706, 709 (1988) (“To
establish actionable negligence, plaintiff must show that: (1) defendant failed to
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exercise due care in the performance of some legal duty owed to plaintiff under the
circumstances; and (2) the negligent breach of such duty was the proximate cause of
the injury.”).
¶ 78 The “overall goal” of the STCA was to “give greater access to the courts to
plaintiffs . . . [that] were injured by the State’s negligence.” Ray v. N.C. Dep’t of
Transp., 366 N.C. 1, 11 (2012). This Court previously has held that the STCA applies
to cases involving state agencies. For example, we have held that the STCA applies
to actions taken by an employee of the State Ports Authority, the North Carolina
Department of Environment and Natural Resources, the Department of Labor, the
Department of Transportation and the Department of Health and Human Services.
See Guthrie v. N.C. State Ports Auth., 307 N.C. 522, 537 (1983) (determining the
Industrial Commission had jurisdiction because the STCA applied to negligent
actions taken by an employee of the State Ports Authority); Myers v. McGrady, 360
N.C. 460, 467 (2006) (“We hold that the public duty doctrine applies to negligence
claims filed under the [STCA] against [the North Carolina Department of
Environment and Natural Resources] for alleged mismanagement of forest fires.”);
Stone v. N.C. Dep’t of Lab., 347 N.C. 473, 481–83 (1998) (determining the public duty
doctrine applies to cases under the STCA and applying it to a case involving
negligence by the Department of Labor for not inspecting a food plant); Teachy v.
Coble Dairies, Inc., 306 N.C. 324, 331, 333 (1982) (determining that the trial court
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did not err by denying motions to dismiss a complaint on grounds that Department
of Transportation was immune under the doctrine of sovereign immunity and
determining the STCA applies to third-party complaints); Multiple Claimants v. N.C.
Dep’t of Health & Hum. Servs., 361 N.C. 372, 379 (2007) (determining the public duty
doctrine did not apply to a claim arising under the STCA against DHHS for the death
of four inmates following a fire at a county jail).
¶ 79 However, to bring a claim under the STCA, a party must prove the standard
elements of negligence, which include duty, breach, causation, and damages. Bolkhir,
321 N.C. at 709 (“Under the [STCA], negligence is determined by the same rules as
those applicable to private parties.”). “The [STCA] does not give [courts] jurisdiction
to award damages based on intentional acts.” Frazier v. Murray, 135 N.C. App. 43,
48 (1999) (citing Jenkins v. Dep’t of Motor Vehicles, 244 N.C. 560 (1956)). Intentional
acts are also legally distinguishable from negligent acts. Id.¶ 80 Our Court has not decided a case involving intentional actions taken by
regulatory agencies, but the Court of Appeals has done so twice. In Williams v. North
Carolina Department of Justice, Criminal Standards Division, 273 N.C. App. 209,
212 (2020), the Court of Appeals held that the CEO of a company providing traffic
control services that was subjected to regulatory action could not bring a claim
against the agency. There, the court expressed that it was “well-settled” that the
STCA does not permit recovery for intentional acts like the alleged regulatory action
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at issue in that case. Id. (quoting Fennell v. N.C. Dep’t of Crime Control & Pub. Safety,
145 N.C. App. 584, 592 (2001)). Similarly, in Frazier, 135 N.C. App. 43, the
Disciplinary Hearing Commission of the North Carolina State Bar pursued criminal
contempt charges against a disbarred attorney who continued to practice law in
violation of multiple orders. Id. at 45. The attorney was imprisoned and filed a tort
claim against the Commission and its members for false imprisonment and
intentional infliction of emotional distress. Id. at 46. There, the Court of Appeals
concluded that “[i]njuries intentionally inflicted by employees of a state agency are
not compensable under the [STCA].” Id. at 48. Both Williams and Frazier are
instructive in determining the case at bar.
¶ 81 DHHS’s regulatory acts are analogous to those in Williams and Frazier
because they involved intentional regulatory acts. These actions are not accidents,
inadvertent, unintended, or the result of a failure to use reasonable care. See Yancey
v. Lea, 354 N.C. 48, 53 (2001) (“Negligence, a failure to use due care, be it slight or
extreme, connotes inadvertence.” (quoting Hinson v. Dawson, 244 N.C. 23, 28 (1956))).
Rather, they were actions taken intentionally by a state agency to enforce laws passed
by the General Assembly under N.C.G.S. §§ 131D-21 (providing residents’ rights),
131D-34 (providing administrative penalties), 131D-2.7 (providing for suspension of
admission). DHHS acted intentionally in determining Cedarbrook’s violations under
N.C.G.S. § 131D-21. When it classified those violations and determined what
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penalties should apply it acted pursuant to N.C.G.S. § 131D-34. And when DHHS
subsequently suspended admissions at Cedarbrook, it acted intentionally pursuant
to N.C.G.S. § 131D-2.7. In carrying out these regulatory actions, DHHS acted
intentionally and cannot be held liable under a theory of negligence or the STCA. See
Williams, 273 N.C. App. at 213–15; Frazier, 135 N.C. App. at 46. Thus, I agree with
the majority that Cedarbrook has failed to assert a viable claim for negligence.
¶ 82 It is unnecessary to reach the many other issues raised by the parties. Indeed,
it is beyond the scope of this case to opine on the question of whether state employees
engaged in regulatory actions are subject to the STCA for their negligence because in
this case, the acts that allegedly caused plaintiffs’ injuries were intentional acts. It is
also unnecessary to interpret the “private person” language of the STCA or overrule
any portion of the Nanny’s Korner decision. See Nanny’s Korner Day Care Ctr., Inc. v.
N.C. Dep’t of Health & Hum. Servs., 264 N.C. App. 71 (2019). Therefore, I do not join
in any portion of the majority opinion in this matter and join in the result only,
reversing the decision of the Court of Appeals and remanding for dismissal of
plaintiffs’ affidavit for failure to assert a claim of negligence against DHHS.
Chief Justice NEWBY dissenting.
¶ 83 What is the remedy when a state actor negligently regulates a business
causing significant operational and financial disruption or the business’s closure?
Potential remedies include three approaches: (1) a constitutional tort under article I,
section 1 of the North Carolina Constitution (fruits of their own labor)1; (2) an action
for negligence under the State Tort Claims Act (STCA); or (3) an administrative
review under the Administrative Procedure Act (APA). The majority’s decision
removes the STCA as a potential option. Specifically, here we consider whether a
state-regulated entity may bring a negligence claim against its state regulator under
the STCA or whether the entity is limited to an administrative remedy under the
APA and/or a constitutional tort claim. Because the STCA provides a limited waiver
of the state’s sovereign immunity, this Court has previously allowed regulated
claimants to bring certain negligence claims challenging the state’s regulatory
activities under the STCA. Further, since state regulators are granted broad
1 We also recognize that a regulatory taking under article I, section 19 (law of the
land) is a potential remedy. Article I, section 19 of our state constitution provides that “[n]o
person shall be . . . deprived of his life, liberty, or property, but by the law of the land.” N.C.
Const. art. I, § 19. As a result of the state’s largely unchecked regulatory authority, the state’s
significant interference with a regulated entity could rise to the level of a constitutional
taking. In the present case, counsel for the North Carolina Department of Health and Human
Services (DHHS) did not have an answer at oral argument when asked at what point the
state’s regulatory actions constitute a taking. See Oral Argument at 1:01:42, Cedarbrook
Residential Ctr., Inc. v. N.C. Dep’t of Health & Hum. Servs. (No. 36A22),
https://www.youtube.com/watch?v=5CThlVBanJY.
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regulatory authority, it is appropriate to require regulators to conduct investigations
and use their authority in a non-negligent manner. As such, state regulators owe a
duty of care to both the regulated entities subject to their authority and to the
individuals whom the regulations are designed to protect. Additionally, the
availability of an administrative remedy under the APA does not preclude a claimant
from seeking a more adequate remedy under the STCA. Accordingly, the decision of
the Court of Appeals should be affirmed. I respectfully dissent.
¶ 84 Plaintiff Cedarbrook Residential Center, Inc. (Cedarbrook) is a licensed adult
care home in Nebo, North Carolina, that serves residents with disabilities and mental
illnesses. Cedarbrook is owned by plaintiff Fred Leonard.2 Defendant North Carolina
Department of Health and Human Services, Division of Health Service Regulation,
Adult Care Licensure Section (DHHS) is the state agency charged with licensing,
inspecting, and enforcing the provisions that govern adult care homes such as
Cedarbrook. Specifically relevant to this case, Cedarbrook serves a “challenging
disabled population” and works to provide a “safe and stable environment” that is
supportive of its residents’ mental health challenges.
¶ 85 In November of 2015, DHHS conducted an extensive investigation of
Cedarbrook and interviewed its residents and employees to ensure the facility was
2 Plaintiffs Cedarbrook Residential Center and Fred Leonard are collectively referred
to as “Cedarbrook.”
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operating in compliance with the governing regulations.3 At the time of the
investigation, Cedarbrook was a Four Star facility, the highest rating available under
DHHS’s rating system. Utilizing investigatory techniques inappropriate for the
residents in plaintiffs’ type of facility, DHHS, however, found numerous alleged
violations and recorded its findings in “Statements of Deficiencies” (statements) that
exceeded 400 pages. The statements largely consisted of copies of the surveyor notes
from the investigations and interviews, rather than reasoned agency findings. The
statements recorded deficiencies in supervision, staffing, and sanitation, among
many other areas. Based on the identified deficiencies, DHHS issued financial
penalties and suspended Cedarbrook from admitting new residents.
¶ 86 In May of 2016, DHHS granted Cedarbrook a provisional operating license, but
DHHS later found that Cedarbrook failed to present acceptable plans to cure the
deficiencies. Accordingly, DHHS issued a Directed Plan of Protection requiring
Cedarbrook to implement increased staffing and administrative measures. As a
result of DHHS’s suspension order, provisional license, and regulatory actions,
Cedarbrook’s occupancy dropped more than 50%, the facility incurred additional costs
3 The majority repeatedly discounts the relevance of the allegations asserted in
plaintiffs’ affidavit. With a motion to dismiss, however, we are to treat the factual allegations
as true and view the facts in the light most favorable to the non-moving party. A brief review
of the relevant facts here is important to understand the duty of state regulators to proceed
in a reasonable manner. Perhaps the majority chooses to discount the facts because the facts
illustrate a breach of the duty of reasonable care.
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to comply with the mandates of the Directed Plan of Protection, Cedarbrook’s
revenues declined, and Mr. Leonard lost a potential sale of the facility.
¶ 87 Cedarbrook initially challenged DHHS’s regulatory actions by filing a
contested case in the Office of Administrative Hearings (OAH). OAH entered a stay
enjoining DHHS’s suspension order. DHHS, however, continued to issue proposed
penalties against Cedarbrook exceeding $340,000. Prior to the hearing, the parties
settled, and DHHS agreed to withdraw all of the agency actions it had taken against
Cedarbrook.
¶ 88 On 25 October 2018, plaintiffs filed an Affidavit and Verified Claim for
Damages against DHHS in the Industrial Commission asserting negligence claims
based on DHHS’s investigative and regulatory actions.4 The Verified Claim for
Damages alleges that:
[DHHS] breached the duty owed to [Cedarbrook and Mr.
Leonard] in (1) conducting the surveys of Cedarbrook; (2)
writing and publishing the Statements of Deficiencies; (3)
issuing the Directed Plan of Protection against
Cedarbrook, and leaving it in place for nearly five months;
and (4) issuing the Erroneous Suspension, and leaving it in
place for nearly eight months.
Plaintiffs’ Verified Claim for Damages specifically details that the manner in which
4 The concurring opinion characterizes plaintiffs’ complaint as alleging intentional
acts and thus contends that plaintiffs’ claims are not cognizable under the STCA. The essence
of plaintiffs’ allegations, however, is not that the regulators intentionally sought to harm
Cedarbrook but that they were negligent in their investigation, which resulted in negligent
regulation.
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DHHS conducted the investigations, the methods DHHS used in performing the
interviews, and the process the surveyors employed in drafting the statements were
unreliable, aggressive, and harmful to the residents. Plaintiffs allege that the DHHS
surveyors “double-teamed” residents, asked suggestive questions, and intruded on
the residents’ privacy. Additionally, plaintiffs allege that the summary nature of
drafting the statements was unreliable and resulted in mischaracterizations,
conclusory statements, and unsupported allegations. As a result of DHHS’s alleged
negligent regulatory activity, plaintiffs claim damages in excess of $1,000,000 for lost
business income and the loss of a potential sale of the facility.
¶ 89 On 8 January 2019, DHHS filed a response and motion to dismiss pursuant to
Rules 12(b)(1), 12(b)(2), and 12(b)(6) of the North Carolina Rules of Civil Procedure
and a motion to stay discovery. The Deputy Commissioner denied DHHS’s motion to
dismiss on 13 March 2019. DHHS appealed to the Full Commission, which approved
DHHS’s request for an interlocutory appeal on 9 May 2019. The Full Commission
held a hearing on 10 September 2019 and entered an order affirming the denial of
DHHS’s motion to dismiss on 6 November 2020. The Full Commission concluded that
the STCA “waived sovereign immunity, and [Cedarbrook] complied with the
requirements of [invoking] the [STCA] in filing [its] Affidavit.” The Full Commission
further concluded that the public duty doctrine did not bar plaintiffs’ claims and that
plaintiffs pled a valid claim for negligence. DHHS appealed to the Court of Appeals.
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¶ 90 On appeal, DHHS argued, in relevant part, that the Industrial Commission
erred by denying DHHS’s motion to dismiss because the APA, rather than the STCA,
provides plaintiffs with an adequate state remedy. Cedarbrook Residential Ctr., Inc.
v. N.C. Dep’t of Health & Hum. Servs., 281 N.C. App. 9, 2021-NCCOA-689, ¶ 13. The
Court of Appeals, relying on Nanny’s Korner Day Care Center, Inc. v. North Carolina
Department of Health and Human Services, 264 N.C. App. 71, 80, 825 S.E.2d 34, 41,
appeal dismissed, disc. rev. denied, 372 N.C. 700, 831 S.E.2d 89 (2019), held that a
regulated entity does have an adequate state remedy under the STCA. Cedarbrook,
¶ 16. The Court of Appeals reasoned that “the availability of an administrative
remedy [through the APA] does not preclude plaintiff from seeking a remedy under
the STCA” for the negligent actions of a state regulator. Id. ¶ 14. The Court of Appeals
thus affirmed the Full Commission’s order denying DHHS’s motion to dismiss. Id. ¶
33.
¶ 91 The dissenting judge disagreed that Cedarbrook could seek a remedy under
the STCA. According to the dissenting judge, the “regulatory review function is
clearly assigned under the [APA] to the [OAH]”; therefore, “[c]laims challenging an
agency’s regulatory actions are properly heard under the [APA].” Id. ¶¶ 39, 41 (Tyson,
J., dissenting). As such, because of the administrative avenue provided through the
APA, the “Industrial Commission cannot waive North Carolina’s sovereign immunity
under the STCA.” Id. ¶ 40. The dissenting judge thus would have held that the
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relevant portion of Nanny’s Korner discussing the availability of a remedy under the
STCA is dicta. Id. ¶¶ 68–69. DHHS appealed to this Court based on the dissenting
opinion.
¶ 92 The controlling question here is whether the STCA provides for a limited
waiver of the state’s sovereign immunity that allows a regulated entity to challenge
a state regulator’s negligent actions or whether the entity is limited to an
administrative remedy and/or a constitutional claim. This Court reviews the denial
of a motion to dismiss on the basis of sovereign immunity de novo. White v. Trew, 366
N.C. 360, 363, 736 S.E.2d 166, 168 (2013). Additionally, when reviewing a motion to
dismiss for lack of subject matter jurisdiction and failure to state a claim upon which
relief can be granted, this Court treats the “factual allegations contained in [the]
affidavit before the Industrial Commission as true.” Hunt v. N.C. Dep’t of Lab., 348
N.C. 192, 194, 499 S.E.2d 747, 748 (1998) (citation omitted).
¶ 93 The doctrine of sovereign immunity “is firmly established in the law of North
Carolina.” Lewis v. White, 287 N.C. 625, 642, 216 S.E.2d 134, 145 (1975). This Court
has long held that “an action cannot be maintained against [a state agency] unless it
consents to be sued or upon its waiver of immunity, and that this immunity is absolute
and unqualified.” Guthrie v. N.C. State Ports Auth., 307 N.C. 522, 534, 299 S.E.2d
618, 625 (1983).
¶ 94 The STCA expressly provides a limited waiver of the state’s sovereign
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immunity. It permits claims that arise:
as a result of the negligence of any officer, employee,
involuntary servant or agent of the State while acting
within the scope of his office, employment, service, agency
or authority, under circumstances where the State of North
Carolina, if a private person, would be liable to the
claimant in accordance with the laws of North Carolina.
N.C.G.S. § 143-291(a) (2021). The purpose of the STCA is to “give greater access to
the courts to plaintiffs in cases in which they [are] injured by the [s]tate’s negligence.”
Ray v. N.C. Dep’t of Transp., 366 N.C. 1, 11, 727 S.E.2d 675, 683 (2012). Further, the
STCA charges the North Carolina Industrial Commission with “hearing and passing
upon [such] tort claims against . . . agencies of the State.” N.C.G.S. § 143-291(a). To
invoke the jurisdiction of the Industrial Commission under the STCA, the claimant
need only file an affidavit in duplicate, containing the following:
(1) The name of the claimant;
(2) The name of the department, institution or agency of
the State against which the claim is asserted, and the
name of the State employee upon whose alleged
negligence the claim is based;
(3) The amount of damages sought to be recovered;
(4) The time and place where the injury occurred;
(5) A brief statement of the facts and circumstances
surrounding the injury and giving rise to the claim.
N.C.G.S. § 143-297 (2021). Moreover, the STCA “incorporate[s] the common law of
negligence.” Stone v. N.C. Dep’t of Lab., 347 N.C. 473, 479, 495 S.E.2d 711, 715 (1998).
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As such, “negligence is determined by the same rules as those applicable to private
parties.” Bolkhir v. N.C. State Univ., 321 N.C. 706, 709, 365 S.E.2d 898, 900 (1988).
¶ 95 The majority contends the STCA is inapplicable because private persons do not
exercise regulatory power; therefore, the plain language of the STCA forecloses
plaintiffs’ claims. The majority holds that plaintiffs’ negligence claim is not cognizable
under the STCA and that a state regulator does not owe a duty of care to a regulated
entity. Finally, the majority contends that the STCA is not the proper statutory
avenue to challenge the state’s regulatory actions because the statutes governing
adult care homes allow entities to seek reversal of the state’s regulatory actions under
the APA through the OAH. According to the majority, because the APA provides for
a remedy through the OAH, plaintiffs are precluded from seeking a remedy for
DHHS’s negligent regulatory actions under the STCA.
¶ 96 In holding that a negligence claim by a regulated entity against its state
regulator is not cognizable under the STCA, the majority misreads Nanny’s Korner
and disregards its clear holding. In Nanny’s Korner, DHHS was notified of a
substantiated sexual abuse allegation at a daycare. Nanny’s Korner, 264 N.C. App.
at 72, 825 S.E.2d at 36. DHHS issued the daycare a written warning, and the daycare
informed its customers of the allegation. Id. at 73–75, 825 S.E.2d at 37–38. As a
result, the daycare lost business and was forced to close. Id. at 74–75, 825 S.E.2d at
38. After initially proceeding through the OAH, the daycare brought a negligence
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claim against DHHS under the STCA for failing to conduct an independent
investigation of the allegation. Id. at 73–75, 825 S.E.2d at 37–38. The Industrial
Commission, however, dismissed the daycare’s negligence claim because the statute
of limitations had run. Id. at 75, 825 S.E.2d at 38. Notably, in addressing the
daycare’s constitutional claim against DHHS, the Court of Appeals concluded that
the constitutional claim failed because the daycare “had an adequate state remedy in
the form of the Industrial Commission through the Torts Claim Act.” Id. at 80, 825
S.E.2d at 41. Thus, the daycare could have pursued its negligent regulation claim
against DHHS under the STCA had the claim been timely filed. See also Craig v. New
Hanover Cnty. Bd. of Educ., 363 N.C. 334, 340, 678 S.E.2d 351, 355 (2009) (allowing
the plaintiff to bring a constitutional claim when the plaintiff’s negligence claim did
“not provide an adequate remedy at state law [because] governmental immunity
[stood] as an absolute bar”); Helm v. Appalachian State Univ., 363 N.C. 366, 677
S.E.2d 454 (2009) (per curiam).
¶ 97 The majority here contends that the court in Nanny’s Korner “did not fully
examine the extent, if any, to which the [STCA] permits the type of claim that the
daycare center pursued.” However, in order to dispose of the daycare’s constitutional
claim, the court had to first consider the alternative remedies and address the
availability of the daycare’s negligence claim against DHHS under the STCA. The
court explained that the STCA “explicitly grants authority to the North Carolina
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Industrial Commission to hear tort claims against State agencies.” Nanny’s Korner,
264 N.C. App. at 80, 825 S.E.2d at 41. Pivotal to the court’s dismissal of the
constitutional claim was its holding of a viable statutory remedy under the STCA had
the negligence claim been timely filed. See Craig, 363 N.C. at 339–40, 678 S.E.2d at
355; Helm, 363 N.C. 366, 677 S.E.2d 454. The majority here discounts this important
step and accordingly disregards that the court clearly expressed that the STCA is an
available avenue for a regulated entity’s negligence claim.
¶ 98 This Court has similarly recognized that negligence claims against state
regulators challenging the state’s regulatory activity are within the scope of the
STCA. In Multiple Claimants v. North Carolina Department of Health and Human
Services, for instance, the plaintiffs filed claims under the STCA alleging that DHHS
was negligent in performing their duties of inspecting the jails. 361 N.C. 372, 373,
646 S.E.2d 356, 357 (2007). This Court held that DHHS had a duty of care to inspect
the jails and ensure the facilities were complying with the regulatory requirements.
Id. at 378, 646 S.E.2d at 361. As such, this Court allowed the plaintiffs to bring
negligence claims challenging DHHS’s regulatory actions under the STCA. Id. at 379,
646 S.E.2d at 361; see also Ray, 366 N.C. at 2–3, 727 S.E.2d at 677–78 (concluding
that the plaintiffs’ claims for negligent design and execution of narrowing a roadway
and negligent failure to repair the road by the Department of Transportation are
within the scope of the STCA); Gammons v. N.C. Dep’t of Hum. Res., 344 N.C. 51, 54,
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472 S.E.2d 722, 724 (1996) (holding that the Industrial Commission had jurisdiction
to hear a claim for the negligent investigation of child abuse by a state agency).5
¶ 99 Accordingly, these cases illustrate instances in which regulatory activities
have been held to be included under the STCA. The “the State . . . , if a private person”
language includes state regulators. N.C.G.S. § 143-291(a) (emphasis added). The
majority contends that “[p]rivate persons do not, of course, exercise regulatory
power.” As shown, this Court has previously recognized, however, instances where
the state is liable for performing regulatory functions that private persons do not
perform. See Multiple Claimants, 361 N.C. at 378, 646 S.E.2d at 360 (DHHS
regulating and inspecting jails); Ray, 366 N.C. at 3, 727 S.E.2d at 677–78
(Department of Transportation designing and executing the narrowing of a roadway).
Thus, the focus is not so much on the status of the government actor. The elements
of negligence are the same under the STCA, and “negligence is determined by the
same rules as those applicable to private parties.” Bolkhir, 321 N.C. at 709, 365
S.E.2d at 900. Therefore, all actors are required to act in a non-negligent manner.
5 Many Court of Appeals decisions have similarly held that negligence claims against
state agencies are within the scope of the State Tort Claims Act. See Est. of Tang v. N.C. Dep’t
of Health & Hum. Servs., 2021-NCCOA-611 (unpublished) (negligent enforcement of
regulations governing an adult care home by DHHS); Crump v. N.C. Dep’t of Env’t & Nat.
Res., 216 N.C. App. 39, 715 S.E.2d 875 (2011) (negligent inspection of land for a septic tank
permit by the Department of Environment and Natural Resources); Haas v. Caldwell Sys.,
98 N.C. App. 679, 392 S.E.2d 110 (1990) (negligent inspecting and monitoring of an
incinerator); Zimmer v. N.C. Dep’t of Transp., 87 N.C. App. 132, 360 S.E.2d 115 (1987)
(negligent designation of a detour route by the Department of Transportation).
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Here DHHS’s conduct and the manner in which it performed the inspections expose
it to liability, rather than its status as a government actor.
¶ 100 Next, the majority holds that state regulators do not owe a duty of care to
regulated entities. The majority emphasizes the “critical” distinction between the
duty of care that state regulators owe to individuals, who benefit from the
regulations, and entities, which are regulated. The law of negligence, however, makes
no such distinction. State regulators owe a duty of care to those subject to the state’s
regulatory authority and to those whom the state’s actions are designed to protect.
Thus, state regulators owe a duty of care to regulated entities and to individuals. It
is not exclusively one or the other. The Court of Appeals’ decision in Crump v. North
Carolina Department of Environment and Natural Resources, 216 N.C. App. 39, 715
S.E.2d 875 (2011), is illustrative.
¶ 101 In Crump, the state negligently issued a septic tank permit, and the
landowners recovered damages under the STCA. Crump, 216 N.C. App. at 39–40, 715
S.E.2d at 876–77.6 The state’s duty of care in properly inspecting and issuing the
permit extended to the landowners, those directly subject to the state’s regulatory
authority, as well as to the surrounding property owners, those who would be
6 Crump also demonstrates a situation in which “the State . . . , if a private person,” is
liable under the STCA. See N.C.G.S. § 143-291(a) (2021). Private persons do not inspect and
issue septic tank permits. The Court of Appeals, however, held that the plaintiffs could
recover for the state’s negligent regulatory actions.
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impacted by an improper septic system. Similarly, here, the state’s duty arising from
the inspection and regulation of Cedarbrook extends to the facility, the entity subject
to the state’s regulatory authority, and to the individuals living at the facility, those
protected by regulations.
¶ 102 The majority also contends that recognizing that state regulators owe a duty
to regulated entities would create conflicting duties of care, which are “inherently
problematic.”7 In support, the majority relies on Koch v. Bell, Lewis & Associates, 176
N.C. App. 736, 740, 627 S.E.2d 636, 638–39 (2006), which declined to recognize the
existence of a duty because of the “conflicting loyalties” an insurance adjuster owes
to both the claimant and the insurer. Here, however, the state owes the same duty of
care to both Cedarbrook and the residents at the facility. DHHS can ensure
Cedarbrook is complying with the governing regulations by conducting a fair
investigation while also satisfying their duties to the residents. Thus, unlike in Koch,
there are no conflicting duties or loyalties that prevent DHHS from extending a duty
of care to both the facility and the individuals. The state’s duty to ensure that
7 The majority contends that the facts in Multiple Claimants illustrate the conflicting
duties “conundrum” that regulatory agencies would face if regulatory negligence claims were
permitted under the STCA. In applying plaintiffs’ position here to the facts of Multiple
Claimants, the majority assumes that the county in Multiple Claimants would challenge the
state’s findings as “unreasonable” upon the state’s “proper inspection of the jail.” To the
contrary, the challenge is to the evidence-gathering process, or the manner in which the
investigation is conducted, as well as the state’s ultimate findings and identified violations.
Thus, plaintiffs’ claim here may be more appropriately characterized as a negligent
regulation claim arising from a negligent investigation.
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regulated entities are complying with the governing regulations does not conflict with
the state’s duty to perform the investigations in a non-negligent manner or treat the
residents properly.
¶ 103 The majority concedes that “it is theoretically possible to find a middle ground
between too much regulation and no regulation at all.” In other words, there can be
state action that complies with the state’s duty to all parties involved. A
non-negligent action ensures compliance with the duty to enforce regulations which
protect those designed to be protected and is fair to the regulated entity. The majority
contends that the General Assembly, rather than the judicial branch, should be
responsible for identifying the “middle ground.” Maintaining a “middle ground” by
requiring state regulators to conduct investigations and exercise their regulatory
authority in a non-negligent manner, however, creates a level playing field. It ensures
that state regulators treat all entities equally in the performance of their regulatory
activity, while properly protecting those whom the statutes were designed to protect.
¶ 104 Because the General Assembly has granted the state significant regulatory
authority over entities, state regulators, who can diminish or destroy a regulated
business, should be required to conduct investigations and exercise their authority in
a non-negligent manner. Proving negligence in the regulation of a business may be
difficult given the discretion granted to the state agency. Nonetheless, in the
extraordinary circumstance where the regulator is not justified in proceeding in the
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manner adopted, the injury caused by the regulator’s negligence should be
compensable. Thus, when a state agency is granted significant regulatory authority,
the regulator should be held to exercise that power, over both the regulated entity
and the individuals that the state’s actions are intended to protect, in a non-negligent
manner.
¶ 105 Here DHHS owes a duty of care to Cedarbrook, as well as the individuals living
at the adult care home. Viewing the factual allegations in the affidavit as true and in
the light most favorable to plaintiffs, Cedarbrook incurred substantial costs,
experienced a significant decrease in revenue, and was required to revise many of its
operating procedures as a result of DHHS’s alleged negligent regulatory actions.8
Accordingly, as provided in Nanny’s Korner and as illustrated by our case law, the
STCA’s limited waiver of the state’s sovereign immunity provides entities, such as
Cedarbrook, with a statutory avenue under the STCA to bring a negligence claim
against DHHS and seek compensable damages through the Industrial Commission.
Because plaintiffs properly invoked the Industrial Commission’s jurisdiction through
their affidavit, plaintiffs should be able to pursue their negligence claims under the
STCA.
¶ 106 Further, the availability of an administrative remedy through the OAH does
8 Moreover, Cedarbrook’s residents suffered significant harm due to DHHS’s intrusive
investigation and interview methods.
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not preclude claimants from seeking an adequate remedy under the STCA through
the Industrial Commission. The statutory provisions governing adult care homes
allow the facilities to challenge penalties and suspensions through an administrative
hearing. See N.C.G.S. § 131D-2.7(d)(4) (2021) (contesting a suspension of admissions
though an administrative hearing as provided by the APA); N.C.G.S. § 131D-34(e)
(2021) (contesting a penalty through an administrative hearing as provided by the
APA). The provisions, however, do not indicate that proceeding under the APA
through the OAH is an exclusive remedy. If the General Assembly intended to provide
a mutually exclusive remedy, rather than a dual remedy, the legislature could have
clarified this statutory intersection. Instead, the legislature has remained silent, and
the courts have consistently interpreted the STCA to include challenges to the state’s
negligent regulatory activity.
¶ 107 Our state constitution, unlike the federal constitution, expressly provides that
individuals are entitled to the fruits of their own labor as an inalienable right. N.C.
Const. art. I, § 1. As a result of the majority’s decision, a regulated entity will be forced
to bring a constitutional tort claim when a state agency infringes upon its ability to
operate and conduct business. Despite conceding that there may be instances when
there is “too much regulation[,]” the majority’s decision removes the appropriate
statutory avenue for entities to seek recovery for negligence by state regulators under
the STCA. Consequently, the majority’s decision thwarts the very purpose of the
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STCA, which was enacted to provide “greater access to the courts to plaintiffs . . .
[who have been] injured by the [s]tate’s negligence.” Ray, 366 N.C. at 11, 727 S.E.2d
at 683. As such, the majority’s decision also broadens the state’s regulatory authority.
Now, state regulators, who possess significant regulatory power over businesses, may
conduct investigations of regulated entities with limited accountability. The STCA
provided such accountability.
¶ 108 In summary, the majority’s decision removes the STCA as a potential avenue
for regulated entities contesting the state’s negligent actions and forces entities to
pursue an administrative remedy and/or a constitutional challenge. Because of the
broad regulatory authority granted to state agencies, regulators should be required
to exercise that authority, over both the regulated entity and the individuals
protected by the regulations, in a non-negligent manner. The Court of Appeals thus
properly affirmed the Full Commission’s order denying DHHS’s motion to dismiss.
Accordingly, I respectfully dissent.
Justice BERGER joins in this dissenting opinion.