Brett Davis v. City of Greensboro

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-1820
BRETT DAVIS; BRIAN CHRIS SMOOT; STEVE SZYMECZEK,
Plaintiffs - Appellees,
v.
CITY OF GREENSBORO, NORTH CAROLINA,
Defendant - Appellant.
No. 13-1825
WENDY CHEEK; BRIAN KEITH COLLINS; JOSEPH CASEY COUNCILMAN;
WALTER STEVEN COUTURIER; TIMOTHY FIELDS; WILLIAM C. MORGAN,
Plaintiffs - Appellees,
v.
CITY OF GREENSBORO, NORTH CAROLINA,
Defendant - Appellant.
No. 13-1826
DAVID MORGAN; ROGERS REYNOLDS,
Plaintiffs - Appellees,
v.
CITY OF GREENSBORO, NORTH CAROLINA,
Defendant - Appellant.
No. 13-1827
MICHAEL BROWNELL; TRAYVEAWN GOODWIN; CHRISTIAN HICKS; TY
JENKS; PATRICK KENNEDY; GEORGE SIMMONS,
Plaintiffs - Appellees,
v.
CITY OF GREENSBORO, NORTH CAROLINA,
Defendant - Appellant.
Appeals from the United States District Court for the Middle
District of North Carolina, at Greensboro. Catherine C. Eagles,
District Judge. (1:12-cv-00888-CCE-JEP; 1:12-cv-00981-CCE-JEP;
1:12-cv-01110-CCE-JEP; 1:12-cv-01311-CCE-JEP)
Argued: September 16, 2014 Decided: October 22, 2014
Before MOTZ and KING, Circuit Judges, and DAVIS, Senior Circuit
Judge.
Affirmed by published opinion. Judge Motz wrote the opinion, in
which Judge King and Senior Judge Davis joined.
ARGUED: Kenneth Kyre, Jr., PINTO, COATES, KYRE & BROWN, PLLC,
Greensboro, North Carolina, for Appellant. Torin L. Fury,
FRAZIER HILL & FURY, RLLP, Greensboro, North Carolina, for
Appellees. ON BRIEF: William L. Hill, James Demarest Secor,
III, FRAZIER HILL & FURY, RLLP, Greensboro, North Carolina, for
Appellees.
2
DIANA GRIBBON MOTZ, Circuit Judge:
The City of Greensboro appeals the denial of motions to
dismiss, arguing that the district court erred in rejecting the
City’s claims of governmental immunity. Before we can review
the district court’s judgments, we must resolve the threshold
question of whether we have jurisdiction over the interlocutory
orders in these consolidated appeals. For the reasons that
follow, we conclude that we do have jurisdiction, and we affirm
the judgments of the district court.
I.
Four groups of current and retired Greensboro police
officers and firefighters (collectively, “the Officers”) brought
separate suits against the City, alleging violations of state
and federal law. Broadly speaking, the Officers’ claims relate
to the City’s alleged failure to pay its employees certain wages
and benefits.
The only benefit at issue in these appeals is the City’s
“longevity payment program.” As recounted in the Officers’
complaints, the City provides annual lump-sum payments to police
officers and firefighters based on the number of years they have
worked for the City. Employees hired prior to July 1, 1994, who
completed twenty years of service by June 30, 2010, were
grandfathered into a previous longevity payment program. For
3
other employees, the longevity payments began after five years
of service and increased with each additional five years on the
job. The Officers allege that the longevity payments are “an
integral part” of their employment contracts with the City, and
that the City lists the payments as a “benefit” in its Employee
Handbook.
According to the complaints, the City began to modify the
longevity payment program in 2010. First, the officers allege,
the City capped the payments for certain employees at a lower
percentage of their annual salary. Two years later, it
converted the longevity payments for some employees into a
discretionary bonus program. These changes lowered the amount
some of the Officers were entitled to receive. The Officers
also allege that the City failed to include longevity pay in
calculating their base rate of pay. This inaccuracy assertedly
led to underpayment of overtime wages, which in turn resulted in
inadequate contributions to the Officers’ retirement funds.
In addition to the many other causes of action in each
complaint, the Officers allege that the City breached a contract
for longevity pay. 1 Some of the Officers also claim that they
1
Two groups of Officers now disclaim any intention to
allege breach of contract claims regarding longevity payments.
To the extent they no longer pursue breach of contract claims,
the disposition of these appeals will not affect their ongoing
litigation.
4
are entitled to the longevity payments under the doctrines of
equitable and quasi estoppel.
The City moved to dismiss every cause of action in all four
complaints. In response to the breach of contract and estoppel
claims, the City argued that governmental immunity protected it
from suit. Although a municipality in North Carolina waives
governmental immunity when it enters into a valid contract, the
City claimed that the Officers failed to adequately allege the
existence of valid contracts for longevity pay.
The district court granted in part and denied in part the
City’s motions to dismiss. Most of the Officers’ claims
survived the motions, including the only claims at issue in this
appeal -- the Officers’ breach of contract and estoppel claims,
to which the City contends it enjoys governmental immunity from
suit. The district court held that the Officers “sufficiently
alleged a contractual longevity payment obligation.” Davis v.
City of Greensboro, N.C., 2013 WL 2317730, at *3 (M.D.N.C. May
28, 2013). After noting that any further evaluation of the
City’s immunity defense was “inappropriate for resolution”
because of the “highly fact-specific” nature of the inquiry
necessary to resolve the immunity issue, the district court
denied the City’s motions to dismiss the Officers’ contract and
estoppel claims. Id. at *2-3.
5
The City timely noted an appeal of this portion of the
district court’s order in all four cases. We have consolidated
the cases for our review.
II.
Before we can address the City’s governmental immunity
defense, we must first determine whether we have jurisdiction
over these appeals.
Federal law, specifically 28 U.S.C. § 1291 (2012), limits
our jurisdiction to appeals from “final decisions of the
district courts.” Generally, the denial of a motion to dismiss
does not constitute a “final decision,” and thus does not
provide the proper basis for an appeal. See Johnson v. Jones,
515 U.S. 304, 309 (1995). But the collateral order doctrine
extends our jurisdiction to a “‘small class’ of collateral
rulings that, although they do not end the litigation, are
appropriately deemed ‘final.’” Mohawk Indus., Inc. v.
Carpenter, 558 U.S. 100, 106 (2009) (quoting Cohen v. Beneficial
Indus. Loan Corp., 337 U.S. 541, 546 (1949)). This small class
“includes only decisions that are conclusive, that resolve
important questions separate from the merits, and that are
effectively unreviewable on appeal from the final judgment in
the underlying action.” Swint v. Chambers Cnty. Comm’n, 514
U.S. 35, 42 (1995); see also Cobra Natural Res., LLC v. Fed.
6
Mine Safety & Health Review Comm’n, 742 F.3d 82, 86 (4th Cir.
2014).
The Supreme Court has held that orders denying certain
kinds of immunity fall within the collateral order doctrine. In
so doing, the Court has exercised jurisdiction over
interlocutory appeals of orders rejecting defenses of absolute
immunity, Nixon v. Fitzgerald, 457 U.S. 731, 742 (1982),
qualified immunity, Mitchell v. Forsyth, 472 U.S. 511, 530
(1985), and a state’s claim of sovereign immunity, Puerto Rico
Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139,
147 (1993). We have similarly exercised jurisdiction over an
interlocutory appeal of an order rejecting the kind of immunity
at issue here, a municipality’s claim of governmental immunity.
Gray-Hopkins v. Prince George’s Cnty., 309 F.3d 224, 231-32 (4th
Cir. 2002).
Only a claimed “immunity from suit,” not “a mere defense to
liability,” can provide the proper basis for an interlocutory
appeal. Mitchell, 472 U.S. at 526 (emphasis in original). To
determine whether a municipality’s claim of governmental
immunity constitutes an immunity from suit, we “must look to
substantive state law.” Gray-Hopkins, 309 F.3d at 231.
Here, the scope of governmental immunity under North
Carolina law is clear. The Supreme Court of North Carolina has
held that governmental immunity provides a “complete defense”
7
that “shields a defendant entirely from having to answer for its
conduct at all in a civil suit for damages.” Craig ex rel.
Craig v. New Hanover Cnty. Bd. of Educ., 678 S.E.2d 351, 354
(N.C. 2009). As such, governmental immunity in North Carolina
constitutes “an immunity from suit rather than a mere defense to
liability.” Id. (emphasis in original) (quoting Mitchell, 472
U.S. at 526) (internal quotation mark omitted).
Even when a defendant claims an immunity from suit,
however, certain orders denying immunity do not provide a proper
basis for interlocutory appeal under the collateral order
doctrine. A district court’s denial of immunity constitutes “an
appealable ‘final decision’” only “to the extent that it turns
on an issue of law.” Mitchell, 472 U.S. at 530. In Ashcroft v.
Iqbal, the Court clarified that a ruling on the sufficiency of
the pleadings at the motion-to-dismiss stage does turn on such
“an issue of law.” 556 U.S. 662, 672 (2009). As the Court
explained, that holding is consistent with the “well
established” rule that “a district court’s order rejecting
qualified immunity at the motion-to-dismiss stage of a
proceeding is a ‘final decision’ within the meaning of § 1291.”
Id.
Thus, here the challenged district court order turned on an
issue of law. The governmental immunity claim the City raised
in its motions to dismiss rested on the argument that the
8
Officers had not adequately alleged valid contracts for
longevity pay. The district court denied the City’s motions to
dismiss and ruled on the sufficiency of the pleadings, holding
that the Officers “sufficiently alleged a contractual longevity
payment obligation.” Davis, 2013 WL 2317730, at *3.
Accordingly, the district court’s orders rejecting the City’s
governmental immunity defense constitute final orders subject to
interlocutory review under the collateral order doctrine.
We note that the district court’s comment that “[t]he
immunity defense is . . . inappropriate for resolution at this
stage,” id., does not defeat our jurisdiction. To be sure, we
recently cautioned that “if a court or agency expressly holds
open the possibility of reconsideration, a collateral order
appeal should not be authorized.” Cobra Natural Res., LLC, 742
F.3d at 88. But here the district court flatly denied the
City’s motions to dismiss. The court did not “expressly,” or
even implicitly, “hold[] open” the question of the sufficiency
of the factual allegations in the Officers’ complaints.
The district court did indicate an interest in the
subsequent “development of the facts.” Davis, 2013 WL 2317730,
at *2. But such further factual development, while certainly
helpful to the district court’s eventual decision about whether
the Officers actually had valid contracts for longevity pay,
does not affect the legal conclusion that the Officers
9
adequately pled the existence of such contracts and so their
claims survived a motion to dismiss.
Indeed, our precedent confirms that jurisdiction over the
district court’s orders here is proper. In Jenkins v. Medford,
119 F.3d 1156, 1159 (4th Cir. 1997) (en banc), we exercised
jurisdiction over an interlocutory appeal when the defendant
raised a qualified immunity defense in his motion to dismiss,
even though the district court expressly did not resolve the
immunity question. The district court denied the defendant’s
motion to dismiss, citing concerns about “factual issues” in
declining to rule on the qualified immunity defense. See
Jenkins v. Medford, 1995 WL 914528, at *5 (W.D.N.C. Apr. 18,
1996). We held that despite the court’s failure to rule on the
defense, the order was immediately appealable because the
court’s “refusal to consider the question subjected [the
defendant] to further pretrial procedures, and so effectively
denied him qualified immunity.” Jenkins, 119 F.3d at 1159.
Here, as in Jenkins, delaying consideration of the immunity
question risks “subject[ing] the [City] to the burdens of
pretrial matters, and some of the rights inherent in a
[governmental] immunity defense [would be] lost.” Id. We are
therefore satisfied that we have jurisdiction over the City’s
interlocutory appeals.
10
III.
Having concluded that we have jurisdiction, we turn to the
City’s contention that governmental immunity provides it with
immunity from the Officers’ breach of contract and estoppel
claims.
All parties agree that, if there are valid contracts
between the City and the Officers for longevity pay, the City
cannot prevail on its governmental immunity defense. The City
offers two arguments as to why the Officers have not alleged
valid contract and estoppel claims. First, the City contends
that the Officers were required, and failed, to allege the
existence of preaudit certificates. Appellant Br. (Davis case)
10-19. Second, the City claims that the Officers were required,
and failed, to allege that their contracts were written. Id. at
19-20. Both arguments are meritless.
A.
In North Carolina, certain contracts with governmental
entities must include a “preaudit certificate.” See N.C. Gen.
Stat. § 159-28(a) (“If an obligation is evidenced by a contract
. . . the contract . . . shall include on its face a certificate
stating that the instrument has been preaudited to assure
compliance with this subsection.”). If such a certificate is
required but lacking, “there is no valid contract, and any claim
by plaintiff based upon such contract must fail.” Data Gen.
11
Corp. v. Cnty. of Durham, 545 S.E.2d 243, 247 (N.C. Ct. App.
2001).
The City contends that any valid contract with the Officers
for longevity pay must comply with the preaudit certificate
requirement of § 159-28(a), and that the Officers failed to
allege the existence of such certificates in their complaints.
The Officers agree that they never alleged that preaudit
certificates exist, but they contend that § 159-28(a) does not
govern their alleged contracts for longevity pay.
The Court of Appeals of North Carolina has held that § 159-
28(a) applies only to a “financial obligation that will come due
in the year the town incurs the obligation.” Myers v. Town of
Plymouth, 522 S.E.2d 122, 123 (N.C. Ct. App. 1999) (Wynn, J.).
Therefore, “a contract that is signed in one year but results in
a financial obligation in a later year will not violate § 159-
28(a).” Id. at 126.
Under Myers, the contracts the Officers claim they have
with the City need not comply with § 159-28(a) because the
Officers allege contractual rights to longevity payments that
were formed years ago. For some of the Officers, those rights
assertedly “vested” after five years of service. Any continuing
rights to receive longevity payments would therefore be
financial obligations due more than a year after formation of
the alleged contracts.
12
The City, however, urges us not to apply the holding in
Myers because it supposedly conflicts with the holding of an
earlier case from the same court, Watauga County Board of
Education v. Town of Boone, 416 S.E.2d 411 (N.C. Ct. App. 1992).
The City misreads Watauga County. The issue in that case was
whether a town breached a contract it had formed with a county
to provide a certain percentage of its Alcohol Beverage Control
Store revenue to the school board. Id. at 412. The court held
there was no breach of contract because “it is outside the power
of the town council to appropriate money to the county school
board.” Id. at 413. This central holding did not even concern
§ 159-28(a); the alleged contract was “void and unenforceable,”
id., regardless of whether it was accompanied by a preaudit
certificate.
The Watauga County court went on to observe, briefly, that
even if the town had the power to enter into the contract with
the school board, the contract was still “not enforceable
because it does not comply with G.S. § 159-28(a).” Id. at 415.
The court described the alleged contract at issue as an
agreement to designate “18% of [the town’s] ABC profits for
school board use,” and apparently this alleged agreement was
followed for three years. Id. at 412. It is not entirely
clear, however, whether this alleged agreement was an annual
contract renewed twice or a multi-year contract. In any event,
13
nowhere in Watauga County -- or in any of the other cases on
which the City relies 2 -- does the court address whether § 159-
28(a) applies to contracts of all lengths or only to contracts
that “come due” the year they are formed. The Myers court, on
the other hand, discusses the distinction in depth. Watauga
County and Myers can therefore be read harmoniously: Watauga
County briefly confirms the applicability of § 159-28(a) to
certain governmental contracts, and Myers clarifies that the
statute only requires preaudit certificates for contracts due
the year they are formed.
The Court of Appeals of North Carolina itself recently held
that Myers states the correct reading of § 159-28(a). See
M Series Rebuild, LLC v. Town of Mount Pleasant, 730 S.E.2d 254(N.C. Ct. App.), rev. denied, 735 S.E.2d 190 (N.C. 2012). In
M Series, the court upheld the dismissal of the plaintiff’s
complaint because the contract at issue did not comply with
§ 159-28(a). Id. at 261. In reaching that holding, the court
emphasized that the case involved “an alleged contract and
obligation to pay [that were] both created in the same fiscal
year.” Id. (emphasis added). Citing Myers, the court
2
See Howard v. Cnty. of Durham, 748 S.E.2d 1 (N.C. Ct.
App.), rev. denied, 748 S.E.2d 321 (N.C. 2013); Data Gen. Corp.
v. Cnty. of Durham, 545 S.E.2d 243 (N.C. Ct. App. 2001);
Cincinnati Thermal Spray, Inc. v. Pender Cnty., 399 S.E.2d 758(N.C. Ct. App. 1991).
14
emphasized that there is a distinction between cases where the
alleged contract and resulting obligation to pay arise in the
same year and cases where the obligation to pay comes due in a
later year. Id.The City would have us hold that the Court of Appeals of
North Carolina incorrectly interpreted its own precedent. But
we see no reason to second-guess the Court of Appeals, which has
never read its own interpretations of § 159-28(a) to conflict.
The City’s arguments to the contrary are best addressed to the
North Carolina courts or legislature. Because § 159-28(a) does
not apply to the Officers’ alleged contracts, the Officers did
not need to allege the existence of preaudit certificates. 3
B.
The City’s second basis for challenging the adequacy of the
complaints is the claim that the Officers failed to allege that
“the contract for longevity pay was written.” Appellant Br.
(Davis case) 19 (emphasis in original). The Greensboro Charter
provides the source for this requirement; it states that “[a]ll
contracts, except as otherwise provided for in this Charter,
3
The City suggests, in a footnote, that even if the
Officers are correct in their reading of North Carolina law,
they still needed to assert in their amended complaints that
“§ 159-28 does not apply” to the alleged contracts. Reply Br.
(Davis case) 10 n.9. This is plainly wrong. Nothing requires
the Officers -- or any other plaintiff for that matter -- to
plead that a law does not apply in order to state a claim upon
which relief can be granted.
15
shall be . . . reduced to writing in order to be binding upon
the City.” City of Greensboro Charter § 4.111. The City cites
no authority, however, for the proposition that a plaintiff must
allege that a contract be written in order to state a claim for
breach of contract.
Moreover, even if the City had pointed to such authority,
the Officers’ complaints would survive the motions to dismiss.
The Officers allege that their Employee Handbook lists longevity
pay as a “benefit.” Construing all well-pled facts “in the
light most favorable to the plaintiff,” as we must, Nemet
Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255
(4th Cir. 2009), this allegation plausibly satisfies the
“reduced to writing” requirement of the City’s charter.
Further, it is not an “unwarranted inference[],” id., to
conclude that the Officers’ employment contracts with the City
have been reduced to writing. Whether any written contract
actually includes a provision on longevity payments constitutes
a factual issue to be resolved at a later stage in the
litigation.
For these reasons, we hold that the Officers have
sufficiently alleged valid contracts with the City. As the City
concedes, such allegations prevent a municipality from obtaining
dismissal of a complaint on the basis of governmental immunity.
16
Therefore, the district court did not err in denying the City’s
motions to dismiss the Officers’ breach of contract claims. 4
IV.
In sum, we hold that we have jurisdiction over the orders
denying the City’s motions to dismiss the Officers’ contract and
estoppel claims on governmental immunity grounds. We further
hold that the district court properly denied the City’s motions
to dismiss because the Officers have sufficiently alleged that
they have valid contracts for longevity pay with the City.
Accordingly, the judgments of the district court are
AFFIRMED.
4
The only other causes of action at issue in these appeals
are the Officers’ equitable and quasi estoppel claims. The
City’s argument for dismissing these claims rests on the
assertion that the Officers and the City have not entered into
valid contracts for longevity payments. Because the Officers
have sufficiently alleged the existence of such contracts, their
estoppel claims must similarly survive the City’s motions to
dismiss.
17