Cabarrus Cty. Bd. of Educ. v. Dep't of State Treasurer

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA17-1017
Filed: 18 September 2018
Wake County, No. 17 CVS 1896
CABARRUS COUNTY BOARD OF EDUCATION, Petitioner,
v.
DEPARTMENT OF STATE TREASURER, RETIREMENT SYSTEMS DIVISION;
DALE R. FOLWELL, STATE TREASURER (in official capacity only); STEVEN C.
TOOLE, DIRECTOR, RETIREMENT SYSTEMS DIVISION (in official capacity
only), Respondents.
Appeal by Respondents from judgment entered 30 May 2017 by Judge James
E. Hardin, Jr. in Superior Court, Wake County. Heard in the Court of Appeals 14
May 2018.
Tharrington Smith, LLP, by Deborah R. Stagner; and Michael Crowell,
Attorney, by Michael Crowell, for Petitioner-Appellee.
Attorney General Joshua H. Stein, by Solicitor General Matthew W. Sawchak,
Deputy General Counsel Blake W. Thomas, Deputy Solicitor General Ryan Y.
Park, and Special Deputy Attorney General Joseph A. Newsome, for
Respondents-Appellants.
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by Elizabeth L.
Troutman and Jill R. Wilson; and North Carolina School Boards Association,
by Legal Counsel Allison Brown Schafer, for North Carolina School Boards
Association, amicus curiae.
McGEE, Chief Judge.
I. Procedural History
CABARRUS CTY. BD. OF EDUC. V. DEP’T OF STATE TREASURER
Opinion of the Court
The Cabarrus County Board of Education (“Petitioner”), filed a “Request for
Declaratory Ruling” pursuant to N.C. Gen. Stat. § 150B-4 (2017) and 20 N.C. Admin.
Code 01F.0201 et seq. on 18 October 2016. Pursuant to this filing, Petitioner
requested the Retirement Systems Division (the “Division”) of the Department of
State Treasurer (the “Department”) (along with State Treasurer at that time, Janet
Cowell,1 and Steven C. Toole, Director of the Division (“Director Toole”), in their
official capacities, (“Respondents”)) to enter a declaratory ruling that the Division’s
adoption of a “cap factor” for the Teachers’ and State Employees’ Retirement System
(“TSERS”) pursuant to N.C. Gen. Stat. § 135-5(a3) (2017) was “void and of no effect
because the [Board of Trustees of TSERS (the ‘Board’)] did not follow the rule making
procedures of . . . the Administrative Procedure Act [(the ‘APA’).]”2 Director Toole
denied Petitioner’s request by letter dated 17 November 2016, and Petitioner filed a
“Petition for Judicial Review” of Director Toole’s decision in Superior Court, Cabarrus
County, on 16 December 2016. Petitioner moved for summary judgment on 25 April
2017, the matter was heard on 10 May 2017, and the trial court granted summary
judgment in favor of Petitioner by judgment entered 30 May 2017. Respondents
appeal.
1 By the time of the order granting summary judgment, Dale R. Folwell had become the State
Treasurer, and had been substituted as a named Respondent.
2 TSERS is established and controlled by the provisions of Article 1 of Chapter 135 of the
General Statutes (“Article 1”) – N.C. Gen. Stat. §§ 135-1 through 135-18.11 (2017). The APA is found
in Article 2A of Chapter 150B – N.C. Gen. Stat. §§ 150B-1 through 150B-52 (2017).
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II. Facts
In 2014, the General Assembly enacted new legislation (the “Act”),3
establishing a cap factor for certain employees covered by TSERS (“members”). 2014
N.C. Sess. Laws 88, sec. 1.(a). The purpose of the Act, in relevant part, was to “adopt
a contribution-based benefit cap factor” (the “cap factor”), in order to limit retirement
benefits paid by TSERS for certain members, whose State salaries had greatly
increased in the latter years of their State employment, thereby significantly
increasing their retirement benefits in disproportion to their overall contributions to
TSERS. See N.C.G.S. § 135-5(a3).4
Dr. Barry Shepherd (“Dr. Shepherd”) was superintendent of Petitioner for a
period of time until his retirement on 1 May 2015. Because of Dr. Shepherd’s
employment history with the State, he was eligible for TSERS retirement benefits,
but was also subject to having his benefits capped pursuant to the provisions of the
Act. Generally, once the Division determines that a member’s benefits will be capped
pursuant to the Act, the following actions are required:
If a member’s retirement allowance is subject to an
adjustment pursuant to the contribution-based benefit cap
established in G.S. 135-5(a3), the [Division] shall notify the
member and the member’s employer that the member’s
retirement allowance has been capped. The [Division]
shall compute and notify the member and the member’s
3 “AN ACT to enact anti-pension-spiking legislation by establishing a contribution-based
benefit cap[.]” 2014 N.C. Sess. Laws 88, preamble and sec. 1.(a).
4 This is a simplified explanation of the Act, but an in-depth explanation is not required for
our analysis of the issues on appeal.
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Opinion of the Court
employer of the total additional amount the member would
need to contribute in order to make the member not subject
to the contribution-based benefit cap. This total additional
amount shall be the actuarial equivalent of a single life
annuity adjusted for the age of the member at the time of
retirement . . . that would have had to have been
purchased to increase the member’s benefit to the pre-cap
level. Except as otherwise provided in this subsection, the
member shall have until 90 days after notification
regarding this additional amount or until 90 days after the
effective date of retirement, whichever is later, to submit a
lump sum payment to the annuity savings fund in order for
the retirement system to restore the retirement allowance
to the uncapped amount.
N.C. Gen. Stat. § 135-4(jj) (2015);5 see also N.C.G.S. § 135-8(f)(2)(f). Upon Dr.
Shepherd’s retirement, the Division informed him and Petitioner that, pursuant to
the Act, a contribution of $208,405.81 would be required to restore Dr. Shepherd’s
benefits to their pre-cap amount. Petitioner submitted this amount to the Division
on behalf of Dr. Shepherd, but also initiated this action, as indicated above, to
challenge the validity of the cap factor “adopted” by the Board and applied in this
case to determine the $208,405.81 amount.
5 We note that the language of N.C.G.S. § 135-4(jj) (2017) references “G.S. 128–27(a3)” instead
of “G.S. 135–5(a3).” We are unable to determine why “G.S. 128–27(a3)” is included in the 2017 version
of the Statute. N.C.G.S. § 135-4(jj) (2015), the version effective when this matter was heard by the
trial court, references “G.S. 135–5(a3),” not “G.S. 128–27(a3).” The Session Laws do not indicate that
there existed any intent to amend the statute to replace “G.S. 135–5(a3)” with “G.S. 128–27(a3)”. See
2015 N.C. Sess. Laws 168, sec. 7.(a), effective 1 January 2016; 2017 N.C. Sess. Laws 128, sec. 2.(a),
effective 20 July 2017. The section including “G.S. 128–27(a3)” was amended, or corrected, to again
cite “G.S. 135–5(a3)” by 2018 N.C. Sess. Laws 85, sec. 14., effective 25 June 2018. We use the 2015
version of the statute because it was in effect during the time period relevant to this appeal.
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Opinion of the Court
Because the Division and the Board, as subdivisions of the Department, are
subject to the contested case provisions of the APA, Petitioner requested a declaratory
ruling from the Division that the cap factor as adopted by the Board was invalid for
two reasons: (1) “because the [B]oard did not follow the rule making procedures of
[the APA];” and (2) that because the cap factor “is not an actuarial assumption under
20 N.C. Admin. Code 02B.0202[,]”6 it was “not exempt from the rule making
procedures of the APA[.]” Petitioner further asked for a ruling that the invoice sent
by the Division for $208,405.81 was void since the cap factor used to calculate this
amount had not been properly adopted pursuant to APA rule making requirements.
As noted above, the Division denied Petitioner’s requested rulings and Petitioner
petitioned for judicial review, which ultimately resulted in the 30 May 2017 summary
judgment in favor of Petitioner that is currently before us on appeal.
We note that there are seven additional appeals by the Department – and
certain of its subdivisions and employees – currently before us that involve identical
issues and arguments. The resolution of this appeal will also determine the
resolution of those seven additional appeals, because our holdings in this appeal will
apply equally to the seven additional appeals.7 Additional relevant facts will be
included in our analysis below.
6 20 N.C. Admin. Code 02B.0202 includes rules adopted by the Division, including the
procedures for adopting tables, rates, and assumptions recommended by the Division’s actuary.
7 The seven additional appeals are COA17-1018, COA17-1019, COA17-1020, COA17-1021,
COA17-1022, COA17-1023, and COA17-1024.
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III. Analysis
Respondents argue that the trial court erred in granting summary judgment
in favor of Petitioner, because the rule making provisions of the APA do not apply to
N.C.G.S. § 135-5(a3) and, therefore, the Board acted within the law and its authority
in adopting the cap factor outside of the APA rule making process. We disagree and
affirm summary judgment.
Summary judgment is properly granted “if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that any party is entitled
to a judgment as a matter of law.” N.C. Gen. Stat. § 1A-1, Rule 56(c) (2017). “‘On
appeal, this Court reviews an order granting summary judgment de novo.’” Manecke
v. Kurtz, 222 N.C. App. 472, 475, 731 S.E.2d 217, 220 (2012) (citations omitted).
Findings of fact and conclusions of law are not required in an order granting summary
judgment, and “‘[i]f the granting of summary judgment can be sustained on any
grounds, it should be affirmed on appeal. If the correct result has been reached, the
judgment will not be disturbed even though the trial court may not have assigned the
correct reason for the judgment entered.’” Save Our Schools of Bladen Cty. v. Bladen
Cty. Bd. of Educ., 140 N.C. App. 233, 237–38, 535 S.E.2d 906, 910 (2000) (citation
omitted). This Court is, however, limited to Respondents’ arguments on appeal when
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Opinion of the Court
considering whether to overturn the trial court’s decision.8 Ahmadi v. Triangle Rent
A Car, Inc., 203 N.C. App. 360, 363, 691 S.E.2d 101, 103 (2010) (on appeal from grant
of summary judgment, pursuant to N.C. R. App. P. 28(b)(6), arguments the appellant
failed to make in its brief were considered abandoned and not considered by this
Court).
Respondents make two arguments in support of their position that the Board
acted properly in the procedure it used to adopt the cap factor and, therefore,
summary judgment in favor of Petitioner was granted in error: (1) “The legislature
chose to have the cap factor adopted by resolution, not by rule[;]” and (2) “[t]he
superior court erred by failing to give weight to the [Division’s] interpretation of its
enabling statute.” We address each argument in turn.
A. The General Assembly’s Intent – Application of Rule Making
The trial court found and concluded that “[t]he cap factor meets the [APA]
definition of a rule in that it is a regulation or standard adopted by the Board . . . to
implement G.S. 135-5(a3). As such, the cap factor is subject to the rule making
requirements of [the APA] unless otherwise exempted.” Although findings of the trial
court on summary judgment do not control our de novo review, we note that
Respondents do not argue on appeal that the cap factor fails to meet the APA
definition of a “rule.” Instead, Respondents argue: “The General Assembly has
8 Because in this case Respondents are the appellants.
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distinguished functions that require rule[ ]making from functions that do not[,]” and
further argue that determination of a cap factor by the Board is a “function” that the
General Assembly intended to exempt, by implication, from the rule making
provisions of the APA.
1. Express Exemption
As our courts have repeatedly noted:
The purpose of the APA “is to establish as nearly as
possible a uniform system of administrative rule making
and adjudicatory procedures for State agencies,” and the
APA applies “to every agency as defined in G.S. 150B-2(1),
except to the extent and in the particulars that any statute,
including subsection (d) of this section, makes specific
provisions to the contrary.” N.C. Gen. Stat. § 150B-1(b), (c)
(1989). . . . . As our Supreme Court has held, the “General
Assembly intended only those agencies it expressly and
unequivocally exempted from the provisions of the
Administrative Procedure Act be excused in any way from
the Act’s requirements and, even in those instances, that the
exemption apply only to the extent specified by the General
Assembly.” Vass [v. Bd. of Trustees of State Employees’
Medical Plan, 324 N.C. 402, 407, 379 S.E.2d 26, 29 (1989)].
North Buncombe Assn. of Concerned Citizens v. Rhodes, 100 N.C. App. 24, 28, 394
S.E.2d 462, 465 (1990) (emphasis added).
There is no dispute that the Division, as a sub-agency of the Department, is
subject to the APA. The “Policy and scope” section of the APA states its purpose:
“This Chapter establishes a uniform system of administrative rule making and
adjudicatory procedures for agencies. The procedures ensure that the functions of
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rule making, investigation, advocacy, and adjudication are not all performed by the
same person in the administrative process.” N.C.G.S. § 150B-1(a). Some agencies or
sub-agencies are completely exempted from the APA by N.C.G.S. § 150B-1(c): “Full
Exemptions[,]” “[t]his Chapter applies to every agency except” those specifically
exempted by direct reference. N.C.G.S. §§ 150B-1(c)(1) through (7). Neither the
Department, nor any of its subdivisions, are granted total exemption from the
provisions of the APA. Id. N.C.G.S. § 150B-1(d) – “Exemptions from Rule Making” –
states: “Article 2A of this Chapter does not apply to the following” enumerated
agencies or subdivisions thereof.9 N.C.G.S. §§ 150B-1(d)(1) through (28). Neither the
Department, nor any of its subdivisions, are exempted from the rule making
provisions of the APA pursuant to N.C.G.S. § 150B-1(d). Article 2A includes nothing
that indicates any legislative intent to exempt the Board from the rule making
process for any purpose. Further, no part of N.C.G.S. § 135-5(a3), or N.C.G.S. § 135-
5 as a whole, references the APA – much less includes any express language
exempting its provisions from the rule making procedures of Article 2A.
As noted above, N.C.G.S. § 135-5(a3) is found in Article 1, “Retirement System
for Teachers and State Employees,” of Chapter 135. N.C.G.S. §§ 135-1 through 135-
18.11. Pursuant to Article 1: “A Retirement System is hereby established and placed
under the management of the Board . . . for the purpose of providing retirement
9 Article 2A is the section of the APA that governs rule making.
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allowances and other benefits under the provisions of this Chapter for teachers and
State employees of the State of North Carolina.” N.C.G.S. § 135-2. “[A]ll
contributions from participating employers and participating employees to this
Retirement System shall be made to funds held in trust” by the Division. N.C.G.S. §
135-2 (emphasis added). N.C.G.S. § 135-6 concerns the “Administration” of the
Retirement System. It establishes that the Board is responsible for the “general
administration and responsibility for the proper operation of the Retirement System
and for making effective the provisions of the Chapter[.]” N.C.G.S. § 135-6(a). Other
duties required of the Board include:
Rules and Regulations. – Subject to the limitations of
this Chapter, the Board . . . shall, from time to time,
establish rules and regulations for the administration of the
funds created by this Chapter and for the transaction of its
business. The Board . . . shall also, from time to time, in
its discretion, adopt rules and regulations to prevent
injustices and inequalities which might otherwise arise in
the administration of this Chapter.
N.C.G.S. § 135-6(f). There is no dispute that the rule making provisions of the APA
apply to the Board when it “establish[es] rules and regulations for the administration
of the funds created by” Chapter 135 – including “all contributions from participating
employers and participating employees . . . made to funds held in trust” by the
Division. Id.; N.C.G.S. § 135-2.
The portion of N.C.G.S. § 135-5(a3) relevant to Respondents’ arguments states:
Anti-Pension-Spiking Contribution-Based Benefit
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Cap. – Notwithstanding any other provision of this section,
every service retirement allowance provided under this
section for members who retire on or after January 1, 2015,
is subject to adjustment pursuant to a contribution-based
benefit cap under this subsection. The Board . . . shall
adopt a contribution-based benefit cap factor recommended
by the actuary, based upon actual experience, such that no
more than three-quarters of one percent (0.75%) of
retirement allowances are expected to be capped. The Board
. . . shall modify such factors every five years, as shall be
deemed necessary, based upon the five-year experience
study as required by G.S. 135-6(n).
N.C.G.S. § 135-5(a3) (emphasis added). All “retirement allowances” are paid from
funds held in trust, which are maintained in solvency by contributions from
participating employers and employees (or “members”). N.C.G.S. § 135-2. Absent
clear contrary direction from the General Assembly, management of the funds from
which retirement allowances are disbursed must be accomplished pursuant to rules
adopted pursuant to the rule making provisions of the APA. N.C.G.S. § 135-6(f);
N.C.G.S. § 150B-1(a); Rhodes, 100 N.C. App. at 28, 394 S.E.2d at 465.
The most clear and direct means available to the General Assembly whereby
it could have expressed its intent to exclude the Board’s adoption of a cap factor from
rule making procedures was to include an express exemption in either the APA,
N.C.G.S. § 135-5(a3), or some other relevant statute. The General Assembly did not
make this choice, and enacted N.C.G.S. § 135-5(a3) without any associated statutory
exemptions from the rule making provisions of the APA with respect to adoption of
the cap factor, or for any other of the Board’s duties. This, despite the fact that the
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General Assembly has done so for specific tasks of other agencies. See, e.g., N.C.G.S.
§ 150B-1(d)(7) (specifically exempting “The State Health Plan for Teachers and State
Employees in administering the provisions of Article 3B of Chapter 135 of the General
Statutes” from APA rule making requirements); N.C.G.S. § 150B-2(8a)(j.) (“The term
[‘rule’] does not include” “[e]stablishment of the interest rate that applies to tax
assessments under G.S. 105-241.21.”). According to the reasoning in Vass and
Rhodes, the rule making provisions of the APA should apply whenever the Board
adopts a “rule,” because the General Assembly has not expressly exempted the Board
from the rule making provisions of the APA. Rhodes, 100 N.C. App. at 28, 394 S.E.2d
at 465.10
2. Exemption by Implication
However, as Respondents have noted, this Court, and our Supreme Court, have
held that exemption from the APA can be recognized by implication rather than
express language in certain limited circumstances. See Bring v. N.C. State Bar, 348
N.C. 655, 501 S.E.2d 907 (1998); N.C. State Bar v. Rogers, 164 N.C. App. 648, 596
S.E.2d 337 (2004) (recognizing, in turn, that by creating express statutory procedures,
for rule making and hearing of contested cases, different from those of the APA, the
General Assembly intended the North Carolina State Bar (the “State Bar”) to operate
outside APA requirements). Respondents have directed this Court to no agency or
10 We again note that Respondents make no argument on appeal that the cap factor does not
fall within the APA definition of a “rule.”
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sub-agency, other than the State Bar, that has been determined to have been
exempted from the APA by implication, and we have found none.
Nonetheless, Respondents compare the wording used in N.C.G.S. § 135-5(a3)
to wording used in other parts of Article 1, contending: “This case turns on a
particular feature of statutory language: the use of the word ‘rule’ in some places but
not in others.” Respondents’ argument is that the General Assembly’s intent to
exclude adoption of the cap factor from APA rule making is evident once we apply the
maxim expressio unius est exclusio alterius, because the General Assembly used the
word “rule” in some parts of Article 1, but not in others, and thereby indicated a clear
intent that APA rule making only applies when the actual word “rule” is used. We
resort to rules of statutory interpretation only if the meaning of some portion of the
relevant statute is legally ambiguous. Assuming, arguendo, that the challenged
language of N.C.G.S. § 135-5(a3) is ambiguous, Respondents’ argument still fails.
Our Supreme Court has rejected an expressio unius est exclusio alterius
argument in similar circumstances. Empire Power Co. v. N.C. Dept. of E.H.N.R., 337
N.C. 569, 592–93, 447 S.E.2d 768, 782 (1994) (citation and parentheses omitted)
(“[The relevant organic] statute makes no provision for petitioner to commence a
contested case hearing, nor does it expressly deny him that right. Respondents,
however, would have us apply to it the maxim expressio unius est exclusio alterius,
mention of specific circumstances implies the exclusion of others, and conclude that
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the legislature intended, albeit by implication, to exclude persons aggrieved, other
than the permit applicant or permittee, from those entitled to a contested case
hearing under the []APA.”). The Court in Empire Power held that the organic statute,
N.C.G.S. § 143–215.108(e), had to be interpreted together with the relevant provisions
of the APA:
N.C.G.S. § 143–215.108(e) and N.C.G.S. § 150B–23,
however, are in pari materia, and we must give effect to
both if possible. Respondents basically contend that the
organic statute amends, repeals, or makes exception to the
[]APA by implication. “The presumption is always against
an intention to [amend or] repeal an earlier statute.” We
thus should not construe the silence of N.C.G.S. § 143–
215.108(e) . . . as a repeal of any . . . rights expressly
conferred upon [the petitioner] under the []APA. The
legislature has not expressed or otherwise made manifestly
clear an intent to deprive petitioner of any right . . . he
might have by virtue of the []APA; moreover, there is not
such repugnancy between the statutes as to create an
implication of amendment or repeal “to which we can
consistently give effect under the rules of construction of
statutes.”
Id. at 593, 447 S.E.2d at 782 (citations omitted). The Court explained that if there is
“a fair and reasonable construction of the organic statute that harmonizes it with the
provisions of the []APA, . . . it is our duty to adopt that construction. Id. (citation
omitted). The Court further reasoned:
“Ordinarily, . . . the enactment of a law will not be held
to have changed a statute that the legislature did not
have under consideration at the time of enacting such
law; and implied amendments cannot arise merely out
of supposed legislative intent in no way expressed,
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however necessary or proper it may seem to be. An
intent to amend a statute will not be imputed to the
legislature unless such intention is manifestly clear from
the context of the legislation; and an amendment by
implication, or a modification of, or exception to, existing
law by a later act, can occur only where the terms of a
later statute are so repugnant to an earlier statute that
they cannot stand together.”
The []APA entitles petitioner to an administrative hearing;
the organic statute, respondents contend, denies him that
right. The question thus is whether the legislature
intended, in enacting the air pollution control
administrative review provisions, to deprive petitioner of
the right it expressly conferred upon him in the []APA.
Applying the foregoing rules of statutory construction, we
conclude that because the organic statute did not expressly
provide otherwise, the legislature did not intend to deprive
petitioner of his right to an administrative hearing.
Empire Power, 337 N.C. at 591–92, 447 S.E.2d at 781–82 (citations and footnote
omitted) (some emphasis added). The Court concluded: “Considering the unequivocal
‘language of the statute [the []APA], the spirit of the act, and what the act seeks to
accomplish,’ we conclude that the legislature intended that the []APA should control
unless the organic statute expressly provides otherwise.” Id. at 594–95, 447 S.E.2d
at 783 (citations omitted). The Court thus held that, because the organic statute
involved in Empire Power did not expressly amend the APA to withdraw the
petitioner’s right of appeal pursuant to the APA and, because there was not “such
repugnancy between the statutes as to create an implication of amendment or repeal
‘to which we can consistently give effect under the rules of construction of statutes[,]’”
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the provisions of the APA controlled. Id. at 593, 447 S.E.2d at 782 (citation omitted)
(emphasis added); see also Id. at 595, 447 S.E.2d at 783–84 (plenary citations in
accord).
Respondents cite Bring and Rogers in support of their argument that the
General Assembly expressed a clear intention to remove adoption of the cap factor
from APA rule making requirements by omitting the word “rule” from the relevant
language of N.C.G.S. § 135-5(a3). Bring and Rogers do both recognize an “exemption”
from provisions of the APA of an agency – the State Bar – by implication rather than
specific exemption. Rogers involved an appeal from the suspension of an attorney’s
(“Rogers”) license to practice law. Rogers, 164 N.C. App. 648, 596 S.E.2d 337. Rogers
argued in part that “he should have had a hearing before an administrative law judge
under the [APA]” instead of being forced to conduct his hearing before the
Disciplinary Hearing Commission of the State Bar (the “DHC”). Id. at 652–53, 596
S.E.2d at 341. This Court rejected Rogers’ “contention that he should be entitled to
a hearing before an administrative law judge under the APA.” Id. at 654, 596 S.E.2d
at 341. In addressing Rogers’ argument, this Court stated:
The APA is a statute of general applicability, and does not
apply where the Legislature has provided for a more
specific administrative procedure to govern a state agency.
See Empire Power Co. v. N.C. Dept. of E.H.N.R., 337 N.C.
569, 586-87, 447 S.E.2d 768, 778-79 (1994). The
Legislature has expressly and specifically given the State
Bar Council and DHC the power to regulate and handle
disciplinary proceedings of the State Bar. See N.C. Gen.
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Stat. § 84-28 (2003) (powers of the State Bar Council to
discipline attorneys); N.C. Gen. Stat. § 84-28.1(disciplinary hearing commission powers). As such,
defendant is not entitled to application of the APA to his
State Bar disciplinary proceeding in this case.
Id. (emphasis added). Although in Rogers this Court did not make an explicit holding
that the organic statutes involved – N.C. Gen. Stat. § 84-15 et seq. (2017) – expressly
amended the APA, we determined, by examining the organic statutes themselves,
that the clear intent of the General Assembly was to exempt the DHC from APA
contested case provisions. See Id.; Empire Power, 337 N.C. at 593, 447 S.E.2d at 782.
The clear implication is that this Court based its determination on reasoning that, by
creating an entirely independent procedure and reviewing authority within the State
Bar, with authority to identify, investigate, prosecute, and rule upon alleged
violations, the “the terms of [the] later [organic] statute [we]re so repugnant to [the
APA] that they [could not] stand together”11 and, therefore, the General Assembly
intended to exempt DHC disciplinary proceedings from APA contested case
procedures:
The Legislature has expressly and specifically given the
State Bar Council and DHC the power to regulate and
handle disciplinary proceedings of the State Bar. See N.C.
Gen. Stat. § 84-28 (2003) (powers of the State Bar Council
to discipline attorneys); N.C. Gen. Stat. § 84-28.1(disciplinary hearing commission powers). As such,
defendant is not entitled to application of the APA to his
State Bar disciplinary proceeding in this case.
11 Id. at 591, 447 S.E.2d at 781 (citations and quotation marks omitted).
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Rogers, 164 N.C. App. at 654, 596 S.E.2d at 341.
In essence, this Court recognized that the General Assembly enacted a distinct,
thorough, complete, and self-contained disciplinary process by which the State Bar –
through the DHC – was mandated to initiate and pursue investigations and hearings
as required to police and regulate attorney conduct. This process includes procedural
rules – such as a right of direct appeal from any final order of the DHC to this Court.
See N.C.G.S. § 84-21 (“(a) The Council shall adopt the rules pursuant to G.S. 45A-9.”
“(b) . . . . Copies of all rules and regulations and of all amendments adopted by the
Council shall be certified to the Chief Justice of the Supreme Court of North Carolina
. . . .: Provided, that the [C]ourt may decline to have so entered upon its minutes any
rules, regulations and amendments which in the opinion of the Chief Justice are
inconsistent with this Article.”); see also, e.g., N.C.G.S. § 84-23; N.C.G.S. § 84-28;
N.C.G.S. § 84-28.1. Therefore, the organic statute left no room for application of APA
procedures, and this Court held APA contested case provisions did not apply.
Bring is fully consistent with our analysis of Empire Power and Rogers. We
first note in general: “When a dispute between a state agency and another person
arises and cannot be settled informally, the procedures for resolving the dispute are
governed by the Administrative Procedure Act (APA), N.C. Gen. Stat. §§ 150B-1 to -
63.” Rhodes, 100 N.C. App. at 28, 394 S.E.2d at 465 (citation omitted). In Bring, our
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Supreme Court held that the General Assembly clearly intended the State Bar to
adopt rules without resort to APA rule making provisions:
It was not necessary to adopt the rule in accordance with
the requirements of the APA. N.C.G.S. § 84-21 gives
specific directions as to how the Board shall adopt rules.
These directions must govern over the general rule-making
provision of the APA. We note that, in her appeal, the
petitioner followed N.C.G.S. § 84-24 dealing with appeals
of decisions of the Board of Law Examiners and not the
provisions of the APA.
The Board’s rules, including Rule .0702, were submitted to
this Court as required by N.C.G.S. § 84-21 and published
at volume 326, page 810 of the North Carolina Reports.
This complies with the statutory requirement. Rule .0702
was properly adopted.
Bring, 348 N.C. at 660, 501 S.E.2d at 910 (citation omitted) (emphasis added). The
organic statute at issue in Bring, N.C. Gen. Stat. § 84-21 (2017), established a rule
making procedure completely independent from that contained in the APA.
Therefore, the General Assembly’s intent was clear that the specific rule making
provisions enacted for proceedings governed by the State Bar controlled, not those
contained in the APA. The Court held “there are adequate procedural safeguards in
the statute to assure adherence to the legislative standards” and noted that “N.C.G.S.
§ 84-24 and N.C.G.S. § 84-21 require that the Bar Council and this Court must
approve rules made by the Board.” Id. at 659, 501 S.E.2d at 910. The Court further
held that there was “a sufficient standard to guide the Board” in rule making
pursuant to Article 4, Chapter 84. Id.19
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Article 1 includes nothing approaching the level of independent rule making
mandated by the General Assembly for the State Bar in Article 4, Chapter 84. We
note that Respondents have utilized the procedures of the APA throughout this action
without objection, including obtaining appeal to this Court pursuant to the right of
appeal granted by the APA. N.C.G.S. § 150B-52.
Additionally, when read together, Rogers and Bring effectively hold that the
APA simply does not apply to Article 4, Chapter 84. N.C.G.S. § 150B-1(a) (emphasis
added) (“Purpose. – This Chapter [the APA] establishes a uniform system of
administrative rule making and adjudicatory procedures for agencies.”); Bring, 348
N.C. at 660, 501 S.E.2d at 910 (APA rule making provisions do not apply to the State
Bar); Rogers, 164 N.C. App. at 654, 596 S.E.2d at 341 (APA adjudicatory procedures
do not apply to the State Bar). In contrast, Article 1 expressly recognizes the general
application of the APA. See, e.g., N.C.G.S. § 135-8(d)(3a) (“Notwithstanding Chapter
150B of the General Statutes [the APA], the total amount payable in each year to the
pension accumulation fund shall not be less than . . . .”). Respondents make an
argument very different than the analyses behind the holdings in Bring and Rogers,
which served to exempt the entire State Bar from the requirements of the APA.
Respondents contend that the application of APA rule making should be determined
on a line-by-line basis, based upon the implied intent of the General Assembly, as
determined by analyzing each individual sentence or clause of a statutory provision.
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Respondents cite to no authority in support of this argument, neither Bring nor
Rogers support Respondents’ argument, and the other opinions cited by Respondents
do not involve the APA and are, therefore, easily distinguishable.
Respondents also focus on the requirement that the cap factor adopted by the
Board is one “recommended by the actuary.” N.C.G.S. § 135-5(a3). However, the
inclusion of a specific requirement concerning the source of the proposed cap factor in
no manner serves to remove the entire cap factor adoption process from general APA
requirements. As part of its administration of Retirement System funds, the Board
“shall keep in convenient form such data as shall be necessary for actuarial valuation
of the various funds of the Retirement System, and for checking the experience of the
System.” N.C.G.S. § 135-6(h). The Board is required to “designate an actuary who
shall be the technical adviser of the Board . . . on matters regarding the operation of
the funds created by the provisions of this Chapter[.]” N.C.G.S. § 135-6(l).
Respondents contend that N.C.G.S. § 135-6(l) establishes “a specific procedure for
how the [Board] adopts actuarial recommendations” from the designated actuary.
N.C.G.S. § 135-6(l) states in relevant part:
For purposes of the annual valuation of System assets, the
experience studies, and all other actuarial calculations
required by this Chapter, all the assumptions used by the
System’s actuary, including mortality tables, interest
rates, annuity factors, and employer contribution rates,
shall be set out in the actuary’s periodic reports or other
materials provided to the Board[.] These materials, once
accepted by the Board, shall be considered part of the Plan
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documentation governing this Retirement System;
similarly, the Board’s minutes relative to all actuarial
assumptions used by the System shall also be considered
part of the Plan documentation governing this Retirement
System, with the result of precluding any employer
discretion in the determination of benefits payable
hereunder[.]
N.C.G.S. § 135-6(l). Respondents contend that the above “statutory procedures vary
significantly from the requirements of the APA[, s]ee [N.C.G.S.] §§ 150B-21.1 to 21.7,”
because of the requirement that the Board adopt a cap factor from cap factor
recommendations provided by its actuary.
Sections 150B-21.1 to 21.7 of the APA constitute the “Adoption of Rules”
section of the APA. Non-exempted agencies must comply with the provisions of
N.C.G.S. § 150B-19.1, see N.C.G.S. § 150B-21.2(a), which include in relevant part:
(a) In developing and drafting rules for adoption in
accordance with this Article, agencies shall adhere to the
following principles:
....
(5) When appropriate, rules shall be based on sound,
reasonably available scientific, technical, economic, and
other relevant information. Agencies shall include a
reference to this information in the notice of text
required by G.S. 150B-21.2(c).
N.C.G.S. § 150B-19.1 (emphasis added); N.C.G.S. § 150B-21.2(a) (“[b]efore an agency
adopts a permanent rule, the agency must comply with the requirements of G.S.
150B-19.1”); N.C.G.S. § 150B-21.2(c)(2a) (the “notice of the proposed text of a rule
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Opinion of the Court
must include” a “link to the agency’s Web site containing the information required by
G.S. 150B-19.1(c)”); N.C.G.S. § 150B-19.1(c)(5) (the posting required by N.C.G.S. §
150B-21.2(c)(2a) shall include “[a]ny fiscal note that has been prepared for the
proposed rule”); N.C.G.S. § 150B-19.1(e) (before submitting “a proposed rule for
publication in accordance with G.S. 150B-21.2, the agency shall review the details of
any fiscal note prepared in connection with the proposed rule and approve the fiscal
note before submission”); N.C.G.S. § 150B-19.1(f) (emphasis added) (“[i]f the agency
determines that a proposed rule will have a substantial economic impact as defined
in G.S. 150B-21.4(b1), the agency shall consider at least two alternatives to the
proposed rule”); N.C.G.S. § 150B-21.4(b1) (when an agency proposes adoption of a
rule “that would have a substantial economic impact and that is not identical to a
federal regulation that the agency is required to adopt, the agency shall prepare a
fiscal note for the proposed rule change and have the note approved by the Office of
State Budget and Management[,]” “the term ‘substantial economic impact’ means an
aggregate financial impact on all persons affected of at least one million dollars
($1,000,000) in a 12-month period”). The APA regularly requires supporting
documentation based on factual data that is prepared by an actuary – including prior
to the adoption of certain rules. As a further example:
Before an agency publishes in the North Carolina Register
the proposed text of a permanent rule change that would
require the expenditure or distribution of funds subject to
the State Budget Act, Chapter 143C of the General
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Opinion of the Court
Statutes,[12] it must submit the text of the proposed rule
change, an analysis of the proposed rule change, and a
fiscal note on the proposed rule change to the Office of State
Budget and Management and obtain certification from the
Office of State Budget and Management that the funds
that would be required by the proposed rule change are
available. The fiscal note must state the amount of funds
that would be expended or distributed as a result of the
proposed rule change and explain how the amount was
computed. The Office of State Budget and Management
must certify a proposed rule change if funds are available
to cover the expenditure or distribution required by the
proposed rule change.
N.C.G.S. § 150B-21.4(a) (emphasis added).
Contrary to Respondents’ arguments, what N.C.G.S. § 135-6(l) requires is that
“the assumptions used by the [Division’s] actuary [to determine cap factor
recommendations], including mortality tables, interest rates, annuity factors, and
employer contribution rates,” “shall be set out in the actuary’s periodic reports or
other materials provided to the Board[.]” The requirement that the actuary submit
proposed cap factors to the Board for adoption does not constitute a separate
procedure for rule making purposes. This requirement merely insures that the cap
factor adopted by the Board is based upon professionally determined assumptions
and projections, and that there will be sufficient documentation to satisfy the
12 N.C. Gen. Stat. § 143C-1-1(b) (2017) (“The provisions of this Chapter shall apply to every
State agency, unless specifically exempted herein[.]”); N.C. Gen. Stat. § 143C-1-3(a)(10) (2017)
(Definition: “Pension and Other Employee Benefit Trust Funds. – Accounts for resources that
are required to be held in trust for the members and beneficiaries of defined benefit pension plans,
defined contribution plans, other postemployment benefit plans, or other employee benefit plans.”).
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Opinion of the Court
requirements of Chapter 135, the APA,13 and the State Budget Act – N.C. Gen. Stat.
§§ 143C-1-1 et seq. (2017).
Further, we presume the General Assembly enacted Article 1 with full
knowledge of the relevant provisions in the APA, and intended for those provisions to
apply to Article 1 absent express legislation to the contrary – which they declined to
enact. Rhyne v. K-Mart Corp., 358 N.C. 160, 189, 594 S.E.2d 1, 20 (2004) (citations
omitted) (we presume “‘the legislature acted in accordance with reason and common
sense,’ and ‘with full knowledge of prior and existing law’”). We hold that there is
nothing to support a finding that “‘the terms of [N.C.G.S. § 135-8(3a)] are so
repugnant to’” the rule making requirements of the APA such that the General
Assembly intended to remove adoption of the cap factor from APA rule making
requirements by implication. Empire Power, 337 N.C. at 591, 447 S.E.2d at 781(citations omitted) (emphasis removed).
3. Statutory Language
In further support of our decision, we look to the language of the relevant
statutes when considered in pari materia. Because the Division is subject to the APA
and the procedures of the APA apply to Petitioner’s “action,” the definitions found in
N.C.G.S. § 150B-2 apply to N.C.G.S. § 135-5(a3) unless specifically supplanted by
13 See, e.g., N.C.G.S. § 135-6(l) to (n), concerning the purposes and duties of actuaries.
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definitions included in Article 1. See Izydore v. City of Durham, 228 N.C. App. 397,
399–401, 746 S.E.2d 324, 325–26 (2013).
The definitions section of Article 1, N.C.G.S. § 135-1, does not define the word
“adopt.” However, the word “adopt” is defined in the APA: “‘Adopt’ means to take
final action to create, amend, or repeal a rule.” N.C.G.S. § 150B-2(1b) (emphasis
added). We hold that the word “adopt” in N.C.G.S. § 135-5(a3) has the same meaning
as that set forth in N.C.G.S. § 150B-2(1b). Further, Article 1 contains no definition
for the word “rule.” The APA defines “rule” as follows:
“Rule” means any agency regulation, standard, or
statement of general applicability that implements or
interprets an enactment of the General Assembly . . . or that
describes the procedure or practice requirements of an
agency. The term includes the establishment of a fee and
the amendment or repeal of a prior rule.
N.C.G.S. § 150B-2(8a) (emphasis added). The General Assembly has included certain
specific exceptions for regulations or standards that would otherwise fall under the
definition of rule, for example, the “[e]stablishment of the interest rate that applies
to tax assessments under G.S. 105-241.21” is expressly excluded from the APA
definition of “rule.” N.C.G.S. § 150B-2(8a)(j.). The APA includes no exemption for
the N.C.G.S. § 135-5(a3) “cap factor.” “‘Policy’ means any nonbinding interpretive
statement within the delegated authority of an agency that merely defines,
interprets, or explains the meaning of a statute or rule.” N.C.G.S. § 150B-2(7a). The
cap factor is clearly not a “policy” as defined by the APA, as it is binding and non-
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interpretive. We agree with the trial court and hold that the cap factor falls within
the APA definition of a “rule.”
Further, pursuant to the APA definition of “adopt,” any time the word “adopt”
is used, it expressly and necessarily requires an associated rule. N.C.G.S. § 150B-
2(1b) (emphasis added) (“‘Adopt’ means to take final action to create, amend, or repeal
a rule.”). Pursuant to the APA definition of adopt, the only thing that the Board in
N.C.G.S. § 135-5(a3) could have possibly “adopted” was a “rule.” N.C.G.S. § 150B-
2(1b). Therefore, treating the cap factor as a “rule,” the contested portion of N.C.G.S.
§ 135-5(a3) can be understood as stating:
The Board . . . shall adopt a [rule, namely a] contribution-
based benefit cap factor recommended by the actuary,
based upon actual experience, such that no more than
three-quarters of one percent (0.75%) of retirement
allowances are expected to be capped. The Board . . . shall
modify such [rules] every five years, as shall be deemed
necessary, based upon the five-year experience study as
required by G.S. 135-6(n).
The language of N.C.G.S. § 135-5(a3), considered in pari materia with the APA, does
not support a finding that the General Assembly, by enacting N.C.G.S. § 135-5(a3),
intended to modify or amend the APA by implication.
B. Deference to the Board’s Interpretation of N.C.G.S. § 135-5(a3)
Respondents further argue that the trial court “erred by failing to give weight
to the [Division’s] interpretation of its enabling statute.” We disagree.
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Initially, our review on summary judgment is de novo, and we will uphold a
grant of summary judgment upon any legitimate basis. Manecke, 222 N.C. App. at
475, 731 S.E.2d at 220; Save Our Schools, 140 N.C. App. at 237–38, 535 S.E.2d at
910. Therefore, even assuming, arguendo, the trial court failed to give proper
deference to the Division’s interpretations of Article 1 and the Division’s rule making
powers, this fact would be irrelevant to our de novo review. Id.Concerning Respondents’ arguments, we first note that, despite the deference
we may give an agency’s interpretation of statutes that agency is required to
implement and enforce, “it is ultimately the duty of courts to construe administrative
statutes; courts cannot defer that responsibility to the agency charged with
administering those statutes.” Wells v. Consolidated Jud’l Ret. Sys. of N.C., 354 N.C.
313, 319, 553 S.E.2d 877, 881 (2001) (citing State ex rel. Utilities Commission v. Public
Staff, 309 N.C. 195, 306 S.E.2d 435 (1983)). Respondents argue: “Since 1981, the
[Division] has held that the [Board] will adopt actuarial ‘tables, rates, or assumptions’
by resolution. 20 N.C. Admin. Code 2B.0202 (2016).” Respondents contend that the
cap factor is an actuarial “rate” or “assumption,” and is therefore governed by 20 N.C.
Admin. Code 2B.0202, a rule adopted by the Division pursuant to the authority
granted it by Article 1.14 First, we disagree with Respondents’ argument that the cap
factor is itself an actuarial assumption or rate that is governed by provisions of 20
14The question of whether the provisions of 20 N.C. Admin. Code 2B.0202 conform with the
requirements of Article 1 is not before us, and we do not consider that question here.
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N.C. Admin. Code 2B.0202. The cap factor must be based upon valid actuarial
assumptions and rates in order for it to comply with the requirements of N.C.G.S. §
135-5(a3), but the cap factor itself is not an actuarial assumption or rate. We have
held above that the cap factor is a rule that, inter alia, helps determine limits on the
retirement benefits of affected State employees. Because the cap factor is a rule for
the purposes of APA rule making, and the Board must comply with APA rule making
provisions when adopting the cap factor, the Division is without the authority to enact
rules, regulations, guidelines, or any other directives that would remove adoption of
the cap factor from the requirements of APA rule making.
It is not at all clear that the Board understood the cap factor to be an actuarial
assumption or rate, or that it adopted the cap factor pursuant to the provisions of 20
N.C. Admin. Code 2B.0202. Therefore, this Court cannot state with any conviction
that the Board, or the Division, interpreted N.C.G.S. § 135-5(a3) in the manner
Respondents suggest – i.e. in a manner allowing the Board to adopt the cap factor
pursuant to the rules set forth in 20 N.C. Admin. Code 2B.0202. Even assuming,
arguendo, the Division has interpreted N.C.G.S. § 135-5(a3) as argued by
Respondents, we hold that such an interpretation is erroneous and contrary to the
law. It is this Court, not the Division, that must ultimately decide the issue now that
it is before us, and we have done so.
C. Policy Arguments
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Respondents’ contention that “public comments will not improve the actuary’s
recommendation,” even if correct, does not factor into our analysis. Assuming,
arguendo, Respondents are correct that application of the rule making procedures of
the APA to the adoption of a cap factor is unnecessarily inefficient, and will serve no
beneficial purpose, this Court is not the proper entity to address those arguments.
Appellate courts will not imply amendments to a statute based “‘merely out of
supposed legislative intent in no way expressed, however necessary or proper it may
seem to be.’” Empire Power, 337 N.C. at 591, 447 S.E.2d at 781 (emphasis added)
(quoting In re Assessment of Sales Tax, 259 N.C. 589, 594, 131 S.E.2d 441, 445 (1963)).
“Weighing . . . public policy considerations is the province of our General Assembly,
not this Court [.]” Wynn v. United Health Servs./Two Rivers Health-Trent Campus,
214 N.C. App. 69, 79, 716 S.E.2d 373, 382 (2011) (citations and quotation marks
omitted); see also Empire Power, 337 N.C. at 595–96, 447 S.E.2d at 784.
IV. Conclusion
We hold that APA rule making provisions apply to the Board’s adoption of a
cap factor. The Division erred in invoicing Dr. Shepherd or Petitioner for any
additional contributions pursuant to N.C.G.S. § 135-5(a3) because the cap factor
adopted by the Board, and applied in determining the amount of the additional
contribution Petitioner was required to pay “in order to make [Dr. Shepherd] not
subject to the contribution-based benefit cap[,]” N.C.G.S. § 135-4(jj), was not properly
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adopted. “An agency shall not seek to implement or enforce against any person a
policy, guideline, or other interpretive statement that meets the definition of a rule
contained in G.S. 150B-2(8a) if [it] has not been adopted as a rule in accordance with
this Article.” N.C.G.S. § 150B-18. We affirm the trial court’s grant of summary
judgment in favor of Petitioner.15
AFFIRMED.
Judges BRYANT and STROUD concur.
15 We reiterate that the reasoning, holdings, and directives in this opinion apply with equal
weight to the seven related appeals in COA17-1018, COA17-1019, COA17-1020, COA17-1021, COA17-
1022, COA17-1023, and COA17-1024.
31