Sanders v. State Personnel Commission

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NO. COA13-654
NORTH CAROLINA COURT OF APPEALS
Filed: 2 September 2014
LULA SANDERS, CYNTHIA EURE,
ANGELINE MCINERNY, JOSEPH C.
MOBLEY, on behalf of themselves
and others similarly situated,
Plaintiffs,
v. Wake County
No. 05-CVS-004322
STATE PERSONNEL COMMISSION, a body
politic; OFFICE OF STATE
PERSONNEL, a body politic; LINDA
COLEMAN, State Personnel Director
(in her official capacity);
TEACHERS’ AND STATE EMPLOYEES’
RETIREMENT SYSTEM OF NORTH
CAROLINA, a body politic and
corporate; MICHAEL WILLIAMSON,
Director of the Retirement System
Division and Deputy Treasurer of
the State of North Carolina (in
his official capacity); JANET
COWELL, Treasurer of The State of
North Carolina and Chairman of The
Board of Trustees of the
Retirement System (in her official
capacity); TEMPORARY SOLUTIONS, a
subdivision of the Office of State
Personnel, and STATE OF NORTH
CAROLINA,
Defendants.
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Appeal by Plaintiffs from order entered 18 December 2012 by
Judge Kenneth C. Titus in Wake County Superior Court. Heard in
the Court of Appeals 12 December 2013.
Kilpatrick Townsend & Stockton LLP, by Adam H. Charnes,
James H. Kelly, Jr., Susan H. Boyles, Richard D. Dietz, and
Gregg E. McDougal, and North Carolina Justice Center, by
Jack Holtzman, for Plaintiffs.
Attorney General Roy Cooper, by Special Deputy Attorney
General Lars F. Nance and Special Deputy Attorney General
Charles Gibson Whitehead, for Defendants.
State Employees Association of North Carolina, by Thomas A.
Harris, amicus curiae.
DILLON, Judge.
This case was commenced in 2005 and has been on appeal
before this Court twice previously. See Sanders v. State
Personnel Comm’n, 183 N.C. App. 15, 644 S.E.2d 10 (“Sanders I”),
disc. review denied, 361 N.C. 696, 652 S.E.2d 653 (2007); and
Sanders v. State Personnel Comm’n, 197 N.C. App. 314, 677 S.E.2d
182 (2009) (“Sanders II”), disc. review denied, 363 N.C. 806,
691 S.E.2d 19 (2010).
In the present appeal, Plaintiffs Lula Sanders, et al.
(“Plaintiffs”) challenge the trial court’s order denying their
motion for partial summary judgment and granting summary
judgment in favor of Defendants State Personnel Commission, et
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al. (“Defendants”). Defendants, on the other hand, have filed a
cross-appeal, challenging the trial court’s award of costs,
including attorneys’ fees, in Plaintiffs’ favor. For the
following reasons, we affirm the trial court’s order denying
Plaintiffs’ motion for partial summary judgment and granting
Defendants’ motion for summary judgment, and we affirm in part
and dismiss in part the issues raised in Defendants’ cross-
appeal.
I. Factual & Procedural Background
Pursuant to its authority under the State Personnel Act,
N.C. Gen. Stat. § 126-4 (2013), the State Personnel Commission
(the “Commission”) has promulgated regulations establishing
various types of appointments through which an individual may
gain employment with the State of North Carolina. See 25
N.C.A.C. 1C.0400, et seq. For example, some individuals are
hired as permanent employees with the State through a permanent
appointment, see 25 N.C.A.C. 1C.0402, and others are hired as
temporary employees through a temporary appointment, see 25
N.C.A.C. 1C.0405.
There are two differences between temporary employees and
permanent employees which are relevant to this case. First,
while under the regulations the period of employment for a
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permanent employee is indefinite, the regulations stipulate that
a person may not be employed as a temporary employee for a
period “exceed[ing] 12 consecutive months” (hereinafter, the
“Twelve-Month Rule”). 25 N.C.A.C. 1C.0405(a). The second
difference is that temporary employees are not eligible to
receive certain benefits available to permanent employees, such
as leave time, state service credit, health benefits, retirement
credit, severance pay, or priority reemployment consideration.
25 N.C.A.C. 1C.0405(b).
Each Plaintiff was employed by the State of North Carolina
as a temporary employee for a period exceeding twelve
consecutive months, in violation of the Twelve-Month Rule.
Plaintiffs commenced this action, alleging that because they had
been employed as temporary employees for more than twelve
consecutive months – in violation of the Twelve-Month Rule –
they were entitled to the “rights, compensation, benefits, and
status” of permanent employees. Plaintiffs alleged claims for
(1) violations of the North Carolina Administrative Code; (2)
violations of the North Carolina Constitution; and (3) breach of
contract. Based on these claims, Plaintiffs prayed for relief
in the form of monetary damages and costs, including attorneys’
fees, in addition to declaratory relief. Plaintiffs also sought
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class certification for inclusion of all similarly-situated
individuals, i.e., those who had been employed by the State as
temporary employees for more than twelve consecutive months.
Defendants responded by moving to dismiss Plaintiffs’
claims for lack of personal jurisdiction pursuant to N.C. R.
Civ. P. 12(b)(2) on grounds of Defendants’ sovereign immunity,
and pursuant to N.C. R. Civ. P. 12(b)(6) for failure to state a
claim for which relief could be granted. In Sanders I, we
affirmed the trial court’s Rule 12(b)(2) dismissal of
Plaintiffs’ claim based on violations of the North Carolina
Administrative Code. 183 N.C. App. at 24, 644 S.E.2d at 16. In
Sanders II, we affirmed the trial court’s Rule 12(b)(6)
dismissal of Plaintiffs’ constitutional claims; however, we
reversed the trial court’s dismissal of Plaintiffs’ breach of
contract claim and remanded the matter “for a declaratory
judgment, to declare plaintiffs’ status and rights pursuant to
the Uniform Declaratory Judgment Act.” 197 N.C. App. at 323,
677 S.E.2d at 189. In analyzing Plaintiffs’ breach of contract
claim, we determined that the Twelve-Month Rule and the other
“relevant regulations of the [Commission]” are part of
Plaintiffs’ employment contracts with Defendants, id. at 320-21,
677 S.E.2d at 187, noting as follows:
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There is an agreement between the parties
whose term is known and agreed. What is
unknown is what are the legal relationships
and status of the parties when the contract
continues in effect after the expiration of
the agreed upon terms.
Id. Accordingly, we instructed the trial court on remand to
determine the legal relationship between the parties, including
the precise terms of Plaintiffs’ employment with Defendants as
of the “twelve month and one day mark and beyond.” Id. at 323,
677 S.E.2d at 188.
On remand from Sanders II, the parties engaged in extensive
discovery regarding Plaintiffs’ breach of contract claim, after
which Plaintiffs filed motions seeking partial summary judgment
on this claim; a declaratory judgment construing their rights
under the contract pursuant to N.C. Gen. Stat. § 1-253; and
class action certification. Defendants likewise moved for
summary judgment with respect to Plaintiffs’ breach of contract
claim.
Following a hearing on these matters, the trial court
entered an order on 18 December 2012 granting relief to both
Plaintiffs and Defendants. Specifically, the trial court
declared that Plaintiffs’ status as temporary employees did not
convert to that of permanent employees after twelve months and
that they were entitled only to the wages for which they had
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bargained and already received for the period that they had
worked as temporary employees beyond the permissible twelve-
month period. Accordingly, the trial court granted Defendants’
motion for summary judgment on Plaintiffs’ breach of contract
claim and denied Plaintiffs’ motions for partial summary
judgment and for class certification.
The trial court, however, also granted Plaintiffs certain
relief; namely, the court enjoined Defendants from future
violations of the Twelve-Month Rule; it directed the State
Personnel Director and the Office of State Personnel to present
to the trial court “a comprehensive plan [hereinafter, the
“Comprehensive Plan”] to assure full compliance with the
mandates of North Carolina General Statutes 126-3(b)(8) and
(9)[;]” and it taxed Defendants “with the costs of this action,
including attorney fees as provided by law [hereinafter,
“Attorneys’ Fees Award”].”
In the present appeal, Plaintiffs seek review of the trial
court’s order granting Defendants’ motion for summary judgment
and denying their motions for partial summary judgment and for
class certification. In Defendants’ cross-appeal, Defendants
seek review of the trial court’s Attorneys’ Fees Award.
II. Jurisdiction
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The threshold issue presented is whether and to what extent
this Court has jurisdiction over the parties’ appeals.
“Generally, an interlocutory order is not immediately
appealable.” Builders Mut. Ins. Co. v. Meeting Street Builders,
LLC, __ N.C. App. __, __, 736 S.E.2d 197, 199 (2012). An order
is interlocutory where it “does not dispose of the case, but
leaves it for further action by the trial court in order to
settle and determine the entire controversy.” Veazey v. City of
Durham, 231 N.C. 357, 361-62, 57 S.E.2d 377, 381 (1950). A
party may immediately appeal from an interlocutory order,
however, where the issue has been certified by the trial court
for immediate appellate review pursuant to N.C. R. Civ. P. 54(b)
or where the interlocutory order “deprives the appellant of a
substantial right which would be jeopardized absent a review
prior to a final determination on the merits.” Jeffreys v.
Raleigh Oaks Joint Venture, 115 N.C. App. 377, 379, 444 S.E.2d
252, 253 (1994) (internal citations omitted).
In the present case, the trial court order resolves the
entire controversy except with respect to two matters. First,
although the trial court has entered the Attorneys’ Fees Award,
the court has not yet determined the amount of the Award.
Second, further action is required with respect to the
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Comprehensive Plan, which the trial court has ordered certain
Defendants to prepare and present to the court for review.
Our Supreme Court has held that “[a]n order that completely
decides the merits of an action [] constitutes a final judgment
for purposes of appeal even when the trial court reserves for
later determination collateral issues such as attorney’s fees
and costs.” Duncan v. Duncan, 366 N.C. 544, 546, 742 S.E.2d
799, 801 (2013) (emphasis added). Therefore, while our Supreme
Court considers the Attorneys’ Fees Award a “collateral issue,”
it is unclear whether the presentation and review of the
Comprehensive Plan also constitutes a “collateral issue.”
Notwithstanding, the trial court has certified the issues raised
in Plaintiffs’ appeal for immediate appellate review.
Accordingly, we have jurisdiction to address the issues raised
in Plaintiffs’ appeal.
Regarding Defendants’ cross-appeal, Defendants are not
challenging the trial court’s injunction prohibiting future
violations of the Twelve-Month Rule or the directive to present
the Comprehensive Plan to the court. Accordingly, we do not
address the propriety of those portions of the order. Rather,
Defendants only challenge the “collateral issue” of the
“Attorneys’ Fees Award.” In that the trial court left open for
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future determination the amount Defendants would be taxed,
Defendants’ appeal of this collateral issue is interlocutory.1
Since the trial court did not certify the Attorneys’ Fees Award
issue for immediate appellate review, Defendants may challenge
the Attorneys’ Fees Award in this appeal only to the extent that
the Award affects a substantial right.
Defendants make a number of arguments in their brief
challenging the Attorneys’ Fees Award; however, their only
argument based on a substantial right is their contention that
the award is “in derogation of [Defendants’] sovereign
immunity.” See McClennahan v. N.C. Sch. of the Arts, 177 N.C.
App. 806, 808, 630 S.E.2d 197, 199 (2006) (holding that “appeals
raising issues of governmental or sovereign immunity affect a
substantial right sufficient to immediate appellate review”),
disc. review denied, 361 N.C. 220, 642 S.E.2d 443 (2007).
Accordingly, we review Defendants’ appeal of the Attorneys’ Fees
Award only to the extent that their challenge is based on
sovereign immunity; however, we dismiss Defendants’ appeal to
1
Under Duncan, an unresolved collateral issue does not render a
judgment or order deciding the main issues interlocutory.
However, an appeal of the collateral issue of attorney fees,
itself, is interlocutory if the trial court has not set the
amount to be awarded.
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the extent that Defendants’ challenge is based on some other
defense or upon the merits.
III. Analysis
We address the issues raised in Plaintiffs’ appeal and the
issue raised in Defendants’ appeal, in turn, below.
A. Plaintiffs’ Appeal
Plaintiffs essentially make two arguments on appeal: (1)
the trial court erred in granting Defendants’ motion for summary
judgment with respect to Plaintiffs’ breach of contract claim;
and (2) the trial court erred in denying Plaintiffs’ motion for
class certification. For the following reasons, we affirm the
trial court’s rulings on these issues.
1. Summary Judgment
In their complaint, Plaintiffs alleged that Defendants had
breached their employment agreements by failing to provide
Plaintiffs, after twelve months of service, with the benefits
generally provided to permanent employees. Plaintiffs contend
that the trial court’s order granting Defendants’ summary
judgment motion on Plaintiffs’ breach of contract claim
conflicts with our holding in Sanders II. Specifically,
Plaintiffs argue that our prior holding in that case establishes
as a matter of law that Defendants are liable to Plaintiffs for
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breach of contract, based on Defendants’ admitted violation of
the Twelve-Month Rule, and all that remained was for a jury to
decide the issue of damages.
Plaintiffs, however, misconstrue our holding in Sanders II.
We did not hold in that case that the failure to adhere to the
Twelve-Month Rule established Defendants’ liability for breach
of contract as a matter of law. We held only that the
allegations in Plaintiffs’ complaint were sufficient to survive
Defendants’ Rule 12(b)(6) motion to dismiss. Sanders II, 197
N.C. App. at 321, 677 S.E.2d at 187 (stating that “[b]ecause
there is a breach of the rules under which the contract was
formed, [P]laintiffs’ complaint sufficiently alleged a breach of
contract claim and should have survived [D]efendants’ motion to
dismiss”). The issue of whether Defendants were liable for
breach of contract was not ripe for consideration at the time we
decided Sanders II, as the issue then presented dealt only with
the sufficiency of the allegations set forth in Plaintiffs’
complaint.
In Sanders II, we instructed the trial court on remand to
determine “the legal relationships and status of the parties” -
including the terms of any agreements - “at the twelve month and
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one day mark and beyond.” Id. at 323, 677 S.E.2d at 188. We
stated as follows:
[I]t is clear that [P]laintiffs accepted
some sort of arrangement with [D]efendants
by accepting continued work and
compensation, without a permanent
appointment and without benefits. Whether
that arrangement was discussed with
[P]laintiffs individually or collectively
and what [P]laintiffs understood about their
status are relevant inquiries requiring
further factual development.
Id. at 323, 677 S.E.2d at 189. On remand, the parties conducted
extensive discovery, after which the trial court conducted a
hearing and granted summary judgment in favor of Defendants on
Plaintiffs’ breach of contract claim.
We believe that the trial court correctly concluded that
Defendants did not breach their employment contracts with
Plaintiffs. Plaintiffs failed to produce any evidence to create
a genuine issue of material fact with respect to whether
Defendants had made any promises or inducements to Plaintiffs to
cause them to continue their employment beyond twelve months,
other than to continue paying their normal wages, which were, in
fact, paid as agreed. There was no evidence presented to
suggest that Defendants had represented to Plaintiffs that their
employment status would convert to that of a permanent employee
after twelve months of service. Furthermore, there is nothing
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in the Commission rules or the relevant law that contractually
obligated Defendants to treat Plaintiffs as permanent employees
after twelve months of service. Indeed, we held just the
opposite in Sanders II, stating that if the trial court were to
determine on remand that Plaintiffs’ employment had
automatically converted to permanent status, the trial court
would be “enact[ing] an employment scheme in direct
contravention of the state constitution and other sections of
the regulatory scheme.” Id. at 322, 677 S.E.2d at 188; see also
Cauthen v. N.C. Dept. of Human Resources, 112 N.C. App. 238,
242, 435 S.E.2d 81, 84 (1993) (refusing to allow an employee
with a permanent appointment to achieve tenure by tacking onto
her current appointment period her previous periods of temporary
employment, stating that in doing so we would effectively be
creating “a quasi-tenure system in temporary employment which
neither the General Assembly nor the State Personnel Commission
intended”).
Plaintiffs, however, argue that Defendants’ “breach” of the
Twelve-Month Rule is sufficient to sustain their breach of
contract claim, even if such breach entitles Plaintiffs only to
nominal damages. We are unpersuaded. As this Court recognized
in Sanders II, administrative regulations pertinent to a
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particular contractual arrangement between the State and its
employees may properly be incorporated into, and govern, a State
employment contract. 197 N.C. App. at 320-21, 677 S.E.2d at
187. The State, certainly, has an obligation to the public to
conduct its affairs in accordance with its own regulations. We
do not believe, however, that every instance in which a
regulation incorporated into a State employment contract is
ignored provides the employee with a breach of contract claim
against the State.
Here, Defendants ignored the Twelve Month Rule by
permitting each Plaintiff to remain employed after twelve
months. Likewise, each Plaintiff ignored the Twelve Month Rule
by continuing to report to work beyond twelve months of
employment. We do not condone Defendants’ conduct in neglecting
to comport with its own administrative regulations. However, we
do not believe the trial court erred in granting Defendants’
motion for summary judgment on Plaintiffs’ breach of contract
claim, where Defendants’ conduct involved allowing Plaintiffs to
continue working under their respective contracts when they were
no longer eligible to continue performing under them -- where
the uncontradicted evidence showed that Plaintiffs were
compensated as agreed and where there is no law requiring
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Defendants to confer any other benefit or status upon Plaintiffs
after twelve months of service.
2. Class Certification
Plaintiffs further contend that the trial court erred in
denying their motion for class certification. Our Supreme Court
has held that “[t]he trial court has broad discretion in
determining whether a case should proceed as a class action.”
Faulkenbury v. Teachers’ and State Employees’ Ret. Sys. Of N.C.,
345 N.C. 683, 699, 483 S.E.2d 422, 432 (1997). Upon review, we
discern no abuse of discretion – given the circumstances
presented and procedural posture of this case – in the trial
court’s decision to deny class certification.
B. Defendants’ Appeal
Defendants appeal from the trial court’s Attorneys’ Fees
Award. As previously stated, since this appeal is
interlocutory, we are compelled only to consider Defendants’
contention that the Attorneys’ Fees Award is in derogation of
its sovereign immunity, which we have held affects a substantial
right.
Plaintiffs argue that the Attorneys’ Fees Award is
appropriate because the State has waived sovereign immunity in
this context under N.C. Gen. Stat. § 6-19.1, a provision which
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authorizes the court to award attorneys’ fees to a prevailing
party “who is contesting State action pursuant to G.S. 150B-43
or any other appropriate provisions of law[.]” N.C. Gen. Stat.
§ 6-19.1(a). Alternatively, Plaintiffs argue that the
Attorneys’ Fees Award is appropriate under the Declaratory
Judgment Act, N.C. Gen. Stat. § 1-263 (2013) (permitting
recovery of attorneys’ fees where “such award of costs [is]
equitable and just”), because the Award is based upon
Plaintiffs’ breach of contract claims, which has already
survived Defendants’ sovereign immunity challenge.
The trial court’s order does not specify a statutory basis
for the Attorneys’ Fees Award. Rather, the order merely taxes
Defendants “with the costs of this action, including attorney
fees as provided by law.” Because the order directs only that
Defendants bear Plaintiffs’ attorneys’ fees “as provided by
law,” and because the State has, in certain instances – e.g.,
under N.C. Gen. Stat. § 6-19.1 – waived sovereign immunity with
respect to claims for attorneys’ fees, we cannot at this point
conclude that the trial court committed reversible error based
on the State’s sovereign immunity defense. We, accordingly,
affirm the portion of the trial court’s order imposing the
Attorneys’ Fees Award “as provided by law” based on the State’s
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contention concerning its defense of sovereign immunity, but we
do not reach the merits of the State’s remaining contentions on
this issue, as they are not predicated upon, and do not
implicate, a substantial right of the State. We note that our
holding in this respect should not be construed as precluding
the State from raising sovereign immunity as a defense should
the trial court enter a subsequent order awarding attorneys’
fees on a particular, articulated basis.
IV. Conclusion
For the foregoing reasons, we affirm the trial court’s
order granting Defendants’ motion for summary judgment and
denying Plaintiffs’ motions for partial summary judgment and for
class certification.
With respect to the issues raised in Defendants’ cross-
appeal, we affirm the Award, in part, based on Defendants’
sovereign immunity argument; and we dismiss, in part, the
Defendants’ arguments concerning the Award not based on
sovereign immunity.
AFFIRMED IN PART; DISMISSED IN PART.
Judge STROUD concurs.
Judge HUNTER, JR. dissents in a separate opinion.
NO. COA13-654
NORTH CAROLINA COURT OF APPEALS
Filed: 2 September 2014
LULA SANDERS, CYNTHIA EURE,
ANGELINE MCINERNY, JOSEPH C.
MOBLEY, on behalf of themselves
and others similarly situated,
Plaintiffs,
v. Wake County
No. 05-CVS-004322
STATE PERSONNEL COMMISSION, a body
politic; OFFICE OF STATE
PERSONNEL, a body politic; LINDA
COLEMAN, State Personnel Director
(in her official capacity);
TEACHERS’ AND STATE EMPLOYEES’
RETIREMENT SYSTEM OF NORTH
CAROLINA, a body politic and
corporate; MICHAEL WILLIAMSON,
Director of the Retirement System
Division and Deputy Treasurer of
the State of North Carolina (in
his official capacity); JANET
COWELL, Treasurer of The State of
North Carolina and Chairman of The
Board of Trustees of the
Retirement System (in her official
capacity); TEMPORARY SOLUTIONS, a
subdivision of the Office of State
Personnel, and STATE OF NORTH
CAROLINA,
Defendants.
HUNTER, JR., Robert N., Judge, dissenting.
I dissent from the majority’s opinion concerning
Plaintiffs’ appeal and Defendants’ appeal. In my view,
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Plaintiffs are entitled to partial summary judgment on the issue
of liability for breach of contract. I would also hold that the
trial court abused its discretion in denying Plaintiffs’ motion
for class certification. Finally, I would dismiss Defendants’
appeal concerning attorneys’ fees as interlocutory
notwithstanding Defendants’ claim of sovereign immunity. My
views with respect to each appeal are addressed separately, in
turn.
A. Plaintiffs’ Appeal
1. Summary Judgment on Plaintiffs’ Breach of Contract Claim
Despite the existence of a temporary employment contract
between the parties, the incorporation of the Twelve-Month Rule
as a condition of that contract, and the admitted violation of
the Twelve-Month Rule by Defendants, the trial court below, and
the majority here, conclude that no breach of contract has
occurred and that Defendants are entitled to summary judgment as
a matter of law. I respectfully dissent.
“[The] standard of review of an appeal from summary
judgment is de novo; such judgment is appropriate only when the
record shows 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.’” In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572,
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576 (2008) (quoting Forbis v. Neal, 361 N.C. 519, 523–24, 649
S.E.2d 382, 385 (2007)).
In Sanders II, this Court said that the Twelve-Month Rule
“has the effect of law and is incorporated into the employment
contract when employees are placed into a temporary assignment.”
Sanders II, 197 N.C. App. at 321, 677 S.E.2d at 187. Admissions
by Defendants and discovery conducted below establish
conclusively that Plaintiffs and thousands of additional state
employees were placed in temporary appointments for more than
twelve consecutive months with no change in employment status in
violation of the Twelve-Month Rule. By doing so, Defendants
breached an implied term of the temporary employment contract.
See id. at 320, 677 S.E.2d at 187 (stating that “[i]n a breach
of contract action, a complainant must show that there is (1)
existence of a valid contract, and (2) breach of the terms of
that contract.” (internal quotation marks and citation
omitted)). Notwithstanding the evident nature of this
conclusion, the majority concludes that no breach of contract
occurred and affirms summary judgment in favor of Defendants.
Although not addressed by the majority, the trial court
concluded that there could have been no breach of contract
because “the acts of any hiring official in violating the
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[Twelve-Month Rule] . . . were clearly ultra vires and would not
bind the State.” Thus, the trial court went so far as to
conclude that there was no valid contractual relationship
between the parties after Plaintiffs had provided twelve months
of service, resting its analysis on a defense to the contract’s
validity.2 However, the trial court’s ultra vires argument must
fail.
The temporary employment contracts were not ultra vires
when they were entered into by the parties. Indeed, to hold
otherwise would be to deny Defendants the ability to initially
hire anyone for a temporary appointment with the State. Rather,
the contract became ultra vires, if at all, because of
Defendants breach of the Twelve-Month Rule. In an analogous
context, we have stated that, as a general matter,
a municipality cannot be made liable for
breach of an express contract for services
when the official making the contract has
exceeded his or her authority by entering
into such a contract. And the city will not
ordinarily be estopped to assert the
invalidity of a contract made by an officer
2
Notably, the record in this case is devoid of any contention
from Defendants that the actions of their hiring officials
constituted ultra vires activity. Defendants’ answer and motion
to dismiss, motion for summary judgment, hearing arguments, and
brief before this Court make no mention of the ultra vires
doctrine or its application to this case. Instead, the doctrine
first appears in the trial court’s order.
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of limited authority when that authority has
been exceeded.
However, such a contract may become binding
and enforceable upon the corporation through
the doctrine of estoppel based upon the acts
or conduct of officers of the corporation
having authority to enter into the contract
originally, as by receiving the benefits of
the contract, or other grounds of equitable
estoppel. A municipality cannot escape
liability on a contract within its power to
make, on the ground that the officers
executing it in its behalf were not
technically authorized in that regard, where
they were proper officers to enter into such
contracts.
Pritchard v. Elizabeth City, 81 N.C. App. 543, 553–54, 344
S.E.2d 821, 827 (1986) (internal citations omitted). Thus,
there is a critical distinction between the complete absence of
authority to enter into a contract and the later improper
exercise of existing contractual authority. Here, Defendants
had authority to enter into temporary employment contracts with
Plaintiffs, but misused that authority in violating the Twelve-
Month Rule.3 Consistent with Pritchard, I would hold that the
defense of ultra vires is unavailable to Defendants.
3
In Sanders II, we stated that “if the court below finds
defendants automatically converted plaintiffs’ positions from
temporary to permanent on their own accord without appropriate
classification and budgetary approval, they would have enacted
an employment scheme in direct contravention of the state
constitution and other sections of the regulatory scheme.”
Sanders II, 197 N.C. App. at 322, 677 S.E.2d at 188. Thus, the
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Even so, the majority concludes that even if the
contractual relationship between the parties is valid, there has
been no breach because Plaintiffs failed to produce any evidence
that “Defendants had made any promises or inducements to
Plaintiffs to cause them to continue their employment beyond
twelve months, other than to continue paying their normal
wages,” or “that Defendants had represented to Plaintiffs that
their employment status would convert to that of a permanent
employee after twelve months of service.” Ante, at ___. The
majority also notes that “there is nothing in the Commission
rules or the relevant law that contractually obligated
Defendants to treat Plaintiffs as permanent employees after
twelve months of service.” Ante, at ___. At this point, I
believe the majority mistakes the remedial question (i.e., the
valuation of Plaintiffs damages based on Plaintiffs’ expected
compensation) with the underlying liability question (i.e.,
whether a breach of the Twelve-Month Rule occurred). I agree
that, at least with respect to the named Plaintiffs, there was
never an expectation of permanent employee benefits after
Plaintiffs continued in their temporary appointments beyond the
conclusion that Defendants misused their contractual authority
in violating the Twelve-Month Rule has already been reached by
this Court and this panel is bound by that decision. In re Civil
Penalty, 324 N.C. 373, 384, 379 S.E.2d 30, 37 (1989).
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twelve month mark. Indeed, the trial court found as fact,
unchallenged before this Court, that:
There is no allegation that the benefits
sought by Plaintiffs were bargained for, or
granted, when Plaintiffs began their
employment. In fact, prior to employment in
their “temporary appointment” all of the
Plaintiffs signed a statement acknowledging
the provisions of 25 N.C.A.C. 1C.0405(b).
Each of the Plaintiffs indicated in their
depositions a desire for continued
employment with the State beyond the twelve
(12) month mark. Further, there are no
allegations of promises or inducements made
to Plaintiffs to cause them to continue
their employment other than the payment of
wages; and no allegations of
representations, conduct, or acts of their
employers indicating the employment would
become permanent.
However, I believe these facts speak to value of Plaintiffs’
expectation interest, not Defendants’ underlying liability for
breach of contract. In my view, Plaintiffs are entitled to an
award of nominal damages in recognition of the technical injury
resulting from Defendants breach of the Twelve-Month Rule.4 See
Cole v. Sorie, 41 N.C. App. 485, 490, 255 S.E.2d 271, 274 (1979)
4
The majority suggests that both parties are in breach of the
employment contract, stating, “[h]ere, Defendants ignored the
Twelve Month Rule by permitting each Plaintiff to remain
employed after twelve months. Likewise, each Plaintiff ignored
the Twelve Month Rule by continuing to report to work beyond
twelve months of employment.” Ante, at ___. However, the
Twelve-Month Rule is a constraint on the State, not the
employees. I would therefore hold that only Defendants are in
breach.
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(standing for the proposition that, “in a suit for damages for
breach of contract, proof of the breach would entitle the
plaintiff to nominal damages at least.” (internal quotation
marks, citation, and brackets omitted)). Accordingly, I would
grant partial summary judgment on the issue of liability for
breach of contract in favor of Plaintiffs and remand for a
determination of damages.
2. Plaintiffs’ Motion for Class Certification
With respect to the issue of class certification, I also
dissent from the majority’s opinion because I would hold that
the trial court’s decision to deny Plaintiffs’ motion for class
certification is an abuse of discretion.
Rule 23 of the North Carolina Rules of Civil Procedure
states, in pertinent part, that “[i]f persons constituting a
class are so numerous as to make it impracticable to bring them
all before the court, such of them, one or more, as will fairly
insure the adequate representation of all may, on behalf of all,
sue or be sued.” N.C. R. Civ. P. 23(a). Our Supreme Court has
recently explained the law with respect to class certification
under Rule 23 as follows:
First, parties seeking to employ the class
action procedure pursuant to our Rule 23
must establish the existence of a class. A
class exists when each of the members has an
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interest in either the same issue of law or
of fact, and that issue predominates over
issues affecting only individual class
members. The party seeking to bring a class
action also bears the burden of
demonstrating the existence of other
prerequisites:
(1) the named representatives must
establish that they will fairly
and adequately represent the
interests of all members of the
class; (2) there must be no
conflict of interest between the
named representatives and members
of the class; (3) the named
representatives must have a
genuine personal interest, not a
mere technical interest, in the
outcome of the case; (4) class
representatives within this
jurisdiction will adequately
represent members outside the
state; (5) class members are so
numerous that it is impractical to
bring them all before the court;
and (6) adequate notice must be
given to all members of the class.
When all the prerequisites are met, it is
left to the trial court’s discretion whether
a class action is superior to other
available methods for the adjudication of
the controversy. . . . The touchstone for
appellate review of a Rule 23 order . . . is
to honor the broad discretion allowed the
trial court in all matters pertaining to
class certification. Accordingly, we review
the trial court’s order denying class
certification for abuse of discretion. The
test for abuse of discretion is whether a
decision is manifestly unsupported by reason
or so arbitrary that it could not have been
the result of a reasoned decision.
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Beroth Oil Co. v. N.C. Dep’t of Transp., ___ N.C. ___, ___, 757
S.E.2d 466, 470–71 (2014) (internal quotation marks, citations,
brackets, and footnote omitted) (second alteration in original).
Here, Plaintiffs’ motion for class certification defined
the putative class as all persons
who have been or currently are employed by
the State of North Carolina who are subject
to the twelve-month limitation set forth in
25 N.C.A.C. 1C.0405(a); and been placed in
temporary appointment for more than twelve
consecutive months in violation of 25
N.C.A.C. 1C.0405(a) during the period of
April 1, 2002 through the present; and have
not received benefits including paid
holidays, vacation leave, sick leave, health
benefits, and when applicable, retirement
benefits and longevity pay; excluding
employees who work less than 20 hours per
week and all employees of the sixteen
institutions of the University of North
Carolina system.
The trial court’s order denying class certification concluded
with respect to Plaintiffs’ motion as follows:
The claims of the Plaintiffs and the
putative class members have an interest in
the same issue of law and fact; that class
counsel and the Plaintiff will adequately
represent the interests of all class members
with no conflict of interest; that they have
a genuine interest in the outcome of the
action; and that class members are
sufficiently numerous that joining them
would be impractical. However, these
factors do not outweigh the predominant
issues affecting individual putative class
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members which are not capable of application
of a general mathematical calculation, but
would require extensive individual inquiry
concerning class members’ unique employment
circumstances (i.e., discussions concerning
employment status, requests or promises of
benefits, higher pay in lieu of benefits,
requests for permanent employment, etc.)[.]
(Emphasis added). Thus, the trial court grounded its decision
to deny class certification on the predominance requirement,
concluding in effect that no “class” exists under Rule 23. See
Beroth, ___ N.C. at ___, 757 S.E.2d at 470 (“A class exists when
each of the members has an interest in either the same issue of
law or of fact, and that issue predominates over issues
affecting only individual class members.”). Accordingly, the
question presented to this Court by Plaintiffs’ appeal is
whether the trial court abused its discretion in determining
that no class existed based on the predominance inquiry. See
id. at ___, 757 S.E.2d at 470 n.2 (“Therefore, we review the
trial court’s determination of whether plaintiffs established
the actual existence of a class for abuse of discretion.”).
In my view, the trial court abused its discretion in
denying class certification because it conflated the remedial
question concerning the calculation of damages with the
underlying issue of liability for breach of contract.
Specifically, the trial court’s determination that “extensive
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individual inquiry concerning class members’ unique employment
circumstances” would be necessary, including “discussions
concerning employment status, requests or promises of benefits,
higher pay in lieu of benefits, requests for permanent
employment, etc.[,]” is a concern for the expectation value of
Plaintiffs’ damages—whether and what each putative class member
expected to receive as compensation after the expiration of
their twelve-month term. This is wholly separate from the
underlying question of contract liability, a question common to
all putative class members based on the narrowly defined class
articulated by Plaintiffs, the incorporation of the Twelve-Month
Rule into each employee’s contract, and the admissions by
Defendant that the Twelve-Month Rule was violated.
In Beroth, our Supreme Court stated that differences in the
amount of damages owed to putative class members should not
preclude class certification as long as the damages inquiry is
not determinative of the underlying merits claim. Id. at ___,
757 S.E.2d at 475. This generally comports with federal
precedent interpreting Fed. R. Civ. P. 23. See generally 2
William B. Rubenstein, Newberg on Class Actions § 4:54, at 205–
10 (5th ed. 2012) (collecting cases and stating that “Courts in
every circuit have . . . uniformly held that the 23(b)(3)
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predominance requirement is satisfied despite the need to make
individualized damage determinations.”).
Here, the trial court acknowledged that “[t]he claims of
the Plaintiffs and the putative class members have an interest
in the same issue of law and fact[,]” yet denied class
certification because of the possibility of individual damage
calculations. Given the aforementioned precedent on this issue,
I believe the trial court’s action to be an abuse of discretion.
I would certify the proposed class and grant partial summary
judgment to Plaintiffs on the issue of liability for breach of
contract.
B. Defendants’ Appeal
With respect to Defendants’ appeal of the trial court’s
award of attorneys’ fees to Plaintiffs, I agree with the
majority that Defendants’ appeal is interlocutory because the
actual amount of attorneys’ fees owed by Defendants has yet to
be decided. Triad Women’s Ctr., P.A. v. Rogers, 207 N.C. App.
353, 358, 699 S.E.2d 657, 660–61 (2010) (“We, therefore,
specifically hold that an appeal from an award of attorneys’
fees may not be brought until the trial court has finally
determined the amount to be awarded. For this Court to have
jurisdiction over an appeal brought prior to that point, the
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appellant would have to show that waiting for the final
determination on the attorneys’ fees issue would affect a
substantial right.”). Furthermore, I also agree that sovereign
immunity is a substantial right for purposes of appellate review
under N.C. Gen. Stat. § 1-277(a) (2013). Kawai Am. Corp. v.
Univ. of North Carolina at Chapel Hill, 152 N.C. App. 163, 165,
567 S.E.2d 215, 217 (2002) (“This Court has repeatedly held that
appeals raising issues of governmental or sovereign immunity
affect a substantial right sufficient to warrant immediate
appellate review.” (quotation marks and citation omitted)).
However, I do not agree that Defendants are entitled to
sovereign immunity in this case and would therefore dismiss
Defendants’ appeal in its entirety. Because the majority goes
beyond a pure jurisdictional analysis and specifically affirms a
portion of the trial court’s order concerning attorneys’ fees, I
respectfully dissent.5
5
The majority opinion states that “we review Defendants’ appeal
of the Attorneys’ Fees Award only to the extent that their
challenge is based on sovereign immunity; however, we dismiss
Defendants’ appeal to the extent that Defendants’ challenge is
based on some other defense or upon the merits.” Ante, at ___.
While the majority opinion does not go so far as to decide
whether the trial court’s award was proper under either N.C.
Gen. Stat. § 6-19.1 or § 1-263, it does decide, and explicitly
affirms “the portion of the trial court’s order imposing the
Attorneys’ Fees Award ‘as provided by law’ based on the State’s
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The trial court’s order states that “Defendants are taxed
with the costs of this action, including attorney fees as
provided by law.” (Emphasis added). As the majority opinion
notes, the trial court’s order does not specify the statutory
authority for its action. Nevertheless, the parties concede
that attorneys’ fees can only be awarded in this case, if at
all, pursuant to either N.C. Gen. Stat. § 6-19.1 or § 1-263.
Thus, Defendants enjoy the right of sovereign immunity in this
case only to the extent that such a claim can shield them from
paying out attorney fees under these two statutes. If the
doctrine of sovereign immunity does not shield Defendants from
paying out attorney fees under the statutes, the trial court’s
order cannot “deprive” Defendants of a substantial right nor
“work injury” if Defendants are forced to attend another hearing
as to the amount owed. See Goldston v. Am. Motors Corp., 326
N.C. 723, 726, 392 S.E.2d 735, 736 (1990) (stating that to meet
the substantial right test for appealing interlocutory orders,
“the right itself must be substantial and the deprivation of
that substantial right must potentially work injury . . . if not
corrected before appeal from final judgment.”).
contention concerning its defense of sovereign immunity[.]”
Ante, at ___.
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N.C. Gen. Stat. § 6-19.1, entitled “Attorney’s fees to
parties appealing or defending against agency decision,”
provides that if certain prerequisites are met, “the court may,
in its discretion, allow the prevailing party to recover
reasonable attorney’s fees, . . . to be taxed as court costs
against the appropriate agency[.]” N.C. Gen. Stat. § 6-19.1(a)
(2013). Thus, by its express terms, N.C. Gen. Stat. § 6-19.1
allows a party who prevails on an underlying merits claim to
recover attorneys’ fees from the State. This is an implicit
waiver of any claim that the State has sovereign immunity from
paying attorney fees awarded under the statute. See Battle
Ridge Cos. v. N.C. Dep’t of Transp., 161 N.C. App. 156, 157, 587
S.E.2d 426, 427 (2003) (“It is an established principle of
jurisprudence, resting on grounds of sound public policy, that a
state may not be sued in its own courts or elsewhere unless it
has consented by statute to be sued or has otherwise waived its
immunity from suit.” (emphasis added)). Accordingly, the
defense of sovereign immunity is not available to Defendants
under N.C. Gen. Stat. § 6-19.1 and this Court should therefore
foreclose any further inquiry under the statute.
N.C. Gen. Stat. § 1-263, entitled “Costs,” provides that
“[i]n any proceeding under [the Uniform Declaratory Judgment
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Act] the court may make such award of costs as may seem
equitable and just.” N.C. Gen. Stat. § 1-263. As is evident
from the text, the statute does not expressly or impliedly waive
the sovereign immunity of the State, and this Court has held
that the Uniform Declaratory Judgment Act does not act as a
general waiver of the State’s sovereign immunity in declaratory
judgment actions. Petroleum Traders Corp. v. State, 190 N.C.
App. 542, 546–47, 660 S.E.2d 662, 664 (2008). Nevertheless, it
is well-established that the State’s sovereign immunity is
waived in “causes of action on contract,” Smith v. State, 289
N.C. 303, 320, 222 S.E.2d 412, 423–24 (1976), and this Court has
recently interpreted that language to include “declaratory
relief actions seeking to ascertain the rights and obligations
owed under an alleged contract.” Atl. Coast Conference v. Univ.
of Maryland, ___ N.C. App. ___, ___, 751 S.E.2d 612, 621 (2013).
Here, the Plaintiffs’ declaratory judgment motion sought a
declaration from the trial court concerning the parties’
temporary employment contracts and the admitted violation of the
Twelve-Month Rule. Plaintiffs’ motion, and the trial court’s
subsequent order, were responsive to this Court’s disposition in
Sanders II when we remanded Plaintiffs’ breach of contract claim
with instructions for the trial court to “assess the terms of
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[P]laintiffs’ contracts with [D]efendants at the twelve month
and one day mark and beyond” and “to declare [P]laintiffs’
status and rights” under the temporary employment contracts.
Sanders II, 197 N.C. App. at 323, 677 S.E.2d at 188–89. Thus,
the declaratory relief at issue here concerns the “rights and
obligations owed under an alleged contract.” By consequence,
and consistent with this Court’s opinion in Atl. Coast
Conference, Defendants cannot assert sovereign immunity to
shield themselves from an obligation to pay costs under N.C.
Gen. Stat. § 1-263. The defense of sovereign immunity is
therefore not available to Defendants under either of the
statutes potentially implicated by Defendants’ appeal.
Accordingly, because the defense of sovereign immunity is
not available to Defendants under N.C. Gen. Stat. § 6-19.1 or §
1-263, I would hold that Defendants have failed to meet the
substantial right test and that we lack jurisdiction to hear
Defendants’ appeal at this time. Although the majority does not
engage in a full merits analysis concerning whether the award
was proper under N.C. Gen. Stat. § 6-19.1 or § 1-263, the
majority errs in affirming a portion of the order. I would
dismiss Defendants’ cross-appeal in its entirety as
interlocutory.
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