Wilson v. North Carolina Department of Commerce

NO. COA14-975
NORTH CAROLINA COURT OF APPEALS
Filed: 17 February 2015
MONICA WILSON and WILSON LAW GROUP
PLLC,
Plaintiffs,
v. Wake County
No. 14 CVS 2499
NORTH CAROLINA DEPARTMENT OF
COMMERCE; NC DEPARTMENT OF
COMMERCE; DIVISION OF EMPLOYMENT
SECURITY; SHARON ALLRED DECKER, in
her capacity as Secretary of
Commerce; and DALE R. FOLWELL, in
his capacity as Assistant
Secretary of Employment Security,
Defendants.
Appeal by defendants from order entered 13 March 2014 by
Judge Paul C. Ridgeway in Wake County Superior Court. Heard in
the Court of Appeals 7 January 2015.
Law Office of James C. White, P.C., by James C. White and
Michelle M. Walker, for plaintiffs-appellees.
The North Carolina Department of Commerce Division of
Employment Security, by Ted Enarson and Jeremy L. Ray, for
defendants-appellants.
INMAN, Judge.
Defendants appeal the order granting plaintiffs a
preliminary injunction compelling the disclosure of unemployment
hearings information. Defendants contend that the interlocutory
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order is immediately appealable because it involves a
substantial right. Furthermore, they allege that the trial
court erred in entering the preliminary injunction because
plaintiffs are unable to show a likelihood of success on the
merits because federal law prohibits the disclosure of the
unemployment appeals hearing notices. In contrast, plaintiffs
argue that the appeal should be dismissed not only because it is
moot but also because it is interlocutory and does not affect a
substantial right. In the alternative, plaintiffs contend that
the order should be affirmed because it was decided correctly
under the law in effect at the time of the hearing.
After careful review, we vacate the order and remand for
the trial court to enter additional findings and conclusions not
inconsistent with this opinion.
Factual and Procedural Background
This appeal involves the North Carolina Division of
Employment Security’s (“DES’s”) decision to terminate its
practice of providing third parties, specifically plaintiffs
Monica Wilson (“Ms. Wilson”) and her law firm Wilson Law Group
PLLC (“WLG”) (collectively, Ms. Wilson and WLG are referred to
as “plaintiffs”), with daily access to appeals hearing notices
about unemployment claimants (the “hearing notices”). The
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hearing notices listed all scheduled hearings set before DES
appeals referees and hearing officers and provided various
information about each claimant, including, among other things,
the claimant’s name, address, phone number, information about
her termination, and the last four digits of her social security
number. Since 2004, Ms. Wilson and several other attorneys
received daily hearing notices from DES in exchange for a
monthly fee of $300. Ms. Wilson picked her copy up daily via
courier from DES because the notices provided only 14 days
notice of the scheduled hearings.
On 26 February 2014, in addition to the day’s hearing
notices, DES sent Ms. Wilson an undated letter stating:
Due to security concerns, the process of
entering [DES] through the back door of our
building near the mail room and outside our
security guards [sic] knowledge will no
longer be allowed after February 28th. I
understand the process of allowing attorneys
to pick up appeals hearing notices was
established by a former DES General Counsel
years ago, but for the safety of our
employees and constituents, this will end.
The letter went on to say that the hearing notices would be sent
to the law offices “at least three times per month” and that the
monthly cost would increase from $300 to $600. The letter was
signed by defendant Dale R. Folwell (“Mr. Folwell”), the
Assistant Secretary of DES. According to plaintiffs, this
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change negatively impacted claimants’ ability to obtain counsel
which resulted in an unfair advantage for employers.
On 28 February 2014, plaintiffs filed a complaint and
request for injunctive relief against DES, Mr. Folwell, the
North Carolina Department of Commerce, and Sharon Decker (“Ms.
Decker”), the Secretary of Commerce (collectively, these parties
are referred to as “defendants”) challenging the withholding of
daily hearing notices.1 Plaintiffs claimed that defendants
violated Chapter 132 of the General Statutes, commonly referred
to as North Carolina’s Public Records Act. Plaintiffs alleged
that the daily hearing notices constituted public records under
N.C. Gen. Stat. § 132-6(a) and that they were entitled to
injunctive relief compelling DES to provide copies of the daily
hearing notices. Plaintiffs further contended that they were
entitled to expedited discovery and to compensation from
defendants for their attorneys’ fees.
1
During the pendency of this appeal, Sharon Decker resigned her
position as Secretary of Commerce. This change does not render
plaintiffs’ claims moot but may lead to an amendment of the
pleadings with regard to acts or omissions after her departure
date. See N.C. Gen. Stat. § 1A-1, Rule 25(f) (2013) (“When a
public officer is a party to an action in his official capacity
and during its pendency dies, resigns or otherwise ceases to
hold office, the action does not abate and his successor is
automatically substituted as a party.”).
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Plaintiffs’ request for a temporary restraining order
(“TRO”) was heard by Judge Michael Morgan on 3 March 2014.
After concluding that plaintiffs were likely to prevail on their
claim that DES’s refusal to provide the hearing notices
constituted a violation of section 132-6(a), the trial court
issued a TRO and scheduled a preliminary injunction hearing.
On 10 March 2014, plaintiffs’ petition for a preliminary
injunction came on for hearing before Judge Paul Ridgeway.
Counsel for the respective parties submitted affidavits,
exhibits, and arguments, and the trial court took the matter
under advisement.
On 13 March, the trial court issued an order concluding
that plaintiffs had met their burden of proving the likelihood
that they would succeed in their public records claim and that
injunctive relief was necessary to protect plaintiffs’ rights
until the matter could be resolved. Furthermore, the trial
court required defendants to allow any person access to DES
headquarters “for the purposes of picking up copies of hearing
notices generated that day in accordance with that person’s
previous request.”
Defendants timely appealed. On 27 May 2014, defendants
filed a petition for writ of supersedeas to stay the trial
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court’s 13 March 2014 order pending outcome of the appeal, which
petition this Court granted.
During the pendency of this appeal, on 25 August 2014, the
General Assembly enacted Session Law 2014-117, “An Act to
Clarify the Confidentiality of Unemployment Compensation
Records,” providing that unemployment appeal hearing notices are
“confidential information” and are specifically exempt from the
Public Records Act.
Analysis
I. Jurisdiction
Initially, we must determine whether the interlocutory
preliminary injunction is immediately appealable. See generally
A.E.P. Indus., Inc. v. McClure, 308 N.C. 393, 400, 302 S.E.2d
754, 759 (1983) (noting that “[a] preliminary injunction is
interlocutory in nature, issued after notice and hearing, which
restrains a party pending final determination on the merits” and
is not immediately appealable absent a showing that it involves
a substantial right). This Court has held that interlocutory
orders requiring the disclosure of information that an appellant
claims constitutes trade secrets, Analog Devices, Inc. v.
Michalski, 157 N.C. App. 462, 465, 579 S.E.2d 449, 452 (2003),
and orders mandating the disclosure of information that a party
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asserts is protected by a statutory privilege, Sharpe v.
Worland, 351 N.C. 159, 166, 522 S.E.2d 577, 581 (1999), are
immediately appealable. We conclude that the preliminary
injunction order at issue here similarly affects a substantial
right because the order requires the disclosure of information
that defendants contend constitutes confidential information
under both state and federal law and because defendants allege
that this disclosure could result in the loss of federal
administrative funding. Consequently, the preliminary
injunction is immediately appealable.
II. Mootness
Next, we must address plaintiffs’ contention that, in light
of the amendment to section 96-4(x), defendants’ appeal is moot.
Although an amendment to a statute may render an appeal moot,
see Davis v. Zoning Bd. of Adjustment of Union Cnty., 41 N.C.
App. 579, 582, 255 S.E.2d 444, 446 (1979), statutory amendment
does not moot an appeal when the relief sought has not been
granted or the questions originally in controversy are still at
issue, In re Peoples, 296 N.C. 109, 147, 250 S.E.2d 890, 912
(1978) (“Whenever, during the course of litigation it develops
that the relief sought has been granted or that the questions
originally in controversy between the parties are no longer at
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issue, the case should be dismissed.”). See also Lambeth v.
Town of Kure Beach, 157 N.C. App. 349, 352, 578 S.E.2d 688, 690
(2003).
Here, N.C. Gen. Stat. 96-4(x) was amended in August 2014
specifically to classify the hearing notices as confidential
information and exempt them from the public records disclosure
requirements of state law. While the language of the amendment
appears to go to the heart of plaintiffs’ claims, it is
plaintiffs’ contention that the amendment substantially changes
the statute and therefore is not retroactive. See Ray v. N.C.
Dep’t of Transp., 366 N.C. 1, 9, 727 S.E.2d 675, 682 (2012)
(distinguishing between clarifying amendments that apply both to
cases brought after the statute’s effective dates and to cases
pending before the courts when the amendment is adopted and
substantive amendments where “the effective date appl[ies]”).
Thus, plaintiffs’ position is still that, based on the 2013
version of section 96-4(x), at least with respect to hearings
scheduled prior to the statutory amendment, they were entitled
to disclosure of daily hearing notices and to recover their
attorneys’ fees incurred in enforcing their right. The statutory
amendment does not provide plaintiffs the relief they sought:
compelled disclosure of the hearing notices prior to the August
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2014 amendment and attorneys’ fees for enforcing that right.
Accordingly, the amendment of N.C. Gen. Stat. § 96-4(x) has not
mooted the appeal.
III. Standard of Review
Our standard of review from a preliminary injunction is
“essentially de novo.” VisionAIR, Inc. v. James, 167 N.C. App.
504, 507, 606 S.E.2d 359, 362 (2004). However, the trial
court’s ruling is “presumed to be correct, and the party
challenging the ruling bears the burden of showing it was
erroneous.” Id. Generally, on appeal from an order granting or
denying a preliminary injunction, “an appellate court is not
bound by the findings, but may review and weigh the evidence and
find facts for itself.” A.E.P. Indus., 308 N.C. at 402, 302
S.E.2d at 760. However, the Court may vacate an injunctive
order and remand to the trial court for entry of additional
findings where the order’s findings fail to make all necessary
determinations. See N. Star Mgmt. of Am., LLC v. Sedlacek, __
N.C. App. __, __, 762 S.E.2d 357, 363 (2014) (vacating the trial
court’s preliminary injunction order and remanding for further
proceedings because the trial court failed to make findings as
to the reasonableness of the geographic scope and prohibited
activities of a non-compete agreement); Conrad v. Jones, 31 N.C.
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App. 75, 79, 228 S.E.2d 618, 620 (1976) (vacating a permanent
injunction and remanding for the trial court to make findings as
to the plaintiff’s interest in the property allegedly being
trespassed upon).
IV. Analysis
A preliminary injunction is “an extraordinary measure” and
will only issue:
(1) if a plaintiff is able to show
likelihood of success on the merits of his
case and (2) if a plaintiff is likely to
sustain irreparable loss unless the
injunction is issued, or if, in the opinion
of the Court, issuance is necessary for the
protection of a plaintiff's rights during
the course of litigation.
Ridge Cmty. Investors, Inc. v. Berry, 293 N.C. 688, 701, 239
S.E.2d 566, 574 (1977) (alteration in original). Pursuant to
Rule 65(d), an order granting injunctive relief must, among
other things, “set forth the reasons for its issuance [and]
shall be specific in terms[.]” N.C. Gen. Stat. § 1A-1, Rule
65(d) (2013). This Court has interpreted Rule 65(d) to require
the trial court to “adequately set forth findings that
succinctly state[] the reasons for the issuance of the
injunction[.]” Staton v. Russell, 151 N.C. App. 1, 12, 565
S.E.2d 103, 109-110 (2002). With regard to plaintiffs’
likelihood of success on the merits, here, the trial court
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concluded that “[p]laintiffs have met their burden, for the
purposes of this Preliminary Injunction, of proving that there
is probable cause the [p]laintiffs will be able to established
[sic] their asserted rights under the North Carolina Public
Records Law at the trial of this matter.” Defendants contend
that this conclusion is erroneous because: (1) under the 2013
version of N.C. Gen. Stat. § 96-4(x), any disclosure of
confidential unemployment information must be consistent with
federal law; (2) federal regulations—specifically, 20 C.F.R. §§
603.2(a) and 603.4(b)—prohibit the disclosure of the hearing
notices because they contain the name of the employee and
employer, addresses, and the reasons for the claim; (3) the
hearing notices do not fall within any exception to the federal
regulations’ general prohibition on disclosure of confidential
information; and (4) the United States Department of Labor
intended the federal regulations to set the minimum requirements
on the confidentiality of unemployment information.
At the preliminary injunction hearing, defendants argued
that the disclosure of the hearing notices violated federal law
and that this violation could “impact [the] grant money that
[DES] use[s]” to administer the appeal hearing system. To
support their contention, defendants introduced, and the trial
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court allowed for the purpose of “explaining what [DES] did upon
receipt of [the] letter,” a letter from the United States
Department of Labor claiming that the practice of selling the
hearing information constitutes “a failure to comply
substantially with [f]ederal law.” Specifically, the letter
asserts that the information contained in the hearing notices is
confidential and that federal law only permits the disclosure of
appeals records and decisions when they are “final.”
In addition to involving federal regulations, plaintiffs’
claims and DES’ defenses require interpretation of two state
statutes. North Carolina’s Public Records Act, specifically,
section 132-6, requires that “in the absence of clear statutory
exemption or exception, documents falling within the definition
of ‘public records’ in the Public Records Act must be made
available for public inspection[,]” News & Observer Pub. Co. v.
Poole, 330 N.C. 465, 486, 412 S.E.2d 7, 19 (1992). The second
statute, N.C. Gen. Stat. § 96-4, describes the administration,
powers, and duties of DES and is the statute amended since the
trial court’s issuance of the preliminary injunction at issue
here.
Prior to its amendment, N.C. Gen. Stat. § 96-4(x) required
that any disclosure of unemployment information be consistent
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with 20 C.F.R. Part 603, the federal regulations concerning the
confidentiality of unemployment insurance information. N.C.
Gen. Stat. § 132-6 compels disclosure of public records when
there is no statutory exception or exemption. News & Observer,
330 N.C. at 486, 412 S.E.2d at 19. Accordingly, to determine
whether plaintiffs would likely succeed in their claims, the
trial court would necessarily have to consider how the federal
regulations affect a person’s right to disclosure of the hearing
notices under the Public Records Act. Here, the trial court’s
order does not mention the federal regulations and their
bearing, if any, on plaintiffs’ public records claim. Such
analysis would be necessary before finding whether plaintiffs
had a likelihood of success on the merits. Given the absence of
any findings on this issue, we must vacate the order and remand
for the trial court to make the necessary findings and
conclusions addressing plaintiffs’ likelihood of success in
light of the applicable federal regulations.
In addition to showing a likelihood of success on the
merits, a party seeking a preliminary injunction must show
either that in the absence of injunctive relief, plaintiffs
would suffer an irreparable injury or that injunctive relief is
necessary to protect rights that cannot be enforced later,
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A.E.P., 308 N.C. at 405, 302 S.E.2d at 761-62 (noting that the
second element may be satisfied by either finding). In this
case, the trial court found that because plaintiffs were
entitled to receive the hearing notices on a daily basis,
injunctive relief was necessary to protect that right. However,
since the trial court must enter additional findings and
conclusions as to the first element, this second finding may
change. Consequently, on remand, the trial court should make
sufficient findings as to this second element based on its
analysis of the interplay between state and federal law.2
In addition to making the necessary findings and
conclusions discussed above, the trial court also will have to
consider the amendment of N.C. Gen. Stat. § 96-4(x) in August
2014, after the trial court’s order but before this appeal was
heard. During that time, the General Assembly passed Session
Law 2014-117, “An Act to Clarify the Confidentiality of
Unemployment Compensation Records.” Prior to this change,
section 96-4(x) (2013), which was in effect at the time of
plaintiffs’ hearing, only required that the disclosure of
2
Because the trial court’s order was not based on a finding of
irreparable harm and defendants do not put forth any argument on
this issue on appeal, we do not address whether plaintiffs would
be able to establish irreparable harm in support of their
request for injunctive relief.
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unemployment information be consistent with 20 C.F.R. Part 603.
However, the 2013 version of section 96-4(x) does not
specifically exempt unemployment information from North
Carolina’s Public Records Act nor does it classify that
information as “confidential information.” The statute was
“clarified”3 in August 2014 to provide that unemployment
compensation information constitutes “confidential information”
and is exempt from the public records disclosure requirements.
Thus, on remand, the trial court also must determine
whether the amendment to N.C. Gen. Stat. § 96-4(x) changed the
substance of the statute or merely clarified it, and in turn,
whether the amendment applies to plaintiffs’ claims for the
disclosure of hearing notices created prior to the amendment.
See Ray, 366 N.C. at 9, 727 S.E.2d at 681 (distinguishing
between amendments that change the substance of a statute and
those that clarify a statute, and noting that clarifying
amendments “apply to all cases pending before the courts when
the amendment is adopted, regardless of whether the underlying
3
We note that we use the term “clarified” in quotation marks
because the General Assembly titled the session law “An Act to
Clarify.” We make no determination at this time of whether the
amendment constituted a clarifying amendment or a substantial
change to the statute, leaving that analysis for the trial court
in the first instance.
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claim arose before or after the effective date of the
amendment”).
If the trial court concludes that the amendment is
substantive, the trial court’s consideration on the merits of
plaintiffs’ claims will be two-fold. First, whether plaintiffs
are entitled to a preliminary injunction for the hearing notices
issued before 25 August 2014 will depend on the trial court’s
analysis discussed above and must include findings and
conclusions regarding how the federal regulations affect the
disclosure of unemployment information. Second, to determine
whether plaintiffs are entitled to a preliminary injunction for
the hearing notices issued on 25 August 2014 and afterwards, the
trial court must take into consideration the new statutory
language of section 96-4(x).
In contrast, if the trial court concludes that the
amendment to N.C. Gen. Stat. § 96-4(x) is clarifying, the new
version of the statute would apply to plaintiffs’ requests for
the hearing notices regardless of the fact that the amendment
occurred after plaintiffs’ claim arose. In other words, the
amendment may be used in interpreting the earlier statute. See
Ferrell v. Dep't of Transp., 334 N.C. 650, 659, 435 S.E.2d 309,
315 (1993). For purposes of remand, this means that if the
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trial court concludes that the amendment is clarifying, it
should apply the statute as amended to determine whether
plaintiffs are able to show a likelihood of success on their
claims that defendants’ refusal to provide access to the hearing
notices violates N.C. Gen. Stat. § 132-6(a).
Conclusion
Based on the foregoing reasons, we vacate the trial court’s
order granting plaintiffs a preliminary injunction and remand
for the trial court to enter necessary findings and conclusions
in accordance with this opinion.
VACATED AND REMANDED.
Judges STEELMAN and DIETZ concur.