City of Gastonia v. Balfour Beatty Const. Corp.

• Citation: 222 F.Supp.2d 771
• Decision Date: 25 September 2002
• Docket Number: No. 3:99-CV-398.,3:99-CV-398.
• Court: U.S. District Court — Western District of North Carolina
• Parties: CITY OF GASTONIA, a North Carolina Municipal Corporation, Plaintiff, v. BALFOUR BEATTY CONSTRUCTION CORPORATION, INC., American Home Assurance Company and Federal Insurance Company, Defendants.

222 F.Supp.2d 771

CITY OF GASTONIA, a North Carolina Municipal Corporation, Plaintiff, v. BALFOUR BEATTY CONSTRUCTION CORPORATION, INC., American Home Assurance Company and Federal Insurance Company, Defendants.

No. 3:99-CV-398.

United States District Court, W.D. North Carolina, Charlotte Division.

September 25, 2002.

P. Marshall Yoder, Thomas L. Ogburn, III, John L. Shaw, Poyner & Spruill, Charlotte, NC, Henry M. Whitesides, Whitesides & Kenny, LLP, GAstonia, NC, Dennis J. Redwing, Gastonia, NC, Ash Smith, City Attorney, Gastonia, NC, for Plaintiff.

Aaron E. Bradshaw, Gastonia, NC, Nathan E. Minear, O'Brien, O'Rourke & Hogan, Maitland, FL, James E. Moye, Moye

O'Brien, O'Rourke, Hogan & Pickert, Maitland, Fl, for Defendants.

Perry R. Safran, Safran Law Offices, Raleigh, NC, for Atlantic Coast Mechanical Inc.

ORDER

MULLEN, Chief Judge.

I. INTRODUCTION

THIS MATTER comes before the Court on Plaintiff City of Gastonia's motion for summary judgment and supporting memorandum filed with the Court on May 31, 2002. Defendant and Cross-claimant Balfour Beatty Construction, Inc. (hereinafter "BBCI") filed a response to Plaintiff's motion on July 8, 2002. Gastonia filed a reply to BBCI's response on July 29, 2002.

The original motion for summary judgment requested that this Court find for Plaintiff as a matter of law on three counts (Counts II, IV, and V) of BBCI's counter-claim. Since the original motion, BBCI has moved for voluntary dismissal of Counts IV and V (alleging fraud and negligent misrepresentation, respectively). The Court granted BBCI's motion for voluntary dismissal of these two counts; thus, this Order only addresses Count II of the counterclaim, which alleges intentional interference with contract.

In support of its motion for summary judgment, Gastonia presents three arguments (listed in the order in which the Court will address them): first, Gastonia is protected from BBCI's tort claim by sovereign immunity; second, BBCI's tort claim actually arises out of a contractual dispute and is therefore barred by, what is called in many jurisdictions, the economic loss doctrine; and third, there are not facts in the record from which a reasonable trier of fact could conclude that Gastonia had committed the tort of intentional interference with contract.

II. SUMMARY JUDGMENT STANDARD

Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment may be granted where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A genuine issue exists only if "the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. But the party opposing summary judgment may not rest upon mere allegations or denials, and a "mere scintilla of evidence" is insufficient to overcome summary judgment. Id. at 249-50, 106 S.Ct. 2505. Courts, in considering motions for summary judgment, view the facts and inferences in the light most favorable to the party opposing the motion. Id. at 255, 106 S.Ct. 2505; Miltier v. Beorn, 896 F.2d 848 (4th Cir.1990); Cole v. Cole, 633 F.2d 1083 (4th Cir.1980). Summary judgment, consequently, is proper where "the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there [being] no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (internal quotations omitted). Summary judgment is also proper where the affirmative defense of sovereign immunity precludes liability. Board of Governors of the University of North Carolina v. Helpingstine, 714 F.Supp. 167 (M.D.N.C.1989) (granting summary judgment on the basis of sovereign immunity).

III. SOVEREIGN IMMUNITY

First, the Court will examine Gastonia's argument that it is immune from tort liability under North Carolina's sovereign immunity doctrine. There is no blanket, absolute sovereign immunity for municipal corporations in North Carolina. Rather, immunity for a municipal corporation depends on "the nature of the power that the corporation is exercising." Steelman v. City of New Bern, 279 N.C. 589, 592, 184 S.E.2d 239, 241 (1971) (quoting Moffit v. Asheville, 103 N.C. 237, 254, 9 S.E. 695, 697 (1885)). The general rule, applicable to the instant case, is that immunity is proper where the municipal corporation is exercising its "governmental" function, rather than performing a task that is merely "proprietary." Data General Corporation v. County of Durham, 143 N.C.App. 97, 545 S.E.2d 243 (2001). Gastonia argues that the construction of a water treatment plant, in all its many facets, is a governmental, not proprietary, function. BBCI urges this Court to hold the opposite—that the construction of a water treatment plant, at least that part of the process of construction of a water treatment plant relevant in this case, is an exercise of a municipal corporation's proprietary function not protected from tort liability by sovereign immunity.

The Courts of North Carolina have spent a great deal of time examining the distinction between governmental and proprietary functions. The North Carolina Court of Appeals noted this when it was faced with such a determination in McCombs v. City of Asheboro, 6 N.C.App. 234, 170 S.E.2d 169 (1969). That Court opined that in the several attempts the North Carolina Supreme Court had made at delineating this distinction, the results were not (and should not necessarily be) consistent through time. "The line between powers classed as governmental and those classified as proprietary is none too sharply drawn and seems to be subject to a change in position as society changes and progresses and the concepts of the functions of government are modified." McCombs, 6 N.C.App. at 238, 170 S.E.2d at 172, see also Pulliam v. City of Greensboro, 103 N.C.App. 748, 751, 407 S.E.2d 567, 568 (1991) ("The `application of the [governmental-proprietary distinction] to given factual situations has resulted in irreconcilable splits of authority and confusion as to what functions are governmental and what functions are proprietary'") (quoting Koontz v. City of Winston-Salem, 280 N.C. 513, 186 S.E.2d 897 (1972)).

The Court notes that since it hears this case under its diversity jurisdiction, it is obliged, under the principles of Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), to construe and apply the substantive law of North Carolina. In such a posture, a federal court must "determine the rule that the [state] Supreme Court would probably follow...." Kline v. Wheels by Kinney, 464 F.2d 184, 187 (4th Cir.1972). Therefore, to the extent that North Carolina law is unclear or unsettled, the Court must attempt to predict how the North Carolina Supreme Court would rule, were it faced today with a like issue. Because the North Carolina Supreme Court has not gone through the analysis of the governmental/proprietary dichotomy in many years and because the North Carolina case law is inconsistent, this Court will apply the law as it believes the North Carolina Supreme Court would.

It appears to the Court that it is likely that, if faced with this question today, the North Carolina Supreme Court would make its determination primarily based on whether the function claimed to be immune can only be undertaken by a municipal corporation, or rather, whether it is the type of activity which could be undertaken by an individual or private corporation. Data General Corporation, 143 N.C.App. at 105, 545 S.E.2d at 249. "If the undertaking of the municipality is one in which only a governmental agency could engage, it is governmental in nature. It is proprietary and `private' when any corporation, individual, or group of individuals could do the same thing." Id. (quoting Britt v. City of Wilmington, 236 N.C. 446, 73 S.E.2d 289 (1952)). The North Carolina Supreme Court would likely not look to the function as a large-scale activity, but would look with particularity at the function. That is to say, a Court should not look at the process of construction of a water treatment plant as a whole, but rather should examine the specific portion of the long process of construction for which immunity is claimed. This reflects the fact that North Carolina courts recognize that certain aspects of an activity can be considered governmental, while other aspects of the same activity are considered proprietary. Faw v. Town of Wilkesboro, 253 N.C. 406, 117 S.E.2d 14 (1960). Additionally, there is no reason to believe that the North Carolina Supreme Court would decide that the distinction between governmental and proprietary functions is determined solely based on whether the...