Cooper v. Berger

Decision Date18 December 2020
Docket NumberNo. 315PA18-2,315PA18-2
Parties Roy A. COOPER, III, individually and in his official capacity as Governor of the State of North Carolina v. Philip E. BERGER, in his official capacity as President Pro Tempore of the North Carolina Senate; Timothy K. Moore, in his official capacity as Speaker of the North Carolina House of Representatives; Charlton L. Allen, in his official capacity as Chair of the North Carolina Industrial Commission; and Yolanda K. Stith, in her official capacity as Vice-Chair of the North Carolina Industrial Commission
CourtNorth Carolina Supreme Court

Daniel F. E. Smith, Jim W. Phillips, Jr., Greensboro, and Eric M. David, Raleigh, for plaintiff-appellant Roy Cooper, Governor of the State of North Carolina.

Nelson Mullins Riley & Scarborough LLP, Raleigh, by D. Martin Warf and Noah H. Huffstetler, III, for defendants-appellee Philip E. Berger and Timothy K. Moore.

K&L Gates LLP, by Matthew T. Houston, Raleigh, and Zachary S. Buckheit, for amicus curiae North Carolina Chamber Legal Institute.

Joshua H. Stein, Attorney General, by Ryan Y. Park, Solicitor General; James W. Doggett, Deputy Solicitor General; and Daniel P. Mosteller, Special Deputy Attorney General, for amicus curiae State of North Carolina.

ERVIN, Justice.

The issue before us in this case is the extent to which the Governor of the State of North Carolina, as compared to the North Carolina General Assembly, has the authority to determine the manner in which monies derived from three specific federal block grant programs should be distributed to specific programs. After careful consideration of the record in light of the applicable law, we hold that the General Assembly did not overstep its constitutional authority by appropriating the relevant federal block grant money in a manner that differs from the Governor's preferred method for distributing the funds in question. As a result, the Court of Appeals’ decision upholding the trial court's decision to grant judgment on the pleadings in favor of the legislative defendants and against the Governor in this case is affirmed.

I. Factual Background
A. Substantive Facts

In March of 2017, plaintiff-appellant Roy A. Cooper, III, acting in his capacity as the duly-elected Governor, submitted a recommended budget to the General Assembly in which he suggested that funds derived from three specific federal block grant programs be spent in a particular manner. More specifically, the Governor recommended (1) that monies received from the Community Development Block Grant (CDBG) program be spent in such a manner that $10,000,000 would be allocated to "Scattered Site Housing" projects, $13,737,500 would be allocated to "Economic Development" projects, and $18,725,000 would be allocated to "Infrastructure" projects; that monies received from the Substance Abuse Block Grant (SABG) program be spent in such a manner that $29,322,717 would be allocated to projects related to "Substance Abuse Treatment for Children and Adults"; and that monies received from the Maternal and Child Health Block Grant (MCHBG) program be spent in such a manner that $14,070,680 would be allocated to projects related to "Women and Children's Health Services."

On 22 June 2017, the General Assembly adopted Senate Bill 257, which approved a state budget for the 20172019 biennium. Although the Governor vetoed Senate Bill 257, the General Assembly overrode the Governor's veto, so that the legislation in question became law as Session Law 2017-57. In its approved budget, the General Assembly redirected approximately $13,000,000 in funds derived from the CDBG program, $2,200,000 in funds derived from the SABG program, and $2,300,000 in funds derived from the MCHBG program to projects selected by the General Assembly. More specifically, Session Law 2017-57 redirected funds derived from the CDBG program to "Neighborhood Revitalization" projects and away from "Scattered Site Housing," "Economic Development," and "Infrastructure" projects; redirected funds derived from the SABG program to "Competitive Block Grant" projects and away from "Substance Abuse Treatment Services for Children and Adults" projects; and redirected funds derived from the MCHBG program to a "Perinatal Strategic Plan Support Position" project and the "Every Week Counts" project and away from "Women and Children's Health Services" projects. 2017 N.C. Sess. Laws 57 §§ 11A.14.(a), 11L.1.(a), 11L.1.(y)(z), 11L.1.(aa)(ee), 15.1.(a), 15.1.(d).

B. Procedural History
1. Trial Court Proceedings

On 26 May 2017 the Governor filed a complaint against defendants Philip E. Berger, in his official capacity as President Pro Tempore of the North Carolina Senate; Timothy K. Moore, in his official capacity as the Speaker of the North Carolina House of Representatives; and two additional defendants, in their capacities as officials of the North Carolina Industrial Commission.1 In his original complaint, the Governor challenged the constitutionality of two state session laws and six state statutes that had been enacted by the General Assembly in late 2016 and early 2017 immediately prior to and shortly after the Governor took office on the grounds that the challenged legislation unconstitutionally curtailed the Governor's authority as defined in the North Carolina State Constitution. On 8 August 2017, the Governor filed an amended complaint in which he added claims challenging the constitutionality of the 2017–19 state budget as enacted in Session Law 2017-57. On 14 September 2017, the legislative defendants filed a responsive pleading in which they moved for dismissal of the Governor's amended complaint, denied the material allegations set out in the amended complaint, and asserted various affirmative defenses.

On 16 March 2018, the Governor filed a motion seeking the entry of summary judgment in his favor with respect to two of the claims asserted in his amended complaint, including his challenge to the constitutionality of the enacted state budget and the reallocation of the monies derived from the CDBG program, the SABG program, and the MCHBG program. On 19 March 2018, the legislative defendants filed a motion seeking the entry of judgment on the pleadings in their favor with respect to the same claims.

On 4 April 2018, the pending motions came on for hearing before the trial court. On 9 April 2018, the trial court entered an order granting the legislative defendantsmotion for judgment on the pleadings and dismissing the relevant claims as set forth in the amended complaint on the grounds that the disputed block grant funds were "designated for the State of North Carolina [to] be paid into the State treasury" and that, in accordance with N.C. Const. art., V, § 7, "no money can be drawn from the State treasury without an appropriation" by the General Assembly. The Governor noted an appeal to the Court of Appeals from the trial court's order.

2. Appellate Proceedings

In seeking relief from the order before the Court of Appeals, the Governor argued that the General Assembly did not have the authority to appropriate the relevant block grant funds by passing Session law 2017-57 on the theory that the funds in question were not contained "within" the State treasury. After conceding that, in accordance with the North Carolina State Constitution, money entering the State treasury can only be appropriated in accordance with legislation adopted by the General Assembly, such as the state budget, the Governor argued that the block grant funds at issue in this case never entered the State treasury. As support for this contention, the Governor relied upon this Court's decision in Gardner v. Bd. of Trustees of N.C. Local Governmental Employees’ Ret. Sys. , 226 N.C. 465, 468, 38 S.E.2d 314, 316 (1946), which described the "State treasury" as "[m]onies paid into the hands of the state treasurer by virtue of a state law " (emphasis added). According to the Governor, the block grant funds at issue in this case were raised and appropriated by federal, rather than state, law and should, for that reason, be treated as "custodial funds" that are "beyond the legislative power of appropriation." Arguing in reliance upon the Colorado Supreme Court's decision in Colo. Gen. Assembly v. Lamm , 700 P.2d 508, 524–25 (Colo. 1985) ( Lamm I ), the Governor asserts that custodial funds are monies that are "not generated by tax revenues" and have been "given to the state for particular purposes," a set of circumstances that places them outside the reach of the General Assembly's appropriation power and makes them subject to executive branch, rather than legislative branch, control.

On the other hand, the legislative defendants argued that the named recipient of the relevant block grant funds was "the State of North Carolina" and that, "[a]s such, the funds come into the State treasury and are properly subject to legislative appropriation, pursuant to Article V, Section 7(1) of the North Carolina Constitution," which provides that "[n]o money shall be drawn from the State treasury but in consequence of appropriations made by law." As a result, the legislative defendants urged the Court of Appeals to affirm the trial court's order.

In affirming the trial court's order, the Court of Appeals began by analyzing the history and purpose of federal block grant programs. According to the Court of Appeals, the federal government had expanded the number of block grants over time on the theory that they "provided state and local governments additional flexibility in project selection" as compared to other types of grants. Cooper v. Berger , 268 N.C.App. 468, 837 S.E.2d 7, 13 (2019) ( Cooper II ) (quoting Robert Jay Dilger & Michael H. Cecire, Cong. Research Serv., R40638, Federal Grants to State and Local Governments: A Historical Perspective on Contemporary Issues 39 (2019)). In addition, the Court of Appeals noted that, in the statutory provisions governing the relevant block grant programs, Congre...

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