Daedalus, LLC v. City of Charlotte
| Decision Date | 05 April 2022 |
| Docket Number | COA21-329 |
| Parties | DAEDALUS, LLC, and Epcon Communities Carolinas, LLC, Plaintiffs, v. CITY OF CHARLOTTE, Defendant. |
| Court | North Carolina Court of Appeals |
Milberg Coleman Bryson Phillips Grossman, PLLC, by James R. DeMay, Concord, Daniel K. Bryson, Martha A. Geer, Mark R. Sigmon, John Hunter Bryson, Raleigh, and Scarbrough, Scarbrough & Trilling, PLLC, Concord, by James E. Scarbrough, John F. Scarbrough, and Madeline J. Trilling, and Shipman & Wright, LLP, Wilmington, by Gary K. Shipman and William G. Wright, for Plaintiffs-Appellees.
Cranfill Sumner LLP, by Steven A. Bader, Raleigh, Patrick H. Flanagan, and Stephanie H. Webster, Charlotte, for Defendant-Appellant.
¶ 1 City of Charlotte (Defendant) appeals from Order entered in favor of Daedalus, LLC, Epcon Communities, LLC, and NVR, INC., (collectively Plaintiffs) on 18 March 2021 partially granting Plaintiffs’ Motion for Summary Judgment. The Record before us reflects the following:
¶ 2 Defendant, a municipality organized under the laws of North Carolina, enacted an ordinance for the collection of water and sewage capacity fees.
¶ 3 At all relevant times, this Ordinance—Charlotte's City Ordinance § 23-12—mandated:
Each applicant for water or sewer service shall pay the applicable capacity charge for the type and size of service connection requested. The capacity charge shall be arrived at in accordance with the water and sewer rate methodology documents as set forth in the schedule of current rates, fees, and charges.
As provided for in the Ordinance, Defendant determines the capacity fee amount utilizing the water and sewer rate methodology set forth in the Charlotte-Mecklenburg Utility Department Revenue Manual (Revenue Manual). The Revenue Manual provides:
Capacity fees are one time fees paid at the time of application for a new service and are charged to pay for a portion of the capital costs associated with providing capacity to serve new growth.
The Revenue Manual also instructs Defendant to calculate the fees using the "buy-in" method. The "buy-in" method establishes the amount of the fee based on "the unit cost of capacity of the water and sewer system in a way that results in the cost of capacity being equal to that which existing customers of the system have paid."
¶ 4 The capacity fees are calculated and paid at the time property owners apply for new water and sewer service. Defendant also required property owners to pay a separate "connection fee" or "tap fee" to cover the cost of actually connecting the property to the water and sewer systems. Upon receipt of the capacity fee and connection/tap fee, Defendant began working to establish the connection—a process that typically took between four to six weeks. After property owners connect to the water and sewer system, they pay user rates based on their use of the water and sewer system. Defendant's ordinances state user rates should be used to pay for the debt incurred for construction of the water and sewer system, as well as for operation and maintenance expenses:
¶ 5 While Defendant used the connection/tap fees to cover the costs associated with connecting the property to the infrastructure and the user fees to cover the costs associated with maintaining the infrastructure, Defendant does not have a stated use for the capacity fees. Instead, Defendant deposits the fees into its general water and sewer fund and "carries [the monies] forward over time." Defendant does not currently have a plan for spending the carried over monies, and instead, merely stated the funds would be spent by Defendant to "fund future operations."
¶ 6 Plaintiffs are developers/home builders who paid these capacity fees to Defendant in the fiscal years 2016-2018 as a mandatory precondition of connecting to Defendant's existing water and sewer infrastructure. The current litigation arose when Plaintiffs filed a Complaint on 5 November 2018, alleging Defendant's collection of capacity fees for the fiscal years 2016-2018 constituted an unlawful ultra vires action. On 13 September 2019, Plaintiff filed a Second Amended and Supplemental Complaint,1 alleging the collection of capacity fees for the fiscal years 2019-2020 constituted an unlawful ultra vires action, or in the alternative, the fees violated Plaintiffs’ equal protection and substantive due process rights because the fees charged had no reasonable relationship or rational nexus to the impact, if any, that new customers have on Defendant's water or sewer systems.
¶ 7 After Plaintiffs filed their Second Amended Complaint on 13 September 2019, Defendant filed an Answer on 23 October 2019. Thereafter, both parties filed motions for summary judgment. The trial court heard the matter on 18 December 2019 and issued an Order Partially Granting Plaintiffs’ Motion for Summary Judgment and Partially Granting Defendant's Motion for Summary Judgment on 2 October 2020. With regard to the capacity fees collected during the fiscal years 2016, 2017, and 2018, the trial court found "there are no genuine issues of material fact[,]" and concluded the assessment and collection of capacity fees during the fiscal years 2016, 2017, and 2018 were ultra vires. With regard to Plaintiffs’ Second Claim for Relief, the alleged ultra vires action of collecting capacity fees during fiscal years 2019 and 2020, the trial court found "there are genuine issues" of material fact and scheduled the matter for trial. However, the trial court also concluded Defendant's assessment and collection of capacity fees during the fiscal years 2019 and 2020 are "not an exaction constituting a governmental taking and Plaintiffs have an adequate remedy at law."
¶ 8 After the entry of the Order, Plaintiffs, with Defendant's consent, filed a Motion to Amend Order to Correct Clerical Error pursuant to Rule 60(a) on 27 October 2020. In the Motion to Amend, Plaintiffs identified several clerical errors in the Order, including references to fiscal years 2018 and 2019, as opposed to fiscal years 2019 and 2020, and references to "Defendant's Claims for Relief," instead of "Plaintiffs’ Claims for Relief." In response to the Rule 60(a) Motion, the trial court issued an Amended Order on 4 November 2020.
¶ 9 On the same day, Defendant filed a Motion for Certification of Judgment requesting the trial court certify the Order for immediate appeal with no just reason for delay pursuant to Rule 54(b). Plaintiffs consented to the Motion to Certify in a Joint Motion to Amend Order filed on 17 March 2021. The Joint Motion to Amend also moved for amendment of the Order pursuant to Rule 60(a) in order to clarify that "a neutral, third-party Referee under Rule 53 [should] calculate the amount of refunded capacity fees plus interest to class members" and add language stating, "that this Order is certified for appeal with no just reason for delay pursuant to Rule 54(b) of the Rules of Civil Procedure." In response to the Joint Motion, the trial court entered the Second Amended Order on 18 March 2021. Thereafter, on 14 April 2021, Defendant filed Notice of Appeal from the Second Amended Order.
¶ 10 Plaintiffs and Defendant acknowledge the Order appealed from is interlocutory, as the referee has not yet calculated the damages for the years 2016-2018 and the ultra vires claim for the years 2019-2020 has not yet been resolved. Nevertheless, Defendant contends they are entitled to immediate appellate review because (1) the trial court certified the order for immediate review under Rule 54(b) ; (2) the Order affects a substantial right because after the referee's final ruling, Defendant will be required to pay a significant sum of money to Plaintiffs; and (3) Defendant filed a separate petition for a writ of certiorari under North Carolina Rule of Civil Procedure 21 contemporaneously with this brief.
¶ 11 "[A]ppeal lies of right directly to the Court of Appeals ... from any final judgment of a superior court ..." N.C. Gen. Stat. § 7A-27(b)(1) (2021). "A final judgment is one which disposes of the cause as to all the parties, leaving nothing to be judicially determined between them in the trial court." Veazey v. Durham , 231 N.C. 357, 361-62, 57 S.E.2d 377, 381 (1950) (citation omitted). Whereas, "[a]n interlocutory order is one made during the pendency of an action, which 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." Id. at 362, 57 S.E.2d at 381.
¶ 12 Generally, there is no right to appeal from an interlocutory order. Jeffreys v. Raleigh Oaks Joint Venture , 115 N.C. App. 377, 379, 444 S.E.2d 252, 253 (1994). "However, immediate appeal of interlocutory orders and judgments is available in at least two instances: when the trial court certifies, pursuant to N.C.G.S. § 1A-1, Rule 54(b), that there is no just reason for delay of the appeal; and when the interlocutory order affects a substantial right under N.C.G.S. §§ 1-277(a) and 7A-27(d)(1)." Turner v. Hammocks Beach Corp. , 363 N.C. 555, 558, 681 S.E.2d 770, 773 (2009) (citation and quotation marks omitted).
¶ 13 Here, the trial court did not certify this case for immediate...
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