Faulkenbury v. Teachers' and State Employees' Retirement System of North Carolina

• Decision Date: 05 January 1993
• Docket Number: No. 9110SC1023,9110SC1023
• Citation: 424 S.E.2d 420,108 N.C.App. 357
• Parties: , 80 Ed. Law Rep. 297 Dorothy M. FAULKENBURY, on behalf of herself and all others similarly situated, Plaintiffs, v. TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM OF NORTH CAROLINA, a corporation; Board of Trustees Teachers' and State Employees' Retirement System of North Carolina, a body politic and corporate; Dennis Ducker, Director of the Retirement Systems Division and Deputy Treasurer of the State of North Carolina (in his individual and official capacities); Harlan E. Boyles, Treasurer of the State of North Carolina and Chairman of the Board of Trustees Teachers' and State Employees' Retirement System of North Carolina (in his individual and official capacities); and State of North Carolina, Defendants.
• Court: North Carolina Court of Appeals

Page 420

424 S.E.2d 420

108 N.C.App. 357, 80 Ed. Law Rep. 297

Dorothy M. FAULKENBURY, on behalf of herself and all others similarly situated, Plaintiffs, v. TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM OF NORTH CAROLINA, a corporation; Board of Trustees Teachers' and State Employees' Retirement System of North Carolina, a body politic and corporate; Dennis Ducker, Director of the Retirement Systems Division and Deputy Treasurer of the State of North Carolina (in his individual and official capacities); Harlan E. Boyles, Treasurer of the State of North Carolina and Chairman of the Board of Trustees Teachers' and State Employees' Retirement System of North Carolina (in his individual and official capacities); and State of North Carolina, Defendants.

No. 9110SC1023.

Court of Appeals of North Carolina.

Jan. 5, 1993.

Marvin Schiller and Womble Carlyle Sandridge & Rice by G. Eugene Boyce and Donald L. Smith, Raleigh, for plaintiffs-appellees.

Attorney Gen. Lacy H. Thornburg by Sp. Deputy Atty. Gen. Tiare B. Smiley, Sp. Deputy Atty. Gen. Norma S. Harrell, and Asst. Atty. Gen. Alexander McC. Peters, Raleigh, for defendants-appellants.

LEWIS, Judge.

By this action for declaratory judgment and damages the plaintiffs challenge an amendment, effective 1 July 1982, to the teachers' and State employee's retirement disability statute enacted by the North Carolina General Assembly. The trial court granted the plaintiffs' motion for class certification, and denied defendants' motions to dismiss the lawsuit. From these orders defendants appealed to this Court.

Plaintiff Dorothy M. Faulkenbury was a public school teacher who retired on disability at age 53 in 1983. Because her years of service as of 1 July 1982 and at the time of her retirement were more than five years, she was a vested member of the Teachers' and State Employees' Retirement System of North Carolina ("Retirement System"), N.C.G.S. § 135-5(a)(1), and was eligible for a disability retirement pension pursuant to N.C.G.S. § 135-5.

Plaintiffs contend that the method in N.C.G.S. § 135-5(d4), the amended statute, for calculating disability retirement benefits unconstitutionally gives them lower benefits than they would have received had the former method of calculation found in N.C.G.S. § 135-5(d3) been used. Under N.C.G.S. § 135-5(d3), benefits for a vested employee retiring on disability were calculated as if the employee had worked to the age of 65 years; or, the employee enjoyed unlimited creditable service to 65 years of age. Under (d4), benefits are calculated with a limit: as if the employee worked to age 65 or worked thirty years, whichever comes first. Plaintiff Faulkenbury alleges that because of this statutory modification, and because there was no "grandfather clause" in place to protect her rights as vested before the amendment, her disability retirement benefit has been underpaid by approximately $76.79 each month. Upon plaintiff Faulkenbury's motion, the trial court certified the suit as a class action, thereby bringing in all persons whose rights had vested under the former statute but who have received disability retirement benefits pursuant to § 135-5(d4).

In this action, the plaintiffs allege that the statutory modification violates their due process and equal protection rights under 42 U.S.C. § 1983; that it constitutes an unconstitutional impairment of the obligations of contracts under Article I, Section 10 of the United States Constitution; and that it constitutes a breach of fiduciary duty. The plaintiffs also allege violations of the North Carolina Constitution, specifically, Article I, Sections 1 and 19, and a violation of N.C.G.S. Chapter 128.

For these alleged wrongs, the plaintiffs seek a declaratory judgment stating that N.C.G.S. § 135-5(d4) is unconstitutional as applied to them and that they are entitled to receive disability benefits calculated under N.C.G.S. § 135-5(d3). Plaintiffs request a constructive or resulting trust be impressed upon all funds held by defendants to which plaintiffs claim entitlement. Finally, plaintiffs' complaint states, "This is a Complaint for damages and other relief, including 42 U.S.C. § 1983, a Class Action and Action for a Declaratory Judgment pursuant to N.C.G.S. § 1-253 et seq., and for a Writ of Mandamus or other appropriate order."

Plaintiffs brought this action against several parties: the State of North Carolina; the Teachers' and State Employees' Retirement System of North Carolina, a corporation established under N.C.G.S. § 135-2; and its Board of Trustees. See N.C.G.S. §§ 135-6, 7(a). Plaintiffs also sued Dennis Ducker, the Director of the Retirement Systems Division and Deputy Treasurer of the State of North Carolina, and Harlan E. Boyles, the Treasurer of the State of North Carolina and Chairman of the Retirement System's Board of Trustees.

Plaintiffs sued defendants Ducker and Boyles in both their individual and official capacities. However, on 30 August 1991, after the notice of appeal was filed by defendants, the plaintiffs filed a notice of voluntary dismissal without prejudice as to the claims they asserted against Ducker and Boyles in their individual capacities only.

A plaintiff may take a voluntary dismissal without prejudice at any time before it rests. N.C.G.S. § 1A-1, Rule 41(a) (1990). The case law is clear that a voluntary dismissal prior to the entry of final judgment is proper. See In re Estate of Tucci, 104 N.C.App. 142, 149, 408 S.E.2d 859, 864 (1991), rev. dismissed, 331 N.C. 749, 417 S.E.2d 236 (1992). There has been no final judgment rendered here, nor have the plaintiffs rested.

Furthermore, while it is true the general rule is that once an appeal is perfected, the lower court is divested of jurisdiction, Wiggins v. Bunch, 280 N.C. 106, 184 S.E.2d 879 (1971), the lower court nonetheless retains jurisdiction to take action which aids the appeal, id. at 111, 184 S.E.2d at 881, and to hear motions and grant orders, so long as they do not concern the subject matter of the suit and are not affected by the judgment appealed from. N.C.G.S. § 1-294 (1983); Herring v. Pugh, 126 N.C 852, 36 S.E. 287 (1900); see also Hightower v. Hightower, 85 N.C.App. 333, 354 S.E.2d 743, cert. denied, 320 N.C. 792, 361 S.E.2d 76 (1987) (after entry of judgment and notice of appeal, trial court retains authority to approve the judgment and direct its filing). We are not convinced that the plaintiffs' voluntary dismissal as to two of the present defendants in their individual capacities affects the subject matter of the action, nor are we persuaded that the dismissal is in actuality an attempt to amend the complaint. We find the voluntary dismissal under Rule 41 to be proper and defendants' appeal on that issue is dismissed.

Defendants argue that it was improper for the plaintiffs to bring an action immediately to the court system. However, our Supreme Court, in a per curiam decision, implicitly recognized an exception to the administrative exhaustion requirement. In Snuggs v. Stanly County Dep't of Pub. Health, 310 N.C. 739, 314 S.E.2d 528 (1984), the Supreme Court allowed the defendants' motions, which it treated as motions to dismiss for failure to state a claim upon which relief may be granted under Rule 12(b)(6). The Court held the motions must be allowed since "plaintiffs ha[d] failed to allege that they do not have adequate remedies under State law which provide due process." Id. at 740, 314 S.E.2d at 529 (citations omitted). In Snuggs, the plaintiffs, after being dismissed from their jobs, appealed to the State Personnel Commission. While that appeal was pending, plaintiffs instituted a 42 U.S.C. § 1983 action in Stanly County Superior Court.

Snuggs is similar to the case at bar. In both cases, plaintiffs failed to exhaust their administrative remedies before seeking judicial review on a section 1983 question. In both cases, defendants filed motions to dismiss. In Snuggs, the Court upheld the lower court's granting the motion, reasoning that the plaintiffs had failed to allege inadequate remedies. However, the case at bar differs in that plaintiffs, in their complaint, have specifically alleged inadequacy and futility of administrative review, by stating that "Dennis Ducker, ... the person who would conduct the administrative review, does not have the jurisdiction or authority to rule upon the constitutionality of the statute." We therefore hold that, pursuant to Snuggs, the plaintiffs' failure to pursue their alleged rights using the administrative process is not fatal to their case.

I. § 1983

AND THE IMMUNITY DEFENSES

Defendants filed Rule 12(b) motions to dismiss the complaint which the Superior Court denied. The defendants attack the validity of plaintiffs' 42 U.S.C. § 1983 cause of action on essentially three bases: (A) the doctrines of qualified and official immunity shield the defendants from suit brought under the theories of section 1983 and any state law claims; (B) defendants are not "persons" subject to suit within the meaning of section 1983; and (C) the doctrine of sovereign immunity bars suit against the defendants.

Plaintiffs, by separate motion dated 11 October 1991, asked this Court to dismiss defendants' appeal on the above issues. The plaintiffs primarily characterize the appeal as interlocutory. It is generally true that a denial of a motion to dismiss is interlocutory and hence not immediately appealable. See Zimmer v. North Carolina Dep't of Transp., 87 N.C.App. 132, 133-34, 360 S.E.2d 115, 116 (1987) (recognizing the general rule but holding that the doctrine of sovereign immunity presents a personal jurisdiction question and as a result the denial of a motion to dismiss on this basis is immediately appealable). However, our Supreme Court has recently held that the denial of a motion for summary judgment affects a substantial right and therefore is immediately appealable where the motion was based upon an immunity defense to a ...