Petroleum Traders Corp. v. State, COA07-1176.

Citation660 S.E.2d 662
Decision Date20 May 2008
Docket NumberNo. COA07-1176.,COA07-1176.
CourtCourt of Appeal of North Carolina (US)
PartiesPETROLEUM TRADERS CORPORATION, an Indiana corporation, and others similarly situated, Plaintiffs, v. STATE of North Carolina, Michael F. Easley, Governor of the State of North Carolina, E. Norris Tolson, Secretary of Revenue of the State of North Carolina, The Department of Revenue of the State of North Carolina, Britt Cobb, Secretary of Administration of the State of North Carolina, The Department of Administration of the State of North Carolina, George J. Bakolia, Chief Information Officer for the State of North Carolina, The Office of Information Technology Services of the State of North Carolina, Robert L. Powell, Controller of the State of North Carolina, and The Office of the State Controller for North Carolina, Defendants.

Locke Reynolds, LLP, by Michael S. Elvin, Pro Hac Vice, Fort Wayne; and Boyce & Isley, PLLC, by G. Eugene Boyce and Philip R. Isley, Raleigh, for Plaintiff-Appellees.

Attorney General Roy Cooper, by Special Deputy Attorney General Ronald M. Marquette, and Special Deputy Attorney General Karen E. Long, for Defendant-Appellants.

ARROWOOD, Judge.

Plaintiff, Petroleum Traders Corporation, is an Indiana corporation that sells gasoline and diesel fuel to its customers, which include the State of North Carolina and various municipalities and governmental entities. Defendants are the Governor of North Carolina; the North Carolina Department of Administration and the Department of Revenue; the North Carolina Office of Information Technology and Office of State Controller; and the officials in charge of these agencies. Defendants appeal from the trial court's denial of their motion to dismiss Counts I and II of Plaintiff's complaint. We reverse.

For purposes of the issues raised on appeal, the pertinent facts are largely undisputed and may be summarized as follows: Plaintiff previously has executed contracts for the sale of fuel to the State of North Carolina or its governmental entities and agencies (North Carolina). Such contracts are awarded under competitive bidding procedures. Several years ago, North Carolina instituted an online bidding process called "E-Procurement," and the state now requires vendors such as Plaintiff to submit bids online using the E-Procurement website. Although vendors are not charged for using the E-Procurement website, the winning bidder is charged an E-Procurement marketing fee of 1.75% of the contract amount. This fee is authorized by N.C. Gen.Stat. § 66-58.12 (2007), which provides in pertinent part that:

(a) Public agencies are encouraged to maximize citizen and business access to their services through the use of electronic and digital transactions....

(b) An agency may charge a fee to cover its costs of permitting a person to complete a transaction through the World Wide Web or other means of electronic access....

The E-Procurement website states that this fee "helps pay for the development and ongoing operations of the North Carolina E-Procurement Service; this includes the services required to effectively implement an initiative of this size, develop and execute training required for both buyers and suppliers, and provide the ongoing maintenance and services needed to sustain the Service." Plaintiff has been awarded contracts for which it was charged the E-Procurement marketing fee.

On 19 July 2006 Plaintiff filed suit against Defendants, in a complaint alleging in pertinent part that: (1) vendors are required to use the E-Procurement system to bid on public contracts in North Carolina; (2) successful bidders are charged an E-Procurement fee in the amount of 1.75% of the total dollar amount of the contract; (3) the dollar amount of E-Procurement fees that are collected is far greater than the amount needed to maintain the E-Procurement system; and that (4) "on information and belief" some of the monies collected as E-Procurement fees have been used to supplement the State's general operating funds and to subsidize shortfalls in its general operating budget. Plaintiff brought the following claims against Defendants:

1. Count I seeks a declaratory judgment that the E-Procurement fee "is a tax not a fee" and that, as a tax "not enacted by the Legislature," it violates Art. II, § 23 of the North Carolina Constitution.

2. Count II is a claim under N.C. Gen. Stat. § 105-267 for refund of the "unconstitutional taxes" that Plaintiff alleges it paid in the form of E-Procurement fees.

3. Count III seeks a declaratory judgment that the E-Procurement fee violates the Commerce Clause of the U.S. Constitution.

4. Count IV seeks a declaratory judgment that the E-Procurement fee violates the Takings Clauses of the U.S. and North Carolina Constitutions.

5. Count V seeks release of certain public records.

On 14 September 2006 Defendants filed a motion to dismiss Plaintiff's action, under N.C. Gen.Stat. § 1A-1, Rule 12(b)(1), (2), and (6) (2007). Defendants asserted, inter alia, that Counts I through IV were barred by sovereign immunity; that G.S. § 105-267 did not apply to Count II; and that Count V was moot. On 31 May 2007 the trial court issued a ruling stating its intention to allow Defendants' motion to dismiss as to Counts III, IV, and V, and to deny Defendants' motion for dismissal as to Counts I and II. The trial court ruled that the doctrine of sovereign immunity did not bar Count I or II of Plaintiff's complaint. On 26 June 2007 the trial court entered an order dismissing Counts III, IV, and V, and denying Defendants' motion to dismiss Counts I and II. From this order Defendants have appealed.

Preliminarily, we note that although Defendants' appeal is interlocutory, it is properly before us because "orders denying dispositive motions grounded on the defense of governmental immunity are immediately reviewable as affecting a substantial right." Hedrick v. Rains, 121 N.C.App. 466, 468, 466 S.E.2d 281, 283 (1996).

Defendants argue that the trial court erred by denying their motion to dismiss for lack of jurisdiction based on the affirmative defense of sovereign immunity. Defendants assert that they did not expressly waive sovereign immunity; that there is no statutory waiver applicable to Plaintiff's claims; and that the common law waiver of sovereign immunity identified in Corum v. University of North Carolina, 330 N.C. 761, 413 S.E.2d 276 (1992), does not apply to Plaintiff's claims. We agree.

"The standard of review on appeal from a motion to dismiss is de novo." N.C. Ins. Guar. Ass'n v. Bd. of Trs. of Guilford Tech. Cmty. College, ___ N.C.App. ___, ___, 648 S.E.2d 859, 860 (2007) (citing Hatcher v. Harrah's N.C. Casino Co., LLC, 169 N.C.App. 151, 155, 610 S.E.2d 210, 212 (2005)). "Under a de novo review, the [C]ourt considers the matter anew and freely substitutes its own judgment for that of the [trial court]." In re Greens of Pine Glen Ltd. P'ship, 356 N.C. 642, 647, 576 S.E.2d 316, 319 (2003) (citations omitted).

"`As a general rule, the doctrine of governmental, or sovereign immunity bars actions against, inter alia, the state, its counties, and its public officials sued in their official capacity.'" Herring v. Winston-Salem/Forsyth County Bd. of Educ., 137 N.C.App. 680, 683, 529 S.E.2d 458, 461 (2000) (quoting Messick v. Catawba County, 110 N.C.App. 707, 714, 431 S.E.2d 489, 493 (1993)). Thus, "a state may not be sued ... unless it has consented by statute to be sued or has otherwise waived its immunity from suit." Battle Ridge Cos. v. N.C. Dep't of Transp., 161 N.C.App. 156, 157, 587 S.E.2d 426, 427 (2003) (citations omitted).

In the instant case, Defendants are state agencies and officials sued in their official capacity. Defendants did not expressly waive sovereign immunity. Accordingly, in the absence of a statutory or implied waiver, Plaintiff's claims are barred by the defense of sovereign immunity.

We first consider whether there is a statutory waiver applicable to Plaintiff's claims. Count I is brought under N.C. Gen.Stat. § Declaratory Judgment Act, N.C. Gen.Stat. §§ 1-253 to 1-267 (2007). Defendants assert that the Declaratory Judgment Act does not waive sovereign immunity, and Plaintiff concedes that it "has not relied on the Declaratory Judgment Act to establish the absence of sovereign immunity." Count II seeks relief under N.C. Gen.Stat. § 105-267 (2007). Defendants assert that G.S. § 105-267 waives sovereign immunity only for claims against the Secretary of Revenue for the refund of taxes, as defined by statute, and argue that, although N.C. Gen.Stat. § 105-267 provides a limited waiver of sovereign immunity, it "does not waive immunity for the particular claim made by Plaintiff." Plaintiff does not challenge this assertion. We conclude that sovereign immunity is not waived by either of the statutes under which Plaintiff has filed Count I and II.

We next consider the possibility of a non-statutory waiver of sovereign immunity. Plaintiff argues that it has a "common law basis" for its claim, based on a waiver of sovereign immunity that was judicially created in Corum. The Corum plaintiff asserted a violation of his right to freedom of speech, a personal right guaranteed by the N.C. Constitution. Corum recognized a direct cause of action under the N.C. Constitution for alleged violation of personal rights granted by the Declaration of Rights, and held that this cause of action was not barred by sovereign immunity.

Plaintiff's complaint does not allege a violation of any right in the N.C. Constitution's Declaration of Rights. Instead, Plaintiff's complaint alleges a violation of North Carolina Constitution Art. II, Section 23, which provides that:

No law shall be enacted to raise money on the credit of the State, or to pledge the faith of the State directly or indirectly for the...

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