Sanders v. State Personnel Com'n

• Decision Date: 01 May 2007
• Docket Number: No. COA06-149.,COA06-149.
• Court: North Carolina Court of Appeals
• Parties: Lula SANDERS, Cynthia Eure, Angeline McInerny, Joseph C. Mobley, on behalf of themselves and others similarly situated, Plaintiffs, v. STATE PERSONNEL COMMISSION, a body politic; Office of State Personnel, a body politic; Thomas H. Wright, State Personnel Director (in his official capacity); Teachers' and State Employees' Retirement System of North Carolina, a body politic and corporate; Michael Williamson, Director of the Retirement System Division and Deputy Treasurer of the State of North Carolina (in his official capacity); Richard H. Moore, Treasurer of the State of North Carolina and Chairman of the Board of Trustees of the Retirement System (in his official capacity); Temporary Solutions, a subdivision of the Office of State Personnel, and State of North Carolina, Defendants.

644 S.E.2d 10

Lula SANDERS, Cynthia Eure, Angeline McInerny, Joseph C. Mobley, on behalf of themselves and others similarly situated, Plaintiffs, v. STATE PERSONNEL COMMISSION, a body politic; Office of State Personnel, a body politic; Thomas H. Wright, State Personnel Director (in his official capacity); Teachers' and State Employees' Retirement System of North Carolina, a body politic and corporate; Michael Williamson, Director of the Retirement System Division and Deputy Treasurer of the State of North Carolina (in his official capacity); Richard H. Moore, Treasurer of the State of North Carolina and Chairman of the Board of Trustees of the Retirement System (in his official capacity); Temporary Solutions, a subdivision of the Office of State Personnel, and State of North Carolina, Defendants.

No. COA06-149.

Court of Appeals of North Carolina.

May 1, 2007.

Appeal by plaintiffs from order entered 22 September 2005 by Judge J.B. Allen, Jr. in Wake County Superior Court. Heard in the Court of Appeals 13 September 2006.

Kilpatrick Stockton, LLP, by Gregg E. McDougal, David C. Lindsay, Robert G. Hensley, Jr., Raleigh, Jim Kelly, and Adam Charnes, Winston-Salem, and North Carolina Justice Center, by Jack Holtzman, Raleigh, for plaintiffs-appellants.

Attorney General Roy Cooper, by Special Deputy Attorney General Norma S. Harrell and Special Deputy Attorney General Lars F. Nance, for defendants-appellees.

State Employees Association of North Carolina, Inc., by Thomas A. Harris, General Counsel, for Amicus Curiae State Employees Association of North Carolina.

GEER, Judge.

Plaintiffs, who worked for the State for more than 12 months as "temporary" employees, assert that they have been wrongfully denied employment benefits and seek relief under the state constitution, for breach of contract, and under 25 N.C. Admin. Code 1C.0405 (2006). The trial court allowed defendants' motion to dismiss under Rule 12(b)(1) of the Rules of Civil Procedure, concluding that each of the claims was barred by sovereign immunity. Because sovereign immunity does not preclude claims under the state constitution and for breach of contract, we reverse the order as to those two claims. We hold that there has been no waiver of sovereign immunity with respect to the cause of action based on the administrative regulation and, therefore, affirm the superior court's order as to that claim.

The named plaintiffs are individuals who have worked for state agencies under the classification of "temporary" employee for periods exceeding 12 months.¹ Defendants in this action are state administrative subdivisions, certain state officials, and the State itself. Plaintiffs contend that their extended employment in "temporary" posts has given rise to a right to the status and benefits of permanent state employees. According to plaintiffs, they have been unlawfully denied the leave, service credit, retirement benefits, and health insurance benefits accorded to permanent employees of the State in violation of (1) 25 N.C. Admin. Code 1C.0405, a regulation promulgated by the State Personnel Commission; (2) their contracts of employment with the State; and (3) article I, sections 1, 19, and 35, of the North Carolina Constitution.

On 22 July 2005, defendants filed a motion to dismiss pursuant to Rules 12(b)(1), 12(b)(2), and 12(b)(6) of the North Carolina Rules of Civil Procedure. The trial court entered an order on 22 September 2005 dismissing plaintiffs' claims "pursuant to N.C.G.S. 1A-1, Rule 12(b)(1) and/or (2), on the grounds of sovereign immunity." Plaintiffs timely appealed this order, arguing that the trial court erred in concluding that sovereign immunity shielded defendants from suit.

I

Plaintiffs first contend that sovereign immunity is not available as a defense to their claims under the North Carolina Constitution, citing Corum v. Univ. of N.C., 330 N.C. 761, 413 S.E.2d 276, cert. denied sub nom. Durham v. Corum, 506 U.S. 985, 113 S.Ct. 493, 121 L.Ed.2d 431 (1992). We agree.

In Corum, our Supreme Court specifically held: "The doctrine of sovereign immunity cannot stand as a barrier to North Carolina citizens who seek to remedy violations of their rights guaranteed by the Declaration of Rights." Id. at 785-86, 413 S.E.2d at 291. The Court emphasized that "when there is a clash between these constitutional rights and sovereign immunity, the constitutional rights must prevail." Id. at 786, 413 S.E.2d at 292.

Defendants, however, point to the statement in Corum that a direct claim under the state constitution is available only "in the absence of an adequate state remedy." Id. at 782, 413 S.E.2d at 289. Defendants argue that if an adequate state remedy exists, then a constitutional claim is barred by sovereign immunity. This Court has, however, previously rejected precisely this contention: "[O]ur Supreme Court in Corum never links sovereign immunity and causes of action under the North Carolina Constitution in the manner defendants presume." McClennahan v. N.C. Sch. of the Arts, ___ N.C.App. ___, ___, 630 S.E.2d 197, 199 (2006), disc. review denied, 361 N.C. 220, 642 S.E.2d 443 (2007). As McClennahan holds, the defense of sovereign immunity is distinct from a defense asserting that a specific constitutional cause of action is barred by the existence of other adequate state remedies.

Corum involved two separate holdings: (1) a holding that a direct cause of action exists under the state constitution in the absence of adequate alternative state remedies, and (2) a holding that such a constitutional cause of action is not barred by sovereign immunity. Thus, in arguing that adequate alternative remedies exist, the State is contending that no cause of action under the constitution is available. Such an argument could be the subject of a motion to dismiss for failure to state a claim for relief under Rule 12(b)(6), but it does not involve a question of sovereign immunity.

In this case, the trial court dismissed the action purely on the grounds of sovereign immunity and declined to address defendants' motion to dismiss pursuant to Rule 12(b)(6). Since defendants did not cross-assign error with respect to the 12(b)(6) motion, the question of the availability of state constitutional claims is not before us. See N.C.R.App. P. 10(d) ("Without taking an appeal an appellee may cross-assign as error any action or omission of the trial court which was properly preserved for appellate review and which deprived the appellee of an alternative basis in law for supporting the judgment, order, or other determination from which appeal has been taken."); Harllee v. Harllee, 151 N.C.App. 40, 51, 565 S.E.2d 678, 685 (2002) ("In the instant case, the additional arguments raised in plaintiff-appellee's brief, if sustained, would provide an alternative basis for upholding the trial court's determination that the premarital agreement is invalid and unenforceable. However, plaintiff failed to cross-assign error pursuant to Rule 10(d) to the trial court's failure to render judgment on these alternative grounds. Therefore, plaintiff has not properly preserved for appellate review these alternative grounds.").

In sum, sovereign immunity is not available as a defense to a claim brought directly under the state constitution. We, therefore, reverse the trial court's order to the extent it dismissed plaintiffs' constitutional claims based on sovereign immunity. See also Peverall v. County of Alamance, 154 N.C.App. 426, 430, 573 S.E.2d 517, 519 (2002) ("It is well established that sovereign immunity does not protect the state or its counties against claims brought against them directly under the North Carolina Constitution."), disc. review denied, 356 N.C. 676, 577 S.E.2d 632 (2003).

II

With respect to their breach of contract claim, plaintiffs rely upon Smith v. State, 289 N.C. 303, 320, 222 S.E.2d 412, 423-24 (1976), in which the Supreme Court held: "[W]henever the State of North Carolina, through its authorized officers and agencies, enters into a valid contract, the State implicitly consents to be sued for damages on the contract in the event it breaches the contract." Defendants, however, argue that plaintiffs' claim for relief based on a breach of contract cannot overcome sovereign immunity, as held by Smith, because the alleged contract is "implied," "imaginary," and in no way "an authorized and valid contract." We disagree.

With respect to a motion to dismiss based on sovereign immunity, the question is whether the complaint "`specifically allege[s] a waiver of governmental immunity. Absent such an allegation, the complaint fails to state a cause of action.'" Fabrikant v. Currituck County, 174 N.C.App. 30, 38, 621 S.E.2d 19, 25 (2005) (quoting Paquette v. County of Durham, 155 N.C.App. 415, 418, 573 S.E.2d 715, 717 (2002) (internal citations omitted), disc. review denied, 357 N.C. 165, 580 S.E.2d 695 (2003)). Fabrikant explains further that "precise language alleging that the State has waived the defense of sovereign immunity is not necessary," but, rather, the complaint need only "contain[] sufficient allegations to provide a reasonable forecast of waiver." Id.

In this case, the sole material before this Court is plaintiffs' amended complaint. The question is, therefore, whether that complaint contains sufficient allegations to support a finding of waiver of sovereign immunity. In the amended complaint, plaintiffs allege that the State entered into employment contracts with the plaintiffs, incorporating state personnel regulations, pursuant to which they were entitled to certain benefits as a result of their employment for more than 12 months. These allegations are materially indistinguishable from those found sufficient in several opinions of this Court to survive claims of sovereign immunity.

In Peverall, the plaintiff "alleged that defendant breached its employment contract by denying plaintiff the disability retirement benefits it agreed to provide in...