Opinion
No. COA15-660
04-19-2016
MATTHEW S. LENNON, Petitioner, v. N.C. DEPARTMENT OF JUSTICE AND THE N.C. DEPARTMENT OF PUBLIC SAFETY, Respondents.
Attorney General Roy Cooper, by Assistant Attorney General Vanessa N. Totten, for the respondent-appellees. The Leon Law Firm, P.C., by Mary-Ann Leon, for petitioner-appellant.
An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure. Office of Administrative Hearings, 14 DOJ 06377 Appeal by petitioner from order entered 19 February 2015 by Administrative Law Judge Augustus B. Elkins II in the Office of Administrative Hearings. Heard in the Court of Appeals 17 November 2015. Attorney General Roy Cooper, by Assistant Attorney General Vanessa N. Totten, for the respondent-appellees. The Leon Law Firm, P.C., by Mary-Ann Leon, for petitioner-appellant. BRYANT, Judge.
Although section 143-300.1 of our General Statutes provides that "the State may provide for the defense of any civil or criminal action or proceeding brought against . . . a State employee," N.C. Gen. Stat. § 143-300.3 (emphasis added), the provision does not create a contract by which the State's sovereign immunity is implicitly waived. Thus, because respondents' sovereign immunity acts as an insurmountable bar to petitioner's claim for reimbursement of expenses incurred while defending against a civil action, we affirm the decision of the Administrative Law Judge to dismiss petitioner's contested case.
On 22 August 2014, petitioner Matthew S. Lennon filed a petition for a contested case hearing in the Office of Administrative Hearings (OAH) naming as respondents two State agencies, the North Carolina Department of Justice (DOJ) and the North Carolina Department of Public Safety. Petitioner, a State employee, specifically a correctional officer, alleged that on 14 August 2012, he was named as a defendant in a federal civil complaint filed by an inmate incarcerated at the correctional institution at which petitioner worked. The inmate alleged that he had been attacked by other correctional employees and during the attack petitioner "stood by . . . [] without taking any action to end the assault." The inmate further alleged that "[p]etitioner was part of 'a group of officers . . . who allegedly assaulted black inmates on a regular basis.' " Petitioner denied the inmate's allegations and alleged that at the time of the attack, he was seeking medical attention for injuries the inmate had inflicted upon him. Petitioner requested that he be provided with legal representation to defend against the inmate's civil action, pursuant to N.C. Gen. Stat. § 143-300.2 et seq. The DOJ, by letter dated 22 August 2012, denied petitioner's request for legal representation, stating " 'N.C. Gen. Stat. § 143-300.4 requires the Attorney General to refuse to provide legal representation if he makes any of the determinations listed in N.C. Gen. Stat. § 143-300.4(a) [(1)] through (4)' and that, based on information provided to [the DOJ,] [the Attorney General] ha[s] concluded that legal representation should not be provided." Petitioner did not challenge the August 2012 denial of representation.
In his Petition for a Contested Case Hearing, petitioner alleged he incurred more than $25,000.00 in legal expenses for his defense of the federal civil action. Petitioner contends that respondents acted arbitrarily and capriciously in denying his request for legal representation and, thus, "failed to make reasonable efforts to perform their obligations under the contract . . . ."
Respondents moved to dismiss petitioner's action pursuant to Rule 12(b)(1), (2), and (6).
In a Final Decision Order of Dismissal, filed 19 February 2015, Administrative Law Judge (ALJ) Augustus B. Elkins II made findings of fact and conclusions of law regarding the status of the underlying case against petitioner, as well as petitioner's request for legal representation. ALJ Elkins found, inter alia, that on 19 February 2014, petitioner entered into a settlement agreement with the inmate in the federal civil action, and thereafter, the underlying case against petitioner was dismissed with prejudice. ALJ Elkins further found that there was no contractual right to representation by respondents reviewable by the OAH and that respondent's denial of such representation "did not give rise to a contested case under the jurisdiction of the OAH." ALJ Elkins concluded, inter alia, that petitioner's contested case was untimely, and that "[r]espondents ha[d] not waived their sovereign immunity . . . ." ALJ Elkins concluded that OAH lacked jurisdiction over the subject matter (Rule 12(b)(1)), lacked jurisdiction over respondents (Rule 12(b)(2)), and that petitioner failed to state a claim upon which relief could be granted (Rule 12(b)(6)). Respondent's motion to dismiss was granted, with prejudice.
On 25 March 2015, petitioner appealed to this Court.
The dispositive issue on appeal is whether the ALJ erred in ruling that petitioner's action was barred by sovereign immunity.
Petitioner argues that the ALJ erred by concluding that respondents were entitled to sovereign immunity against both petitioner's claims of a violation of Chapter 143 of our General Statutes and of an employee contract. Petitioner contends that sovereign immunity should not act as a bar to recovery. We disagree.
Chapter 143 of the General Statutes ("State Departments, Institutions, and Commissions") is comprised of an entire volume of our General Statutes and covers over eighty articles. This does not include Chapters 143A, 143B, 143C, and 143D. Petitioner's Chapter 143 claims are in Articles 31 ("Tort claims against State Departments and Agencies") and 31A ("Defense of State employees . . . .") and, specifically, relate to General Statutes, sections 143-300.1, -300.3, and -300.4. --------
The standard of review to be applied to this issue is set out in General Statutes, section 150B-51.
In reviewing a final decision in a contested case, the court shall determine whether the petitioner is entitled to the relief sought in the petition based upon its review of the final decision and the official record. With regard to asserted errors . . . [(1) in violation of constitutional
provisions; (2) in excess of the statutory authority or jurisdiction of the agency or administrative law judge; (3) made upon unlawful procedure; or (4) affected by other error of law], the court shall conduct its review of the final decision using the de novo standard of review.N.C. Gen. Stat. § 150B-51(c) (2015). Thus, we review the issue presented de novo.
General Statutes, section 143-300.3 (entitled "Defense of State employees"), states the following:
Except as otherwise provided in G.S. 143-300.4, upon request of an employee or former employee, the State may provide for the defense of any civil or criminal action or proceeding brought against him in his official or individual capacity, or both, on account of an act done or omission made in the scope and course of his employment as a State employee.N.C. Gen. Stat. § 143-300.3 (2015) (emphasis added). The Attorney General informed petitioner via letter that he refused petitioner's request for representation in the civil suit, pursuant to section 143-300.4 (entitled "Grounds for refusal of defense").
The State shall refuse to provide for the defense of a civil or criminal action or proceeding brought against an employee or former employee if the State determines that:
(1) The act or omission was not within the scope and course of his employment as a State employee; or
(2) The employee or former employee acted or failed to act because of actual fraud, corruption, or actual malice on his part; or
(3) Defense of the action or proceeding by the State would create a conflict of interest between the State and the employee or former employee; or
Id. § 143-300.4(a).(4) Defense of the action or proceeding would not be in the best interests of the State.
In refusing petitioner's request for legal representation, petitioner contends that "[r]espondents acted arbitrarily and capriciously and otherwise unlawfully when they failed to make reasonable efforts to perform their obligations under the contract . . . ."
As presented in his brief to this Court, petitioner specifically challenges three conclusions of law made by the ALJ:
7. Respondents were not required to defend Petitioner under an employment contract and it has not waived its sovereign immunity under a contract theory. . . .
8. Respondents' sovereign immunity is not waived with respect to any claim under Chapter 143 of North Carolina General Statutes, Article 31A. . . .
9. Sovereign immunity bars reimbursement claims against the State of North Carolina and Respondents for legal fees and related costs. See Cates v. N.C. Dep't of Justice, 121 N.C. App. 243, 245-46, 465 S.E.2d 64, 66-67 (1996), aff'd as modified by[] 346 N.C. 781, 487 S.E.2d 723 (1997).
As a general principle, our State appellate courts have held that where the State enters into a contract, the State waives its sovereign immunity to suit for breach of that contract. See Smith v. State, 289 N.C. 303, 222 S.E.2d 412 (1976) (holding that sovereign immunity would not bar a breach of contract claim for unpaid compensation brought by a State hospital superintendent, where the State entered into an employment contract with the superintendent).
Essentially, petitioner claims that because of the representations in section 143-300.3, he was induced to rely upon a promise—a contract—that the State would provide legal representation in a civil action, and when respondents failed to perform their obligations under the contract, they did so arbitrarily and capriciously. As a result, petitioner claims to have raised a valid cause of action for breach of contract, resulting in a waiver of the State's sovereign immunity. We disagree.
In support of his argument, petitioner cites several cases wherein this Court and our Supreme Court have held that a contractual agreement existed such that the State implicitly waived its sovereign immunity from suit: Middlesex Constr. Corp. v. State ex rel. Art Museum Bldg. Comm'n, 307 N.C. 569, 299 S.E.2d 640 (1983) (holding that sovereign immunity would not act as a bar to a company's breach of contract claim where the State entered into a contract, but company must exhaust its administrative remedies); Smith, 289 N.C. 303, 222 S.E.2d 412; Peverall v. Cnty. of Alamance, 154 N.C. App. 426, 573 S.E.2d 517 (2002) (holding that sovereign immunity would not bar an action for breach of contract after the county retroactively adopted a benefits program for health benefits requiring more years of service before vesting); Hubbard v. Cnty. of Cumberland, 143 N.C. App. 149, 544 S.E.2d 587 (2001) (holding that sovereign immunity would not bar claims for compensation pursuant to adopted salary program after the county had availed itself of the employees' services); and S. Furniture Co. v. Dep't of Transp., 122 N.C. App. 113, 468 S.E.2d 523 (1996) (holding that a breach of contract claim against the Department of Transportation (DOT) would not be dismissed on the basis of sovereign immunity where DOT had entered into a contract with the plaintiff). We find each of these cases significantly distinguishable from the instant matter.
Petitioner attempts to use employment contract cases and analysis to support his claim that respondents were statutorily bound to represent him in his legal defense, and, therefore, respondents are contractually bound to represent him or reimburse him for legal expenses incurred. However, the statutory provision on which petitioner relies to make his claim does not create a contractual obligation for providing legal defense services.
The statutory provision at issue does not automatically provide for legal defense services for state employees. Such services are offered in the discretion of the Attorney General: "the State may provide for the defense of any civil or criminal action or proceeding brought against . . . a State employee." N.C.G.S. § 143-300.3 (emphasis added). Further, under section 143-300.4, the State is virtually prohibited from defending State employees under certain circumstances as set out in subsections (a)(1) through (a)(4). "The determinations required [where the State shall refuse to provide for the defense of a civil or criminal action under (a)(1)-(a)(4)] shall be made by the Attorney General." Id. § 143-300.4(b). "It is generally agreed that mutual promises of employer and employee furnish valuable considerations each to the other for [a] contract." Greene Co. v. Kelley, 261 N.C. 166, 168, 134 S.E.2d 166, 167 (1964). "[However,] [m]utuality of promises means that promises, to be enforceable, must each impose a legal liability upon the promisor." Wellington v. Tent Co., 196 N.C. 748, 751, 147 S.E. 13, 15 (1929).
Because petitioner cannot establish that the State was contractually bound to provide services for his legal defense in the underlying civil action, petitioner has consequently failed to establish a waiver of sovereign immunity by contract. Further, sovereign immunity bars petitioner's action seeking reimbursement of costs for legal services expended in his defense of a civil action. In addition to the above analysis as to the lack of a contract, our holding is also guided by our Court's reasoning in Cates v. N.C. Dep't of Justice, 121 N.C. App. 243, 465 S.E.2d 64 (1996), aff'd as modified, 346 N.C. 781, 487 S.E.2d 723 (1997).
[B]ecause the [the Attorney General's Office] is a state agency and [G.S. § 143-300.4] does not specifically provide for damage awards against it, any claim for reimbursement is barred by the doctrine of sovereign immunity. See Teer Co. v. Highway Comm'n, 265 N.C. 1, 9, 143 S.E.2d 247, 253 (1965) (state agency immune from liability unless immunity waived). Therefore, this claim was properly dismissed.Id. at 248, 465 S.E.2d at 68.
Based on the foregoing reasoning, we hold that sovereign immunity bars petitioner's claim against respondents for reimbursement of expenses incurred in legal defense of the civil action. Therefore, we uphold the conclusions of the ALJ that "[r]espondents were not required to defend Petitioner under an employment contract"; "[r]espondents' sovereign immunity is not waived with respect to any claim under Chapter 143 of North Carolina General Statutes, Article 31A"; and "[s]overeign immunity bars reimbursement claims against the State of North Carolina and Respondents for legal fees and related costs." Accordingly, we overrule petitioner's argument.
Because there is no waiver of sovereign immunity here on the basis of contract and because sovereign immunity acts as a bar to petitioner's claim for reimbursement from the State, petitioner's additional challenges to the ALJ's order relating to Rule 12(b)(6) and Chapter 126 are now moot.
For the reasons stated herein, the ruling of the ALJ is
AFFIRMED.
Judges GEER and McCULLOUGH concur.
Report per Rule 30(e).