Hall v. Liles

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF NORTH CAROLINA

WESTERN DIVISION

No. 5:23-CV-220-BO-BM

OZIE L. HALL, JR., )

Plaintiff, )

)

V. ) ORDER

)

MATTHEW L. LILES, individually and as_)

Assistant Attorney General of the State of )

North Carolina; JAMES STEVEN BASS, _ )

individually and as Assistant State Auditor )

of the State of North Carolina; )

ALEXANDRA S. SCHAUSS, individually )

and as Director of the Division of School __)

Business, N.C. Department of Public )

Instruction; LEIGH ANN KERR, )

individually and as Assistant Director of the )

Division of School Business, N.C. )

Department of Public Instruction; EUGENE )

THOMAS BRUTON, individually and

Staff Accountant in the Division of School _)

Business, N.C. Department of Public )

Instruction, )

Defendants. )

This cause comes before the Court on defendants’ motions to dismiss and plaintiff's motion

to file an amended complaint. The appropriate responses and replies have been filed, or the time

for doing so has expired, and in this posture the motions are ripe for ruling. For the reasons that

follow, plaintiff's complaint is dismissed and his motion to amend is denied.

BACKGROUND

Plaintiff, who proceeds in this action pro se, filed his complaint against defendants on April

24, 2023, seeking to recover damages for alleged violations of his federal constitutional and civil

rights. Plaintiff further alleges claims for violations of his rights under the North Carolina

Constitution and state law, and in addition to damages seeks declaratory and injunctive relief.

Plaintiff alleges that his claims arise from a pattern of misconduct within the North Carolina

Department of Public Instruction, which began before 2007 and “matured into a conspiracy, and

culminated in a failed individual capacity civil prosecution” of plaintiff in Wake County Superior

Court. See, generally, State ex rel. Stein v. Kinston Charter Acad., 379 N.C. 560 (2021).

Plaintiff alleges the following in his complaint which specifically relates to the conduct of

defendants. [DE 1]. Plaintiff was the Chief Executive Officer (CEO) and Principal of Kinston

Charter Academy from 2007 until it surrendered its charter in 2013. Plaintiff had also served as

the President of the Pitt County Coalition for Educating Black Children, which was party to a

school desegregation and unitary status case filed in this district in 1969 and reopened for

additional proceedings beginning in 2008. See Everett v. Pitt County Board of Education, No.

6:69-cv-702-H (E.D.N.C. filed Nov. 12, 1969). Plaintiff alleges that he became well known to the

Department of Public Instruction and State Board of Education as a result of his involvement with

the Everett case.

Plaintiff alleges that when he became CEO of Kinston Charter Academy (KCA), which

had been in operation since 2004, Kinston Charter Acad., 379 N.C. at 562, he was pressured by

defendant Eugene Bruton, a staff accountant in the Division of School Business in the Department

of Public Instruction, to continue using Acadia Northstar LLC as a financial services vendor,

despite plaintiffs belief that Acadia Northstar was providing KCA with misleading and inaccurate

monthly financial reports. Plaintiff was also active in opposing what he believed was a pattern of

race-based discrimination in North Carolina’s treatment of charter schools, culminating in a civil

rights complaint filed with the United States Department of Education against the North Carolina

State Board of Education, Department of Public Instruction, and Office of Charter Schools in 2010.

Plaintiff alleges that it was well known that the Department of Public Instruction was upset with

him over the civil rights complaint. Plaintiff further alleges that in 2010 he reported defendant

Bruton to the Division of School Business for misconduct relating to the Acadia Northstar contract.

In 2011, KCA terminated its Acadia Northstar contract and engaged a different financial services

vendor.

Plaintiff alleges that, in or around 2012, Bruton and defendant Schauss, Director of the

Division of School Business, formed a conspiracy to use illegal means to close KCA, discredit

plaintiff and damage his reputation, and violate and impair plaintiffs right to engage in his

profession as an educator and advocate. Defendant Kerr, who became the Assistant Director of the

Division of School Business in 2013, subsequently joined in this conspiracy to “destroy KCA and

discredit Plaintiff Hall based upon racial animus and the desire to silence Plaintiff Hall in

exercising his rights to free speech.” Comp. § 67. Some of the steps Bruton, Schauss, and Kerr

allegedly took included a policy change that disrupted KCA’s cash flow, completing a false

financial noncompliance finding, and asking the North Carolina State Board of Education to

revoke KCA’s charter based upon the failure to make payments to state health and retirement plans

for KCA employees.

“In North Carolina, charter schools receive operating funds from the State on a per pupil

basis. In the spring of each year, a charter school is required to provide an estimate to the

Department of Public Instruction . . . of its anticipated average daily membership . . . for the

upcoming school year.” State ex rel. Cooper v. Kinston Charter Acad., 268 N.C. App. 531, 533

(2019). Before the start of the 2013-2014 school year, plaintiff provided the Department of Public

Instruction with an estimated initial KCA enrollment of 366 students for the 2013-2014 year. This

resulted in KCA receiving $666,000 in state public school funds in July 2013. On August 22, 2013,

KCA received a letter from the Office of Charter Schools stating that, at the request of the Office

of Charter Schools and the Division of School Business, KCA had been placed on the Board of

Education’s September 4, 2013, public meeting agenda to consider revocation of KCA’s charter.

Plaintiff alleges these actions had immediate adverse impact on student enrollment and that KCA

experienced an immediate, dramatic decline in student enrollment as a result thereof. On

September 4, 2013, KCA’s board of directors held an emergency meeting and voted to surrender

the school’s charter.

A closeout monitoring visit was conducted at KCA on September 10, 2013, at which

defendant Kerr was present. Plaintiff alleges that Kerr was disorganized, belligerent, made racial

slurs, and appeared to intentionally provoke conflict. Plaintiff further alleges that defendant Kerr

informed him that day that she had contacts at the Office of the State Auditor and would make sure

that the State Auditor would place plaintiff in a “living hell.” Plaintiff elleges that after that

statement, defendant Schauss, who was Kerr’s supervisor, submitted a written document to the

Office of the State Auditor seeking an audit of KCA.

An investigation was initiated by the Office of the State Auditor into KCA and its finances,

with which plaintiff fully complied, and its report was issued in January 2015. The State Auditor’s

report concluded that KCA had not provided evidence to support its estimated student enrollment

increase for the 2013-14 school year, that plaintiff had improperly hired relatives to work at KCA

who were not qualified, and that KCA had improperly used state funds provided in July 2013 to

repay $230,000 in loans and to pay plaintiff $11,000 in vacation pay.

In April 2016, North Carolina’s Attorney General filed suitagains: plaintiff, his wife, wlho

sat on KCA’s board of directors, and KCA alleging violations of North Carolina’s False Claims

Act, Nonprofit Corporations Act, and Unfair and Deceptive Trade Practices Act. See, generally,

Kinston Charter Acad., 379 N.C. 560. Plaintiff alleges that defendant Liles, an assistant Attorney

General, had begun his investigation of plaintiff and KCA in 2014 and that defendant Liles or

someone from his office collaborated with defendant Bass and the State Auditor’s Office to include

a false statement regarding the lack of explanation for the 2013-14 school year estimated

enrollment in the final report. Plaintiff alleges that defendant Liles filed the suit despite having

collected sufficient data and information to conclude there was no legitimate basis upon which to

file a complaint against plaintiff, and that he filed suit with actual malice after having been made

aware of plaintiffs civil rights advocacy and based upon racial animus and retaliation.

The Attorney General’s complaint was filed in Wake County Superior Court, which

dismissed the Unfair and Deceptive Trade Practices Act and Nonprofit Corporations Act claims,

but allowed the False Claims Act claims to proceed. The North Carolina Supreme Court later

affirmed that ruling. Kinston Charter Acad., 379 N.C. at 588. On June 10, 2022, pursuant to a

consent order, KCA and the State settled the case' and the claims against plaintiff were

subsequently dismissed with prejudice. [DE 1-4].

In the instant complaint, plaintiff has brought federal and state law claims. Plaintiff brings

claims under 42 U.S.C. § 1983 for violation of his equal protection and due process rights as well

as a civil conspiracy claim under 42 U.S.C. § 1985. Plaintiff also appears to allege a First

Amendment retaliation claim. Plaintiff brings claims under North Carolina state law for malicious

prosecution, abuse of process, civil conspiracy, and violation of the North Carjlina Constitution.

Defendants Liles and Bass have moved to dismiss plaintiff s claims against them for lack of subject

matter jurisdiction and for failure to state a claim. Defendants Schauss, Kerr, and Bruton have

' A copy of the consent order has not been filed as a part of the record in this case, but defendants

Liles and Bass have noted the order in their brief. Although the consent order is not part of an

allegation in plaintiff's complaint, plaintiff does not appear to challenge the existence of the

consent order, and only states that he was not a party to KCA’s settlement.

moved to dismiss plaintiff's claims on the same grounds. Both sets of defendants argue that

Eleventh Amendment, absolute, qualified, and public official immunity bar plaintiff's claims, that

his claims are untimely, and that plaintiff has failed to plausibly allege his claims. Plaintiff seeks

to amend his complaint to address any alleged deficiencies in his original complaint. Both sets of

defendants oppose granting leave to amend, arguing that, at bottom, amendment would be futile.

DISCUSSION

Generally, leave to amend a complaint should be freely given where justice so requires.

Fed. R. Civ. P. 15(a). However, leave may be denied where the amendment would be prejudicial

to the opposing party, where there has been bad faith on the part of the moving party, or when the

amendment would be futile. Johnson v. Oroweat Food Co., 785 F.2d 503, 509 (4th Cir. 1986)

(citing Foman v. Davis, 371 U.S. 178, 182 (1962)). A proposed amendrnent is “futile ifthe claim

it presents would not survive a motion to dismiss.” Save Our Sound OBX, Inc. v. N. Carolina Dep’t

of Transp., 914 F.3d 213, 228 (4th Cir. 2019) (citation omitted).

Plaintiff's additional allegations in his proposed amended complaint concern the

underlying factual grounds for his claims. Because, however, as is discussed more fully below, the

Court concludes that plaintiff's federal claims are ‘subject to dismissal and declines to exercise its

supplemental jurisdiction over plaintiffs state law claims, the Court determiines that amendment

at this stage would be futile.

A motion to dismiss for lack of subject matter jurisdiction is considered under Rule

12(b)(1) of the Federal Rules of Civil Procedure:. “Subject-matter jurisdiction cannot be forfeited

or waived and should be considered when fairly in doubt.” Ashcroft v. Iqbal, 556 U.S. 662, 671

(2009) (citation omitted). When subject-matter jurisdiction is challenged, the plaintiff has the

burden of proving jurisdiction to survive the motion. Evans v. B.F. Perkins Co., 166 F.3d 642,

647-50 (4th Cir. 1999). When a facial challenge to subject-matter jurisdiction is raised, the facts

alleged by the plaintiff in the complaint are taken as true, “and the motion must be denied if the

complaint alleges sufficient facts to invoke subject-matter jurisdiction.” Kerns v. United States,

585 F.3d 187, 192 (4th Cir. 2009). The Court can consider evidence outside the pleadings without

converting the motion into one for summary judgment. See, e.g., Evans, 166 F.3d at 647.

A Rule 12(b)(6) motion tests the legal sufficiency of the complaint. Papasan v. Allain, 478

U.S. 265, 283 (1986). When acting on a motion to dismiss under Rule 12(b)(6), “the court should

accept as true all well-pleaded allegations and should view the complaint in a light most favorable

to the plaintiff.” Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir.1993). A complaint must

allege enough facts to state a claim for relief that is facially plausible. Bell Atlantic Corp. v.

Twombly, 550 U.S. 544, 570 (2007). Facial plausibility means that the facts pled “allow[] the court

to draw the reasonable inference that the defendant is liable for the misconduct alleged,” and mere

recitals of the elements of a cause of action supported by conclusory statements do not suffice.

Ashcroft v. Igbal, 556 U.S. 662, 678 (2009). A complaint must be dismissed if the factual

allegations do not nudge the plaintiff's claims “across the line from conceivable to plausible.”

Twombly, 550 U.S. at 570.

A. Official capacity claims

“The Eleventh Amendment bars suit against non-consenting states by private individuals

in federal court.” Bd. of Trustees of the Univ. of Ala. v. Garrett, 531 U.S. 356, 363 (2001). This

guarantee applies not only to suits against the state itself but also to suits where “one of [the state’s]

agencies or departments is named as the defendant” as well as statie officers who are sued in their

official capacities. Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 100-102 (1984). The

Eleventh Amendment bars suit in federal court regardless of the nature of the relief that is sought,

id. at 100, unless one of the limited exceptions, such as waiver or abrogation, applies. See Edelman

v. Jordan, 415 U.S. 651, 673 (1974); Seminole Tribe v. Florida, 517 U.S. 44 (1996).

The claims against defendants Liles, Bass, Schauss, Kerr and Bruton in their official

capacities are barred by Eleventh Amendment immunity. Plaintiff has identified no waiver of the

North Carolina’s Eleventh Amendment immunity for his claims. Instead, plaintiff has responded

that his federal claims are alleged against defendants in their official capacities only insofar as they

fall under Ex Parte Young. Under Ex Parte Young, “federal courts may exercise jurisdiction over

claims against state officials by persons at risk of or suffering from violations by those officials of

federally protected rights, if (1) the violation for which relief is sought is an ongoing one, and (2)

the relief sought is only prospective.” Republic of Paraguay v. Allen, 134 F.3d 622, 627 (4th Cir.

1998). Where the effect of a declaratory judgment and injunction would be to “undo accomplished

state action{,]” the Ex Parte Young exception does not apply. Paraguay, 134 F.3d at 628.

Moreover, “even though the consequences of any past violation may persist, invoking those effects

does not transform past state action into an ongoing violation.” Jemsek v. Rhyne, 662 F. App’x

206, 211 (4th Cir. 2016).

Plaintiff argues that the prospective relief he seeks against defendants in their official

capacities is “an injunction to restrain future misconduct[.]” In his complaint, plaintiff seeks a

declaration that he did not “mismanage” KCA, that he was maliciously prosecuted, and that his

state and federal constitutional rights were violated by defendants. As discussed above, a

declaration regarding past conduct cannot be characterized as prospective injunctive relief.

Plaintiffs argument regarding future misconduct is also misplaced, as he has identified no ongoing

violation of federal law. See Verizon Maryland, Inc. v. Pub. Serv. Comm'n of Maryland, 535 U.S.

635, 645 (2002).

Plaintiff s remaining arguments against application of Eieventh Amendment immunity fail.

_ The Supreme Court has consistently applied Eleventh Amendment immunity in suits “by citizens

against their own States.” Garrett, 531 U.S. at 363. Finally, the Ex parte Young doctrine does not

provide a basis for relief for alleged violations of state law. Bragg v. W. Virginia Coal Ass'n, 248

F.3d 275, 293 (4th Cir. 2001). Accordingly, defendants are immune from suit on plaintiffs claims

against them in their official capacities.

B. Absolute immunity

Defendant Liles is entitled to absolute immunity for his role in bringing a civil action

against plaintiff. “[I]n initiating a prosecution and in presenting the State’s case, the prosecutor is

immune from a civil suit for damages under [§] 1983.” Imbler v. Pachtman, 424 U.S. 409, 431

(1976).

Since Jmbler, courts have extended the immunity beyond “initiating a prosecution

and .. . presenting the State’s case,” id. at 431, to cover any activities undertaken

“in connection with one’s duties in functioning as a prosecutor,” Higgason vy.

Stephens, 288 F.3d 868, 877 (6th Cir. 2002). The immunity also extends beyond

the criminal process to conduct in civil proceedings where a government attorney

is operating in an enforcement role in “initiating . . . judicial proceedings,” Cooper

v. Parrish, 203 F.3d 937, 947 (6th Cir. 2000), or “undertaking the defense of a civil

suit,” Al-Bari v. Winn, 1990 U.S. App. LEXIS 11539, No. 89-5150, 1990 WL

94229, at *1 (6th Cir. July 9, 1990).

Skinner v. Govorchin, 463 F.3d 518, 525 (6th Cir. 2006) (cleaned up); see also Murphy v. Morris,

849 F.2d 1101, 1105 (8th Cir. 1988) (“state assistant attorney general’s function as a government

advocate entitles him or her to absolute immunity from suit for damages.”’).

In determining whether absolute immunity applies to a prosecutor’s actions, courts apply

a “functional approach” and examine “the specific act challenged[.]” Nero v. Mosby, 890 F .3d □□□

120 (4th Cir. 2018) (internal quotations and citations omitted); see also Savage v. Maryland, 896

F.3d 260, 268 (4th Cir. 2018). Here, plaintiff's allegations against Liles include that Liles

interviewed Department of Public Instruction officials, collected documents, and held meetings

with the Office of the State Auditor about its investigation, findings, and the underlying facts.

These are the types of actions by a prosecutor that are entitled to immunity. Nero, 890 F.3d at 119;

Dababnah v. Keller-Burnside, 208 F.3d 467, 470 (4th Cir. 2000) (“absolute immunity is afforded

prosecutors when acting ‘within the advocate’s role.’”).

Plaintiff also alleges that Liles concluded after his investigation that there was no legitimate

basis upon which to file a claim against plaintiff, but nonetheless named plaintiff as a defendant in

the Attorney General’s suit and falsely and maliciously claimed that plaintiff made a false

statement in making a claim for state funds based upon the content of a telephone call. Plaintiff

further alleges, on information and belief, that Liles had been made aware during the investigation

stage that plaintiff was involved in civil rights actions, and further that Liles or someone from his

office conspired to include a false statement in the State Auditor’s final report. These allegations,

insofar as they are outside the protected conduct of a prosecutor, are speculative and conclusory.

See also Carter v. Burch, 34 F.3d 257, 263 (4th Cir. 1994) (“the presentation of false testimony in

court is a charge for which the prosecutor is afforded absolute immunity.”). Plaintiff alleges,

without any factual support, that Liles joined in an ongoing conspiracy against him when

investigating KCA’s and plaintiff's actions, and that this conspiracy was motivated by, at bottom,

racial animus. Even viewing the facts in the light most favorable to plaintiff, his allegations are

conclusory and speculative, and the Court determines that Liles is entitled to absolute immunity

for his role in prosecuting the False Claims Act complaint against plaintiff.

C. Statute of limitations

Plaintiff's claims under § 1983 and § 1985 are time-barred. “The statute of limitations for

all § 1983 claims is borrowed from the applicable state’s statute of limitations for personal-injury

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actions, even when a plaintiff's particular § 1983 claim does not involve personal injury.” Tommy

Davis Constr., Inc. v. Cape Fear Pub. Util. Auth., 807 F.3d 62, 66-67 (4th Cir. 2015). In North

Carolina, the limitations period is three years. Jd. at 67. The same is true for claims under § 1985.

McHam v. N.C. Mut. Life Ins. Co., No. 1:05CV01168, 2007 U.S. Dist. LEXIS 42582, at *5

(M.D.N.C. June 11, 2007).

When a section 1983 or 1985 claim accrues is a question of federal law. Wallace v. Kato,

549 U.S. 384, 388 (2007). “For most common-law torts, a plaintiff's cause of action accrues, and

the limitations period commences, when the plaintiff knows or has reason to know of his injury.”

Owens v. Baltimore City State’s Attorneys Office, 767 F.3d 379, 389 (4th Cir. 2014). However, a

court must consider any distinction provided in the common law for the most analogous tort in

order to determine when a plaintiff's claim under § 1983 should commence. /d. (quoting Wallace,

549 U.S. at 388).

KCA’s charter was surrendered in September 2013. The State Auditor filed a report in

January 2015 and the complaint against plaintiff and KCA was filed in April 2016. Plaintiff filed

this action in April 2023, but he knew or had reason to know of the alleged denial of his civil

rights, including the alleged conspiracy, denial of equal protection, and First Amendment

retaliation, at the latest in April 2016 when the Wake County civil action was filed.

In opposition, plaintiff argues that the “continuing wrong” theory renders his claims timely,

and further that he could not have brought this suit until the culmination of the Wake County civil

action. “In general, to establish a continuing violation the plaintiff must establish that the

unconstitutional or illegal act was a fixed and continuing practice.” Nat’ Adver. Co. v. Raleigh,

947 F.2d 1158, 1166 (4th Cir. 1991) (cleaned up, quotation marks and citation omitted). The

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continuing wrong theory does not apply, however, to ‘““continual ill effects from an original

violation.’” Jd. (citation omitted).

Plaintiff has not alleged discrete acts repeated by the individual defendants which would

cause his § 1983 and § 1985 claims to be timely. Plaintiff's allegations in support of his federal

claims consist of conduct surrounding the surrender of KCA’s charter, the investigation into KCA

and plaintiff, and the filing of a civil suit. Plaintiff's requests to defendant Liles that he dismiss the

Wake County civil action, and Liles’s refusal, were not separate acts constituting the same alleged

violation which would support application of the continuing wrong theory. Plaintiff's bare

assertion that his injuries have been caused by an alleged pattern or practice of discrimination also

fails to support application of the continuing wrong theory. Williams v. Giant Food, Inc., 370 F.3d

423, 429 (4th Cir. 2004). Plaintiff's proposed amended complaint does not contain allegations

which would render his federal claims timely. Though plaintiff argues that defendants initiated

and maintained a civil prosecution of plaintiff until June 10, 2022, he nonetheless knew or had

reason to know of defendants’ alleged wrongful acts when the suit was initiated in April 2016.

Accordingly, the Court determines that, to the extent they are not barred by Eleventh

Amendment or absolute immunity, plaintiff's claims under § 1983 and § 1985 are time-barred.

D. Supplemental jurisdiction

“The doctrine of supplemental jurisdiction indicates that federal courts generally have

discretion to retain or dismiss state law claims when the federal basis for an action drops away.”

Shanaghan v. Cahill, 58 F.3d 106, 109 (4th Cir. 1995). The Court has determined that defendants

are entitled to immunity in some form for plaintiffs federal claims against them and that the federal

claims are barred by the applicable statute of limitations, and thus the basis for this Court’s

lz

jurisdiction has dropped away. Given the early stage of the proceeding, the Court exercises its

discretion to dismiss plaintiff's state law claims without prejudice.

CONCLUSION

Accordingly, for the foregoing reasons, defendants’ motions to dismiss [DE 16 & 19] are

GRANTED. Plaintiff's federal claims against defendants are DISMISSED. Plaintiff's state law

claims are DISMISSED without prejudice as the Court declines to exercise supplemental

jurisdiction. Plaintiffs motion to amend his complaint [DE 33] is DENIED.

SO ORDERED, this aCAry of December 2023.

KS

TE NCE W. BOYLE

UNITED STATES DISTRICT JUDGE

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