Crosby v. City of Gastonia

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

DENNIS CROSBY, on behalf of 

himself and all others similarly

situated; JACKIE STEVEN POSTELL;

DANNY RAY COCHRAN,

Plaintiffs-Appellants,

v.  No. 10-1153

CITY OF GASTONIA, a municipality

existing under the laws of the

State of North Carolina,

Defendant-Appellee.



Appeal from the United States District Court

for the Western District of North Carolina, at Charlotte.

Robert J. Conrad, Jr., Chief District Judge.

(3:06-cv-00462-RJC-DSC)

Argued: December 9, 2010

Decided: March 10, 2011

Before Sandra Day O’CONNOR, Associate Justice

(Retired), Supreme Court of the United States, sitting by

designation, and KING and DAVIS, Circuit Judges.

Affirmed by published opinion. Judge King wrote the opin-

ion, in which Justice O’Connor and Judge Davis joined. Judge

Davis wrote a separate concurring opinion.

2 CROSBY v. CITY OF GASTONIA

COUNSEL

ARGUED: Fred William DeVore, III, DEVORE, ACTON &

STAFFORD, Charlotte, North Carolina, for Appellants. Ben-

jamin Robert Sullivan, Jr., PARKER, POE, ADAMS &

BERNSTEIN, LLP, Charlotte, North Carolina, for Appellee.

ON BRIEF: Anthony Fox, Susan W. Matthews, PARKER,

POE, ADAMS & BERNSTEIN, LLP, Charlotte, North Caro-

lina, for Appellee.

OPINION

KING, Circuit Judge:

Retired officers of the Gastonia, North Carolina Police

Department appeal the district court’s judgment in favor of

the City of Gastonia with respect to several claims arising

from the failure of the Gastonia Policemen’s Supplemental

Pension Fund (the "Fund"). The judgment incorporated by

reference the court’s final Order, which dismissed the offi-

cers’ federal claim and granted summary judgment to the City

on a pair of related state law claims. See Crosby v. City of

Gastonia, 682 F. Supp. 2d 537 (W.D.N.C. 2010). We affirm.

I.

A.

The Fund came into being in 1955 by virtue of an Act of

the North Carolina General Assembly. The Act entrusted

management of the Fund to a Board of Trustees, comprised

of three City officials, but the City proper was accorded no

authority to direct or control the Fund’s administration.

The Act was amended a number of times over the years, the

most pertinent occasion being in 1959 when the General

CROSBY v. CITY OF GASTONIA 3

Assembly added a funding proviso. According to the

amended Act, a retired officer who had earned a vested inter-

est in the Fund by meeting age and service requirements

shall receive monthly for the remainder of his life

from the [Fund], so long as funds are available, an

amount equal to two percent for each five years of

service, or major portion thereof, not to exceed four-

teen per cent of his average monthly salary for the

three highest salaried years while employed by [the

Department].

1959 N.C. Sess. Laws ch. 301, § 2 (emphasis added). All sub-

sequent amendments to the Act retained the funding proviso.

The City adopted a parallel Ordinance in 1983. The Ordi-

nance more or less faithfully tracked the language of the Act,

although it omitted the 1959 funding proviso, an apparent

oversight that remained uncorrected for eight years. The year

1983 also marked the debut of an "Employee Information

Guide" distributed generally to City employees. The 1991

version of the Guide explained merely that "[a]dditional pen-

sion funds are available as a supplement to the Retirement

System for both Police and Fire personnel. Details concerning

these are available in the respective departments." J.A. 243.1

In 1989, the City issued a pamphlet entitled "Career Oppor-

tunities in Law Enforcement with the City of Gastonia Police

Department." The pamphlet, made available for a time to

potential police officers, notes simply that "[t]he Gastonia

Police Department also has a supplemental pension fund

which pays 2% for every five years of service." J.A. 252.

Finally, in 2001, the Police Department created a website that,

for at least a while, contained a statement that "[t]he Police

1

Citations herein to "J.A. ___" refer to the contents of the Joint Appen-

dix filed by the parties to this appeal.

4 CROSBY v. CITY OF GASTONIA

Department also has a supplemental pension fund for police

officers." J.A. 255.

B.

In the early 1990s, the Fund began to experience financial

difficulties, and, in 1995, the Board of Trustees ordered an

audit. The audit revealed that the Fund would fail without

additional income. Since its inception, the Fund had been sup-

ported through myriad sources, including surcharges on crimi-

nal fines, vending machine proceeds, direct allocations from

the City, and refunds of State contributions to another retire-

ment fund made on behalf of City officers who subsequently

left employment prior to qualifying for benefits.

Responding to the audit’s findings, the Board invoked a

provision of the Act authorizing contributions from active

officers working toward retirement. In 1996, the active offi-

cers approved by referendum a proposal to deduct 2% of their

salaries for deposit with the Fund. Unfortunately, the officers’

efforts failed to restore the Fund to solvency. A follow-up

audit in 2001 concluded that salary contributions from active

officers would have to be increased from 2% to "as much as"

7.5% to avoid utter depletion of the Fund within six years.

J.A. 595.

In a second referendum, conducted in April 2002, the

active officers voted 154 to 4 to "authorize the Board of

Trustees to seek legislation to stop the 2% salary deduction,"

and "allow the Board of Trustees to ask for legislation amend-

ing [the Act] to allow for an eligible employee to receive their

contributions from the [F]und prior to leaving employment."

J.A. 516. Shortly thereafter, the Board asked the City to adopt

a resolution requesting the General Assembly to amend the

Act to implement the wishes of the active officers as

expressed through the referendum. The City complied, with

the result that the Assembly amended the Act in October 2002

to foreclose eligibility for supplemental benefits to all new

CROSBY v. CITY OF GASTONIA 5

hires, cease further contributions to the Fund from active offi-

cers, and refund the entirety of those officers’ prior contribu-

tions. See 2002 N.C. Sess. Laws. ch. 130, § 1. The Board

carried out its statutory mandate to pay benefits to vested

retirees until August 2005, when its assets were at last

exhausted.

C.

In October 2006, three of the retirees brought suit in state

court against the City, which elected to remove the matter to

the Western District of North Carolina. The plaintiffs in that

proceeding sought to certify a class comprised of all the

vested retirees, but while their motion for certification was

pending, another group of more than sixty retired officers

filed a similar federal action. The district court ultimately

declined to certify a class, but it permitted consolidation of

the two cases, the upshot being that, on June 24, 2008, the

court received an Amended Complaint filed on behalf of all

the plaintiffs.

The Amended Complaint asserted four counts for relief: (1)

that the City was liable pursuant to 42 U.S.C. § 1983 for,

among other things, "[i]nterfering with [the plaintiffs’] con-

tractual rights as guaranteed by the Contract Clause of the

United States Constitution";2 (2) that the City had also run

afoul of various provisions of the North Carolina Constitu-

tion; (3) that the conduct of the City toward the plaintiffs gave

rise to a contract as defined by North Carolina law, which the

City had failed to perform; and (4) that the City had breached

a state law fiduciary duty to the plaintiffs.

2

The Clause provides, in pertinent part, that "[n]o State shall . . . pass

any . . . Law impairing the Obligation of Contracts." U.S. Const. art. I,

§ 10, cl. 1. The Supreme Court and nearly all federal courts have, over the

years, inconsistently denominated this key provision of Article I as both

the "Contract Clause" and the "Contracts Clause." Because the text of the

Constitution speaks of the obligation of "contracts" in the plural, we will

use that form of the noun to refer to the Clause in this opinion.

6 CROSBY v. CITY OF GASTONIA

The discovery process refined the plaintiffs’ claims and

theories, limiting the issues before the district court on cross-

motions for summary judgment.3 With respect to the initial

count of the Amended Complaint, the court ruled that the

City’s conduct toward the plaintiffs was not an impairment of

obligation within the meaning of the Contracts Clause. See

Crosby, 682 F. Supp. 2d at 544. Absent such an impairment,

the court reasoned, it lacked jurisdiction over the subject mat-

ter of the claim. See id. at 545.

The ruling on the jurisdictional issue left only state law

claims, which a North Carolina court might thereafter have

adjudicated. The district court chose instead to decide the

state claims on the merits in recognition of the developed

record and because the case had been pending for more than

three years. See Crosby, 682 F. Supp. 2d at 545-46. Having

elected to proceed, the court granted summary judgment to

the City on the contract and fiduciary duty claims. In so

doing, the court strongly intimated that the plaintiffs had

failed to establish the existence of either an enforceable con-

tract or a cognizable legal duty for which the City could be

held liable, see id. at 546-47, but ultimately concluded that

3

For example, although Count II of the Amended Complaint alleged

state constitutional violations, the plaintiffs’ summary judgment motion

did not mention the North Carolina Constitution at all, instead confining

its citations and argument to authorities construing the federal Constitu-

tion. The district court followed the plaintiffs’ lead, requesting supplemen-

tal briefing regarding whether the parties’ supposed contract had been

"impaired," but restricted solely to the interpretation of that term in the

context of its appearance within the Contracts Clause of the Constitution

of the United States; tellingly, in their responsive submissions, both parties

observed the court’s parameters. Thus, the district court quite evidently

considered the plaintiffs to have forgone their state constitutional claims,

see e.g., Forrest Drive Assocs. v. Wal-Mart Stores, Inc., 72 F. Supp. 2d

576, 586 n.5 (M.D.N.C. 1999) (allegations neither argued nor briefed at

summary judgment stage deemed abandoned), and therefore did not

address those claims in its final Order.

CROSBY v. CITY OF GASTONIA 7

even in the presence of an enforceable contract, no breach had

occurred, see id. at 549.4

The district court entered its judgment adverse to the plain-

tiffs on January 7, 2010. By notice timely filed on February

3, 2010, the plaintiffs appeal.

II.

A.

The City removed the initial filing to the district court on

the ground that it gave rise to a federal question within the

contemplation of 28 U.S.C. § 1331, in that the plaintiffs had

asserted a claim pursuant to the Civil Rights Act of 1871. The

current iteration of that Act provides in pertinent part:

Every person who, under color of any statute, ordi-

nance, regulation, custom, or usage, of any State or

Territory or the District of Columbia, subjects, or

causes to be subjected, any citizen of the United

States . . . to the deprivation of any rights, privileges,

4

With particular respect to the fiduciary duty claim, the district court

premised its summary judgment for the City upon alternative holdings that

the plaintiffs had abandoned the issue by not proffering supporting evi-

dence or argument, and that the City had in any case retained its govern-

mental immunity. See Crosby, 682 F. Supp. 2d at 546. Neither the court’s

judgment nor its final Order mentioned a pair of counterclaims asserted by

the City, namely, that two of the plaintiffs had served on the Board of

Trustees and another had participated in recruiting and hiring officers, ren-

dering all three potentially liable to indemnify the City for any money

judgment. Because indemnification was contingent upon liability first

being imposed upon the City and the judgment below foreclosed that

result, the court implicitly resolved the counterclaims. The district court’s

judgment therefore constitutes a final decision disposing of all claims,

over which we possess appellate jurisdiction pursuant to 28 U.S.C. § 1291.

See, e.g., Ford Motor Co. v. Transport Indem. Co., 795 F.2d 538, 543 (6th

Cir. 1986); Am. Family Mut. Ins. Co. v. Jones, 739 F.2d 1259, 1261 n.1

(7th Cir. 1984).

8 CROSBY v. CITY OF GASTONIA

or immunities secured by the Constitution and laws

shall be liable to the party injured in an action at law,

suit in equity, or other proper proceeding for redress.

...

42 U.S.C. § 1983.5 A federal civil rights claim based upon

§ 1983 has two essential elements: "[A] plaintiff must allege

the violation of a right secured by the Constitution and laws

of the United States, and must show that the alleged depriva-

tion was committed by a person acting under color of state

law." West v. Atkins, 487 U.S. 42, 48 (1988).

In Carter v. Greenhow, 114 U.S. 317 (1885), a Richmond

property owner tendered negotiable coupons detached from

matured State bonds as part payment for real estate taxes

owed to the sovereign. Notwithstanding that the 1879 act

authorizing the bonds prescribed the coupons as receivable in

payment of all State taxes, and that the same prescription was

imprinted upon the coupons themselves, the tax collector

refused to accept them as legal tender. The basis for the

refusal was intervening legislation in 1882 that forbade State

collectors from accepting anything in satisfaction of tax liabil-

ities other than "gold, silver, United States treasury notes, and

national bank currency[.]" 114 U.S. at 319. The dispute

remained unresolved, with the result that the tax collector

seized personal items from the property owner’s place of

business to satisfy the underlying tax debt. The property

owner filed suit, maintaining that he was entitled to a remedy

for the seizure under the provisions of the 1871 Civil Rights

Act because he had been deprived of one or more constitu-

tional rights under color of state law.

5

Federal subject matter jurisdiction over a § 1983 civil rights claim also

lies specifically in accordance with 28 U.S.C. § 1343(a), which confers

jurisdiction upon the district courts "of any civil action authorized by law

to be commenced by any person . . . (3) [t]o redress the deprivation, under

color of any State law . . . of any right, privilege or immunity secured by

the Constitution of the United States or by any Act of Congress providing

for equal rights."

CROSBY v. CITY OF GASTONIA 9

The Supreme Court characterized those rights as the free-

dom to pay the taxes in the desired fashion and immunity

from enforcement of the tax debt as a delinquency, each "de-

rive[d] from the contract with the state, contained in the act

of March 28, 1879, and the bonds and coupons issued under

its authority." 114 U.S. at 322. The Court identified the Con-

tracts Clause as the lone potential constitutional source secur-

ing the asserted rights, see id., but held them to be

unenforceable through a civil rights action. Justice Matthews,

writing for the Court, explained:

That constitutional provision, so far as it can be said

to confer upon or secure to any person any individ-

ual rights, does so only indirectly and incidentally.

. . . In any judicial proceeding necessary to vindicate

his rights under a contract affected by . . . legislation,

the individual has a right to have a judicial determi-

nation declaring the nullity of the attempt to impair

its obligation. That is the only right secured to him

by that clause of the constitution.

Id. Justice Matthews observed that the plaintiff had not shown

any deprivation of his right to seek declaratory or injunctive

relief through the judicial process, having "simply chosen not

to resort to it." Id.

The Supreme Court surmised that "[i]t might be difficult to

enumerate the several descriptions of rights secured to indi-

viduals by the constitution, the deprivation of which, by any

person, would subject the latter to an action for redress under

[the civil rights laws]." 114 U.S. at 323. The Court concluded,

however, that it was "sufficient to say that the declaration now

before us does not show a cause of action within its terms."

Id.

As a result of the Supreme Court’s holding in Carter, then,

recourse to § 1983 for the deprivation of rights secured by the

Contracts Clause is limited to the discrete instances where a

10 CROSBY v. CITY OF GASTONIA

state has denied a citizen the opportunity to seek adjudication

through the courts as to whether a constitutional impairment

of a contract has occurred, or has foreclosed the imposition of

an adequate remedy for an established impairment. Section

1983 provides no basis to complain of an alleged impairment

in the first instance.

We acknowledge that one of our sister circuits has reached

the opposite conclusion. See S. Cal. Gas Co. v. City of Santa

Ana, 336 F.3d 885, 887 (9th Cir. 2003) (per curiam) ("The

City’s argument that section 1983 provides no relief for a

party deprived of its rights under the Contracts Clause is with-

out merit."). The short opinion issued in Santa Ana briefly

addressed Carter, maintaining that the precedent set forth in

the latter was "not to the contrary" of the Ninth Circuit’s hold-

ing. The court of appeals rested its assertion on a lone quote

from Dennis v. Higgins, 498 U.S. 439 (1991), in which Jus-

tice White responded via footnote to the dissent’s citation of

Carter by noting that the Court

has already given that decision a narrow reading,

stating that the case "held as a matter of pleading

that the particular cause of action set up in the plain-

tiff’s pleading was in contract and was not to redress

deprivation of the ‘right secured to him by that

clause of the Constitution’[the contract clause], to

which he had ‘chosen not to resort.’"

Dennis, 498 U.S. at 451 n.9 (quoting Chapman v. Houston

Welfare Rights Org., 441 U.S. 600, 613 n.29 (1979) (internal

citation omitted) (alteration in original)). The Supreme Court

in Dennis recognized a § 1983 cause of action for the depriva-

tion of rights secured by the Commerce Clause; as such, the

continuing vitality of Carter and its precedent with respect to

the Contracts Clause was not before the Dennis Court.

Our view, in opposition to that of the Ninth Circuit, is that

Justice White’s reference to the "narrow reading" accorded

CROSBY v. CITY OF GASTONIA 11

Carter was intended to address the usefulness of that case in

providing a framework for the analysis of § 1983 claims

invoking parts of the Constitution other than the Contracts

Clause, or alleging the deprivation of rights secured by other

federal laws. We agree with Justice White that, inasmuch as

the Carter Court disposed of the matter before it largely on

procedural grounds and therefore lacked the opportunity to

substantively explore the contours of a properly pleaded

claim, Justice Matthews’s decision is of limited utility in

determining whether § 1983 might afford a remedy for

infringements of federal rights not previously considered in

that context. There is little doubt, however, that Carter stands

even today for the proposition that an attempted § 1983 action

alleging state impairment of a private contract will not lie.6

6

The dispute underlying Kestler v. Board of Trustees, 48 F.3d 800 (4th

Cir. 1995), was similar to the one at bar, and it arrived before us as an

appeal of declaratory and injunctive relief granted under the auspices of

§ 1983 following statutory changes to retirement benefits that, according

to the district court, begat an unconstitutional impairment of the plaintiffs’

contractual rights. We reversed on the ground that a 1987 decision of the

North Carolina Court of Appeals, since overruled, mandated the conclu-

sion that any rights conferred by prior legislative enactments had failed to

vest in the plaintiffs, who had not reached retirement age. See 48 F.3d at

804. Judge Hall dissented, stating his belief that subsequent state court

decisions had undermined the authority on which the panel majority

relied. See id. at 805 (Hall, J., dissenting).

We were not called upon in Kestler to decide at the threshold whether

§ 1983 might provide a remedy for impairments in violation of the Con-

tracts Clause, and neither the panel majority nor Judge Hall raised the

issue sua sponte, as we have now chosen to do. We point out, however,

that the trail we have blazed today is entirely consistent with our prior,

non-precedential decision in Andrews v. Anne Arundel County, 114 F.3d

1175, 1997 WL 321573 (4th Cir. June 13, 1997) (per curiam) (unpub-

lished) (affirming district court’s denial of attorney fees otherwise

afforded prevailing parties by 42 U.S.C. § 1988(b) because, on the author-

ity of Carter, "there is no cause of action available under [§ 1983] for vio-

lations of the Contract Clause").

12 CROSBY v. CITY OF GASTONIA

B.

We need not scrutinize the Amended Complaint in especial

detail to discern that the plaintiffs are attempting to pursue a

prohibited claim. Count I of the Amended Complaint — sub-

titled "(Violation of Federal Constitutional Rights) (42 USC

1983)" — alleges, inter alia, that a contract existed between

the plaintiffs and the City, and that certain acts by the latter

"violate[d] the constitutional rights of each plaintiff . . . by

[i]nterfering with his contractual rights as guaranteed by the

Contract Clause of the United States Constitution." Amended

Complaint 5. As a component of the remedies prayed for, the

plaintiffs requested the district court to "find the termination

of the vested pension plan . . . to be unconstitutional . . . and

that the [City] be enjoined from not paying future retirement

benefits to the vested police officers." Id. at 8.

The most reasonable interpretation of the Amended Com-

plaint is that it seeks a judicial determination under § 1983

that the City unconstitutionally deprived the plaintiffs of their

right to receive supplemental pension payments. There is no

allegation that the City had impermissibly thwarted the plain-

tiffs in any prior attempt on their behalf to vindicate the appli-

cation of the Contracts Clause to the parties’ dispute by resort

to the courts.

The question presented in this case is therefore indistin-

guishable in any meaningful way from that in Carter, which

controls the result we announce today. We conclude that

Count I of the Amended Complaint, insofar as it does not

allege that the plaintiffs have been deprived of a protected

federal right, fails to state a claim upon which relief may be

granted pursuant to 42 U.S.C. § 1983. See Fed. R. Civ. P.

12(b)(6); Graham v. Nat’l Collegiate Athletic Ass’n, 804 F.2d

953, 957-58 (6th Cir. 1986) (recognizing that trial court prop-

erly dismissed § 1983 action in accordance with Rule

12(b)(6), as facts alleged in complaint did not establish essen-

tial element of state action).

CROSBY v. CITY OF GASTONIA 13

C.

The district court, however, did not dismiss Count I on

Rule 12(b)(6) grounds, but instead relied on Rule 12(b)(1) to

dismiss Count I for lack of subject matter jurisdiction. The

court concluded that the plaintiffs had failed to plead facts

constituting an "impairment" of obligation of contract, and

thus could establish no violation of the Contracts Clause. See

supra Part I.C. In so ruling, the court appears to have con-

strued Count I to allege a direct constitutional challenge to the

actions taken by the City, rather than to complain more indi-

rectly that the City’s supposed contravention of the Constitu-

tion deprived the plaintiffs of one or more rights protected by

§ 1983.

The district court had the discretion, and indeed the duty,

to construe the pleadings "so as to do justice." Fed. R. Civ. P.

8(e). Having construed the Amended Complaint as formulat-

ing a direct challenge, the district court correctly analyzed the

alleged acts of the City as establishing nothing more than a

mere breach of contract, not rising to the level of a constitu-

tional impairment of obligation. See St. Paul Gaslight Co. v.

City of St. Paul, 181 U.S. 142, 149 (1901) (assuming,

arguendo, that contract arose from city’s 1856 charter to

plaintiff to provide gas for streetlights, subsequent 1897 ordi-

nance that forbade city from paying interest on cost of lamps

rendered obsolete by electric lights "was but a denial by the

city of its obligation to pay").7

7

As the Seventh Circuit has explained, "when a state repudiates a con-

tract to which it is a party it is doing nothing different from what a private

party does when the party repudiates a contact; it is committing a breach

of contract." Horwitz-Matthews, Inc. v. City of Chicago, 78 F.3d 1248,

1250 (7th Cir. 1996). We wholeheartedly agree with our learned col-

leagues that "[i]t would be absurd to turn every breach of contract by a

state or municipality into a violation of the federal Constitution." Id. If the

offended party retains the right to recover damages for the breach, the

Contracts Clause is not implicated; if, on the other hand, the repudiation

goes so far as to extinguish the state’s duty to pay damages, it may be said

14 CROSBY v. CITY OF GASTONIA

Moreover, we cannot criticize the court’s decision to pro-

ceed under Rule 12(b)(1) in dismissing the "direct" portion of

Count I, although courts have also entered a dismissal in such

cases pursuant to Rule 12(b)(6). Numerous reported cases

take either course. Compare, e.g., St. Paul Gaslight Co., 181

U.S. at 151 (dismissing appeal for want of subject matter

jurisdiction), and Pitsch Recycling & Disposal, Inc. v. County

of Ionia, 386 F. Supp. 2d 938, 943 (W.D. Mich. 2005) (plain-

tiff seeking declaratory judgment "fail[ed] to state a claim

under the Contract Clause that implicates the federal question

jurisdiction of the Court"), with, e.g., United Auto., Aero-

space, Agric. Implement Workers of Am. Int’l, No. 10-1069,

2011 WL 241965, at *3 (1st Cir. Jan. 27, 2011) (concluding

that "plaintiffs did not plead sufficient facts . . . to survive a

Rule (12)(b)(6) motion" as to Contracts Clause claim), and

Moore v. Church Hill House/Agent, 220 F.R.D. 454, 456

(E.D. Va. 2003) (dismissing, pursuant to Rule 12(b)(6), plain-

tiff’s Contracts Clause claim for failing to allege state action).8

In parsing Count I to discover a direct constitutional chal-

lenge, however, the district court was not free to disregard the

more straightforward § 1983 claim. Absent a conclusion that

the pertinent allegations of the Amended Complaint were so

"plainly insubstantial" or "entirely frivolous" as to be mani-

to have impaired the obligation of contract. See id. at 1250-51 ("The anal-

ogy to the principle that government does not violate the takings clause if

it stands ready to pay compensation for its taking should be evident." (cita-

tions omitted)). The plaintiffs did not contend below that they were some-

how barred from recovering damages from the City as the result of the

latter’s purported breach. In fact, Count III of the Amended Complaint

alleges, and the district court ruled upon, a claim under North Carolina law

for breach of contract. See infra Part III.

8

In either case, we review de novo the district court’s decision to dis-

miss. See Pitt County v. Hotels.com, L.P., 553 F.3d 308, 311 (4th Cir.

2009) (appeal of dismissal in accordance with Rule 12(b)(1) for lack of

subject matter jurisdiction); Unus v. Kane, 565 F.3d 103, 115 (4th Cir.

2009) (appeal of dismissal pursuant to Rule 12(b)(6) for failure of plain-

tiffs to state claim).

CROSBY v. CITY OF GASTONIA 15

festly outside federal jurisdiction, see Lovern v. Edwards, 190

F.3d 648, 656 (4th Cir. 1999), that portion of Count I could

be properly dismissed only for failure to state a claim, as pro-

vided by Rule 12(b)(6). See also Bell v. Hood, 327 U.S. 678,

681-83 (1946) (where complaint is drawn to seek recovery

under Constitution or other federal law, dismissal for want of

subject matter jurisdiction is to be avoided unless claim

"clearly appears to be immaterial and made solely for the pur-

pose of obtaining jurisdiction or where such a claim is wholly

insubstantial and frivolous").9

Similar to the situation in Bell v. Hood, the plaintiffs’

Amended Complaint served to "raise serious questions, both

of law and fact, which the district court can decide only after

it has assumed jurisdiction over the controversy." 327 U.S. at

683-84. As evidenced by the foregoing discussion, Count I

was susceptible to nuances of interpretation requiring a care-

ful examination of its allegations "to decide whether [they]

state a cause on which the court can grant relief as well as to

determine issues of fact arising in the controversy." Id. at 682.

The allegations in Count I could not be said to have been

insubstantial or frivolous, and inasmuch as the matter origi-

nated in state court, the claims under federal law plainly were

not asserted solely for the purpose of invoking the jurisdiction

of the district court.

Whether for lack of subject matter jurisdiction (under Rule

12(b)(1)) or for failure to state a claim upon which relief may

be granted (under Rule 12(b)(6)), the end result is the same:

the district court should have dismissed, and did dismiss,

Count I. The court’s judgment as to that count must therefore

be affirmed. See Catawba Indian Tribe v. City of Rock Hill,

9

Justice Black, writing for the Court in Bell v. Hood, elaborated that

jurisdiction "is not defeated . . . by the possibility that the averments might

fail to state a cause of action. . . . For it is well settled that the failure to

state a proper cause of action calls for a judgment on the merits and not

for a dismissal for want of jurisdiction." 327 U.S. at 682.

16 CROSBY v. CITY OF GASTONIA

501 F.3d 368, 374 (4th Cir. 2007) (where district court had

granted summary judgment to defendant on direct Contracts

Clause challenge on ground that assumed impairment served

legitimate public purpose, affirmance was proper even though

court of appeals concluded instead that no impairment had

occurred).10

III.

A.

We move on at last to address the district court’s grant of

summary judgment to the City on the plaintiffs’ state law

claims for breach of contract and for breach of fiduciary duty.

At the outset, we observe that the lower court exercised sup-

plemental jurisdiction over these non-federal claims under the

authority of 28 U.S.C. § 1367(a), which provides that "in any

civil action of which the district courts shall have original

jurisdiction, the district courts shall have supplemental juris-

diction over all other claims that are so related to claims in the

action within such original jurisdiction that they form part of

the same case or controversy." See also Hinson v. Norwest

Fin. S.C., Inc., 239 F.3d 611, 616 (4th Cir. 2001) (recognizing

that supplemental jurisdiction statute, in particular § 1367(c),

likewise confers discretion upon district courts in certain

instances to remand pendent claims for disposition outside

federal system).

Had the federal claims in this matter truly been susceptible

to dismissal solely for lack of subject matter jurisdiction, as

the district court supposed, its discretionary exercise of sup-

plemental jurisdiction over the state-law claims would have

been problematic. See Arbaugh v. Y & H Corp., 546 U.S. 500,

10

In Catawba Indian Tribe, we reiterated our oft-repeated admonition

that "we review judgments, not opinions. . . . We are accordingly entitled

to affirm the district court on any ground that would support the judgment

in favor of the party prevailing below." 501 F.3d at 372 n.4.

CROSBY v. CITY OF GASTONIA 17

514 (2006) ("[W]hen a federal court concludes that it lacks

subject-matter jurisdiction, the court must dismiss the com-

plaint in its entirety."). The effects of a Rule 12(b)(1) dis-

missal, which can occur at any stage of the litigation, see id.

at 506, can seem draconian. Arbaugh was itself a rather

extreme illustration, in that the district court granted the

defendant’s motion to dismiss and vacated its judgment not-

withstanding that a jury had already awarded damages to the

plaintiff on her combined federal and state claims. The

Supreme Court reversed the district court’s dismissal on the

ground that subject matter jurisdiction had actually existed, id.

at 515-16, but the warning klaxon sounded by the Court in

Arbaugh cannot fail to reverberate throughout the federal

bench and bar.

Arbaugh left undisturbed, however, the long-standing prin-

ciple that, "[i]n contrast, when a court grants a motion to dis-

miss for failure to state a federal claim, the court generally

retains discretion to exercise supplemental jurisdiction . . .

over pendent state-law claims." 546 U.S. at 514. In this case,

Count I could not have been legitimately dismissed in its

entirety without invoking Rule 12(b)(6), so although the dis-

trict court purported to act pursuant to Rule 12(b)(1) exclu-

sively, we are confident that the court’s misapprehension had

no bearing upon its decision to assume supplemental jurisdic-

tion. In other words, the court below would certainly have

proceeded in the same manner had it announced the proper

grounds for dismissal, and in doing so would not have abused

the discretion afforded it under the law.11 Hence, we find no

error in the district court’s decision to address the state-law

11

A district court "enjoy[s] wide latitude in determining whether or not

to retain [supplemental] jurisdiction over state claims." Shanaghan v.

Cahill, 58 F.3d 106, 110 (4th Cir. 1995). Several factors, including conve-

nience and fairness to the parties plus concerns for judicial economy,

weighed heavily in favor of retaining supplemental jurisdiction over the

state law claims in this case. By the time judgment had been entered

below, the proceedings had been pending for more than three years, and

the parties had already fully briefed summary judgment motions.

18 CROSBY v. CITY OF GASTONIA

claims, and we proceed to review the court’s grant of sum-

mary judgment to the City.12

B.

Rather than embark on a lengthy analysis of North Carolina

law to decide whether the various actions of the City over the

years engendered an enforceable contract with the plaintiffs,

we will assume, as the district court did, that such a contract

existed. Even so, the gorilla in the room is that a fundamental

term of the contract since 1959, before any of the plaintiffs

can be said to have acquired vested rights in the Fund, was the

statutory caveat that benefits would be paid only "so long as

funds are available." 1959 N.C. Sess. Laws ch. 301, § 2. The

plaintiffs maintain that the funding proviso ceases to apply

upon vesting of an officer’s entitlement to benefits, but that

contention is unavailing and finds no support in the clear lan-

guage of the statute.

"One of the ‘chief purposes’ of contract law is ‘to secure

the realization of expectations reasonably induced by the

expressions of agreement.’" Joyner v. Adams, 387 S.E.2d 235,

239 (N.C. Ct. App. 1990) (quoting 3 A. Corbin, Contracts

§ 537 (1971)). It is not reasonable, in our opinion, to expect

that a contractual obligation expressly contingent upon avail-

able funding may nonetheless be enforced once funding has

dissipated and the contingency has been frustrated. The far

less tortured interpretation leads one to expect that once the

funding evaporates, so does the obligation. And without a

contractual obligation, there can be no cognizable breach

thereof and, thus, no legal claim for damages. See One Bea-

con Ins. Co. v. United Mech. Corp., 700 S.E.2d 121, 124

(N.C. Ct. App. 2010) ("The elements of a claim for breach of

contract are (1) existence of a valid contract and (2) breach of

12

A "court shall grant summary judgment if the movant shows that there

is no genuine dispute as to any material fact and the movant is entitled to

judgment as a matter of law." Fed. R. Civ. P. 56(a).

CROSBY v. CITY OF GASTONIA 19

the terms of that contract." (citations and internal quotation

marks omitted)). In the absence of an actionable breach, the

district court correctly concluded that the City was entitled to

summary judgment on the state law contract claim.13

IV.

Pursuant to the foregoing, the district court’s judgment in

favor of the City is affirmed.

AFFIRMED

DAVIS, Circuit Judge, concurring:

I concur fully in Judge King’s fine opinion for the panel.

I simply note that no one doubts that the Appellants, dedi-

cated former public servants who spent a career in law

enforcement regularly putting their lives on the line, are

deserving of every consideration. As the panel opinion notes,

it appears that the Supreme Court of North Carolina, in ways

that vary significantly from the approach of federal courts, has

been especially solicitous of Contracts Clause claims asserted

in a wide range of circumstances by government employees

against their state and local employers. See, e.g., Faulkenbury

v. Teachers’ and State Employees’ Retirement System of

North Carolina, 483 S.E.2d 422 (N.C. 1997). Nevertheless,

like the district court, this court simply cannot blink at the fact

that when the North Carolina legislature amended the Supple-

mental Retirement Fund in 1959, it expressly conditioned

such benefits on the availability of funds, and it did so in a

13

From the outset, the plaintiffs have lived on the edge regarding the

preservation of their fiduciary duty claim. See Crosby, 682 F. Supp. 2d at

546 (addressing claim on merits although plaintiffs "failed to brief or pre-

sent evidence on the issue"); supra note 4. Having also neglected to brief

the issue on appeal, the plaintiffs, we adjudge, have finally skated off the

precipice. See Canady v. Crestar Mortg. Corp., 109 F.3d 969, 973-74 (4th

Cir. 1997) (issues set forth in notice of appeal but not subsequently briefed

are deemed waived).

20 CROSBY v. CITY OF GASTONIA

manner that did not impose any statutory duty on the City of

Gastonia. Though the City touted the existence of the fund

and no doubt used it as a part of its overall recruitment strat-

egy to hire law enforcement officers, it is clear that, through-

out the fund’s existence, the burden of its continuing viability

was placed squarely on the shoulders of its Trustees.

Notably, two of the Appellants actually served long terms

as Trustees of the fund and were actively involved in earnest

attempts to forestall the fund’s collapse. The record shows

that up until the bitter end, neither the Trustees nor any one

else ever suggested that the City of Gastonia was legally obli-

gated to come to the fund’s rescue. This belatedly-filed litiga-

tion against the City of Gastonia is entirely understandable,

given the circumstances. Nevertheless, the Appellants’ claims

fail as a matter of law.

The failure of the Trustees to stave off the demise of the

fund was not for want of sincere efforts; it was a political fail-

ure that does not in any manner lessen the moral imperative

that clearly underlies the Appellants’ claims. Yet, that said,

for the reasons stated in the panel opinion, we have no war-

rant to upset the district court’s sound legal determinations.