Brett Davis v. City of Greensboro

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 13-1820

BRETT DAVIS; BRIAN CHRIS SMOOT; STEVE SZYMECZEK,

Plaintiffs - Appellees,

v.

CITY OF GREENSBORO, NORTH CAROLINA,

Defendant - Appellant.

No. 13-1825

WENDY CHEEK; BRIAN KEITH COLLINS; JOSEPH CASEY COUNCILMAN;

WALTER STEVEN COUTURIER; TIMOTHY FIELDS; WILLIAM C. MORGAN,

Plaintiffs - Appellees,

v.

CITY OF GREENSBORO, NORTH CAROLINA,

Defendant - Appellant.

No. 13-1826

DAVID MORGAN; ROGERS REYNOLDS,

Plaintiffs - Appellees,

v.

CITY OF GREENSBORO, NORTH CAROLINA,

Defendant - Appellant.

No. 13-1827

MICHAEL BROWNELL; TRAYVEAWN GOODWIN; CHRISTIAN HICKS; TY

JENKS; PATRICK KENNEDY; GEORGE SIMMONS,

Plaintiffs - Appellees,

v.

CITY OF GREENSBORO, NORTH CAROLINA,

Defendant - Appellant.

Appeals from the United States District Court for the Middle

District of North Carolina, at Greensboro. Catherine C. Eagles,

District Judge. (1:12-cv-00888-CCE-JEP; 1:12-cv-00981-CCE-JEP;

1:12-cv-01110-CCE-JEP; 1:12-cv-01311-CCE-JEP)

Argued: September 16, 2014 Decided: October 22, 2014

Before MOTZ and KING, Circuit Judges, and DAVIS, Senior Circuit

Judge.

Affirmed by published opinion. Judge Motz wrote the opinion, in

which Judge King and Senior Judge Davis joined.

ARGUED: Kenneth Kyre, Jr., PINTO, COATES, KYRE & BROWN, PLLC,

Greensboro, North Carolina, for Appellant. Torin L. Fury,

FRAZIER HILL & FURY, RLLP, Greensboro, North Carolina, for

Appellees. ON BRIEF: William L. Hill, James Demarest Secor,

III, FRAZIER HILL & FURY, RLLP, Greensboro, North Carolina, for

Appellees.

2

DIANA GRIBBON MOTZ, Circuit Judge:

The City of Greensboro appeals the denial of motions to

dismiss, arguing that the district court erred in rejecting the

City’s claims of governmental immunity. Before we can review

the district court’s judgments, we must resolve the threshold

question of whether we have jurisdiction over the interlocutory

orders in these consolidated appeals. For the reasons that

follow, we conclude that we do have jurisdiction, and we affirm

the judgments of the district court.

I.

Four groups of current and retired Greensboro police

officers and firefighters (collectively, “the Officers”) brought

separate suits against the City, alleging violations of state

and federal law. Broadly speaking, the Officers’ claims relate

to the City’s alleged failure to pay its employees certain wages

and benefits.

The only benefit at issue in these appeals is the City’s

“longevity payment program.” As recounted in the Officers’

complaints, the City provides annual lump-sum payments to police

officers and firefighters based on the number of years they have

worked for the City. Employees hired prior to July 1, 1994, who

completed twenty years of service by June 30, 2010, were

grandfathered into a previous longevity payment program. For

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other employees, the longevity payments began after five years

of service and increased with each additional five years on the

job. The Officers allege that the longevity payments are “an

integral part” of their employment contracts with the City, and

that the City lists the payments as a “benefit” in its Employee

Handbook.

According to the complaints, the City began to modify the

longevity payment program in 2010. First, the officers allege,

the City capped the payments for certain employees at a lower

percentage of their annual salary. Two years later, it

converted the longevity payments for some employees into a

discretionary bonus program. These changes lowered the amount

some of the Officers were entitled to receive. The Officers

also allege that the City failed to include longevity pay in

calculating their base rate of pay. This inaccuracy assertedly

led to underpayment of overtime wages, which in turn resulted in

inadequate contributions to the Officers’ retirement funds.

In addition to the many other causes of action in each

complaint, the Officers allege that the City breached a contract

for longevity pay. 1 Some of the Officers also claim that they

1

Two groups of Officers now disclaim any intention to

allege breach of contract claims regarding longevity payments.

To the extent they no longer pursue breach of contract claims,

the disposition of these appeals will not affect their ongoing

litigation.

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are entitled to the longevity payments under the doctrines of

equitable and quasi estoppel.

The City moved to dismiss every cause of action in all four

complaints. In response to the breach of contract and estoppel

claims, the City argued that governmental immunity protected it

from suit. Although a municipality in North Carolina waives

governmental immunity when it enters into a valid contract, the

City claimed that the Officers failed to adequately allege the

existence of valid contracts for longevity pay.

The district court granted in part and denied in part the

City’s motions to dismiss. Most of the Officers’ claims

survived the motions, including the only claims at issue in this

appeal -- the Officers’ breach of contract and estoppel claims,

to which the City contends it enjoys governmental immunity from

suit. The district court held that the Officers “sufficiently

alleged a contractual longevity payment obligation.” Davis v.

City of Greensboro, N.C., 2013 WL 2317730, at *3 (M.D.N.C. May

28, 2013). After noting that any further evaluation of the

City’s immunity defense was “inappropriate for resolution”

because of the “highly fact-specific” nature of the inquiry

necessary to resolve the immunity issue, the district court

denied the City’s motions to dismiss the Officers’ contract and

estoppel claims. Id. at *2-3.

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The City timely noted an appeal of this portion of the

district court’s order in all four cases. We have consolidated

the cases for our review.

II.

Before we can address the City’s governmental immunity

defense, we must first determine whether we have jurisdiction

over these appeals.

Federal law, specifically 28 U.S.C. § 1291 (2012), limits

our jurisdiction to appeals from “final decisions of the

district courts.” Generally, the denial of a motion to dismiss

does not constitute a “final decision,” and thus does not

provide the proper basis for an appeal. See Johnson v. Jones,

515 U.S. 304, 309 (1995). But the collateral order doctrine

extends our jurisdiction to a “‘small class’ of collateral

rulings that, although they do not end the litigation, are

appropriately deemed ‘final.’” Mohawk Indus., Inc. v.

Carpenter, 558 U.S. 100, 106 (2009) (quoting Cohen v. Beneficial

Indus. Loan Corp., 337 U.S. 541, 546 (1949)). This small class

“includes only decisions that are conclusive, that resolve

important questions separate from the merits, and that are

effectively unreviewable on appeal from the final judgment in

the underlying action.” Swint v. Chambers Cnty. Comm’n, 514

U.S. 35, 42 (1995); see also Cobra Natural Res., LLC v. Fed.

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Mine Safety & Health Review Comm’n, 742 F.3d 82, 86 (4th Cir.

2014).

The Supreme Court has held that orders denying certain

kinds of immunity fall within the collateral order doctrine. In

so doing, the Court has exercised jurisdiction over

interlocutory appeals of orders rejecting defenses of absolute

immunity, Nixon v. Fitzgerald, 457 U.S. 731, 742 (1982),

qualified immunity, Mitchell v. Forsyth, 472 U.S. 511, 530

(1985), and a state’s claim of sovereign immunity, Puerto Rico

Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139,

147 (1993). We have similarly exercised jurisdiction over an

interlocutory appeal of an order rejecting the kind of immunity

at issue here, a municipality’s claim of governmental immunity.

Gray-Hopkins v. Prince George’s Cnty., 309 F.3d 224, 231-32 (4th

Cir. 2002).

Only a claimed “immunity from suit,” not “a mere defense to

liability,” can provide the proper basis for an interlocutory

appeal. Mitchell, 472 U.S. at 526 (emphasis in original). To

determine whether a municipality’s claim of governmental

immunity constitutes an immunity from suit, we “must look to

substantive state law.” Gray-Hopkins, 309 F.3d at 231.

Here, the scope of governmental immunity under North

Carolina law is clear. The Supreme Court of North Carolina has

held that governmental immunity provides a “complete defense”

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that “shields a defendant entirely from having to answer for its

conduct at all in a civil suit for damages.” Craig ex rel.

Craig v. New Hanover Cnty. Bd. of Educ., 678 S.E.2d 351, 354

(N.C. 2009). As such, governmental immunity in North Carolina

constitutes “an immunity from suit rather than a mere defense to

liability.” Id. (emphasis in original) (quoting Mitchell, 472

U.S. at 526) (internal quotation mark omitted).

Even when a defendant claims an immunity from suit,

however, certain orders denying immunity do not provide a proper

basis for interlocutory appeal under the collateral order

doctrine. A district court’s denial of immunity constitutes “an

appealable ‘final decision’” only “to the extent that it turns

on an issue of law.” Mitchell, 472 U.S. at 530. In Ashcroft v.

Iqbal, the Court clarified that a ruling on the sufficiency of

the pleadings at the motion-to-dismiss stage does turn on such

“an issue of law.” 556 U.S. 662, 672 (2009). As the Court

explained, that holding is consistent with the “well

established” rule that “a district court’s order rejecting

qualified immunity at the motion-to-dismiss stage of a

proceeding is a ‘final decision’ within the meaning of § 1291.”

Id.

Thus, here the challenged district court order turned on an

issue of law. The governmental immunity claim the City raised

in its motions to dismiss rested on the argument that the

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Officers had not adequately alleged valid contracts for

longevity pay. The district court denied the City’s motions to

dismiss and ruled on the sufficiency of the pleadings, holding

that the Officers “sufficiently alleged a contractual longevity

payment obligation.” Davis, 2013 WL 2317730, at *3.

Accordingly, the district court’s orders rejecting the City’s

governmental immunity defense constitute final orders subject to

interlocutory review under the collateral order doctrine.

We note that the district court’s comment that “[t]he

immunity defense is . . . inappropriate for resolution at this

stage,” id., does not defeat our jurisdiction. To be sure, we

recently cautioned that “if a court or agency expressly holds

open the possibility of reconsideration, a collateral order

appeal should not be authorized.” Cobra Natural Res., LLC, 742

F.3d at 88. But here the district court flatly denied the

City’s motions to dismiss. The court did not “expressly,” or

even implicitly, “hold[] open” the question of the sufficiency

of the factual allegations in the Officers’ complaints.

The district court did indicate an interest in the

subsequent “development of the facts.” Davis, 2013 WL 2317730,

at *2. But such further factual development, while certainly

helpful to the district court’s eventual decision about whether

the Officers actually had valid contracts for longevity pay,

does not affect the legal conclusion that the Officers

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adequately pled the existence of such contracts and so their

claims survived a motion to dismiss.

Indeed, our precedent confirms that jurisdiction over the

district court’s orders here is proper. In Jenkins v. Medford,

119 F.3d 1156, 1159 (4th Cir. 1997) (en banc), we exercised

jurisdiction over an interlocutory appeal when the defendant

raised a qualified immunity defense in his motion to dismiss,

even though the district court expressly did not resolve the

immunity question. The district court denied the defendant’s

motion to dismiss, citing concerns about “factual issues” in

declining to rule on the qualified immunity defense. See

Jenkins v. Medford, 1995 WL 914528, at *5 (W.D.N.C. Apr. 18,

1996). We held that despite the court’s failure to rule on the

defense, the order was immediately appealable because the

court’s “refusal to consider the question subjected [the

defendant] to further pretrial procedures, and so effectively

denied him qualified immunity.” Jenkins, 119 F.3d at 1159.

Here, as in Jenkins, delaying consideration of the immunity

question risks “subject[ing] the [City] to the burdens of

pretrial matters, and some of the rights inherent in a

[governmental] immunity defense [would be] lost.” Id. We are

therefore satisfied that we have jurisdiction over the City’s

interlocutory appeals.

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III.

Having concluded that we have jurisdiction, we turn to the

City’s contention that governmental immunity provides it with

immunity from the Officers’ breach of contract and estoppel

claims.

All parties agree that, if there are valid contracts

between the City and the Officers for longevity pay, the City

cannot prevail on its governmental immunity defense. The City

offers two arguments as to why the Officers have not alleged

valid contract and estoppel claims. First, the City contends

that the Officers were required, and failed, to allege the

existence of preaudit certificates. Appellant Br. (Davis case)

10-19. Second, the City claims that the Officers were required,

and failed, to allege that their contracts were written. Id. at

19-20. Both arguments are meritless.

A.

In North Carolina, certain contracts with governmental

entities must include a “preaudit certificate.” See N.C. Gen.

Stat. § 159-28(a) (“If an obligation is evidenced by a contract

. . . the contract . . . shall include on its face a certificate

stating that the instrument has been preaudited to assure

compliance with this subsection.”). If such a certificate is

required but lacking, “there is no valid contract, and any claim

by plaintiff based upon such contract must fail.” Data Gen.

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Corp. v. Cnty. of Durham, 545 S.E.2d 243, 247 (N.C. Ct. App.

2001).

The City contends that any valid contract with the Officers

for longevity pay must comply with the preaudit certificate

requirement of § 159-28(a), and that the Officers failed to

allege the existence of such certificates in their complaints.

The Officers agree that they never alleged that preaudit

certificates exist, but they contend that § 159-28(a) does not

govern their alleged contracts for longevity pay.

The Court of Appeals of North Carolina has held that § 159-

28(a) applies only to a “financial obligation that will come due

in the year the town incurs the obligation.” Myers v. Town of

Plymouth, 522 S.E.2d 122, 123 (N.C. Ct. App. 1999) (Wynn, J.).

Therefore, “a contract that is signed in one year but results in

a financial obligation in a later year will not violate § 159-

28(a).” Id. at 126.

Under Myers, the contracts the Officers claim they have

with the City need not comply with § 159-28(a) because the

Officers allege contractual rights to longevity payments that

were formed years ago. For some of the Officers, those rights

assertedly “vested” after five years of service. Any continuing

rights to receive longevity payments would therefore be

financial obligations due more than a year after formation of

the alleged contracts.

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The City, however, urges us not to apply the holding in

Myers because it supposedly conflicts with the holding of an

earlier case from the same court, Watauga County Board of

Education v. Town of Boone, 416 S.E.2d 411 (N.C. Ct. App. 1992).

The City misreads Watauga County. The issue in that case was

whether a town breached a contract it had formed with a county

to provide a certain percentage of its Alcohol Beverage Control

Store revenue to the school board. Id. at 412. The court held

there was no breach of contract because “it is outside the power

of the town council to appropriate money to the county school

board.” Id. at 413. This central holding did not even concern

§ 159-28(a); the alleged contract was “void and unenforceable,”

id., regardless of whether it was accompanied by a preaudit

certificate.

The Watauga County court went on to observe, briefly, that

even if the town had the power to enter into the contract with

the school board, the contract was still “not enforceable

because it does not comply with G.S. § 159-28(a).” Id. at 415.

The court described the alleged contract at issue as an

agreement to designate “18% of [the town’s] ABC profits for

school board use,” and apparently this alleged agreement was

followed for three years. Id. at 412. It is not entirely

clear, however, whether this alleged agreement was an annual

contract renewed twice or a multi-year contract. In any event,

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nowhere in Watauga County -- or in any of the other cases on

which the City relies 2 -- does the court address whether § 159-

28(a) applies to contracts of all lengths or only to contracts

that “come due” the year they are formed. The Myers court, on

the other hand, discusses the distinction in depth. Watauga

County and Myers can therefore be read harmoniously: Watauga

County briefly confirms the applicability of § 159-28(a) to

certain governmental contracts, and Myers clarifies that the

statute only requires preaudit certificates for contracts due

the year they are formed.

The Court of Appeals of North Carolina itself recently held

that Myers states the correct reading of § 159-28(a). See

M Series Rebuild, LLC v. Town of Mount Pleasant, 730 S.E.2d 254

(N.C. Ct. App.), rev. denied, 735 S.E.2d 190 (N.C. 2012). In

M Series, the court upheld the dismissal of the plaintiff’s

complaint because the contract at issue did not comply with

§ 159-28(a). Id. at 261. In reaching that holding, the court

emphasized that the case involved “an alleged contract and

obligation to pay [that were] both created in the same fiscal

year.” Id. (emphasis added). Citing Myers, the court

2

See Howard v. Cnty. of Durham, 748 S.E.2d 1 (N.C. Ct.

App.), rev. denied, 748 S.E.2d 321 (N.C. 2013); Data Gen. Corp.

v. Cnty. of Durham, 545 S.E.2d 243 (N.C. Ct. App. 2001);

Cincinnati Thermal Spray, Inc. v. Pender Cnty., 399 S.E.2d 758

(N.C. Ct. App. 1991).

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emphasized that there is a distinction between cases where the

alleged contract and resulting obligation to pay arise in the

same year and cases where the obligation to pay comes due in a

later year. Id.

The City would have us hold that the Court of Appeals of

North Carolina incorrectly interpreted its own precedent. But

we see no reason to second-guess the Court of Appeals, which has

never read its own interpretations of § 159-28(a) to conflict.

The City’s arguments to the contrary are best addressed to the

North Carolina courts or legislature. Because § 159-28(a) does

not apply to the Officers’ alleged contracts, the Officers did

not need to allege the existence of preaudit certificates. 3

B.

The City’s second basis for challenging the adequacy of the

complaints is the claim that the Officers failed to allege that

“the contract for longevity pay was written.” Appellant Br.

(Davis case) 19 (emphasis in original). The Greensboro Charter

provides the source for this requirement; it states that “[a]ll

contracts, except as otherwise provided for in this Charter,

3

The City suggests, in a footnote, that even if the

Officers are correct in their reading of North Carolina law,

they still needed to assert in their amended complaints that

“§ 159-28 does not apply” to the alleged contracts. Reply Br.

(Davis case) 10 n.9. This is plainly wrong. Nothing requires

the Officers -- or any other plaintiff for that matter -- to

plead that a law does not apply in order to state a claim upon

which relief can be granted.

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shall be . . . reduced to writing in order to be binding upon

the City.” City of Greensboro Charter § 4.111. The City cites

no authority, however, for the proposition that a plaintiff must

allege that a contract be written in order to state a claim for

breach of contract.

Moreover, even if the City had pointed to such authority,

the Officers’ complaints would survive the motions to dismiss.

The Officers allege that their Employee Handbook lists longevity

pay as a “benefit.” Construing all well-pled facts “in the

light most favorable to the plaintiff,” as we must, Nemet

Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255

(4th Cir. 2009), this allegation plausibly satisfies the

“reduced to writing” requirement of the City’s charter.

Further, it is not an “unwarranted inference[],” id., to

conclude that the Officers’ employment contracts with the City

have been reduced to writing. Whether any written contract

actually includes a provision on longevity payments constitutes

a factual issue to be resolved at a later stage in the

litigation.

For these reasons, we hold that the Officers have

sufficiently alleged valid contracts with the City. As the City

concedes, such allegations prevent a municipality from obtaining

dismissal of a complaint on the basis of governmental immunity.

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Therefore, the district court did not err in denying the City’s

motions to dismiss the Officers’ breach of contract claims. 4

IV.

In sum, we hold that we have jurisdiction over the orders

denying the City’s motions to dismiss the Officers’ contract and

estoppel claims on governmental immunity grounds. We further

hold that the district court properly denied the City’s motions

to dismiss because the Officers have sufficiently alleged that

they have valid contracts for longevity pay with the City.

Accordingly, the judgments of the district court are

AFFIRMED.

4

The only other causes of action at issue in these appeals

are the Officers’ equitable and quasi estoppel claims. The

City’s argument for dismissing these claims rests on the

assertion that the Officers and the City have not entered into

valid contracts for longevity payments. Because the Officers

have sufficiently alleged the existence of such contracts, their

estoppel claims must similarly survive the City’s motions to

dismiss.

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