Moss v. N.C. Dep't of State Treasurer

IN THE COURT OF APPEALS OF NORTH CAROLINA

2022-NCCOA-206

No. COA21-60

Filed 5 April 2022

Wake County, No. 19 CVS 00816

DEBORAH SINK MOSS and CARLA SHUFORD, on behalf of themselves and others

similarly situated, Plaintiffs,

v.

N.C. DEPARTMENT OF STATE TREASURER, RETIREMENT SYSTEMS

DIVISION, Defendant.

Appeal by Plaintiffs from orders entered 9 July 2020 by Judge Paul C.

Ridgeway in Wake County Superior Court. Heard in the Court of Appeals 6 October

2021.

Zaytoun Ballew & Taylor, PLLC, by John R. Taylor, Robert E. Zaytoun and

Clare F. Kurdys, for Plaintiffs-Appellants.

Attorney General Joshua H. Stein, by Special Deputy Attorney General

Katherine A. Murphy, for Defendant-Appellee.

WOOD, Judge.

¶1 Deborah Sink Moss and Carla Shuford (collectively, “Plaintiffs”) appeal from

orders entered on July 9, 2020, 1) granting Defendant’s motion to dismiss and 2)

affirming the administrative law judge’s final decisions. On appeal, Plaintiffs allege

the trial court erred by granting Defendant’s motion to dismiss and denying their

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petition for judicial review. After a careful review of the record and applicable law,

we affirm the orders of the trial court.

I. Factual and Procedural Background

¶2 When Plaintiff Shuford was 15 years old she was diagnosed with osteogenic

sarcoma and a tumor in her left leg. As a result, her left leg was amputated. On

March 8, 1982, Plaintiff Shuford began working in an administrative position at the

University of North Carolina. While at the University of North Carolina, Plaintiff

Shuford was hospitalized due to post-traumatic stress issues relating to the loss of

her leg and her physical disabilities. On August 23, 1988, she applied for short-term

disability and received approval shortly thereafter. On June 15, 1989, Plaintiff

Shuford applied for long-term disability and was approved for long-term disability

benefits retroactive to August 15, 1988.

¶3 On August 18, 1986, Plaintiff Moss worked as a teacher for the Wake County

Public School Systems. Plaintiff Moss was given credit for 10 years of prior work

experience. From November 1988 to December 1989, Plaintiff Moss was in three

separate automobile accidents which resulted in injuries that caused her to

experience pain while teaching. Subsequently, Plaintiff Moss was diagnosed with

depression and stress from these car accidents. On April 17, 1990, she applied for

short-term disability and was approved shortly thereafter. She then applied for long-

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term disability benefits on April 21, 1991 and was approved on June 11, 1991.

¶4 Each Plaintiff receives Transitional Disability Benefits from the North

Carolina Department of State Treasurer, Retirement Systems Division

(“Defendant”). Under the terms of North Carolina’s Transitional Disability Benefits,

disability payments are reduced by the gross amount of Social Security Disability

benefits to which a person is entitled. As Social Security Disability benefits increase

due to cost of living adjustments, the Plaintiffs’ disability payments from Defendant

are reduced accordingly.

¶5 In 2017, Defendant discovered a programming error which failed to account for

cost of living increases to Plaintiffs’ Social Security benefits. As a result, Defendant’s

payments of benefits to individuals within the transitional disability group had been

overpaid since 2006. Following this discovery, Defendant calculated the amount

Plaintiffs should have received and accordingly reduced Plaintiffs’ monthly benefit

payment amounts to offset the previously overpaid amount.

¶6 In 2017, Defendant informed Plaintiff Moss that she owed $13,235.00 in

overpayments and informed Plaintiff Shuford that she owed $19,702.00 in

overpayments. Defendant then reduced the amounts of Plaintiffs’ monthly disability

benefits in order to recoup the overpayments.

¶7 Plaintiffs Moss and Shuford each filed a petition with the Office of

Administrative Hearings (“OAH”) in December 2017, challenging the reduction in

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their disability payments. Due to similar facts and legal issues, Plaintiffs’ cases were

consolidated on January 2, 2018. The OAH held separate hearings for each Plaintiff.

¶8 On October 9, 2018, Plaintiff Moss’s case was heard by the administrative law

judge, and on October 9 and 15, 2018, Plaintiff Shuford’s case was heard by the

administrative law judge. At the hearing, Plaintiff Shuford offered her bank account

statements and a spreadsheet as evidence of Defendant’s miscalculation of her

benefits. At the conclusion of each hearing, Defendant made a Rule 41(b) motion for

involuntary dismissal after the evidence was presented for Plaintiff Moss and

Plaintiff Shuford.

¶9 On December 17, 2018, the administrative law judge issued final decisions in

favor of Defendant and dismissed Plaintiffs’ cases with prejudice. Although Plaintiff

Shuford had proffered her bank account statements at her hearing, the

administrative law judge found they were “insufficient evidence to prove that her

gross . . . [Social Security] Benefits differed from Respondent’s accounting.” The

administrative law judge further held that disability benefit overpayments were

State property, not Plaintiffs’ personal property. The administrative law judge

concluded Plaintiffs (1) offered insufficient evidence to prove that the overpayment

calculations were incorrect; (2) knew Social Security disability payments were to be

deducted from their payments under the Transitional Disability Benefits; and (3)

failed to prove Defendant substantially prejudiced their rights.

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¶ 10 On January 16, 2019, Plaintiffs filed petitions in Wake County Superior Court

for judicial review of the OAH Decisions, asserting both errors of law and fact.

Defendant filed a motion to dismiss. On July 9, 2020, the Superior Court entered an

order granting Defendant’s motion to dismiss and entered another order affirming

the OAH Decisions. From entry of these two orders, Plaintiffs now appeal.

II. Discussion

¶ 11 Plaintiffs raise multiple issues on appeal; each will be addressed in turn.

A. Motion to Dismiss

¶ 12 Plaintiffs first argue the trial court erred by granting Defendant’s motion to

dismiss because Plaintiffs had established valid claims for breach of contract. We

disagree.

¶ 13 We begin our review by noting a motion to dismiss is reviewed de novo.

Arnesen v. Rivers Edge Golf Club & Plantation, Inc., 368 N.C. 440, 448, 781 S.E.2d 1,

8 (2015); Holton v. Holton, 258 N.C. App. 408, 414, 813 S.E.2d 649, 654 (2018). Here,

the Superior Court granted Defendant’s motion to dismiss under both Rule 12(b)(1)

and 12(b)(6).

1. 12(b)(6) Motion

¶ 14 Turning first to Rule 12(b)(6), a Rule 12(b)(6) motion to dismiss “tests the legal

sufficiency of the complaint . . . .” Isenhour v. Hutto, 350 N.C. 601, 604, 517 S.E.2d

121, 124 (1999) (quoting Forsyth v. Memorial Hosp. v. Armstrong World Indus., 336

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N.C. 438, 442, 444 S.E.2d 423, 425 (1994)). “When reviewing the denial of a motion

to dismiss pursuant to Rule 12(b)(6), the factual allegations in plaintiff’s complaint

are treated as true.” Id. (citing Cage v. Colonial Bldg. Co., 337 N.C. 682, 683, 448

S.E.2d 115, 116 (1994)).

¶ 15 A Rule 12(b)(6) motion reviews whether “as a matter of law, the allegations of

the complaint, treated as true, are sufficient to state a claim upon which relief can be

granted under some [recognized] legal theory.” Forsyth Memorial Hosp., 336 N.C. at

442, 444 S.E.2d at 425-26 (citation omitted). See Lynn v. Overlook Dev., 328 N.C. 689,

692, 403 S.E.2d 469, 471 (1991). “The complaint must be liberally construed, and the

court should not dismiss the complaint unless it appears beyond a doubt that the

plaintiff could not prove any set of facts to support his claim which would entitle him

to relief.” Block v. County of Person, 141 N.C. App. 273, 277-78, 540 S.E.2d 415, 419,

(2000). See also Peoples Sec. Life Ins. Co. v. Hooks, 322 N.C. 216, 218, 367 S.E.2d 647,

649 (1988) (“A claim should be dismissed under Rule 12(b)(6) where it appears that

the plaintiff is entitled to no relief under any statement of facts which could be

proven.”).

¶ 16 Turning to Plaintiff’s argument that they had established valid claims for

breach of contract, the elements for a breach of contract claim are the existence of a

valid contract and a breach of the terms therein. Supplee v. Miller-Motte Bus. Coll.,

Inc., 239 N.C. App. 208, 216, 768 S.E.2d 582, 590 (2015); see Poor v. Hill, 138 N.C.

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App. 19, 26, 530 S.E.2d 838, 843 (2000).

¶ 17 The relationship between State employees and the long-term disability system

is contractual in nature. See Wells v. Consolidated Judicial Retirement Sys., 136 N.C.

App. 671, 673, 526 S.E.2d 486, 488 (2000). The long-term disability system is

governed by Article 6 Chapter 135 of the North Carolina General Statutes. N.C. Gen.

Stat. § 135-100(a) (2021). Chapter 135 was enacted in 1987 and became effective on

January 1, 1988. An Act to Make Appropriations for Current Operations of State

Departments, Institutions, and Agencies, and For Other Purposes Except For Aid to

Certain Governmental and Nongovernmental Units, ch. 738, § 29(r), 1987 N.C.

Session Laws 1354, 1392. The contractual right to long-term disability benefits vests

after “five or more years of membership service.” N.C. Gen. Stat. § 135-106(a) (1988).

However, a transitional provision provides an opportunity for employees who were

employed at the time of Chapter 135’s enactment to receive disability benefits despite

having less than five years of membership service:

Any participant in service as of the date of ratification of

this Article and who becomes disabled after one year of

membership service will be eligible for all benefits provided

under this Article notwithstanding the requirement of five

years’ membership service to receive the long-term benefit;

provided, however, any beneficiary who receive[s] benefits

as a result of this transition provision before completing

five years of membership service shall receive lifetime

benefits in lieu of service accruals under the Retirement

System as otherwise provided in [N.C.] G[en]. S[tat]. [§]

135-4(y).

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N.C. Gen. Stat. § 135-112(a) (1988).

¶ 18 Here, Plaintiffs were both employed as teachers for the State for at least one

year, and thus, Plaintiffs qualified for long-term disability benefits. To the extent

Plaintiffs and Defendant differ as to whether Plaintiffs were vested beneficiaries of

the Teachers’ & State Employees’ Retirement System, or only in the transitional

disability group per Section 135-112(a), we need not reach the merits of this

argument. In the case sub judice, Plaintiffs only challenge Defendant’s right to

recoup disability benefits. Thus, whether Plaintiffs were vested beneficiaries or not,

Plaintiffs were still eligible for, and indeed received, disability payments under

Chapter 135. These disability payments, in turn, are governed by the statutory

requirements within Chapter 135. See Wells, 136 N.C. App. at 673, 526 S.E.2d at

488.

¶ 19 Under N.C. Gen. Stat. § 135-106(b), the amount of long-term disability benefits

received were supposed to be offset dollar-for-dollar by the Social Security Disability

benefit for which Plaintiffs would otherwise be eligible. N.C. Gen. Stat. § 106(b)

(1988). Additionally, each contract contained a recoupment provision pursuant to

N.C. Gen. Stat § 135-9. When Chapter 135 became effective in 1988, Section 135-9(b)

stated

[n]otwithstanding any provisions to the contrary, any

overpayment of benefits to a member in a state-

administered retirement system or the former Disability

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Salary Continuation Plan or the Disability Income Plan of

North Carolina may be offset against any retirement

allowance, return of contributions or any other right

accruing under this Chapter to the same person, the

person’s estate, or designated beneficiary.

N.C. Gen. Stat. § 135-9(b) (1988) (emphasis added). See N.C. Gen. Stat. § 143-

64.80(a). At the time of Plaintiffs’ hearings in 2018, our General Assembly had

amended the language of Section 135-9(b) so that it read,

[n]otwithstanding any provisions to the contrary, any

overpayment of benefits or erroneous payments to a member

in a State-administered retirement system or the former

Disability Salary Continuation Plan or the Disability

Income Plan of North Carolina, including any benefits paid

to, or State Health Plan premiums or claims paid on behalf

of, any member or beneficiary who is later determined to

have been ineligible for those benefits or unentitled to

those amounts, may be offset against any retirement

allowance, return of contributions or any other right

accruing under this Chapter to the same person, the

person’s estate, or designated beneficiary.

N.C. Gen. Stat. § 135-9(b) (2018) (emphasis added).

¶ 20 Moreover, the State has a duty under Section 143-64.80 to pursue the

recoupment of any overpayment: “No State department, agency, or institution, or

other State-funded entity may forgive repayment of an overpayment of State funds,

but shall have a duty to pursue the repayment of State funds by all lawful means

available, including the filing of a civil action in the General Court of Justice.” N.C.

Gen. Stat. § 143-64.80(b) (2018). The plain language of Section 135-9 in both 1988

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and 2018 required the State to recoup any overpayments resulting from disability

payments. In other words, the statutory terms of Plaintiff Moss and Plaintiff

Shuford’s right to receive disability payments included a recoupment clause which

mandated Defendant to seek reimbursement from any overpayment.

¶ 21 Although we sympathize with the financial difficulties faced by Plaintiffs due

to Defendant’s error, Plaintiffs’ statutory right to disability benefits also mandates

the Defendant to seek recoupment of overpayments. See N.C. Gen. Stat. § 135-9(b)

(2018). Plaintiffs’ argument that Defendant’s lawful action under the terms of

Chapter 135 constitutes a breach of contract fails because Defendant had “a duty to

pursue the repayment of State funds by all lawful means available.” § 143-64.80(b).

Therefore, we hold the trial court did not err by granting Defendant’s motions to

dismiss.

2. 12(b)(1) Motion

¶ 22 Plaintiffs next argue the trial court erred by granting Defendant’s motion to

dismiss under Rule 12(b)(1). A trial court grants a motion to dismiss pursuant to

Rule 12(b)(1) when the court lacks jurisdiction over a subject matter. N.C. Gen. Stat.

§ 1A-1, Rule 12(b)(1) (2021). A party, or the court on its own, may assert lack of

jurisdiction. Dale v. Lattimore, 12 N.C. App. 348, 352, 183 S.E.2d 417, 419 (1971).

“The filing of a motion to dismiss under Rule 12(b)(1) does not raise an issue of fact[,]

[i]t challenges the jurisdiction of the court over the subject matter.” Journeys

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International, Inc. v. Corbett, 53 N.C. App. 124, 125, 280 S.E.2d 5, 6 (1981). A Rule

12(b)(1) motion may not be viewed in the same manner as a Rule 12(b)(6) motion

because under Rule 12(b)(1) “matters outside the pleadings[] . . . may be considered

and weighed by the court in determining the existence of jurisdiction over the subject

matter.” Tart v. Walker, 38 N.C. App. 500, 502, 248 S.E.2d 736, 737 (1978).

¶ 23 Here, Plaintiffs specifically contend that Defendant waived the defense of

sovereign immunity when it entered into a contract with Plaintiffs. See Guthrie v.

North Carolina State Ports Authority, 307 N.C. 522, 535, 299 S.E.2d 618, 625 (1983)

(“Sovereign immunity is a legal principle which states in its broadest terms that the

sovereign will not be subject to any form of judicial action without its express

consent.”). However, because the trial court properly granted Defendant’s motion to

dismiss under 12(b)(6) we need not address Plaintiffs’ argument regarding 12(b)(1).

B. Plaintiffs’ Petition for Judicial Review

¶ 24 Next, Plaintiffs contend the trial court erred by affirming the administrative

law judge’s decisions. “When the trial court exercises judicial review over an agency’s

final decision, it acts in the capacity of an appellate court.” N.C. Dep’t of Env’t &

Natural Res. v. Carroll, 358 N.C. 649, 662, 599 S.E.2d 888, 896 (2004) (first citing

Mann Media, Inc. v. Randolph County Planning Bd., 356 N.C. 1, 12, 565 S.E.2d 9, 17

(2002); and then citing Avant v. Sandhills Ctr. For Mental Health, Development

Disabilities & Substances Abuse Servs., 132 N.C. App. 542, 545, 513 S.E.2d 79, 82

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(1999)).

¶ 25 Under N.C. Gen. Stat. § 150B-51, the reviewing court may affirm or remand a

final decision. N.C. Gen. Stat. § 150B-51(b) (2021). The reviewing court may also

“reverse or modify the decision if the substantial rights of the petitioners may have

been prejudiced because the findings, inferences, conclusions, or decisions are:” 1) A

“violation of constitutional provisions”; 2) an “excess of the statutory authority or

jurisdiction of the agency or administrative judge”; 3) an “unlawful procedure”; or 4)

“[a]ffected by other error of law . . . .” § 150B-51(b)(1)-(4). If a petitioner alleges any

of the above has been violated, the reviewing court must apply a de novo standard of

review. § 150B-51(c). However, if a reviewing court is determining whether the

findings, inferences, conclusions, or decisions are “[u]nsupported by substantial

evidence admissible under G.S. 150B-29(a), 150B-30, or 150B-31 in view of the entire

record as submitted” or “[a]rbitrary, capricious, or an abuse of discretion,” a whole

record standard of review is to be applied. § 150B-51(b)(5)-(6), (c).

¶ 26 When this Court reviews an appeal from a superior court which either affirmed

or reversed an administrative agency’s decision, we review for two factors: “(1)

whether the superior court applied the appropriate standard of review and, if so, (2)

whether the superior court properly applied this standard.” Mayo v. N.C. State Univ.,

168 N.C. App. 503, 507, 608 S.E.2d 116, 120 (2005) (citing In re Appeal by McCrary,

112 N.C. App. 161, 166, 435 S.E.2d 359, 363 (1993), aff’d, 360 N.C. 52, 619 S.E.2d 502

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(2005).

1. Bank Account Statements

¶ 27 Plaintiffs initially allege the administrative law judge’s decisions are not

supported by competent evidence because they did not consider Plaintiff Shuford’s

financial records. Plaintiffs argue that the financial records provided by Plaintiff

Shuford were conclusive to show the State’s mathematical calculations used to

withhold Plaintiffs’ disability statements were incorrect. Since Plaintiffs allege the

decisions were not supported by substantial evidence, the trial court was required to

apply a whole record standard of review. See § 150B-51(c). The trial court

appropriately applied such standard, stating “[w]ith respect to assertions of fact-

based errors, the Court has applied a whole record standard of review.” Thus, we

conclude the trial court did not err in its standard of review.

¶ 28 Next, we examine whether the trial court applied the whole record standard of

review correctly. The whole record test “requires the examination of all competent

evidence to determine if the administrative agency’s decision is supported by

substantial evidence.” Rector v. North Carolina Sheriffs’ Educ. & Training

Standards Com., 103 N.C. App. 527, 532, 406 S.E.2d 613, 616 (1991) (citing

Henderson v. N.C. Dep’t of Human Resources, 91 N.C. App. 527, 530, 372 S.E.2d, 887,

889 (1988)). Substantial evidence is relevant evidence “a reasonable mind might

accept as adequate to support a conclusion.” Avant v. Sandhills Ctr. for Mental

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Health, Developmental Disabilities & Substance Abuse Servs., 132 N.C. App. 542, 546,

513 S.E.2d 79, 83 (1999) (quoting Lackey v. N.C. Dep’t of Human Resources, etc., 306

N.C. 231, 238, 293 S.E.2d 171, 176 (1982)). Notably, the whole record test is not a

“tool of judicial intrusion; instead, it merely gives a reviewing court the capability to

determine whether an administrative decision has a rational basis in the evidence.”

In re Rogers, 297 N.C. 48, 65, 253 S.E.2d 912, 922 (1979). Even if the record contains

evidence contrary to an agency’s findings, an appellate court may not substitute its

judgment in lieu of the agency’s judgment. Avant, 132 N.C. App. at 547, 513 S.E.2d

at 83.

¶ 29 Applying the whole record standard of review, we consider the following

evidence. Plaintiff Shuford offered her bank account statements and a spreadsheet

into evidence. Plaintiff Shuford’s spreadsheet showed the amount of social security

payments deposited into her bank account, amount of disability payments deposited

into her bank account, benefits paid by the state, social security offset amount

calculated by the state, benefit amount the state should have paid, and social security

offset amount the state should have paid from January 2006 until July 2017.

Defendant also provided a spreadsheet detailing the amount it actually paid Plaintiff

Shuford versus the amount it should have paid. The social security offset amount on

Plaintiff Shuford’s spreadsheet differed from the social security offset amount on the

spreadsheet prepared by Defendant. For instance, Plaintiff Shuford’s spreadsheet

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showed the social security offset amount for December 2006 was $1,056.00, while

Defendant’s spreadsheet showed Plaintiff Shuford’s social security offset amount for

the same date was $1,090.00.

¶ 30 These discrepancies are not due to a calculation error by Defendant, but rather

are indicative of potential withholdings. Thomas Causey, a witness on behalf of

Defendant, testified the social security offset amount illustrated on Plaintiff

Shuford’s spreadsheet statements does not consider potential money withheld by the

Social Security Administration. Causey further testified that “Social Security has

other deductions that they take out before . . . direct deposits are made for members.

. . . So . . . the direct deposits, again, would not help us to know the amount that

should be deducted.” In other words, the amount of social security offset in Plaintiff

Shuford’s spreadsheet shows only the net amount of her social security benefits if

money was withheld, not the gross amount of the benefits. The social security offset

amount in Defendant’s spreadsheet showed the gross amount of social security

benefits received by Plaintiff Shuford prior to any withholdings. As a result, if the

Social Security Administration was withholding money from the gross amount

provided to an individual, this would be reflected in a lower amount being deposited

into the individual’s bank account. Nowhere within the record did Plaintiff Shuford

offer evidence of the gross amount she received from the Social Security

Administration, only proffering evidence as to the net amount. Therefore, the

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administrative law judge had substantial evidence from Defendant’s spreadsheet to

support its decisions.

¶ 31 Assuming arguendo Plaintiff Shuford’s spreadsheet sufficed as contrary

evidence for the purpose of calculating the overpayment amount, we are not

permitted to substitute our judgment for that of the administrative law judge just

because contrary evidence existed. See id.; see also City of Rockingham v. N.C. Dep’t

of Env’t & Natural Res., 224 N.C. App. 228, 239, 736 S.E.2d 764, 771 (2012) (“In an

administrative proceeding, it is the prerogative and duty of that administrative body,

once all the evidence has been presented and considered, to determine the weight and

sufficiency of the evidence and the credibility of the witnesses, to draw inferences

from the facts, and to appraise conflicting and circumstantial evidence.” (internal

quotation marks omitted)). In light of the foregoing findings, we hold substantial

evidence existed regarding the financial records to support the administrative law

judge’s decisions.

2. Cost of Living Adjustments

¶ 32 Plaintiffs also contend the administrative law judge erred by not considering

Defendant’s possible overpayments in the years when the Social Security

Administration did not increase benefits due to a cost of living adjustments (“COLA”).

Because Plaintiffs challenge whether findings of fact within the decisions were

supported by substantial evidence, the trial court was required to apply a whole

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record standard of review. See § 150B-51(c). The trial court appropriately applied

such standard, stating “[w]ith respect to assertions of fact-based errors, the Court has

applied a whole record standard of review.” Therefore, we must analyze whether the

trial court appropriately applied the whole record standard of review.

¶ 33 In this case, the administrative law judge made the following relevant findings

of fact:

35. Because ORBIT had not been programmed to deduct

the cost-of-living adjustments from the Transitional

Benefit accounts, Petitioner Moss’[s] Transitional

Disability Benefits had not been reduced by the Social

Security cost-of-living adjustment increases which

occurred in the years of 2006, 2007, 2008, 2011, 2012, 2013,

2014, and 2016.

...

56. Subsequently, on June 16, 2017, Respondent notified

Petitioner Shuford that Social Security cost-of-living

adjustments had been given in 2006, 2007, 2008, 2011,

2012, 2013, 2014, and 2016, but that these cost-of-living

adjustments had not been deducted from Shuford’s

Transitional Disability Benefits.

In 2009, 2010, and 2015, no COLA was awarded, and thus, the Social Security

Administration did not increase its benefits. A careful review of Defendant’s “should

have paid” spreadsheets for each Plaintiff reveals Defendant did not increase the

amounts of their social security benefits in the years when no COLA was granted. In

the administrative law judge’s findings, she omitted the years 2009, 2010, and 2015,

the same years COLA was not awarded. Accordingly, we hold the administrative law

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judge considered Defendant’s possible overpayments to Plaintiffs in the years COLA

was not awarded and substantial evidence supported her findings.

3. Breach of Contract

¶ 34 Finally, Plaintiffs contend the trial court erred by denying their petition for

judicial review because the administrative law judge did not consider their

contractual rights to receive disability benefits. We disagree.

¶ 35 As explained above, Plaintiffs’ rights to disability payments were subject to

Chapter 135’s statutory requirements. These requirements, in turn, contained a

mandatory recoupment clause pursuant to N.C. Gen. Stat. § 135-9(b). Thus, by

accepting disability benefits, Plaintiffs agreed Defendant would recoup any

overpayments of benefits to them. Furthermore, a careful review of the

administrative law judge’s decisions shows she properly considered the mandatory

recoupment clause inherent to Plaintiffs’ disability benefits. Therefore, substantial

evidence existed to support the administrative law judge’s conclusions Defendant

acted within its statutory duty to recoup overpayments made to Plaintiffs, and

Plaintiffs’ argument is without merit.

C. Collateral Estoppel

¶ 36 Although Defendant crafted a lengthy argument as to why Plaintiffs are barred

from pursuing their claims in superior court under the doctrine of collateral estoppel,

collateral estoppel is an affirmative defense under Rule 8 and thus must have been

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raised in the trial court in order to preserve this argument for appeal. N.C. Gen. Stat.

§ 1A-1, Rule 8(c) (2021); N.C. R. App. P. 10(a)(1). “Failure to plead an affirmative

defense ordinarily results in waiver of the defense.” Ward v. Beaton, 141 N.C. App.

44, 49, 539 S.E.2d 30, 34 (2000). Defendant raised the affirmative defense of

collateral estoppel for the first time on appeal, and thus failed to preserve this issue

for appeal. See also In re D.R.S., 181 N.C. App. 136, 140, 638 S.E.2d 626, 628 (2007)

(since “respondent raise[d] the defenses of collateral estoppel and res judicata for the

first time on appeal, . . . [respondent] thus failed to properly preserve the issue[]”).

III. Conclusion

¶ 37 For the foregoing reasons, the trial court did not err by granting Defendant’s

motion to dismiss. Additionally, the trial court did not err by affirming the OAH

Decisions entered by the administrative law judge. Accordingly, the orders of the

trial court are affirmed.

AFFIRMED.

Judges ZACHARY and CARPENTER concur.