Sandhill Amusements, Inc. v. Sheriff of Onslow County

NO. COA14-85

NORTH CAROLINA COURT OF APPEALS

Filed: 5 September 2014

SANDHILL AMUSEMENTS, INC.
AND GIFT SURPLUS, LLC,
Plaintiffs,

v. Onslow County
No. 13 CVS 3705
SHERIFF OF ONSLOW COUNTY,
NORTH CAROLINA, ED BROWN, in
his official capacity; and
DISTRICT ATTORNEY FOR THE FOURTH
PROSECUTORIAL DISTRICT
OF THE STATE OF NORTH CAROLINA,
ERNIE LEE, in his official
capacity,
Defendants.

Appeal by defendant from orders entered on 4 November 2013 by

Judge Jack Jenkins in Onslow County Superior Court. Heard in the

Court of Appeals 8 May 2014.

Onslow County Attorney, by Lesley F. Moxley; and Turrentine
Law Firm, PLLC, by S.C. Kitchen, for Defendant-Appellant.

Daughtry, Woodard, Lawrence & Starling, by Kelly K. Daughtry;
and Hyler & Lopez, P.A., by Stephen P. Agan and George B.
Hyler, Jr., for Plaintiffs-Appellees.

HUNTER, JR., Robert N., Judge.

Onslow County Sheriff Ed Brown (“Sheriff Brown”) appeals from

orders entered on 4 November 2013 denying his motions to dismiss

under Rule 12 as well as granting a preliminary injunction in favor
 -2-
of plaintiffs Sandhill Amusements, LLC (“Sandhill”) and Gift

Surplus, LLC (“Gift Surplus”) (collectively “Plaintiffs”).1

We agree with Sheriff Brown that this Court has jurisdiction

to determine his interlocutory appeal of the motions to dismiss

because his defense of sovereign immunity affects a substantial

right warranting immediate review. We vacate certain portions of

the preliminary injunction that affect a substantial right and

dismiss Sheriff Brown’s appeal from the remaining portions of that

order. On the merits of the motions to dismiss, we affirm the

trial court.

I. Facts & Procedural History

On 2 July 2013, Alcohol Law Enforcement (“ALE”) Special Agent

Kenny Simma (“Agent Simma”), Assistant Supervisor Keith Quick

(“Agent Quick”), and Onslow County Sheriff’s Office Sergeant John

Matthews (“Sgt. Mathews”), in response to complaints that certain

video gaming machines (hereinafter “kiosks”) were providing money

payouts, visited a business in the Rhodestown area of Onslow

County. The business that Sgt. Matthews and the ALE agents visited

1 Gift Surplus is a Georgia corporation licensed to do business in
North Carolina. Gift Surplus licenses the kiosks at issue in this
case. Gift Surplus’s kiosks are “sweepstakes promotion devices
used to promote the sale of gift cards and e-commerce business.”
Sandhill Amusement, Inc. (“Sandhill”), distributes the kiosks in
Onslow County and surrounding areas.
 -3-
was located in a building with blacked-out windows lacking any

exterior sign displaying the name of the business. Sgt. Matthews

and the ALE agents peered inside through a crack in the tint and

knocked on the door. A male unlocked and opened the door and

allowed Sgt. Matthews and the ALE agents inside. Agent Simma said

that inside

[t]he only things in the business was [sic] a
counter with two Megatouch video poker
machines on the counter, a pool table, I think
a jukebox. I can’t remember if it was three
or four of these specific devices we’re
referring to, and a claw machine that -- like
you see at Walmart, you put a quarter in and
try to pick up a stuffed animal, and a pool
table.

Later the business’s proprietor arrived and showed Sgt. Matthews

and the ALE agents how the machines worked.

The kiosks each include a 19” touch-screen display, an audio

speaker, a control panel with “print ticket and play buttons,” a

receipt printer, and a currency acceptor. The kiosks allow patrons

the opportunity to purchase gift certificates that may be used at

Gift Surplus’s online store, www.gift-surplus.com. When a patron

inserts currency into the kiosk, a receipt is printed with

equivalent credits ($1 is equivalent to 100 sweepstakes entries).

The receipts printed also contain a “quick response code,” which

users may scan to enter a weekly drawing on the Gift Surplus
 -4-
website. Patrons may also use the kiosk to request a free entry

request code, which allows for 100 free sweepstakes entries.

The kiosks contain five game themes: “Silver Bar Spin,” “Truck

Stop,” “Lucky Shamrock 2,” “Magic Tricks,” and “Candy Money.” Nick

Farley (“Mr. Farley”), an expert in gaming machines and software,

described these game as follows:

Each of the aforementioned game themes offer
several play levels which the participant may
choose. A single finite pool is allocated to
each play level for each game theme. Game
play for these themes may be accomplished one
of two ways:

(1) By pressing the “REVEAL” button an entry
is drawn from the corresponding theme/play
level finite pool. The potential value is
shown to the participant, and they are
prompted to “Press SKIP or ANIMATE.” Pressing
either button will reveal a reel outcome. If
the entry had no winning prize, a non-winning
reel combination is displayed and either the
play ends (if the “SKIP” button was pressed),
or the participant is given the chance to
nudge one of the three reels either up or down
to another non-winning outcome (if the
“ANIMATE” button was pressed). If the entry
has a winning prize, a non-winning reel
outcome is displayed and the participant must
make a decision to nudge one of the three reels
either up or down to align a winning
combination corresponding to the prize value
previous shown.

(2) Alternatively, a participant may initiate
the play by pressing the “ANIMATE” or “PLAY”
button. A game initiated by pressing either
the “ANIMATE” or “PLAY” button will not show
the potential win value, but rather simply
 -5-
display a non-winning reel outcome which the
player must then make a decision to nudge one
of the three reels either up or down to align
a winning combination.

Regardless of the method the player uses to
initiate play, the potential prize-value is
determined by the entry revealed. Whether the
potential prize is awarded is dependent upon
the participant successfully nudging the
correct reel in the correct direction to
obtain a winning combination of symbols.
Should a player fail to nudge the correct reel
in the correct direction to obtain a winning
combination, the potential prize is forfeited.

Agent Simma later told his supervisor about his visit and

expressed his opinion that the kiosks were illegal video

sweepstakes machines. The ALE agents later returned and took

photographs and videos of the kiosks. Agent Simma then sent the

videos to Deputy Director Mark Senter at ALE headquarters, who

also felt that the kiosks in Rhodestown violated the statutes

regulating video sweepstakes machines. After receiving the ALE

agents’ report, District Attorney Ernie Lee and Sheriff Brown

composed a letter to Richard W. Frye (“Mr. Frye”), President of

Sandhill (hereinafter “innocent owner letter”). The letter

informed Mr. Frye that the kiosks would be seized as evidence and

that the person/persons in possession would be criminally charged.

Mr. Frye testified that Sandhill removed kiosks from two Onslow

County locations and opted not to place kiosks in five other Onslow
 -6-
County locations after receiving the innocent owner letter.

On 27 September 2013, Sandhill and Gift Surplus filed a joint

Complaint and Motion for Preliminary Injunctive Relief against

Sheriff Brown in his official capacity. The complaint alleged

that Plaintiffs were suffering irreparable injury from the loss of

revenues and profits resulting from the innocent owner letter

issued by Sheriff Brown stating that the Plaintiffs’ kiosks were

illegal. Plaintiffs alleged that, since Sheriff Brown issued this

letter, existing retail outlets that used Plaintiffs’ products

have removed the kiosks, refused to install the kiosks, or gave

Plaintiffs notice that they intended to remove the kiosks.

Plaintiffs also attached the affidavit and report of Mr. Farley,

who opined that the kiosks operated based on skill and dexterity,

rather than mere chance.

Plaintiffs’ complaint sought the issuance of (i) preliminary

and permanent injunctions prohibiting Defendants from removing the

kiosks from any establishment in North Carolina and from issuing

warnings and citations to such facilities; (ii) preliminary and

permanent injunctions prohibiting Defendants from forcing or

coercing a North Carolina retailer to remove Plaintiffs’ kiosks;

(iii) a preliminary injunction prohibiting Defendants from making

or issuing statements outside of the litigation stating that the
 -7-
kiosks were illegal; and (iv) a declaratory judgment after a full

hearing that declared the kiosks and Plaintiffs’ marketing system

are “not prohibited gambling, lottery or gaming products.”

On 9 October 2013, Sheriff Brown filed motions to dismiss for

lack of subject matter jurisdiction under N.C. R. Civ. P. 12(b)(1),

lack of personal jurisdiction under N.C. R. Civ. P. 12(b)(2),

failure to state a claim upon which relief may be granted under

N.C. R. Civ. P. 12(b)(6), and failure to bring suit on behalf of

the real party in interest under N.C. Gen. Stat. § 1-57 (2013).

On 11 October 2013, the trial court held a hearing concerning

Sheriff Brown’s motion to dismiss and Plaintiffs’ motion for

injunctive relief. On 4 November 2013, Judge Jenkins entered an

order relying in part on the expert witness’s opinions that denied

Sheriff Brown’s motion to dismiss and granted Plaintiffs’ motion

for a preliminary injunction. In its orders, the trial court held

that there was a likelihood that the Plaintiffs would prevail in

that:

(a) Gift Surplus System v1-01.1 and the Gift
Surplus computer kiosk operated by Gift
Surplus, LLC, conduct a valid sweepstakes
within the applicable law.

(b) The Gift Surplus System v1-01.1 and the
Gift Surplus computer kiosk operated by Gift
Surplus, LLC, in promotion of their
sweepstakes are dependent on skill or
dexterity as required under North Carolina
 -8-
statutory law.

(c) The Gift Surplus System v1-01.1 and the
Gift Surplus computer kiosk operated by Gift
Surplus, LLC, is a lawful promotional device
for the sale of gift certificates and
operation of their promotional sweepstakes.

The trial court also held that the suit was not barred by the

doctrine of sovereign immunity and that Defendant had failed to

show that Plaintiffs’ claim should be dismissed under Rule

12(b)(1), Rule 12(b)(2), Rule 12(b)(6), or N.C. Gen. Stat. § 1-

57. Accordingly, the trial court denied Defendant’s motion to

dismiss and granted Plaintiffs’ request for the issuance of a

preliminary injunction. Under the preliminary injunction, Sheriff

Brown was:

a. Restrained and enjoined from using North
Carolina General Statutes Sections 14-292, 14-
293, 14-301, 14-306.1A, and 14-306.4 to
prohibit the Plaintiffs from displaying,
selling, operating or promoting the Gift
Surplus System v1-01.1 and the Gift Surplus
computer kiosk and sweepstakes promotion of
the www.giftsurplus.com website and gift
cards; and,

b. Restrained and enjoined from compelling or
attempting to compel, coerce[,] or persuade
the Plaintiffs to remove the Gift Surplus
System v1-01.1 and the Gift Surplus computer
kiosks and equipment associated with the
kiosks and sweepstakes from any retail
establishment in Onslow County; and,

c. Restrained and enjoined from citing or
prosecuting the Plaintiffs for criminal
 -9-
administrative offenses or violations by
reason of such party’s display, sale,
operation[,] or promotion of the Gift Surplus
System v1-01.1 and the Gift Surplus computer
kiosks and sweepstakes promotions of the
www.gift-surplus.com website and gift cards in
Onslow County.

The trial court limited the applicability of the preliminary

injunction to “those Onslow County places which are validly

operating four or less Gift Surplus System v1-01.1/Gift Surplus

computer kiosks. . . .” Sheriff Brown filed timely written notice

of appeal on 13 November 2013.

II. Appellate Jurisdiction

A judicial order is either interlocutory or the final

determination of the rights of the parties. N.C. R. Civ. P. 54(a).

In Veazey v. Durham, 231 N.C. 357, 57 S.E.2d 377 (1950), our

Supreme Court succinctly explained the difference between the two

types of orders:

A final judgment is one which disposes of the
cause as to all the parties, leaving nothing
to be judicially determined between them in
the trial court. . . . An interlocutory order
is one made during the pendency of an action,
which does not dispose of the case, but leaves
it for further action by the trial court in
order to settle and determine the entire
controversy.

Id. at 361–62, 57 S.E.2d at 381 (citations omitted); see also Royal

Oak Concerned Citizens Ass’n v. Brunswick Cnty, ___ N.C. App ___,
 -10-
___, 756 S.E.2d 833, 835 (2014) (citations omitted). Final

judgments are appealable under N.C. Gen. Stat. § 7A-27 (2013).

“Interlocutory orders may be appealed only where there has been a

final determination of at least one claim” and the trial court

certifies under N.C. R. Civ. P. 54(b) that “there is no just reason

to delay the appeal” or, alternatively, if “delaying the appeal

would prejudice a substantial right.” White v. Carver, 175 N.C.

App. 136, 139, 622 S.E.2d 718, 720 (2005) (citations, alterations,

and quotation marks omitted) (“The reason for this rule is to

prevent fragmentary, premature and unnecessary appeals by

permitting the trial court to bring the case to final judgment

before it is presented to the appellate courts.”); see also N.C.

Gen. Stat. § 1-277 (2013).

Sheriff Brown’s appeal from the order denying the motions to

dismiss and granting the preliminary injunction is interlocutory

since the trial court’s orders did not dispose of the case.

Additionally, there was no Rule 54(b) certification by the trial

court. Accordingly, we consider whether Sheriff Brown’s asserted

defense of sovereign immunity affects a substantial right.

Whether an interlocutory order affects a substantial right

“is determined on a case by case basis.” McConnell v. McConnell,

151 N.C. App. 622, 625, 566 S.E.2d 801, 803 (2002). The appellant
 -11-
bears the burden of establishing that a substantial right will be

affected unless he is allowed an immediate appeal. Embler v.

Embler, 143 N.C. App. 162, 166, 545 S.E.2d 259, 262 (2001)

(citations omitted). “Our Supreme Court has defined ‘substantial

right’ as a legal right affecting or involving a matter of

substance as distinguished from matters of form: a right materially

affecting those interests which a [person] is entitled to have

preserved and protected by law: a material right.” Royal Oak, ___

N.C. App. at ___, 756 S.E.2d at 835.

“Essentially a two-part test has developed—the right itself

must be substantial and the deprivation of that substantial right

must potentially work injury . . . if not corrected before appeal

from final judgment.” Goldston v. Am. Motors Corp., 326 N.C.

723, 726, 392 S.E.2d 735, 736 (1990). To prove that a substantial

right is affected, an appellant must first prove that the right

itself is substantial. Id. Second, an appellant “must demonstrate

why the order affects a substantial right. . . .” Hoke Cnty Bd.

of Educ. v. State, 198 N.C. App. 274, 277–78, 679 S.E.2d 512, 516

(2009) (emphasis in original).

Sheriff Brown asserts that the rejection of his defense of

sovereign immunity affects a substantial right. Sheriff Brown

also argues that the trial court’s issuance of the preliminary
 -12-
injunction enjoins him from enforcing criminal laws and also

affects a substantial right. We address each in turn.

A. Motions to Dismiss

Sheriff Brown contends that the denial of his 12(b)(1), (2),

and (6) motions to dismiss based on sovereign immunity affects a

substantial right. We agree.

“The denial of a motion to dismiss is an interlocutory order

which is not immediately appealable unless that denial affects a

substantial right of the appellant.” Carl v. State, 192 N.C. App.

544, 550, 665 S.E.2d 787, 793 (2008). “The appealing party bears

the burden of demonstrating that the order from which he or she

seeks to appeal is appealable despite its interlocutory nature.”

Hamilton v. Mortg. Info. Servs., 212 N.C. App. 73, 77, 711 S.E.2d

185, 189 (2011).

This Court has “repeatedly held that appeals raising issues

of governmental or sovereign immunity affect a substantial right

sufficient to warrant immediate appellate review.” Price v. Davis,

132 N.C. App. 556, 558–59, 512 S.E.2d 783, 785 (1999). “[W]hen

[a] motion is made on the grounds of sovereign and qualified

immunity,. . . a denial is immediately appealable, because to force

a defendant to proceed with a trial from which he should be immune

would vitiate the doctrine of sovereign immunity.” Smith v.
 -13-
Phillips, 117 N.C. App. 378, 380, 451 S.E.2d 309, 311 (1994).

Here, we consider the denial of a motion to dismiss based on

sovereign immunity and, accordingly, we must review whether

Sheriff Brown is entitled to that defense. Atl. Coast Conference

v. Univ. of Maryland, ___ N.C. App. ___, ___, 751 S.E.2d 612, 617

(2013) (“Defendants' underlying interest in asserting sovereign

immunity is substantial . . . [.]”); Richmond Cnty. Bd. of Educ.

v. Cowell, ___ N.C. App. ___, ___, 739 S.E.2d 566, 568 (2013),

review denied, ___ N.C. ___, 747 S.E.2d 553 (2013).

However, we note that “‘a motion to dismiss based on sovereign

immunity is a jurisdictional issue [and] whether sovereign

immunity is grounded in a lack of subject matter jurisdiction or

personal jurisdiction is unsettled in North Carolina.’” Atl. Coast

Conference, ___ N.C. App. at ___, 751 S.E.2d at 617 (quoting M

Series Rebuild, LLC v. Town of Mount Pleasant, ___ N.C. App. ___,

___, 730 S.E.2d 254, 257 (2012) (alterations omitted)). “[B]ecause

our case law remains ambiguous as to the type of jurisdictional

challenge presented by a sovereign immunity defense, the ability

of a litigant raising the defense to immediately appeal may vary,

to some extent, based on the manner in which the motion is styled.”

Id. As in Atl. Coast Conference, “we leave the type of

jurisdictional challenge presented by a sovereign immunity claim
 -14-
for resolution by a future court” and accept jurisdiction of

Sheriff Brown’s appeal pursuant to the authority conferred by N.C.

Gen. Stat. §§ 1–277(a) and 7A–27(d). Id. Accordingly, we now

address whether sovereign immunity barred Plaintiffs’ action for

declaratory judgment.

i. Standard of Review

The standard of review for the denial of a motion to dismiss

on the basis of sovereign immunity is de novo. White v. Trew, 366

N.C. 360, 363, 736 S.E.2d 166, 168 (2013).

“Under de novo review, we examine the case with new eyes.”

State v. Young, ___ N.C. App. ___, ___, 756 S.E.2d 768, 779 (2014)

“[D]e novo means fresh or anew; for a second time, and an appeal

de novo is an appeal in which the appellate court uses the trial

court’s record but reviews the evidence and law without deference

to the trial court’s rulings.” Parker v. Glosson, 182 N.C. App.

229, 231, 641 S.E.2d 735, 737 (2007) (quotation marks and citations

omitted).

ii. Merits of Sovereign Immunity Defense

“Under the doctrine of sovereign immunity, the State is immune

from suit absent waiver of immunity.”2 Meyer v. Walls, 347 N.C.

2 Sheriff Brown does not argue that Plaintiffs failed to assert
waiver of sovereign immunity in his brief. When considering a
motion to dismiss based on a defense of sovereign immunity, the
 -15-
97, 104, 489 S.E.2d 880, 884 (1997). Further

when an action is brought against individual
officers in their official capacities the
action is one against the state for the
purposes of applying the doctrine of sovereign
immunity. . . .[I]f plaintiff’s complaint
demonstrates that she has sued the defendants
only in an official capacity, rather than as
individuals, defendants would be potentially
shielded from plaintiff’s cause of action by
governmental immunity.

Whitaker v. Clark, 109 N.C. App. 379, 381–82, 427 S.E.2d 142, 143–

44 (1993) (citations omitted). Ultimately

[t]he crucial question for determining whether
a defendant is sued in an individual or
official capacity is the nature of the relief
sought, not the nature of the act or omission
alleged. If the plaintiff seeks an injunction
requiring the defendant to take an action
involving the exercise of a governmental
power, the defendant is named in an official
capacity. If money damages are sought, the
court must ascertain whether the complaint
indicates that the damages are sought from the
government or from the pocket of the
individual defendant. If the former, it is an
official-capacity claim; if the latter, it is
an individual-capacity claim; and if it is
both, then the claims proceed in both
capacities.

complaint must allege a waiver, without which the complaint fails
to state a cause of action. Paquette v. Cnty. of Durham, 155 N.C.
App. 415, 418, 573 S.E.2d 715, 717 (2002). However, Sheriff Brown
does not raise this issue on appeal nor does waiver appear to be
addressed by either party or considered by the trial court.
Accordingly we do not address this issue on appeal. Abbott v.
N.C. Bd. of Nursing, 177 N.C. App. 45, 47–48, 627 S.E.2d 482, 484–
85 (2006).
 -16-
Meyer, 347 N.C. at 110, 489 S.E.2d at 887 (quotation marks and

citations omitted).

“The doctrine of sovereign immunity bars actions against

public officials sued in their official capacities. Sheriffs and

deputy sheriffs are considered public officials for purposes of

sovereign immunity. Thus, sovereign immunity bars plaintiff’s

claims against defendants in their official capacities.” Phillips

v. Gray, 163 N.C. App. 52, 56–57, 592 S.E.2d 229, 232 (2004)

(citations omitted).

Plaintiffs sued Sheriff Brown in his official capacity in

accordance with White. 366 N.C. at 364, 736 S.E.2d at 169.

Additionally, Plaintiffs seek “an injunction requiring the

defendant to take an action involving the exercise of a

governmental power,” which means that “the defendant is named in

an official capacity.” Meyer, 347 N.C. at 110, 489 S.E.2d at 887.

From the foregoing, it appears that Plaintiffs’ claim should be

dismissed, since sovereign immunity would typically bar claims

against Sheriff Brown in his official capacity.

However, this Court’s opinion in Am. Treasures, Inc. v. State,

173 N.C. App. 170, 617 S.E.2d 346 (2005), controls this case. Am.

Treasures concerned a seller of long-distance pre-paid phone cards

that included a free promotional scratch-off game piece. Id. at
 -17-
172–73, 617 S.E.2d at 348. The plaintiff sold these cards through

convenience stores and, eventually, ALE agents began “threatening

to take action against the convenience stores’ licenses to sell

beer and alcoholic beverages . . . on the grounds that the sale of

plaintiff’s phone cards was illegal.” Id. at 173–74, 617 S.E.2d

at 348. The plaintiff brought an action for declaratory judgment

and injunctive relief against the State. Id. at 174, 617 S.E.2d

at 348.

In Am. Treasures, this Court discussed McCormick v. Proctor,

217 N.C. 23, 6 S.E.2d 870 (1940). Am. Treasures, 173 N.C. App. at

175, 617 S.E.2d at 349–50. Specifically:

In McCormick, law enforcement officers
interfered with an owner’s possession of
certain slot machines on the grounds that such
machines were illegal. Id., 217 N.C. at 24,
6 S.E.2d at 871. The trial court declined to
restrain the interference on the grounds that
the officers were engaged in the enforcement
of criminal law and refused to hear evidence
or find facts regarding the legality of the
machines. Id. Citing the above principles,
our Supreme Court reversed, holding that
equity may nevertheless be invoked as an
exception to those principles and may operate
to “interfere, even to prevent criminal
prosecutions, when this is necessary to
protect effectually property rights and to
prevent irremediable injuries to the rights of
persons.” Id., 217 N.C. at 29, 6 S.E.2d at
874.

Id. at 175, 617 S.E.2d at 349 (emphasis added). This Court in Am.
 -18-
Treasures also discussed Animal Protection Society v. State, 95

N.C. App. 258, 382 S.E.2d 801 (1989):

Moreover, this Court has previously reviewed
a trial court’s consideration of a prayer for
declaratory and injunctive relief concerning
the applicability of North Carolina’s bingo
statutes to a charitable sales promotion
without indicating the existence of any
jurisdictional bar. Animal Protection Society
v. State, 95 N.C. App. 258, 382 S.E.2d 801
(1989).

Am. Treasures, 173 N.C. App. at 175–76, 617 S.E.2d at 349–50.

Ultimately this Court relied on the two cases in holding that:

the trial court’s exercise of jurisdiction
under the facts of the instant case was
proper. First, we find McCormick and Animal
Protection Society are sufficiently similar to
the facts of the instant case and are
controlling on the issue of the trial court’s
jurisdiction. Second, the declaratory
judgment procedure is the only way plaintiff
can protect its property rights and prevent
ALE from foreclosing the sale of its product
in convenience stores.

. . .

Accordingly, without seeking a declaratory
judgment, plaintiff would be unable to
effectively protect its property rights.
Defendants’ jurisdictional argument is
overruled.

Id. at 176, 617 S.E.2d at 350 (emphasis added).

Here, as in Am. Treasures, Plaintiffs face restrictions on

their property rights resulting from Sheriff Brown’s transmission
 -19-
of the innocent owner letter, which effectively barred any future

sale and current placement of their kiosks. Additionally, as in

Am. Treasures, sovereign immunity acts as a bar to Plaintiffs’

ability to seek redress through monetary damages. Without such

redress, Plaintiffs have no viable option for protecting their

property rights during this litigation.

Accordingly, as (i) the facts at present are sufficiently

similar to the controlling cases in this area and (ii) the

declaratory judgment procedure is the only method by which

Plaintiffs have recourse to protect their property interests in

the kiosks, we hold that the trial court properly exercised

jurisdiction and that sovereign immunity did not bar Plaintiffs’

claim for injunctive relief. We next address whether Sheriff

Brown’s challenge to the trial court’s decision to issue a

preliminary injunction is interlocutory.

B. Preliminary Injunction

The purpose of a preliminary injunction is
ordinarily to preserve the status quo pending
trial on the merits. Its issuance is a matter
of discretion to be exercised by the hearing
judge after a careful balancing of the
equities. Its impact is temporary and lasts
no longer than the pendency of the action. Its
decree bears no precedent to guide the final
determination of the rights of the parties. In
form, purpose, and effect, it is purely
interlocutory. Thus, the threshold question
presented by a purported appeal from an order
 -20-
granting a preliminary injunction is whether
the appellant has been deprived of any
substantial right which might be lost should
the order escape appellate review before final
judgment.

A.E.P. Indus., Inc. v. McClure, 308 N.C. 393, 400, 302 S.E.2d 754,

759 (1983) (citation and internal quotation marks omitted); see

also Bessemer City Express, Inc. v. City of Kings Mountain, 155

N.C. App. 637, 639, 573 S.E.2d 712, 714 (2002); Little v. Stogner,

140 N.C. App. 380, 383, 536 S.E.2d 334, 336 (2000) (“For a

‘defendant to have a right of appeal from a mandatory preliminary

injunction, ‘substantial rights’ of the appellant must be

adversely affected.’” (quoting Dixon v. Dixon, 62 N.C. App. 744,

744, 303 S.E.2d 606, 607 (1983)).

A substantial right is affected when the trial court’s order

prohibits the State from enforcing the law. Beason v. State Dep’t

of the Sec’y of State, ___ N.C. App. ___, ___, 743 S.E.2d 41, 44–

45 (2013) (“[T]he trial court found that respondent was improperly

interpreting statutes it is responsible for enforcing. Thus, we

conclude that respondent suffers the risk of injury if we do not

consider the merits of this interlocutory appeal. Therefore, we

deny petitioner’s motion to dismiss.”); Johnston v. State, ___

N.C. App. ___, ___, 735 S.E.2d 859, 864 (2012), writ allowed,

review on additional issues denied, 366 N.C. 562, 738 S.E.2d 360
 -21-
(2013) and appeal dismissed, 366 N.C. 562, 738 S.E.2d 361 (2013)

and aff’d, ___ N.C. App. ___, 749 S.E.2d 278 (2013).

Sheriff Brown argues that his ability to enforce the law is

impeded by the trial court’s grant of a preliminary injunction,

and points our attention to Rockford-Cohen Grp., LLC v. N.C. Dep’t

of Ins., ___ N.C. App. ___, 749 S.E.2d 469 (2013), which stated

that “[w]hen an agent of the State that is charged with enforcing

statutes chooses to appeal rulings limiting the enforcement of

those statutes, the right to enforce the statute is substantial

and the rulings are immediately appealable.” Id. at ___,

749 S.E.2d at 471.

Rockford ultimately held that, because the defendant was not

a state agency or agent of the State charged with enforcing the

statutes, a substantial right was not affected. Id. at ___, 749

S.E.2d at 472. This Court relied on Johnston and Gilbert v. N.C.

State Bar, 363 N.C. 70, 76–77, 678 S.E.2d 602, 606 (2009) for this

proposition. This Court in Johnston held

that the State has a substantial right to
enforce the criminal laws of North Carolina
and that this right is affected by a ruling
declaring a statute, duly enacted by the
General Assembly, to be unconstitutional. The
State has also demonstrated that the
deprivation of that substantial right will
potentially work injury if not addressed
before appeal from a final judgment. The
trial court’s judgment prohibits the State
 -22-
from prosecuting plaintiff for possession of
a firearm. Further, it casts doubt upon every
prosecution by the State throughout North
Carolina under Article 54A of Chapter 14 of
the General Statutes.

Johnston, ___ N.C. App. at ___, 735 S.E.2d at 864.

Here, the trial court’s grant of preliminary injunction

violated the substantial right of Sheriff Brown in its sixth

conclusion of law:

6. The Gift Surplus System v1-01.1 and the
Gift Surplus computer kiosk promote the sale
of products through a lawful sweepstakes under
North Carolina law.

In essence, this conclusion of law determines that these particular

kiosks fit within the statutory framework and does so unnecessarily

at the preliminary injunction stage. In Beason, this Court held

that “[t]he substantial basis of this appeal involves the trial

court’s order concluding that the alleged violations respondent

fined petitioner for were not actually violations.” Beason, ___

N.C. App. at ___, 743 S.E.2d at 45 (emphasis added). Here, the

trial court does the same thing, since it declares that Plaintiffs

were operating a “lawful sweepstakes” and, thus, finds that the

Sheriff threatened to prosecute actions that were not actually

violative of the statutes. This broad wording in the sixth

conclusion of law goes much further than the equitable

consideration of “likely to prevail on the merits.” Instead, this
 -23-
conclusion of law makes a declaration concerning the lawfulness of

these kiosks and would “cast doubt upon every prosecution by the

State throughout North Carolina . . . .” Johnston, ___ N.C. App.

at ___, 735 S.E.2d at 864.

Similarly, in the decretal section of the order, the trial

court ordered that “[t]he Preliminary Injunction . . . is

specifically enforceable in those Onslow County places which are

validly operating four or less Gift Surplus System v1-01.1/Gift

Surplus computer kiosks at one location or on one site.” The trial

court’s use of “validly” within the preliminary injunction,

similar to its use of “lawful” in its sixth conclusion of law,

exceeds the scope of a preliminary injunction, as use of the term

“valid” may imply within the preliminary injunction that

Plaintiff’s kiosks are “legally sufficient” within the applicable

statutes. Black’s Law Dictionary 1690 (9th ed. 2009). Such a

conclusion would also cast doubt on prosecutions undertaken by

Sheriff Brown and impede his ability to enforce the law.

As these portions of the preliminary injunction go beyond

maintaining the status quo by declaring that Plaintiffs’ conduct

was lawful or valid, these portions affect Sheriff Brown’s

substantial right to enforce the laws of North Carolina. Thus, we

exercise jurisdiction for the limited purpose of vacating the sixth
 -24-
conclusion of law in its entirety and striking the word “validly”

from the third item in the decretal section of the preliminary

injunction.

The remainder of the preliminary injunction does not

implicate a substantial right in enforcing the statutes and simply

maintained the status quo pending a trial on the merits. Sheriff

Brown was prohibited from enforcing certain statutes listed in the

decretal section of the order (N.C. Gen. Stat. §§ 14-292, 14-293,

14-301, 14-306.1A, and 14-306.4). Additionally, the preliminary

injunction was limited in its scope: the bar against enforcement

extends only to “those Onslow County places which are

. . . operating four or less Gift Surplus System v1-01.1/Gift

Surplus computer kiosks at one location or on one site.” The order

also has no effect “on any individuals or entities who are not a

party hereto, or on the parties hereto upon the trial or ultimate

disposition of this matter.” Simply, Sheriff Brown was not

enjoined from enforcing the criminal laws of North Carolina by the

remainder of the trial court’s preliminary injunction; Sheriff

Brown was enjoined from enforcing certain criminal laws against

parties to the litigation until the resolution of this case.3 The

3 This Court has found that enforcing the statutes against an
individual affects a substantial right warranting immediate
review, but has done so with permanent injunctions or final orders
 -25-
remainder of the preliminary injunction preserves the status quo

and “all parties remain free to fully litigate the merits of the

case in the correct procedural context before the trial

court . . . .” CB & I Constructors, Inc. v. Town of Wake Forest,

157 N.C. App. 545, 550, 579 S.E.2d 502, 505 (2003). The remainder

of the preliminary injunction does not affect a substantial right.

As the remainder does not affect a substantial right, we do not

have jurisdiction to consider this interlocutory appeal, so the

remainder of Sheriff Brown’s appeal is dismissed.

We next turn to the justiciability argument advanced by

Sheriff Brown in opposition to Plaintiffs’ request for a

declaratory judgment.

C. Justiciability of Declaratory Judgment Claim

The North Carolina Declaratory Judgment Act provides that

Any person interested . . . whose rights,
status or other legal relations are affected
by a statute, municipal ordinance, contract or
franchise, may have determined any question of
construction or validity arising under the

concerning enforcement of a particular statute or regulation. See,
e.g., Gilbert, 363 N.C. at 75, 678 S.E.2d at 605 (“Although we
express no opinion as to the merits of defendant's Gilbert III
complaint, we note that the trial court order from which defendant
appeals includes a permanent injunction enjoining defendant from
prosecuting Gilbert III.” (emphasis added)); Beason, ___ N.C. App.
at ___, 743 S.E.2d at 44–45 (considering an order that decided
some of the petitioner’s claims and made definite statements that
the petitioner’s actions were not violations of certain lobbying
laws that respondent was responsible for enforcing).
 -26-
instrument, statute, ordinance, contract, or
franchise, and obtain a declaration of rights,
status, or other legal relations thereunder.

N.C. Gen. Stat. § 1-254 (2013). Further, N.C. Gen. Stat. § 1-253

(2013) provides trial courts with the “power to declare rights,

status, and other legal relations, whether or not further relief

is or could be claimed.”

Our Supreme Court has “required that an actual controversy

exist both at the time of the filing of the pleading and at the

time of hearing” in declaratory judgment actions. Sharpe v. Park

Newspapers of Lumberton, Inc., 317 N.C. 579, 585, 347 S.E.2d 25,

30 (1986). Without an “actual controversy between the parties,”

jurisdiction does not attach under the Declaratory Judgment Act.

Fabrikant v. Currituck Cnty., 174 N.C. App. 30, 44, 621 S.E.2d 19,

29 (2005). An “actual controversy” must be more than a “mere

difference of opinion between the parties” and this Court lacks

the authority to render an advisory opinion that “the parties

might, so to speak, put on ice to be used if and when occasion

might arise.” Id. (citations and quotation marks omitted).

However,

[a]lthough a declaratory judgment action must
involve an actual controversy between the
parties, plaintiffs are not required to allege
or prove that a traditional cause of action
exists against defendants in order to
establish an actual controversy. A
 -27-
declaratory judgment should issue (1) when it
will serve a useful purpose in clarifying and
settling the legal relations at issue, and (2)
when it will terminate and afford relief from
the uncertainty, insecurity and controversy
giving rise to the proceeding.

Goldston, 361 N.C. at 33, 637 S.E.2d at 881 (citations, quotation

marks, and alterations omitted); see also Wake Cares, Inc., et al.

v. Wake Cnty Bd of Educ., 190 N.C. App. 1, 12, 660 S.E.2d 217, 224

(2008), aff’d, 363 N.C. 165, 675 S.E.2d 345 (2009) (holding that

an actual controversy existed where plaintiffs, who were not

charged with or threatened to be charged with a crime, were

affected by several statutes and where a declaratory judgment

“would terminate and afford relief from the uncertainty,

insecurity, and controversy currently existing”). Ultimately,

plaintiffs in declaratory judgment actions are “not required to

sustain actual losses in order to make a test case[,]” since that

“‘requirement would thwart the remedial purpose of the Declaratory

Judgment Act.’” Charlotte-Mecklenburg Hosp. Auth. v. N.C. Indus.

Comm’n, 336 N.C. 200, 214, 443 S.E.2d 716, 725 (1994), superseded

by statute on other grounds as stated in Mehaffey v. Burger King,

___ N.C. ___, ___, 749 S.E.2d 252, 256 (2013) (quoting Bland v.

City of Wilmington, 278 N.C. 657, 659, 180 S.E.2d 813, 815 (1971)).

Plaintiffs seek to determine whether the software and kiosks

they operate comply with N.C. Gen. Stat. §§ 14-292, 14-293, 14-
 -28-
301, 14-306.1A, and 14-306.4 (2013), which regulate electronic

sweepstakes machines. Plaintiffs do not seek to determine the

criminal culpability of their potential customers, and the courts

retain the ability to grant a declaratory judgment when a

“questioned statute relates to penal matters.” Jernigan v. State,

279 N.C. 556, 561, 184 S.E.2d 259, 263–64 (1971). Simply put,

“[w]hen a plaintiff has a property interest which may be adversely

affected by the enforcement of the criminal statute, he may

maintain an action under the Declaratory Judgment Act to determine

the validity of the statute in protection of his property rights.”

Id. at 561, 184 S.E.2d at 264; see also Calcutt v. McGeachy, 213

N.C. 1, 2, 195 S.E. 49, 49 (1938) (allowing jurisdiction for a

declaratory judgment action to test the constitutionality of a

criminal statute “prohibiting the manufacture, sale, possession,

and use of gambling devices”).

The record tends to show a conflict between Sheriff Brown’s

interpretation and Plaintiff’s interpretation of the relevant

statutes. Sheriff Brown sent an innocent owner letter declaring

that the machines were illegal, while Plaintiffs countered with

expert testimony asserting that the machines complied with the

State’s recent statutory changes. A declaratory judgment would

help clarify the “legal relations at issue” and would remove
 -29-
uncertainty from Plaintiffs’ continuing business interests.

Sheriff Brown argues that “there is no actual controversy

existing at the time of the hearing[.]” This argument is premised

on (a) Sheriff Brown having seized kiosks at a Rhodestown location

rather than where Sandhill’s owner believed the machines actually

were, which was in the Town of Holly Ridge, and (b) Sheriff Brown

having removed the kiosks from the Rhodestown location prior to

the hearing on the motion to dismiss. Sheriff Brown cites

Fabrikant for the proposition that the actual controversy must

exist “at the time of the filing of the pleading and at the time

of hearing.” Fabrikant, 174 N.C. App. at 44, 621 S.E.2d at 29.

However, Sheriff Brown’s office, through the transmission of

the innocent owner letter, expressed doubts about the legality of

“several video gaming machines associated with the web-site known

as www.gift-Surplus.com.” The hearing itself centered on the

conflict concerning whether the kiosks at issue were illegal and

the uncertainty concerning the legality of these kiosks ultimately

impacts Plaintiffs’ ability to operate a business going forward.

Additionally, Plaintiffs alleged in their complaint that, since

Sheriff Brown issued the innocent owner letter, existing retail

outlets that used Plaintiffs’ products had removed the kiosks or

chosen not to use the kiosks due to the uncertainty surrounding
 -30-
their legality. From the foregoing, it is clear that a justiciable

actual controversy, as required by the Declaratory Judgment Act,

exists. Accordingly, the trial court’s exercise of jurisdiction

over the declaratory judgment claim was proper.

Because we (a) hold that Sheriff Brown is not entitled to the

defense of sovereign immunity on the Rule 12 motions, (b) dismiss

Sheriff Brown’s appeal of the trial court’s grant of a preliminary

injunction in part and strike portions of the preliminary

injunction in part, and (c) find an actual case or controversy

existed, we do not address Sheriff Brown’s remaining arguments on

appeal.

III. Conclusion

In conclusion, (i) we hold that the trial court’s denial of

Sheriff Brown’s motion to dismiss affected a substantial right;

(ii) we affirm the trial court’s order denying Sheriff Brown’s

motion to dismiss; (iii) we exercise limited jurisdiction to vacate

portions of the preliminary injunction which exceed the scope of

a preliminary injunction; and (iv) we dismiss Sheriff Brown’s

appeal of the trial court’s grant of a preliminary injunction as

interlocutory and not affecting a substantial right.

AFFIRMED in part, VACATED in part, and DISMISSED in part.

Judge ELMORE concurs.
 -31-
Judge ERVIN dissents in a separate opinion.
 NO. COA14-85
NORTH CAROLINA COURT OF APPEALS
Filed: 5 September 2014

SANDHILL AMUSEMENTS, INC. AND GIFT
SURPLUS, LLC,
Plaintiffs,

Onslow County
v.
No. 13 CVS 3705

SHERIFF OF ONSLOW COUNTY, NORTH
CAROLINA, ED BROWN, in his official
capacity; and DISTRICT ATTORNEY FOR THE
FOURTH PROSECUTORIAL DISTRICT OF THE
STATE OF NORTH CAROLINA, ERNIE LEE, in
his official capacity,
Defendants

ERVIN, Judge, dissenting.

Although I agree with my colleagues concerning the proper

resolution of Defendant’s challenge to the denial of his motion to

dismiss based upon governmental immunity and justiciabiity

grounds, I am unable to agree with their determination that a

portion of Defendant’s appeal from the issuance of the preliminary

injunction did not affect a substantial right and is not subject

to immediate appellate review in its entirety. In addition, after

evaluating the validity of Defendant’s challenge to the

preliminary injunction on the merits, I believe that the trial

court erred by issuing the preliminary injunction and that the

portion of the trial court’s order preliminarily enjoining

Defendant from engaging in certain enforcement-related activities
 -33-
should be reversed in its entirety. As a result, I concur in the

Court’s opinion in part and dissent from the Court’s opinion in

part.

Appealability

As a general proposition, “there is no right of immediate

appeal from interlocutory orders and judgments,” Travco Hotels,

Inc. v. Piedmont Natural Gas Co., Inc., 332 N.C. 288, 291, 420

S.E.2d 426, 428 (1992) (citing Goldston v. American Motors Corp.,

326 N.C. 723, 725, 392 S.E.2d 735, 736 (1990)), such as the one at

issue here. However, immediate appellate review of interlocutory

orders is available “when the trial court enters a final judgment

as to one or more, but fewer than all, claims or parties and

certifies there is no just reason for delay” pursuant to N.C. Gen.

Stat. § 1A-1, Rule 54(b), or when “the [interlocutory] order

affects a substantial right under” N.C. Gen. Stat. § 1-277(a) and

N.C. Gen. Stat. § 7A-27(b)(3). Sharpe v. Worland, 351 N.C. 159,

162, 522 S.E.2d 577, 579 (1999) (citing DKH Corp. v. Rankin-

Patterson Oil Co., 348 N.C. 583, 585, 500 S.E.2d 666, 668 (1998),

and Oestreicher v. American Nat’l Stores, 290 N.C. 118, 121-22,

225 S.E.2d 797, 800 (1976)). In view of the fact that the trial

court did not include, and could not properly have included, a

certification pursuant to N.C. Gen. Stat. § 1A-1, Rule 54(b), in
 -34-
its order, the only basis upon which this Court might have

jurisdiction over Plaintiff’s appeal from that portion of the trial

court’s order preliminarily enjoining Defendant from engaging in

certain enforcement-related activities is in the event that that

portion of the trial court’s order affects a substantial right.

“The ‘substantial right’ test for appealability is more

easily stated than applied.” Bailey v. Goode, 301 N.C. 205, 210,

270 S.E.2d 431, 434 (1980) (citing Waters v. Qualified Personnel,

Inc., 294 N.C. 200, 208, 240 S.E.2d 338, 343 (1978)). An

interlocutory order “affects a substantial right” for purposes of

N.C. Gen. Stat. § 1-277(a) and N.C. Gen. Stat. § 27(b)(3) in the

event that it “deprive[s] the appealing party of a substantial

right which will be lost if the order is not reviewed before a

final judgment is entered.” Cook v. Bankers Life & Cas. Co., 329

N.C. 488, 491, 406 S.E.2d 848, 850 (1991) (citing Waters, 294 N.C.

at 207, 240 S.E.2d at 343). “Essentially a two-part test has

developed--the right itself must be substantial and the

deprivation of that substantial right must potentially work injury

. . . if not corrected before appeal from final judgment.”

Goldston, 326 N.C. at 726, 392 S.E.2d at 736. A “substantial

right” is “‘a legal right affecting or involving a matter of

substance as distinguished from matters of form: a right
 -35-
materially affecting those interests which a [litigant] is

entitled to have preserved and protected by law: a material

right.’” Oestreicher, 290 N.C. at 130, 225 S.E.2d at 805 (quoting

Webster’s Third New International Dictionary 2280 (1971)).

“Whether an interlocutory ruling affects a substantial right

requires consideration of ‘the particular facts of that case and

the procedural context in which the order from which appeal is

sought was entered.’” N.C. Dep’t. of Transp. v. Rowe, 351 N.C.

172, 175, 521 S.E.2d 707, 709 (1999) (quoting Waters, 294 N.C. at

208, 240 S.E.2d at 343)).

In the decretal paragraphs contained in its order, the trial

court stated, in pertinent part, that:

2. That Plaintiffs’ Motion for
Preliminary Injunction should be and hereby is
GRANTED, and that Defendant Ed Brown, Sheriff
of Onslow County is hereby:

a. Restrained and enjoined from using
[N.C. Gen. Stat. §§] 14-292, 14-293,
14-301, 14-306.1A, and 14-306.4 to
prohibit the Plaintiffs from
displaying, selling, operating or
promoting the Gift Surplus System
v1-01.1[] and the Gift Surplus
computer kiosk and sweepstakes
promotion of the
www.giftsurplus.com website and
gift cards; and

b. Restrained and enjoined from
compelling or attempting to compel,
coerce or persuade the Plaintiffs to
 -36-
remove the Gift Surplus System v1-
01.1 and the Gift Surplus computer
kiosks and equipment associated
with the kiosks and sweepstakes from
any retail establishment in Onslow
County; and

c. Restrained and enjoined from citing
or prosecuting the Plaintiffs for
criminal administrative offenses or
violations by reason of such party’s
display, sale, operation, or
promotion of the Gift Surplus System
v1-01.1 and the Gift Surplus
computer kiosks and sweepstakes
promotions of the www.gift-
surplus.com website and gift cards
in Onslow County.

3. The Preliminary Injunction set out
in [Paragraph No. 2] above is specifically
enforceable only in those Onslow County places
which are validly operating four or less Gift
Surplus System v1-01.1/Gift Surplus computer
kiosks at one location or on one site.

In other words, the clear import of the preliminary injunction

provisions contained in the trial court’s order was to prevent

Defendant and his agents from taking any steps to enforce the

provisions of N.C. Gen. Stat. §§ 14-292, 14-293, 14-301, 14-306.1A,

and 14-306.4 against the display, sale, operation, promotion of

the equipment, computer programs, and websites in sites located in

Onslow County at which no more than four kiosks were present. As

a result, every provision of the preliminary injunction had the

effect of prohibiting Defendant from enforcing certain statutory
 -37-
provisions as he understood them against Plaintiffs’ equipment and

activities as the activities in question occurred at locations in

Onslow County at which no more than four kiosks were present.

As I read the relevant decisions, this Court has recognized

that the entry of a preliminary injunction precluding a state or

local agency from enforcing the law affects a substantial right

and is immediately appealable. Rockford-Cohen Group, LLC v. N.C.

Dep’t. of Ins., __ N.C. App. __, __, 749 S.E.2d 469, 471 (2013)

(stating that, “[w]hen an agency of the State that is charged with

enforcing statutes chooses to appeal rulings limiting the

enforcement of those statutes, the right to enforce the statute is

substantial, and the rulings are immediately appealable”) (citing

Johnston v. State, __ N.C. App. __, __, 735 S.E.2d 859, 864 (2012)

(allowing an immediate appeal from an interlocutory order

declaring that a statute, as applied to the plaintiff, was

unconstitutional since that decision had the effect of permanently

“enjoin[ing] the State from prosecuting plaintiff for violations

of the” relevant statutory provisions), disc. review concerning

additional issues denied, 366 N.C. 562, 738 S.E.2d 360 (2013),

appeal dismissed, 366 N.C. 562, 738 S.E.2d 361 (2013), aff’d, __

N.C. App. __, 749 S.E.2d 278 (2013), and Gilbert v. N.C. State

Bar, 363 N.C. 70, 76-77, 678 S.E.2d 602, 606 (2009) (allowing an
 -38-
immediate appeal from an interlocutory order that “enjoin[ed]

defendant from prosecuting” a related proceeding); see also Beason

v. N.C. Dep’t. of Sec’y. of State, __ N.C. App. __, __, 743 S.E.2d

41, 44-45 (2013) (stating that, “since respondent is charged with

investigating violations of and enforcing” certain provisions of

the lobbying laws, since “respondent’s right to carry out these

duties is substantial,” and since “respondent’s ability to carry

out its duties requires that it be able to act timely on

allegations it believes constitute violations,” the respondent’s

appeal from an interlocutory order enjoining the enforcement of

those lobbying laws against the petitioner was subject to immediate

appellate review). I find no basis for departing from this well-

established line of precedent, as the Court’s opinion appears to

do, in this case. As a result, given that the preliminary

injunction issued by the trial court prohibits Defendants from

taking action to enforce the relevant gaming machine statutes as

he understands them, I would hold that this Court has jurisdiction

over Defendant’s appeal from the issuance of the preliminary

injunction and proceed to address the validity of Defendant’s

challenge to that portion of the trial court’s order on the merits.

In its opinion, the Court concludes that a portion of the

trial court’s preliminary injunction affects a substantial right
 -39-
and should be invalidated and that a portion does not affect a

substantial right and should remain undisturbed. More

specifically, the Court concludes that the sixth conclusion of law

contained in the trial court’s order should be vacated and that

“validly” should be stricken from the third decretal paragraph on

the grounds that these portions “go beyond maintaining the status

quo.” In reaching this conclusion, the Court relies on the

Supreme Court’s statement in A.E.P. Indus., Inc. v. McClure, 308

N.C. 393, 400, 302 S.E.2d 754, 759 (1983) (citation and quotation

marks omitted), to the effect that “[t]he purpose of a preliminary

injunction is ordinarily to preserve the status quo pending trial

on the merits” and concludes that, because the relevant portions

of the preliminary injunction order do more than serve the purpose

of maintaining the status quo, they “affect Sheriff Brown’s

substantial right to enforce the laws of North Carolina” and should

be invalidated on appeal. On the other hand, the Court appears to

hold that the remainder of the preliminary injunction is so limited

in scope and effect that it does not affect a substantial right

and is not subject to immediate appellate review. I do not believe

that the Court’s approach to the resolution of this issue has any

support in our “substantial right” jurisprudence as explained in

decisions such as Gilbert, Johnston, and Beason.
 -40-
As an initial matter, the Court’s analysis seems to indicate

that the extent to which Defendant was entitled to appeal from the

issuance of the preliminary injunction hinges upon the validity of

the injunction itself.4 In other words, the Court seems to conclude

that Defendant is entitled to immediate appellate review of the

preliminary injunction to the extent, and only to the extent, that

the trial court exceeded its authority in issuing the injunction

in the first place. I see no basis in our “substantial right”

jurisprudence for equating a litigant’s ability to appeal from an

interlocutory order with the litigant’s ability to prevail on the

merits in the event that such an appeal was to be entertained.

Instead, the extent to which this Court has jurisdiction to

entertain an immediate appeal from an interlocutory order and the

extent to which the trial court erred by entering the interlocutory

order in question constitute two completely different issues that

4This aspect of the Court’s analysis is similar to the
argument advanced in Plaintiff Sandhill Amusements’ brief, which
suggests that the preliminary injunction does not affect a
substantial right on the theory that, since Plaintiffs’ equipment
and activities do not violate the applicable gambling statutes,
Defendant has not been enjoined from properly enforcing the law.
However, as is discussed in more detail in the text, the extent to
which the substance of a party’s position on the merits is correct
and the extent to which that party has a right to seek immediate
appellate review from an interlocutory order are two separate, and
essentially unrelated, questions.
 -41-
have little or no relation to each other in the preliminary

injunction context.

Secondly, the Court’s appealability analysis appears to hinge

on the assumption that we have jurisdiction over Defendant’s appeal

from the trial court’s order to the extent, and only to the extent,

that the trial court’s order disturbed the status quo. More

specifically, the Court states that the portion of the preliminary

injunction that it does not believe to be subject to appellate

review on an interlocutory basis “does not implicate a substantial

right in enforcing the statutes and simply maintained the status

quo pending a trial on the merits.” Aside from the fact that the

extent to which a particular order maintains or disturbs the status

quo is not the sum total of the test employed for evaluating the

merits of a trial court’s decision to issue a preliminary

injunction, I am unable to find any support in our “substantial

right” jurisprudence for the use of such a standard. Simply put,

I am not aware of any decision that finds or declines to find the

existence of a “substantial right” sufficient to support the

maintenance of an appeal from an interlocutory order based upon

the extent to which the underlying order preserves or disturbs the

status quo. For that reason, I do not believe that the Court’s

reference to the impact of the underlying preliminary injunction
 -42-
on the status quo has any bearing on Defendant’s right to immediate

appellate review of the preliminary injunction.

Finally, the Court appears to conclude that Gilbert,

Johnston, and Beason only authorize interlocutory appeals from

orders that permanently, rather than preliminarily, enjoin state

or local agencies or officials from enforcing the law against

specific litigants.5 However, the Court’s interpretation of these

cases is inconsistent with our statement of the applicable legal

principle in Rockford-Cohen, a case that involved a challenge to

the issuance of a preliminary injunction; has no support in their

underlying logic, which assumes that an order precluding a state

5As we have already noted, the Court suggests that the fact
that the preliminary injunction merely affects Defendant’s ability
to enforce a limited number of statutory provisions against a
limited number of persons in a limited geographic area militates
in favor of a finding that a portion of the preliminary injunction
does not affect a substantial right and appears to read Gilbert as
distinguishing between injunctions that affect a defendant’s
ability to enforce the laws generally and injunctions that affect
a defendant’s ability to enforce the laws against specific
litigants. A similar argument resting on the scope of the
preliminary injunction is advanced in the briefs submitted by
Plaintiff Gift Surplus and Plaintiff Sandhill Amusements.
However, since the orders at issue in Gilbert, Beason, and Johnston
all precluded the relevant agency or official from enforcing
specific statutory provisions against specific litigants in
specific contexts, it is clear that such scope-related arguments
have no support in our “substantial right” jurisprudence and that
the Court’s emphasis upon these factors in declining to review a
portion of the preliminary injunction rests upon our
misapprehension of our “substantial right” jurisprudence.
 -43-
or local official from enforcing the law affects a substantial

right without in any way suggesting the existence of a temporal

limitation on the applicability of that principle; and ultimately

rests upon stray references to the permanence of the injunctions

at issue in those cases that had no apparent impact upon the

reasoning actually employed in holding that the orders challenged

in those case were immediately appealable.6 As a result, since

the preliminary injunction at issue in this case prohibits a state

or local official from enforcing the law against Plaintiffs, since

our decisions clearly allow immediate appellate review of such

6To be sure, Gilbert notes that the order from which the
defendant appealed permanently enjoined it from prosecuting a
separate proceeding. Id. at 75, 678 S.E.2d at 605. Similarly,
the orders at issue in Beason, __ N.C. App. at __, 743 S.E.2d at
44-45, and Johnston, __ N.C. App. at __, 735 S.E.2d at 864, involve
permanent orders rather than preliminary injunctions. However,
nothing in the opinions in question in any way suggests that the
fact that the injunctions or orders at issue in those cases were
permanent rather than preliminary had any bearing on the Court’s
appealability analysis. Instead, the Court simply held that an
injunction or order that precluded a state or local official from
enforcing the laws affected a substantial right and was immediately
appealable without in any way suggesting that a different principle
would apply to preliminary, as compared to permanent, injunctions
or orders. As a result, while the Court has correctly identified
a factual distinction between the relevant cases and this case,
the logic upon which the Court based those decisions applies
equally to permanent and preliminary injunctions or orders and
nothing in the opinions in those cases in any way suggests that
the outcome would have been different in the event that the bar to
further enforcement had been preliminary rather than permanent in
nature.
 -44-
orders, and since the logic upon which the Court relies in reaching

a different conclusion rests upon a misapprehension of our prior

decisions concerning appealability issues, I would hold that this

Court has jurisdiction over the entirety of Defendant’s challenge

to the preliminary injunction and will now, in light of that

conclusion, address Defendant’s challenge to the issuance of the

preliminary injunction on the merits.

Validity of the Preliminary Injunction

“[A preliminary injunction] will be issued only (1) if a

plaintiff is able to show likelihood of success on the merits of

his case and (2) if a plaintiff is likely to sustain irreparable

loss unless the injunction is issued, or if, in the opinion of the

Court, issuance is necessary for the protection of a plaintiff’s

rights during the course of litigation.” Ridge Cmty. Investors,

Inc. v. Berry, 293 N.C. 688, 701, 239 S.E.2d 566, 574 (1977).

“[O]n appeal from an order of superior court granting or denying

a preliminary injunction, an appellate court is not bound by the

findings, but may review and weigh the evidence and find facts for

itself.” A.E.P. Indus., 308 N.C. at 402, 302 at 754, 760 (citation

omitted). Although appellate courts review orders granting or

denying preliminary injunctions using a de novo standard of review,

we have also noted that “a trial court’s ruling on a motion for a
 -45-
preliminary injunction is presumed to be correct, and the party

challenging the ruling bears the burden of showing it was

erroneous.” Analog Devices, Inc. v. Michalski, 157 N.C. App. 462,

465, 579 S.E.2d 449, 452 (2003) (citation omitted). For purposes

of this case, the ultimate issue raised by Defendant’s challenge

to the validity of the preliminary injunction is whether Plaintiffs

have shown a likelihood of success on the merits and whether they

are likely to sustain an irreparable injury in the event that they

are deprived of injunctive relief prior to the completion of a

trial on the merits.7

According to N.C. Gen. Stat. § 14-306.4(b), “it shall be

unlawful for any person to operate, or place into operation, an

electronic machine or device to . . . [c]onduct a sweepstakes

through the use of an entertaining display, including the entry

process or the reveal of a prize.” An “electronic machine or

device” for purposes of N.C. Gen. Stat. § 14-306.4(b) is a piece

of equipment “that is intended to be used by a sweepstakes entrant,

that uses energy, and that is capable of displaying information on

a screen or other mechanism.” N.C. Gen. Stat. § 14-306.4(a)(1).

7In view of the fact that Defendant has not argued that
Plaintiffs have shown the existence of the necessary irreparable
injury, we will focus our discussion in the text on the extent to
which Plaintiffs have shown that they are likely to succeed on the
merits at trial.
 -46-
Similarly, an “entertaining display” is defined as “visual

information, capable of being seen by a sweepstakes entrant, that

takes the form of actual game play, or simulated game play,”

including “[a] video game based on or involving the random or

chance matching of different pictures, words, numbers, or symbols

not dependent on the skill or dexterity of the player” and “[a]ny

. . . video game not dependent on skill or dexterity that is played

while revealing a prize as the result of an entry into a

sweepstakes.” N.C. Gen. Stat. § 14-306.4(a)(3). Finally, a

“sweepstakes” is defined as “any game, advertising scheme or plan,

or other promotion, which, with or without payment of any

consideration, a person may enter to win or become eligible to

receive any prize, the determination of which is based upon

chance.” N.C. Gen. Stat. § 14-306.4(a)(5). As a result, given

that the equipment and activities protected by the preliminary

injunction clearly involve the use of electronic devices to engage

in or simulate game play based upon which a participant may win or

become eligible to win a prize, the only basis upon which

Plaintiffs’ equipment and activities can avoid running afoul of

N.C. Gen. Stat. § 14-306.4(b) is in the event that the game or

simulated game involved is “dependent on skill or dexterity.”

In its order, the trial court found as a fact that:
 -47-
19. Nick Farley . . . testified on
behalf of the Plaintiffs. He was proffered
and accepted as an expert witness in the field
of gaming and software.8

20. Prior to trial, Farley conducted a
review and examination of the computer
software program, Gift Surplus System v1-01-
1, developed by Gift Surplus, as well as the
Gift Surplus computer kiosk, which resulted in
a written report dated April 16, 2013 (a copy
of which was received into evidence).

21. In Farley’s uncontroverted opinion
as evidenced by his report and testimony, the
computer software program that operates the
distribution of Gift Surplus sweepstakes
entries and the video games used to reveal
winning sweepstakes entries on the Gift
Surplus Kiosk is a sweepstakes which operates
in compliance with the generally accepted
guidelines for operating sweepstakes in North
Carolina and many other jurisdictions in the
United States.

22. Farley testified that, based on his
expertise honed through years of experience
and his thorough knowledge of the gaming
machines and software, he understands the

8At this point, the trial court stated in Footnote No. 5 to
its order that: “Nick Farley is the owner of Nick Farley &
Associates, Inc., d/b/a Eclipse Compliance Testing, based in
Salon, Ohio. This is one of three firms in the country that
provides technical consulting services for compliance of gaming
machines with state and federal regulations. Eclipse Compliance
Testing consults with and has been hired by law enforcement, tribal
and government regulatory agencies in 245 jurisdictions, as well
as by regulated device manufacturers, regarding device
classification and regulatory compliance. The firm has been
involved solely in the business of compliance and testing from
2000 to present. Mr. Farley has testified as an expert witness in
these matters in federal, state and tribal courts both as a witness
for the government and for the defense.”
 -48-
meaning and interpretation of the words
“skill” and “dexterity” as used by the
industry in North Carolina and many other
jurisdictions.9

23. In Farley’s uncontroverted opinion
as evidenced by his report and testimony, the
Gift Surplus System v1-01-1, developed by Gift
Surplus and used in the kiosk (Plaintiff’s
Exhibit 1) is dependent on skill or dexterity
in order to realize any prize or entitlement
from the sweepstakes entries.10

Based upon these and other findings, the trial court concluded as

a matter of law that:

6. The Gift Surplus System v1-01-1 and
the Gift Surplus computer kiosk promote the

9At this point, in Footnote No. 6 to its order, the trial
court stated that: “In preparation for his testimony, Nick Farley
was provided by counsel the definition of ‘skill or dexterity’ in
statutes in the United States. As noted in his testimony, Farley’s
testimony was based partially upon the statutory definitions used
around the country.”

10At this point, in Footnote No. 7 to its order, the trial
court stated that: “Farley’s report found that a participant’s
decision can be viewed as a strategic choice or tactic which will
evolve into confidence with practice and experience. Participants
familiar with revealing sweepstakes entries through the game theme
will develop an aptitude or ability to quickly recognize the
correct reel and the correct skill moves to reveal a prize winning
sweepstakes entry. Experienced participants will demonstrate
fluency in the execution of the learned past of recognizing and
selecting the correct reel and making the correct skill move to
reveal a potential winning outcome. Further, if the participant
takes no action to effectuate the outcome of the game, the
participant will not be able to realize any potential prize
associated with the sweepstakes entry because these systems will
never display a winning sequence on the first sweepstakes entry
presented. Therefore, the kiosk games, per Farley, are dependent
on skill or dexterity and not the element of chance.”
 -49-
sale of products through a lawful sweepstakes
under North Carolina law.

. . . .

8. There is a likelihood that the
Plaintiffs will prevail in that:

a. Gift Surplus System v1-01.1 and the
Gift Surplus computer kiosk
operated by Gift Surplus, LLC,
conduct a valid sweepstakes within
the applicable law.

b. The Gift Surplus System v1-01.1 and
the Gift Surplus computer kiosk
operated by Gift Surplus, LLC, in
promotion of their sweepstakes are
dependent on skill or dexterity as
required under North Carolina
statutory law.

c. The Gift Surplus System v1-01.1 and
the Gift Surplus computer kiosk
operated by Gift Surplus, LLC, is a
lawful promotional device for the
sale of gift certificates and
operation of their promotional
sweepstakes.

As a result, the trial court determined that Defendant should be

enjoined from taking any action against Plaintiffs’ equipment and

activities based upon a determination that the extent to which a

person received a prize for participating in the sweepstakes hinged

upon that person’s skill or dexterity.

The trial court’s conclusion that Plaintiffs’ equipment and

activities involved a game whose outcome depended on skill or
 -50-
dexterity rested upon acceptance of Mr. Farley’s testimony to the

effect that the outcome of the games played utilizing Plaintiffs’

equipment depended on the player’s skill or dexterity. Although

the term “skill or dexterity” as used in N.C. Gen. Stat. § 14-

306.4 has not been statutorily defined, the meaning of the term in

question, as used in Article 37 of Chapter 14 of the General

Statues, a set of provisions governing gambling-related activities

that includes N.C. Gen. Stat. § 14-306.4, has been addressed by

this Court. In light of that fact, the trial court should have

determined whether Plaintiffs’ equipment and activities

facilitated a game of “skill and dexterity” or a game of chance

based upon the meaning of that term as used in North Carolina

gambling-related cases rather than on the basis of the meaning of

that term as used in other jurisdictions and in the gaming

industry, which is the approach that the trial court found to have

been adopted in Mr. Farley’s testimony. Thus, in order to

determine whether the trial court correctly found that Plaintiffs’

equipment and activities were lawful, we must first ascertain the

difference between a game of skill and a game of chance as those

terms are used in our gambling statutes and then determine which

side of the resulting line Plaintiffs’ equipment and activities

fall on.
 -51-
In Collins Coin Music Co. of North Carolina, Inc. v. North

Carolina Alcoholic Beverage Control Comm’n, 117 N.C. App. 405,

408, 451 S.E.2d 306, 308 (1994), disc. rev. denied, 340 N.C. 110,

456 S.E.2d 312 (1995), we stated that:

A game of chance is “such a game as is
determined entirely or in part by lot or mere
luck, and in which judgment, practice, skill
or adroitness have honestly no office at all,
or are thwarted by chance.” State v. Eisen,
16 N.C. App. 532, 535, 192 S.E.2d 613, 615
(1972) (citation omitted). “A game of skill,
on the other hand, is one in which nothing is
left to chance, but superior knowledge and
attention, or superior strength, agility and
practice gain the victory.” Id. at 535, 192
S.E.2d at 615-16 (citation omitted). In State
v. Stroupe, 238 N.C. 34, 76 S.E.2d 313 (1953),
a case involving the legality of the game of
pool, our Supreme Court stated:

It would seem that the test of the character
of any kind of a game of pool as to whether it
is a game of chance or a game of skill is not
whether it contains an element of chance or an
element of skill, but which of these is the
dominating element that determines the result
of the game, to be found from the facts of
each particular kind of game. Or to speak
alternatively, whether or not the element of
chance is present in such a manner as to thwart
the exercise of skill or judgment.

Id. at 38, 76 S.E.2d at 316-317.

In light of this understanding of the meaning of the relevant

statutory language, this Court considered whether a video poker

game was one of skill or of chance, id. at 406, 451 S.E.2d at 307,
 -52-
and determined that the game in question was one of chance rather

than one of skill because, at least in part, almost all of the

skill-related elements in an in-person poker game, including the

use of psychological factors such as bluffing to prevail over an

opponent, were absent from video poker. Id. at 408, 451 S.E.2d at

308. In addition, we stated that:

although a player’s knowledge of statistical
probabilities can maximize his winnings in the
short term, he cannot determine or influence
the result since the cards are drawn at
random. In the long run, the video game’s
program, which allows only a predetermined
number of winning hands, negates even this
limited skill element.

Id. at 409, 451 S.E.2d at 308 (internal citation omitted). As a

result, the essential difference between a game of skill and a

game of chance for purposes of our gambling statutes, including

N.C. Gen. Stat. § 14-306.4, is whether skill or chance determines

the final outcome and whether chance can override or thwart the

exercise of skill.

As was the case with the video poker game at issue in Collins

Coin Music, the machines and equipment at issue here only permitted

a predetermined number of winners. For that reason, a player who

plays after the predetermined number of winners has been reached

will be unable to win a prize no matter how much skill or dexterity
 -53-
he or she exhibits.11 In addition, use of the equipment at issue

here will result in the playing of certain games in which the

player will be unable to win anything of value regardless of the

skill or dexterity that he or she displays.12 Finally, the extent

to which the opportunity arises for the “nudging” activity upon

which the trial court’s order relies in support of its

determination that the equipment in question facilitated a game of

“skill or dexterity” appears to be purely chance-based. Although

Mr. Farley persuaded the trial court that the outcome of the games

facilitated by Plaintiffs’ equipment and activities depended on

skill or dexterity, the only basis for this assertion was the

player’s ability to affect the outcome by “nudging” a third symbol

in one direction or the other after two matching symbols appeared

at random on the screen. Assuming for purposes of argument that

this “nudging” process does involve skill or dexterity, I am unable

to see how this isolated opportunity for such considerations to

11As
Mr. Farley indicated, “[s]hould the random distribution
of entries cause the payout rate to exceed a predetermined limit,
prizes selected for distribution which exceed $200 will be returned
to the pool and another prize will be selected to be revealed.”

12Mr.
Farley admitted on cross-examination that a number of
screens will offer a “zero value prize” so that the participant
cannot win anything of value regardless of his or her actions in
the game and that “[w]hich entry is going to come out of the pool
is determined by chance.”
 -54-
affect the outcome overrides the impact of the other features

which, according to the undisputed evidence, affect and

significantly limit the impact of the player’s skill and dexterity

on the outcome. In light of these inherent limitations on a

player’s ability to win based upon a display of skill and

dexterity, an individual playing the machines and utilizing the

equipment at issue simply does not appear to be able to “determine

or influence the result over the long haul.” Id. at 409, 451

S.E.2d at 309 (citation omitted). As a result, for all of these

reasons, I am compelled by the undisputed evidence to “conclude

that the element of chance dominates the element of skill in the

operation” of Plaintiffs’ machines, id., a fact that demonstrates

that Plaintiff is not likely to succeed on the merits at trial and

that the trial court erred by preliminarily enjoining Defendant

from enforcing the strictures of N.C. Gen. Stat. § 14-304.6(b)

against Plaintiffs. Thus, I believe that the trial court’s order

should be reversed to the extent that it preliminarily enjoins

Defendant from enforcing the provisions of N.C. Gen. Stat. § 14-

306.4 against Plaintiffs.13

13Asa result of the fact that our resolution of the “skill
or dexterity” issue for purposes of N.C. Gen. Stat. § 14-306.4
applies equally to the other statutes that Defendant was enjoined
from enforcing against Plaintiffs, we need not separately analyze
 -55-
Conclusion

Thus, while I agree with my colleagues that we have

jurisdiction over Defendant’s challenge to the denial of his

dismissal motion and that the trial court properly rejected

Defendant’s governmental immunity and justiciability challenges to

Plaintiffs’ complaint, I am unable to agree with their decision

that only a portion of the trial court’s preliminary injunction

order is subject to immediate appellate review and would further

conclude, after examining the merits of Defendant’s challenge to

the preliminary injunction, that, since Plaintiffs did not

demonstrate a likelihood of success on the merits at trial, that

portion of the trial court’s order preliminarily enjoining

Defendant from enforcing various statutory provisions against

Plaintiffs should be reversed. As a result, I would affirm the

trial court’s refusal to dismiss Plaintiffs’ complaint, reverse

the trial court’s decision to issue a preliminary injunction

against Defendant, and remand this case to the Onslow County

Superior Court for further proceedings not inconsistent with this

opinion and dissent from the Court’s decision to the extent that

it reaches a contrary result.

the validity of the preliminary injunction under these additional
statutory provisions.