Sanders v. State Personnel Commission

-1-
NO. COA13-654

NORTH CAROLINA COURT OF APPEALS

Filed: 2 September 2014

LULA SANDERS, CYNTHIA EURE,
ANGELINE MCINERNY, JOSEPH C.
MOBLEY, on behalf of themselves
and others similarly situated,

Plaintiffs,

v. Wake County
No. 05-CVS-004322
STATE PERSONNEL COMMISSION, a body
politic; OFFICE OF STATE
PERSONNEL, a body politic; LINDA
COLEMAN, State Personnel Director
(in her official capacity);
TEACHERS’ AND STATE EMPLOYEES’
RETIREMENT SYSTEM OF NORTH
CAROLINA, a body politic and
corporate; MICHAEL WILLIAMSON,
Director of the Retirement System
Division and Deputy Treasurer of
the State of North Carolina (in
his official capacity); JANET
COWELL, Treasurer of The State of
North Carolina and Chairman of The
Board of Trustees of the
Retirement System (in her official
capacity); TEMPORARY SOLUTIONS, a
subdivision of the Office of State
Personnel, and STATE OF NORTH
CAROLINA,

Defendants.
 -2-
Appeal by Plaintiffs from order entered 18 December 2012 by

Judge Kenneth C. Titus in Wake County Superior Court. Heard in

the Court of Appeals 12 December 2013.

Kilpatrick Townsend & Stockton LLP, by Adam H. Charnes,
James H. Kelly, Jr., Susan H. Boyles, Richard D. Dietz, and
Gregg E. McDougal, and North Carolina Justice Center, by
Jack Holtzman, for Plaintiffs.

Attorney General Roy Cooper, by Special Deputy Attorney
General Lars F. Nance and Special Deputy Attorney General
Charles Gibson Whitehead, for Defendants.

State Employees Association of North Carolina, by Thomas A.
Harris, amicus curiae.

DILLON, Judge.

This case was commenced in 2005 and has been on appeal

before this Court twice previously. See Sanders v. State

Personnel Comm’n, 183 N.C. App. 15, 644 S.E.2d 10 (“Sanders I”),

disc. review denied, 361 N.C. 696, 652 S.E.2d 653 (2007); and

Sanders v. State Personnel Comm’n, 197 N.C. App. 314, 677 S.E.2d

182 (2009) (“Sanders II”), disc. review denied, 363 N.C. 806,

691 S.E.2d 19 (2010).

In the present appeal, Plaintiffs Lula Sanders, et al.

(“Plaintiffs”) challenge the trial court’s order denying their

motion for partial summary judgment and granting summary

judgment in favor of Defendants State Personnel Commission, et
 -3-
al. (“Defendants”). Defendants, on the other hand, have filed a

cross-appeal, challenging the trial court’s award of costs,

including attorneys’ fees, in Plaintiffs’ favor. For the

following reasons, we affirm the trial court’s order denying

Plaintiffs’ motion for partial summary judgment and granting

Defendants’ motion for summary judgment, and we affirm in part

and dismiss in part the issues raised in Defendants’ cross-

appeal.

I. Factual & Procedural Background

Pursuant to its authority under the State Personnel Act,

N.C. Gen. Stat. § 126-4 (2013), the State Personnel Commission

(the “Commission”) has promulgated regulations establishing

various types of appointments through which an individual may

gain employment with the State of North Carolina. See 25

N.C.A.C. 1C.0400, et seq. For example, some individuals are

hired as permanent employees with the State through a permanent

appointment, see 25 N.C.A.C. 1C.0402, and others are hired as

temporary employees through a temporary appointment, see 25

N.C.A.C. 1C.0405.

There are two differences between temporary employees and

permanent employees which are relevant to this case. First,

while under the regulations the period of employment for a
 -4-
permanent employee is indefinite, the regulations stipulate that

a person may not be employed as a temporary employee for a

period “exceed[ing] 12 consecutive months” (hereinafter, the

“Twelve-Month Rule”). 25 N.C.A.C. 1C.0405(a). The second

difference is that temporary employees are not eligible to

receive certain benefits available to permanent employees, such

as leave time, state service credit, health benefits, retirement

credit, severance pay, or priority reemployment consideration.

25 N.C.A.C. 1C.0405(b).

Each Plaintiff was employed by the State of North Carolina

as a temporary employee for a period exceeding twelve

consecutive months, in violation of the Twelve-Month Rule.

Plaintiffs commenced this action, alleging that because they had

been employed as temporary employees for more than twelve

consecutive months – in violation of the Twelve-Month Rule –

they were entitled to the “rights, compensation, benefits, and

status” of permanent employees. Plaintiffs alleged claims for

(1) violations of the North Carolina Administrative Code; (2)

violations of the North Carolina Constitution; and (3) breach of

contract. Based on these claims, Plaintiffs prayed for relief

in the form of monetary damages and costs, including attorneys’

fees, in addition to declaratory relief. Plaintiffs also sought
 -5-
class certification for inclusion of all similarly-situated

individuals, i.e., those who had been employed by the State as

temporary employees for more than twelve consecutive months.

Defendants responded by moving to dismiss Plaintiffs’

claims for lack of personal jurisdiction pursuant to N.C. R.

Civ. P. 12(b)(2) on grounds of Defendants’ sovereign immunity,

and pursuant to N.C. R. Civ. P. 12(b)(6) for failure to state a

claim for which relief could be granted. In Sanders I, we

affirmed the trial court’s Rule 12(b)(2) dismissal of

Plaintiffs’ claim based on violations of the North Carolina

Administrative Code. 183 N.C. App. at 24, 644 S.E.2d at 16. In

Sanders II, we affirmed the trial court’s Rule 12(b)(6)

dismissal of Plaintiffs’ constitutional claims; however, we

reversed the trial court’s dismissal of Plaintiffs’ breach of

contract claim and remanded the matter “for a declaratory

judgment, to declare plaintiffs’ status and rights pursuant to

the Uniform Declaratory Judgment Act.” 197 N.C. App. at 323,

677 S.E.2d at 189. In analyzing Plaintiffs’ breach of contract

claim, we determined that the Twelve-Month Rule and the other

“relevant regulations of the [Commission]” are part of

Plaintiffs’ employment contracts with Defendants, id. at 320-21,

677 S.E.2d at 187, noting as follows:
 -6-
There is an agreement between the parties
whose term is known and agreed. What is
unknown is what are the legal relationships
and status of the parties when the contract
continues in effect after the expiration of
the agreed upon terms.

Id. Accordingly, we instructed the trial court on remand to

determine the legal relationship between the parties, including

the precise terms of Plaintiffs’ employment with Defendants as

of the “twelve month and one day mark and beyond.” Id. at 323,

677 S.E.2d at 188.

On remand from Sanders II, the parties engaged in extensive

discovery regarding Plaintiffs’ breach of contract claim, after

which Plaintiffs filed motions seeking partial summary judgment

on this claim; a declaratory judgment construing their rights

under the contract pursuant to N.C. Gen. Stat. § 1-253; and

class action certification. Defendants likewise moved for

summary judgment with respect to Plaintiffs’ breach of contract

claim.

Following a hearing on these matters, the trial court

entered an order on 18 December 2012 granting relief to both

Plaintiffs and Defendants. Specifically, the trial court

declared that Plaintiffs’ status as temporary employees did not

convert to that of permanent employees after twelve months and

that they were entitled only to the wages for which they had
 -7-
bargained and already received for the period that they had

worked as temporary employees beyond the permissible twelve-

month period. Accordingly, the trial court granted Defendants’

motion for summary judgment on Plaintiffs’ breach of contract

claim and denied Plaintiffs’ motions for partial summary

judgment and for class certification.

The trial court, however, also granted Plaintiffs certain

relief; namely, the court enjoined Defendants from future

violations of the Twelve-Month Rule; it directed the State

Personnel Director and the Office of State Personnel to present

to the trial court “a comprehensive plan [hereinafter, the

“Comprehensive Plan”] to assure full compliance with the

mandates of North Carolina General Statutes 126-3(b)(8) and

(9)[;]” and it taxed Defendants “with the costs of this action,

including attorney fees as provided by law [hereinafter,

“Attorneys’ Fees Award”].”

In the present appeal, Plaintiffs seek review of the trial

court’s order granting Defendants’ motion for summary judgment

and denying their motions for partial summary judgment and for

class certification. In Defendants’ cross-appeal, Defendants

seek review of the trial court’s Attorneys’ Fees Award.

II. Jurisdiction
 -8-
The threshold issue presented is whether and to what extent

this Court has jurisdiction over the parties’ appeals.

“Generally, an interlocutory order is not immediately

appealable.” Builders Mut. Ins. Co. v. Meeting Street Builders,

LLC, __ N.C. App. __, __, 736 S.E.2d 197, 199 (2012). An order

is interlocutory where it “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.” Veazey v. City of

Durham, 231 N.C. 357, 361-62, 57 S.E.2d 377, 381 (1950). A

party may immediately appeal from an interlocutory order,

however, where the issue has been certified by the trial court

for immediate appellate review pursuant to N.C. R. Civ. P. 54(b)

or where the interlocutory order “deprives the appellant of a

substantial right which would be jeopardized absent a review

prior to a final determination on the merits.” Jeffreys v.

Raleigh Oaks Joint Venture, 115 N.C. App. 377, 379, 444 S.E.2d

252, 253 (1994) (internal citations omitted).

In the present case, the trial court order resolves the

entire controversy except with respect to two matters. First,

although the trial court has entered the Attorneys’ Fees Award,

the court has not yet determined the amount of the Award.

Second, further action is required with respect to the
 -9-
Comprehensive Plan, which the trial court has ordered certain

Defendants to prepare and present to the court for review.

Our Supreme Court has held that “[a]n order that completely

decides the merits of an action [] constitutes a final judgment

for purposes of appeal even when the trial court reserves for

later determination collateral issues such as attorney’s fees

and costs.” Duncan v. Duncan, 366 N.C. 544, 546, 742 S.E.2d

799, 801 (2013) (emphasis added). Therefore, while our Supreme

Court considers the Attorneys’ Fees Award a “collateral issue,”

it is unclear whether the presentation and review of the

Comprehensive Plan also constitutes a “collateral issue.”

Notwithstanding, the trial court has certified the issues raised

in Plaintiffs’ appeal for immediate appellate review.

Accordingly, we have jurisdiction to address the issues raised

in Plaintiffs’ appeal.

Regarding Defendants’ cross-appeal, Defendants are not

challenging the trial court’s injunction prohibiting future

violations of the Twelve-Month Rule or the directive to present

the Comprehensive Plan to the court. Accordingly, we do not

address the propriety of those portions of the order. Rather,

Defendants only challenge the “collateral issue” of the

“Attorneys’ Fees Award.” In that the trial court left open for
 -10-
future determination the amount Defendants would be taxed,

Defendants’ appeal of this collateral issue is interlocutory.1

Since the trial court did not certify the Attorneys’ Fees Award

issue for immediate appellate review, Defendants may challenge

the Attorneys’ Fees Award in this appeal only to the extent that

the Award affects a substantial right.

Defendants make a number of arguments in their brief

challenging the Attorneys’ Fees Award; however, their only

argument based on a substantial right is their contention that

the award is “in derogation of [Defendants’] sovereign

immunity.” See McClennahan v. N.C. Sch. of the Arts, 177 N.C.

App. 806, 808, 630 S.E.2d 197, 199 (2006) (holding that “appeals

raising issues of governmental or sovereign immunity affect a

substantial right sufficient to immediate appellate review”),

disc. review denied, 361 N.C. 220, 642 S.E.2d 443 (2007).

Accordingly, we review Defendants’ appeal of the Attorneys’ Fees

Award only to the extent that their challenge is based on

sovereign immunity; however, we dismiss Defendants’ appeal to

1
Under Duncan, an unresolved collateral issue does not render a
judgment or order deciding the main issues interlocutory.
However, an appeal of the collateral issue of attorney fees,
itself, is interlocutory if the trial court has not set the
amount to be awarded.
 -11-
the extent that Defendants’ challenge is based on some other

defense or upon the merits.

III. Analysis

We address the issues raised in Plaintiffs’ appeal and the

issue raised in Defendants’ appeal, in turn, below.

A. Plaintiffs’ Appeal

Plaintiffs essentially make two arguments on appeal: (1)

the trial court erred in granting Defendants’ motion for summary

judgment with respect to Plaintiffs’ breach of contract claim;

and (2) the trial court erred in denying Plaintiffs’ motion for

class certification. For the following reasons, we affirm the

trial court’s rulings on these issues.

1. Summary Judgment

In their complaint, Plaintiffs alleged that Defendants had

breached their employment agreements by failing to provide

Plaintiffs, after twelve months of service, with the benefits

generally provided to permanent employees. Plaintiffs contend

that the trial court’s order granting Defendants’ summary

judgment motion on Plaintiffs’ breach of contract claim

conflicts with our holding in Sanders II. Specifically,

Plaintiffs argue that our prior holding in that case establishes

as a matter of law that Defendants are liable to Plaintiffs for
 -12-
breach of contract, based on Defendants’ admitted violation of

the Twelve-Month Rule, and all that remained was for a jury to

decide the issue of damages.

Plaintiffs, however, misconstrue our holding in Sanders II.

We did not hold in that case that the failure to adhere to the

Twelve-Month Rule established Defendants’ liability for breach

of contract as a matter of law. We held only that the

allegations in Plaintiffs’ complaint were sufficient to survive

Defendants’ Rule 12(b)(6) motion to dismiss. Sanders II, 197

N.C. App. at 321, 677 S.E.2d at 187 (stating that “[b]ecause

there is a breach of the rules under which the contract was

formed, [P]laintiffs’ complaint sufficiently alleged a breach of

contract claim and should have survived [D]efendants’ motion to

dismiss”). The issue of whether Defendants were liable for

breach of contract was not ripe for consideration at the time we

decided Sanders II, as the issue then presented dealt only with

the sufficiency of the allegations set forth in Plaintiffs’

complaint.

In Sanders II, we instructed the trial court on remand to

determine “the legal relationships and status of the parties” -

including the terms of any agreements - “at the twelve month and
 -13-
one day mark and beyond.” Id. at 323, 677 S.E.2d at 188. We

stated as follows:

[I]t is clear that [P]laintiffs accepted
some sort of arrangement with [D]efendants
by accepting continued work and
compensation, without a permanent
appointment and without benefits. Whether
that arrangement was discussed with
[P]laintiffs individually or collectively
and what [P]laintiffs understood about their
status are relevant inquiries requiring
further factual development.

Id. at 323, 677 S.E.2d at 189. On remand, the parties conducted

extensive discovery, after which the trial court conducted a

hearing and granted summary judgment in favor of Defendants on

Plaintiffs’ breach of contract claim.

We believe that the trial court correctly concluded that

Defendants did not breach their employment contracts with

Plaintiffs. Plaintiffs failed to produce any evidence to create

a genuine issue of material fact with respect to whether

Defendants had made any promises or inducements to Plaintiffs to

cause them to continue their employment beyond twelve months,

other than to continue paying their normal wages, which were, in

fact, paid as agreed. There was no evidence presented to

suggest that Defendants had represented to Plaintiffs that their

employment status would convert to that of a permanent employee

after twelve months of service. Furthermore, there is nothing
 -14-
in the Commission rules or the relevant law that contractually

obligated Defendants to treat Plaintiffs as permanent employees

after twelve months of service. Indeed, we held just the

opposite in Sanders II, stating that if the trial court were to

determine on remand that Plaintiffs’ employment had

automatically converted to permanent status, the trial court

would be “enact[ing] an employment scheme in direct

contravention of the state constitution and other sections of

the regulatory scheme.” Id. at 322, 677 S.E.2d at 188; see also

Cauthen v. N.C. Dept. of Human Resources, 112 N.C. App. 238,

242, 435 S.E.2d 81, 84 (1993) (refusing to allow an employee

with a permanent appointment to achieve tenure by tacking onto

her current appointment period her previous periods of temporary

employment, stating that in doing so we would effectively be

creating “a quasi-tenure system in temporary employment which

neither the General Assembly nor the State Personnel Commission

intended”).

Plaintiffs, however, argue that Defendants’ “breach” of the

Twelve-Month Rule is sufficient to sustain their breach of

contract claim, even if such breach entitles Plaintiffs only to

nominal damages. We are unpersuaded. As this Court recognized

in Sanders II, administrative regulations pertinent to a
 -15-
particular contractual arrangement between the State and its

employees may properly be incorporated into, and govern, a State

employment contract. 197 N.C. App. at 320-21, 677 S.E.2d at

187. The State, certainly, has an obligation to the public to

conduct its affairs in accordance with its own regulations. We

do not believe, however, that every instance in which a

regulation incorporated into a State employment contract is

ignored provides the employee with a breach of contract claim

against the State.

Here, Defendants ignored the Twelve Month Rule by

permitting each Plaintiff to remain employed after twelve

months. Likewise, each Plaintiff ignored the Twelve Month Rule

by continuing to report to work beyond twelve months of

employment. We do not condone Defendants’ conduct in neglecting

to comport with its own administrative regulations. However, we

do not believe the trial court erred in granting Defendants’

motion for summary judgment on Plaintiffs’ breach of contract

claim, where Defendants’ conduct involved allowing Plaintiffs to

continue working under their respective contracts when they were

no longer eligible to continue performing under them -- where

the uncontradicted evidence showed that Plaintiffs were

compensated as agreed and where there is no law requiring
 -16-
Defendants to confer any other benefit or status upon Plaintiffs

after twelve months of service.

2. Class Certification

Plaintiffs further contend that the trial court erred in

denying their motion for class certification. Our Supreme Court

has held that “[t]he trial court has broad discretion in

determining whether a case should proceed as a class action.”

Faulkenbury v. Teachers’ and State Employees’ Ret. Sys. Of N.C.,

345 N.C. 683, 699, 483 S.E.2d 422, 432 (1997). Upon review, we

discern no abuse of discretion – given the circumstances

presented and procedural posture of this case – in the trial

court’s decision to deny class certification.

B. Defendants’ Appeal

Defendants appeal from the trial court’s Attorneys’ Fees

Award. As previously stated, since this appeal is

interlocutory, we are compelled only to consider Defendants’

contention that the Attorneys’ Fees Award is in derogation of

its sovereign immunity, which we have held affects a substantial

right.

Plaintiffs argue that the Attorneys’ Fees Award is

appropriate because the State has waived sovereign immunity in

this context under N.C. Gen. Stat. § 6-19.1, a provision which
 -17-
authorizes the court to award attorneys’ fees to a prevailing

party “who is contesting State action pursuant to G.S. 150B-43

or any other appropriate provisions of law[.]” N.C. Gen. Stat.

§ 6-19.1(a). Alternatively, Plaintiffs argue that the

Attorneys’ Fees Award is appropriate under the Declaratory

Judgment Act, N.C. Gen. Stat. § 1-263 (2013) (permitting

recovery of attorneys’ fees where “such award of costs [is]

equitable and just”), because the Award is based upon

Plaintiffs’ breach of contract claims, which has already

survived Defendants’ sovereign immunity challenge.

The trial court’s order does not specify a statutory basis

for the Attorneys’ Fees Award. Rather, the order merely taxes

Defendants “with the costs of this action, including attorney

fees as provided by law.” Because the order directs only that

Defendants bear Plaintiffs’ attorneys’ fees “as provided by

law,” and because the State has, in certain instances – e.g.,

under N.C. Gen. Stat. § 6-19.1 – waived sovereign immunity with

respect to claims for attorneys’ fees, we cannot at this point

conclude that the trial court committed reversible error based

on the State’s sovereign immunity defense. We, accordingly,

affirm the portion of the trial court’s order imposing the

Attorneys’ Fees Award “as provided by law” based on the State’s
 -18-
contention concerning its defense of sovereign immunity, but we

do not reach the merits of the State’s remaining contentions on

this issue, as they are not predicated upon, and do not

implicate, a substantial right of the State. We note that our

holding in this respect should not be construed as precluding

the State from raising sovereign immunity as a defense should

the trial court enter a subsequent order awarding attorneys’

fees on a particular, articulated basis.

IV. Conclusion

For the foregoing reasons, we affirm the trial court’s

order granting Defendants’ motion for summary judgment and

denying Plaintiffs’ motions for partial summary judgment and for

class certification.

With respect to the issues raised in Defendants’ cross-

appeal, we affirm the Award, in part, based on Defendants’

sovereign immunity argument; and we dismiss, in part, the

Defendants’ arguments concerning the Award not based on

sovereign immunity.

AFFIRMED IN PART; DISMISSED IN PART.

Judge STROUD concurs.

Judge HUNTER, JR. dissents in a separate opinion.
 NO. COA13-654

NORTH CAROLINA COURT OF APPEALS

Filed: 2 September 2014

LULA SANDERS, CYNTHIA EURE,
ANGELINE MCINERNY, JOSEPH C.
MOBLEY, on behalf of themselves
and others similarly situated,

Plaintiffs,

v. Wake County
No. 05-CVS-004322
STATE PERSONNEL COMMISSION, a body
politic; OFFICE OF STATE
PERSONNEL, a body politic; LINDA
COLEMAN, State Personnel Director
(in her official capacity);
TEACHERS’ AND STATE EMPLOYEES’
RETIREMENT SYSTEM OF NORTH
CAROLINA, a body politic and
corporate; MICHAEL WILLIAMSON,
Director of the Retirement System
Division and Deputy Treasurer of
the State of North Carolina (in
his official capacity); JANET
COWELL, Treasurer of The State of
North Carolina and Chairman of The
Board of Trustees of the
Retirement System (in her official
capacity); TEMPORARY SOLUTIONS, a
subdivision of the Office of State
Personnel, and STATE OF NORTH
CAROLINA,

Defendants.

HUNTER, JR., Robert N., Judge, dissenting.

I dissent from the majority’s opinion concerning

Plaintiffs’ appeal and Defendants’ appeal. In my view,
 -2-
Plaintiffs are entitled to partial summary judgment on the issue

of liability for breach of contract. I would also hold that the

trial court abused its discretion in denying Plaintiffs’ motion

for class certification. Finally, I would dismiss Defendants’

appeal concerning attorneys’ fees as interlocutory

notwithstanding Defendants’ claim of sovereign immunity. My

views with respect to each appeal are addressed separately, in

turn.

A. Plaintiffs’ Appeal

1. Summary Judgment on Plaintiffs’ Breach of Contract Claim

Despite the existence of a temporary employment contract

between the parties, the incorporation of the Twelve-Month Rule

as a condition of that contract, and the admitted violation of

the Twelve-Month Rule by Defendants, the trial court below, and

the majority here, conclude that no breach of contract has

occurred and that Defendants are entitled to summary judgment as

a matter of law. I respectfully dissent.

“[The] standard of review of an appeal from summary

judgment is de novo; such judgment is appropriate only when the

record shows that ‘there is no genuine issue as to any material

fact and that any party is entitled to a judgment as a matter of

law.’” In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572,
 -3-
576 (2008) (quoting Forbis v. Neal, 361 N.C. 519, 523–24, 649

S.E.2d 382, 385 (2007)).

In Sanders II, this Court said that the Twelve-Month Rule

“has the effect of law and is incorporated into the employment

contract when employees are placed into a temporary assignment.”

Sanders II, 197 N.C. App. at 321, 677 S.E.2d at 187. Admissions

by Defendants and discovery conducted below establish

conclusively that Plaintiffs and thousands of additional state

employees were placed in temporary appointments for more than

twelve consecutive months with no change in employment status in

violation of the Twelve-Month Rule. By doing so, Defendants

breached an implied term of the temporary employment contract.

See id. at 320, 677 S.E.2d at 187 (stating that “[i]n a breach

of contract action, a complainant must show that there is (1)

existence of a valid contract, and (2) breach of the terms of

that contract.” (internal quotation marks and citation

omitted)). Notwithstanding the evident nature of this

conclusion, the majority concludes that no breach of contract

occurred and affirms summary judgment in favor of Defendants.

Although not addressed by the majority, the trial court

concluded that there could have been no breach of contract

because “the acts of any hiring official in violating the
 -4-
[Twelve-Month Rule] . . . were clearly ultra vires and would not

bind the State.” Thus, the trial court went so far as to

conclude that there was no valid contractual relationship

between the parties after Plaintiffs had provided twelve months

of service, resting its analysis on a defense to the contract’s

validity.2 However, the trial court’s ultra vires argument must

fail.

The temporary employment contracts were not ultra vires

when they were entered into by the parties. Indeed, to hold

otherwise would be to deny Defendants the ability to initially

hire anyone for a temporary appointment with the State. Rather,

the contract became ultra vires, if at all, because of

Defendants breach of the Twelve-Month Rule. In an analogous

context, we have stated that, as a general matter,

a municipality cannot be made liable for
breach of an express contract for services
when the official making the contract has
exceeded his or her authority by entering
into such a contract. And the city will not
ordinarily be estopped to assert the
invalidity of a contract made by an officer

2
Notably, the record in this case is devoid of any contention
from Defendants that the actions of their hiring officials
constituted ultra vires activity. Defendants’ answer and motion
to dismiss, motion for summary judgment, hearing arguments, and
brief before this Court make no mention of the ultra vires
doctrine or its application to this case. Instead, the doctrine
first appears in the trial court’s order.
 -5-
of limited authority when that authority has
been exceeded.

However, such a contract may become binding
and enforceable upon the corporation through
the doctrine of estoppel based upon the acts
or conduct of officers of the corporation
having authority to enter into the contract
originally, as by receiving the benefits of
the contract, or other grounds of equitable
estoppel. A municipality cannot escape
liability on a contract within its power to
make, on the ground that the officers
executing it in its behalf were not
technically authorized in that regard, where
they were proper officers to enter into such
contracts.

Pritchard v. Elizabeth City, 81 N.C. App. 543, 553–54, 344

S.E.2d 821, 827 (1986) (internal citations omitted). Thus,

there is a critical distinction between the complete absence of

authority to enter into a contract and the later improper

exercise of existing contractual authority. Here, Defendants

had authority to enter into temporary employment contracts with

Plaintiffs, but misused that authority in violating the Twelve-

Month Rule.3 Consistent with Pritchard, I would hold that the

defense of ultra vires is unavailable to Defendants.

3
In Sanders II, we stated that “if the court below finds
defendants automatically converted plaintiffs’ positions from
temporary to permanent on their own accord without appropriate
classification and budgetary approval, they would have enacted
an employment scheme in direct contravention of the state
constitution and other sections of the regulatory scheme.”
Sanders II, 197 N.C. App. at 322, 677 S.E.2d at 188. Thus, the
 -6-
Even so, the majority concludes that even if the

contractual relationship between the parties is valid, there has

been no breach because Plaintiffs failed to produce any evidence

that “Defendants had made any promises or inducements to

Plaintiffs to cause them to continue their employment beyond

twelve months, other than to continue paying their normal

wages,” or “that Defendants had represented to Plaintiffs that

their employment status would convert to that of a permanent

employee after twelve months of service.” Ante, at ___. The

majority also notes that “there is nothing in the Commission

rules or the relevant law that contractually obligated

Defendants to treat Plaintiffs as permanent employees after

twelve months of service.” Ante, at ___. At this point, I

believe the majority mistakes the remedial question (i.e., the

valuation of Plaintiffs damages based on Plaintiffs’ expected

compensation) with the underlying liability question (i.e.,

whether a breach of the Twelve-Month Rule occurred). I agree

that, at least with respect to the named Plaintiffs, there was

never an expectation of permanent employee benefits after

Plaintiffs continued in their temporary appointments beyond the

conclusion that Defendants misused their contractual authority
in violating the Twelve-Month Rule has already been reached by
this Court and this panel is bound by that decision. In re Civil
Penalty, 324 N.C. 373, 384, 379 S.E.2d 30, 37 (1989).
 -7-
twelve month mark. Indeed, the trial court found as fact,

unchallenged before this Court, that:

There is no allegation that the benefits
sought by Plaintiffs were bargained for, or
granted, when Plaintiffs began their
employment. In fact, prior to employment in
their “temporary appointment” all of the
Plaintiffs signed a statement acknowledging
the provisions of 25 N.C.A.C. 1C.0405(b).
Each of the Plaintiffs indicated in their
depositions a desire for continued
employment with the State beyond the twelve
(12) month mark. Further, there are no
allegations of promises or inducements made
to Plaintiffs to cause them to continue
their employment other than the payment of
wages; and no allegations of
representations, conduct, or acts of their
employers indicating the employment would
become permanent.

However, I believe these facts speak to value of Plaintiffs’

expectation interest, not Defendants’ underlying liability for

breach of contract. In my view, Plaintiffs are entitled to an

award of nominal damages in recognition of the technical injury

resulting from Defendants breach of the Twelve-Month Rule.4 See

Cole v. Sorie, 41 N.C. App. 485, 490, 255 S.E.2d 271, 274 (1979)

4
The majority suggests that both parties are in breach of the
employment contract, stating, “[h]ere, Defendants ignored the
Twelve Month Rule by permitting each Plaintiff to remain
employed after twelve months. Likewise, each Plaintiff ignored
the Twelve Month Rule by continuing to report to work beyond
twelve months of employment.” Ante, at ___. However, the
Twelve-Month Rule is a constraint on the State, not the
employees. I would therefore hold that only Defendants are in
breach.
 -8-
(standing for the proposition that, “in a suit for damages for

breach of contract, proof of the breach would entitle the

plaintiff to nominal damages at least.” (internal quotation

marks, citation, and brackets omitted)). Accordingly, I would

grant partial summary judgment on the issue of liability for

breach of contract in favor of Plaintiffs and remand for a

determination of damages.

2. Plaintiffs’ Motion for Class Certification

With respect to the issue of class certification, I also

dissent from the majority’s opinion because I would hold that

the trial court’s decision to deny Plaintiffs’ motion for class

certification is an abuse of discretion.

Rule 23 of the North Carolina Rules of Civil Procedure

states, in pertinent part, that “[i]f persons constituting a

class are so numerous as to make it impracticable to bring them

all before the court, such of them, one or more, as will fairly

insure the adequate representation of all may, on behalf of all,

sue or be sued.” N.C. R. Civ. P. 23(a). Our Supreme Court has

recently explained the law with respect to class certification

under Rule 23 as follows:

First, parties seeking to employ the class
action procedure pursuant to our Rule 23
must establish the existence of a class. A
class exists when each of the members has an
 -9-
interest in either the same issue of law or
of fact, and that issue predominates over
issues affecting only individual class
members. The party seeking to bring a class
action also bears the burden of
demonstrating the existence of other
prerequisites:

(1) the named representatives must
establish that they will fairly
and adequately represent the
interests of all members of the
class; (2) there must be no
conflict of interest between the
named representatives and members
of the class; (3) the named
representatives must have a
genuine personal interest, not a
mere technical interest, in the
outcome of the case; (4) class
representatives within this
jurisdiction will adequately
represent members outside the
state; (5) class members are so
numerous that it is impractical to
bring them all before the court;
and (6) adequate notice must be
given to all members of the class.

When all the prerequisites are met, it is
left to the trial court’s discretion whether
a class action is superior to other
available methods for the adjudication of
the controversy. . . . The touchstone for
appellate review of a Rule 23 order . . . is
to honor the broad discretion allowed the
trial court in all matters pertaining to
class certification. Accordingly, we review
the trial court’s order denying class
certification for abuse of discretion. The
test for abuse of discretion is whether a
decision is manifestly unsupported by reason
or so arbitrary that it could not have been
the result of a reasoned decision.
 -10-

Beroth Oil Co. v. N.C. Dep’t of Transp., ___ N.C. ___, ___, 757

S.E.2d 466, 470–71 (2014) (internal quotation marks, citations,

brackets, and footnote omitted) (second alteration in original).

Here, Plaintiffs’ motion for class certification defined

the putative class as all persons

who have been or currently are employed by
the State of North Carolina who are subject
to the twelve-month limitation set forth in
25 N.C.A.C. 1C.0405(a); and been placed in
temporary appointment for more than twelve
consecutive months in violation of 25
N.C.A.C. 1C.0405(a) during the period of
April 1, 2002 through the present; and have
not received benefits including paid
holidays, vacation leave, sick leave, health
benefits, and when applicable, retirement
benefits and longevity pay; excluding
employees who work less than 20 hours per
week and all employees of the sixteen
institutions of the University of North
Carolina system.

The trial court’s order denying class certification concluded

with respect to Plaintiffs’ motion as follows:

The claims of the Plaintiffs and the
putative class members have an interest in
the same issue of law and fact; that class
counsel and the Plaintiff will adequately
represent the interests of all class members
with no conflict of interest; that they have
a genuine interest in the outcome of the
action; and that class members are
sufficiently numerous that joining them
would be impractical. However, these
factors do not outweigh the predominant
issues affecting individual putative class
 -11-
members which are not capable of application
of a general mathematical calculation, but
would require extensive individual inquiry
concerning class members’ unique employment
circumstances (i.e., discussions concerning
employment status, requests or promises of
benefits, higher pay in lieu of benefits,
requests for permanent employment, etc.)[.]

(Emphasis added). Thus, the trial court grounded its decision

to deny class certification on the predominance requirement,

concluding in effect that no “class” exists under Rule 23. See

Beroth, ___ N.C. at ___, 757 S.E.2d at 470 (“A class exists when

each of the members has an interest in either the same issue of

law or of fact, and that issue predominates over issues

affecting only individual class members.”). Accordingly, the

question presented to this Court by Plaintiffs’ appeal is

whether the trial court abused its discretion in determining

that no class existed based on the predominance inquiry. See

id. at ___, 757 S.E.2d at 470 n.2 (“Therefore, we review the

trial court’s determination of whether plaintiffs established

the actual existence of a class for abuse of discretion.”).

In my view, the trial court abused its discretion in

denying class certification because it conflated the remedial

question concerning the calculation of damages with the

underlying issue of liability for breach of contract.

Specifically, the trial court’s determination that “extensive
 -12-
individual inquiry concerning class members’ unique employment

circumstances” would be necessary, including “discussions

concerning employment status, requests or promises of benefits,

higher pay in lieu of benefits, requests for permanent

employment, etc.[,]” is a concern for the expectation value of

Plaintiffs’ damages—whether and what each putative class member

expected to receive as compensation after the expiration of

their twelve-month term. This is wholly separate from the

underlying question of contract liability, a question common to

all putative class members based on the narrowly defined class

articulated by Plaintiffs, the incorporation of the Twelve-Month

Rule into each employee’s contract, and the admissions by

Defendant that the Twelve-Month Rule was violated.

In Beroth, our Supreme Court stated that differences in the

amount of damages owed to putative class members should not

preclude class certification as long as the damages inquiry is

not determinative of the underlying merits claim. Id. at ___,

757 S.E.2d at 475. This generally comports with federal

precedent interpreting Fed. R. Civ. P. 23. See generally 2

William B. Rubenstein, Newberg on Class Actions § 4:54, at 205–

10 (5th ed. 2012) (collecting cases and stating that “Courts in

every circuit have . . . uniformly held that the 23(b)(3)
 -13-
predominance requirement is satisfied despite the need to make

individualized damage determinations.”).

Here, the trial court acknowledged that “[t]he claims of

the Plaintiffs and the putative class members have an interest

in the same issue of law and fact[,]” yet denied class

certification because of the possibility of individual damage

calculations. Given the aforementioned precedent on this issue,

I believe the trial court’s action to be an abuse of discretion.

I would certify the proposed class and grant partial summary

judgment to Plaintiffs on the issue of liability for breach of

contract.

B. Defendants’ Appeal

With respect to Defendants’ appeal of the trial court’s

award of attorneys’ fees to Plaintiffs, I agree with the

majority that Defendants’ appeal is interlocutory because the

actual amount of attorneys’ fees owed by Defendants has yet to

be decided. Triad Women’s Ctr., P.A. v. Rogers, 207 N.C. App.

353, 358, 699 S.E.2d 657, 660–61 (2010) (“We, therefore,

specifically hold that an appeal from an award of attorneys’

fees may not be brought until the trial court has finally

determined the amount to be awarded. For this Court to have

jurisdiction over an appeal brought prior to that point, the
 -14-
appellant would have to show that waiting for the final

determination on the attorneys’ fees issue would affect a

substantial right.”). Furthermore, I also agree that sovereign

immunity is a substantial right for purposes of appellate review

under N.C. Gen. Stat. § 1-277(a) (2013). Kawai Am. Corp. v.

Univ. of North Carolina at Chapel Hill, 152 N.C. App. 163, 165,

567 S.E.2d 215, 217 (2002) (“This Court has repeatedly held that

appeals raising issues of governmental or sovereign immunity

affect a substantial right sufficient to warrant immediate

appellate review.” (quotation marks and citation omitted)).

However, I do not agree that Defendants are entitled to

sovereign immunity in this case and would therefore dismiss

Defendants’ appeal in its entirety. Because the majority goes

beyond a pure jurisdictional analysis and specifically affirms a

portion of the trial court’s order concerning attorneys’ fees, I

respectfully dissent.5

5
The majority opinion states that “we review Defendants’ appeal
of the Attorneys’ Fees Award only to the extent that their
challenge is based on sovereign immunity; however, we dismiss
Defendants’ appeal to the extent that Defendants’ challenge is
based on some other defense or upon the merits.” Ante, at ___.
While the majority opinion does not go so far as to decide
whether the trial court’s award was proper under either N.C.
Gen. Stat. § 6-19.1 or § 1-263, it does decide, and explicitly
affirms “the portion of the trial court’s order imposing the
Attorneys’ Fees Award ‘as provided by law’ based on the State’s
 -15-
The trial court’s order states that “Defendants are taxed

with the costs of this action, including attorney fees as

provided by law.” (Emphasis added). As the majority opinion

notes, the trial court’s order does not specify the statutory

authority for its action. Nevertheless, the parties concede

that attorneys’ fees can only be awarded in this case, if at

all, pursuant to either N.C. Gen. Stat. § 6-19.1 or § 1-263.

Thus, Defendants enjoy the right of sovereign immunity in this

case only to the extent that such a claim can shield them from

paying out attorney fees under these two statutes. If the

doctrine of sovereign immunity does not shield Defendants from

paying out attorney fees under the statutes, the trial court’s

order cannot “deprive” Defendants of a substantial right nor

“work injury” if Defendants are forced to attend another hearing

as to the amount owed. See Goldston v. Am. Motors Corp., 326

N.C. 723, 726, 392 S.E.2d 735, 736 (1990) (stating that to meet

the substantial right test for appealing interlocutory orders,

“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.”).

contention concerning its defense of sovereign immunity[.]”
Ante, at ___.
 -16-
N.C. Gen. Stat. § 6-19.1, entitled “Attorney’s fees to

parties appealing or defending against agency decision,”

provides that if certain prerequisites are met, “the court may,

in its discretion, allow the prevailing party to recover

reasonable attorney’s fees, . . . to be taxed as court costs

against the appropriate agency[.]” N.C. Gen. Stat. § 6-19.1(a)

(2013). Thus, by its express terms, N.C. Gen. Stat. § 6-19.1

allows a party who prevails on an underlying merits claim to

recover attorneys’ fees from the State. This is an implicit

waiver of any claim that the State has sovereign immunity from

paying attorney fees awarded under the statute. See Battle

Ridge Cos. v. N.C. Dep’t of Transp., 161 N.C. App. 156, 157, 587

S.E.2d 426, 427 (2003) (“It is an established principle of

jurisprudence, resting on grounds of sound public policy, that a

state may not be sued in its own courts or elsewhere unless it

has consented by statute to be sued or has otherwise waived its

immunity from suit.” (emphasis added)). Accordingly, the

defense of sovereign immunity is not available to Defendants

under N.C. Gen. Stat. § 6-19.1 and this Court should therefore

foreclose any further inquiry under the statute.

N.C. Gen. Stat. § 1-263, entitled “Costs,” provides that

“[i]n any proceeding under [the Uniform Declaratory Judgment
 -17-
Act] the court may make such award of costs as may seem

equitable and just.” N.C. Gen. Stat. § 1-263. As is evident

from the text, the statute does not expressly or impliedly waive

the sovereign immunity of the State, and this Court has held

that the Uniform Declaratory Judgment Act does not act as a

general waiver of the State’s sovereign immunity in declaratory

judgment actions. Petroleum Traders Corp. v. State, 190 N.C.

App. 542, 546–47, 660 S.E.2d 662, 664 (2008). Nevertheless, it

is well-established that the State’s sovereign immunity is

waived in “causes of action on contract,” Smith v. State, 289

N.C. 303, 320, 222 S.E.2d 412, 423–24 (1976), and this Court has

recently interpreted that language to include “declaratory

relief actions seeking to ascertain the rights and obligations

owed under an alleged contract.” Atl. Coast Conference v. Univ.

of Maryland, ___ N.C. App. ___, ___, 751 S.E.2d 612, 621 (2013).

Here, the Plaintiffs’ declaratory judgment motion sought a

declaration from the trial court concerning the parties’

temporary employment contracts and the admitted violation of the

Twelve-Month Rule. Plaintiffs’ motion, and the trial court’s

subsequent order, were responsive to this Court’s disposition in

Sanders II when we remanded Plaintiffs’ breach of contract claim

with instructions for the trial court to “assess the terms of
 -18-
[P]laintiffs’ contracts with [D]efendants at the twelve month

and one day mark and beyond” and “to declare [P]laintiffs’

status and rights” under the temporary employment contracts.

Sanders II, 197 N.C. App. at 323, 677 S.E.2d at 188–89. Thus,

the declaratory relief at issue here concerns the “rights and

obligations owed under an alleged contract.” By consequence,

and consistent with this Court’s opinion in Atl. Coast

Conference, Defendants cannot assert sovereign immunity to

shield themselves from an obligation to pay costs under N.C.

Gen. Stat. § 1-263. The defense of sovereign immunity is

therefore not available to Defendants under either of the

statutes potentially implicated by Defendants’ appeal.

Accordingly, because the defense of sovereign immunity is

not available to Defendants under N.C. Gen. Stat. § 6-19.1 or §

1-263, I would hold that Defendants have failed to meet the

substantial right test and that we lack jurisdiction to hear

Defendants’ appeal at this time. Although the majority does not

engage in a full merits analysis concerning whether the award

was proper under N.C. Gen. Stat. § 6-19.1 or § 1-263, the

majority errs in affirming a portion of the order. I would

dismiss Defendants’ cross-appeal in its entirety as

interlocutory.
-19-