In a pair of unrelated cases, the Supreme Court of North Carolina has curtailed the ability of local governments to regulate towing prices and the use of cell phones while driving on the one hand, while endorsing a broad view of governmental immunity on the other.

Let’s start with King v. Chapel Hill, a potentially far-reaching case that appears to restrict the powers of municipal governments to use ordinances to further the public good.

Local “Police Power” Does Not Extend to Price Regulation

 The State has the sweeping authority, sometimes called the “police power,” to “protect or promote the health, morals, order, safety, and general welfare of society.” The legislature has delegated this broad authority to local municipalities, allowing them to enact local ordinances as a proper exercise of their delegated authority. N.C. Gen. Stat. § 160A-174 (“General ordinance-making power”). In recognition of the breadth of this power, the legislature has enumerated certain types of ordinances that are impermissible, such as an ordinance purporting to make a criminal act lawful within the city limits. See id. § 160A-174(b)(3). Provided the ordinance does not run afoul of those exceptions, it will generally be upheld as within a broad construction of the delegated police power. See id. § 160A-4 (“[G]rants of power shall be construed to include any additional and supplementary powers that are reasonably necessary or expedient to carry them into execution and effect.”).

Sometimes, however, an otherwise valid ordinance clashes with individual freedoms or property interests. For this reason, in the commercial context, an ordinance purporting to regulate a trade or business must be “rationally related to a substantial government purpose.” Our attorney-readers know this “rational basis” test is generally not a hard obstacle to overcome.

The Supreme Court found today, however, that Chapel Hill failed to surmount this hurdle in its towing ordinance.

The ordinance includes a comprehensive scheme for regulating the towing of cars from private property. As any visitor to Franklin Street knows, there is never enough parking. You might think you can ditch your car in some lot for five minutes and no one will be the wiser, but you are wrong—it will be gone by the time you get back. The ordinance serves the contradictory aims of (1) promoting private towing, to protect the interests of businesses in having available parking, and (2) regulating private towing, to ensure that the power-to-tow is not abused.

The Court upheld much of the towing ordinance, but rejected the Town’s argument that the limits on what a towing company can charge are rationally related to the Town’s delegated police power. The Court could not find any direct connection between the cap on towing fees and the welfare of the citizenry. The Court, therefore, struck down the fee schedule contained in the ordinance.

But towing is quite unlike other commercial enterprises. An aberrant parker does not “choose” one towing company over another—the private property owner chooses which towing company it will hire to police its lot. In other words, the towing market has a third-party-payor problem. In addition, the driver does not have the option of not doing business with the towing company. After all, the towing company has possession of her car. What incentive does the towing company have to charge a fair price? Indeed, couldn’t you argue that the towing company has an incentive to overcharge, so that a particular private property owner would get a reputation for being a place no one dares park-and-run?

The Court provides a consolation to municipalities, stating that there is nothing stopping the General Assembly from expressly delegating the power to regulate towing fees to municipalities. I’m not sure this would solve the problem, however, since the Court’s decision to strike down this part of the ordinance is predicated on the apparent lack of a rational basis between the government’s exercise of its police power and citizen welfare, not on the lack of delegation of that power from the State to local governments.

Moreover, the Court appears to state that a municipality could never engage in “price setting” as an exercise of its police power, because that “could subject other enterprises not only to price setting but also to officious and inappropriate regulation of other aspects of their businesses.” This may be true as a policy matter, but it is not clear how this policy arises as an inherent limitation on the police power of the government.

The State Has “Occupied the Field” of Regulating Cell Phone Use While Driving

The Court also struck down Chapel Hill’s ban on cell phone use while driving. Citing the extensive State-level regulation of motor vehicles, and of cell-phone use in particular, the Court found that the State has “occupied the field” and therefore preempted local attempts to regulate driving while talking.

Field preemption is a useful concept in certain contexts. Sometimes, there are multiple constituencies whose views are all considered by a state or federal legislative body, which then crafts a careful and comprehensive scheme that balances all the competing interests. Federal labor laws are a classic example: the federal government does not want individual states upsetting the careful balance Congress struck between employers’ right to operate efficiently and employees’ right to organize.

Applying field preemption to the use of mobile phones while driving seems odd to me, however. True, the legislature has regulated the use of phones while driving in certain respects, barring anyone from texting while driving, and barring minors from using their phones at all while driving. But I’m not convinced it follows that the legislature was carefully balancing competing interests in deciding to only go that far in regulating the field. Instead, it looks more like an incremental approach to a growing problem of grave importance to public safety.

Moreover, as the General Assembly stated in the statute delegating its police power to municipalities, “The fact that a State or federal law, standing alone, makes a given act, omission, or condition unlawful shall not preclude city ordinances requiring a higher standard of conduct or condition.” N.C. Gen. Stat. § 160A-174(b). Isn’t Chapel Hill’s ban on cell phone use just an “ordinance[] requiring a higher standard of conduct or condition”?

Governmental Immunity Applies When Governments Operate Facilities That Mix Governmental and Proprietary Functions

 In the other case relating to local governments decided today, the Supreme Court decided that a negligence claim against a county arising from a fall at an administrative building that mixed governmental and proprietary functions was barred by governmental immunity.

In Bynum v. Wilson County, the Court was asked to decide whether governmental immunity is appropriate for a slip-and-fall at a county-run office building that housed numerous county departments, some of which were purely governmental in nature (e.g., the planning department) while at least one other was “proprietary” in nature (the water department). The plaintiff argued that, because he was visiting the building to pay his water bill, he was engaged with the county in its “proprietary” capacity, meaning that, under established law, the county did not enjoy an immunity defense to his tort suit. The county argued that the focus should be on the governmental activity giving rise to the claim—the “maintenance, repair, and use of all county property”—a decidedly “governmental” function.

Four of the Justices agreed with the county. Three Justices, however, joined a concurring opinion to clarify that the decision did not provide an end-around the established law that a tort claim against a local government arising from its, say, operation of a sports arena for profit could proceed.

Gotta run—I think I’m double parked.

–Matt Leerberg