Almost two years ago, my colleague Matt Leerberg wrote about the Court of Appeals’ decision in Can Am South, LLC v. North Carolina and the potential implications of that decision:
Relying on prior case law, the Court of Appeals dismissed the State’s appeal of the order to the extent its sovereign immunity defense was based on Rule 12(b)(1) (subject matter jurisdiction) but allowed the appeal of the order to the extent it was based on Rule 12(b)(2) (personal jurisdiction). The Court noted that it would also have allowed the immediate appeal had the State couched its sovereign immunity defense as a Rule 12(b)(6) motion (failure to state a claim), because of the “longstanding rule that the denial of such a motion affects a substantial right” under N.C. Gen. Stat. § 1-277(a).
In this particular appeal, the “split verdict” on the propriety of the interlocutory appeal had no practical effect, since the State had raised a 12(b)(2) defense in the alternative. But the legal framework cited in this case appears to lay a trap for the State for future cases—cite “the wrong b” in a motion to dismiss, and a denial of your sovereign immunity defense no longer affects a substantial right. (emphasis added)
Yesterday, the State got caught in the precise trap that Matt previously identified. In Murray v. Univ. of North Carolina at Chapel Hill, the Court of Appeals dismissed the State’s interlocutory appeal of an order denying its motion to dismiss on sovereign immunity grounds. The reason? 1) The State had moved to dismiss based on sovereign immunity pursuant to Rule 12(b)(1) and not Rule 12(b)(2), and 2) the trial court’s order only referenced Rule 12(b)(1) and not Rule 12(b)(2). Holding that it was bound by Can Am South, the majority in Murray determined that because the State’s sovereign immunity argument was made pursuant to Rule 12(b)(1), and the trial court arguably ruled on that argument pursuant to Rule 12(b)(1), the Order was not immediately appealable.
If your reaction is that this decision (and Can Am South) exalts form over substance, then I agree with you. The State’s sovereign immunity argument is the same regardless of what Rule of North Carolina Civil Procedure is cited in the State’s motion or the trial court’s Order. As the Court of Appeals itself has noted, sovereign immunity is immunity from suit. The State’s immunity is considered a substantial right that is immediately appealable because the right to be immune from suit is lost once a party has to actually defend a suit beyond the motion to dismiss stage. See, e.g., Doe v. Charlotte-Mecklenburg Bd. of Educ., 222 N.C. App. 359, 363, 731 S.E.2d 245, 248 (2012). It makes little sense that an immunity defense would be a substantial right if brought pursuant to one subsection of Rule 12, but not a substantial right if brought pursuant to a different subsection of the same Rule. The end result of the denial of the motion to dismiss is the same under any circumstance—the defendant loses the benefit of immunity. The Court of Appeals impliedly acknowledged this in Atl. Coast Conference v. Univ. of Maryland, 230 N.C. App. 429, 436, 751 S.E.2d 612, 617 (2013) when it held that assertion of a defense of sovereign immunity, regardless of how it is framed, provides the Court with “substantial right jurisdiction” over an appeal of an interlocutory order pursuant to pursuant to N.C. Gen.Stat. §§ 1–277(a) and 7A–27(d).
I previously blogged about the Court of Appeals declining to exalt form over substance in determining whether the denial of a particular motion was immediately appealable. In that post I cited to the Court of Appeals’ opinion in Poret v. State Personnel Com’n, 74 N.C. App. 536, 328 S.E.2d 880 (1985), overruled on other grounds by Batten v. N. Carolina Dept. of Correction, 326 N.C. 338, 343, 389 S.E.2d 35, 39 (1990). In Poret, the Court specifically noted that the substance of the motion, not the label, controls on the issue of immediate appealability. (“Merely making a motion to dismiss for lack of such jurisdiction will not ipso facto make an otherwise interlocutory order appealable; substance, not form, controls.”)
Approximately a year ago, Matt blogged on another opinion in which the Court of Appeals declined to exalt form over substance in determining whether an interlocutory order was immediately appealable. Presciently, our colleague Beth Scherer asked the following question in the comments to Matt’s post:
“I wonder if the appellate courts allow this rule to work the other way–i.e., to the advantage of the appellant? For example, if a trial court motion is labeled a Rule 12(b)(6) motion, but is actually raising a Rule 12(b)(2) defense for lack of personal jurisdiction or sovereign immunity, will the court look beyond the wrong Rule 12(b) label to find appellate jurisdiction?”
The answer to Beth’s question, according to the Court of Appeals in Murray, is “no, the rule does not work the other way.”
Judge Tyson issued a dissenting opinion in Murray, arguing that the State had properly raised the immunity defense under 12(b)(6) and therefore the order affected a substantial right and was immediately appealable. Judge Tyson’s dissent means this case could very well end up before the Supreme Court of North Carolina. If it does, the Supreme Court will have the opportunity to clarify at least two issues: (1) to what extent the labels used in a motion (or the Rule referenced in an trial court’s order) controls the immediate appealability of an interlocutory order, and (2) the proper Rule(s) of Civil Procedure on which to bring a motion to dismiss on the grounds of sovereign/governmental immunity? A recent case referenced by both the majority and the dissent in Murray acknowledges that this second issue is one that is “unsettled” under North Carolina law. See M Series Rebuild, LLC v. Town of Mount Pleasant, Inc., 222 N.C. App. 59, 62, 730 S.E.2d 254, 257 (2012)(citing cases showing that in some instances the Court of Appeals considers a sovereign immunity defense to be properly raised under Rule 12(b)(1) and in some instances to be properly raised under Rule 12(b)(2)).
Here’s hoping that the Supreme Court provides some clarity on both issues. Stay tuned.