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Can Am South, LLC v. State

Court of Appeals of North Carolina

June 3, 2014

CAN AM SOUTH, LLC, Plaintiff,
v.
THE STATE OF NORTH CAROLINA, THE NORTH CAROLINA DEPARTMENT OF HEALTH AND HUMAN SERVICES, and THE NORTH CAROLINA DEPARTMENT OF ADMINISTRATION, Defendants

Heard in the Court of Appeals March 5, 2014.

Wake County. No. 12 CVS 14873. Donald W. Stephens, Judge.

Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by Walter L. Tippett, Jr. and S. Wilson Quick, for plaintiff-appellee.

Attorney General Roy Cooper, by Special Deputy Attorney General Donald R. Teeter, Sr. and Assistant Attorney General G. Mark Teague, for defendants-appellants.

Robert C. HUNTER, Judge. Judges GEER and McCULLOUGH concur.

OPINION

Page 305

Appeal by defendants from order entered 8 May 2013 by Senior Resident Judge Donald W. Stephens in Wake County Superior Court.

Page 306

HUNTER, Robert C., Judge.

The State of North Carolina (" the State" ), the North Carolina Department of Health and Human Services (" DHHS" ), and the North Carolina Department of Administration (collectively " defendants" ) appeal from an order denying their motion to dismiss. Can Am South, LLC (" plaintiff" ) filed suit against defendants for breach of contract and declaratory judgment. Defendants argue that the trial court erred by: (1) denying defendants' motion to dismiss plaintiff's claim for a declaratory judgment because defendants did not waive sovereign immunity, or in the alternative, the complaint fails to allege the existence of an actual controversy; and (2) denying defendants' motion to dismiss because defendants did not breach any contract with plaintiff, thus foreclosing waiver of sovereign immunity. Defendants also argue that the availability of funds clause in the lease agreements is enforceable and its enforcement does not constitute a breach of contract.

After careful review, we dismiss the appeal in part and affirm the trial court's order denying defendants' Rule 12(b)(2) motion to dismiss on the ground of sovereign immunity.

Background

The facts of this case are undisputed. Plaintiff is a limited liability company existing under the laws of North Carolina but operating its principal place of business in New York. Plaintiff owns a converted commercial office and storage facility in Raleigh, N.C., which it leased at varying times and capacities to defendants.

Plaintiff entered into the first lease (" the DDS lease" ) with the State on 20 May 1999 for use by the Department of Health and Human Services, Disability Determination Services (" DDS" ). Plaintiff and the State entered into a renewal agreement, the effect of which was to extend the DDS lease through 31 July 2019 and to include the so-called " availability of funds clause." The availability of funds clause states:

15. The parties to this lease agree and understand that the continuation of this Lease Agreement for the term period set forth herein, or any extension or renewal thereof, is dependent upon and subject to the appropriation, allocation or availability of funds for this purpose to the agency of the Lessee responsible for payment of said rental. The parties to this lease also agree that in the event the agency of the Lessee or that body responsible for the appropriation of said funds, in its sole discretion, determines in view of its total local office operations that available funding for the payment of rents is insufficient to continue the operation of its local office on the premise leased herein, it may choose to terminate the lease agreement set forth herein by giving Lessor written notice of said termination, and the lease agreement shall terminate immediately without any further liability to Lessee.

Defendants have not attempted to exercise their right to terminate the DDS lease pursuant to the availability of funds clause.

On 6 November 2000, plaintiff and the State entered into the second lease (" the ACTS lease" ) for use by an administrative unit of DHHS known as Automation Collections and Tracking System(s) (" ACTS" ). The availability of funds clause was included in the ACTS lease, and after renewal, the lease was set to run through 28 February 2014. However, DHHS notified plaintiff on 12 May 2011 that the State was exercising its right to terminate the ACTS lease pursuant to the availability of funds clause, effective 30 June 2011. The State ...


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