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Cashwell v. Town of Oak Island

United States District Court, E.D. North Carolina, Southern Division

May 31, 2019

TOWN OF OAK ISLAND, NORTH CAROLINA; DAVID KELLY in his individual capacity; DAVID HATTEN in his individual capacity; KATIE COLEMAN in her individual capacity, Defendants.


          Louise W. Flanagan, United States District Judge.

         This matter is before the court on defendants' motion to dismiss for lack of subject matter jurisdiction and failure to state a claim, pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) (DE 22). Also before the court is defendants' motion to strike a portion of plaintiffs' response in opposition to the motion to dismiss (DE 36). The issues raised have been fully briefed, and in this posture are ripe for ruling. For the reasons that follow, defendants' motion to dismiss is granted for reasons of comity, and defendants' motion to strike is denied as moot.


         This case concerns the constitutionality of a municipality collecting revenue from undeveloped property owners within a sewer treatment district authorized by state law. Plaintiffs, proceeding pro se, commenced this action on June 20, 2018, alleging violation of their rights under the Fifth and Fourteenth Amendments to the United States Constitution. In their complaint, plaintiffs seek compensatory and punitive damages, as well as declaratory and injunctive relief. Defendants filed the instant motion to dismiss on October 19, 2018, asserting this action is barred by the Tax Injunction Act (“TIA”), 28 U.S.C. § 1341, as well as principles of comity.

         Plaintiffs initially responded in opposition only to defendants' jurisdictional arguments, and moved to stay briefing on defendants' 12(b)(6) motion. The court denied plaintiffs' motion, but allowed plaintiffs leave to respond to the remaining part of defendants' motion. Plaintiffs followed with a supplemental brief totaling 61 pages, together with a “memorandum of clearly established law” presenting another 49 pages of legal arguments. Defendants moved to strike the filing in opposition for exceeding the page limit for memoranda allowed by Local Civil Rule 7.1(f).


         The facts in the complaint[1] may be summarized as follows. Plaintiffs are local undeveloped property owners within the jurisdiction of defendant Town of Oak Island (“Town”). (See Compl. ¶¶ 2-6).[2] In 2006, the North Carolina General Assembly granted defendant Town authority to create a fee-supported sewer treatment district. (Id. ¶ 14); Act of July 13, 2004, S.L. 2004-96, 2004 N.C. Sess. Laws 117 (allowing the Town of Holden Beach to impose a sewer treatment district charge); Act of June 30, 2006, S.L. 2006-54, 2006 N.C. Sess. Laws 85 (authorizing defendant Town to impose a sewer treatment charge on the same terms as the Town of Holden Beach).[3] The enabling law allows defendant Town to “impose annual fees for the availability of sewer service within the district” (“charge”), which are to be “on the property tax bill for each parcel of property lying within the municipal limits on which the fee is imposed.” 2004 N.C. Sess. Laws at 117; 2006 N.C. Sess.

         Laws at 85. The charge may not exceed the cost of providing sewer services, and “shall be imposed on owners of each dwelling unit or parcel of property that could or does benefit from the availability of sewage treatment.” 2004 N.C. Sess. Laws at 117; 2006 N.C. Sess. Laws at 85. The charge is “to be used only to pay the debt service for the sewer system.” 2004 N.C. Sess. Laws at 118; 2006 N.C.

         Sess. Laws at 85. The law further requires defendant Town to “administer the fund to provide for the payment of said sewer services provided by the county.” 2004 N.C. Sess. Laws at 118; 2006 N.C. Sess. Laws at 85.

         On June 25, 2009, defendant Town adopted a resolution establishing a sewer treatment district and levied a charge of $146.15 for property tax year 2009 upon all property owners. (Compl. ¶ 15). At the same time, defendant Town also approved a refund of the 2009 sewer treatment district charges to developed parcel owners, but not undeveloped parcel owners. (Id.). Following discussion and approval of the resolution, defendant Town's mayor made the following statement summarizing the rationale behind the measure:

Let [me] make this clear for the people watching on TV. The annual fees imposed on parcels of property within the district in the amount of $146.15 per parcel-everybody's gonna get it. The collection fees will be applied to debt service for the Town Wastewater Project; a credit will be applied to users of the Town system. So if you're buying water now, you're buying any kind of utility now, you're gonna get a credit for the amount that we're billing. This is so the parcels of property that don't have anything on it can help pay their share which they're not doing now. So don't let anybody tell you that you're getting billed $146.15 and that's the way it is. You're gonna get a credit for it. So let's make that clear.

(Town Counsel Meeting (DE 11-2) at 4-6).[4] Thereafter, defendant Town proceeded to adopt similar annual resolutions. Each year from 2015 to 2017, [5] defendant Town approved annual sewer treatment district charges of $803.82, then credited that amount back to developed parcel owners but not undeveloped parcel owners. (Compl. ¶¶ 16-17; see 2016 Johnson Developed Property (DE 11-4) at 2; 2016 Johnson Undeveloped Property (DE 11-5) at 2).

         The charges billed to plaintiffs were for the “availability of sewer treatment service within the district.” (Compl. ¶ 20). Plaintiffs contend that sewer treatment service was not “available” to their undeveloped properties because, in order to access sewer service, defendant Town must approve a sewer hookup application and certain development fees must be paid to develop and establish a connection to the sewer system. (Id.; see Town Fee Schedule (DE 11-3) at 1-2). On September 18, 2017, plaintiff Brad Johnson (“Johnson”) served a demand letter upon defendant Town, requesting individually and on behalf of those similarly situated a refund of charges paid by undeveloped property owners. (Compl. ¶ 21; Demand Letter (DE 11-6) at 2-3).

         COURT'S ...

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