STATE OF NORTH CAROLINA, ex rel. ROY COOPER, Attorney General, Plaintiff,
KINSTON CHARTER ACADEMY, a North Carolina non-profit corporation; OZIE L. HALL, JR., individually and as Chief Executive Officer of Kinston Charter Academy; and DEMYRA MCDONALD HALL, individually and as Board Chair of Kinston Charter Academy, Defendants.
in the Court of Appeals 16 January 2019.
by defendants Kinston Charter Academy and Ozie L. Hall, Jr.
from orders entered 21 March 2018 by Judge A. Graham Shirley
in Wake County No. 16CVS5628 Superior Court.
Attorney General Joshua H. Stein, by Assistant Attorney
General Matthew L. Liles, for the State.
L. Hall, Jr., pro se, defendant-appellant.
Ragsdale Liggett PLLC, by Mary M. Webb, Edward E. Coleman,
III, and Amie C. Sivon, for defendant-appellant Kinston
filed an action against Defendants Kinston Charter Academy
("Kinston Charter") and Ozie L. Hall
("Hall") for, among other things, violations of
North Carolina's False Claims Act. On March 21, 2018, the
trial court denied motions to dismiss filed by Kinston
Charter and Hall (collectively, "Appellants").
Appellants now appeal the interlocutory orders denying their
respective motions to dismiss. In addition, Appellants have
filed petitions for writs of certiorari seeking review of the
sufficiency of the State's pleadings under Rule 9 of the
North Carolina Rules of Civil Procedure. For the reasons
discussed below, we reverse the trial court's order
denying dismissal for Kinston Charter, affirm the trial
court's order denying dismissal for Hall, and deny
Appellants' petitions for certiorari review.
and Procedural Background
Charter is a non-profit corporation located in Kinston, North
Carolina. From January 2004 to September 2013, Kinston
Charter operated a public school pursuant to a charter from
the North Carolina State Board of Education as provided for
by Section 115C-238.29 of the North Carolina General
Statutes. Hall served as Kinston Charter's CEO
from 2007 until 2013. Demyra McDonald-Hall served as the
chairwoman of Kinston Charter's board of directors for
roughly the same period of time.
North Carolina, charter schools receive operating funds from
the State on a per pupil basis. In the spring of each year, a
charter school is required to provide an estimate to the
Department of Public Instruction ("DPI") of its
anticipated average daily membership ("ADM") for
the upcoming school year. This estimate is determined by the
school's current ADM plus or minus any estimated losses
or increases in the student population for the upcoming year
("Estimated ADM"). During the time period relevant
to this case, charter schools were permitted to submit
estimated growth in student enrollment of up to twenty
percent in their Estimated ADM without prior approval from
the State; an increase of more than twenty percent in any
given year required approval from the State Board of
Education. N.C. Gen. Stat. § 115C-238.29D(f)(1)
the school year begins, charter schools must provide an
average total enrollment from the first and twentieth days of
the school year ("Actual ADM"). If the Estimated
ADM does not align with the Actual ADM, the charter
school's funding allotment is adjusted to recapture the
excess funds paid to the charter school at the beginning of
the school year based on its Estimated ADM.
April 26, 2013, Hall reported to DPI an estimated enrollment
for Kinston Charter of 366 students for the 2013-2014 school
year. This estimate was within the statutory twenty percent
growth range and did not require prior approval from the
State Board of Education. However, when Kinston Charter
opened for the 2013-2014 school year, the school only had 189
students in attendance-177 students less than the estimate
provided by Hall, despite efforts by the school to advertise
and attract additional students.
September 4, 2013, Kinston Charter surrendered its charter to
the State Board of Education. Due to the timing of the
surrender, excess operating funds provided to Kinston Charter
as a result of the difference between the school's
Estimated ADM and Actual ADM were not recaptured by the
April 26, 2016, the State of North Carolina, by and through
then-Attorney General Roy Cooper, initiated this action
against Kinston Charter, Hall, and McDonald-Hall. The
complaint alleged violations of the North Carolina False
Claims Act ("NCFCA"), Chapter 55A of the North
Carolina General Statutes ("Chapter 55A"), and the
Unfair and Deceptive Trade Practices Act ("UDTPA").
Pursuant to Rule 2.1 of the General Rules of Practice for
Superior and District Courts, the case was designated
3, 2017, the trial court heard arguments on Hall and
McDonald-Hall's motions to dismiss pursuant to Rule
12(b)(6) of the North Carolina Rules of Civil Procedure. On
August 9, 2017, the trial court granted dismissal of the
Chapter 55A and UDTPA claims against Hall in his individual
capacity and denied dismissal of the NCFCA claim. The court
granted dismissal of all claims against McDonald-Hall in her
March 19, 2018, the trial court heard Kinston Charter's
motion to dismiss pursuant to Rules 12(b)(1), 12(b)(3), and
12(b)(6). The trial court also heard arguments on Hall and
McDonald-Hall's 12(b)(6) motions to dismiss all charges
against them in their official capacities. Additionally, the
trial court heard arguments on Hall's 12(b)(1) motion to
dismiss the NCFCA claim against him in his individual
March 21, 2018, the court granted dismissal of the Chapter
55A and UDTPA claims against Kinston Charter and denied
dismissal of the NCFCA claim. The court granted dismissal of
all claims against Hall and McDonald-Hall in their official
capacities. Additionally, the trial court denied Hall's
12(b)(1) motion to dismiss the NCFCA claim against him in his
now seek interlocutory review, arguing that the trial court
erred in denying their motions to dismiss pursuant to Rules
12(b)(1) and 12(b)(6). In addition, Appellants have filed
petitions for writs of certiorari seeking interlocutory
review regarding the sufficiency of the State's pleadings
under Rule 9 of the North Carolina Rules of Civil Procedure.
For the reasons set forth herein, we reverse the trial
court's order denying dismissal for Kinston Charter,
affirm the trial court's order denying dismissal for
Hall, and deny Appellants' petitions for certiorari.
initial matter, we must address the scope of this Court's
jurisdiction over Appellants' interlocutory appeals.
An order is either interlocutory or the final determination
of the rights of the parties . . . . An appeal is
interlocutory when noticed from an order entered during the
pendency of an action, which does not dispose of the entire
case and where the trial court must take further action in
order to finally determine the rights of all parties involved
in the controversy.
Beroth Oil Co. v. N.C. Dep't of Transp., 256
N.C.App. 401, 410, 808 S.E.2d 488, 496 (2017) (citations and
quotation marks omitted).
an interlocutory order is not immediately appealable.
Davis v. Davis, 360 N.C. 518, 524, 631 S.E.2d 114,
119 (2006). However, a party may seek immediate appellate
review when an interlocutory order affects a substantial
right. N.C. Gen. Stat. §§ 1-277(a), 7A-27(b)(3)(a)
(2017). "[T]he appellant has the burden of showing this
Court that the order deprives the appellant of a substantial
right which would be jeopardized absent review prior to a
final determination on the merits." Jeffreys v.
Raleigh Oaks Joint Venture, 115 N.C.App. 377, 380, 444
S.E.2d 252, 254 (1994).
appeal from an interlocutory order raising issues of
sovereign immunity affects a substantial right sufficient to
warrant immediate review. Hinson v. City of
Greensboro, 232 N.C.App. 204, 209, 753 S.E.2d 822, 826
(2014). "However, this only applies for denial of a
motion to dismiss under Rules 12(b)(2), 12(b)(6), and 12(c),
or a motion for summary judgment under Rule 56. We cannot
review a trial court's order denying a motion to dismiss
under Rule 12(b)(1)." Id. at 209, 753 S.E.2d at
826 (citation and quotation marks omitted). Accordingly, only
Appellants' challenges to the trial court's denial of
their motions to dismiss under Rule 12(b)(6) based on
sovereign immunity are properly before this Court.
review a trial court's denial of a motion to dismiss
under Rule 12(b)(6) de novo. Wray v. City of
Greensboro, 370 N.C. 41, 46, 802 S.E.2d 894, 898 (2017).
"Dismissal of an action under Rule 12(b)(6) is
appropriate when the complaint fails to state a claim upon
which relief can be granted." Id. at 46, 802
S.E.2d at 898 (purgandum). When ruling on a motion
to dismiss, the well-pleaded material allegations of the
complaint are deemed admitted for purposes of the motion.
Arnesen v. Rivers Edge Golf Club & Plantation,
Inc., 368 N.C. 440, 448, 781 S.E.2d 1, 7 (2015). A
complaint should only be dismissed where it ...