Fed. Dist. Court of NC Finds North Carolina Coastal Commission Had Sovereign Immunity

This post was authored by Matthew Loescher, Esq.

The Zitos were residents of Timonium, Maryland and owned a beachfront lot at 10224 East Seagull Drive in South Nags Head, North Carolina. In 2016, a fire destroyed the Zitos’ home, and on July 31, 2017, the Zitos sought to rebuild their home, with a total floor area of 1,792 on a 32′ × 28′ footprint, and submitted a North Carolina Coastal Area Management Act (“CAMA”) Minor Permit application to the Town of Nags Head’s CAMA Local Permit Officer (“LPO”). The CAMA rules and regulations include set-back requirements for ocean-front development on property within the Ocean Erodible Area of Environmental Concern (“AEC”). In 2018, the Town of Nags Head LPO denied the Zitos’ CAMA Minor Permit. After the denial, the Zitos filed a variance petition with the North Carolina Coastal Commission. The Commission held that the Zitos failed to demonstrate the requisite hardship to qualify for a variance.

The court first noted that because the Commission was asserting sovereign immunity, it had the burden of proving such immunity. Here, the Commission, along with the DCM and larger CAMA programs, received funding from the North Carolina General Assembly (“NCGA”), federal grants and appropriations, and permit revenue, which become state funds when deposited in State Treasury accounts. Additionally, although the state is not explicitly liable for the Commission’s liability, the state is functionally liable for any judgment. The court further found that both the appointment and funding considerations demonstrated that the Commission lacked autonomy. As for the third factor concerning statewide concern, the Commission regulated the coastal areas of North Carolina and thereby affected areas of state-wide importance. As for waiver, the Zitos did not alleged any facts indicating that the Commission had clearly and unequivocally waived immunity to a federal takings claims in federal court.

Next, although the Zitos correctly claimed that N.C. Gen. Stat. §113A-123(b) did not provide a monetary remedy for temporary takings during the eminent domain procedure, the North Carolina Constitution provided such a remedy. Specifically, even though the North Carolina Constitution did not expressly prohibit governments from taking private property for public use without just compensation, the Supreme Court of North Carolina has found such a prohibition in the Law of the Land Clause. Thus, the Zitos could sue under the Law of the Land Clause of the North Carolina Constitution, which provides: “No person shall be taken, imprisoned, or disseized of his freehold, liberties, or privileges, or outlawed, or exiled, or in any manner deprived of his life, liberty, or property, but by the law of the land.”

The court found the Zitos’ takings claim could not be remedied fully under N.C. Gen. Stat. §113A-123 because the eminent domain procedures failed to compensate for the temporary loss in value during the duration of the proceedings. However, the Supreme Court of North Carolina, recognized “inverse-condemnation” claims, similar to the regulatory taking at issue here, as allowing for damages. Moreover, North Carolina courts have allowed “vested rights claims,” which are “rooted in the due process of law and the law of the land clauses of the federal and state constitutions,” to proceed as claims under the North Carolina Constitution in the context of zoning claims. Accordingly, the court granted the Commission’s motion to dismiss

Zito v North Carolina Coastal Commission, 2020 WL 1493476 (ED NC 3/27/2020)