Governmental Immunity for Activities Designated by Statute as Governmental Functions?

The doctrine of governmental immunity shields cities and counties from financial liability for tort claims arising from the performance of governmental functions. (A “tort” is wrongful conduct, such as negligence or assault, for which a victim may be able to recover money damages in a lawsuit.) When tort claims stem from proprietary functions, however, the local government is generally liable to the same degree as a private company. As I explained in a previous blog post, the North Carolina Supreme Court in Williams v. Pasquotank County, 366 N.C. 195 (2012), formulated a three-part test for determining whether an activity counts as a governmental or proprietary function in the governmental immunity context. The first part of the Williams test requires a judge to examine whether the General Assembly has classified the specific activity that led to the plaintiff’s damages as governmental or proprietary. The Williams opinion indicates that, when the legislature has made such a designation, there is ordinarily no need to apply the other two parts of the test. Deference to the legislature should be the norm. I have been asked whether Williams effectively overrules Rhodes v. City of Asheville, 230 N.C. 134 (1949), an old governmental immunity case in which the supreme court didn't defer to the legislature. In Rhodes the court held that the operation of a municipal airport is a proprietary function, even though a statute declared the activity to be a governmental undertaking. While they might seem to be at odds, Rhodes and Williams actually complement one another. Read together, they tell us how a court should evaluate whether the legislature’s designation of an activity as a governmental function triggers the protections of governmental immunity. The two cases establish that, among other things, the reason for the designation and the breadth of the activity defined as governmental are relevant to a court’s immunity analysis.

Contexts in Which Functions are Called Governmental or Proprietary  The law has different uses for the terms “governmental function” and “proprietary function,” depending on the nature of the claims at issue. An appreciation of these uses is necessary to reconcile Rhodes and Williams.

• Governmental Immunity. The terms appear most prominently, but not exclusively, in cases involving a local government’s assertion that governmental immunity bars tort claims against it. In such cases, the courts have described governmental functions as activities that are “discretionary, political, legislative, or public in nature and performed for the public good in behalf of the State.” Millar v. Town of Wilson, 222 N.C. 340, 341 (1942). They have characterized proprietary functions as undertakings that are “commercial or chiefly for the private advantage of the compact community.” Id. Obviously, these standards are less than exact. Courts have had a hard time applying them to particular activities, causing “irreconcilable splits of authority and confusion as to what functions are governmental [or] proprietary.” Koontz v. City of Winston-Salem, 280 N.C. 513, 528 (1972). The Williams test represents an effort to bring order to governmental immunity rulings.
• Statutes of Limitation. The courts also invoke the governmental/proprietary distinction when deciding whether a statute of limitation or repose prevents the state or a local government from pursuing a claim of its own in a lawsuit. Statutes of limitation and repose limit the time a party has to pursue certain kinds of civil claims. If a civil claim by the state or a local government involves a governmental function, a statute of limitation or repose will not bar the claim, unless the statute expressly includes the state. See, e.g., City of Greensboro v. Morse, 197 N.C. App. 624, 627 (2009) (holding that a one-year statute of limitation didn't bar the city from suing the defendant for unpaid parking tickets, in part because “the collection of fines and fees to enforce [a city’s] parking regulations . . . is a governmental function”).
• Constitutional Funding Restraints. The term “governmental function” is sometimes employed to assert that an activity satisfies the requirement in Article V, Subsection 2(1) of the state constitution that public funds be spent for public purposes only. In one case, for instance, the court upheld the constitutionality of a statute that authorized the expenditure of public funds on economic development programs because “[e]conomic development has long been recognized as a proper governmental function.” Maready v. Winston-Salem, 342 N.C. 708, 723 (1996).

It’s possible for an endeavor to be classified as a governmental function for one purpose but not for another. If this weren’t so, neither the state nor local governments could spend public funds on any of the many undertakings – such as the operation of municipal airports – that have been deemed proprietary functions in governmental immunity cases. The constitutional ban on the expenditure of public funds for non-public purposes would have to be interpreted to prohibit such expenditures. Rhodes: Statutory Designation of an Activity as Governmental Isn’t Always Binding The Rhodes case involved a fatal shooting at the Asheville-Hendersonville Airport. According to the complaint, N. Cecil Rhodes was wrongfully and negligently shot by an airport guard. The local government defendants argued that governmental immunity barred the wrongful death claims. In particular, they asserted that they could not be held liable for Mr. Rhodes’ death because G.S. 63-50 describes the construction, maintenance, and operation of municipal airports as “governmental and municipal functions exercised for a public purpose and matters of public necessity.” 230 N.C. at 137 (internal quotation marks omitted). The supreme court ruled that G.S. 63-50 didn’t bar the wrongful death claims against the defendants. It gave three reasons for its holding:

• Classification of an activity as a governmental function doesn’t necessarily mean that governmental immunity applies. For example, the supreme court had long held that a city may be liable for injuries resulting from its failure to keep its streets in a reasonably safe condition, even though the maintenance of city streets is undoubtedly a governmental function. (Liability for those claims flows from the “positive duty” that the law imposes on cities to ensure that their streets remain in proper repair. Bunch v. Edenton, 90 N.C. 431, 434 (1884).)
• Appellate courts in other states had overwhelmingly viewed the operation of municipal airports as a proprietary function that may result in tort liability for local governments.
• The General Assembly didn’t enact G.S. 63-50 intending to provide governmental immunity for municipal airports. Rather, “the intent of the Legislature [was] to declare that the acquisition, construction, and maintenance of an airport . . . was a governmental function in the sense that it was a public purpose.” 230 N.C. at 140. In other words, the statute expresses the legislature’s view that public funds may be spent on municipal airports.

Although it rejected the defendants’ immunity argument, the court noted that the General Assembly has the power to exempt the operation of airports from tort liability, even though the undertaking is proprietary in nature. It explained that, if the legislature wishes to take such action, it must expressly confer immunity on airport-related activities. The court repeated this point in rejecting the defendants’ petition for rehearing, with a sharp reminder that the judiciary, not the legislature, enjoys the last word on whether an undertaking is governmental or proprietary. 230 N.C. 759 (1949). It reaffirmed this stance in a later case, when it remarked that, notwithstanding G.S. 63-50, an airport authority functions in a proprietary capacity when setting airport landing and rental fees. Piedmont Aviation v. Raleigh-Durham Airport Auth., 288 N.C. 98, 102-03 (1975). Williams: Broad Statutory Designations of Governmental Functions Might Not Trigger Governmental Immunity In Williams the County was sued by the estate of a young man who had drowned at a public park. The County argued that governmental immunity barred the claims, pointing to G.S. 160A-351, which declares that the “creation, establishment, and operation of public parks and recreation programs is a proper governmental function.” As noted above, the supreme court formulated a three-part test in Williams for determining whether an activity constitutes a governmental or proprietary function for immunity purposes. The “threshold inquiry” is “whether, and to what degree, the legislature has addressed the issue.” 366 N.C. at 200. The other parts of the test set forth factors to be considered “[w]hen the legislature has not directly resolved whether a specific activity is governmental or proprietary in nature.” Id. at 202. Part two of the test asks whether the activity constitutes one that only a governmental entity could undertake. If it does, the activity must be regarded as a governmental function. If it doesn't, then it becomes necessary to move on to the test’s third part, which describes additional factors to be examined, such as whether the activity is one traditionally undertaken by local governments, whether the defendant local government charged a substantial fee as part of the activity, and whether any such fee generated a profit. Under the third part of the Williams test, the more that an undertaking appears to be a mechanism for producing revenue, the greater the chances that it will be regarded as a proprietary function. The court sent the Williams case back to the trial judge with instructions to consider “the degree of effect, if any, of [G.S. 160A-351]” on the lawsuit. While conceding that the statute was “clearly relevant” to the question of whether the county’s conduct was governmental or proprietary, the court explained that G.S. 160A-351 doesn’t cover “every nuanced action that could occur in a park.” Id. at 202. Consequently, said the court, a ruling on whether governmental immunity bars a tort claim involving a public park can't be made until the precise conduct that injured the plaintiff has been identified. The court cited an earlier case in which it had held that a municipality could be liable for personal injuries a plaintiff sustained when a rock ejected from a lawnmower struck him in the head during a picnic in a public park. The outcome in that case seemed to turn on the fact that the local government derived more than incidental income from the park. See Glenn v. City of Raleigh, 246 N.C. 469 (1957). The North Carolina Court of Appeals (“COA”) applied the Williams test in another park-related case. In Horne v. Town of Blowing Rock, 732 S.E.2d 614 (2012), the Town argued that governmental immunity barred negligence claims for injuries the minor plaintiff had suffered at a public park when he stepped into a drain hole concealed by overgrown grass. The COA noted the legislature’s use of the term “governmental function” in G.S. 160A-351, but concluded that the statute didn’t resolve the question of whether governmental immunity defeated the claims against the Town. Like the court in Williams, the COA held that G.S. 160A-351 doesn’t encompass every action which could occur in a public park. Turning to the non-statutory components of the Williams test, the COA observed that the record in Horne lacked any evidence showing the extent to which the park generated revenue for the Town. It explained that, under Williams, the Town’s upkeep of the park couldn’t be classified as governmental or proprietary in the absence of such evidence. The COA reviewed pre-Williams cases in which the supreme court had considered revenue evidence when deciding whether governmental immunity barred tort claims for injuries sustained in public parks. According to the COA, the cases establish that the operation of free public parks “is traditionally a governmental function to which governmental immunity will ordinarily apply” but that this immunity may be waived “when revenue is derived either from the operation of the park itself or the conduct of activities within the park.” 732 S.E.2d at 620. Although it clarifies that G.S. 160A-351 doesn’t bar all park-related tort claims against local governments, Williams offers little guidance about the kinds of activities that would fall within the statute’s scope. Moreover, Horne strongly suggests that future decisions concerning the applicability of governmental immunity to public park activities are much more likely to hinge on revenue than on 160A-351. Thus, while Williams stresses deference to the legislature in governmental immunity cases, the net effect of Williams and Horne is probably to eliminate G.S. 160A-351 as a serious factor in lawsuits arising from the operation of public parks.

• NOTE: The Horne case doesn’t hold that any use of a public park to generate income automatically transforms the operation of the park into a proprietary function. Rather, as I read the case, the COA treated the revenue question as a preliminary inquiry. If no revenue is produced, the operation of the park is likely a governmental function. On the other hand, if the park produces revenue for the defendant local government, other relevant factors articulated in Williams must be considered before a governmental/proprietary determination may be made. I hope to address the current state of governmental immunity for public parks in more detail in a future blog post.

Rhodes and Williams: Five Principles for Analyzing Statutes that Designate Governmental Functions Collectively, Rhodes and Williams tell us five things about the role of statutes that classify activities as governmental functions in governmental immunity determinations.

• When a statute classifies the specific undertaking that led to a plaintiff’s injury as a governmental function, it can be important for a court to identify the reason for the classification. If the purpose of the designation is to assert that public funds may be spent on the activity, the statute may have little bearing on whether governmental immunity bars the plaintiff’s tort claims. The appearance of the words “public purpose” in the statute is a signal that the General Assembly was more worried about constitutional restraints on public funds than about tort claims against local governments.
• When a statute classifies the specific activity that resulted in a plaintiff’s injury as a governmental function, and the court doesn’t think that the classification was made for reasons unrelated to liability, the court should generally defer to the legislature’s pronouncement. Even in such circumstances, though, it’s not always a given that governmental immunity will cover the activity. As remarked in Rhodes, for example, governmental immunity doesn’t bar tort claims arising from a city’s failure to keep its streets reasonably safe, even though street maintenance is plainly a governmental function.
• It may be appropriate for a court to reject the General Assembly’s designation of a specific activity as governmental when the courts of other states have overwhelmingly classified the undertaking as proprietary for liability purposes.
• If a statute broadly defines a governmental function, a court may have to apply the second and third parts of the Williams test in order to determine the proper characterization of the precise conduct that led to a plaintiff’s injury. The breadth of the language used in G.S. 160A-351, for instance, makes the statute a minor factor in most tort cases arising from the operation of public parks.
• Even when the case law defines an activity as proprietary, the legislature has the power to exempt the undertaking from tort liability. An unambiguous declaration of the legislature’s intent is required to create an exemption for a proprietary undertaking.