Appeals Court allows private lake owners to pursue suit against Fayetteville

The North Carolina Court of Appeals will allow owners of private lakes and dams lost to Hurricane Matthew in 2016 to proceed with a lawsuit against Fayetteville. The property owners blame the city for discharging stormwater into their dried-up lakebeds.

Appellate judges reversed a trial judge’s decision favoring Fayetteville.

“Plaintiffs allege that, during Hurricane Matthew, dams located on four amenity lakes owned by Plaintiffs overtopped, causing the lakes to drain. As a result, not only did Plaintiffs lose their lakes and dams, but the city’s drainage system, which had previously discharged into the amenity lakes, also began discharging stormwater directly onto the now-dry lakebeds,” wrote Judge Hunter Murphy for the Appeals Court majority.

Property owners initially filed suit against the city in federal court. A federal judge ruled in favor of Fayetteville in 2021. Property owners followed up with the state case, Devonwood-Loch Lomond Lake Association v. City of Fayetteville, filed in September 2022.

“The complaint alleged that the manner in which the city conducted its stormwater drainage led to the overtopping of the dams and the subsequent dumping of stormwater onto the now-dry lakebeds,” Murphy wrote.

The federal court decision blocks the plaintiffs from pursuing some of their claims at the state level, Murphy explained. That includes a claim for inverse condemnation, which would force the city to pay for taking property from the plaintiffs. Yet claims for negligence, nuisance, and trespass can move forward.

Those claims face a different statute of limitations than others the property owners filed against Fayetteville. “As alleged, the dumping of stormwater onto Plaintiffs’ dry lakebeds is a discrete instance of negligence, and it necessarily arose at the time of and subsequent to the dams overtopping, emptying the lakes,” Murphy wrote. “Unlike inverse condemnation, negligence is subject to a three-year — not two-year — statute of limitations.”

“[G]overnmental immunity did not bar this claim,” Murphy added. “’Governmental immunity covers only the acts of a municipality or a municipal corporation committed pursuant to its governmental functions. Governmental immunity does not, however, apply when the municipality engages in a proprietary function.’  Under N.C.G.S. § 160A-311, stormwater management is a quintessentially proprietary municipal function.”

“The trial court correctly dismissed all claims arising from the overtopping of the dams themselves due to the federal order’s preclusive effect on the issue of causation,” Murphy concluded. “It also correctly dismissed the entirety of Plaintiffs’ inverse condemnation claim. However, Plaintiffs’ claims for damages arising from Defendant’s discharging of stormwater onto Plaintiffs’ dry lakebeds — namely, negligence, negligence per se, nuisance, and trespass — were improperly dismissed.”

Judge April Wood joined Murphy’s decision. Judge John Tyson would have allowed the property owners to pursue the inverse condemnation claim as well.

“While the inverse condemnation claim in Plaintiffs’ complaint alleged their action had been asserted within twenty-four months of the taking of their property, no date was provided,” Tyson wrote in a partial dissent. “Defendant’s … motion was similarly sparse, and it merely provided Plaintiffs’ claim was barred by ‘the statute of limitations.’ … [I]t is ‘not possible to tell from the pleadings alone whether the [alleged taking occurred] within the limitations period.’ The [trial] court erred in dismissing Plaintiff’s inverse condemnation claim under Rule 12(b)(6).”