State Supreme Court to decide if Apex fee challenge moves forward as class action

The North Carolina Supreme Court will decide in the months ahead whether developers challenging a recreation fee in Apex can move forward with a class-action suit. The town has asked the high court to reverse a trial judge’s decision allowing the class action.

Justices heard oral arguments in the dispute Tuesday afternoon.

Plaintiff Empire Contractors filed suit in March 2023, challenging Apex’s requirement of a $64,000 payment in lieu of dedicating land for recreation in its 20-lot, 3.5-acre development. A trial judge ruled in April 2024 that the case could involve other developers who paid the same type of fee.

“I think everybody’s interests are aligned here,” argued Jim DeMay, Empire’s lawyer. “The interest is the town’s not spending these fees, and they’re not using it for our particular benefit. So everybody is joined at that.”

A state law allowing Apex to charge the fee requires the money to be used for parks and recreation projects in or near the affected subdivision.

“We deposed everybody with the town that knows anything about this issue,” DeMay said. “Every one of them said for each class member, the town has no idea how the fees were spent.”

“Under the town’s own spending rules, their own accounting principles, not a dollar of these fees have been spent on any project,” he added.

Apex’s lawyer responded that state law sets no deadline for the town to spend the fees.

“What they’re saying is you illegally charged us this fee, and we’re entitled to it back, and all of the class members are as well,” said Dan Hartzog. “The statute … doesn’t give us a time frame on which those fees must be spent.”

“Inherently, in parks and recreation planning, it takes some time to plan, purchase, develop a park,” Hartzog continued. “For the plaintiffs to come in here and say, ‘They have violated the statute and never had the authority to charge us in the first place,’ is a premature determination at this point because the money could be spent on a neighborhood park right near their subdivision.”

The trial judge committed multiple “errors of law” that should prompt the state Supreme Court to throw out the case’s class-action status, Hartzog argued.

Apex argued in a February brief that a state law permitted the town to charge the fee.

“To prove that a recreation fee-in-lieu paid as a condition of subdivision approval was unlawful, Plaintiff must show that the fee-in-lieu was beyond the scope of the enabling statute, which includes ‘implied powers … essential to the exercise of those which are expressly conferred,’” Apex’s lawyers wrote.

“It is undisputed that the enabling statute allows Apex to adopt a regulation that ‘… provide[s] for payment of funds to be used to acquire or develop recreation areas serving residents of the development or subdivision or more than one subdivision or development within the immediate area,’” Apex’s brief continued. “The statute contains only one express restriction on the use of the funds by cities: that they ‘shall be used only for the acquisition or development of recreation, park, or open space sites.’”

“Apex has additional authority by local act that allows the Town to ‘us[e] a formula based upon a charge per dwelling unit of the development or subdivision without reference to property tax value,’ so long as the ‘the collection, maintenance, and use of such funds are otherwise consistent with G.S. 160A-372’ and the fee-in-lieu does not ‘exceed the fair market value of the land area that would have otherwise been required to be dedicated,’” Apex’s lawyers wrote.

Beyond the specifics of Empire Contractors’ lawsuit, Apex argues that Superior Court Judge Gale Adams was wrong to conclude that this case could cover other developers.

“The impact of each development will differ based upon many factors, including the number and type of dwelling units, the resources already available in the area of Town where the development is located, or whether the development increases the population of an existing area of Town or extends its boundaries,” Apex’s lawyers wrote. “In another example, the amenities built into the development by the developer may have the potential to mitigate its impact. Analysis of the impact of the development will also require fact-specific discovery and proof for each putative class member. This inquiry is ad hoc and fact- intensive. It is not susceptible to common proof, and the trial court erred in finding that it was a common issue of law or fact shared among the class.”

“There is a common nucleus of operative facts among all class members that underlie each of these issues,” Adams wrote in the order granting the lawsuit class-action status. “Plaintiff’s claim is typical of all other class members as it relates to the general theories of liability set forth in the common issues. The Court concludes that a ‘class’ exists in this action and that common issues of law and fact predominate over any individual issues.”