AGI Associates, LLC v. City of Hickory, NC
773 F.3d 576
4th Cir.2014Background
- AGI Associates (assignee of a bank loan) sued Profile Aviation and the City of Hickory after Profile defaulted on a promissory note secured by leasehold interests at Hickory Regional Airport.
- Profile’s lease permitted Profile to grant security interests, and gave Hickory a right to cure defaults to reclaim leasehold interests free of security interests.
- After Profile defaulted and bankruptcy proceedings, Hickory took possession of the leased premises and refused AGI’s demands for tenant rents.
- AGI sued Hickory for judicial foreclosure (later dismissed as moot), accounting (dismissed as moot), disgorgement of rents, and unjust enrichment; jurisdiction was diversity.
- Hickory moved to dismiss for lack of subject-matter jurisdiction, arguing governmental immunity shields it; the district court denied dismissal, holding Hickory waived immunity by acting in a proprietary capacity.
- The Fourth Circuit affirmed, holding North Carolina law permits waiver of governmental immunity for equitable claims when a municipality acts in a proprietary capacity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a municipality acting in a proprietary capacity waives governmental immunity for equitable claims (e.g., unjust enrichment, disgorgement) | Waiver under the proprietary-function theory extends to any suit arising from proprietary activity, including equitable claims. | Proprietary-capacity waiver applies only to tort and contract claims, not to equitable remedies. | Court held waiver under the proprietary-function theory can extend to equitable claims; district court correctly denied dismissal. |
Key Cases Cited
- Estate of Williams ex rel. Overton v. Pasquotank Cnty. Parks & Recreation Dep’t, 732 S.E.2d 137 (N.C. 2012) (reaffirming governmental vs. proprietary function distinction)
- Data Gen. Corp. v. Cnty. of Durham, 545 S.E.2d 243 (N.C. Ct. App. 2001) (addressing immunity and contract-formalities; did not resolve proprietary-equitable question)
- Viking Utils. Corp. v. Onslow Water & Sewer Auth., 755 S.E.2d 62 (N.C. Ct. App. 2014) (denial of dismissal on equitable claims where proprietary capacity later proved possible)
- Whitfield v. Gilchrist, 497 S.E.2d 412 (N.C. 1998) (overview that municipalities retain immunity unless waived)
- Owen v. City of Independence, 445 U.S. 622 (U.S. 1980) (explaining governmental-proprietary distinction and that municipalities acting proprietarily are treated like private corporations)
- Bowling v. City of Oxford, 148 S.E.2d 624 (N.C. 1966) (municipality engaged in proprietary activity is liable like a private entity)