261 N.C. App. 325
N.C. Ct. App.2018Background
- Cabarrus County Board of Education (Petitioner) challenged the Teachers’ and State Employees’ Retirement System (TSERS) ‘‘cap factor’’ enacted by the General Assembly in 2014 and ‘‘adopted’’ by the TSERS Board, claiming the Board failed to follow the Administrative Procedure Act (APA) rule‑making process.
- Dr. Barry Shepherd, a retiring superintendent, was invoiced $208,405.81 (based on the cap factor) to restore his retirement benefit to its pre‑cap level; Cabarrus paid the amount but sought declaratory relief that the cap factor was invalid and the invoice void.
- The Retirement Systems Division denied the declaratory request; Petitioner sought judicial review and moved for summary judgment in superior court.
- The trial court granted summary judgment for Petitioner, holding the cap factor met the APA definition of a “rule” and thus required adoption under the APA unless exempted.
- The Department appealed, arguing the General Assembly intended the Board to adopt the cap factor by resolution (not APA rulemaking) and that deference should be given to the Division’s interpretation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the TSERS cap factor is a "rule" requiring APA rulemaking | Cap factor is a binding regulation that limits benefits and thus is a rule under the APA; adoption must follow APA procedures | The cap factor is an actuarial recommendation/resolution adopted by the Board (per statutory scheme and Division practice), not an APA rule | The cap factor falls within the APA definition of a rule and must be adopted under APA rulemaking procedures |
| Whether Article 1 / §135-5(a3) implicitly exempts cap factor adoption from the APA | No express statutory exemption; APA applies unless legislature clearly and expressly provides otherwise | The legislature’s phrasing (use of "adopt" and requirement that actuary recommend the factor) shows intent to exclude APA procedures by implication | No implied exemption. Absent express statutory language, APA controls; in pari materia construction favors applying APA unless repugnancy exists |
| Whether agency/board interpretations and historical practice (20 N.C. Admin. Code 02B.0202) control | N/A (Petitioner challenges Board procedure) | Agency practice and Division rule treat actuarial assumptions and recommendations as adopted by Board resolution; court should defer to agency interpretation | Agency interpretation that cap factor is outside APA is erroneous; courts have final duty to construe statutes and deference does not override statutory/APA requirements |
| Remedy: validity of the invoice to Dr. Shepherd | Invoice based on an improperly adopted cap factor is void | Invoice valid because Board properly adopted the cap factor under its procedures | Invoice erroneous because the cap factor was not adopted in compliance with APA; summary judgment for Petitioner affirmed |
Key Cases Cited
- Vass v. Bd. of Trustees of State Emp. Med. Plan, 324 N.C. 402 (N.C. 1989) (legislature must expressly and unequivocally exempt agencies from APA to avoid its requirements)
- Empire Power Co. v. N.C. Dep’t of E.H.N.R., 337 N.C. 569 (N.C. 1994) (organic statutes must be harmonized with the APA; implied repeal or amendment of APA is disfavored)
- Bring v. N.C. State Bar, 348 N.C. 655 (N.C. 1998) (where legislature provides a comprehensive, specific statutory rulemaking/hearing process, that scheme can supersede the APA)
- Rogers v. N.C. State Bar, 164 N.C. App. 648 (N.C. Ct. App. 2004) (State Bar’s statutory disciplinary scheme operates outside APA contested‑case procedures where the statute creates a complete alternative process)
- Wells v. Consol. Jud. Ret. Sys. of N.C., 354 N.C. 313 (N.C. 2001) (courts retain the ultimate duty to interpret administrative statutes; agency interpretation is not dispositive)
- Manecke v. Kurtz, 222 N.C. App. 472 (N.C. Ct. App. 2012) (standard of de novo review for summary judgment on appeal)