T&A Amusements, LLC v. McCrory, 251 N.C. App. 904

Plaintiffs Crazie Overstock (licensor) and T and A Amusements (distributor) operate a promotional rewards program (CO Rewards) that converts purchased gift certificates into points used on chance-based reward games and a subsequent dexterity test redeemable for cash.
Local ALE agents and Asheboro police viewed a demonstration, concluded the program resembled illegal electronic sweepstakes/gambling, and threatened criminal prosecution and seizure if operations did not cease.
Plaintiffs sued state and local officials (all in official capacity) seeking declaratory and injunctive relief that the CO Rewards Program is lawful and to enjoin enforcement action; defendants moved to dismiss under Rules 12(b)(1), (2), and (6) asserting sovereign/governmental immunity and lack of a justiciable controversy.
The trial court dismissed the amended complaint on immunity and nonjusticiability grounds; Plaintiffs appealed.
The Court of Appeals reversed, holding sovereign immunity did not bar the suit and that a justiciable controversy existed because threatened enforcement impaired Plaintiffs’ ability to distribute and license the program.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether sovereign immunity bars suits for declaratory/injunctive relief challenging enforcement of state gambling laws	Immunity does not apply where declaratory/injunctive relief is needed to protect property/business rights	Sovereign (and governmental) immunity bars suit absent waiver	Sovereign immunity did not bar Plaintiffs’ claims; trial court erred
Whether Plaintiffs had to plead an express waiver of sovereign immunity	No; immunity is inapplicable here and pleading was sufficient	Plaintiffs failed to plead a specific statutory waiver, so immunity applies	Pleading in ¶89 provided a reasonable forecast of waiver; sufficed for pleadings stage
Whether an actual controversy exists (justiciability) to support declaratory relief	Threats of prosecution and equipment seizure and resulting loss of retail outlets create a live controversy affecting Plaintiffs’ business	No actual prosecution; thus no justiciable controversy	Justiciable controversy existed because threatened enforcement and loss of retail venues impaired Plaintiffs’ business
Whether dismissal under Rule 12(b)(6) was appropriate for nonjusticiability/immunity	Complaint pleaded facts showing injury and need for declaratory relief	Dismissal appropriate on immunity/nonjusticiability grounds	Dismissal was improper; case remanded for further proceedings

N.C. Ins. Guar. Ass’n v. Bd. of Trs. of Guilford Tech. Cmty. Coll., 364 N.C. 102, 691 S.E.2d 694 (2010) (sovereign immunity bars suit against State absent consent)
Charlotte-Mecklenburg Hosp. Auth. v. N.C. Indus. Comm’n, 336 N.C. 200, 443 S.E.2d 716 (1994) (limited exception: injunctive/declaratory relief against agency acting beyond statutory authority that threatens private rights)
Sandhill Amusements, Inc. v. Sheriff of Onslow Cty., 236 N.C. App. 340, 762 S.E.2d 666 (2014) (App. Ct.) (threatened enforcement against sweepstakes kiosks gave rise to declaratory/injunctive claims), rev’d per curiam, 368 N.C. 91, 773 S.E.2d 55 (2015) (not disturbing immunity conclusion)
American Treasures, Inc. v. State, 173 N.C. App. 170, 617 S.E.2d 346 (2005) (threats to retail licensees supported justiciable controversy to protect property/business rights)
Can Am S., LLC v. State, 234 N.C. App. 119, 759 S.E.2d 304 (2014) (plaintiff must reasonably forecast waiver of sovereign immunity in complaint)
Goldston v. State, 361 N.C. 26, 637 S.E.2d 876 (2006) (scope of declaratory relief and actual controversy requirement)
Moore v. City of Creedmoor, 345 N.C. 356, 481 S.E.2d 14 (1997) (official-capacity suits treated as actions against the governmental entity)