Poyner Spruill LLP

On March 2, 2021, the North Carolina Court of Appeals ruled in Farmer v. Troy University that an Alabama university, which was operating an office in North Carolina was entitled to sovereign immunity and was therefore immune from suit, even if the lawsuit against it was filed in North Carolina.  Sovereign immunity is typically available as a defense to a state against claims seeking a civil remedy, such as monetary damages.  This is similar, but different from governmental immunity, which is typically a defense available to municipalities and counties in North Carolina.  Another critical distinction is that sovereign immunity applies to claims relating to both governmental and proprietary functions, while governmental immunity generally only applies in North Carolina to governmental functions.  A governmental function is one only a government can exercise, such as law enforcement, voting and issuing building permits.  A proprietary function is one that a government or a private party can exercise, such as providing utilities.  In this case, even though education can be provided by the state and also by private parties, sovereign immunity was asserted as a defense by Troy, a member of the State of Alabama’s university system because sovereign immunity applies to all functions of state government.  The question is whether it would apply as a defense to an Alabama state university being sued not in an Alabama state court, but in a North Carolina state court. 

By way of background, Farmer worked in Fayetteville, NC at a recruiting office for Troy University, part of Alabama’s state university system.  Farmer claimed two of his colleagues sexually harassed him and that upon reporting the inappropriate conduct to officials at Troy, Farmer was subject to retaliation and termination of his employment.  Farmer sued Troy (in Cumberland County Superior Court) alleging claims of wrongful discharge and negligent retention and supervision.  Farmer also asserted claims against Troy and his two colleagues (as agents and employees of Troy) for intentional infliction of emotional distress, tortious interference with a contract, and various violations of his rights under the North Carolina State Constitution. 

The Cumberland County Superior Court granted Defendants’ motion to dismiss citing the recent U.S. Supreme Court decision in Franchise Tax Board of California v. Hyatt (issued May 13, 2019), which held that states retain their sovereign immunity from private suits brought in the courts of other states.  Farmer appealed the dismissal of his case to the North Carolina Court of Appeals, which rejected his arguments that sovereign immunity didn’t apply and that Troy waived immunity by registering as a nonprofit corporation in North Carolina.  The North Carolina Court of Appeals further rejected Farmer’s argument that Hyatt did not apply retrospectively, given North Carolina’s adherence to the Blackstonian Doctrine (stating that as a general rule, a decision of a court of supreme jurisdiction overruling a former decision is retrospective in its operation). 

The unanimous panel affirmed the dismissal of the case, stating that “as an arm of the State of Alabama, Troy University is immune from suit under the doctrine of sovereign immunity,” which the Court noted applied to both proprietary and governmental functions, absent an express waiver.  Moreover, because Farmer sued the individual defendants in their official capacity, those claims were also against the state and subject to dismissal based on sovereign immunity.

What this means for state institutions and employees who are haled involuntarily into the courts of other states, is that sovereign immunity may serve as a bar to suit, but litigants should prepare to address the sovereign immunity defense as it pertains to the institution itself and the employee tortfeasors in their individual or official capacities.  Litigants should also prepare to address the applicable state’s tort claims act.  Given the COVID-19 pandemic and the increase of individuals working remotely, state institutions that have employees operating outside of their typical state boundaries may confront the arguments made in Farmer and Hyatt and should continue to monitor subsequent legal developments.