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North Carolina's highest court has considered whether an association has standing to bring a lawsuit when some, but not all, of its members are adversely impacted by an action.
The State Employees Association of North Carolina ("Association") is a nonprofit corporation representing current and retired employees of the State of North Carolina ("State"). Approximately one-quarter of the Association's members are retired. A pension provided by the State to its employees vests after five years of employment.
The State experienced financial problems in 2000. In order to balance the State's budget, the Governor proposed redirecting some of the pension plan funds to other parts of the budget. The pension funds were created by the State's legislature, with the enacting legislation stating that pension funds may not be "applied, diverted, loaned to, or used by the State, any State agency, State officer, public officer, or public employee." However, the State's Constitution gave the Governor the power to "effect the necessary economies" to avoid the State having a budget shortfall.
The Association filed a lawsuit seeking to stop the State from redirecting the pension funds. The lawsuit sought injunctive relief to prevent the State from transferring these funds, and also alleged that the redirection of funds would amount to an unconstitutional taking of property from the members of the State's retirement system, arguing that the members had a contractual right to receive these funds. The trial court refused to enter injunctive relief prohibiting the State from redirecting the pension funds. The court ruled that the Association lacked "standing" to bring a lawsuit challenging the State's actions, and this ruling was affirmed on appeal. The Association appealed.
The Supreme Court of North Carolina reversed the lower court's rulings. Standing is a judicially-created doctrine which requires that an actual "controversy" exist between the parties involved in the lawsuit. Special standing rules exist for an association bringing a lawsuit on behalf of its members. An association has standing to bring a lawsuit on behalf of its members when: (1) the members had standing to bring the lawsuit on their own; (2) the interests that the association is seeking to protect are related to the association's purpose; and (3) neither the claim asserted nor the relief requested require the participation of individual association members. Interpreting other decisions by North Carolina courts, the lower courts had determined that associational standing occurred only when all members of the association had individual standing to bring the lawsuit. Since not all members of the Association had vested rights in the pension plan, the lower courts had ruled the Association lacked standing to bring the lawsuit and so had dismissed the lawsuit.
One appellate court justice had dissented from the majority opinion. This justice had argued that the majority opinion misunderstood the earlier decisions, and found that it was not required that each member of the association had standing but rather, citing a decision by the Supreme Court of the United States, that "the complaining association or one of its members must suffer some immediate or threatened injury." The Court had further stated that the standing determination should be based on the type of relief being sought, stating that an association will have standing when the relief sought will benefit those members of the association who are suffering harm. Looking at this case, the dissenting judge argued that the Association had standing since the relief sought would benefit members of the Association who had vested pension rights.
The court agreed with the dissenting appellate court justice and reversed the appellate court decision. The court did not issue an opinion, simply adopting the rationale of the dissenting appellate court justice. Thus, the Association had standing to bring a lawsuit to challenge the State's redirection of pension funds and so the case was remanded to the lower courts to consider the allegations made in the Association's lawsuit.
State Employees Ass'n of N. Carolina v. State of N. Carolina, 580 S.E.2d 693 (N.C. 2003), reversing, 573 S.E.2d 525 (N.C. Ct. App. 2002).
Editor's Note: NAR Legal Affairs would like to thank the legal department at the North Carolina Association of REALTORS® for alerting us to this decision.