Justice warns town against ‘constitutionally suspect’ recreation fees

The North Carolina Supreme Court delivered a recent legal victory to a Wake County town. But one justice’s commentary suggests the win could be short-lived.

His concurring opinion labeled the town’s actions “constitutionally suspect.”

All seven justices backed a Dec. 12 opinion favoring Apex in its court battle with developer Empire Contractors.

Empire filed suit against the town in May 2023. The complaint challenged Apex’s requirement that Empire pay $64,000 unless it dedicated land for recreation in its 20-lot, 3.5-acre development. Empire seeks a refund.

Nearly a year after the developer filed suit, a trial judge granted a class action in the case. The class would cover other developers who paid Apex’s recreation fee.

The state Supreme Court’s recent decision threw out the class. Justices agreed that issues unique to individual fee payers “predominate over the common issues of law and fact,” Justice Richard Dietz wrote. Addressing specific issues for each developer would cause the case to “degenerate into a series of mini-trials.”

Now a trial judge must revisit whether the dispute can proceed as a class-action suit.

In the meantime, Justice Phil Berger Jr. issued a warning to Apex within a separate two-page opinion.

Berger sought “to highlight the constitutionally suspect nature of the town’s collection and management of the recreation fees at issue,” he wrote.

The suit alleged that Apex collected fees without using them for their stated purpose.

“Empire’s allegations that the recreation fees have been commingled with general town revenue and have not been used to develop recreation spaces near the subdivisions raise threats to this State’s constitutional protections for economic liberty,” Berger wrote.

His concurring opinion reminded readers of North Carolina’s protection — in Article I, Section 1 of the state constitution — of people’s “enjoyment of the fruits of their own labor.”

“The fundamental right to property is as old as our state,” Berger explained, citing his own dissent in a 2021 case. “From the very beginnings of our republic we have jealously guarded against the governmental taking of property.”

Looking back even further in history, the concurrence cited Frederic Bastiat’s 1850 work “The Law.” “Indeed, the very ‘mission’ of the law, ‘far from being able to oppress the people, or to plunder their property, even for a philanthropic end, … is to protect the people, and to secure to them the possession of their property.’”

“The town’s recreation fee scheme seems to be at odds with this principle,” Berger warned.

“‘This Court’s duty to protect fundamental rights includes preventing arbitrary government actions that interfere with the right to the fruits of one’s own labor,’” he continued, citing a 2014 state Supreme Court precedent called King v. Town of Chapel Hill.

“And even where the government acts in furtherance of a desirable goal, any state action burdening economic activity must be ‘reasonably necessary to promote the accomplishment of a public good, or to prevent the infliction of a public harm,’” Berger added, citing the high court’s 2024 decision in a dispute pitting state government against Alamance County-based Ace Speedway.

“[E]ven if the asserted purpose for the governmental interference is reasonable, a plaintiff ‘may rebut that assertion with evidence demonstrating that the State’s asserted purpose is not the true one, and instead the State is pursuing a different, unstated purpose,’” the concurrence explained.

“If Empire’s allegations are true, then the town has collected fees from developers under the premise that the money will be used for recreation purposes,” Berger wrote. “The town chose to do this through the fees instead of tax collection. After all, politicians revel in limiting political accountability while delivering with other people’s money.”

“But even if extracting fees to build pickleball courts may be reasonably necessary, hoarding the money is not,” the justice warned. “The town appears to have leveraged a narrow statutory provision as a means for general revenue collection.”

“Such a scheme cannot be a permissible interference with economic liberty, and this is, in reality, legal plunder under the guise of philanthropy. But here, the emperor truly has no pickleball courts,” Berger concluded.

No other justice signed on to Berger’s opinion. It’s not clear whether his colleagues share his concerns about the way Apex has approached its collection and use of recreation fee revenue. Berger’s concurrence does not indicate whether Apex or Empire will ultimately prevail.

Yet Berger sent a message to Apex and other local governments. They must not misuse targeted fees to cover general government expenses. The North Carolina Constitution and precedents from the state’s highest court stand in their way.

Mitch Kokai is senior political analyst for the John Locke Foundation.