The North Carolina Supreme Court ruled Thursday that a trial court improperly certified a class action challenging recreation fees charged by the Town of Apex to developers, finding that individualized issues would overshadow common legal questions.
In *Empire Contractors, Inc. v. Town of Apex*, the high court addressed whether developers could pursue class-wide declaratory relief against municipal recreation fees that served as substitutes for dedicating parkland in new subdivisions. Justice Dietz wrote for the court in the case, which was heard Sept. 16 and decided Dec. 12.
The dispute centers on fees that Apex charged developers for many years as an alternative to requiring them to dedicate portions of their subdivisions for public parks or recreation areas. Under state law, municipalities must use such recreation fees to create or improve public recreation facilities near the developments that generated the payments.
Empire Contractors brought the putative class action seeking a declaration that Apex's recreation fees violated state law and demanding refunds. The company argued that the fees were illegally imposed and collected, making them subject to mandatory reimbursement to developers who paid them.
Wake County Superior Court Judge Gale M. Adams granted Empire's motion for class certification on April 1, 2024, certifying a class that encompassed all of the plaintiff's declaratory relief claims. The class would have included numerous developers who paid recreation fees to Apex over the relevant time period.
Apex appealed the certification order, arguing that common issues among class members did not predominate over individualized questions as required under North Carolina's class action rules. The town contended that a class action was not the superior method for resolving the legal disputes at issue.
The Supreme Court agreed with Apex's position, finding that the certified class failed to meet the predominance requirement for class certification. Justice Dietz explained that individualized issues would predominate over common legal and factual questions in the proposed class.
The court identified several specific problems with the class certification. The declaratory relief claims would require fact-intensive determinations that varied significantly among class members, including assessments of the fair market value of real property and calculations of the costs that particular developments imposed on the municipality.
"Resolving these fact issues would cause the case to 'degenerate into a series of mini-trials' for each class member that would vastly overshadow the common legal issues," the court wrote, citing precedent from *Jackson v. Home Depot U.S.A., Inc.*
The ruling represents a significant procedural victory for Apex, which had faced the prospect of defending against claims from potentially dozens or hundreds of developers in a single consolidated proceeding. By reversing the class certification, the court effectively requires Empire Contractors to pursue its claims individually or seek certification of a more limited class.
The decision does not resolve the underlying legal question of whether Apex's recreation fees violated state law. Empire Contractors remains free to pursue its individual claims against the town, and other developers could file separate lawsuits challenging the fees.
Recreation fees have become increasingly common tools for North Carolina municipalities dealing with rapid growth and the need to provide public amenities for new residential developments. Towns like Apex, which has experienced substantial population growth in recent decades, often use such fees when developers cannot or prefer not to dedicate land within their subdivisions for public use.
The legal framework governing recreation fees requires municipalities to use the collected funds for their intended purpose of creating or improving public recreation facilities that serve the developments generating the fees. Developers and municipal law experts will likely watch closely to see how the underlying legal claims proceed and whether other courts address similar challenges to recreation fee programs.
The case was argued by attorneys from Milberg Coleman Bryson Phillips Grossman, PLLC, representing Empire Contractors, and Hartzog Law Group, LLP, representing the Town of Apex. The appeal reached the Supreme Court under N.C.G.S. § 7A-27(a)(4), which allows direct appeals from certain class certification orders.
While the Supreme Court's decision eliminates the class action vehicle for challenging Apex's recreation fees, the ruling establishes important precedent for evaluating class certification in cases involving municipal fee disputes. The court's emphasis on individualized factual determinations may influence how similar challenges to municipal exactions and impact fees are structured in future litigation.
The decision also highlights the tension between efficiency concerns that favor class treatment of similar claims and the procedural requirements that ensure individual issues do not overwhelm common questions in class litigation. For municipalities facing multiple challenges to fee programs, the ruling may provide some protection against large-scale class actions while still allowing individual developers to pursue their claims.