Summary Judgment Win for Milberg Plaintiffs in Recreation Fees Lawsuit

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November 28, 2022

by Brian Eckert

Milberg Coleman Bryson Phillips Grossman (“Milberg”) attorneys James R. DeMay, J. Hunter Bryson, and W. Mark Cumalander won a $3M+ summary judgment award in a class action lawsuit challenging park development fees charged by the Town of Clayton, North Carolina.

Case Background: North Carolina Law and Recreation Fees

At issue in the case was whether under North Carolina law the Town of Clayton unlawfully charged “recreation fees-in-lieu of land dedication” (“Recreation Fees”) to residential subdivision developers.

The lead plaintiff in the case, Granite Land and Timber LLC, was represented by Milberg on behalf of more than 50 persons and entities that paid Recreation Fees to the Town of Clayton. A Johnston County Superior Court judge certified the class action on June 9, 2022.

N.C.G.S. § 160D-804(d) authorizes a local government to require residential subdevelopers to dedicate or reserve recreation areas serving subdivision residents, or, to pay funds to the town for the purpose of acquiring or developing recreation areas serving subdivision residents. The legislative intent of this statute, per North Carolina case law, is to “somehow secure to the residents of the ‘immediate neighborhood within the subdivision’ the benefit of particular recreation areas.”

There are no genuine issues of material fact that the Town’s Recreation Fees violate the Town’s lawful authority under N.C.G.S. § 160D-804(d).4

Before it grants new development approval, Clayton requires residential subdivisions to dedicate or reserve private lands (e.g., though a homeowners’ association) for recreation areas—such as playgrounds, mini-parks, greenways, and clubhouse and pool amenities—that serve subdivision residents. In addition to this requirement, Clayton also requires developers to either: (a) dedicate land to the town for public recreation areas, or (b) pay the town a Recreation Fee.

Between September 22, 2017 and June 25, 2022, Clayton collected $2,319,875 in Recreation Fees from Class Members. The plaintiffs alleged that these fees were collected illegally per N.C.G.S. § 160D-106. This subsection states that, when a local government charges a development fee for development approval that the law does not specifically authorize, the local government is liable to refund the development fee, plus interest, to the party that paid the fee.

The class claimed that Clayton charged them unlawful Recreation Fees, pursuant to N.C.G.S. § 160D-106, and that they were entitled to a refund of the fees they paid because they were already required to dedicate or reserve recreation/open space for their subdivisions.

Judge Sides With Plaintiffs

Plaintiffs filed a motion for summary judgment in the case that was granted. Superior Court Judge G. Bryan Collins entered judgment against the Town of Clayton in a November 21, 2022 order.

According to Collins, “the Town has charged and collected Recreation Fees in violation of its lawful authority under N.C.G.S. § 160D-804(d) and Plaintiff and Class Members are entitled to the return of their Recreation Fees paid to the Town from September 22, 2017 through the present, plus 6% interest from the date of payment, pursuant to N.C.G.S. § 160D-106.”

The total amount awarded to the plaintiffs, including fees and interest, is more than $3 million.

Milberg’s North Carolina Practice

Milberg’s roots in North Carolina are wide and deep. Our Raleigh office has over 15 attorneys and is led by founding partner Dan Bryson, who has practiced law in North Carolina for more than three decades. We regularly serve as local counsel in a variety of North Carolina matters from our office at 900 W. Morgan Street.

To speak with our North Carolina attorneys, call 866.252.0878 or contact us.