Class Actions Brief Blog

The North Carolina Supreme Court’s recent decision in Empire Contractors, Inc. v. Town of Apex, 923 S.E.2d 516 (N.C. 2025), highlights the importance that individual fact issues can play at the class certification stage, including in cases under the North Carolina Rules of Civil Procedure.

In Empire Contractors, a developer brought a putative class action against the Town of Apex challenging the Town’s collection of recreation fees from developers when they develop land and seeking a refund of paid fees. It also sought a declaration that the fee was unlawful under North Carolina General Statutes section 160D-804(d), which requires that subdivision developers either dedicate recreation areas for residents of the immediate neighborhood within the subdivision or pay a fee to the city or county in which the development is located. The fee must be used by the city or county for acquiring or developing recreation areas serving residents of the subdivision. Finally, the developer sought a declaration that the fee violated the Takings Clause of the North Carolina Constitution because it is not roughly proportional to the costs of any impact of the proposed development on the Town’s parks and recreation facilities.

At the class certification stage, the trial court certified a class of all persons who paid development recreation fees to the Town of Apex dating back to November 2017. In doing so, the trial court determined that the following four issues were common claims that predominated over individualized concerns:

(1) Whether the Recreation Fees violate N.C.G.S. § 160D-804(d) because Class Members dedicate recreation or open space areas in their subdivisions for the benefit of the subdivision residents;

(2) Whether the Recreation Fees violate N.C.G.S. § 160D-804(d) and the Town’s Charter because the amount of the Recreation Fees is not based on the property’s fair market value at the time the initial development application submittal is made to the Town;

(3) Whether the Recreation Fees violate N.C.G.S. § 160D-804(d) because the Fees are not used by the Town to acquire and develop recreation or open space areas in the immediate area of the Class Member’s subdivision, and/or the Fees are not used by the Town for the particular benefit of the Class Member’s subdivision; and

(4) Whether the Recreation Fees are unconstitutional because they are not roughly proportional to the costs of any impact of the proposed development on the Town’s parks and recreation facilities.

On appeal, the North Carolina Supreme Court vacated the trial court’s class certification order. In doing so, the Supreme Court noted that, while an abuse of discretion standard of review generally applies to class certification orders, certain aspects of the trial court’s analysis¬, like the commonality and predominance requirements of class certification, deal with questions of law and are subject to the more stringent de novo standard.

Applying de novo review, the Supreme Court disagreed with the trial court’s conclusion that common issues predominated over individualized ones. The Court determined that to establish liability as to all class members, the trial court would need to consider individual fact-intensive issues such as (1) the fair market value of the developed land; (2) whether the collected fees for each development were roughly proportional to the costs of any impact of the development; and (3) whether the collected funds associated with each development were used to develop recreational or open spaces within the immediate area of the development. The Supreme Court held that these issues would devolve into a series of mini-trials and ultimately “predominate the entire lawsuit.” It remanded the case to the trial court with instructions to evaluate any remaining claims that do not involve individualized fact issues, but cautioned that the developer’s inability to pursue all of its claims in a class action might preclude further class action litigation due to claim-splitting concerns.

The North Carolina Supreme Court’s decision shows the importance that factual considerations can play in the class certification analysis. Even when there are common questions of law, like a challenge to the lawfulness of a statute, a class cannot be certified if a plaintiff cannot establish a defendant’s liability as to each class member without factual and individualized inquiries.