Appeals Court rules suit over off-campus WCU housing can proceed

The North Carolina Court of Appeals will allow the owner of an off-campus student housing complex at Western Carolina University to move forward with its lawsuit against the school.

Owners of The Husk argued that the university breached a contract in 2021 when it opened three new on-campus dorms and planned to require all first- and second-year students to live on campus.

In an unpublished opinion Wednesday, a unanimous Appeals Court panel affirmed a trial judge’s decision allowing plaintiff ZP No. 335 LLC to move forward with its breach of contract claim. The appellate panel threw out another part of the lawsuit alleging “negligent misrepresentation.”

In November 2017, WCU’s Endowment Fund “issued a request for qualifications to create student housing on the Millennial Campus,” Judge Christopher Freeman wrote. “This request bore WCU’s logo and provided that all contracts were subject to WCU’s approval. Then and throughout this case, WCU maintained a policy that required all first-year student undergraduate students to live in on-campus residence halls for ‘two academic years[.]’”

The Husk project started in February 2018, when parent company Zimmer Development submitted a proposal to the Endowment Fund. “Zimmer’s proposal described a student off-campus housing project made up of eight buildings and 496 beds in apartment-style student housing,” Freeman wrote. “After submitting this proposal, Zimmer began communicating with WCU’s Vice Chancellor for Administration and Finance, Michael Byers.”

Byers addressed multiple questions in a June 2018 email. “Zimmer specifically asked, ‘What is the long term plan for on-campus housing requirements at WCU? Currently 2-year freshman and 1-year transfer – any future consideration to modifying this?’ To which Byers replied, ‘No plans to modify. We have never actually required sophomores to live on campus. Although our policy states it, we have released sophomores from this policy each year,’” Freeman wrote.

The plaintiff and WCU reached an agreement in December 2018. Construction was completed in August 2020.

The Husk’s owner “alleged in its pleadings to the trial court that ‘during the 2020–2021 school year, the Husk achieved a 98% occupancy rate,’” Freeman wrote.

“Before the start of the 2021–2022 academic year, WCU opened three new university-owned on-campus residence halls: Water Rock Hall, Shining Rock Hall and Black Rock Hall,” the court opinion continued. “The addition of these new dormitories created roughly 900 beds and were created by WCU ‘for first year student living.’ In September 2021, WCU stated in a Division of Student Affairs email titled ‘Residential Living – Policy 96 Update’ that beginning in the 2022–2023 school year, it would require first and second year students to live on campus.”

“WCU shared its decision to enforce the policy ‘was made with several pieces of information in mind, including a significant drop in the freshman retention rate and impact this can have on a student’s long-term academic success.’ Plaintiff alleged it was first made aware of the Policy change through this email,” Freeman wrote.

The Husk’s owner filed suit in September 2023. A judge denied Western Carolina’s motion to dismiss the case in March 2024.

“In the present case, defendants are state actors and therefore entitled to sovereign immunity,” Freeman wrote. “However, because the parties do not dispute they formed a valid contract, defendants waived sovereign immunity when they entered that contract. Therefore, ‘the doctrine of sovereign immunity will not be a defense to the State,’ and defendants ‘will occupy the same position as any other litigant.’ Accordingly, we affirm the trial court’s order denying defendants’ motion to dismiss as it relates to plaintiff’s breach of contract claim.”

While the plaintiff can pursue the claim that WCU breached its contract, judges threw out the negligent misrepresentation claim. The plaintiff should have taken that claim to a different venue, Freeman explained.

“Since the Tort Claims Act ‘waives the sovereign immunity of the State with respect to suits brought as a result of negligent acts committed by its employees in the course of their employment[,]’ plaintiff’s negligent misrepresentation claim is subject to the Tort Claims Act,” he wrote. “Therefore, plaintiff’s negligent misrepresentation claim was brought in the wrong forum and ‘could only be pursued in the Industrial Commission but not in superior court.’ Because plaintiff did not bring its claim in the proper forum, the trial court erred in denying defendants’ motion to dismiss plaintiff’s negligent misrepresentation claim.”

Chief Judge Chris Dillon and Judge Toby Hampson joined Freeman’s opinion.

Unpublished Appeals Court decisions have limited value as precedents in future disputes.

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