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Arts project shields city from lawsuit.

Byline: David Donovan

A nuanced legal issue is like a compelling work of artopen to more than one interpretation. In the case of one city's decision to lease an historic building to a local arts guild, the North Carolina Supreme Court saw a city that was acting in a governmental, rather than a proprietary, capacity, potentially immunizing it from a slip-and-fall lawsuit filed by an artist who broke her hip in a tumble down the building's steps.

It's been several decades since there was actually a bank at the historic Citizens National Bank building in downtown Gastonia. In an effort to spruce up its deteriorating downtown, the city purchased the building in 2011 and since 2013 has leased it to the guild to use as a space to show and sell art. But artist Joan Meinck alleges that the city, which remained responsible for the building's upkeep, failed to maintain its exit in a safe condition, causing her to fall while she was carrying away some large pictures.

In 2016 Gaston County Superior Court Judge Lisa Bell granted the city's motion to dismiss Meinck's lawsuit based on a theory of sovereign immunity, but the North Carolina Court of Appeals unanimously reversed the ruling the following year. Judge John Tyson, writing for the court, said the defense did not apply because the city, which collected substantial revenues from its contract with the guild, was engaging in a proprietary functionone that is chiefly commercial or for private advantage, as opposed to a governmental function performed for the public good.

But in an Oct. 26 decision, the Supreme Court, also unanimously, reversed that decision and remanded the case back to the trial court. It was the first time the court had ever considered the application of governmental immunity to an arrangement like the one Gastonia had with the arts guild.

Justice Robin Hudson wrote in the court's opinion that lawmakers haven't said whether leasing unused city property, as is permitted by law, is generally a governmental or proprietary function. In this case, however, Gastonia was acting pursuant to the state's Urban Redevelopment Law, a more specific statute that permits cities to act in the public interest to redevelop their blighted areas when the private sector has failed to do so.

Gastonia's city manager had testified in a deposition that the city decided to lease the property to nonprofit arts groups because attracting artists to run-down areas had been a crucial kickstarter for successful revitalization efforts elsewhere. Importantly, although the city kept most of the rent collected from artists in the building as a way of defraying its costs, it entered into the lease knowing that it would take a significant loss on the deal.

As a result, Hudson said that while the city was superficially acting as the guild's landlord, which might look like a proprietary function, its primary objective was really to revitalize its flagging downtown. Because the legislature has determined that urban blight cannot be effectively combatted without some engagement by local governments, in this case the city was engaging in a governmental function and thus could invoke governmental immunity.

"Art occupies a unique role in our society and our state," Hudson wrote, noting that the state has a whole department devoted to maximizing citizens' opportunities to enjoy and benefit from the arts. "Defendant's undertaking to promote the arts by bringing individual, local artists into the downtown area furthers these aims, which in turn dovetail with the overall goal of revitalizing the downtown area."

Hudson emphasized that the court was not holding that every urban redevelopment activity is a governmental function, "or even that every lease of historic property to a nonprofit arts group for the purpose of promoting the arts is a governmental function." Urban revitalization activities defy straightforward definition, and such projects could potentially encompass endeavors that might be more commercial in nature. Any inquiry would therefore necessarily be fact-intensive, Hudson wrote.

The court remanded the case back to the Court of Appeals to consider whether the trial court correctly ruled that the city did not waive governmental immunity by purchasing liability insurance.

Martha Raymond Thompson of Stott, Hollowell, Palmer & Windham in Gastonia represented the City of Gastonia. Thompson said that the decision is significant because the issue of governmental functions versus proprietary functions is complex, and this is the first ruling of its kind that discusses the application of governmental immunity in the setting of downtown revitalization.

"I think any municipality that's looking at doing some revitalization efforts and that might wish to exercise governmental immunity for any potentially liability issues would want to look at this case to be sure that the factors that are present in their situation resemble what the city of Gastonia has done," Thompson said.

Thomas Bumgardner of Charlotte represented Meinck. Bumgardner could not be reached for comment on the decision.

The 32-page decision is Meinck v. City of Gastonia (Lawyers Weekly No. 010-082-18). The full text of the opinion is available online at nclawyersweekly.com.

Follow David Donovan on Twitter @NCLWDonovan

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Author:Donovan, David
Publication:North Carolina Lawyers Weekly
Date:Nov 1, 2018
Words:847
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