KENNETH L. HUNTER; RICK A. DONATHAN; JERRY D. MEDLIN, Plaintiffs - Appellants,
TOWN OF MOCKSVILLE, NORTH CAROLINA; ROBERT W. COOK, in his official capacity as Administrative Chief of Police of the Mocksville Police Department and in his individual capacity; CHRISTINE W. BRALLEY, in her official capacity as Town Manager of the Town of Mocksville and in her individual capacity, Defendants - Appellees, and INTERLOCAL RISK FINANCING FUND OF NC, Intervenor - Appellee. NORTH CAROLINA ADVOCATES FOR JUSTICE; NATIONAL ASSOCIATION OF POLICE ORGANIZATIONS, INC., Amici Supporting Appellants.
Argued: March 22, 2018
from the United States District Court for the Middle District
of North Carolina, at Greensboro. Thomas D. Schroeder, Chief
District Judge. (1:12-cv-00333-TDS-JEP)
Reynolds Michael Elliot, Robert Mauldin Elliot, ELLIOT MORGAN
PARSONAGE, Winston-Salem, North Carolina, for Appellants.
Cathryn MacDonald Little, LITTLE & LITTLE, PLLC, Raleigh,
North Carolina, for Appellee Interlocal Risk Financing Fund
of North Carolina. Patrick Houghton Flanagan, CRANFILL,
SUMNER & HARTZOG, LLP, Charlotte, North Carolina, for
Appellee Town of Mocksville, North Carolina.
M. Benshoff, BROUGH LAW FIRM, PLLC, Chapel Hill, North
Carolina; Philip M. Van Hoy, Stephen J. Dunn, VAN HOY
REUTLINGER ADAMS & DUNN, Charlotte, North Carolina, for
Appellee Town of Mocksville, North Carolina.
Narendra K. Ghosh, Paul E. Smith, PATTERSON HARKAVY LLP,
Chapel Hill, North Carolina, for Amicus North Carolina
Advocates for Justice.
Michael McGuinness, THE MCGUINNESS LAW FIRM, Elizabethtown,
North Carolina; William J. Johnson, NATIONAL ASSOCIATION OF
POLICE ORGANIZATIONS, Alexandria, Virginia, for Amicus
National Association of Police Organizations, Inc.
NIEMEYER, WYNN, and DIAZ, Circuit Judges.
former police officers with the Town of Mocksville Police
Department ("Mocksville PD")-sued Mocksville
Administrative Chief of Police Robert W. Cook
("Cook"), Mocksville Town Manager Christine W.
Bralley ("Bralley"), and the Town of Mocksville
("the Town," and collectively with Cook and
Bralley, "Defendants"), alleging several claims
related to Defendants' termination of Plaintiffs'
employment. At the conclusion of trial, a jury found
Defendants liable to Plaintiffs under both state and federal
law, awarded Plaintiffs approximately $1.4 million in
compensatory damages, and recommended that the district court
further award Plaintiffs approximately $2.6 million in front
series of post-trial rulings, the district court awarded
Plaintiffs substantially less front pay than the jury had
recommended and held that governmental immunity limited the
Town's aggregate liability for damages. Plaintiffs appeal
both rulings, as well as the district court's pre-trial
dismissal of Plaintiffs' First Amendment claims against
reasons that follow, we reverse the district court's
conclusion that the Town's insurance policy covered only
$1 million of the aggregate damages awarded to Plaintiffs. We
also reverse the district court's dismissal of
Plaintiffs' First Amendment claims against the Town. But
we conclude that the district court properly disposed of
Plaintiffs' remaining claims. Accordingly, we affirm in
part, reverse in part, and remand for further proceedings
consistent with this opinion.
Kenneth L. Hunter, Rick A. Donathan, and Jerry D. Medlin
worked at Mocksville PD for several years. Throughout their
tenure with Mocksville PD, Plaintiffs received numerous
awards and commendations. After Cook became Mocksville
PD's Administrative Chief of Police, Plaintiffs developed
concerns about his personal conduct and management of
Mocksville PD. Plaintiffs initially voiced their concerns to
Bralley; however, they noticed no marked improvement in
Cook's behavior thereafter.
December 14, 2011, Plaintiffs used a disposable cell phone to
contact the North Carolina Office of the Governor (the
"Governor's Office") and report what they
viewed as corruption and misconduct within Mocksville PD. The
Governor's Office relayed Plaintiffs' concerns to the
State Bureau of Investigation ("SBI") for further
inquiry. A week later, Plaintiffs noticed a local SBI Agent
at Mocksville PD and subsequently received a call from that
agent on the disposable phone. Plaintiffs did not return the
call and, out of fear of retaliation, disposed of the phone.
Plaintiffs' efforts to remain anonymous, Cook and Bralley
eventually identified Plaintiffs as the anonymous callers.
Thereafter, Cook and Bralley consulted with the Town's
attorney to determine whether they could lawfully terminate
Plaintiffs. After being advised that they could do so
lawfully, Cook and Bralley terminated Plaintiffs from
Mocksville PD on December 29, 2011. Plaintiffs'
termination letters stated that they were fired for myriad
misdeeds, including "[i]nsubordinat[ion],"
"[a]ttitude," and "conduct unbecoming a[n]
[o]fficer." See J.A. 2381, 2415, 2420. However,
prior to Plaintiffs' terminations, none had received any
performance-related discipline, and "[t]heir written
service records were essentially unblemished."
Hunter v. Town of Mocksville, 201 F.Supp.3d 750, 754
(M.D. N.C. 2016). Additionally, this "was the first time
that then-Chief Cook had ever terminated an officer,"
notwithstanding the fact that other officers previously had
engaged in misconduct. Id. at 753.
April 2012, Plaintiffs filed a complaint in the U.S. District
Court for the Middle District of North Carolina against the
Town, Cook, and Bralley. In their complaint, Plaintiffs
alleged that they were (1) terminated in retaliation for
exercising their free speech rights under the First Amendment
of the United States Constitution, in violation of 42 U.S.C.
§ 1983; (2) denied their rights to free speech,
guaranteed by Sections 1 and 14 of Article 1 of the North
Carolina Constitution; and (3) wrongfully discharged against
public policy, in violation of North Carolina state law.
September 2013, the district court granted partial summary
judgment to Defendants on all of Plaintiffs' First
Amendment claims. In a memorandum opinion explaining its
decision, the district court first concluded that qualified
immunity shielded Cook and Bralley from suit. The district
court further concluded that Plaintiffs' terminations
could not fairly be attributed to the Town for purposes of
municipal liability under Section 1983 because Plaintiffs
failed to demonstrate that either Cook or Bralley possessed
"final policymaking authority" to set employment
policy for the Town. Hunter v. Town of Mocksville,
No. 1:12-cv-333, 2013 WL 5726316, at *9-10 (M.D. N.C. Oct.
21, 2013), vacated in part, 2014 WL 881136 (M.D.
N.C. Jan. 22, 2014). And the district court reserved judgment
on the question of whether Plaintiffs could properly pursue
their free speech claims under the North Carolina
Constitution. Id. at *11.
January 2014, the district court reversed its grant of
summary judgment to Cook and Bralley on Plaintiffs' First
Amendment claims, instead concluding that neither defendant
was entitled to qualified immunity. Hunter v. Town of
Mocksville, No. 1:12-cv-333, 2014 WL 881136, at *2 (M.D.
N.C. Jan. 22, 2014). In so doing, the district court relied
on Durham v. Jones, 737 F.3d 291 (4th Cir. 2013),
then a newly issued opinion, in which this Court held that
"it was clearly established in the law of this Circuit .
. . that an employee's speech about serious governmental
misconduct, and certainly not least of all serious misconduct
in a law enforcement agency, is protected," id.
at 303-04 (citation omitted). This Court affirmed the
district court's holding that neither Cook nor Bralley
was entitled to qualified immunity, but concluded that we
lacked subject matter jurisdiction to consider the propriety
of the district court's interlocutory order dismissing
Plaintiffs' First Amendment claims against the Town.
Hunter v. Town of Mocksville, 789 F.3d 389, 400-03
(4th Cir. 2015).
a nine-day trial, a jury returned a verdict for Plaintiffs on
their First Amendment claims against Cook and Bralley, as
well as a verdict for Plaintiffs on their state-law
wrongful-discharge claims against the Town. The jury found
all Defendants liable to Plaintiffs for approximately $1.4
million in compensatory damages, and awarded Plaintiffs an
aggregate total of $60, 000 in punitive damages to be paid
specifically by Cook and Bralley. The jury also returned an
advisory verdict recommending that Defendants pay Plaintiffs
approximately $2.6 million in front pay. Soon thereafter,
Plaintiffs moved for the entry of judgment and equitable
relief in the form of reinstatement or, alternatively, the
jury-recommended front-pay awards.
August 12, 2016, the district court entered judgment on the
verdicts, granting Plaintiffs the compensatory and punitive
damages awarded by the jury. Hunter, 201 F.Supp.3d
at 767. The district court also partially granted
Plaintiffs' requests for equitable relief. In particular,
the district court denied Plaintiffs' requests for
reinstatement but granted Plaintiffs front pay in lieu of
reinstatement. However, the district court's front-pay
award amounted to an aggregate total of approximately $600,
000-roughly one-fourth of the amount recommended by the
jury. Consequently, two plaintiffs- Donathan and
Medlin-moved for the district court to reconsider its grant
of equitable relief in the form of front pay and instead
award them reinstatement.
February 21, 2017, the district court issued several
dispositive rulings. First, the district court addressed
Donathan and Medlin's motion to reconsider its decision
to award front pay in lieu of reinstatement. Upon
reconsideration, the district court upheld its initial
decision to deny reinstatement to Medlin, but granted
Donathan's request for reinstatement to a lieutenant
position at Mocksville PD upon the next available opening.
Hunter v. Town of Mocksville, 237 F.Supp.3d 349,
354-56 (M.D. N.C. 2017).
the district court concluded that the Town enjoyed state-law
governmental immunity from tort claims, like the claims
asserted by Plaintiffs, arising from the actions of the
Town's officers and employees while performing a
governmental function. Id. at 356-57 (citing
Clayton v. Branson, 570 S.E.2d 253, 256-57 ( N.C.
Ct. App. 2002)). The district court further observed that
"[u]nder North Carolina law, the Town waives its
immunity to the extent it has purchased insurance."
Id. at 357 (citing, inter alia, N.C. Gen.
Stat. § 160A-485)). Consequently, because all parties
agreed that the Town maintained some amount of
liability insurance, the district court sought to determine
the extent of the Town's insurance coverage. To that end,
the district court allowed the Town's insurer-Interlocal
Risk Financing Fund of North Carolina
("Interlocal")-to intervene in the proceedings.
Id. at 358. Interlocal argued that the Town
policy's per-claim limit of $1 million limited
Plaintiffs' aggregate recovery against the Town to $1
million. By contrast, Plaintiffs argued that the policy
provided up to $1 million per plaintiff and,
therefore, $3 million in the aggregate. Id. at
district court agreed with Interlocal. Specifically, the
district court analyzed the Town's insurance policy and
concluded that, per the policy's terms, all three
Plaintiffs' claims together constituted one single claim
under the policy-not three separate claims. Therefore, given
the policy's per-claim limit of $1 million, the district
court concluded that the Town had waived its governmental
immunity in the amount of $1 million only. Id. at
the Town's governmental immunity precluded Plaintiffs
from recovering approximately half of their damages from the
Town, Plaintiffs argued that they lacked an "adequate
state remedy" against the Town and thus could seek to
recover against the Town under the North Carolina
Constitution. Id. at 366-67. The district court
disagreed, concluding that Plaintiffs' ability to recover
$1 million in insurance proceeds from the Town constituted an
adequate state remedy. Id. at 367-68. Accordingly,
the district court dismissed Plaintiffs' state
constitutional claims. Id.
March 3, 2017, the district court entered final judgment
against Defendants. Specifically, the district court held
Defendants jointly and severally liable to Plaintiffs for a
total of $1, 990, 544 in compensatory damages and front pay.
The Court also ordered Cook and Bralley each to pay each
Plaintiff $10, 000 in punitive damages. And, notwithstanding
its conclusion that Defendants were jointly and severally
liable for the nearly $2 million in compensatory damages and
front pay, the district court held that "pursuant to
N.C. Gen. Stat. §160-485(c), the maximum liability
of the Town of Mocksville for damages under this Judgment
shall not exceed One Million dollars ($1, 000,
000)." J.A. 2854 (emphasis added). Thus, although
the Town was jointly and severally liable for the
approximately $2 million in damages owed to Plaintiffs, the
Town's governmental immunity shielded it from having to
pay more than $1 million.
noted a timely appeal.
begin with the district court's interpretation of the
coverage limit in the Town's employment-practices
liability insurance policy-a question of law we review de
novo. See Cont'l Cas. Co. v. Amerisure Ins. Co.,
886 F.3d 366, 370 (4th Cir. 2018). As mentioned above, North
Carolina municipalities enjoy governmental immunity from
common-law tort claims arising out of their performance of
governmental functions. Evans v. Hous. Auth. of
Raleigh, 602 S.E.2d 668, 670 ( N.C. 2004). However, a
municipality, like the Town, waives such immunity if and to
the extent it has purchased liability insurance covering
tortious acts. See N.C. Gen. Stat. §
160A-485; Clayton, 570 S.E.2d at 257.
it is undisputed that the Town has purchased such insurance.
The critical inquiry, therefore, is the extent to which the
Town has waived its governmental immunity by virtue of its
purchase of insurance. Plaintiffs argue that the district
court erred when it construed the Town's insurance policy
to cover only $1 million, in aggregate, of Plaintiffs'
damages and front-pay awards. In their view, the Town's
policy covers up to $1 million for each
Plaintiff's claim-for a combined limit of $3 million. The
parties agree that North Carolina law governs the
interpretation of the Town's insurance policy.
Accordingly, we start by reciting the North Carolina law
applicable to the interpretation of insurance contracts.
North Carolina law, "the object of construing an
insurance policy 'is to arrive at the insurance coverage
intended by the parties when the policy was
issued.'" Harleysville Mut. Ins. Co. v. Buzz Off
Insect Shield, LLC, 692 S.E.2d 605, 612 ( N.C. 2010)
(quoting Wachovia Bank & Tr. Co. v. Westchester Fire
Ins. Co, 172 S.E.2d 518, 522 ( N.C. 1970)). With this
principle in mind, when the language contained in a policy is
unambiguous, courts must "enforce the contract as the
parties have made it and may not, under the guise of
interpreting an ambiguous provision, remake the contract and
impose liability upon the company which it did not assume and
for which the policyholder did not pay."
Wachovia, 172 S.E.2d at 522. "If the parties
have defined a term in the agreement, then we must ascribe to
the term the meaning the parties intended."
Harleysville, 692 S.E.2d at 612. Any undefined,
"nontechnical" words in the policy are given a
"meaning consistent with the sense in which they are
used in ordinary speech, unless the context clearly requires
otherwise." Wachovia, 172 S.E.2d at 522.
the language of the policy is ambiguous, courts must resolve
the ambiguity in favor of coverage. Id. "We do
so because the insurance company is the party that selected
the words used." Harleysville, 692 S.E.2d at
612. "An ambiguity exists in a contract when either the
meaning of words or the effect of provisions is uncertain or
capable of several reasonable interpretations."
Register v. White, 599 S.E.2d 549, 553 ( N.C. 2004).
And "[a]n ambiguity can exist when, even though the
words themselves appear clear, the specific facts of the case
create more than one reasonable interpretation of the
contractual provisions." Id. Consequently,
"[i]n interpreting the language of an insurance policy,
courts must examine the policy from the point of view of a
reasonable insured." Id. If a word in the
policy "has more than one meaning in its ordinary usage
and if the context does not indicate clearly the one
intended, it is to be given the meaning most favorable to the
policyholder, or beneficiary." Wachovia, 172
S.E.2d at 522. Additionally, any provisions excluding or
limiting coverage are construed strictly against the
insurance company. Harleysville, 692 S.E.2d at 612.
Town policy's Declarations Page provides the following
limits of insurance:
Each Claim Limit $1, 000, 000
Annual Aggregate Limit for all Claims $3, 000, 000
Deductible (Each Claim) $5, 000
Id. at 2683. Section I of the policy, titled
"Employment Practices Liability Coverage,"
provides: "We will pay those sums that the insured
becomes legally obligated to pay as damages resulting from
'claims' to which this insurance applies, against the
insured by reasons of 'employment wrongful
act(s).'" Id. at 2704. Section VI defines a
"Claim" means a demand received by the insured for
money damages, . . . filing and or service of suit papers or
arbitration proceedings filed against the insured arising out
of "employment wrongful act(s)" to which this
Id. at 2713. And Section VI defines "employment
wrongful act(s)" as, among other things, "actions
involving . . . termination of employment, . . . retaliatory
action, . . . or other employment-related practices,
policies, acts or omissions." Id. The policy
further provides that "[t]he amount we will pay for
damages is limited as described in ...