Commercial Zoning

North Carolina Court of Appeals Addresses Challenge to Legislative Zoning Decision Regarding Location of Pawn Shops

In 2006, the Raleigh City Council began considering a zoning ordinance which would serve to restrict pawn shops to certain locations within the City. At that time, pawn shops were permitted in the Business, Thoroughfare, Industrial-1, Industrial-2, Buffer Commercial, Neighborhood Business, and Shopping Center zoning districts.

On 17 February 2009, after conducting 14 meetings to discuss the issue over approximately two and one-half years, the City Council enacted an ordinance restricting pawn shops to the Business, Thoroughfare, Industrial-1, and Industrial-2 zoning districts; in other words, the new zoning ordinance carved “Buffer Commercial, Neighborhood Business, and Shopping Center” zoning districts from the permitted areas. Those pawn shops already in existence were allowed to remain in their current locations.

On 17 April 2009, plaintiffs — a group of pawn shops and pawn shop owners — filed an application and order extending time to file a complaint with the trial court, which was granted. On 1 May 2009, plaintiffs filed a complaint for declaratory judgment and a motion for preliminary injunction alleging, inter alia, that the new zoning ordinance was arbitrary and capricious. On 1 March 2010, the City filed a motion for summary judgment, which the trial court granted.

On appeal, plaintiffs primarily argue that the trial court erred in granting summary judgment because there were material issues of fact pertaining to the reasonableness of enacting the ordinance and whether the enactment was arbitrary and capricious. Plaintiffs contend that “the ordinance does nothing that the existing ordinances governing pawn shops did not already accomplish.”

In an unpublished decision captioned Beck v. City of Raleigh, the Court of Appeals affirmed the trial court’s decision. The Court noted that “allegations that the City Council’s decision was unreasonable, or arbitrary and capricious, does not create a factual dispute,” which should suffice and should probably end the analysis. Indeed, why not dismiss at the Rule 12(b) stage rather than wait for Rule 56 summary judgment? Nevertheless, citing to Graham v. City of Raleigh, 55 N.C. App. 107, 284 S.E.2d 742 (1981) (“When the action of the legislative body is reviewed by the courts, the latter are not free to substitute their opinion for that of the legislative body so long as there is some plausible basis for the conclusion reached by that body.”), the Beck Court continued with a relatively brief but fulsome recitation of facts in the record to demonstrate “a ‘plausible basis’ for the enactment of the ordinance, and the decision to enact the ordinance was not arbitrary and capricious.” In doing so, the Court made clear that “[t]he plausible basis standard does not require a substantial amount of evidence to support the City Council’s [legislative] determination.”

Lastly, the Court addressed plaintiffs’ contention that the zoning ordinance amounted to “exclusionary zoning,” which occurs when a municipality impermissibly uses its zoning power to prevent a lawful type of land use from locating within its borders. The Court notes that “North Carolina has not specifically recognized a cause of action for exclusionary zoning” but rather such arguments have been addressed in the State “under the Equal Protection Clause.” Finding that plaintiffs’ have not made an equal protection argument, the Beck Court affirms summary judgment on this claim, as well. Again, why hadn’t the parties addressed this claim at the Rule 12(b) stage?

Municipalities are afforded significant discretion in discharging their legislative functions. And according to Beck, it seems that any municipality should meet contentions to the contrary at the Rule 12(b) stage insofar as allegations of arbitrary and capricious behavior are wholly questions of law. For their part, those challenging municipal zoning and other legislative decisions should take care to plead specifically and with a full enough record before the municipality to meet the inevitable dispositive briefing.

Mike Thelen is a lawyer in Womble Carlyle’s Real Estate Litigation practice group. He regularly represents a wide variety of clients in land use and land development issues, from local governments to businesses, in both state and federal venues throughout North Carolina.

Categories: Commercial Zoning

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