Johnson Bros. v. City of Charlotte

Johnson Bros. v. City of Charlotte, 2024 NCBC 11. STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION MECKLENBURG COUNTY 23 CVS00 2076-590 JOHNSON BROS. CORPORATION, A SOUTHLAND COMPANY, Plaintiff, ORDER AND OPINION ON v. DEFENDANT CITY OF CHARLOTTE’S MOTIONS TO DISMISS CITY OF CHARLOTTE, Defendant. JOHNSON BROS. CORPORATION, A SOUTHLAND COMPANY, Third-Party Plaintiff, v. URS CORPORATION, Third-Party Defendant. 1. THIS MATTER is before the Court on Defendant City of Charlotte’s Motions to Dismiss Plaintiff’s Claims (the “Motion”) under Rules 12(b)(1), 12(b)(2), and 12(b)(6) of the North Carolina Rules of Civil Procedure (the “Rules”) in the above- captioned case. 1 2. This case involves a dispute between Johnson Brothers Corporation, a Southland Company (“JBC”), which served as the general contractor on the City of Charlotte’s (the “City”) CityLYNX Gold Line Streetcar extension project (the “Project”), and the City over the City’s alleged breaches of the parties’ contract for 1 (Def. City Charlotte’s Mots. Dismiss, Answer First Am. Verified Compl., and Countercl. [hereinafter, the “Mots.”], ECF No. 3.) construction of the Project. The City denies all liability and seeks to dismiss JBC’s claims on grounds that those claims are barred by sovereign immunity and by the applicable statute of limitations. 3. Having considered the Motion, the materials submitted in support of and in opposition to the Motion, the arguments of counsel at the hearing on the Motion, and other appropriate matters of the record, the Court hereby GRANTS in part and DENIES in part the Motion as set forth below. Cokinos Young, by John P. DiBiasi and Branson Rogers, and Windle Terry Bimbo, by Steele B. Windle, III, for Plaintiff Johnson Bros. Corporation, a Southland Company. Hamilton Stephens Steele + Martin, PLLC, by Rebecca K. Cheney, Bentford E. Martin, and Graham B. Morgan, for Defendant City of Charlotte. Bledsoe, Chief Judge. I. FACTUAL BACKGROUND 4. The Court recites the allegations asserted and the documents referenced in the Amended Complaint that are relevant to the Court’s determination of the Motion. 5. JBC is a Texas corporation with its principal place of business in Grapevine, Texas. 2 The City is a local government existing under the laws of the State of North Carolina. 3 2 (First. Am. Verified Compl. [hereinafter, “Am. Compl.”] ¶ 1, ECF No. 2.) 3 (Am. Compl. ¶ 2.)  6. In October 2016, the City solicited contractors to submit competitive bid proposals for the construction of the Project and published plans and specifications for contractors to rely upon in preparing their bids. 4 JBC submitted a bid proposal to the City and was selected as the Project’s general contractor on 28 November 2016. 5 Thereafter, the City and JBC entered into a contract for construction of the Project (the “Contract”), and JBC began work on the Project after the City issued a Notice to Proceed on 27 February 2017. 6 The Contract included a provision adopting a mandatory mediation process (the “Mediation Process”) and providing that full compliance with the Mediation Process was a precondition to initiating litigation concerning a dispute arising under the Contract. 7 The Contract incorporated plans and specifications that provided the sequence of construction and the scope of work for the Project, including the traffic control measures the contractor could expect (the “Plans and Specifications”). 8 7. The Contract also incorporated portions of the 2012 North Carolina Department of Transportation’s Standard Specifications for Roads and Structures (the “SSRS”). 9 The SSRS is a compilation of standard requirements used by the 4 (Am. Compl. ¶ 6.) 5 (Am. Compl. ¶¶ 7–9.) 6 (Am. Compl. ¶¶ 7–9, 19.) 7(Index Exs. Filed Supp. Def. City Charlotte’s Mots. Ex. 1, Standard Special Provisions Article 2.32 [hereinafter, the “Contract”], ECF Nos. 26.1, 26.2, 26.3.) 8 (Am. Compl. ¶¶ 10, 15.) 9 (Am. Compl. ¶ 12; Contract 79–81.) North Carolina Department of Transportation for construction contracts. 10 At issue here are the SSRS procedures through which a contractor may seek additional compensation under the Contract. 8. The SSRS defines “extra work” as “work found necessary or desirable to fully complete the work as contemplated in the contract for which payment is not provided for by the contract unit or lump sum prices in the original contract.” 11 9. Section 104-7 of the SSRS sets forth the procedure the contractor must follow to be compensated for “extra work”: When the Contractor is required to perform work that is, in his opinion, extra work, he shall notify the Engineer in writing before performing such work. The Engineer will investigate and, based upon his determination, one of the following will occur. (A) If the Engineer determines that the affected work is extra work, the Contractor will be notified in writing by the Engineer and compensation will be made in accordance with [Section] 104- 8(A). (B) If the Engineer determines that the work is not extra work, he will notify the Contractor in writing of his determination. If the Contractor upon receipt of the Engineer's written determination intends to file a claim for additional compensation by reason of such work, he shall notify the Engineer in writing of such intent before beginning any of the alleged extra work and in conformance with [Section] 104-8(B). Work performed without prior written consent of the Engineer will be considered incidental to the work of the contract. 12 10 (Index Exs. Filed Supp. Def. City Charlotte’s Mots. Dismiss Ex. 10 [hereinafter, “SSRS”], ECF No. 26.12.) 11 (SSRS Section 101.) 12 (SSRS Section 104-7.)  10. In relevant part, SSRS Section 104-8 provides that when the City’s engineer has determined that the disputed work is not “extra work” and the contractor has submitted a notice of intent to file a claim for additional compensation under Section 104-7, the work is “force account work.” 13 Section 109-4 sets forth specific documentation procedures the contractor must follow in submitting records of force account work (together with the procedures enumerated in Section 104-8, the “Notice and Documentation Requirements”). 14 11. Section 104-3 delineates a similar procedure for contractors to follow in the event that the City’s engineer directs an “alteration in the plans or details of construction that materially changes the character of the work and the cost of performing the work.” The Notice and Documentation Requirements apply to claims made under Section 104-3 as well. 15 12. The SSRS also provides in Section 104-2 that the City may enter into supplemental agreements with the contractor when it is necessary to make amendments to satisfactorily complete the proposed construction or to provide authorized time extensions. 16 13. Finally, the SSRS provides the contractor a right to file a verified claim: If the Contractor fails to receive such settlement as he claims to be entitled to under the terms and provisions of the contract, the 13 (SSRS Section 104-8(B).) 14 (SSRS Section 109-4.) 15 (SSRS Sections 104-3, 104-8, 109-4.) 16 (SSRS Section 104-2.)  Contractor may submit a written and verified claim for such amounts he deems himself or his subcontractor entitled to under the terms and provisions of the contract provided he has complied with the applicable provisions of the contract including, but not limited to, giving written notice of intent to file a claim, keeping and submission of cost records and the initial submission of a written claim within the specified time period. 17 14. JBC alleges that from almost the outset of the Project, the City made major changes to the contracted scope of work that had been set forth, at least in part, by the Plans and Specifications, including changes to traffic control plans, unanticipated restrictions and limitations on JBC’s working hours, conflicts with other contractors, and unexpected requirements for constructing new storm drain structures, as opposed to planned pre-cast drain structures. 18 15. In February 2018, the City notified JBC that it believed JBC’s progress on the Project was unsatisfactory and threatened to assess liquidated damages. 19 In response, JBC sent a letter to the City in March 2018 asserting that the delays to the Project were the result of factors caused by the City which prevented JBC from completing the work within the anticipated time frame set forth in the Plans and Specifications (the “March 2018 Letter”). 20 These factors included (i) the City’s failure to timely obtain encroachment agreements, (ii) the City’s changes to traffic control plans, (iii) the City’s delayed submittals for precast concrete structures and 17 (SSRS Section 107-24.) 18 (Am. Compl ¶¶ 20–38.) 19 (Am. Compl. ¶ 39.) 20 (Index Exs. Filed Supp. Def. City Charlotte’s Mots. Dismiss Ex. 2, ECF No. 26.4; Pl.’s Br. Opp’n City’s Mots. Dismiss Ex. 4, ECF No. 36.) the inability to use precast concrete structures, (iv) the City’s changes to the storm drain system on Hawthorne Lane, and (v) a gas line conflict at the intersection of 7th Street and Hawthorne Lane. 21 The City responded to the March 2018 letter in August 2018, advising that “no time extension [could] be determined at [that] time.” 22 In October 2018, JBC and the City exchanged letters again—JBC’s letter reiterating that the City-imposed factors had caused JBC’s delay and the City’s letter complaining that JBC’s progress on the Project was unsatisfactory. 23 16. JBC and the City exchanged many letters of a similar nature after October 2018, including until well after the Project was opened for public use on 30 August 2021 (at least until November 2021). 24 Despite the parties’ disagreements, they did not enter into a supplemental agreement or engage in the Mediation Process under the Contract during this time. 17. JBC submitted the first official claim letter on 30 September 2020 (the “September 2020 Claim Letter”). 25 In that letter, JBC sought to “initiate discussions 21 (Index Exs. Filed Supp. Def. City Charlotte’s Mots. Dismiss Ex. 2.) 22 (Pl.’s Br. Opp’n City’s Mots. Dismiss Ex. 5, ECF No. 37.) 23 (Pl.’s Br. Opp’n City’s Mots. Dismiss Ex. 6, 7, ECF Nos. 38, 39; Index Exs. Filed Supp. Def. City Charlotte’s Mots. Dismiss Ex. 4, ECF No. 26.6.) 24 (Am. Compl. ¶¶ 46–59; Pl.’s Br. Opp’n City’s Mot. Dismiss Exs. 10, 23–24, 26–27, ECF Nos. 42, 55–56, 58–59; Index Exs. Filed Supp. Def. City Charlotte’s Mots. Dismiss Ex. 5, ECF No. 26.7.) 25(Index Exs. Filed Supp. Def. City Charlotte’s Mots. Dismiss Ex. 7 [hereinafter, the “September 2020 Claim Letter”], ECF No. 26.9; Pl.’s Br. Opp’n City’s Mots. Dismiss Ex. 21, ECF No. 53.) that [would] allow JBC and the City to resolve all outstanding commercial issues.” 26 To this end, JBC listed nine “disruptions” that it claimed impacted the nature and character of the work and resulted in delays, which it titled: (i) “Extra-Contractual Traffic Control & Workhour Restrictions,” (ii) “Conflicts with Existing Utilities,” (iii) “Interference by Other Contractors—New Construction,” (iv) “Brick Built Boxes vs. Pre-Cast Storm Drain Structures,” (v) “Design Changes/Plan Revisions,” (vi) “Hawthorne Bridge—Abutment Beam Seat Elevation Discrepancies,” (vii) “Hawthorne Bridge—Deck Elevation,” (viii) “Extra-Contractual Submittal Requirements and Extended Review/Approval,” and (ix) “COVID-19, Social Justice Protests, and Weather.” 27 18. JBC submitted another claim letter on 1 March 2021. This letter updated the September 2020 Claim letter based on the status of the Project as of February 2021. 28 Eight months later, on 2 November 2021, JBC submitted a Preliminary Verified Claim and requested to begin the Mediation Process provided by the Contract. 29 19. Although the City opened the Project for public use on 30 August 2021, the City declined to certify substantial or final completion of the Project at that time and instead issued lists identifying additional work JBC was to complete, including 26 (September 2020 Claim Letter.) 27 (September 2020 Claim Letter.) 28 (Pl.’s Br. Opp’n City’s Mots. Dismiss Ex. 23.) 29 (Am. Compl. ¶ 56; Pl.’s Br. Opp’n City’s Mots. Dismiss Ex. 27.) maintenance “punch lists.” 30 JBC claims that it completed most of these “punch list” items, but the City notified JBC on 4 April 2023 that it considered JBC to be in default for failure to complete all of the items by the Contract’s completion date. 31 20. Almost all of the nearly 70 pay applications JBC submitted for Project work were paid late, some remaining unpaid until at least January 2023. 32 JBC and the City completed a mediation concerning JBC’s claims but reached an impasse on 27 January 2023. 33 II. PROCEDURAL BACKGROUND 21. On 31 January 2023, JBC initiated this action by requesting and obtaining the issuance of a summons and permission from the Court to file its complaint within 20 days thereafter under Rule 3(a). 34 JBC then timely filed its original Complaint on 20 February 2023 35 and thereafter filed its First Amended Complaint (“Amended 30 (Am. Compl. ¶ 59.) At the Hearing, JBC’s counsel represented that for purposes of the Motion, JBC agreed that “substantial completion” occurred on 31 August 2021. (See November 2, 2023 Hr’g Tr. 83:13–15 [hereinafter “Tr.”], ECF No. 88) (“But for purposes of the analysis, Your Honor, we will agree for this analysis substantial completion in that term occurred on August 31, 2021.”). 31 (Am. Compl. ¶ 62.) 32 (Am. Compl. ¶ 58.) 33 (Pl.’s Br. Opp’n City’s Mots. Dismiss Exs. 29, 30, ECF Nos. 61, 62.) 34 (Application and Order Extending Time File Compl., ECF No. 9); see also N.C.R. Civ. P. 3(a) (“A civil action may . . . be commenced by the issuance of a summons when (1) A person makes application to the court stating the nature and purpose of his action and requesting permission to file his complaint within 20 days and (2) The court makes an order stating the nature and purpose of the action and granting the requested permission.”) 35 (Verified Compl., ECF No. 10.) Complaint”) on 12 April 2023. 36 JBC asserted ten claims against the City in the Amended Complaint: (i) breach of contract, (ii) material alteration/fundamental change, (iii) breach of expressed & implied warranties, (iv) breach of the implied covenant of good faith and fair dealing, (v) misrepresentation, (vi) mutual mistake, (vii) violation of the Prompt Payment Act, (viii) unjust enrichment, (ix) quantum meruit, and (x) pass-through claims of subcontractors. 37 22. On 1 June 2023, the City filed the Motion, seeking dismissal of each of JBC’s ten claims. 38 JBC later voluntarily dismissed four of its claims: material alteration/fundamental change, misrepresentation, unjust enrichment, and quantum meruit. 39 23. After full briefing, the Court convened a hearing on the Motion on 2 November 2023, at which all parties were represented by counsel (the “Hearing”). The Motion is now ripe for resolution. 36 (Am. Compl., ECF No. 2.) 37 (Am. Compl. ¶¶ 69–142.) 38 (Mots.) Although the City moved to dismiss JBC’s claim for violation of the Prompt Payment Act, it conceded in its brief supporting the Motion and at the Hearing that this claim should survive the City’s Motion. Accordingly, the Court will deny the Motion to the extent the City seeks dismissal of this claim. (See Def. City Charlotte’s Br. Supp. Mots. Dismiss 2 [hereinafter “City’s Br. Supp.”], ECF No. 29; Tr. 16:04–07.) 39 (Johnson Bros. Corp.’s Notice Dismissal Certain Causes Action Without Prejudice, ECF No. 82.)  III. LEGAL STANDARD 24. The City brings the Motion under Rules 12(b)(1), 12(b)(2), and 12(b)(6), 40 and, as noted above, seeks dismissal of JBC’s claims based on sovereign immunity. 41 In North Carolina, the appropriate rule for consideration of a motion to dismiss on the grounds of sovereign immunity is somewhat unsettled. See, e.g., Battle Ridge Cos. v. N.C. Dep’t Transp., 161 N.C. App. 156, 157 (2003) (“Our courts have held that the defense of sovereign immunity is a Rule 12(b)(1) defense. Our courts have also held that the defense of sovereign immunity is a matter of personal jurisdiction that would fall under Rule 12(b)(2)[.]” (internal citation omitted)); Farmer v. Troy Univ., 382 N.C. 366, 369–70 (2022) (reviewing a motion to dismiss on the grounds of sovereign immunity made under 12(b)(6)). Our Court of Appeals, however, recently determined that “[issues of sovereign immunity] should be classified as [issues] of personal jurisdiction under Rule 12(b)(2).” Torres v. City of Raleigh, 288 N.C. App. 617, 620 (2023). Accordingly, the Court will construe the Motion for dismissal on sovereign immunity grounds as an issue of personal jurisdiction under Rule 12(b)(2) and apply the appropriate standard of review for motions under that Rule. 25. “The standard of review to be applied by a trial court in deciding a motion under Rule 12(b)(2) depends upon the procedural context confronting the court.” Id. 40 (See Mots.; City’s Br. Supp.19.) 41 (City’s Br. Supp. 23–34; see also Mots. 2.) (quoting Banc of Am. Sec., LLC v. Evergreen Int’l Aviation, Inc., 169 N.C. App. 690, 693 (2005)). When neither party submits evidence, the allegations of the complaint must disclose jurisdiction although the particulars of jurisdiction need not be alleged. The trial judge must decide whether the complaint contains allegations that, if taken as true, set forth a sufficient basis for the court’s exercise of personal jurisdiction. If the defendant supplements his motion to dismiss with an affidavit or other supporting evidence, the allegations in the complaint can no longer be taken as true or controlling and plaintiff cannot rest on the allegations of the complaint. In this circumstance, in order to determine whether there is evidence to support an exercise of personal jurisdiction, the court then considers (1) any allegations in the complaint that are not controverted by the defendant’s affidavit and (2) all facts in the affidavit (which are uncontroverted because of the plaintiff’s failure to offer evidence.) Parker v. Town of Erwin, 243 N.C. App. 84, 96 (2015) (cleaned up) (quoting Banc of Am. Sec., LLC, 169 N.C. App. at 693–94). 26. When “the parties each submit[ ] affidavits, depositions, and other documentary evidence to the trial court for consideration as to whether it ha[s] personal jurisdiction[,]” the Court “ha[s] the responsibility of acting as a fact-finder, and [is] responsible for determining the weight and sufficiency of the evidence.” Id. at 99 (cleaned up). “In such circumstances . . . a plaintiff then has the ultimate burden of proving jurisdiction rather than the initial burden of establishing prima facie that jurisdiction was proper.” Id. at 97 (cleaned up). 27. The City also seeks dismissal of all claims apart from JBC’s claim for violation of the Prompt Payment Act under Rule 12(b)(6) on the ground that they are barred by the applicable statute of limitations. When deciding whether to dismiss for failure to state a claim under Rule 12(b)(6), the Court considers “whether the allegations of the complaint, if treated as true, are sufficient to state a claim upon which relief can be granted under some legal theory.” Corwin v. Brit. Am. Tobacco, PLC, 371 N.C. 605, 615 (2018) (quoting CommScope Credit Union v. Butler & Burke, LLP, 369 N.C. 48, 51 (2016)). 28. “[D]ismissal pursuant to Rule 12(b)(6) is proper when ‘(1) the complaint on its face reveals that no law supports the plaintiff’s claim; (2) the complaint on its face reveals the absence of facts sufficient to make a good claim; or (3) the complaint discloses some fact that necessarily defeats the plaintiff’s claim.’ ” Corwin, 371 N.C. at 615 (quoting Wood v. Guilford County, 355 N.C. 161, 166 (2002)). 29. Under Rule 12(b)(6), “the trial court is to construe the pleading liberally and in the light most favorable to the plaintiff, taking as true and admitted all well- pleaded factual allegations contained within the complaint.” Donovan v. Fiumara, 114 N.C. App. 524, 526 (1994) (cleaned up); see also, e.g., Sykes v. Health Network Sols., Inc., 372 N.C. 326, 332 (2019) (recognizing that, under Rule 12(b)(6), the allegations of the complaint should be “view[ed] as true and in the light most favorable to the non-moving party”) (cleaned up). 30. When considering a motion to dismiss under Rule 12(b)(6), a court “may properly consider documents which are the subject of a plaintiff’s complaint and to which the complaint specifically refers even though they are presented by the defendant.” Oberlin Cap., L.P. v. Slavin, 147 N.C. App. 52, 60 (2001); see, e.g., Deluca v. River Bluff Holdings II, LLC, 2015 NCBC LEXIS 12, at *8 (N.C. Super. Ct. Jan. 28, 2015) (stating that under Rule 12(b)(6), “a trial court may properly consider a contract that is the subject matter of the complaint, even if the plaintiff did not attach it to the complaint[ ]”). IV. ANALYSIS A. Sovereign Immunity 31. The Court addresses the City’s sovereign immunity defense on a claim-by- claim basis. 1. Breach of Contract and Pass-Through Claims 32. “As a general rule, under the doctrine of sovereign immunity, the State is immune from suit absent waiver of immunity.” Wray v. City of Greensboro, 370 N.C. 41, 47 (2017) (cleaned up). “Governmental immunity is that portion of the State’s sovereign immunity which extends to local governments.” Id. “Although the State’s sovereign immunity applies to both its governmental and proprietary functions, the more limited governmental immunity covers only the acts of a municipality or a municipal corporation committed pursuant to its governmental functions.” Providence Volunteer Fire Dep’t, Inc. v. Town of Weddington, 382 N.C. 199, 211–12 (2022) (cleaned up). a. Governmental Activity 33. The City asserts that the acts which gave rise to JBC’s claims—the extension of an operating streetcar system—were committed pursuant to the City’s governmental function. 42 JBC relies upon the Court of Appeals’ decision in Town of Sandy Creek v. E. Coast Contracting, Inc., 226 N.C. App. 576 (2013), to contend in opposition that the City’s acts in contracting for the construction of the streetcar system were proprietary functions because “a local governmental unit acts in a proprietary function when it contracts with engineering and construction companies, regardless of whether the project under construction will be a governmental function once it is completed.” 43 34. Both the City and JBC have submitted affidavits and documentary evidence in support of and in opposition to the Motion. 44 As a result, the Court must determine the weight and sufficiency of that evidence. See Parker, 243 N.C. App. at 99. Accordingly, the Court hereby enters the following findings of fact and conclusions of law on whether the City’s acts giving rise to JBC’s claims were committed pursuant to the City’s governmental function or its proprietary function. 42 (City’s Br. Supp. 21–23.) 43 (See Pl. Johnson Bros. Corporation, a Southland Company’s Br. Opp’n City of Charlotte’s Mots. Dismiss 13 [hereinafter, “JBC’s Br. Opp’n”] (quoting Town of Sandy Creek, 226 N.C. App. at 581–82), ECF No. 30.) 44 (See Aff. Kelly Ridall Goforth Supp. Def.’s Mots. Dismiss, dated Aug. 29, 2023 [hereinafter, “Goforth Aff.”], ECF No. 27; Aff. Imad Mohammed Supp. Pl.’s Br. Opp’n City’s Mots. Dismiss, dated Sept. 20, 2023 [hereinafter, “Mohammed Aff.”], ECF No. 31.) In his affidavit, Mohammed lists 26 exhibits and asserts that they are “true and correct copies of project correspondence between JBC and [the City.]” (Mohammed Aff. ¶ 3.) The documents to which Mohammed refers are attached as exhibits to JBC’s brief in opposition to the Motion. (See Pl.’s Johnson Bros. Corporation, a Southland Company’s Br. Opp’n Def. City of Charlotte’s Mots. Dismiss Exs. 3–29, ECF Nos. 35–62.)  FINDINGS OF FACT 45 35. Public transportation in Charlotte, North Carolina is provided by the Charlotte Area Transit System and all public transportation assets are owned by the City. 46 The CityLYNX Gold Line Streetcar (the “Gold Line”) is a streetcar system that is being implemented in Charlotte in phases as a part of the Charlotte Area Transit System’s public transportation plan. 47 The Gold Line opened for service to the public in 2021 and has been free of charge to users since that time. 48 36. Nearly all public transit services in the United States, including buses, light rail, streetcars, and paratransit, are provided by public agencies, and the twenty-two streetcar agencies currently operating across the country are either public transportation authorities, local governments, or non-profit agencies. 49 CONCLUSIONS OF LAW 37. Our Supreme Court has “long held that a ‘governmental’ function is an activity that is discretionary, political, legislative, or public in nature and performed for the public good in behalf of the State rather than for itself.” Estate of Williams ex rel. Overton v. Pasquotank Cnty. Parks & Recreation Dep’t, 366 N.C. 195, 199 (2012). The Supreme Court set forth the following test in Estate of Williams to ascertain 45 Any findings of Fact that are more appropriately deemed Conclusions of Law are incorporated by reference into the Court’s Conclusions of Law. 46 (Goforth Aff. ¶ 6.) 47 (Goforth Aff. ¶¶ 7–8.) 48 (Goforth Aff. ¶ 9.) 49 (Goforth Aff. ¶¶ 4–5.) “whether an action undertaken by a county or municipality is governmental or proprietary in nature[:]” [T]he threshold inquiry in determining whether a function is proprietary or governmental is whether, and to what degree, the legislature has addressed the issue. . . . [W]hen an activity has not been designated as governmental or proprietary by the legislature, that activity is necessarily governmental in nature when it can only be provided by a governmental agency or instrumentality. . . . [W]hen the particular service can be performed both privately and publicly, the inquiry involves consideration of a number of additional factors, of which no single factor is dispositive. Relevant to this inquiry is whether the service is traditionally a service provided by a governmental entity, whether a substantial fee is charged for the service provided, and whether that fee does more than simply cover the operating costs of the service provider. We conclude that consideration of these factors provides the guidance needed to identify the distinction between a governmental and proprietary activity. Id. at 200, 202–203. 38. Turning to the first prong of the Estate of Williams test—the threshold inquiry—it is undisputed that the legislature has not specifically determined whether the construction of an extension of a streetcar system or providing the streetcar system itself reflects a governmental or a proprietary function. Therefore, the Court must turn to the second and third prongs of the Estate of Williams test. Here, the evidence shows that the City does not charge a fee for its streetcar service and that streetcar systems in the United States are typically a component of public transportation provided by public agencies. 50 These “additional factors” as contemplated by the third prong of the Estate of Williams test compel the conclusion 50 (Goforth Aff. ¶¶ 4–5.) that the City’s provision of its streetcar system is a governmental activity. See, e.g., Providence Volunteer Fire Dep’t, Inc., 382 N.C. at 217 (holding that the “additional factors mentioned in Estate of Williams . . . clearly tend[] to suggest that the activities . . . were governmental” where the services a town provided were traditionally provided by the government, either directly or through contracts with private entities, and the town did not charge a fee for the service or make a profit in connection with the service.) JBC does not allege facts or offer evidence to challenge otherwise. 51 39. Further, the Court finds JBC’s reliance on Town of Sandy Creek unavailing. In Town of Sandy Creek, the Court of Appeals divided the governmental entity’s activity between the provision of the public service and the contracting for its construction and determined the latter to be proprietary. 226 N.C. App. at 581–82. The Supreme Court, however, rejected that approach in Providence Volunteer Fire Department, Inc., holding instead that the proper inquiry to determine whether a governmental entity’s act is a governmental function is the three-step test provided by Estate of Williams. The Court stated: [W]e decline [the plaintiff’s] invitation to divide the activity in which the [t]own was engaged into multiple, separate pieces[.] . . . [G]iven that [the town] would need a fire station in order to provide service to the [t]own and given that the transaction reflected in the [contract] set out the manner in which the needed fire station would be provided, we are unable to divorce the provisions of the [contract] from the remainder of the overall transaction between the parties, which was clearly intended to ensure that the residents of the [t]own received fire protection services. 51 (See generally Mohammed Aff.) Providence Volunteer Fire Dep’t, Inc., 382 N.C. at 218. 40. Based on the above, the Court concludes that, because the City’s provision of the streetcar system is a governmental function under the third prong of the Estate of Williams test, the City is, absent waiver, entitled to governmental immunity against JBC’s claims. b. Waiver of Governmental Immunity 41. The Court next considers whether the City has waived its governmental immunity and consented to be sued on JBC’s claims under the Contract. Our Supreme Court has held that “whenever the State of North Carolina, through its authorized officers and agencies, enters into a valid contract, the State implicitly consents to be sued for damages on the contract in the event it breaches the contract . . . [I]n causes of action on contract, . . . the doctrine of sovereign immunity will not be a defense to the State.” Smith v. State, 289 N.C. 303, 320 (1976). “[A] waiver of governmental immunity is implied, and effectively alleged, when the plaintiff pleads a contract claim.” Wray v. City of Greensboro, 370 N.C. 41, 48 (2017). “Thus, an allegation of a valid contract is an allegation of waiver of governmental immunity.” Id. 42. The City contends that, since the Contract requires that the contractor comply with the Notice and Documentation Requirements to receive additional compensation above the contract price, JBC’s failure to satisfy the Notice and Documentation Requirements for each component of its breach of contract claim bars JBC’s claim under governmental immunity. 52 For the same reason, the City argues that the pass-through claims of JBC’s subcontractors should be dismissed. Like with JBC’s contract claim, the City argues that the SSRS conditions subcontractor recovery on compliance with the same notice and documentation procedure, which the City contends JBC did not follow here. 53 43. In response, JBC argues that it is inappropriate for the Court to consider whether JBC has complied with the contractual procedures for recovery at this stage of the litigation because the Court is not to consider the merits of a claim when addressing the applicability of sovereign immunity. 54 JBC contends that the inquiry into sovereign immunity at this stage is determined solely by whether a plaintiff has pleaded the existence of a valid contract with the City. 55 The Court agrees with JBC. 44. The general rule, as announced in Smith v. State, is that “that whenever the State of North Carolina, through its authorized officers and agencies, enters into a valid contract, the State implicitly consents to be sued for damages on the contract in the event it breaches the contract.” 289 N.C. at 320. Further, our Court of Appeals has clarified that “consistent with the concept of notice pleading, a complaint need only allege facts that, if taken as true, are sufficient to establish a waiver by the State of sovereign immunity.” Can Am S., LLC v. State, 234 N.C. App. 119, 126 (2014) 52 (City’s Br. Supp. 24–30.) 53 (City’s Br. Supp. 33–34.) 54 (JBC’s Br. Opp’n 12–13.) 55 (JBC’s Br Opp’n 12.) (quoting Fabrikant v. Currituck County, 174 N.C. App 30, 38 (2005)). To meet this burden, a plaintiff need only “plead[ ] with particularity the circumstances surrounding their entry into [ ] valid contracts with [the State.]” Can Am S., LLC, 234 N.C. App. at 126; see also Wray, 370 N.C. at 50 (holding that plaintiff’s allegations that the defendant City of Greensboro failed to honor its contractual obligations to plaintiff were sufficient to establish wavier of governmental immunity “[i]n light of the low bar for notice pleading . . . as well as the waiver of governmental immunity that is inferred from the pleading of a contract claim.”) 45. In Can Am South, LLC, the State argued that the plaintiff could not establish waiver of sovereign immunity because the State did not breach the contracts at issue. 234 N.C. App. at 126. The court, however, rejected this argument, stating that “[courts] are not to consider the merits of a claim when addressing the applicability of sovereign immunity as a potential defense to liability.” Id. at 127. The court then explained the following about the rule announced in Smith: [A]ll applicable caselaw leads us to conclude that the State waives its sovereign immunity when it enters into a contract with a private party, not when it engages in conduct that may or may not constitute a breach[.] It is plain to us that the phrases “in the event it breaches the contract” and “if it breaches that contract” in [Smith and its progeny] refer to the events that would typically trigger a suit against the State. They do not mean that the State only waives its sovereign immunity “in the event it breaches the contract” and “if it breaches that contract.” To hold otherwise would require a plaintiff to definitively establish its entire cause of action against the State in its complaint without the opportunity to conduct discovery, a result that was clearly unintended by the Smith Court when it adopted the doctrine of implied waiver of sovereign immunity in this context. Id. at 127 (emphasis in original).  46. The City contends that inquiry into JBC’s compliance with the Notice and Documentation Requirements is not an inquiry into the merits of JBC’s claim. Rather, the City posits that an inquiry into the merits of JBC’s claim would focus on whether the City engaged in the conduct JBC alleges constituted a breach of the Contract, i.e. whether the City changed the traffic control plans, whether the City obstructed JBC’s progress, etc. 56 This argument, however, is unpersuasive because determining compliance with conditions precedent (i.e., JBC’s compliance with the Notice and Documentation Requirements) is a component of determining breach, which is therefore an inquiry into the merits of JBC’s claim. For this reason, the Court concludes that Smith precludes the Court from considering whether JBC complied with the Notice and Documentation Requirements in determining whether the City has waived sovereign immunity on the current Motion. 47. Based on the above, the Court concludes that the City’s entry into the Contract waived its governmental immunity to permit JBC’s assertion of its breach of contract claim and the pass-through claims of its subcontractors. The City’s Motion seeking dismissal of these claims on sovereign immunity grounds must therefore be denied. 57 56 (Tr. 23:20–24:08.) 57 The Court notes that the parties devoted significant portions of their briefs, (see JBC’s Br. Opp’n 13–15; City’s Reply Br. Supp. Mots. Dismiss [hereinafter, “City’s Reply Br.”] 8–11, ECF No. 67), and significant argument at the Hearing on whether the Notice and Documentation Requirements apply to JBC’s Contract-based claims and whether the Amended Complaint and its referenced documents establish that JBC complied with those Requirements. Since the Court has determined that JBC’s allegations are sufficient to plead waiver of sovereign immunity for claims arising from the Contract, the Court does not reach these arguments on this Motion.  2. Breach of Warranty 48. The City also seeks dismissal of JBC’s claim for breach of warranty on sovereign immunity grounds. 58 The Court finds the City’s argument without merit. 49. Our Court of Appeals has recognized that plans and specifications published in accord with the SSRS constitute “positive representations upon which a contractor is justified in relying” and that a governmental agency “which furnishes inaccurate information as a basis for bids may be liable on a breach of warranty theory[.]” Battle Ridge Cos., 161 N.C. App. at 160 (quoting Lowder, Inc. v. Highway Comm’n, 26 N.C. App. 622, 638 (1975)). “[A] claim for relief based upon a breach of an implied warranty of plans and specifications arises under the contract and, if sufficiently pled, will withstand a [ ] motion to dismiss on grounds of immunity.” Battle Ridge Cos., 161 N.C. App. at 160. 50. North Carolina has adopted the general rule that “a construction contractor who has followed plans and specifications furnished by the owner, or his architect or engineer, will not be responsible for consequences of defects in those plans or specifications[ ]” because “there is an implied warranty by the owner that the plans and specifications are suitable for the particular purpose, and that if they are complied with[,] the com