TOWN OF LELAND, NORTH CAROLINA, )

and H2GO BRUNSWICK REGIONAL )

WATER & SEWER, )
Plaintiffs, )
vs. )
TOWN OF BELVILLE, NORTH CAROLINA, )
Defendant. )
_________________________________)
TOWN OF LELAND, NORTH CAROLINA, )
Plaintiff and Cross- )
Claim Plaintiff )
vs. ) ORDER ALLOWING
TOWN OF BELVILLE, NORTH CAROLINA, ) JOINT MOTION
Defendant, ) MODIFYING JULY 12, 2019
and ) ORDER
H2GO BRUNSWICK REGIONAL )
WATER AND SEWER, )
Cross-claim )
Defendant. )
_________________________________ )
INTERLOCAL RISK FINANCING FUND OF )
NORTH CAROLINA, )
Intervenor. )
_________________________________)

This matter came on before the court for hearing on April 30, 2020 by

conference call with the consent of all parties, properly noticed, on a joint written

motion of the plaintiff H2GO and the defendant Town of Belville to modify the July

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12, 2019 Order entered by the court. In that order the court entered a permanent

injunction, partial final judgment but stayed the order pending appeal of the court’s

order entered on April 22, 2019.

A summary of the relevant background is as follows:

1. On April 5, 2018 the Town of Leland and H2GO Brunswick Regional Water & Sewer

filed their First Amended Complaint for Declaratory and Injunctive Relief.

2. In the first eight causes of action Leland and H2GO asked the court to (1) declare

that the challenged resolutions, putative transfer and putative agreements

unlawful, void, and of no effect; (2) maintain the Preliminary Injunction entered

by the Honorable Thomas H. Lock on December 28, 2017; (3) grant permanent

injunctive relief including mandatory injunctive relief; (4) direct that the public

reflect that H2GO is the lawful owner of all assets and debts involved in the

putative transfer and putative agreements; and (5) assess and tax Belville with

plaintiff’s attorney fees and litigation expenses.

3. The Preliminary Injunction provided generally and in part that: (1) Belville would

retain title and ownership of the real and personal property of the water and sewer

systems and would not be permitted to transfer or dispose of those assets; (2)

H2GO would remain a body politic and corporate and provide water and sewer

services to its customers; (3) the November 28, 2017 Agreement for the

Operation and Maintenance of Water and Sewer Systems would remain

indefinitely in effect; (4) some of the terms of the operating agreement which

were specifically listed were deemed inoperable; (5) H2GO and Belville would not

permit a default of any bond obligations; (6) H2GO and Belville would not permit

a default of any contractual obligations incurred by H2GO, and would pay all

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 contractual indebtedness; (7) H2GO and Belville would not seek approval from

the North Carolina Local Government Commission or H2GO bondholders for

transfer of assets or obligations; and (8) H2GO and Belville were enjoined from

proceeding with the construction of the RO Plant.

4. In an order entered on January 3, 2019 the court stayed Leland’s claim against

Belville and H2GO for alleged violations of the Open Meetings Law. This stay was

entered pending disposition of the remaining claims in which Leland reserved the

right to proceed if it was unsuccessful on the remaining claims unaffected by this

stay.

5. The April 22, 2019 order declared that: (a) the challenged Resolution of the

Brunswick Regional Water and Sewer H2GO, the Agreement to Convey Water and

Sewer Systems, and the Assignment and Bill of Sale and Special Warranty Deed

were unlawful, void and of no effect; (b) the preliminary injunction previously

entered by the Court on December 26, 2017 would remain in full effect; (c) a

permanent mandatory injunction would be entered by the court consistent with

and in support of the rulings of the court which would require the public records

to state that H2GO is the lawful owner of all assets and debts described in the

specialty warranty deed and the assignment and bill of sale; and (d) the previous

order staying any consideration of the open meetings law would remain in effect.

6. On April 30, 2019 Belville filed a notice of appeal of the April 22, 2019 order and

pursuant to Rule 62 moved on May 13, 2019 for an order staying any proceedings

for enforcement of that order or entry of a permanent injunction. In the

alternative, Belville moved for an order staying the effectiveness or enforcement

of that injunction during the appeal. Belville was amenable to keeping the

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 preliminary injunction in place throughout their appeal. It conceded that the

preliminary injunction had been in effect for seventeen months, “during which

time the status quo has been effectively maintained and that operation of H2GO’s

water and sewer system has proceeded with[out] incident or impediment.”

7. On May 16, 2019 Leland and H2GO jointly requested the court enter a permanent

injunction or an injunction pending appeal “transferring and requiring the transfer

of the Sanitary District’s property back to the Sanitary District” and such other

relief as the Court deems just and proper. Leland and H2GO in their joint motion

contended that they “are entitled to, and justice requires, entry of a permanent

mandatory injunction returning the Sanitary District’s property back to the

Sanitary District.”

8. In its brief in support of the entry of a permanent injunction, Leland and H2GO

detailed the reasons and basis in support of the entry of a permanent mandatory

injunction “requiring that the property be transferred back to the Sanitary

District.” They argued that there was “no basis to delay entering the permanent

injunction, and justice and equity require its entry as soon as the Court can do

so.” In the alternative, these parties requested that, although not ideal, the Court

should act under Rule 62(c) to transfer possession of the property back to H2GO

while the appeal is pending.

9. On May 28, 2019 Belville filed a brief in support of its motion for an order staying

any proceedings for enforcement of the April 22, 2019 order including the entry

of a permanent injunction, or, in the alternative, during the appeal, for an order

staying the effectiveness or enforcement of the permanent injunction. It argued

that enforcement of the April 22, 2019 order with the entry of a permanent

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 injunction without any stay or limitation pending appeal would upset the status

quo by reverting ownership and control of the transferred assets to H2GO

prejudicing Belville’s substantial rights with respect to the challenged

agreements and transferred assets. Without a stay of the enforcement of the

order, H2GO would be in position to “permanently waste, harm or dispose of

the assets relating to the proposed RO Plant …”

10. After careful consideration of the briefs and the arguments made by the

parties, the court on July 12, 2019 concluded as a matter of law that H2GO

and Leland were irreparably harmed by the November 28, 2017 transaction

which resulted in Belville holding title and maintaining possession of H2GO’s

property. The court further concluded that it was in the public interest and the

interests of justice that a permanent, mandatory injunction be entered, the

terms of which were detailed in the order. The court, pursuant to Rule 54(b),

also certified as immediately appealable the partial final judgment as to the

first ten causes of action asserted in the First Amended Complaint and the

counterclaims of Belville.

11. Also, in the discretion of the court pursuant to Rule 62(c), the court entered a

discretionary stay pending the parties’ appeal leaving the preliminary

injunction order of December 28, 2017 in place during the pendency of those

appeals. The stay previously ordered in the open meeting law claim was not

affected.

12. On July 16, 2019 Belville filed a second notice of appeal from the July 12,

2019 order entering a permanent injunction and a stay of the effectiveness of

that injunction pending appeal, and on August 8, 2019 amended this second

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 notice of appeal to clarify that it was also appealing from the court’s August

20, 2018 interlocutory order which denied Belville’s motions to dismiss Leland’s

claims for lack of standing.

13. On July 26, 2019 Leland gave notice of appeal of those portions of the August

20, 2018 order that dismissed the plaintiffs’ seventh claim for relief and notice

of appeal of those portions of the April 22, 2019 order that denied summary

judgment to the plaintiffs as to fourth, fifth and sixth causes of action contained

within the First Amended Complaint for Declaratory and Injunctive Relief, and

which, in turn, granted summary judgment to the defendant Belville. Leland

also gave notice of appeal to those portions of the July 12, 2019 order which

entered partial final judgment in favor of Belville on the fourth, fifth and sixth

causes of action and any other relief granted Belville.

14. H2GO gave notice of appeal on July 26, 2019 from the August 20, 2018 order

dismissing the plaintiffs’ seventh and eleventh claims for relief and the granting

of summary judgment in the April 22, 2019 order to Belville on H2GO’s fourth,

fifth, sixth, ninth and tenth claims of action. It also appealed that portion of

the July 12, 2019 order which entered partial final judgment in favor of Belville

on the fourth, fifth, sixth, ninth and tenth causes of action.

15. After settlement discussions failed to find a resolution of all of the parties’

claims, Belville and H2GO between themselves entered into a settlement

agreement on February 24, 2020 wherein they agreed that even if Leland does

not withdraw its appeals to the Court of Appeals, (1) they both would accept

and be bound by the terms of the April 22, 2019 order and permanent

injunction and acknowledge that the purported November, 2017 transfer

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 between H2GO and Belville is void and of no legal effect; (2) they both have

withdrawn and dismissed their respective appeals to the Court of Appeals

referenced in paragraphs twelve (12) and fourteen (14) above; (3) if the court

were to agree to modify the permanent injunction Belville will formally transfer

to H2GO by special warranty deed and assignment and bill of sale all of the

property that was putatively transferred to Belville in the voided November,

2017 transactions; and (4) they both agreed to terminate the putative

agreement to convey the water and sewer systems.

16. As a result of this agreement, Belville and H2GO request that the court lift the

stay of the permanent injunction and dissolve the necessity, pending an

appeal, of the directives of the preliminary injunction filed on December 28,

2017. The effect of the withdrawal of the appeals by Belville to the court’s

April 22, 2019 order removes from appellate consideration any basis to reverse

the basis for and the entry of the permanent injunction.

17. Leland opposes the joint motion of Belville and H2GO to lift the stay pending

appeal of the permanent injunction entered on July 12, 2019. On May 17,

2019, it stated its basis for its opposition to the entry of the stay in a lengthy

brief filed with the court. Leland in its prayer for relief contained in the First

Amended Complaint for Declaratory and Injunctive Relief asked that the court

(1) “Declare that the Challenged Resolution, Putative Transfer, and Putative

Agreements are unlawful, void and of no effect;” and (2) “Grant permanent

injunctive relief, including mandatory injunctive relief, to the plaintiffs (H2GO

and Leland)”. Lifting the stay entered on July 12, 2019 to the April 22, 2019

order accomplishes what Leland originally requested and returns all of the

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 assets to H2GO so that it will have the power to fully operate as a body politic

and corporate with respect to the ownership and operational control of the

water and sewer systems and allows it to fully meet the needs of current and

future customers.

18. The court has carefully considered the contentions of the parties raised in their

respective briefs and in arguments made via a hearing by conference call with

the consent of the parties. The court finds that the contentions of Leland

opposing the grant of the joint motion by plaintiff H2GO and defendant Belville

to be without sufficient merit to deny their motion. Further, the court

concludes that it is in the public interest and the interests of justice that a

permanent, mandatory injunction be entered that provides to H2GO the means

to fully operate and govern its water and sewer systems.

Based upon the foregoing the court concludes as matter of law, pursuant to

N.C. Gen. Stat. §1-294 and Rule 62(c) of the North Carolina Rules of Civil

Procedure and in the court’s discretion, that the joint motion of defendant Belville

and plaintiff H2GO be allowed after submission and approval of the plans and

documents that will satisfy the terms and conditions of the permanent injunction.

It is ordered that:

(1) Belville and H2GO will, within 20 days of the filing of this order, submit to the

court its written plan and drafts of the proposed documents that will give full force

and effect to the requirements of the Permanent Mandatory Injunction. All efforts to

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put into effect this permanent mandatory injunction will not be deemed to be a

violation of the preliminary injunction.

(2) Upon approval of the court and the execution of the necessary documents,

the stay of the Permanent Mandatory Injunction entered on July 12, 2019 will be

lifted and the terms of the injunction will be given full force and effect;

(3) The court’s order staying the open meetings law claim entered on January 3,

2019 shall remain in effect. In addition, this order does not impact or affect Leland’s

appellate rights or any party’s future claim for attorney fees and costs.

This the 18th day of May, 2020.

____________________________
Judge Presiding
ND: 4831-2410-8732, v. 1