Retirement: North Carolina seeks recoupment of erroneously paid retirement benefits

Where a woman who erroneously received extra retirement benefits filed suit after the state began recoupment efforts, but each of her claims failed as a matter of law, her suit was dismissed.

Background

For over eight years, North Carolina paid Patsy Talley $857 more in monthly retirement benefits than she was supposed to receive. North Carolina finally realized its mistake, it notified Talley that going forward, her monthly benefits would be reduced to recoup the overpayment. In response, Talley sued. The district court dismissed all her claims.

Ex parte Young

Talley argues her official capacity procedural due process claims fall within the Ex parte Young exception to Eleventh Amendment immunity. But Talley’s primary complaint is she wasn’t provided with sufficient process prior to her benefits being reduced. That alleged failure occurred before she filed her complaint. Thus, it is not ongoing conduct as required by Ex parte Young.

Talley responds that the continued recoupment from each of her monthly pension payments is a “consequence” of the earlier failure to provide pre-deprivation process that is itself an ongoing constitutional violation. But the defendants were not in violation of federal law by the time Talley filed her complaint, if they ever were.

That’s because by that time, the defendants provided the administrative hearing at which she was able to oppose the recoupment. Her dissatisfaction with the outcome of that hearing does not make the hearing deficient, nor does she really argue that it was.

Talley’s only real complaint about the hearing was her inability to raise constitutional issues at the hearing. But the final decision told Talley that she had a right to appeal to the superior court of the county where she resided. She declined to do so. Her decision not to avail herself of the appeals process—through which she could have made her constitutional arguments in state court—does not render the process she received constitutionally deficient.

Individual capacity

Talley also argues that the district court erred in holding that qualified immunity applies to her procedural due process claims against the defendants in their individual capacities. To begin, Talley fails to address the district court’s statements that she did not make substantive arguments on qualified immunity below. Thus, she likely waived her arguments on this point.

Moreover, as the district court below observed, “[r]arely will a state official who simply enforces a presumptively valid state statute thereby lose her immunity from suit.” North Carolina law requires the state to pursue the recoupment of state funds; the state cannot simply forgive the repayment of overpaid funds. And existing caselaw does not “place[] the . . . constitutional question [here] beyond debate.”

Substantive Due Process

To succeed on a substantive due process claim, a plaintiff must demonstrate “(1) that he had property or a property interest; (2) that the state deprived him of this property or property interest; and (3) that the state’s action falls so far beyond the outer limits of legitimate governmental action that no process could cure the deficiency.” Talley does not come close to alleging facts that meet this standard.

Equal Protection

The only question is whether the defendants’ process for recouping overpayments by reducing benefit checks in varying amounts is rationally related to that interest. The only counterargument Talley makes is that the defendants pursued recoupment in a way that was discretionary and resulted in different treatment for different people.

But the defendants argue that responding to different individuals differently depending upon their requests or the requests of their attorneys merely “shows appropriate flexibility and passes rational-basis scrutiny.” In the absence of any meaningful arguments to the contrary from Talley, and considering the high bar set by the many opinions applying rational-basis review, this court finds no error in the district court’s holding.

Amend

The district court denied Talley’s motion to amend because Talley filed it four months after the deadline in the scheduling order for amending pleadings had passed and did not file a motion to amend the scheduling order until after she filed her motion to amend her complaint. Talley does not contradict the district court’s finding that she knew about at least two of these plaintiffs before the deadline passed—she simply argues that her approach of seeking to add all plaintiffs at once is “more efficient.”

But that is not the point. The district court entered a scheduling order, which it is allowed to enforce. Talley has offered no argument that the district court abused its discretion in holding that no good cause existed to warrant modifying the scheduling order.

Affirmed.

Talley v. Folwell, Case No. 24-1215, Apr. 4, 2025. 4th Cir. (Quattlebaum), from EDNC at Greenville (Boyle). Valerie Bateman for Appellant. Olga Eugenia Vysotskaya de Brito for Appellees. VLW 025-2-116. 24 pp.