Appeals Court rules against Charlotte in flooded homeowner dispute

A federal Appeals Court has ruled against Charlotte in its dispute with a homeowner over a $45,000 payment linked to sewage flooding in her home in 2022. The case attracted attention from local media.

Wednesday’s split 2-1 decision from the 4th US Circuit Court of Appeals reversed US District Judge Max Cogburn’s decision favoring the city.

“Stephanie Walker, an elderly widow with limited income, was left suddenly homeless when her Charlotte home was flooded with raw sewage from a sewer-system backup,” Judge James Wynn wrote the 4th Circuit’s majority. “The City of Charlotte offered $45,000 to Walker on the condition that she sign a release of any claims she might have against the City of Charlotte related to the incident.”

“Walker initially protested but, lacking the money to make her home habitable and fearing that she would not survive living in her car, signed the release to pay for emergency repairs,” Wynn continued. “Because Walker has forecast evidence from which a jury could conclude that the release was obtained through undue influence, we reverse the district court’s grant of summary judgment to the City of Charlotte.”

Wynn highlighted evidence that could boost Walker’s case.

“First, Walker has offered evidence that her age, economic condition, and emergency situation made her more susceptible to undue influence,” the majority opinion explained. “Walker is a widow in her late 70s with a limited income. Her house had been flooded with raw sewage, and she had ‘no spouse support or money saved up’ to fix it. In her affidavit, Walker testified that at the time she signed the release, she was losing her temporary housing and was ‘in fear for [her] life’ because she ‘had nowhere else to go’ and ‘it would be very cold in the winter.’”

“Though initially she signed the release with a ‘protest statement’ included, she removed the statement at the City of Charlotte’s request after she ‘thought about dying,’” Wynn wrote. “[A] jury could conclude that Walker’s compliance with the City of Charlotte’s demand for her to remove her protest statement was simply further evidence of its control over Walker’s execution of the contract.”

“We do not suggest that the City of Charlotte acted with bad faith or ill motive, but undue influence may void a transaction even ‘without an affirmative intention of wrong-doing or an evil purpose,’” Wynn added. “Rather, a party that ‘tak[es] advantage of another’s weakness’ to the extent that it supplants the other party’s will has exerted undue influence.”

The majority opinion also emphasized “the disparity between her damages and the settlement amount.”

“[U]nder North Carolina law, when a negligent actor creates physical peril for a victim and then conditions rescue funds on the release of the victim’s claims, there is at least a question of fact on whether the release was obtained through undue influence,” Wynn explained. “That is the factual question that the record before us presents that should be resolved by a jury, not by summary judgment.”

Judge DeAndrea Gist Benjamin joined Wynn’s opinion. Judge Paul Niemeyer issued a partial dissent.

Niemeyer offered a different take on Walker’s response to Charlotte’s initial offer.

“After the City refused to pay her more than $15,000 — the maximum automatically awardable without fault under its sewer backup policy — she retained an attorney,” according to the dissent. “Her attorney demanded $65,000, but, following negotiations, he obtained an agreement to settle with the City for $45,000. As Walker needed the money to repair her home because of her poor financial condition, she signed the settlement agreement with the approval of her attorney.”

“The majority, now, chooses to find sufficient evidence to vacate the district court’s judgment, but without any factual support for doing so,” Niemeyer wrote. “One party’s personal financial condition is not sufficient to show that the other party in any way overbore the first party’s will.”

“To the contrary, the evidence in this case is that Walker exercised her will, with the advice of counsel, and signed the settlement agreement because that was the best financial outcome for her at the time, even though it was a compromise of all that she had wished to obtain,” the dissent continued. “This case presents a routine negotiation for a settlement in which the parties signing were represented by counsel. The fact that the City was able, because of its superior financial condition, to adhere to its final offer is not a ground to void the agreement that Walker voluntarily signed, albeit in protest, with the approval of her attorney.”

“The fact remains that there was no conduct on the part of the City to overbear Walker’s will,” Niemeyer wrote. “Indeed, after the City adjuster had initially visited her to offer the then maximum $15,000 under the City’s sewer backup policy, no representative of the City ever again had any contact with Walker by which to overbear her will. To the contrary, she executed her settlement of her own will, weighing her own financial plight and the amount and timing of the City’s offer. And only her own financial condition brought pressure on her.”

“The district court was clearly correct, and I would affirm,” Niemeyer added.

“Appeals Court rules against Charlotte in flooded homeowner dispute” was originally published on www.carolinajournal.com.