N.C. Business Court Considers When a  Private Company Can Be Deemed a State “Agency” for Purposes of the Public Records Act


In Southern Environmental Law Center v. Saylor et al., 2019 NCBC 59 (N.C. Super. Ct. Sept. 11, 2019), the Business Court considered whether the defendant North Carolina Railroad Company (the “Railroad”) was a State “agency” for purposes of the Public Records Act, N.C. G.S. § 132-1 et seq. If so, then the Railroad was required to comply with the plaintiff Southern Environmental Law Center’s (“SELC”) request for its “public records.” The Railroad asserted that as a private corporation, it was not subject to the Act, and moved for judgment on the pleadings. The SELC countered that the Railroad was a State “agency”—and therefore was subject to the Act—because, among other reasons, it was wholly owned by the State of North Carolina. Judge Robinson held that the matter was “incapable of resolution on the pleadings,” and denied the Railroad’s motion in favor of a more developed factual record.


  • A private corporation may be required to produce its “public records” where it is deemed to be an “agency” of the State.
  • Whether a private corporation is an “agency” of the State depends largely on the degree of control exercised by the State over the corporation.
  • The determination whether a private corporation is an “agency” of the State is fact-intensive and not easily resolved based on the pleadings alone.

Many in North Carolina are familiar with the Durham-Orange Light Rail Transit Project, which would have connected Chapel Hill and Durham via a 17.7 mile light rail line. Id. ¶ 6. The SELC was “significantly involved” in advocating for that project, which was discontinued in the spring of 2019. Id.

In May 2019, the SELC requested records from the Railroad relating to the Light Rail Project. Id. ¶ 16. The Railroad, which owned tracks near the contemplated rail line and apparently was not a supporter of the project, declined the SELC’s request for records on the basis that it was not subject to the Public Records Act. Id. ¶¶ 8, 16.

The SELC thereafter brought suit against the Railroad, seeking an order “compelling the Railroad and its agents to permit inspection of certain documents pursuant to the [Public Records] Act.” Id. ¶ 3. In particular, the SELC brought its claim under N.C.G.S. §§ 132-1 – 132-10, which provides, among other things, that “[e]very custodian of public records shall permit any record in the custodian’s custody to be inspected and examined at reasonable times and under reasonable supervision[.]” Id. ¶ 22 (quoting N.C.G.S. § 132-6) (emphasis added).

The matter was designated to the Business Court, where it was “given priority” pursuant to N.C.G.S. § 132-9(a) (providing expedited proceedings with respect to “[a]ny person who is denied access to public records”). Id. ¶¶ 4, 25-26.

Once in the Business Court, the Railroad sought to stop the SELC’s claim in its tracks. The Railroad attached “numerous documents” to its answer (more on this later) and moved for judgment on the pleadings. The Railroad contended that as a private corporation, it was not subject to the Public Records Act as a matter of law. The SELC opposed the motion on the grounds that the Railroad was, in fact, subject to the Public Records Act as an “agency” of the State of North Carolina. See N.C.G.S. § 132-1(a) (defining “public records” to include “all documents . . . made or received . . . by any agency of North Carolina government or its subdivisions) (emphasis added).  The SELC pointed out that the Railroad was wholly-owned by the State, had eminent domain powers, and was comprised of board members who were appointed by government officials.

The Business Court framed the central, “intriguing question” as follows: “may ‘private’ corporations, otherwise generally exempt from the disclosure requirements of the [Public Records Act], nonetheless be subject to the Act’s requirements where those corporations are wholly-owned by the State of North Carolina?” Id. ¶ 2.

Spoiler alert: the answer is “yes,” but only if the private corporation is deemed a State “agency” for purposes of the Public Records Act.

In addressing this question, the Business Court looked to the North Carolina Court of Appeals’ decision in News & Observer Publishing Co. v. Wake County Hospital System, Inc., 55 N.C. App. 1, 284 S.E.2d 542 (1981). There, the appellate court concluded that the Wake County Hospital System was an “agency” of the State based on the degree of control that Wake County exercised over the hospital. Id. ¶ 31. In reaching its decision, the News & Observer court noted the following:

  • Upon dissolution, the hospital’s assets were to be transferred to Wake County;
  • All vacancies on the board of directors were subject to approval by county commissions;
  • The hospital occupied premises owned by the county virtually rent-free;
  • County commissioners reviewed and approved the hospital’s annual budget;
  • The county audited the hospital’s books and records;
  • The hospital reported its charges and rates to the county;
  • The hospital was financed by county bond orders;
  • Revenue collected pursuant to the bond orders was to be considered revenue of the county;
  • The hospital would not change its corporate existence or amend its articles of incorporation without the county’s written consent; and
  • The hospital was performing an important “public and governmental” function.

Id. ¶ 32 (citing News & Observer, 55 N.C. App. at 11, 284 S.E.2d at 548-49).

Noting that the above “factors” were “not intended to be an exclusive list,” id. ¶ 33, the Business Court observed that the “ultimate question” in its analysis was “the degree of ‘supervisory responsibilities and control’” exercised by the State over the corporate entity. Id. ¶ 34 (quoting Chatfield v. Wilmington Hous. Fin. & Dev., Inc., 166 N.C. App. 703, 708-09, 603 S.E.2d 837, 840 (2004)).

In other words, where the State’s exercise of control over the private company is such that the company is, in essence, acting as an arm or “agency” of the State, the company will be treated as a “public” company for purposes of the Public Records Act.

The Business Court proceeded to determine that the following allegations were “potentially supportive” of a finding that the Railroad was an “agency” of the State:

  • The Railroad’s assets upon dissolution will be transferred to the State;
  • The Governor of North Carolina and General Assembly appoint all members of the Railroad’s Board of Directors;
  • The Railroad is required to provide annual reports to the legislature which go above and beyond what is required for other corporate entities;
  • The Railroad has eminent domain power; and
  • According to the Railroad’s stated mission, the Railroad performed the important “public and governmental” function of managing a railroad corridor for the benefit of North Carolina citizens.

Id. ¶ 35. In addition, the Railroad was exempt from paying Federal and State income taxes and its charter provided that it shall “have a corporate existence as a body politic in perpetuity.” Id. ¶¶ 9, 15.

The Railroad, for its part, put forth a number of reasons why it should not be deemed a State “agency” under the Public Records Act. For example, the Railroad offered a report published by the General Assembly in 2012 explicitly stating that the Railroad was “not part of state government” and that certain state laws, including the State’s public records law, “do not apply” to the Railroad. Id. ¶¶ 14, 42. With respect to the State’s status as the Railroad’s sole shareholder, the Railroad cited a more-than-century-old case holding that “the State of North Carolina ‘laid down her sovereignty’ when the State became a shareholder of a private corporation” and, further, that “the state’s sovereignty did not extend to a corporation which it controlled . . . .” Id. ¶ 39 (quoting Southern Railway Co. v. North Carolina Railroad Co., 81 F. 595, 599-600 (N.C. 1897)). The Railroad also argued that the “body politic” language in its charter was essentially meaningless because all corporations created at that time (in the 1840s) were created by an act of the legislature. Id. ¶ 45.

Potentially detrimental to the Railroad’s motion, however, was the Court’s decision not to consider the “numerous documents” attached to the Railroad’s answer. Id. ¶ 21 n.1. Although, as the Court noted, it was free to consider documents attached to an answer “that are the subject of a plaintiff’s complaint and to which the complaint specifically refers,” it can only do so where the plaintiff has made admissions with respect to those documents. Id. And because the SELC had made no admissions with respect to the documents attached to the Railroad’s answer, those documents could not properly be considered by the Court in ruling on the Railroad’s Rule 12(c) motion. (The Court did, however, consider a report prepared by the General Assembly that was attached to Railroad’s answer—which “pronounced therein that the [Railroad] is not part of state government”—because the SELC had cited that document in its complaint. Id. ¶ 42.)

In the end, the Business Court concluded that the State “agency” determination required a “fact-intensive” inquiry that was “ill-suited for resolution on the pleadings pursuant to Rule 12(c).” Id. ¶ 35. Based on the pleadings alone, questions remained. And under the Rule 12(c) standard, the SELC’s complaint was not “so fatally deficient in substance as to present no material issue of fact . . . .” Id. ¶ 20 (quoting George Shinn Sports, Inc. v. Bahakel Sports, Inc., 99 N.C. App. 481, 486, 393 S.E.2d 580, 583 (1990)); id. ¶ 46 (concluding that “SELC’s position taken in the Complaint is not factually deficient and that this matter is incapable of resolution on the pleadings”).

Accordingly, the Business Court denied the Railroad’s motion for judgment on the pleadings, allowing the case to proceed in favor of a more developed factual record.


Matt Krueger-Andes is a litigation associate in Fox Rothschild’s Charlotte office.  He regularly represents clients in the Business Court and advises on Business Court and other business litigation-related matters.  He is also a former law clerk to the Honorable Louis A. Bledsoe, III, Chief Judge of the North Carolina Business Court.