Constitutional Protections for Economic Liberty in North Carolina: The Fruits of Their Own Labor Clause and Beyond

I’ve long been interested in how state courts sometimes provide protection for economic liberty under state constitutions, beyond what the federal constitution would offer. I’ve seen this particularly in North Carolina, under the state constitution’s Fruits of Their Own Labor Clause. Here’s the latest example, from Tuesday’s Proctor v. City of Jacksonville, in an opinion by Judge Griffin, joined by Judges Tyson and Collins:

This case arises out of tension between business owners in Jacksonville and the City …. In 2014, the City passed the Unified Development Ordinance of the City of Jacksonville (“the UDO”). The UDO provides numerous zoning maps which dictate the areas where a food truck may operate and numerous regulations which provide the conditions food trucks and private-property owners must meet before operating on private property[, including that] …

Any Food vendor shall be at least 250 feet from any other parcel containing: 1) a food vendor, 2) a low density, medium density, high density residential or downtown residential zoning district, and or 3) a restaurant; …

Plaintiffs allege the location restrictions prevent food truck operators from conducting business in approximately ninety-six percent of property located in Jacksonville. Because of these restrictions, Plaintiffs contend their rights to engage in safe and lawful occupations are severely infringed….

The Fruits of Their Labor clause provides: “We hold it to be self-evident that all persons are created equal; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty, the enjoyment of the fruits of their own labor, and the pursuit of happiness.”

Our Supreme Court has recognized substantive economic protections under the Fruits of Their Labor Clause prevent the State and consequently its political subdivisions from creating and enforcing regulations that impede “legitimate and innocuous vocations by which men earn their daily bread.” State v. Ballance (N.C. 1949) (holding a licensing scheme for photographers violated the Fruits of Their Labor Clause); see also Roller v. Allen (N.C. 1957) (holding a licensing scheme for ceramic tile installers violated the Fruits of Their Labor Clause).

The Law of the Land clause, on the other hand, provides: “No person shall be taken, imprisoned, or disseized of his freehold, liberties, or privileges, or outlawed, or exiled, or in any manner deprived of his life, liberty, or property, but by the law of the land.” This provision, analogous to the Fourteenth Amendment’s Due Process Clause, “serves to limit the [S]tate’s police power to actions which have a real or substantial relation to the public health, morals, order, safety or general welfare.” Poor Richard’s, Inc. v. Stone (N.C. 1988).

Thus, both the Fruits of Their Own Labor clause and the Law of the Land clause protect citizens’ constitutional right to earn a living from arbitrary regulations. See id. (“These constitutional protections have been consistently interpreted to permit the [S]tate, through the exercise of its police power, to regulate economic enterprises provided the regulation is rationally related to a proper governmental purpose.”)….

“[A] single standard determines whether [an] ordinance passes constitutional muster imposed by both section 1 and the ‘law of the land’ clause of section 19: the ordinance must be rationally related to a substantial government purpose.”  “[T]o survive constitutional scrutiny under this provision, the challenged state action ‘must be reasonably necessary to promote the accomplishment of a public good, or to prevent the infliction of a public harm.’”  “This test involves a “twofold” inquiry: ‘(1) is there a proper governmental purpose for the statute, and (2) are the means chosen to effect that purpose reasonable?’” Kinsley v. Ace Speedway Racing, Ltd. (2024) (quoting Poor Richard’s).

Plaintiffs allege the City and its officials enacted the UDO, and the challenged provisions therein, “to protect brick-and-mortar restaurants from competition.” In support of this contention, Plaintiffs point to the UDO’s enactment history. Plaintiffs allege the UDO initially provided for a less restrictive scheme which would have allowed food trucks to operate within a larger area of Jacksonville. However, the UDO was redrafted because “in the restaurant owners’ view, the original overlay map did not sufficiently insulate them from competition.” As a result of this pressure, “the City Council considered allowing food trucks only if they did not operate within 250 feet of, among other things, any other parcel with a restaurant.” This consideration ultimately became the codified version of the UDO.

As entities who are engaged in the same business should be subject to the same restrictions, an allegation that the government enacted a regulation solely to benefit a subset of businesses at the expense of another subset within the same line of business, here food purveyors, is sufficient to meet prong one [of the Poor Richard's test]. Thus, taking Plaintiffs’ allegations as true, we hold they sufficiently pled an unlawful and improper governmental purpose for the UDO. Accordingly, as the first prong of Poor Richard’s test for a colorable constitutional claim under Article I, sections 1 and 19 is met, we do not reach the second question of whether the means chosen to affect that purpose are reasonable. Rather, we reverse the trial court’s order dismissing Plaintiffs’ claims under the Fruits of Their Own Labor clause and the Law of the Land clause.

The court also held that plaintiffs sufficiently stated a claim under the North Carolina Constitution’s Equal Protection Clause:

Under the Equal Protection clause of Article I, section 19, when a party challenges a government regulation that classifies businesses and then treats those businesses differently on the basis of said classification, we apply a twofold test, asking: “(1) [is it] based on differences between the business to be regulated and other businesses and (2) [are] these differences [ ] rationally related to the purpose of the legislation[?]” If the answers to both questions are yes, then the classification is permitted….

Plaintiffs, as food truck owners, allege “[f]ood trucks are engaged in the same business as, or are similarly situated to, other businesses offering food and drink for sale to the general public, including brick-and-mortar restaurants, which are not subject to the 250-foot proximity ban.” Plaintiff Gonzalez alleges that she and her company “are engaged in the same property use as, or are similarly situated to, property owners who host businesses offering food and drink for sale to the general public, including brick-and-mortar restaurants, but are not subject to the 250-foot proximity bans.” To exemplify their contention that the UDO provides for different regulations based on arbitrary distinctions and are imposed to further unlawful economic protectionism of restaurants, Plaintiffs also allege “[t]he 250-foot proximity bans do not apply to other businesses offering food and drink for sale to the general public, such as restaurants with indoor and/or outdoor seating, drive-through restaurants, specialty-eating establishments, produce stands, bars, taverns, clubs, convenience or drug stores, gas stations, bed and breakfasts, or museums.”

To this point, the regulations do not prevent food trucks from parking or giving food away on eligible property, they only prevent food trucks from “selling food while they are there.” Another consequence of the UDO’s classifications is that “[a] specialty-eating establishment like a bakery, a coffee shop, or an ice cream shop could open on Eligible Property next door to a restaurant, residential property, or a food truck … , but a food truck offering the very same baked goods, coffee, or ice cream could not.” Plaintiffs’ Complaint contains numerous other factual allegations explaining how the UDO’s classifications allow for businesses engaged in substantially the same business as Plaintiffs, namely selling food and drink, to set up shop in areas that food trucks may not.

Despite the alleged similarities between Plaintiffs and other businesses, Plaintiffs’ assert that “[t]he 250-foot proximity bans do not draw the classification between food trucks and all other businesses offering food and drink for sale to the general public, including brick-and-mortar restaurants, based on any legitimate distinguishing feature of food trucks or the property owners who would host them.”

These allegations, taken as true, are sufficient to satisfy the first part of the test–the UDO’s harsher restrictions on food trucks are not based on any differences between Plaintiffs’ businesses, subject to those restrictions, and other business which are not. See Cheek v. City of Charlotte (N.C. 1968) (“The legislature may not, under the guise of protecting the public interests, arbitrarily interfere with private business, or impose unusual and unnecessary restrictions upon lawful occupations.”). Moreover, Plaintiffs’ two allegations that the regulation (1) is “solely to further the unconstitutional purpose of protecting brick-and-mortar restaurants from competition[,]” and (2) classifies “without substantially or reasonably furthering any constitutionally legitimate, permissible, or substantial government purpose[,]” are sufficient to satisfy the second prong of the test. See Roller v. Allen (N.C. 1957) (striking down a licensing scheme because, in part, “[t]he [a]ct in question here has as its main and controlling purpose not health, not safety, not morals, not welfare, but a tight control of tile contracting in perpetuity by those already in the business”). Taken as true, Plaintiffs sufficiently allege the UDO’s differential classifications are not rationally related to the purpose of the ordinance nor are they based on a permissible purpose.

These allegations essentially allege that, despite being in the same business, Plaintiffs and their respective businesses are “subject to different restrictions [and] are treated differently under the same conditions.” … [T]he [constitutional] test requires the trial court to engage in a more nuanced analysis than just addressing whether it can envision “reasonably conceivably rational bases.” However, the ultimate inquiry does lie in ascertaining whether the government’s distinctions are drawn based on actual differences between businesses and whether that distinction is rationally related to the promotion of a permissible government interest. Nonetheless, taking their allegations as true, which we are required to do, Plaintiffs sufficiently alleged facts to survive Defendants’ Rule 12(b)(6) motion for their Equal Protection claim….

The court also held that the trial court erred in failing to apply commercial speech protections to the sign restrictions in the ordinance, and remanded so the trial court could indeed apply them. And it allowed plaintiffs to go forward with their claim that the fees imposed under the ordinance exceeded what was authorized by state statute.

Nicole Jo Moss (Cooper & Kirk, PLLC) and Robert Belden and Justin Pearson (Institute for Justice) represent plaintiffs.

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