Which edition of the NEC is applicable in your area? The permissible uses of NM have expanded somewhat in recent years.

I'm really not sure. I looked it up in a version that goes back a few years. It's possible that she is using something a few years old. This city has it's own inspectors and the City Council, I believe, only has to update the ordinances to proclaim that the latest version of the natl. code will be in effect. This has always been done as a formality through the recommendation of the local electricl board which is made of up the current inspector and a couple of retired electricians.

At the first level of interaction between the inspector and the "electrician", the code interpretation is that of the inspector. Most jurisdictions just adopt the NEC by reference so that the NEC becomes law for that jurisdiction. If an older version of the NEC is the applicable code and prohibits some installation feature and a later version of the NEC permits it, often an inspector will agree to the installation anyway. It helps if the inspector has actual experience as an electrician.

Somtim ein the last few code cycles the prohibition against NM in residential buildings 3 stories above grade was removed.
UNless the jurisdiction has adopted one of the newer versions you may have to use AC or MC.