A unanimous N.C. Supreme Court has sided with Attorney General Josh Stein in a battle over money flowing to state government from a legal settlement between the state and hog operation Smithfield Foods.
The 6-0 decision allows Stein to continue using the money to fund an environmental grant program he controls. Critics have labeled the arrangement a “slush fund.”
The Supreme Court’s latest decision overrules the N.C. Court of Appeals. That court had ruled in December 2020 that money connected to the Smithfield deal should head to the state treasury.
The Appeals Court’s decision followed an April 2020 state Supreme Court victory for Stein. With a 6-1 vote, the high court had rejected the New Hanover County school board’s argument that the Smithfield money should be considered a civil penalty.
A ruling in favor of the school board at that time would have sent all proceeds from the Smithfield deal to a state fund supporting public schools. Instead the court determined that the Smithfield funds amounted to a gift to the state.
When the Supreme Court returned the case to the Appeals Court in 2020, judges at that intermediate appellate court determined that a 2019 state law required shifting the money to the treasury. N.C.G.S. § 147-76.1 says cash gifts and donations to the state “shall be deposited into the State treasury.”
Justice Sam “Jimmy” Ervin IV wrote both the April 2020 Supreme Court opinion and the new opinion siding with the attorney general.
“We agree with the Attorney General that the Board of Education’s complaint did not suffice to state a claim for relief,” Ervin wrote.
Ervin noted that the Appeals Court addressed the impact of the 2019 law long after the case had gone to trial.
“In this case, … the trial court was never asked to consider whether the
Board of Education’s complaint sufficed to state a claim pursuant to N.C.G.S. § 147-76.1 and could not have done so because the relevant statutory provision did not exist at the time that the trial court decided to grant summary judgment in the Attorney General’s favor,” Ervin wrote. “As a result, this case does not involve ‘mislabel[ing]’ or a ‘fail[ing] to label’ a claim properly; instead, the Board of Education could not have asserted a claim based upon § 147-76.1 before the trial court because the amended complaint was filed years before the relevant statutory provision was enacted.”
“In other words, the Court of Appeals lacked the authority to address and decide a wholly new claim,” he added.
Though the current case is over, the school board could file a new lawsuit based on the 2019 law, Ervin wrote.
Smithfield and its subsidiaries made a $50 million deal in 2000 with then-Attorney General Mike Easley. Easley’s successor, Roy Cooper, set up the grant program that Stein has overseen since 2017.
The legal fight against the attorney general’s environmental grant fund started in October 2016. Francis De Luca, then-president of the Civitas Institute, went to court to have the proceeds of the fund declared a state penalty against Smithfield. As the case proceeded through the state’s legal system, courts ruled De Luca out as a plaintiff. The New Hanover County school board proceeded with the case after De Luca bowed out.
The Civitas Institute merged capabilities in 2021 with the John Locke Foundation. Locke oversees Carolina Journal.
Justice Phil Berger Jr. took no part in the case, titled New Hanover County Board of Education v. Stein.