A superior court judge, on Tuesday, decided not to re-instate an injunction against the state Attorney General’s office to enjoin it from spending possibly millions of dollars while the appeal to decide whether that money should go to the public school fund moves forward.
The order comes about a week after the court ruled against the plaintiffs in the case, Civitas Institute President Francis De Luca and the New Hanover County Board of Education, saying that a $65 million settlement between the state Attorney General’s (AG) office and Smithfield Foods, a major pork producer, is not a penalty, and therefore not beholden to the state requirement that penalties and fines go to the public school fund.
De Luca brought the suit against the AG’s office in 2016 while now Gov. Roy Cooper was still in the job, but the suit has been transferred to Attorney General Josh Stein.
The suit claimed that the millions in environmental program funding should have gone to the public school fund, as the state constitution requires for fines and forfeitures.
De Luca and the school board have already initiated an appeal, but also asked Superior Court Judge Paul Ridgeway to reinstate the injunction during the appeals process, trying to retain as much of the funds for the public school fund should the appeal go their way.
Of the decision not to reinstate the injunction De Luca said, “While we are hopeful that our appeal to the NC Court of Appeals will be successful, it is disappointing to know that funds which could go to education will continue to be distributed by the Attorney General, with no legislative authority, to private groups of his choosing.”
Skip Stam, the attorney for De Luca, argued in court that the decision of whether or not to re-install the injunction was purely at the discretion of the judge, while the defense argued that the plaintiffs had to prove that there was a reasonable belief that the plaintiffs would win on appeal. The defense also asked that should an injunction be granted, De Luca be asked to put up a $2 million bond, under Judge Robert Hobgood’s original injunction the required bond was $1.
Ridgeway agreed with Stam that the decision on whether to grant the injunction while the appeal moved forward, or until the Court of Appeals decided on whether an injunction was warranted, fell under his discretion. However he chose not to grant the injunction after about 10 minutes of arguments.
The summary judgment order released by the Superior Court on Oct. 12 removed the temporary stay leaving the AG’s office free to spend the funds.
Last week De Luca said of the appeal that so far his side, joined by the New Hanover County Board of Education, prevailed in the preliminary motions, avoiding a dismissal and obtaining the preliminary injunction, and that the AG’s office, and interveners North Carolina Coastal Federation and Sound Rivers, Inc., won in the Superior Court ruling, but it is now on to the next fight.
“We’re one and one, and now we are going for the tie-breaker,” De Luca said.
The case rests on whether the Smithfield Foods company, and its subsidiaries, entered into the agreement to pay $65 million over the next 25 years, beginning in 2000, as part of a penalty, or to avoid penalties, or the company decided to voluntarily pay out the $65 million without any enforcement action.
The agreement, settled in July of 2000, between Smithfield Foods, and its subsidiaries, with the AG’s office was to pay $15 million to North Carolina State University up front for research into technologies for more efficient, environmentally friendly disposal of hog waste. In subsequent years, Smithfield was to pay $2 million annually for 25 years, or $1 for every pig capped at $2 million, to a fund that the state attorney general, then Mike Easley, would control for the purpose of funding what the suit calls supplemental environmental programs.
For the last 16 years the fund has been administering grants at the discretion of the state attorney general – Mike Easley and then Cooper, and now Stein.
The case seemingly rested on the testimony of some of the former state officials involved in the handling of the agreement or in the area of environmental enforcement in the state 15 years ago.
The testimonies held that the agreement was not based on any pending enforcement action, and also was not done to avoid a coming enforcement action, and therefore it was ruled that the $65 million was not paid as a part of a settlement.
An affidavit from former director of the Environmental Division of the North Carolina Department of Environmental and Natural Resources (now the Department of Environmental Quality) Daniel Oakley, who was the primary negotiator of the agreement, said “I know that the agreement was not reached in order to settle any case in which a civil penalty had been assessed by [the North Carolina Department of Environmental and Natural Resources].”
Oakley did say that there were penalties filed against the companies that were party to the 2000 agreement in the five years leading up to the agreement and in the following year, but that those were settled through other means.
In the ruling the judge handling the case said that a key difference between a similar case and De Luca’s was that there were already penalties assessed in the referenced case as opposed to De Luca’s case.