Since the 1996 Maready v. City of Winston Salem case, there have been several challenges to North Carolina economic incentives brought in a variety of situations, such as Peacock v. Shinn(2000) (upholding financing agreements for the coliseum used by the Charlotte Hornets basketball team) and Blinson v. State (2007) (upholding the constitutionality of state and local government incentives given to a major computer manufacturer in Forsyth County). Given the hostility to economic incentives evidenced by these types of challenges, it is essential not only that companies obtain knowledgeable advice on the front end of economic development deals, but also that they stand ready to defend those deals if challenged.
Our firm successfully defended the constitutionality of incentives against just such an attack, resulting in the North Carolina Court of Appeals upholding the constitutionality of $7.5 million in economic incentives grants given by the North Carolina General Assembly to Johnson & Wales University. The Court of Appeals' opinion affirmed the trial court's decision to dismiss the Plaintiffs' complaint in its entirety in the matter of Saine v. State of North Carolina and Johnson & Wales University, 709 S.E.2d 379 (2011).
The lawsuit challenged, on state constitutional grounds, the power of the General Assembly to give $7.5 million in economic incentive grants to Johnson & Wales University in Charlotte. The Plaintiffs sought repayment by Johnson & Wales University of all the money the University had received from the State, which funds had already been spent on construction of the school's new national headquarters in Charlotte.
In the trial court Johnson & Wales University, represented by Reed Hollander of our firm, was successful in obtaining dismissal of the complaint in its entirety for failure to state a valid cause of action. On appeal, Plaintiffs contended that they had stated a cause of action because they asserted that the incentives grants violated the Public Purpose Clause, the Exclusive Emoluments Clause and the Equal Protection Clause of the North Carolina Constitution. The Court of Appeals unanimously upheld the trial court’s dismissal of the complaint in its entirety, agreeing with Johnson and Wales’ arguments and making a firm statement that economic incentives of this type fall squarely within the constitutional authority of the North Carolina General Assembly.
As this case exemplifies, economic development incentive grants and programs can overcome legal challenges brought in the North Carolina courts and companies should stand ready to defend incentives when such challenges are brought.