Lawyer Article

To: Clients and Friends of Womble Carlyle

Since at least as early as my time as governor, North Carolina has been a leader in providing incentives to businesses to help them locate or expand their operations in North Carolina. While North Carolina and the other southeastern states have educated hard-working employees, provided good infrastructure, and fostered welcoming tax and regulatory regimes, incentives can sometimes tip the balance in favor of our region. In recent years, North Carolina has added new jobs in important industries such as pharmaceuticals, finance, and computer manufacturing with the help of incentives. (An Op-Ed piece in the Raleigh News & Observer from my partners, former North Carolina Chief Justice Burley Mitchell and Press Millen, on the importance of incentives in staying competitive can be found here.)

Yet incentives have been under attack from those who want to unilaterally disarm in the face of competition from other states, regions and especially foreign countries. Womble Carlyle, which has negotiated some of the largest incentives packages in the southeast for its clients, has also been in the forefront of fighting the opponents of incentives in the courts. Last year, our team, led by Burley Mitchell, Press Millen and Sean Andrussier, was successful in persuading a North Carolina federal court to dismiss an action challenging the constitutionality of local retail incentives. Heritage Place of Wilson, L.L.C. v. Westwood Village Limited Partnership No. 05-CVS-841 (E.D.N.C. 2005).

Even more significant was the same team’s victory just last week in Wake County Superior Court where the trial judge, Robert H. Hobgood, ruled in favor of our client Dell along with the State of North Carolina, in the constitutional challenge to the $280 million incentives package provided by North Carolina, Forsyth County and Winston-Salem in connection with the computer manufacturing facility built by Dell in Winston-Salem last year. That incentive package was the largest ever offered to any business in North Carolina and the lawsuit against those incentives has been one of the most closely-watched cases in the incentives community around the country.

If plaintiffs had been successful, incentives in North Carolina would likely have been stopped in their tracks.

Fortunately, Judge Hobgood ruled against each of the 22 separate claims on various federal and state constitutional and statutory grounds asserted by plaintiffs. Among other things, Judge Hobgood ruled that “attracting jobs to a community by public economic incentives provides a direct general economic welfare and benefit to the people of those communities” and that “challenges to the constitutionality of the state and local tax incentives to promote economic development” are political questions "best addressed to the legislature." (Judge Hobgood’s entire Order can be found here.)

The case has attracted national attention with reports in Business Week and over a hundred other publications.

While plaintiffs will now no doubt move on to the North Carolina appellate courts, North Carolina’s important incentives policies remain intact.

I’m proud to be associated with Womble Carlyle, the premier law firm for negotiating, structuring, and litigating business incentives.

James B. Hunt, Jr.

If you have questions regarding incentives in North Carolina, please contact Burley Mitchell at (919) 755-8166, Don Donadio at (919) 755-2102 or Press Millen at (919) 755-2135.