Client Alert

Going back 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. North Carolina has recognized that in addition to educated, hard-working employees, good infrastructure, and appropriate tax and regulatory regimes, incentives can sometimes tip the balance in favor of our State for businesses seeking to relocate or expand. As a result, in recent years, North Carolina has added new jobs in important industries such as pharmaceuticals, finance, and computer manufacturing, all 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 at the following link: http://www.wcsr.com/StayingCompetitive.)

Despite this record of success, 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. In 2005, our team led by Burley Mitchell, Press Millen and Sean Andrussier, were 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).

Last year, the same team was successful in persuading the trial court to dismiss a case seeking to stop North Carolina’s incentives efforts in their tracks. That case concerned our client Dell in a constitutional challenge to the $280 million incentives package provided by the State of North Carolina, Forsyth County and the City of Winston-Salem in connection with the computer manufacturing facility built by Dell in Winston-Salem in 2005. That incentives 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, North Carolina would have been stymied in its attempts to remain on the competitive forefront in attracting new businesses to our State.

Today, the North Carolina Court of Appeals, in a unanimous ruling, upheld the constitutionality of the Dell incentives. The court held that "every state provides tax and other economic incentives as an inducement to local industrial location and expansion" and that questions about the wisdom of particular incentives were properly for the legislature and not the courts.

The court found that the Dell incentives (and incentives generally) serve the public and therefore do not violate the public purpose clause of the North Carolina Constitutional. In sum, the court rejected each of plaintiffs' 22 challenges to the Dell incentives. In so ruling, the court resisted the temptation to engage in judicial activism by overturning the settled law of North Carolina at the urging of anti-growth and anti-business advocates. (The Court of Appeals opinion can be found here: http://www.aoc.state.nc.us/www/public/coa/opinions/2007/061258-1.htm.)

The ruling is a critical acknowledgment of the importance of incentives as one of the tools our State can use to try to attract new and expanding businesses. It will also be an important part of our team’s defense of the incentives package recently provided to Google in connection with its construction of a data center in Caldwell County which has been challenged by the same group.

While plaintiffs will now no doubt seek to persuade the North Carolina Supreme Court to take their case, 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.

Sincerely,

Governor James B. Hunt, Jr.

If you have questions regarding incentives, please contact Burley Mitchell at (919) 755-8166, Don Donadio at (919) 755-2102, Press Millen at (919) 755-2135, or Sean Andrussier at (919) 755-2199.