De Luca v. Stein ( 2018 )


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  •                IN THE COURT OF APPEALS OF NORTH CAROLINA
    No. COA17-1374
    Filed: 4 September 2018
    Wake County, No. 16 CVS 12965
    FRANCIS X. DE LUCA and THE NEW HANOVER COUNTY BOARD OF
    EDUCATION, Plaintiffs,
    v.
    JOSH STEIN, in his capacity as Attorney General of the State of North Carolina,
    Defendant,
    and
    NORTH CAROLINA COASTAL FEDERATION and SOUND RIVERS, INC.,
    Intervenors.
    Appeal by plaintiff from order entered 12 October 2017 by Judge Paul C.
    Ridgeway in Wake County Superior Court. Heard in the Court of Appeals 20 June
    2018.
    Stam Law Firm, PLLC, by Paul Stam and Amy C. O’Neal, for plaintiff-
    appellants.
    Attorney General Joshua H. Stein, by Special Deputy Attorneys General Marc
    Bernstein and Jennie Wilhelm Hauser, for defendant-appellee Joshua H. Stein
    in his capacity as Attorney General of the State of North Carolina.
    Southern Environmental Law Center, by Mary Maclean Asbill, Brooks Rainey
    Pearson and Blakely E. Hildebrand, for intervenor-appellees North Carolina
    Coastal Federation and Sound Rivers, Inc.
    Tharrington Smith, L.L.P., by Deborah R. Stagner and Lindsay Vance Smith,
    for amicus curiae North Carolina School Boards Association.
    DE LUCA V. STEIN
    Opinion of the Court
    TYSON, Judge.
    Plaintiffs’ appeal asserts the trial court erred in concluding, as a matter of law,
    that payments specified in an agreement between the Attorney General of North
    Carolina and Smithfield Foods, Inc., and its subsidiaries are not civil penalties
    required to be used to fund public education pursuant to Article IX, § 7 of the North
    Carolina Constitution. The trial court’s order granting the defendant’s motion for
    summary judgment and denying the plaintiffs’ cross-motion for summary judgment
    is reversed in part and remanded for trial.
    I. Background
    On 25 July 2000, Michael F. Easley, in his capacity as Attorney General of
    North Carolina, entered into an agreement (the “Agreement”) with Smithfield Foods,
    Inc. (“Smithfield”) and several of its subsidiaries, Brown’s of Carolina, Inc., Carroll’s
    Foods, Inc., Murphy Farms, Inc., Carroll’s Foods of Virginia, Inc., and Quarter M
    Farms, Inc. (collectively, the “Companies”).
    Daniel Oakley, the former Division Director of the North Carolina Department
    of Justice’s Environmental Division at the time the Agreement was negotiated and
    entered into, stated in an affidavit:
    The background for the [Agreement] was a five-year period
    of time, from 1995 to 2000, when ruptured or flooded swine
    waste lagoons, not all of them Smithfield’s, had spilled
    millions of gallons of waste into North Carolina waterways,
    contaminating surface waters and killing aquatic life,
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    DE LUCA V. STEIN
    Opinion of the Court
    while seepage from waste lagoons impacted groundwater
    supplies.
    In the Agreement, the Department of Environmental Quality is referred to
    under its previous name of the Department of Environment and Natural Resources,
    or DENR. As of 1 July 2015, the agency was formally renamed the North Carolina
    Department of Environmental Quality. 2015 S.L. 241, § 14.30.(c), eff. July 1, 2015.
    We refer to the agency throughout this opinion under its current name of the
    Department of Environmental Quality (“DEQ”).
    Under the terms of the Agreement, the Companies entered into it for the
    purpose of undertaking “a series of environmental initiatives intended to preserve
    and enhance water quality in eastern North Carolina.” To support “environmental
    initiatives,” the Companies agreed to commit funds to “environmental enhancement
    activities.” The Agreement specified these funds would be “paid to such organizations
    or trusts as the Attorney General will designate. The funds will be used to enhance
    the environment of the State, including eastern North Carolina, to obtain
    environmental easements, construct or maintain wetlands and such other
    environmental purposes, as the Attorney General deems appropriate.”
    In the Agreement, the Companies committed, among other things, to “pay each
    year for 25 years an amount equal to one dollar for each hog in which the Companies
    . . . have had any financial interest in North Carolina during the previous year,
    provided, . . . that such amount shall not exceed $2 million in any year.” To facilitate
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    DE LUCA V. STEIN
    Opinion of the Court
    these payments, the Companies maintain an escrow account into which funds are
    deposited. The Attorney General maintains the sole authority to direct the escrow
    agent to disburse funds to grant recipients, who are chosen by the Attorney General.
    Under the Agreement, the Attorney General may consult with the Companies,
    DEQ, and “any other groups or individuals he deems appropriate and may appoint
    any advisory committees he deems appropriate[,]” in administering the grant
    program.
    To facilitate the administration of the funds in escrow, the Attorney General
    established the Environmental Enhancement Grant Program (“EEG Program”).
    Every year since the Agreement was established, the Attorney General has received
    proposals from governmental agencies and nonprofit organizations to receive
    Environmental Enhancement Grants (“EEGs”). A panel consisting of representatives
    from the Department of Justice, DEQ, the North Carolina Department of Natural
    and Cultural Resources, academic institutions, and environmental nonprofit
    organizations reviews the EEG proposals and makes recommendations to the
    Attorney    General.     Representatives    from    Smithfield   could   also   submit
    recommendations separate from the panel.
    The Attorney General exercises sole discretion over the selection of grant
    recipients and approval of the amounts awarded, up to a maximum of $500,000 per
    award.     After the Attorney General selects the grant recipients, the funds are
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    DE LUCA V. STEIN
    Opinion of the Court
    distributed as reimbursements for expenses already incurred by the grant recipients.
    The Attorney General has awarded grants totaling more than $24 million since the
    Agreement was signed.
    On 18 October 2016, Francis X. De Luca (“De Luca”), a citizen and resident of
    Wake County, North Carolina, filed a complaint against the Attorney General of
    North Carolina, Roy Cooper, in his official capacity. In his complaint, De Luca sought
    a preliminary and permanent injunction to prevent the Attorney General from
    distributing monies paid under the Agreement to any entities other than to the
    State’s Civil Penalty and Forfeiture Fund.
    The Attorney General filed a motion to dismiss on 19 December 2016. On 25
    January 2017, while the motion to dismiss was pending, De Luca filed an amended
    complaint, which added the New Hanover County Board of Education (“NHCBE”) as
    a party-plaintiff. Joshua H. Stein (“the Attorney General”), in his official capacity as
    the current Attorney General of North Carolina, was substituted as the defendant.
    The Attorney General subsequently filed an amended motion to dismiss.
    On 14 June 2017 and 16 June 2017, respectively, De Luca and the NHCBE
    (collectively, “Plaintiffs”) filed a motion for preliminary injunction and a motion for
    summary judgment.       The trial court heard Plaintiffs’ motion for preliminary
    injunction and the Attorney General’s amended motion to dismiss on 27 June 2017.
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    DE LUCA V. STEIN
    Opinion of the Court
    The trial court denied the Attorney General’s motion to dismiss and granted
    Plaintiffs’ request for a preliminary injunction, based upon the court’s finding that
    Plaintiffs were “likely to prevail” and “the public interest favors the granting of a
    preliminary injunction.” The Attorney General filed an answer to the amended
    complaint on 17 July 2017. On 21 July 2017, upon consent of the parties, an amended
    injunction was entered to clarify the preliminary injunction would only apply to
    grants awarded after 30 September 2016.
    On 21 August 2017, two environmental organizations, who had previously
    received grants under the Agreement, the North Carolina Coastal Federation, Inc.
    and Sound Rivers, Inc. (collectively, “Intervenors”), filed a motion to intervene. On
    22 September 2017, Plaintiffs served their opposition to the motion to intervene and
    renewed their motion for summary judgment. The same day, the Attorney General
    filed a motion for summary judgment. On 28 September 2017, the Intervenors filed
    a motion for leave to file a memorandum of law in support of the Attorney General’s
    motion for summary judgment, and the North Carolina School Boards Association
    (“NCSBA”) filed a motion for leave to file an amicus curiae brief in support of
    Plaintiffs’ motion for summary judgment.
    The parties’ cross-motions for summary judgment, Intervenors’ motion to
    intervene, and NCSBA’s motion for leave to file an amicus brief were heard by the
    trial court on 5 October 2017. On 12 October 2017, the trial court entered its order,
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    DE LUCA V. STEIN
    Opinion of the Court
    which granted the Attorney General’s motion for summary judgment, denied
    Plaintiffs’ motion for summary judgment, dismissed Plaintiffs’ complaint with
    prejudice, and dissolved the preliminary injunction previously entered by the trial
    court. The trial court also entered orders granting Intervenors’ motion to intervene
    and NCSBA’s motion for leave to file an amicus brief. On appeal, Plaintiffs do not
    challenge the trial court’s order, to the extent it granted Intervenors’ motion to
    intervene.
    From the trial court’s order granting the Attorney General’s motion for
    summary judgment and denying their motion for summary judgment, Plaintiffs filed
    timely notice of appeal on 25 October 2017.
    II. Jurisdiction
    Jurisdiction lies in this Court pursuant to N.C. Gen. Stat. § 7A-27(b) (2017) as
    an appeal from a final judgment of the superior court.
    III. Standard of Review
    “Summary judgment is appropriate if the pleadings, depositions, answers to
    interrogatories, and admissions on file, together with the affidavits, if any, show that
    there is no genuine issue as to any material fact and that [a] party is entitled to
    judgment as a matter of law.” Summey v. Barker, 
    357 N.C. 492
    , 496, 
    586 S.E.2d 247
    ,
    249 (2003) (citation and internal quotation marks omitted); see N.C. Gen. Stat. § 1A-
    1, Rule 56(c).
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    DE LUCA V. STEIN
    Opinion of the Court
    A defendant may show entitlement to summary judgment
    by (1) proving that an essential element of the plaintiff’s
    case is non-existent, or (2) showing through discovery that
    the plaintiff cannot produce evidence to support an
    essential element of his or her claim, or (3) showing that
    the    plaintiff  cannot      surmount    an    affirmative
    defense. Summary judgment is not appropriate where
    matters of credibility and determining the weight of the
    evidence exist.
    Once the party seeking summary judgment makes the
    required showing, the burden shifts to the nonmoving
    party to produce a forecast of evidence demonstrating
    specific facts, as opposed to allegations, showing that he
    can at least establish a prima facie case at trial. To hold
    otherwise . . . would be to allow plaintiffs to rest on their
    pleadings, effectively neutralizing the useful and efficient
    procedural tool of summary judgment.
    Draughon v. Harnett Cty. Bd. of Educ., 
    158 N.C. App. 208
    , 212, 
    580 S.E.2d 732
    , 735
    (2003) (citations and quotation marks omitted), aff’d per curiam, 
    358 N.C. 131
    , 
    591 S.E.2d 521
     (2004).
    “Our standard of review of an appeal from summary judgment is de novo[.]” In
    re Will of Jones, 
    362 N.C. 569
    , 573, 
    669 S.E.2d 572
    , 576 (2008) (quoting Forbis v. Neal,
    
    361 N.C. 519
    , 523-24, 
    649 S.E.2d 382
    , 385 (2007)). “The evidence produced by the
    parties is viewed in the light most favorable to the non-moving party.” Hardin v. KCS
    Int’l., Inc., 
    199 N.C. App. 687
    , 695, 
    682 S.E.2d 726
    , 733 (2009) (citation omitted). “If
    the evidentiary materials filed by the parties indicate that a genuine issue of material
    fact does exist, the motion for summary judgment must be denied.” Vernon, Vernon,
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    DE LUCA V. STEIN
    Opinion of the Court
    Wooten, Brown & Andrews, P.A. v. Miller, 
    73 N.C. App. 295
    , 298, 
    326 S.E.2d 316
    , 319
    (1985).
    Here, both parties moved for summary judgment and assert no genuine issues
    of material fact exist. Under our de novo review of an order granting summary
    judgment, we are not bound by the trial court’s conclusion or the parties’ contention
    that no genuine issues of material fact exist. See MCC Outdoor, LLC v. Town of Wake
    Forest, 
    222 N.C. App. 70
    , 75, 
    729 S.E.2d 694
    , 697 (2012) (denying summary judgment
    on both the plaintiff’s and the defendant’s motions after determining genuine issues
    of material fact existed).
    IV. Analysis
    A. Standing
    Intervenors argue Plaintiffs do not have standing to bring suit over the grant
    funds provided in the Agreement. Standing refers to “a party’s right to have a court
    decide the merits of a dispute[,]” and provides the courts of this State subject matter
    jurisdiction to hear a party’s claims. Teague v. Bayer AG, 
    195 N.C. App. 18
    , 23, 
    671 S.E.2d 550
    , 554 (citation and internal quotation marks omitted).
    “[S]tanding is a necessary prerequisite to a court’s proper exercise of subject
    matter jurisdiction and can be challenged at any stage of the proceedings, even after
    judgment.” Willowmere Cmty. Ass’n, Inc. v. City of Charlotte, 
    370 N.C. 553
    , 561, 
    809 S.E.2d 558
    , 563-64 (2018) (internal quotation marks and citations omitted).
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    DE LUCA V. STEIN
    Opinion of the Court
    “Standing is jurisdictional in nature and consequently, standing is a threshold issue
    that must be addressed, and found to exist, before the merits of the case are judicially
    resolved.” In re Miller, 
    162 N.C. App. 355
    , 357, 
    590 S.E.2d 864
    , 865 (2004).
    Standing is a question of law which this Court reviews de novo. Neuse River
    Found., Inc. v. Smithfield Foods, Inc., 
    155 N.C. App. 110
    , 114, 
    574 S.E.2d 48
    , 51
    (2002), disc. review denied, 
    356 N.C. 675
    , 
    577 S.E.2d 628
     (2003).
    The Attorney General initially asserted De Luca lacked standing in a Rule
    12(b)(6) motion to dismiss. The trial court ruled De Luca and NHCBE had standing
    in its 14 July 2017 order granting Plaintiffs’ request for a preliminary injunction.
    The Attorney General subsequently reasserted Plaintiffs’ lack of standing in a brief
    in support of his motion for summary judgment. The trial court expressly declined to
    revisit the issue of standing in its 12 October 2017 order, which granted Defendants’
    motion for summary judgment. The trial court’s order states:
    In a prior order of the Superior Court, the Honorable
    Robert Hobgood presiding, the Court found that Plaintiffs
    DeLuca and the New Hanover Board of Education each had
    standing. Although Defendant raises this issue anew in
    arguing the current motion, the prior order of the Court
    will not be revisited by the undersigned.
    Intervenors, but not the Attorney General, argue on appeal that the Plaintiffs
    lack standing. Neither the Attorney General nor the Intervenors appealed from the
    trial court’s earlier order in which it concluded Plaintiffs each had standing.
    Nevertheless “[s]tanding is a necessary prerequisite to a court’s proper exercise of
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    DE LUCA V. STEIN
    Opinion of the Court
    subject matter jurisdiction,” Aubin v. Susi, 
    149 N.C. App. 320
    , 324, 
    560 S.E.2d 875
    ,
    878-79, disc. review denied, 
    356 N.C. 610
    , 
    574 S.E.2d 474
     (2002), and “[a] challenge
    to subject matter jurisdiction may be made at any time.” Whittaker v. Furniture
    Factory Outlet Shops, 
    145 N.C. App. 169
    , 172, 
    550 S.E.2d 822
    , 824 (2001) (citations,
    quotation marks, and ellipses in original omitted).          Because, “subject matter
    jurisdiction may not be waived, and this Court has not only the power, but the duty
    to address the trial court’s subject matter jurisdiction[,]” we address Intervenors
    arguments concerning standing. Rinna v. Steven B., 
    201 N.C. App. 532
    , 537, 
    687 S.E.2d 496
    , 500 (2009).
    1. De Luca’s Standing
    With regard to Plaintiff De Luca, Intervenors argue De Luca’s standing as a
    taxpayer is “limited to challenges against the government for misuse or
    misappropriation of public funds.” (Emphasis original). Intervenors contend this case
    does not involve public or taxpayer funds because the grant funding at issue is
    provided by private companies.     This Court addressed the question of taxpayer
    standing to bring suit under Article IX, § 7 of the North Carolina Constitution in
    Fuller v. Easley, 
    145 N.C. App. 391
    , 
    553 S.E.2d 43
     (2001).
    In Fuller, the plaintiff brought an action against then Attorney General Easley,
    alleging the Attorney General had improperly diverted proceeds from numerous
    lawsuits to a “public service message campaign.” Fuller, 145 N.C. App. at 393-94, 553
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    DE LUCA V. STEIN
    Opinion of the Court
    S.E.2d at 45-46. The plaintiff alleged the lawsuit proceeds were required to be used
    to fund public education pursuant to Article IX, § 7 of the State Constitution. Id. at
    396, 
    553 S.E.2d at 47
    . The plaintiff brought the suit in his capacity as a taxpayer of
    Wake County. Id. at 395, 
    553 S.E.2d at 46
    . The trial court dismissed the plaintiff’s
    complaint for reasons unspecified in its order. Id. at 394, 
    553 S.E.2d at 46
    .
    On appeal, the plaintiff argued the trial court improperly dismissed his
    complaint, in part, for lack of standing. 
    Id.
     In addressing the plaintiff’s arguments,
    this Court recited the rules regarding taxpayer standing, as follows:
    Generally, an individual taxpayer has no standing to bring
    a suit in the public interest. Green v. Eure, Secretary of
    State, 
    27 N.C. App. 605
    , 608, 
    220 S.E.2d 102
    , 105 (1975).
    However, the taxpayer may have standing if he can
    demonstrate:
    [A] tax levied upon him is for an unconstitutional,
    illegal or unauthorized purpose[;] that the carrying
    out of [a] challenged provision will cause him to
    sustain personally, a direct and irreparable injury[;]
    or that he is a member of the class prejudiced by the
    operation of [a] statute.
    Texfi Industries v. City of Fayetteville, 
    44 N.C. App. 268
    ,
    270, 
    261 S.E.2d 21
    , 23 (1979) (citations omitted). Our
    review of plaintiff’s complaint reveals no allegations which
    allow him to sue as an individual taxpayer.
    Nonetheless, plaintiff may have had standing to bring a
    taxpayer action, not as an individual taxpayer, but on
    behalf of a public agency or political subdivision, if “ ‘the
    proper authorities neglect[ed] or refus[ed] to act.’ ” Guilford
    County Bd. of Comrs. v. Trogdon, 
    124 N.C. App. 741
    , 747,
    
    478 S.E.2d 643
    , 647 (1996) (quoting Branch v. Board of
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    DE LUCA V. STEIN
    Opinion of the Court
    Education, 
    233 N.C. 623
    , 625, 
    65 S.E.2d 124
    , 126 (1951)).
    To establish standing to bring an action on behalf of public
    agencies and political divisions, a taxpayer must allege
    that he is a taxpayer of [that particular] public
    agency or political subdivision, . . . [and either,] “(1)
    there has been a demand on and refusal by the
    proper authorities to institute proceedings for the
    protection of the interests of the political agency or
    political subdivision; or (2) a demand on such
    authorities would be useless.”
    
    Id.
     (citation omitted).
    Id. at 395-96, 
    553 S.E.2d at 46-47
    . This Court concluded the plaintiff in Fuller lacked
    standing because he had “failed to allege that the Wake County Board of Education
    or any other Board of Education refused to bring a suit to recover funds, that he
    requested the Board do so, or that such a request would be futile.” Id. at 396, 
    553 S.E.2d at 47
    .
    Upon reviewing Plaintiffs’ complaint, Plaintiffs have failed to allege any basis
    upon which De Luca may sue solely upon his capacity as a taxpayer. De Luca has
    not alleged that: (1) the payments at issue constitute an illegal or unconstitutional
    tax; (2) the Agreement has caused him a personal, direct, and irreparable injury; or,
    (3) he is a member of a class prejudiced by the Agreement. See Texfi, 
    44 N.C. App. at 270
    , 
    261 S.E.2d at 23
    .
    De Luca’s complaint also fails to allege he had made any demand upon proper
    authorities to bring suit, or that such a demand would be futile or useless. See
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    DE LUCA V. STEIN
    Opinion of the Court
    Trogdon, 124 N.C. App. at 747, 
    478 S.E.2d at 647
    . Under our precedents, De Luca
    has not alleged a basis to sustain his standing to challenge the Attorney General’s
    alleged violation of Article IX, § 7 of our State Constitution. See Fuller, at 394, 
    553 S.E.2d at 46
    .
    2. NHCBE’s Standing
    Intervenors also argue NHCBE does not have standing because it has not
    demonstrated “any injury in fact from the creation or execution of the Smithfield
    Agreement” and “[n]either plaintiff has presented any evidence to support a claim
    that the Agreement has deprived them of payments to which they are entitled.” We
    disagree.
    Taking the allegations in Plaintiffs’ amended complaint as true and the monies
    paid by the Companies under the Agreement as penalties, then NHCBE would be an
    intended beneficiary of a portion of those monies under Article IX, § 7 of the State
    Constitution and under N.C. Gen. Stat. § 115C-457.2 (2017), which requires all “civil
    penalties, civil forfeitures, and civil fines” to be placed in the Civil Penalty and
    Forfeiture Fund for the benefit of the public schools.
    Intervenors argument that NHCBE has failed to demonstrate standing is
    dependent upon viewing the allegations in Plaintiffs’ amended complaint in light of
    the evidence in the record. However, whether a party has standing
    is determined at the time of the filing of a complaint. “Our
    courts have repeatedly held that standing is measured at
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    DE LUCA V. STEIN
    Opinion of the Court
    the time the pleadings are filed. The Supreme Court has
    explained that ‘[w]hen standing is questioned, the proper
    inquiry is whether an actual controversy existed’ when the
    party filed the relevant pleading.” Quesinberry v.
    Quesinberry, [
    196 N.C. App. 118
    , 123], 
    674 S.E.2d 775
    , 778
    (2009) (citation omitted).
    Metcalf v. Black Dog Realty, LLC, 
    200 N.C. App. 619
    , 625, 
    684 S.E.2d 709
    , 714 (2009).
    Viewing the allegations in Plaintiffs’ complaint in the light most favorable to
    NHCBE, NHCBE would be an intended beneficiary of the monies the Companies
    have paid or are obligated to pay under the Agreement pursuant to Article IX, § 7 of
    the State Constitution. NHCBE has alleged that they have been deprived of money
    to which they are constitutionally entitled, and have consequently alleged an injury
    in fact. NHCBE has standing to maintain this action against the Attorney General
    and Intervenors. Intervenors’ arguments are overruled.
    B. N.C. Constitution Article IX, § 7
    Plaintiffs and the NCSBA argue the trial court erred in granting the Attorney
    General’s motion for summary judgment, and denying Plaintiffs’ motion, because the
    monies paid by the Companies under the Agreement are “penalties” pursuant to
    Article IX, § 7 of the North Carolina Constitution, as a matter of law. N.C. Const. art.
    IX, § 7.
    Article IX, § 7 mandates “the clear proceeds of all penalties and forfeitures and
    of all fines collected in the several counties for any breach of the penal laws of the
    State, shall belong to and remain in the several counties, and shall be faithfully
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    DE LUCA V. STEIN
    Opinion of the Court
    appropriated and used exclusively for maintaining free public schools.” N.C. Const.
    art. IX, § 7(a).   Supplementing funding for public schools with proceeds from
    “penalties, forfeitures, and fines” as unbudgeted, non-recurring sources of revenue
    reflects North Carolina’s stated and strong public policy to support public education.
    See generally David M. Lawrence, Fines, Penalties, and Forfeitures: An Historical and
    Comparative Analysis, 
    65 N.C. L. Rev. 49
    , 54-59 (1986).
    The general statutes mandate that the proceeds of penalties and other monies
    within the scope of Article IX, § 7 must be remitted by the collecting agency to the
    Office of State Management and Budget in order for the proceeds to be deposited in
    the State’s Civil Penalty and Forfeiture Fund. N.C. Gen. Stat. §§ 115C-457.2, -457.3
    (2017).
    The Supreme Court of North Carolina has defined a “penalty” to be an amount
    collected under a “penal law[ ],” or a “law[ ] that impose[s] a monetary payment for
    [its] violation [where] [t]he payment is punitive rather than remedial in nature and
    is intended to penalize the wrongdoer rather than compensate a particular party.”
    Mussallam v. Mussallam, 
    321 N.C. 504
    , 509, 
    364 S.E.2d 364
    , 366-67 (emphasis
    supplied), reh’g denied, 
    322 N.C. 116
    , 
    367 S.E.2d 915
     (1988).
    “[A]n assessment is a penalty or a fine if it is ‘imposed to deter future violations
    and to extract retribution from the violator’ for his illegal behavior.” Shavitz v. City of
    High Point, 
    177 N.C. App. 465
    , 475, 
    630 S.E.2d 4
    , 12 (2006) (emphasis supplied)
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    DE LUCA V. STEIN
    Opinion of the Court
    (quoting N.C. School Bds. Ass’n v. Moore, 
    359 N.C. 474
    , 496, 
    614 S.E.2d 504
    , 517
    (2005)).
    1. Civil Penalties
    Plaintiffs and NCSBA assert our Supreme Court’s holdings in Craven County
    Bd. of Education v. Boyles, 
    343 N.C. 87
    , 
    468 S.E.2d 50
     (1996), and Moore, 
    359 N.C. 474
    , 
    614 S.E.2d 504
    , support their arguments that the monies paid pursuant to the
    Agreement are civil “penalties” and are required to be remitted to the Civil Penalty
    and Forfeiture Fund. The Attorney General and Intervenors argue the monies paid
    under the Agreement are not “penalties” because the payments were made
    “voluntarily” by the Companies, and were not intended to penalize the Companies for
    any environmental violations “or to deter future violations.” See Shavitz, 177 N.C.
    App. at 475, 
    630 S.E.2d at 12
    . We disagree.
    In Moore, the City of Kinston had been cited for environmental violations. 
    359 N.C. at 507-08
    , 
    614 S.E.2d at 524
    . The City of Kinston entered into a settlement
    agreement with DEQ, under which it agreed to fund a “Supplemental Environmental
    Project” in lieu of paying a civil penalty. 
    Id.
     DEQ had established Supplemental
    Environmental Projects as an alternative enforcement mechanism under which
    environmental violators would agree to fund “projects that are beneficial to the
    environment and/or to public health” as part of settlements to enforcement actions.
    
    Id. at 508
    , 
    614 S.E.2d at 525
    .
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    DE LUCA V. STEIN
    Opinion of the Court
    The Supreme Court of North Carolina considered whether the monies paid by
    the City of Kinston to fund a Supplemental Environmental Project were subject to
    Article IX, § 7 of our State Constitution. Id. at 507-08, 
    614 S.E.2d at 524
    . The Court
    concluded the monies at issue were subject to Article IX, § 7, in part because:
    The payment would not have been made had [DEQ] not
    assessed a civil penalty against [the violator] for violating
    a water quality law. To suggest that the payment was
    voluntary is euphemistic at best. Moreover, the money
    paid under the [Supplemental Environmental Project] did
    not remediate the specific harm or damage caused by the
    violation even though a nexus may exist between the
    violation and the program [funded by the payment.]
    Id. at 509, 
    614 S.E.2d at 525
     (emphasis supplied).
    In Boyles, a company had been formally assessed a civil penalty by DEQ of
    $1,466,942.44. Boyles, 
    343 N.C. at 88
    , 
    468 S.E.2d at 51
    .        The company sought
    administrative review of the penalty in the Office of Administrative Hearings. Before
    the matter was adjudicated, the parties settled. 
    Id.
     The settlement required the
    company to pay $926,000, but recited that the vast majority of this amount was not
    a penalty, but instead was made to redress harm to the environment. 
    Id. at 88-89
    ,
    
    468 S.E.2d at 51
    . Despite DEQ and the company explicitly specifying the settlement
    amount to not be a penalty, our Supreme Court had determined the settlement
    payments were “covered by Article IX, Section 7.” 
    Id. at 91
    , 
    468 S.E.2d at 52
    .
    The Court based its determination primarily upon the fact the company had
    “entered into a settlement agreement” with DEQ “after the department found that
    - 18 -
    DE LUCA V. STEIN
    Opinion of the Court
    the company had violated state environmental standards and assessed a civil penalty
    against” the company “for violation of those standards.” 
    Id.
          The company had
    subsequently “filed for a contested [case] hearing and then settled with the
    department in lieu of contesting the civil penalty that had been assessed.” 
    Id.
     The
    payments fell within the scope of Article IX, § 7 because they were “paid because of a
    civil penalty assessed against” the company. Id. (emphasis supplied).
    2. Genuine Issues of Material Fact
    To support their assertions that the monies the Companies agreed to pay under
    the Agreement before us are not penalties, the Attorney General refers to several
    affidavits submitted in support of his motion for summary judgment. In the affidavit
    of Alan Hirsch, he averred that negotiations of the Agreement were initiated in 1999
    by Hirsch, the then Director of the Consumer Protection Division of the North
    Carolina Department of Justice under the direct authority of the Attorney General.
    Hirsch and representatives of the Companies took approximately eight months
    to negotiate the Agreement.        Attorneys from the Department of Justice’s
    Environmental Division were also involved throughout the negotiation process,
    purportedly “[t]o be certain that there was nothing in the language of the draft
    agreement that could be read to limit or affect in any way the compliance
    responsibilities of [DEQ].”
    - 19 -
    DE LUCA V. STEIN
    Opinion of the Court
    Hirsch averred “the Agreement was not reached in order to settle any cases in
    which a civil penalty had been issued or might later be issued[,]” and “[t]he
    Agreement did not arise from or address any actual or alleged violations of law or
    regulation on the part of Smithfield. No penalties or punitive action of any sort was
    ever discussed or considered. The Agreement was not, and is not, punitive.”
    Regarding the Companies reasons for entering the Agreement, Hirsch stated:
    9. I believe the purpose from Smithfield’s perspective was
    to solve a long running problem of major public concern, to
    demonstrate good corporate citizenship by working
    towards better waste management solutions, and to
    further its public standing by making additional
    enhancements of North Carolina’s environment. The
    image of the industry was under intense scrutiny by the
    press, citizens and the General Assembly, all a matter of
    great concern to the industry.
    Daniel Oakley stated in his affidavit:
    21. As a primary negotiator of [the Agreement], . . . I know
    that the [Agreement] was not reached in order to settle any
    cases in which a civil penalty had been assessed by [DEQ].
    As Director of the Environmental Division, I know that no
    civil penalty being defended by attorneys in my Division
    was settled, compromised, or in any way impacted by the
    negotiation or execution of the [Agreement].
    ...
    24. Although there were Notices of Violation and Civil
    Penalty Assessments issued to various hog farms from
    1995 to 2001, any Civil Penalty Assessments were resolved
    by other means and were not part of the Agreement at issue
    in this case.
    - 20 -
    DE LUCA V. STEIN
    Opinion of the Court
    The sworn attestations in these affidavits purport the payments the
    Companies undertook to pay under the Agreement are not punitive because they did
    not resolve any past, present, or future violations of environmental laws.
    Nonetheless, several factors in the record raise genuine issues of material fact
    regarding whether the payments were “intended to penalize” the Companies or were
    “imposed to deter future violations and to extract retribution from” the Companies.
    Mussallam, 
    321 N.C. at 509
    , 
    364 S.E.2d at 367
    ; Moore, 
    359 N.C. at 496
    , 
    614 S.E.2d at 517
    .
    First, it is undisputed by the parties that the negotiating and consummating
    of the Agreement was instigated at the behest of and initiated by the Attorney
    General’s office, and not by the Companies. If the Agreement was purportedly sought
    or undertaken by the Companies to “demonstrate good corporate citizenship” and to
    “improve the image” of the hog farming industry, as attested to by Alan Hirsch, and
    not to penalize the Companies for environmental or other legal violations or coerce
    the Companies’ compliance with such laws, a genuine issue of material fact exists
    regarding why the impetus for the Agreement was instigated from the office of the
    Attorney General, the chief law enforcement officer of the State, and not from DEQ
    or the Companies, or why the Attorney General retains sole authority over the
    disbursements of the funds. See In re Investigation by Attorney General, 
    30 N.C. App. 585
    , 589, 
    227 S.E.2d 645
    , 648 (1976) (“The Attorney General is . . . the State’s chief
    - 21 -
    DE LUCA V. STEIN
    Opinion of the Court
    law enforcement officer”).
    Second, the basis, formula, and manner in which the amounts are calculated
    for the Companies to pay each year under the Agreement are apparently based more
    in penalties, or a “head tax” calculation, rather than “voluntary contributions”
    designed to enhance the Companies’ “good corporate citizenship,” images or goodwill,
    and created issues of fact. The Agreement specifically provides:
    The Companies agree to pay each year for 25 years an
    amount equal to one dollar for each hog in which the
    Companies (including, for such purpose, any successor-in-
    interest of any of the Companies, by merger, sale of stock
    or assets or otherwise) have had any financial interest in
    North Carolina during the previous year, provided,
    however, that such amount shall not exceed $2 million in
    any year. For purposes of this paragraph, the Companies
    have a financial interest in any hog that, inter alia, they
    (or their nonparty subsidiaries or affiliates) raise, produce,
    contract for, own or slaughter.
    The record does not disclose the reasoning upon which the Companies agreed
    to pay the annual amount of $1-per-hog for 25 years. If the Companies were purely
    motivated out of a desire to further their corporate image, as the Attorney General
    contends, it is not apparent why they would agree to pay $1-per-hog over 25 years as
    opposed to a specific lump sum or stated contribution.
    We note that the per-hog payments specified under the Agreement bears a
    resemblance to the per-cigarette payments the General Assembly enacted in the late
    1990s to implement the Master Settlement Agreement with tobacco manufacturers
    - 22 -
    DE LUCA V. STEIN
    Opinion of the Court
    to settle lawsuits filed by several states’ Attorneys General, including Attorney
    General Easley, over healthcare costs stemming from tobacco use.
    In November 1998, North Carolina and forty-five other
    states signed a Master Settlement Agreement (MSA) with
    four major tobacco manufacturers for the purpose of
    settling claims that North Carolina could have otherwise
    asserted against those manufacturers arising from
    smoking-related health care costs incurred by the State as
    a result of the consumption of the major manufacturers’
    products. The General Assembly enacted a series of
    statutory provisions entitled the Tobacco Reserve Fund
    and Escrow Compliance Act (Act) in July, 1999 in order to
    effectuate the MSA. Pursuant to that legislation, all
    cigarette manufacturers doing business in North Carolina
    were made subject to 
    N.C. Gen. Stat. § 66-291
    , which
    required them to choose between either (1) participating in
    the MSA or (2) paying certain specified sums, computed on
    the basis of the quantities of cigarettes sold by April 15 of
    each year, into a special fund. See State ex rel. Cooper v.
    Ridgeway Brands Mfg., LLC, 
    362 N.C. 431
    , 433, 
    666 S.E.2d 107
    , 109 (2008). More specifically, 
    N.C. Gen. Stat. § 66-291
    provides that:
    (a) Any tobacco product manufacturer selling cigarettes to
    consumers within the State (whether directly or through a
    distributor, retailer, or similar intermediary or
    intermediaries) after the effective date of this Article shall
    do one of the following:
    (1) Become a participating manufacturer (as that term is
    defined in section II(jj) of the Master Settlement
    Agreement) and generally perform its financial obligations
    under the Master Settlement Agreement;   or
    (2) Place into a qualified escrow fund by April 15 of the year
    following the year in question the following amounts (as
    such amounts are adjusted for inflation): . . . .
    - 23 -
    DE LUCA V. STEIN
    Opinion of the Court
    [e. For each of 2007 and each year thereafter: $.0188482
    per unit sold.]
    
    N.C. Gen. Stat. § 66-291
    (a). The funds placed in escrow
    pursuant to 
    N.C. Gen. Stat. § 66-291
    (a)(2) are intended to
    provide a source from which any judgment for
    reimbursement of medical costs obtained by the State
    against a nonparticipating manufacturer resulting from
    the consumption of cigarettes produced by that
    nonparticipating manufacturer can be satisfied.
    State ex rel. Cooper v. Seneca-Cayuga Tobacco Co., 
    197 N.C. App. 176
    , 177-78, 
    676 S.E.2d 579
    , 581 (2009) (emphasis supplied) (citing 
    N.C. Gen. Stat. § 66-291
    (a)).
    Under the MSA:
    In return for the states dropping their suits against the
    four companies, the companies agreed to pay the states
    $206 billion over twenty-five years. Thereafter, payments
    were to continue to be based on the quantity of cigarette
    sales of each company. Payment was made as
    compensation for the additional cost that state Medicaid
    programs had allegedly incurred for treatment of Medicaid
    recipients with smoking-related diseases and as a penalty
    for deceptive trade practices of the companies.
    Frank Sloan & Lindsey Chepke, Litigation, Settlement, and the Public Welfare:
    Lessons from the Master Settlement Agreement, 
    17 Widener L. Rev. 159
    , 161 (2011).
    Unlike the tobacco MSA, the Attorney General and Intervenors contend the
    Agreement with the Companies before us is not a settlement agreement, as it
    purportedly did not “settle” any legal claims. However, a genuine issue of material
    fact exists of whether the Agreement was motivated by a desire by the Companies to
    - 24 -
    DE LUCA V. STEIN
    Opinion of the Court
    forestall, or forebear, any potential claims the Attorney General or DEQ could have
    asserted against them.
    If so, an issue of fact exists of whether the Companies would not have agreed
    to make the payments at issue, but for potential legal claims, and consequent civil
    penalties or fines, the Attorney General could have asserted against them. See Moore,
    
    359 N.C. at 509
    , 
    614 S.E.2d at 525
     (holding, in part, that a payment made by the City
    of Kinston to fund environmental programs in lieu of civil penalties asserted by DEQ
    was a penalty subject to Article IX, § 7).
    The timing of enforcement actions taken against the Companies and
    subsequent facts also raise genuine issues of material fact with regard to whether the
    payments under the Agreement were intended to be punitive, or in lieu of
    enforcement actions asserted against the Companies. Records before the Court of
    DEQ enforcement actions against the Companies presented by Plaintiffs highlight
    that a number of the Companies had civil penalties assessed against them in the time
    period preceding and following the signing of the Agreement.
    In the fourteen months preceding the signing of the Agreement, DEQ assessed
    nine civil penalties against the Companies for environmental violations. In the eight
    months following the signing of the Agreement, DEQ assessed nine additional
    penalties against the Companies. Eight of these civil penalties were paid in full by
    the Companies, including six that were paid in full after the Agreement was signed.
    - 25 -
    DE LUCA V. STEIN
    Opinion of the Court
    Seven penalties were settled for discounted amounts. Although the Companies paid
    many of these civil penalties after the Agreement was executed on 25 July 2000, all
    were for notices of violations accrued or issued by DEQ before the Agreement was
    executed. The record before us does not demonstrate DEQ issued any notices of
    violations to the Companies after the Agreement was signed.
    This apparent discrepancy between the number of notices of violations issued
    to the Companies before and after the Agreement was signed raises genuine issues of
    material fact regarding whether the Attorney General, DEQ, and the Companies
    intended for the Agreement, and the payments specified therein, to be in lieu of
    further enforcement actions, and their related civil penalties, against the Companies.
    Whether these payments were “intended to penalize” the Companies or were
    “imposed . . . to deter future violations and to extract retribution from” the Companies
    is an issue of fact, which remains to be resolved. Mussallam, 
    321 N.C. at 509
    , 
    364 S.E.2d at 366-67
    ; Moore, 
    359 N.C. at 496
    , 
    614 S.E.2d at 517
    .
    Another genuine issue of material fact, concerning whether the payments were
    intended to penalize the Companies, is also raised by the express terms of the
    Agreement. In addition to the commitment to pay up to $50 million for environmental
    enhancement activities, the Companies also committed in the Agreement to
    implement plans to correct “deficient site conditions or operating practices” on
    properties and operations they owned. The Companies also committed to implement
    - 26 -
    DE LUCA V. STEIN
    Opinion of the Court
    what the Agreement refers to as “Environmentally Superior Technologies.” The
    Agreement specifies, “[i]mplementation will include the installation and operation of
    monitoring equipment and procedures needed to ensure compliance with applicable
    environmental standards, in accordance with the applicable permit conditions.”
    (Emphasis supplied).
    The question of why the Companies committed to undertake actions to
    remediate deficient conditions on their farms and operations, install equipment, and
    additionally pay up to $50 million raises the issue of whether the $50 million in
    additional payments was intended to penalize the Companies for non-compliance
    with environmental standards or to induce forbearance on the part of the Attorney
    General, or DEQ, in bringing future enforcement actions. This is especially pertinent
    in light of the Companies relinquishing any control over to whom and in what
    amounts the Attorney General distributes the environmental grants.
    Another genuine issue of material fact concerning whether these payments
    were intended to be penalties is raised by two official and public communications
    issued by the Attorney General’s office in 2002 and 2013, respectively. Both of these
    communications expressly refer to the Agreement as a “settlement.” Whether the
    Agreement is, in fact, a “settlement” is not ultimately determinative of whether the
    payments are penalties. See Boyles, 
    343 N.C. at 92
    , 
    468 S.E.2d at 53
     (stating “it is not
    determinative that the monies were collected by virtue of a settlement agreement”).
    - 27 -
    DE LUCA V. STEIN
    Opinion of the Court
    However, the Attorney General’s reference to the Agreement as a “settlement” in
    these press releases raises a genuine issue of material fact of whether the parties
    intended for the Agreement, and the payments thereunder, to be in lieu of any
    potential claims or enforcement actions the Attorney General or DEQ could have
    brought against the Companies.
    Based upon the genuine issues of material fact regarding whether these
    payments, instigated at the Attorney General’s behest, were “intended to penalize”
    the Companies or were “imposed . . . to deter future violations and to extract
    retribution from” the Companies, the superior court incorrectly concluded these
    payments constitute civil penalties as a matter of law.
    V. Conclusion
    Genuine issues of material fact exist to preclude summary judgment for the
    parties. The record on appeal is not sufficiently developed for us to make the de novo
    determination of whether the payments undertaken by the Companies under the
    Agreement were, as a matter of law, “penalties” within the scope of Article IX, § 7 of
    our State Constitution.    Whether these payments are penalties depends upon
    whether they were “intended to penalize” the Companies or “imposed to deter future
    violations and to extract retribution.” Mussallam, 
    321 N.C. at 509
    , 
    364 S.E.2d at
    366-
    67; Moore, 
    359 N.C. at 496
    , 
    614 S.E.2d at 517
    .
    - 28 -
    DE LUCA V. STEIN
    Opinion of the Court
    We reverse the trial court’s order, which determined that the payments are not
    penalties as a matter of law. We remand to the trial court for trial to determine
    whether the payments in the Agreement were intended to constitute penalties,
    payment in lieu of penalties, forbearance for potential or future enforcement actions,
    or were not penalties. The order of the trial court, which granted Defendant’s motion
    for summary judgment, is reversed. This matter is remanded for trial. It is so
    ordered.
    REVERSED AND REMANDED.
    Judge BERGER concurs.
    Judge BRYANT dissents with separate opinion.
    - 29 -
    No. COA17-1374 – De Luca v. Stein
    Bryant, Judge, dissenting.
    The majority holds that genuine issues of material fact exist so as to preclude
    summary judgment because the “record on appeal is not sufficiently developed for us
    to make the determination of whether the payments undertaken by the Companies
    [(Smithfield Foods, Inc., and subsidiaries)] under the Agreement were ‘penalties’
    within the scope of Article IX § 7 of our State Constitution.” The majority goes on to
    state that “[w]hether these payments are penalties depends upon whether they were
    ‘intended to penalize’ the Companies or ‘imposed to deter future violations and to
    extract retribution.’ ” Because I believe the record on appeal is sufficient to make a
    determination as a matter of law on the question before this Court, I respectfully
    dissent.
    The trial court concluded as a matter of law that funds paid pursuant to the
    agreement between the North Carolina Attorney General and the Companies were
    not subject to Article IX of the North Carolina Constitution and should not be
    remitted to the Civil Penalty and Forfeiture Fund. The question before this Court is
    whether the trial court erred in reaching this conclusion. I submit the trial court did
    not err.
    I disagree with the majority’s determination that there are genuine issues of
    material fact—a determination that is not otherwise supported herein. The record is
    replete with affidavits and submissions on the very matters for which the majority
    would have the trial court hold another hearing. In the summary judgment hearing
    DE LUCA V. STEIN
    Bryant, J., dissenting
    before the trial court and in the arguments made before this Court, there was no
    argument that the case was not ripe for summary judgment or that genuine issues of
    material fact were yet to be decided. In fact, plaintiff-appellant states:
    The question before the trial court was a matter of law—
    whether the Smithfield Agreement constituted a
    settlement agreement such that the Section III.D
    payments must be remitted to the Civil Penalty and
    Forfeiture Fund. . . . ONLY A QUESTION OF LAW
    REMAINS . . . Plaintiffs have consistently maintained this
    case is one “where only a question of law on the
    indisputable facts is in controversy.”
    (citation omitted). Plaintiffs then go on to outline what they consider to be the
    relevant, indisputable facts, none of which are in controversy. They, and all parties,
    acknowledge the only matter in controversy is the legal issue that has been appealed
    to this Court.
    By determining that material issues of fact exist and that the matter should
    be remanded to the trial court, this Court has created an argument none of the parties
    anticipated. See Viar v. N. Carolina Dep’t of Transp., 
    359 N.C. 400
    , 402, 
    610 S.E.2d 360
    , 361 (2005) (“It is not the role of the appellate courts, however, to create an appeal
    for a[] [party]. As this case illustrates, the Rules of Appellate Procedure must be
    consistently applied; otherwise, the Rules become meaningless, and an [opposing
    party] is left without notice of the basis upon which an appellate court might rule.”
    (citation omitted)).
    2
    DE LUCA V. STEIN
    Bryant, J., dissenting
    Therefore, based on the voluminous evidence before this Court, I would reach
    the main legal issue before us—which is the same issue that was before the trial
    court—hold that the trial court properly applied the law to the undisputed material
    facts of this case, and affirm the judgment of the trial court.
    3