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NC Supreme Court rules in favor of attorney general in Smithfield case, deals setback to conservatives

The North Carolina Supreme Court delivered a blow to conservatives today, ruling that the attorney general’s office is within its authority to allocate environmental grants from the historic Smithfield Foods agreement.

In its decision, the Supreme Court reversed the state appellate court’s ruling against the attorney general’s office. It returned the case to the appeal court for any outstanding issues unrelated to today’s decision.

The case, New Hanover County Board of Education vs. Josh Stein, began more than three years ago when Francis X. DeLuca, the former director of conservative think tank the Civitas Institute, sued the attorney general’s office, then occupied by Roy Cooper.

The Smithfield agreement was a deal brokered in 2000 among then-attorney general Mike Easley, the pork producer and its subsidiaries to compensate for the environmental damage caused by industrialized hog farms.

DeLuca had argued that the $50 million, payable to the state by pork producer Smithfield Foods over 25 years was not a voluntary contribution, but actually a civil penalty. Instead of the attorney general disbursing the Smithfield funds to environmental nonprofits, cities and other eligible groups, as laid out in the agreement, that money should have been reallocated to school districts, DeLuca argued.

Under state law, civil penalties and forfeitures are allocated to school districts in the counties where the offenses occurred.

The fact that DeLuca brought the suit, in effect advocating for public schools, is a smokescreen. The Civitas Institute has long criticized the public school system, favoring instead charter schools, the privatization of education and further cuts to public education. Instead, the lawsuit was really about eliminating funding for environmental groups and projects.

However, an appeals court found that DeLuca did not have standing to sue, and the New Hanover County Board of Education became the plaintiff.

From 1995 to 2000 waste lagoons, not all of them Smithfield’s, “had spilled millions of gallons of waste into North Carolina waterways,” according to court documents, “contaminating surface waters and killing aquatic life, while seepage from waste lagoons impacted groundwater supplies.”

Under the terms of the 2000 agreement, Smithfield pays $1 per hog it owns in North Carolina each year, up to $2 million annually, roughly equivalent to $50 million. The agreement is valid through 2025.

Of the voluntary funds, about $15 million is to be spent on developing “environmentally superior” waste management systems, although Smithfield has not made any meaningful progress toward those solutions.

The payments, testified several officials in affidavits, were not intended as penalties for wrongdoing, but rather “voluntary contributions” that the corporation paid in order to burnish its image by “working toward better waste management solutions.”

In fact, as the Supreme Court pointed out, state environmental regulators continued to penalize Smithfield after the agreement was signed. According to court documents, Christine Lawson, program manager for the Department of Environmental Quality’s Animal Feeding Operations Program, provided an affidavit listing approximately 19 civil penalties against Smithfield and its subsidiaries during the year preceding the execution of the agreement and the year following the execution of the agreement.

According to Lawson, “almost half of those penalties were assessed after the execution of the agreement and were based upon notices of violation that had been issued prior to the agreement’s execution.”

The Smithfield contributions go into an escrow account managed by PNC Bank. Each year, as part of the Environmental Enhancement Program, the attorney general’s office solicits proposals and then awards funding to groups working on environmental projects that would improve water quality in the state. Nonprofits, government agencies and other groups can apply for the grants, which max out at $500,000.

While the applications are reviewed by a panel of representatives for state agencies, universities and environmental nonprofits, the attorney general has the sole authority to award choose the recipients and award the money.

The attorney general’s office has awarded $24 million to grant recipients since the fund’s inception. It recently solicited another round of applications.

Wake County Superior Court Judge Paul Ridgeway originally ruled in favor of the attorney general’s office. The New Hanover Board of Education appealed the decision, and the state appellate court was split on the matter, which automatically sent the case to the NC Supreme Court.

Supreme Court Justice Sam Ervin IV wrote the opinion for the majority of the court; Judge Paul Newby wrote the dissent.

Sound Rivers and the NC Coastal Federation intervened on behalf of the attorney general’s office. They were represented by the Southern Environmental Law Center. The New Hanover County school board was represented by former Republican legislator, attorney Paul Stam.

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