Title: New Hanover County Board of Education v. Stein
Citation: N/A
Docket Number: 339A18
State: north-carolina
Issuer: north-carolina Supreme Court
Date: April 3, 2020

IN THE SUPREME COURT OF NORTH CAROLINA 
No. 339A18 
Filed 3 April 2020 
THE NEW HANOVER COUNTY BOARD OF EDUCATION 
 
v. 
 
JOSH STEIN, in his capacity as Attorney General of the State of North Carolina; 
and NORTH CAROLINA COASTAL FEDERATION and SOUND RIVERS, INC., 
Intervenors 
 
 
Appeal pursuant to N.C.G.S. 7A-30(2) from a divided panel of the Court of 
Appeals, 820 S.E.2d 89 (N.C. Ct. App. 2018), reversing and remanding an order 
entered on 12 October 2017 by Judge Paul C. Ridgeway in Superior Court, Wake 
County.  On 30 January 2019, the Supreme Court allowed petitions for discretionary 
review as to additional issues filed by plaintiff, defendant, and intervenors.  Heard in 
the Supreme Court on 19 November 2019 in session in the Whitted Building in the 
Town of Hillsborough pursuant to section 18B.8 of Chapter 57 of the 2017 North 
Carolina Session Laws. 
Stam Law Firm, PLLC, by R. Daniel Gibson and Paul Stam, for plaintiff-
appellee. 
 
Joshua H. Stein, Attorney General, by Matthew W. Sawchak, Solicitor General, 
James W. Doggett, Deputy Solicitor General, and Marc Bernstein, Special 
Deputy Attorney General, for defendant-appellant Josh Stein. 
 
The Southern Environmental Law Center, by Mary Maclean Asbill, Brooks 
Rainey Pearson, and Blakely E. Hildebrand, for intervenor-appellants North 
Carolina Coastal Federation and Sound Rivers, Inc. 
 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-2- 
Tharrington Smith, L.L.P., by Lindsay Vance Smith and Deborah R. Stagner; 
and Allison B. Schafer for North Carolina School Boards Association, amicus 
curiae. 
 
ERVIN, Justice. 
On 25 July 2000, following a five-year period during which ruptured or flooded 
hog waste lagoons spilled millions of gallons of waste into North Carolina’s 
waterways, then-Attorney General Michael F. Easley entered into an agreement with 
Smithfield Foods, Inc., and several of its subsidiaries.1  Pursuant to the agreement, 
Smithfield and its subsidiaries agreed to: 
(1) undertake 
immediate 
measures 
for 
enhanced 
environmental protection on Company-owned Farms 
and provide assistance to Contract Farmers in 
undertaking these same measures; 
 
(2) commit 
$15 
million 
for 
the 
development 
of 
Environmentally 
Superior 
Technologies 
for 
the 
management of swine waste and to facilitate the 
development, testing, and evaluation of potential 
technologies on Company-owned Farms; 
 
(3) install Environmentally Superior Technologies on each 
Company-owned Farm in North Carolina and provide 
financial and technical assistance to Contract Farmers 
for the installation of these technologies; 
 
(4) commit $ 50 million to environmental enhancement 
activities; 
 
(5) cooperate fully with the Attorney General to ensure 
compliance with applicable laws, regulations, policies 
and standards; and 
                                            
1 The Smithfield subsidiaries that joined in the agreement include Brown’s of 
Carolina, Inc.; Carroll’s Foods, Inc.; Murphy Farms, Inc.; Carroll’s Foods of Virginia, Inc.; 
and Quarter M Farms, Inc. 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-3- 
 
(6) in cooperation with the Attorney General and all other 
interested parties, take a leadership role in enhancing 
the effectiveness of the Albemarle-Pamlico National 
Estuary Program . . . . 
 
In compliance with the provision of the agreement in which Smithfield and its 
subsidiaries agreed to commit $50 million to facilitate environmental enhancement 
activities, the entities in question promised to “pay each year for 25 years an amount 
equal to one dollar for each hog in which [Smithfield and its subsidiaries] . . . had any 
financial interest in North Carolina during the previous year, provided . . . that such 
amount shall not exceed $2 million in any year.”  The agreement further provided 
that the monies derived from these payments were to be deposited into an escrow 
account and “paid to such organizations or trusts as the Attorney General will 
designate . . . to enhance the environment of the State.”  In administering the grant 
program, the Attorney General was entitled to consult with the North Carolina 
Department of Environmental Quality2 and “any other groups or individuals he 
deem[ed] appropriate and [to] appoint any advisory committees he deem[ed] 
appropriate.”  Finally, the agreement provided that, “in consideration of the 
commitments by [Smithfield and its subsidiaries], the Attorney General agrees . . . 
[t]o use the full power and authority of his office to diligently pursue expeditious 
implementation of Environmentally Superior Technologies” on farms identified in the 
                                            
2 At the time that the agreement between the Attorney General and Smithfield and 
its subsidiaries was entered into, the North Carolina Department of Environmental Quality 
was known as the North Carolina Department of Environment and Natural Resources. 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-4- 
agreement; to “use his influence to expedite the permitting process”; and to refrain 
from “undertak[ing] any actions in conflict with” the agreement. 
In January 2003, then-Attorney General Roy Cooper established the 
Environmental Enhancement Grants Program in order to “improve the air, water and 
land quality of North Carolina by funding environmental projects that address the 
goals of the agreement.”  On an annual basis, the grant program accepts applications 
from government agencies and nonprofit organizations.  The submitted applications 
are reviewed by a panel consisting of representatives from the North Carolina 
Department of Justice, the Department of Environmental Quality, the North 
Carolina Department of Natural and Cultural Resources, academic institutions, and 
conservation-focused nonprofit organizations. 
After completing the review process, the panel makes a recommendation to the 
Attorney General concerning the manner in which the available grant monies should 
be distributed.  A representative of Smithfield and its subsidiaries is entitled to make 
a separate recommendation concerning the same subject.  After considering the 
recommendation, the Attorney General selects the recipients to be awarded grants 
and determines the amount, up to a maximum of $500,000, to be awarded to each 
recipient.  In the years since the agreement was executed, the Attorney General has 
awarded approximately $25 million in grants under the program. 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-5- 
On 18 October 2016, Francis X. De Luca filed a complaint alleging that 
payments made pursuant to the agreement were actually civil penalties for purposes 
of article IX, section 7 of the North Carolina Constitution, which states that: 
(a)  
Except as provided in subsection (b) of this section, 
all moneys, stocks, bonds, and other property belonging to 
a county school fund, and 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 
appropriated 
and 
used 
exclusively 
for 
maintaining free public schools. 
 
(b)  
The General Assembly may place in a State fund the 
clear proceeds of all civil penalties, forfeitures, and fines 
which are collected by State agencies and which belong to 
the public schools pursuant to subsection (a) of this section.  
Moneys in such State fund shall be faithfully appropriated 
by the General Assembly, on a per pupil basis, to the 
counties, to be used exclusively for maintaining free public 
schools. 
 
N.C. Const. art. IX, § 7.  As a result, Mr. De Luca sought to have the Attorney General 
preliminarily and permanently enjoined from distributing monies received pursuant 
to the agreement to any recipient other than the Civil Penalty and Forfeiture Fund 
authorized by article IX, section 7(b) and N.C.G.S. §§ 115C-457.1–475.3 and 
requested that all monies distributed under the grant program within the last three 
years and all future payments received by the Attorney General be placed into the 
Civil Penalty and Forfeiture Fund. 
On 19 December 2016, the Attorney General filed a motion to dismiss Mr. De 
Luca’s complaint pursuant to Rules 12(b)(2) and 12(b)(6) of the North Carolina Rules 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
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of Civil Procedure.  On 25 January 2017, Mr. De Luca filed an amended complaint 
adding the New Hanover County Board of Education as an additional party plaintiff 
and substituting current Attorney General Joshua H. Stein, in his official capacity, 
as the party defendant.  The Attorney General then filed an amended dismissal 
motion.  On 14 June 2017, plaintiffs filed a motion seeking the issuance of a 
preliminary injunction precluding the Attorney General from making any further 
disbursements under the grant program and requiring the Attorney General to 
initiate legal proceedings to recoup any funds that had been disbursed in accordance 
with the grant program since 2014.  On 16 June 2017, plaintiffs filed a motion seeking 
the entry of summary judgment in their favor. 
On 27 June 2017, Judge Robert H. Hobgood entered an order denying the 
Attorney General’s amended dismissal motion and directing the Attorney General to 
answer the amended complaint and an additional order preliminarily enjoining the 
Attorney General from making disbursements under the agreement pending final 
resolution of this case.  On 17 July 2017, the Attorney General filed an answer to 
plaintiffs’ amended complaint in which he denied the material allegations contained 
in the amended complaint and asserted a number of affirmative defenses, including 
laches, waiver, failure of consideration, and equitable estoppel.  On 21 July 2017, 
Judge Hobgood entered an amended preliminary injunction precluding the Attorney 
General from making any disbursements to recipients relating to grants awarded on 
or after 30 September 2016.  On 21 August 2017, the North Carolina Coastal 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
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Federation and Sound Rivers, Inc., filed a motion seeking leave to intervene in 
support of the Attorney General and a proposed answer to plaintiffs’ amended 
complaint. 
On 22 September 2017, the Attorney General filed a motion seeking the entry 
of summary judgment in his favor along with a number of attached affidavits from 
individuals with knowledge about the process that led to the execution of the 
agreement.  In his affidavit, Alan S. Hirsch, a former Director of the Consumer 
Protection Division of the Department of Justice, stated that he had “led the 
negotiation and drafting” of the agreement on behalf of the Attorney General.  Mr. 
Hirsch averred that, in his opinion, Smithfield and its subsidiaries had entered into 
the agreement in order to address a “long running problem of major public concern, 
to demonstrate good corporate citizenship[,] . . . and to further its public standing by 
making additional enhancements of North Carolina’s environment” given that “[t]he 
image of the industry was under intense scrutiny.”  Mr. Hirsch indicated that the 
agreement was drafted in such a manner as to prevent it from being “read to limit or 
affect in any way the compliance responsibilities of [the Department of 
Environmental Quality]”; that the agreement did not “arise from,” “address,” or 
“settle” “any actual or alleged violations of law” that Smithfield and its subsidiaries 
might have committed in the past or might commit in the future or to resolve any 
cases in which a civil penalty “had been issued or might later be issued” against 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
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Smithfield and its subsidiaries; and that “[n]o penalties or punitive action of any sort 
was ever discussed or considered” during the negotiations of the agreement. 
Daniel C. Oakley, a former Director of the Environmental Division of the 
Department of Justice, averred in his affidavit that he had been a “primary 
negotiator” of the agreement.  According to Mr. Oakley, “the agreement was not 
reached in order to settle any cases in which a civil penalty had been assessed by [the 
Department of Environmental Quality].”  In fact, Mr. Oakley “[knew] that no civil 
penalty being defended by attorneys in [his] [d]ivision was settled, compromised, or 
in any way impacted by the negotiation or execution of” the agreement.  In addition, 
Mr. Oakley noted that, “[a]lthough 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 [a]greement at 
issue in this case.”  Finally, Mr. Oakley stated that Roy Cooper took office as Attorney 
General and William G. Ross took office as Secretary of the Department of 
Environmental Quality in January 2001 and that these two individuals had “ensured 
that [the Department of Environmental Quality] continued its robust enforcement 
activity against those of the State’s hog farms that were not in compliance with laws 
and regulations for discharge and non-discharge operations.” 
Dennis Ramsey, a former Supervisor of the Non-Discharge Branch of the 
Division of Water Resources at the Department of Environmental Quality, stated in 
his affidavit that penalties for environmental noncompliance were assessed by the 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
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director of the Division of Water Quality from 1995 until 2001.  Mr. Ramsey indicated 
that he had been responsible for making recommendations to the division director 
concerning the entities that should be penalized during that period.  In addition, Mr. 
Ramsey averred that he was familiar with the process by which penalty assessments 
were settled and compromised.  Mr. Ramsey stated that he had never been asked to 
modify any enforcement-related recommendation based upon the agreement and 
that, “[t]o the best of [his] knowledge,” the agreement was “entirely separate from, 
and in no way related to, any pending or anticipated enforcement action by [the 
Department of Environmental Quality] against any of the signatories to the 
[a]greement.” 
Finally, Christine Lawson, the Program Manager for the Department of 
Environmental Quality’s Animal Feeding Operations Program, executed an affidavit 
in which she provided information demonstrating that the Department of 
Environmental Quality had assessed approximately nineteen 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 the 
information provided by Ms. 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. 
On 25 September 2017, the North Carolina School Boards Association filed a 
motion seeking leave to file an amicus curiae brief in support of plaintiffs’ position.  
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
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On 28 September 2017, plaintiffs filed a response in opposition to the intervention 
petition filed by the Coastal Federation and Sound Rivers and a renewed summary 
judgment motion in which they cited to (1) records showing a history of environmental 
violations by Smithfield and its subsidiaries, including several violations that had 
been noticed in the year prior to the execution of this agreement; (2) a letter written 
by counsel for Smithfield and its subsidiaries several months after the execution of 
the agreement stating that “Smithfield [and its subsidiaries] benefit[ ] [from the 
agreement] because it is an opportunity to avoid enforcement actions by correcting 
deficiencies before they become enforcement problems” and because it “gives both the 
State and Smithfield [and its subsidiaries] an opportunity to correct deficiencies that 
might not be compliance problems now, but could lead to noncompliance in the future 
if not corrected”; and (3) statements that the Attorney General’s Office had made in 
press releases issued in 2002 and 2013 referring to the agreement as a “settlement.”  
In addition, plaintiffs asserted that the Attorney General lacked the authority to 
enter into the agreement. 
On 12 October 2017, the trial court entered an ordering granting summary 
judgment in favor of the Attorney General.  In reaching this conclusion, the trial court 
stated that the Attorney General had “presented sufficient evidence to establish its 
right to judgment as a matter of law that . . . the payments made by [Smithfield and 
its subsidiaries] under the [agreement] were not ‘penalties,’ ‘forfeitures,’ or ‘fines’ 
collected for ‘any breach of the penal laws of the State’ and thus [were] not within the 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-11- 
scope of article IX, sec[tion] 7.”  According to the trial court, the facts in this case are 
distinguishable from those at issue in earlier penalty-related cases decided by this 
Court.  The trial court determined that, even if Smithfield and its subsidiaries had 
entered into the agreement in the hope of avoiding future penalties, this 
“speculation[,] . . . even if true, would not be sufficient, as a matter of law, to recast 
the payments made under the [agreement] as ‘penalties,’ ‘forfeitures’ or ‘fines’ 
collected ‘for any breach of the penal laws of the State’ ” for purposes of article IX, 
section 7.  In other words, the trial court decided that “there is simply no proffer of 
competent evidence” that the agreement was entered into “to reduce, settle, remit or 
compromise any threatened or pending violation or to obtain forbearance by [the 
Department of Environmental Quality] of any anticipated enforcement action.”  
Finally, the trial court noted that plaintiffs had not challenged the Attorney General’s 
constitutional authority to enter into the agreement in the complaint and that, even 
if plaintiffs had pled such a claim, “it does not logically follow that the payments made 
under the [agreement], if made pursuant to an agreement in excess of the Attorney 
General’s authority, would fall under the scope of article IX, sec[tion] 7.”  As a result, 
the trial court granted the Attorney General’s motion for summary judgment, denied 
plaintiffs’ summary judgment motion, dismissed plaintiffs’ complaint, and dissolved 
the preliminary injunction.  The trial court entered separate orders allowing the 
intervention petition filed by the Coastal Federation and Sound Rivers and the filing 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
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of the amicus curiae brief submitted by the School Boards Association.  Plaintiffs 
noted an appeal from the trial court’s orders to the Court of Appeals. 
In seeking relief from the trial court’s orders before the Court of Appeals, 
plaintiffs argued that the payments made pursuant to the agreement constituted 
penalties for purposes of article IX, section 7 and that the Attorney General lacked 
the authority to enter into the agreement unless it was a settlement agreement 
subject to article IX, section 7.  On 4 September 2018, the Court of Appeals filed an 
opinion reversing the trial court’s summary judgment order and remanding this case 
to the Superior Court, Wake County, for trial. 
The Court of Appeals began its analysis by addressing the issue of whether Mr. 
De Luca had standing to assert a claim against the Attorney General pursuant to 
article IX, section 7.  De Luca v. Stein, 820 S.E.2d 89 (N.C. Ct. App. 2018).  According 
to the Court of Appeals, Mr. De Luca had failed to allege that “(1) the payments at 
issue constitute an illegal or unconstitutional tax; (2) the [a]greement has caused him 
a personal, direct, and irreparable injury; or, (3) he is a member of a class prejudiced 
by the [a]greement,” id. at 95 (citing Texfi Indus., Inc. v. City of Fayetteville, 44 N.C. 
App. 268, 270, 261 S.E.2d 21, 23 (1979), aff’d, 301 N.C. 1, 269 S.E.2d 142 (1980)), and 
had failed to file suit on behalf of any local board of education, make any demand 
upon an entity with standing to assert a claim such as the one at issue to in this case, 
or demonstrate that the making of such a demand would be futile.  Id.  On the other 
hand, the Court of Appeals held that the Board of Education did have standing to 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
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bring an action against the Attorney General pursuant to article IX, section 7 because 
it was an intended beneficiary of monies that were subject to the relevant 
constitutional provision and claimed to have been unconstitutionally deprived of 
monies to which it was entitled.  Id. 
Secondly, the Court of Appeals addressed plaintiffs’ contention that payments 
made pursuant to the agreement constituted penalties for purposes of article IX, 
section 7.  Id. at 96.  In spite of the fact that “[t]he sworn attestations in the[ ] 
affidavits [submitted on behalf of the Attorney General] purport [that] the payments 
[Smithfield and its subsidiaries] undertook to pay under the [a]greement are not 
punitive because they did not resolve any past, present, or future violations of 
environmental laws,” the Court of Appeals noted that “several factors in the record 
raise genuine issues of material fact regarding whether the payments were ‘intended 
to penalize’ [Smithfield and its subsidiaries] or were ‘imposed to deter future 
violations and to extract retribution from’ [Smithfield and its subsidiaries].”  Id. at 97 
(citing Mussallam v. Mussallam, 321 N.C. 504, 509, 364 S.E.2d 364, 367 (1988); N.C. 
Sch. Bds. Ass’n v. Moore, 358 N.C. 474, 496, 614 S.E.2d 504, 517 (2005)).  More 
specifically, the Court of Appeals held that the record reflected the existence of 
genuine issues of material fact concerning whether the agreement had been 
“instigated at the behest of and initiated by the Attorney General’s office” rather than 
by Smithfield and its subsidiaries or the Department of Environmental Quality and 
why “the Attorney General retains sole authority over the disbursement of the funds” 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
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if the agreement was “sought or undertaken by [Smithfield and its subsidiaries] to 
‘demonstrate good corporate citizenship’ and to ‘improve the image’ of the hog farming 
industry.”  Id. at 97–98.  In addition, the Court of Appeals held that there was a 
genuine issue of material fact concerning whether “the basis, formula, and manner 
in which the amounts are calculated for [Smithfield and its subsidiaries] to pay each 
year under the [a]greement [rested more upon] penalties, or a ‘head tax’ calculation,’ 
rather than [being] ‘voluntary contributions’ designed to enhance [Smithfield and its 
subsidiaries’] ‘good corporate citizenship,’ images or goodwill.”  Id. at 98.  In other 
words, the Court of Appeals questioned why Smithfield and its subsidiaries “would 
agree to pay $1-per-hog over 25 years as opposed to a specific lump sum or stated 
contribution” if they were “purely motivated out of a desire to further their corporate 
image” given that “the per-hog payments specified under the agreement [bore] a 
resemblance to the per-cigarette payments [that] the General Assembly enacted in 
the late 1990s to implement the Master Settlement Agreement with tobacco 
manufacturers to settle lawsuits filed by several states’ Attorneys General . . . over 
healthcare costs stemming from tobacco use.”  Id.  Thus, the Court of Appeals held 
that “a genuine issue of material fact exist[ed concerning] whether the agreement 
was motivated by a desire by [Smithfield and its subsidiaries] to forestall, or forebear, 
any potential claims the Attorney General or [the Department of Environmental 
Quality] could have asserted against them” and “whether [Smithfield and its 
subsidiaries] would not have agreed to make the payments at issue, but for potential 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
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legal claims, and consequent civil penalties or fines, the Attorney General could have 
asserted against them.”  Id. at 99. 
Similarly, the Court of Appeals held that the timing of enforcement actions 
taken against Smithfield and its subsidiaries raised a genuine issue of material fact 
as to whether the payments provided for in the agreement were intended to be 
punitive in nature.  Id.  In support of its decision, the Court of Appeals noted that, 
even though the Department of Environmental Quality had assessed nine penalties 
against Smithfield and its subsidiaries in the fourteen months preceding the signing 
of the agreement and an additional nine penalties in the eight months following the 
signing of the agreement, each of the penalties related to “notices of violations accrued 
or issued by [the Department of Environmental Quality] before the [a]greement was 
executed.”  Id. (emphasis omitted).  In addition, the Court of Appeals determined that 
the record “d[id] not demonstrate [that the Department of Environmental Quality 
had] issued any notices of violations to [Smithfield and its subsidiaries] after the 
[a]greement was signed.”  Id. (emphasis omitted).  According to the Court of Appeals, 
the “apparent discrepancy between the number of notices of violations issued to 
[Smithfield and its subsidiaries] before and after the [a]greement was signed” raised 
a genuine issue of material fact concerning whether payments made pursuant to the 
agreement were made “in lieu of further enforcement actions[ ] and their related civil 
penalties.”  Id. (emphasis omitted). 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
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Finally, the Court of Appeals held that “the express terms of the [a]greement” 
evidenced the existence of a genuine issue of material fact concerning whether the 
payments were intended to “penalize [Smithfield and its subsidiaries] for non-
compliance with environmental standards or to induce forbearance on the part of the 
Attorney General, or [the Department of Environmental Quality], in bringing future 
enforcement actions.”  Id. at 99–100.  In essence, the Court of Appeals asked “why 
[Smithfield and its subsidiaries] committed to undertake actions to remediate 
deficient conditions on their farms and operations, install equipment, and 
additionally pay up to $50 million” for environmental enhancement activities, 
particularly given that they had “relinquish[ed] any control over to whom and in what 
amounts the Attorney General distribute[d] the environmental grants.”  Id. at 100 
(emphasis omitted).  Similarly, the Court of Appeals noted that the Attorney General 
had described the agreement as a “settlement” in press releases issued in 2002 and 
2013 and concluded that these descriptions of the agreement raised a genuine issue 
of material fact concerning the extent to which the payments provided for in the 
agreement were intended to be penalties.  Id.  As a result, given that the Court of 
Appeals determined that the record disclosed the existence of genuine issues of 
material fact and that “[t]he record . . . is not sufficiently developed for [the Court of 
Appeals] to make the de novo determination of whether the payments undertaken by 
[Smithfield and its subsidiaries] under the [a]greement were, as a matter of law, 
‘penalties’ within the scope of [article IX, section 7],” the Court of Appeals reversed 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
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the trial court’s order and remanded this case to the Superior Court, Wake County, 
“to determine whether the payments in the [a]greement were intended to constitute 
penalties, payment in lieu of penalties, forbearance for potential or future 
enforcement actions, or were not penalties.”  Id. (emphasis omitted). 
In dissenting from the majority’s decision, Judge Bryant stated that “the record 
on appeal is sufficient to make a determination as a matter of law on the question 
before this Court” and opined that the trial court had not erred by concluding as a 
matter of law that funds paid pursuant to the agreement were not penalties subject 
to article IX, section 7.  Id. at 101.  According to Judge Bryant, the majority 
erroneously created an argument that had not been advanced by any party in the 
course of concluding that the record disclosed the existence of genuine issues of 
material fact necessitating a trial on the merits.  Id.  Instead, Judge Bryant “would 
[have] reach[ed] the main legal issue that is before us—which is the same issue that 
was before the trial court—[and would have held] that the trial court properly applied 
the law to the undisputed material facts of this case, and affirm the judgment of the 
trial court.”  Id. 
The Attorney General and the Coastal Federation and Sound Rivers filed 
notices of appeal seeking review of the Court of Appeals’ decision based upon Judge 
Bryant’s dissent.  In addition, each party filed a petition seeking discretionary review 
of additional issues pursuant to N.C.G.S. § 7A-31 to ensure that each of the issues 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
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that had been properly raised in this case before the lower courts were properly before 
this Court.3  The Court allowed each party’s discretionary review petition. 
In seeking to persuade us to overturn the Court of Appeals’ decision, the 
Attorney General4 argues that, unlike this Court’s earlier decisions holding that 
payments relating to the violation of environmental standards constituted civil 
penalties for purposes of article IX, section 7, this case did not involve the 
replacement of, or a reduction in, a previously assessed civil penalty resulting from 
violations of environmental standards.  As a result, the Attorney General contends 
that the Court of Appeals erred by failing to hold that the payments made in 
compliance with the agreement fell outside the scope of article IX, section 7. 
In addition, the Attorney General contends that the Court of Appeals failed to 
base its decision upon the analytical framework that appellate courts are required to 
utilize in evaluating the validity of a trial court’s decision to grant or deny a summary 
judgment motion.  The Attorney General argues that, after affidavits tending to show 
that payments made pursuant to the agreement should not be treated as penalties 
had been submitted, the burden shifted to plaintiffs to rebut that evidence.  See 
                                            
3 Although the Board of Education expressed disagreement with the Court of Appeals’ 
determination that Mr. De Luca lacked standing to challenge the Attorney General’s failure 
to pay monies received under the agreement to the Civil Penalty and Forfeiture Fund, Mr. 
De Luca refrained from seeking review of the Court of Appeals’ standing-related decision 
because the Board of Education could adequately present plaintiffs’ challenge to the 
agreement before this Court. 
 
4 The brief filed by the Coastal Federation and Sound Rivers adopted the arguments 
advanced by the Attorney General. 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
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N.C.G.S. § 1A-1, Rule 56(c), (e); Charlotte-Mecklenburg Hosp. Auth. v. Talford, 366 
N.C. 43, 50–51, 727 S.E.2d 866, 871–72 (2012) (affirming the trial court’s decision to 
grant summary judgment in the plaintiff’s favor in a case in which the plaintiff 
presented “minimally sufficient” evidence to satisfy its burden and the responsive 
evidence offered by the defendant “failed to demonstrate that an issue of material fact 
remained”); Kidd v. Early, 289 N.C. 343, 370, 222 S.E.2d 392, 410 (1976) (holding 
that, where the party seeking summary judgment has produced sufficient evidence 
to demonstrate that he or she is entitled to prevail as a matter of law, “the rule 
requires the party opposing a motion for summary judgment—notwithstanding a 
general denial in his pleadings—to show that he [or she] has, or will have, evidence 
sufficient to raise an issue of fact”).  The Attorney General contends, instead, that the 
Court of Appeals developed a number of unsupported and speculative theories for the 
purpose of showing that the record did, in fact, disclose the existence of disputed 
factual issues.  As a result, the Attorney General contends that the Court of Appeals’ 
conclusion that there are genuine issues of material fact should be reversed as well. 
In seeking to persuade us to reverse the decision of the Court of Appeals, the 
Board of Education argues that there is no genuine issue of material fact in this case 
and that the only question that we should address and resolve is the extent to which 
a payment made pursuant to the agreement constitutes a settlement of penalty 
claims, so that the payments required by the agreement must be remitted to the Civil 
Penalty and Forfeiture Fund.  The Board of Education argues that it “provided many 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-20- 
examples of [Smithfield and its subsidiaries’] violations and assessed penalties, press 
releases, and other documents” that “prove[d that] the [a]greement is a settlement 
agreement and is subject to article IX, section 7.”  However, instead of resolving the 
substantive issue that both parties agree was before the Court of Appeals, the Board 
of Education contends that the Court of Appeals erred by holding that the parties’ 
subjective intent in entering into the agreement “would be determinative” and by 
concluding that there existed a genuine issue of material fact as to the parties’ 
subjective intent. 
Next, the Board of Education asserts that the agreement is a settlement, with 
this contention being based upon record evidence that, in its opinion, demonstrates 
that (1) the payments made pursuant to the agreement were designed to deter 
noncompliance on the part of Smithfield and its subsidiaries and are, for that reason, 
the functional equivalent of penalties; (2) the payments made pursuant to the 
agreement are punitive rather than remedial in nature; and (3) the Attorney 
General’s references to the agreement as a settlement in 2002 and 2013 demonstrate 
that the Attorney General understood the agreement to be a settlement.  As a result, 
the Board of Education contends that this Court should hold that the payments made 
pursuant to the agreement constitute penalties subject to article IX, section 7 and 
should, for that reason, be remitted to the Civil Penalty and Forfeiture Fund. 
We review appeals from trial court summary judgment orders using a de novo 
standard of review.  Daughtridge v. Tanager Land, LLC, 835 S.E.2d 411, 415 (N.C. 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-21- 
2019) (citing Ussery v. Branch Banking & Tr. Co., 368 N.C. 325, 334–35, 777 S.E.2d 
272, 278 (2015)).  “The purpose of summary judgment can be summarized as being a 
device to bring litigation to an early decision on the merits without the delay and 
expense of a trial where it can be readily demonstrated that no material facts are in 
issue.”  Kessing v. Nat’l Mortg. Corp., 278 N.C. 523, 533, 180 S.E.2d 823, 829 (1971) 
(citing 2 McIntosh, N.C. Practice and Procedure § 1660.5 (2d Ed., Phillips’ Supp. 
1970); 3 Barron and Holtzoff, Federal Practice and Procedure § 1234 (Wright ed., 
1958)).  Summary judgment is appropriate in two instances:  “(a) [t]hose where a 
claim or defense is utterly baseless in fact, and (b) those where only a question of law 
on the indisputable facts is in controversy and it can be appropriately decided without 
full exposure of trial.”  Id. 
“Summary judgment is proper if ‘there is no genuine issue as to any material 
fact and . . . any party is entitled to a judgment as a matter of law.’ ”  Daughtridge, 
835 S.E.2d at 415 (citing N.C.G.S. § 1A-1, Rule 56(c) (2017)).  “The movant is entitled 
to summary judgment . . . when only a question of law arises based on undisputed 
facts.”  Id.  In determining whether the entry of summary judgment is or is not 
appropriate, the trial court must take “[a]ll facts asserted by the [nonmoving] party 
. . . as true” and view the evidence “in the light most favorable to that party.”  Id. 
(quoting Dobson v. Harris, 352 N.C. 77, 83, 530 S.E.2d 829, 835 (2000)).  Summary 
judgment involves a two-step process: first, “[t]he party moving for summary 
judgment bears the burden of establishing that there is no triable issue of material 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-22- 
fact,” DeWitt v. Eveready Battery Co., 355 N.C. 672, 681, 565 S.E.2d 140, 146 (2002) 
(citing Nicholson v. Am. Safety Util. Corp., 346 N.C. 767, 774, 488 S.E.2d 240, 244 
(1997)), and then, “[o]nce the moving party satisfies these tests, the burden shifts to 
the nonmoving party to ‘produce a forecast of evidence demonstrating that the 
[nonmoving party] will be able to make out at least a prima facie case at trial.’ ”  Id. 
at 681–82, 565 S.E.2d at 146 (quoting Collingwood v. Gen. Elec. Real Estate Equities, 
Inc., 324 N.C. 63, 66, 376 S.E.2d 425, 427 (1989)). 
As an initial matter, we note that the Board of Education argued, among other 
things, that the payments contemplated in the agreement could only have been a 
penalty given that the Attorney General lacked the authority to enter into the 
agreement unless it involved the settlement of a notice of violation.  In support of this 
assertion, the Board of Education argued that, at the time that the agreement was 
entered into, the only authority granted to the Attorney General was that delineated 
in N.C.G.S. §§ 114-1.1 and 114-2, neither of which give the Attorney General the 
power to enter into an agreement such as the one at issue in this case, and that the 
agreement must have been a settlement for that reason.5  The Attorney General, on 
the other hand, argued that, as the State’s chief legal officer, he possessed the 
common law authority to manage the legal affairs of the State, including the 
authority to accept gifts on behalf of the State such as the grant funding embodied in 
                                            
5 As an aside, we note that the Board of Education never argued before this Court that 
the Attorney General lacked the authority to enter into the agreement at all and, in fact, 
expressly disclaimed any intention of doing so. 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-23- 
the agreement.  Although the question of the extent to which the Attorney General 
had the authority to enter into the agreement is an interesting one, we do not believe 
that it is before us in this case.   
Generally speaking, the only persons entitled to “call into question the validity 
of a statute [are those] who have been injuriously affected thereby in their persons, 
property or constitutional rights.”  Piedmont Canteen Serv., Inc. v. Johnson, 256 N.C. 
155, 166, 123 S.E.2d 582, 589 (1962) (citing Leonard v. Maxwell, 216 N.C. 89, 98, 3 
S.E.2d 316 (1939); and St. George v. Hardie, 147 N.C. 88, 98, 60 S.E. 920 (1908)); see 
also Mangum v. Raleigh Bd. of Adjustment, 362 N.C. 640, 642, 669 SE.2d 279, 282 
(2008) (stating that “the ‘gist of the question of standing’ is whether the party seeking 
relief has ‘alleged such a personal stake in the outcome of the controversy as to assure 
the concrete adverseness which sharpens the presentation[s] of issues upon which 
the court so largely depends for illumination of difficult constitutional questions’ ” 
(quoting Stanley v. Dep’t of Conservation & Dev., 284 N.C. 15, 28, 199 S.E.2d 641, 650 
(1973))).  In this instance, the mere fact that the Attorney General and Smithfield 
and its subsidiaries entered into the agreement did no harm to the Board of Education 
in light of the fact that it was not a party to the agreement, did not have any rights 
under the agreement, and would not be entitled to have any monies paid into the 
Civil Penalty and Forfeiture Fund in the event that the agreement was determined 
to be unenforceable.  For that reason, while the Board of Education did have standing 
to assert that the payments made pursuant to the agreement constituted penalties 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-24- 
for purposes of article IX, section 7, it lacks standing to assert that the Attorney 
General lacked the authority to enter into the agreement at all and appropriately 
made no such argument. 
Moreover, the ultimate issue before us in this case is not whether the Attorney 
General had the authority to enter into the agreement.  Instead, the question that we 
are called upon to decide in this instance is whether, taking the existence of the 
agreement as a given, payments made pursuant to the agreement constitute 
penalties that must be turned over to the Civil Penalty and Forfeiture Fund or 
something else.  As a result, for all of these reasons, we express no opinion concerning 
the extent, if any, to which the Attorney General had the right to enter into the 
agreement or what status any relevant party would occupy in the event that the 
agreement was determined to be invalid. 
The first issue that we do have to address is whether, as the Court of Appeals 
determined, one or more genuine issues of material fact exist in this case or whether 
this case involves “only a question of law on the indisputable facts . . . in controversy 
[that] can be appropriately decided without full exposure of trial.”  Kessing, 278 N.C. 
at 533, 180 S.E.2d at 829.  As we have already noted, all of the parties to this case 
are, and the trial court was, of the opinion that no such factual issue arose upon the 
present record.  Although the Court of Appeals concluded that issues of fact that 
needed to be resolved at trial existed in this case, each of the allegedly factual issues 
delineated in the Court of Appeals’ opinion focuses upon the subjective intentions 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-25- 
with which either the Attorney General or Smithfield and its subsidiaries acted at 
the time that the agreement was executed, the purposes that Smithfield and its 
subsidiaries sought to achieve by entering into the agreement, and other similar 
questions.  We do not believe that any of the “issues” upon which the Court of Appeals’ 
decision was predicated suffice to preclude an award of summary judgment on behalf 
of one party or the other to this case. 
We begin by noting that the Court of Appeals did not point to any conflicts in 
the evidence about which credibility determinations needed to be made.  See Kessing, 
278 N.C. at 535, 180 S.E.2d at 830.  Moreover, none of the parties indicated that 
additional evidence existed that might shed light upon the substantive legal issue 
that is in dispute between the parties.  On the other hand, a number of the issues 
that the Court of Appeals believed to require further factual development involve the 
manner in which the undisputed evidence should be evaluated in light of the 
applicable legal standard, rather than disputed issues of fact about which further 
factual development would be appropriate.  As this Court has previously stated, “the 
presence of important or difficult questions of law is no barrier to the granting of 
summary judgment,” id. at 534, 180 S.E.2d at 830 (citing Ammons v. Franklin Life 
Ins., 348 F. 2d 414 (5th Cir. 1965); Palmer v. Chamberlin, 191 F.2d 532, 27 A.L.R.2d 
416 (5th Cir. 1951); Crowder v. United States, 255 F. Supp. 873 (N.D. Cal. 1964), aff’d, 
362 F.2d 1011 (9th Cir. 1966); 3 Barron and Holtzoff, supra § 1234, pp. 126–27 
(Wright ed. 1958); 6 Moore’s Federal Practice § 56.16 (2d ed. 1966)), and the record 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-26- 
suggests that the questions that we have before us in this case are just such issues of 
law rather than disputed issues of material fact. 
Secondly, and perhaps more importantly, the bulk of the “factual” issues upon 
which the Court of Appeals relied in remanding this case for trial focus upon the 
subjective intent of the parties at the time that they took certain actions.  However, 
as has already been noted, the principal substantive issue that we are called upon to 
decide in this case is whether the payments that are received pursuant to the 
agreement are or are not penalties as that term is used in article IX, section 7.  In 
making that determination, our focus must necessarily be upon what the payments 
actually are, rather than upon questions such as which party instigated the process 
that led to the execution of the agreement, why the agreement was structured the 
way that it was, or what each party subjectively and in isolation thought to be the 
purpose served by the payments contemplated under the agreement.  For that reason, 
most of the issues of “fact” upon which the Court of Appeals’ decision rests are simply 
irrelevant to the ultimate legal issue that the Court has been called upon to resolve 
in this case and pose no obstacle to a decision to grant summary judgment in favor of 
one party or the other.  As a result, we hold (1) that the Court of Appeals erred by 
reversing the trial court’s order and remanding this case to the Superior Court, Wake 
County, for trial on the merits and (2) that this case is ripe for resolution on the merits 
on the basis of the parties’ cross motions for summary judgment. 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-27- 
As we have already noted, article IX, section 7 provides, in pertinent part, that 
“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 appropriated and used 
exclusively for maintaining free public schools.”  N.C. Const. art. IX, § 7.  In making 
a determination as to whether a particular payment is a penalty for purposes of 
article IX, section 7, “the label attached to the money is not controlling.”  Moore, 359 
N.C. at 487, 614 S.E.2d at 512 (citing Cauble v. City of Asheville, 301 N.C. 340, 271 
S.E.2d 258 (1980); State v. Rumfelt, 241 N.C. 375, 85 S.E.2d 398 (1955); Bd. of Sch. 
Dirs. v. City of Asheville, 128 N.C. 249, 38 S.E. 874 (1901); and Bd. of Educ. v. Town 
of Henderson, 126 N.C. 689, 36 S.E. 158 (1900)).  Instead, the “determinative” or 
“critical” question is whether the alleged “ ‘civil penalty’ is punitive or remedial in 
nature” or, put another way, “whether the penalty mandated for violation of the 
statute is imposed as punishment to deter noncompliance or to measure the damages 
accruing to an individual or class of individuals resulting from the breach.”  Id. at 
512–13, 614 S.E.2d at 488 (citing Remedial, Black’s Law Dictionary (6th ed. 1990)).  
In applying this basic standard to funds collected relating to environmental 
enforcement, this Court has held that money paid to support a Supplemental 
Environmental Project as a full or partial substitute for an environmental 
noncompliance penalty was a penalty for purposes of article IX, section 7, given that 
[t]he payment would not have been made had [the 
Department of Environmental Quality] not assessed a civil 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-28- 
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].  The payment was still 
punitive in nature.  Nor is the nature of the payment by 
the City of Kinston or any other violator altered by its being 
made to a third party pursuant to a policy promulgated by 
[the Department of Environmental Quality] in an attempt 
to 
circumvent 
the 
statutory 
and 
constitutional 
requirement that the clear proceeds of civil penalties be 
paid to the Civil Penalty and Forfeiture Fund. 
 
Id. at 509, 614 S.E.2d at 525.  Similarly, this Court held in Craven Cty. Bd. of Educ. 
v. Boyles, 343 N.C. 87, 92, 468 S.E.2d 50, 53 (1996), that monies paid to settle 
proceedings initiated for the purpose of enforcing environmental standards 
constituted penalties subject to article IX, section 7, stating that “it is not 
determinative that the monies were collected by virtue of a settlement agreement” or 
that the parties “stated that the payment [was] not [to] be construed as a penalty” 
given that “[t]he monies were paid to settle the assessments of a penalty for violations 
of environmental standards.”  As a result, the ultimate question before this Court is 
whether the payments made pursuant to the agreement, construed in realistic, rather 
than nominal terms, were intended to punish Smithfield and its subsidiaries for 
committing one or more environmental violations or to serve some other purpose. 
The language in which the agreement is couched clearly demonstrates that the 
payments at issue in this case were not intended to punish Smithfield and its 
subsidiaries for any specific environmental violation or to deter them from 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-29- 
committing any future environmental violation.  On the contrary, the agreement 
provides, in pertinent part, that: 
[Smithfield and its subsidiaries] have entered into this 
binding 
[a]greement 
freely 
for 
the 
purpose 
of 
memorializing the commitments they have voluntarily 
agreed to undertake . . . . 
 
[Smithfield and its subsidiaries] acknowledge that the 
Attorney General, in consultation with [the Department of 
Environmental Quality], will undertake a comprehensive 
review of the operation of the swine industry in North 
Carolina to ensure that [Smithfield and its subsidiaries] 
and other integrators and operators of swine facilities are 
taking all appropriate steps, and have adopted compliance 
assurance systems, to ensure that they remain at all times 
in compliance with the law . . . . 
 
Nothing in this [a]greement shall be construed to in any 
way limit State or private enforcement against [Smithfield 
and its subsidiaries] for past, present, or future violations 
of law . . . .  This [a]greement shall not be construed as a 
settlement of any liability of [Smithfield and its 
subsidiaries] for penalties, fines, damages or other liability. 
 
. . . .  
 
Nothing in this [a]greement shall relieve [Smithfield and 
its subsidiaries] of their responsibility to comply with 
applicable law . . . . 
 
Thus, the agreement specifically provides that the commitments made by Smithfield 
and its subsidiaries do not effect a settlement of any liability that might arise from 
any past environmental violation or have any effect upon any enforcement action that 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-30- 
might be taken by the Department of Environmental Quality in the event that any 
environmental violation occurs in the future.6 
Consistently with the general terms in which the agreement is couched, the 
specific payments at issue here, unlike those that the Court deemed to be penalties 
in Moore and Boyles, do not stem from an enforcement proceeding in which the 
Department of Environmental Quality or some other state agency attempted to 
assess a penalty for the purpose of punishing a past environmental violation or 
deterring future violations before accepting a payment from the alleged violator to 
either an agency of the State or some other entity in full or partial satisfaction of a 
civil penalty that would have otherwise become due and owing.  On the contrary, the 
agreement was not, by its own terms, tied to any particular violations of the 
environmental laws.  In addition, the undisputed evidence forecast by the Attorney 
General tends to show that no existing settlement actions were disposed of as a result 
of the decision of Smithfield and its subsidiaries to enter into the agreement and that 
                                            
6 The fact that sections III.A.1.b and III.A.1.d of the agreement provide that Smithfield 
and its subsidiaries will submit plans that “identif[y] those Company-owned Farms that have 
the potential to adversely impact water quality due to deficient site conditions or operating 
practices and a description (together with expeditious implementation schedules) of proposed 
measures to correct such deficiencies or operating practices” and “identif[y] all abandoned 
lagoons on Company-owned Farms and a description (together with expeditious 
implementation schedules) of proposed measures for closure of the lagoons on Company-
owned Farms in accordance with current NRCS and [Department of Environmental Quality] 
standards and consistent with [the Department of Environmental Quality’s] most current 
priority list” does nothing to undercut the conclusion set out in the text.  Simply put, nothing 
in the record shows that the actions delineated in these provisions of the agreement, which 
are explicitly stated to be remedial in nature, involve the sanctioning of violations of legally-
enforceable environmental standards. 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-31- 
no State agency or official, including the Department of Environmental Quality or 
the Attorney General, has refrained from seeking the imposition of a penalty for any 
environmental violation that occurred after the date upon which the agreement was 
entered into.  In light of the language in which the agreement is couched, there is no 
evidence in the present record tending to show that Smithfield and its subsidiaries 
made the payments contemplated under the agreement in lieu of paying a penalty for 
specific violations of an environmental standard. 
In seeking to persuade us that the payments contemplated under the 
agreement were, in fact, the functional equivalent of a civil penalty, the Board of 
Education advances a number of arguments, none of which we find persuasive.  For 
example, the Board of Education argues that an examination of the Department of 
Environmental Quality’s enforcement records relating to Smithfield and its 
subsidiaries indicates that the Department of Environmental Quality began “going 
light” on them after the agreement was entered into and that this information 
permits a reasonable inference that the agreement did, in fact, serve as a substitute 
for penalties that would have been assessed against Smithfield and its subsidiaries.  
However, given that the Board of Education has not shown what level of enforcement 
would have been appropriate in light of the level of compliance with the 
environmental laws exhibited by Smithfield and its subsidiaries after the date upon 
which the agreement was executed, we are unable to say that the Board of 
Education’s argument is anything more than an exercise in speculation or conjecture.  
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-32- 
See Dickens v. Puryear, 302 N.C. 437, 457, 276 S.E.2d 325, 337 (1981) (stating that, 
where the plaintiff “in essence relies on the allegations . . . in his complaint and 
possible speculation or conjecture[,]” such information “is not enough to survive [the 
defendant’s] motion for summary judgment”).  Such a deficiency in the record 
precludes reliance upon rhetorical questions asking what considerations might have 
motivated Smithfield and its subsidiaries to enter into the agreement if it was not 
intended to avoid or lessen future penalty payments.   
Similarly, the Board of Education directs our attention to portions of a letter 
written by counsel for Smithfield and its subsidiaries following the execution of the 
agreement in which the benefits of the agreement to Smithfield and its subsidiaries 
are said to include the ability to proactively “correct[ ] deficiencies before they become 
enforcement problems.”  However, instead of suggesting that the agreement settled 
future enforcement actions by providing for a payment that constituted the functional 
equivalent of a penalty, the relevant portion of counsel’s letter actually demonstrates 
that the agreement did not address or settle any environmental violations that had 
previously occurred and that the agreement was intended, instead, to help correct 
deficiencies that could lead to future enforcement actions.  In other words, counsel’s 
letter described the agreement as having a remedial and preventative, rather than a 
punitive, purpose. 
In a related argument, the Board of Education directs our attention to the fact 
that the Attorney General referred to the agreement in two different press releases 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-33- 
as a “settlement” and argues that the Attorney General’s settlement authority is 
limited to compromising an enforcement action.  However, we believe that the Board 
of Education puts more weight on this argument than it will reasonably bear.  As we 
have previously stated, “it is neither ‘the label attached to the money’ nor ‘the 
[collection] method employed,’ but ‘the nature of the offense committed’ that 
determines whether the payment constitutes a penalty.”  Boyles, 343 N.C. at 92, 468 
S.E.2d at 53 (quoting Cauble, 301 N.C. at 344, 271 S.E.2d at 260); see also Moore, 359 
N.C. at 510, 614 S.E.2d at 526 (stating that “the terms and descriptions [that the 
Department of Environmental Quality] and a violator use to refer to a payment are 
not determinative” (citing Boyles, 343 N.C. at 92, 468 S.E.2d at 53)).  Regardless of 
whether the agreement represents a “settlement” or something else entirely, the 
relevant issue for purposes of this case is whether the payments provided for in the 
agreement constitute the functional equivalent of penalties, rather than the way in 
which the parties characterize them.  In other words, the relevant issue for purposes 
of this case not whether the agreement involves a gift or a settlement; instead, the 
relevant issue is whether the payments at issue here constitute penalties.  And, as 
we have previously indicated, the record does not contain any evidence tending to 
show that the payments made pursuant to the agreement have served to either settle 
any particular enforcement action or as the functional equivalent of a penalty and 
does contain a considerable amount of evidence pointing in the opposite direction. 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-34- 
Finally, the Board of Education’s assertion that Smithfield and its subsidiaries 
had no incentive to enter into the agreement if acting in that fashion did not somehow 
offset some current or future liability rests upon a misunderstanding of the applicable 
legal test, which focuses upon the purpose for which the relevant payment was made 
rather than the subjective intentions of the persons or entities involved in the making 
of that payment.  In order for a particular payment to constitute a “penalty” as that 
term is used in article IX, section 7, both the payor and the regulatory agency must 
understand that the payment in question is the functional equivalent of a penalty to 
which the payor would be exposed as a result of an environmental violation.  In the 
absence of an express or implied agreement on the part of the regulatory agency that 
the payment will, in fact, be treated in that fashion, the mere fact that the payor 
subjectively hopes that its actions will have the effect of reducing the severity with 
which the regulatory agency views any violation that it might commit in the future 
is simply not sufficient to convert that payment into a penalty for purposes of article 
IX, section 7. 
Thus, for all of these reasons, we hold that the Court of Appeals erred by 
determining that the record disclosed the existence of genuine issues of material fact 
that precluded the entry of summary judgment in favor of either party and remanding 
this case to the Superior Court, Wake County, for a trial on the merits.  In addition, 
we hold that the trial court correctly decided to enter summary judgment in favor of 
the Attorney General on the grounds that the payments contemplated by the 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Opinion of the Court 
 
 
-35- 
agreement did not constitute penalties for purposes of article IX, section 7.7  As a 
result, we reverse the decision of the Court of Appeals and remand this case to the 
Court of Appeals for any additional proceedings not inconsistent with this opinion.8 
REVERSED AND REMANDED. 
 
                                            
7 Any argument that the agreement is invalid because it rests upon a violation of 
article I, section 6 of the North Carolina Constitution (providing that “[t]he legislative, 
executive, and judicial powers of the State government shall be forever separate and distinct 
from each other”) by impermissibly infringing upon the General Assembly’s constitutional 
taxing authority is not properly before this Court.  No such arguments were made before the 
trial court, the Court of Appeals, or this Court, and we decline to deviate from our long-
standing refusal to address constitutional issues that were not presented to the lower court 
by reaching out to decide that issue in this case.  Dennis v. Duke Power Co., 341 N.C. 91, 103, 
459 S.E.2d 707, 715 (1995) (stating that “[i]t is a well[-]established rule of this Court that it 
will not decide a constitutional question which was not raised or considered in the court 
below” (quoting Johnson v. Highway Commission, 259 N.C. 371, 373, 130 S.E.2d 544, 546 
(1963))).  As a result, we express no opinion concerning the merits of any separation of powers 
challenge that might be advanced in opposition to the lawfulness of the agreement that is 
before us in this case.  
 
8 On 18 November 2019, Governor Roy Cooper signed 2019 N.C. Sess. Laws 250 into 
law.  The relevant session law amended N.C.G.S. § 147-76.1 so as to provide, in pertinent 
part, that, “[e]xcept as otherwise specifically provided by law, all funds received by the State, 
including cash gifts and donations, shall be deposited into the State treasury,” N.C.G.S. § 
147-76.1(b), and that, “[e]xcept as otherwise provided by subsection (b) of this section, the 
terms of an instrument evidencing a cash gift or donation are a binding obligation of the 
State[, with] [n]othing in this section [to] be construed to supersede, or authorize a deviation 
from the terms of an instrument evidencing a gift or donation setting forth the purpose for 
which the funds may be used.”  N.C.G.S. § 147-76.1(c).  Although 2019 N.C. Sess. Laws 250, 
§ 5.7.(c) provided that newly-enacted N.C.G.S. § 147-76.1 became effective on 1 July 2019, 
and would be applicable to all funds received on or after that date, the parties agreed that 
the provisions of newly-enacted N.C.G.S. § 147-76.1 have no bearing upon the proper 
resolution of this case.  As a result, we will refrain from attempting to construe N.C.G.S. § 
147-76.1 or to apply its provisions to the facts of this case. 
 
 
 
 
Justice NEWBY dissenting. 
According to the Attorney General, the multi-million-dollar agreement reached 
with Smithfield is not a settlement, even though it references regulatory deficiencies 
for which the State presumably could have held Smithfield responsible. We are asked 
to believe instead that Smithfield regarded its potential payments totaling $50 
million over twenty-five years as nothing more than a gift that the Attorney General 
would use in his sole discretion to fund grants to environmental groups. The 
undisputed facts of this case, especially when viewed in light of controlling legal 
precedent, reveal that the $50 million is not a gift. The agreement is a settlement, 
drafted to circumvent the North Carolina Constitution’s requirement that the money 
proceeds of fines and penalties go to the public schools. Furthermore, if the agreement 
is not a settlement, it violates our state constitution’s separation-of-powers principle 
by invading the General Assembly’s policymaking and budgetary prerogatives in a 
way that invites other constitutional officers to create and manage programs funded 
by “gifts” received from the very companies they police. Because this agreement is a 
settlement, not a gift, I respectfully dissent. 
The circumstances leading to this agreement aid in understanding its true 
nature. Severe flooding of swine farms in the 1990s brought about environmental 
challenges. Ruptured and flooded swine waste lagoons spilled millions of gallons of 
waste into the State’s waterways and groundwater. Smithfield was among the largest 
companies in the swine industry; in the late 1990s, it received at least forty-five 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Newby, J., dissenting 
 
 
-2- 
 
notices of violation of environmental laws and regulations from the Department of 
Environmental Quality (DEQ, formerly the Department of Environment and Natural 
Resources).  
On 25 July 2000 then-Attorney General Michael F. Easley made an agreement 
with Smithfield and some of its subsidiaries (collectively, Smithfield) in which 
Smithfield agreed to, among other things, immediately take measures to enhance 
environmental protection on its farms, commit $15 million towards the development 
of advanced technologies for dealing with environmental hazards like swine waste, 
install these technologies on its farms, and cooperate with the Attorney General to 
ensure compliance with environmental laws. The agreement established a timeline 
for Smithfield to address many of its environmental issues. For example, it allowed 
Smithfield until 15 October 2000 to submit a plan to correct “deficient site conditions 
or operating practices” at some of its farms and until 15 December 2000 to submit a 
plan to shut down its abandoned lagoons. Most significantly to this case, Smithfield 
promised to contribute up to $50 million over twenty-five years towards 
“environmental enhancement” activities administered at the discretion of the 
Attorney General. After the agreement was made, the Attorney General’s office 
referred to it as a “settlement” multiple times in press releases. 
The Attorney General, in his discretion, administers the $50 million fund as 
follows: Smithfield deposits the payments for environmental enhancement activities 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Newby, J., dissenting 
 
 
-3- 
 
in an escrow account, from which funds are then paid out to organizations, at the 
direction of the Attorney General, for environmental projects. The Attorney General 
created the “Environmental Enhancement Grants Program.” Governmental and 
nonprofit entities may apply for grants from the program and a panel made up of 
individuals from the Department of Justice, DEQ, the Department of Natural and 
Cultural Resources, and certain nongovernmental entities reviews the applications. 
The panel, as well as a Smithfield representative, recommends to the Attorney 
General how grants should be dispersed, but the Attorney General makes the 
ultimate decision. Since the agreement was made, the Attorney General has awarded 
more than $25 million in grants through this program. The program continues to 
operate today, with millions of dollars more to be distributed. 
The majority decides that the $50 million Smithfield promised to pay for the 
Attorney General’s grant program is not a settlement payment for two primary 
reasons. First, one section of the agreement provides that the agreement has no effect 
on the Attorney General’s ability to resolve current enforcement actions or bring new 
ones. Second, there is no evidence that Smithfield obtained the dismissal of any 
outstanding enforcement action brought against it as a result of the agreement. 
Certainly these considerations should factor into the analysis of the agreement’s 
nature, but they do not capture the entire story.  
The agreement must be viewed as a whole for its true effect, notwithstanding 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Newby, J., dissenting 
 
 
-4- 
 
how the agreement’s isolated provisions or the agreement’s parties characterize it. 
See Cauble v. City of Asheville, 301 N.C. 340, 344, 271 S.E.2d 258, 260 (1980) 
(explaining that, as to the question about whether funds are derived from penalties 
and so reserved for education, this Court has “often stated that the label attached to 
the money does not control”). When viewed in its entirety, the agreement reveals that 
Smithfield promised millions of dollars to the Attorney General in exchange for 
leniency in enforcing State environmental laws and regulations. The $50 million is 
therefore a payment in lieu of penalties, subject to Article IX, Section 7’s requirement 
that the funds go to the State’s public schools. See N.C. Const. art. IX, § 7.1 The 
agreement’s provision explaining that it should not be viewed in this way does not 
change the agreement’s substance.  
This case is not unique. Indeed, our case law applying Article IX, Section 7 has 
developed over time in response to attempts by state and local governmental entities 
to circumvent the State constitutional requirement that proceeds from fines or 
penalties inure to benefit of public schools. In Cauble citizens of the City of Asheville 
paid funds for parking citations they received from the City. 301 N.C. at 342, 271 
S.E.2d at 259. The City argued that the funds were not fines subject to Article IX, 
Section 7 because, among other things, the citizens paid the funds “voluntarily” after 
                                            
1 Article IX, Section 7 of the North Carolina Constitution declares that “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 be faithfully appropriated and used 
exclusively for maintaining free public schools.” 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Newby, J., dissenting 
 
 
-5- 
 
receiving a citation; they were not assessed after a criminal conviction. Id. at 343–44, 
271 S.E.2d at 260. The Court disagreed and held that the funds were subject to Article 
IX, Section 7. Id. at 345, 271 S.E.2d at 261. The central question in cases like that 
one, the Court said, is not “whether the monies are denominated ‘fines’ or ‘penalties’ ” 
because “the label attached to the money does not control.” Id. at 344, 271 S.E.2d at 
260. It explained that “[t]he crux of the distinction lies in the nature of the offense 
committed, and not in the method employed by the municipality to collect fines for 
commission of the offense.” Id.  
In response to the Court’s ruling in Cauble, the Department of Environment, 
Health and Natural Resources (DEHNR) ventured a different argument in Craven 
County Board of Education v. Boyles, 343 N.C. 87, 468 S.E.2d 50 (1996). In that case, 
DEHNR assessed a penalty against a company for violating air pollution standards. 
Id. at 88, 468 S.E.2d at 51. DEHNR and the company eventually made a settlement 
agreement under which payments were not to “be construed as forfeitures, fines, 
penalties, or payments in lieu thereof.” Id. at 89, 468 S.E.2d at 51. Despite the 
language of the agreement, the Court explained that because the payments arose 
from an environmental enforcement action against the payor, the funds were 
proceeds from penalties and thus subject to Article IX, Section 7. Id. at 92, 468 S.E.2d 
at 53.  
In due course, the Department of Environment and Natural Resources 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Newby, J., dissenting 
 
 
-6- 
 
(DENR), DEHNR’s successor, tried another argument to avoid Article IX, Section 7 
in North Carolina School Boards Association v. Moore, 359 N.C. 474, 614 S.E.2d 504 
(2005). In that case, DENR assessed a penalty against the City of Kinston, but 
eventually remitted the penalty altogether. See id. at 509–10, 614 S.E.2d at 525. 
Instead, the parties made an agreement under which the City of Kinston paid money 
to the State’s “Supplemental Environmental Project.” Id. at 508, 614 S.E.2d at 524–
25. Nonetheless, the Court held the payment was a settlement of penalties despite 
the State’s assertion that the payments were voluntary and remedial in nature. Id. 
at 508–10, 614 S.E.2d at 524–26. Because the payment would not have been made 
had DENR not assessed a penalty against the City of Kinston, the Court stated it 
would be “euphemistic at best” to say the payment was voluntary. Id. at 509, 614 
S.E.2d at 525.  
This case represents perhaps the most creative effort yet to avoid Article IX, 
Section 7. The Attorney General argues that the agreement at issue falls outside that 
provision because it did not resolve any outstanding civil penalties assessed against 
Smithfield. Though the agreement resolved no such penalties, a fair reading of the 
document shows that, as consideration for its $50 million promise, Smithfield 
received time to correct regulatory deficiencies that otherwise could have resulted in 
the imposition of further penalties. For example, in subsection III(A)(1)(b), the 
agreement gave Smithfield until 15 October 2000 to submit a plan to correct “deficient 
site conditions or operating practices” at some of its farms. “Deficient” sites indicate 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Newby, J., dissenting 
 
 
-7- 
 
that those sites fell below the lawful standards. So, the agreement appears to have 
allowed Smithfield nearly three months to submit a plan to correct conditions for 
which the Attorney General presumably could have immediately brought an 
enforcement action. Similarly, subsection III(A)(1)(d) of the agreement allowed 
Smithfield until 15 December 2000 to submit a plan to shut down its abandoned 
lagoons; it thus granted Smithfield nearly five months to submit a plan to correct 
conditions for which the Attorney General could bring an enforcement action 
immediately, assuming the abandoned lagoons presented an unlawful environmental 
hazard.2 
There simply is no good reason to believe that Smithfield would have entered 
into the agreement had the deficiency provisions not been part of the document. In 
support of his position, the Attorney General points to language near the end of the 
document which states that the agreement should not be interpreted to limit State 
enforcement “for past, present, or future violations of law . . . .” That language is no 
more dispositive than the provision in the Boyles settlement agreement that 
described the company’s settlement payments as something other than a fine, 
penalty, or forfeiture. As this Court did in Boyles, we should refuse to take at face 
                                            
2 Counsel for the Attorney General admitted at oral argument that much of the 
agreement functioned to help Smithfield come into compliance with State law. This 
statement presumes that some of Smithfield’s facilities violated the law at the time the 
agreement was made. The agreement thus secured for Smithfield an alternative to the 
standard enforcement process.  
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Newby, J., dissenting 
 
 
-8- 
 
value a single settlement provision that is at odds with the plain intent of the parties 
and that appears designed to deny the public schools funds owed to them under 
Article IX, Section 7. 
The Attorney General’s effort to portray Smithfield’s payments as a gift creates 
a Catch-22. At oral argument, when asked how the section under which Smithfield 
promised to pay money is enforceable, the Attorney General asserted that the funds 
are an enforceable charitable gift. It is, however, a longstanding principle of contract 
law that a gift is not generally enforceable unless it is given for consideration. See, 
e.g., Picot v. Sanderson, 12 N.C. (1 Dev.) 309, 309 (1827) (explaining that a 
transaction was “a mere contract or agreement to give, which, being 
without consideration, cannot be enforced”). In other words, a “gift” is enforceable 
when the “giver” gets something in return—that is, when the gift is not truly a gift at 
all. If the payments really are a gift, they are unenforceable. If they are not a gift, 
then they are part of a settlement agreement involving the enforcement of state law 
and therefore subject to Article IX, Section 7. 
Because the best reading of the whole agreement shows that Smithfield 
secured favor from the Attorney General regarding Smithfield’s noncompliant 
practices, the funds promised by Smithfield are not a gift. It does not matter that no 
outstanding enforcement action was dismissed by the Attorney General because of 
the agreement. The function of the agreement viewed objectively is to secure leniency 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Newby, J., dissenting 
 
 
-9- 
 
by the regulators in favor of the regulated party, Smithfield. Because of the potential 
of future enforcement actions against Smithfield, it is, like it was in Moore, 
“euphemistic at best” to say that Smithfield voluntarily made a gift out of pure good 
will. The agreement appears artfully drafted based on this Court’s precedent on 
penalties, but the substance of the agreement shows through nonetheless. Given the 
binary choice presented in this case—a gift or a settlement in lieu of penalties—the 
funds should be classified as a settlement and thus directed to the Civil Penalties and 
Forfeiture Fund. This classification is consistent with how the Attorney General’s 
office has characterized the agreement. 
Indeed, if the agreement with Smithfield is not a settlement, the Attorney 
General lacked authority to make the agreement. The majority states that this Court 
need not resolve the question of the Attorney General’s authority in this case. I 
disagree.3 The issue is not only critically important to the State’s public interest and 
                                            
3 The majority asserts that plaintiff does not have standing to challenge the Attorney 
General’s authority to make the agreement because the existence of the agreement does not 
harm plaintiff. 
First, I do not think standing is a bar to considering this issue because plaintiff does 
not actually claim the agreement is invalid; it simply argues the agreed upon payments must 
be a settlement if the agreement is to be considered valid. This argument is not a separate 
claim for which a plaintiff must show standing. It is an additional argument supporting the 
central claim, which plaintiff has standing to assert. 
Second, as to the substance of the standing issue, generally, any person may bring an 
action alleging a separation of powers violation if they can show any injury, even if the injury 
is the same as that suffered by the rest of the public. We have recognized causes of action 
arising directly under the North Carolina Constitution to vindicate rights secured by the 
Declaration of Rights. Corum v. Univ. of N.C., 330 N.C. 761, 783, 413 S.E.2d 276, 290, cert. 
denied, 506 U.S. 985, 113 S. Ct. 493, 121 L. Ed. 2d 431 (1992). The Declaration of Rights 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Newby, J., dissenting 
 
 
-10- 
 
jurisprudence, but plaintiff also adequately presented it, arguing that the agreement 
must involve settlement in lieu of penalties if the agreement is to be a valid exercise 
of the Attorney General’s powers.  
The General Assembly has decided that the Attorney General should have all 
the “powers of the Attorney General that existed at the common law, that are not 
repugnant to or inconsistent with the Constitution or laws of North Carolina.” 
N.C.G.S. § 114-1.1 (2019) (emphasis added). Specifically, it gave the Attorney General 
the duty to represent the interests of the State in legal proceedings, N.C.G.S. § 114-2 
(2019), and authority regarding settlements to which the State is a party, N.C.G.S. 
                                            
provides, among many other things, that “[t]he legislative, executive, and supreme judicial 
powers of the State government shall be forever separate and distinct from each other.” N.C. 
Const. art. I, § 6. In this case, plaintiff may have been injured by a separation of powers 
violation by the Attorney General because one conceivable result of the Attorney General’s 
actions is that money that could have been extracted as a penalty, and so directed to 
supporting education, is instead extracted as a “gift” for environmental enhancement.  
This Court should consider the Attorney General’s authority in this case. The result 
of the majority’s decision that the agreement does not involve settlement payments in lieu of 
penalties means that both the agreement and the Attorney General’s grant program remain 
intact and active. The Court thus allows a potentially invalid exercise of governmental power 
to go unchecked indefinitely. Furthermore, if, as the majority says, these payments are not 
in settlement of any wrongdoing, past or future, then what is the true nature of the 
agreement? The agreement at least appears to involve the Attorney General accepting 
gratuitous payments from entities against which the Attorney General should be enforcing 
regulations. Can a regulated party give gifts to the regulator without the public seeing the 
payments as being for something? By upholding such a scheme, the majority invites mischief, 
and the public has an interest in curtailing such mischief. In addition, Smithfield will 
continue to pay millions into the fund for at least the next five years. Because of the 
agreement, these substantial funds go into the Attorney General’s preferred grant program 
rather than into any other public fund. The public thus has an interest in the extent of the 
Attorney General’s powers. Because the Attorney General’s authority and the nature of this 
State’s separation of powers principle are critical to the public interest and to the State’s 
jurisprudence, this Court should address those issues now. 
 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Newby, J., dissenting 
 
 
-11- 
 
§ 114-2.1, -2.4 (2019). The Attorney General thus appears to have the authority to 
settle legal claims that the State may have against private parties, or that private 
parties may have against the State. 
The Attorney General’s central argument in this case, however, is that the 
agreement is not a settlement. If that is true, as the majority concludes, then the 
Attorney General must find another basis for his authority to make such an 
agreement. 
The Attorney General argues that he has special authority to make the 
agreement because he is the State’s “chief legal advisor,” and he has the authority to 
accept gifts on the State’s behalf. The title of “chief legal advisor,” he says, gives him 
the authority to manage all the State’s legal affairs, which is not limited to litigation. 
Specifically, he claims, the Attorney General has “plenary authority to act in the 
interests of the public, including non-litigation efforts ‘to enforce the state’s 
statutes.’ ” (quoting 7 Am Jur. 2d Attorney General § 5, at 10 (2017)). 
It is simply incorrect that the Attorney General has “plenary authority to act 
in the interests of the public.” The separation of powers principle of the North 
Carolina Constitution makes that clear. The Attorney General should act in the 
public interest, but he may not exercise legislative power to do so. And even if the 
Attorney General has the power to engage in “non-litigation efforts to enforce the 
state’s statutes,” that power is not broad enough to vindicate his actions here if the 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Newby, J., dissenting 
 
 
-12- 
 
payments are not a settlement in lieu of penalties. Under the majority’s and the 
Attorney General’s view, neither the agreement nor the grant program “enforces” any 
State statute. The Attorney General in fact argues that the agreement was not a 
penalty or settlement resulting from any violation of the law. It is, instead, part of a 
policy initiative to conserve the State’s natural environment. The initiative may be 
commendable, but it does not enforce the State’s laws. If the agreement does not 
involve settlement of penalties, it involves legislative policy considerations, a role 
constitutionally reserved for the General Assembly. 
Searching for statutory authority, the Attorney General also argues he has 
power to “accept gifts on behalf of the State” under N.C.G.S. § 138A-32(f)(5) (2019). 
Obviously intended as an anti-corruption measure, section 138A-32 imposes 
restrictions on the solicitation and receipt of gifts by certain state officials and 
employees. Subsection (f)(5) merely states that the statute’s restrictions do not apply 
in the case of gifts “accepted on behalf of the State for use by the State or for the 
benefit of the State.” The best reading of this provision is that, if a governmental 
official may otherwise accept a gift for the State, section 138A-32 does not prohibit 
the official from doing so. Subsection (f)(5) does not give the Attorney General or other 
officials authority they would not otherwise have to accept gifts on the State’s behalf. 
Moreover, under the agreement and grant program, the Attorney General does 
not simply accept the funds on the State’s behalf, he accepts them for his separate 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Newby, J., dissenting 
 
 
-13- 
 
fund, and decides precisely how the money should be used. He, in accordance with 
the agreement, has decided that the funds should be deposited into a specific escrow 
account, and he has the final say about who receives grants from that fund. The 
purpose of subsection (f)(5) is to enable public servants, legislators, or legislative 
employees to accept gifts for the good of the State without violating ethical rules. The 
General Assembly, in passing that provision, could not have intended those officials 
and employees to have the authority to unilaterally decide exactly how the State’s 
gift should be used. That is a strikingly broad power which falls squarely within the 
General Assembly’s policymaking purview alone. 
Without a specific statutory provision to grant the Attorney General the 
authority to fund and establish the grant program, the actions of the Attorney 
General in this case violate the separation of powers principle as well. The North 
Carolina Constitution provides that “[t]he legislative, executive, and supreme judicial 
powers of the State government shall be forever separate and distinct from each 
other.” N.C. Const. art. I, § 6. The legislative power belongs to the General Assembly. 
N.C. Const. art. II, § 1 (“The legislative power of the State shall be vested in the 
General Assembly . . . .”). No governmental entity other than the General Assembly 
may exercise a power that is uniquely legislative. Any usurpation of the legislative 
power by the executive branch, regardless of intent, is an exercise of powers in 
violation of the North Carolina Constitution. 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Newby, J., dissenting 
 
 
-14- 
 
By entering into this agreement and creating and operating the grant program 
the Attorney General has unconstitutionally exercised legislative power. The levying 
of funds received from private entities is a quintessentially legislative power. 
References to such power in the North Carolina Constitution refer to powers, or 
limitations of power, of the General Assembly. See, e.g., N.C. Const. art. II, § 24(1)(k); 
N.C. Const. art. V, §§ 1, 2, and 5. The Constitution does not grant any similar power 
to the Attorney General or any other executive branch member. In fact, the 
Constitution specifically provides that the General Assembly may pass laws to allow 
other entities to appropriate funds for public purposes. See N.C. Const. art. V, § 7. 
Thus, any executive action extracting funds from private entities violates the 
separation of powers principle of this State unless authorized by the General 
Assembly. The Attorney General’s agreement is unconstitutional if the payments 
constitute a gift instead of a settlement. The entering of the agreement and operating 
the grant program cannot, then, fall under the Attorney General’s power, which 
extends only to those actions which are not “repugnant to or inconsistent with the 
Constitution or laws of North Carolina.” N.C.G.S. § 114-1.1. 
Under the Attorney General’s argument, every Council of State member could 
“encourage” “gifts” from those entities that they regulate and redirect those gifts to 
each member’s preferred recipients. In doing so, each member could effectively “tax” 
the regulated entities to fund the member’s own policy initiatives, thereby 
circumventing the General Assembly. This usurpation of legislative authority would 
NEW HANOVER CTY. BD. OF EDUC. V. STEIN 
 
Newby, J., dissenting 
 
 
-15- 
 
clearly be unconstitutional. Moreover, such governmental actions could suggest 
impropriety, inviting the onlooking public to question whether those regulated 
entities that participate in the “gift” programs sponsored by regulators will be treated 
the same as those that do not. 
The Attorney General’s agreement with Smithfield is a settlement for purposes 
of Article IX, Section 7. The public schools are therefore entitled to the clear proceeds 
of Smithfield’s settlement payments. If, as the Attorney General insists, the 
agreement is not a settlement, it constitutes an unauthorized and unconstitutional 
usurpation of powers that properly belong to the legislature. I therefore disagree with 
the majority’s decision to let the agreement stand.  
I respectfully dissent.