Bailey v. State, North Carolina Department of Revenue

540 S.E.2d 313, 353 N.C. 142, 2000 N.C. LEXIS 896
CourtSupreme Court of North Carolina
DecidedDecember 21, 2000
DocketNO. 92CVS10221; NO. 94CVS06904; NO. 95CVS04346; NO. 95CVS06625; NO. 95CVS08230; NO. 98CVS00738; No. 56PA00-2
StatusPublished
Cited by16 cases

This text of 540 S.E.2d 313 (Bailey v. State, North Carolina Department of Revenue) is published on Counsel Stack Legal Research, covering Supreme Court of North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bailey v. State, North Carolina Department of Revenue, 540 S.E.2d 313, 353 N.C. 142, 2000 N.C. LEXIS 896 (N.C. 2000).

Opinions

ORR, Justice.

This matter is before the Court on appeal from the trial court’s order granting attorneys’ fees to counsel representing prevailing plaintiffs in a class action against the State. The Attorney General originally appealed the order to the Court of Appeals. Plaintiffs followed by filing with this Court a petition for discretionary review to bypass the Court of Appeals, which we granted. At issue are whether the Attorney General has standing to challenge the fees awarded to opposing counsel and whether such fees are excessive. In addition to the appeal, the Attorney General filed a motion for review of these issues pursuant to Rule 2 of the North Carolina Rules of Appellate Procedure and petitioned this Court for a writ of certiorari. Plaintiffs have countered by filing with this Court a motion to dismiss the Attorney General’s appeal.

This matter arises out of the long and contentious litigation between plaintiffs — a consolidated class of retirees (both state and federal) — and the State over the constitutionality of a tax exemption cap on retirement benefits. To date, the case, on one issue or another, has been appealed to this Court five times. In Bailey v. State, 330 N.C. 227, 412 S.E.2d 295 (1991) (Bailey I), cert. denied, 504 U.S. 911, 118 L. Ed. 2d 547 (1992), class plaintiffs took a voluntary dismissal after this Court concluded that their tax challenge failed to comply with mandatory statutory requirements. In Bailey v. State, 348 N.C. 130, 500 S.E.2d 54 (1998) (Bailey II), this Court: (1) affirmed a trial court’s holding that the disputed tax was unconstitutional as “an improper impairment of contract and a taking of property without just compensation,” id. at 167, 500 S.E.2d at 76; and (2) held that the class of plaintiffs could not be limited to those who filed protests over the tax, id. at 166, 500 S.E.2d at 76. In Bailey v. State, 351 N.C. 440, 526 [149]*149S.E.2d 657 (2000) (Bailey III), decided after the parties had reached a settlement in the case, we determined the date that interest began to accrue on the settlement’s initial payment. Shortly thereafter, in Bailey v. State, 352 N.C. 127, 529 S.E.2d 448 (2000) (Bailey IV), this Court determined the limitations on who would qualify for eligibility as a class member. Now, in “Bailey V,” the Attorney General asks that we review the issue of attorneys’ fees, as awarded by the trial court, to plaintiffs’ Class Counsel. We decline to do so, for reasons set forth in Parts II and III of this opinion.

I

A

This case commenced nearly a decade ago as a certified class action involving approximately 200,000 class members who alleged that a tax imposed on their retirement benefits was illegal. This Court, in Bailey II, agreed with the plaintiffs and held that the tax was unconstitutional. Subsequent to the Bailey II decision, attorneys for the class agreed to a settlement with the State in the amount of $799,000,000, which was to be distributed as a refund to affected class members in proportion to taxes each had actually paid. The settlement fund was established by an act of the General Assembly, which simultaneously “appropriated” and “transferred” monies from the State’s General Fund to a reserve fund intended to compensate plaintiffs. Act of Sept. 30, 1998, ch. 164, sec. 2, 1998 N.C. Sess. Laws 534, 534.

As part of the 7 October 1998 order approving the settlement, the trial judge set aside 15% of the award to serve as a reserve fund for plaintiffs’ attorneys’ fees. The trial judge then appointed a referee to review class counsel’s expenditures throughout the litigation. After examining the referee’s report, the trial judge ordered that Class Counsel, along with their respective co-counsel, be paid fees of 8% of the $799,000,000 in the plaintiffs’ common fund, an amount equal to $63,920,000. The 24 March 2000 order — “Memorandum and Order on Application for Assessment of Attorney Fees and Costs” — signed by Superior Court Judge Jack A. Thompson, who was appointed on 3 June 1998 by the Chief Justice to oversee the case through its completion, precipitated the Attorney General’s filing of a notice of appeal.

From the outset, we note that the Attorney General represented the State and its various agencies as defendants throughout this [150]*150case’s lengthy litigation, a position that placed his office squarely at odds with plaintiffs’ interests for nearly a decade. Nevertheless, the Attorney General now contends that he has changed hats — eschewing his former clients in order to champion the cause of his long-term adversaries — because his self-described role as “defender of the public interest” allows, if not compels, him to do so. In short, the Attorney General argues that the amount awarded as fees to Class Counsel is excessive and concludes that since none of the prevailing class members have appealed the allocation of such fees, his office must carry the mantle — in the public interest.

B

The settlement agreement between class members and the State was signed by legislative representatives acting on behalf of the State and counsel for plaintiffs. It was additionally approved as to form by the Attorney General and was ultimately expressed as a consent order signed and approved by Judge Thompson. The order contains the following provision:

7. Attorney fees, costs and the expenses of administration shall be determined by the Court and shall be paid from the Settlement Fund. The defendants [the State, as represented by the Attorney General] waive any rights to be heard concerning these matters.

Moreover, the “Settlement Fund” referenced in provision 7 is composed of monies awarded to plaintiffs in satisfaction of their claim against the State. Although paid from the state treasury, the fund represents taxes illegally taken from class members. Once the settlement took effect, the funds were no longer state property but were money that belonged to the plaintiffs themselves.

From these facts, it is readily apparent that: (1) the State, as defendant, expressly agreed that it would not involve itself in the issue of plaintiffs’ attorneys’ fees; and (2) plaintiffs, none of whom appealed, were paying their attorneys not with State funds but with their own money. Thus, the Attorney General’s client — the State as defendant — is without interest in either the allocation of attorneys’ fees or the funds that paid them.

Despite this backdrop, the Attorney General’s representatives sought to involve themselves in the attorneys’ fees question from the outset, although at no point did they move to formally intervene as a party pursuant to Rule 24 of the North Carolina Rules of Civil [151]*151Procedure. When the trial court received Class Counsel’s application for fees, the Attorney General filed an adversarial response to the application. In preparation for oral arguments before the trial court on the issue, the Attorney General filed a motion to be heard — and he was. His representatives also filed with the trial court a demand for access to plaintiffs’ attorneys’ billing records. Although the demand motion was denied, the trial court subsequently appointed a special referee to examine and assess those records.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

State v. Burgess
Court of Appeals of North Carolina, 2025
In re: G.B.G.
Court of Appeals of North Carolina, 2025
Justice v. Mission Hosp., Inc.
2019 NCBC 36 (North Carolina Business Court, 2019)
State v. Culbertson
805 S.E.2d 511 (Court of Appeals of North Carolina, 2017)
State v. Anderson
804 S.E.2d 189 (Court of Appeals of North Carolina, 2017)
State v. Biddix
780 S.E.2d 863 (Court of Appeals of North Carolina, 2015)
State v. Ledbetter
779 S.E.2d 164 (Court of Appeals of North Carolina, 2015)
State v. Robinson
763 S.E.2d 178 (Court of Appeals of North Carolina, 2014)
Northland Cable Television, Inc. v. Highlands Cable Group, Lp
680 S.E.2d 271 (Court of Appeals of North Carolina, 2009)
Blitz v. Xpress Image, Inc.
2007 NCBC 9 (North Carolina Business Court, 2007)
Ex Parte Condon v. State
583 S.E.2d 430 (Supreme Court of South Carolina, 2003)
Bailey v. State
540 S.E.2d 313 (Supreme Court of North Carolina, 2000)
Smith v. . Brown
7 S.E. 890 (Supreme Court of North Carolina, 1888)

Cite This Page — Counsel Stack

Bluebook (online)
540 S.E.2d 313, 353 N.C. 142, 2000 N.C. LEXIS 896, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bailey-v-state-north-carolina-department-of-revenue-nc-2000.