Bailey v. State

Citations: 540 S.E.2d 313; 353 N.C. 142Docket: 56PA00-2

Court: Supreme Court of North Carolina; December 21, 2000; North Carolina; State Supreme Court

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This case involves a group of individual petitioners, including James H. Pou Bailey and numerous others, who are suing the State of North Carolina and various officials, including Janice Faulkner and Harlan E. Boyles, in their official capacities. The petitioners are acting on their own behalf and for the benefit of others similarly situated, indicating a potential class action. The legal dispute centers around issues involving the North Carolina Department of Revenue and the Department of State Treasurer. The specific claims or legal issues presented by the petitioners against the state and its officials are not detailed in the excerpt.

The document outlines two groups of plaintiffs, consisting of numerous individuals, including James H. Pou Bailey and others, suing the State of North Carolina and its agencies, including the North Carolina Department of Revenue and the Department of State Treasurer, along with their respective officials, Janice Faulkner and Harlan E. Boyles. The plaintiffs are acting individually and on behalf of similarly situated individuals, suggesting a class action or collective claim regarding unspecified grievances against the state and its agencies. The roles of the defendants indicate an official capacity, implying that the lawsuit may challenge governmental actions or policies impacting the plaintiffs.

The legal document lists a multitude of plaintiffs, including James H. Pou Bailey, Donald L. Smith, and Mildred Godwin, among others, who are suing the State of North Carolina and various officials in their official capacities, including Janice Faulkner and Harlan E. Boyles. The case number is 56PA00-2, and it was decided by the Supreme Court of North Carolina on December 21, 2000. The plaintiffs are represented by attorneys from Boyce. Isley and Womble Carlyle Sandridge. The defendants include the State of North Carolina and Harlan E. Boyles, who serves as the Treasurer of the State. The plaintiffs are acting individually and on behalf of others in similar situations, suggesting a class action aspect to the case. The Attorney General's office, led by Michael F. Easley, is representing the defendants.

Gulley, represented by Michael D. Calhoun and various organizations as amici curiae, pertains to an appeal concerning the trial court's decision to award attorneys' fees to counsel for prevailing plaintiffs in a class action against the State. The Attorney General appealed this decision to the Court of Appeals, followed by the plaintiffs filing a petition for discretionary review to bypass that court, which was granted. Key issues include the Attorney General's standing to contest the awarded fees and their alleged excessiveness. Additionally, the Attorney General sought a review under Rule 2 of the North Carolina Rules of Appellate Procedure and requested a writ of certiorari. The plaintiffs countered with a motion to dismiss the Attorney General's appeal. This case stems from ongoing litigation between a consolidated class of retirees and the State regarding the constitutionality of a tax exemption cap on retirement benefits, which has reached this Court five times. Previous decisions include Bailey v. State, where the Court determined that the tax was unconstitutional and ruled that the class of plaintiffs could not be restricted to those who protested the tax.

In *Bailey v. State*, 351 N.C. 440, 526 S.E.2d 657 (2000), the court addressed the commencement date for interest on a settlement payment after the parties settled the case. The subsequent case, *Bailey v. State*, 352 N.C. 127, 529 S.E.2d 448 (2000), clarified eligibility criteria for class members. In *Bailey V*, the Attorney General sought to review the trial court's award of attorneys' fees to Class Counsel, but the court declined, citing reasons in Parts II and III of its opinion.

The case originated nearly a decade earlier as a certified class action involving about 200,000 class members who claimed an illegal tax on their retirement benefits. The court previously ruled in *Bailey II* that the tax was unconstitutional. Following this ruling, the class's attorneys negotiated a $799,000,000 settlement with the State, which was to be refunded to affected members based on their tax payments. The settlement was enacted through General Assembly legislation that appropriated funds from the General Fund to a reserve for plaintiffs.

In the order approving the settlement on October 7, 1998, the trial judge allocated 15% of the settlement for attorneys' fees and appointed a referee to review counsel's expenditures. After reviewing the referee's report, the judge awarded Class Counsel 8% of the settlement fund, totaling $63,920,000. This decision led to the Attorney General filing a notice of appeal.

Throughout the litigation, the Attorney General represented the State, opposing the plaintiffs. However, he later positioned himself as a defender of public interest, claiming the awarded fees were excessive and stating that since no class members appealed the fee allocation, his office had a duty to intervene. The settlement agreement, signed by legislative representatives and approved by the Attorney General, stipulated that the court would determine attorney fees from the settlement fund, with the defendants waiving the right to contest these matters.

The 'Settlement Fund' mentioned in provision 7 consists of funds awarded to plaintiffs from the state treasury, representing taxes unlawfully collected from class members. Post-settlement, these funds became the plaintiffs' property, not state assets. The State, as the defendant, agreed not to concern itself with plaintiffs' attorneys' fees, which were to be paid with plaintiffs' own money, not state funds. Despite this, the Attorney General, representing the State, attempted to involve itself in the attorneys' fees issue without formally intervening under Rule 24 of the North Carolina Rules of Civil Procedure. 

When Class Counsel applied for fees, the Attorney General filed an opposing response, sought to participate in oral arguments, and demanded access to billing records, although this demand was denied. The trial court appointed a special referee to review the records. Plaintiffs attempted to limit the Attorney General's involvement, but a definitive resolution on this matter was not recorded. Following the trial court's order awarding attorneys' fees, the Attorney General appealed, claiming the fees were excessive and contesting the trial court's calculation methods. 

In his appeal, the Attorney General positioned himself as a defender of the public interest, arguing that Class Counsel had a conflict of interest regarding their fees. He asserted his authority to act on behalf of the public interest due to the excessive fees awarded. The Attorney General cited his ten-year experience as counsel for defendants to support his claims and emphasized his common law powers, as reaffirmed by N.C.G.S. 114-1.1 (1999), which grants him authority to act independently of his statutory duties in the public interest.

The Attorney General possesses common law powers recognized by the General Assembly, but these powers are deemed inapplicable in the current case. He claims authority to act in the protection of citizens' property and revenue, citing *Martin v. Thornburg* as a precedent. In his interpretation, his actions serve the "public interest" rather than the State directly. However, the Attorney General fails to substantiate this claim with relevant case law demonstrating how his common law powers extend to defending the public interest independently from the State's interests. 

The court finds the Attorney General's argument unpersuasive for two key reasons. First, he does not provide any legal authority to support his assertion that his role in defending the public interest is separate from that of the State. *Martin v. Thornburg* established a duty to protect the State's property and revenue without distinguishing between the interests of the people and the State. The State's agreement, represented by the Attorney General, to abstain from contesting the plaintiffs' attorneys' fees contradicts his current position.

Second, an examination of statutory or constitutional foundations for his authority reveals that Article III, Section 7(2) of the North Carolina Constitution limits the Attorney General's duties to those prescribed by law, which are defined in N.C.G.S. 114-2. This statute mandates defense of the State's interests without reference to the public interest. Although it allows for intervention in certain cases for the public interest, the specific provisions do not support the Attorney General's broader claims in this instance.

Subsection (8)(a) of the statute is governed by N.C.G.S. 62-20, which delineates the Attorney General's role in Utilities Commission proceedings. The Attorney General may intervene in these proceedings only on behalf of 'the using and consuming public,' specifically those who utilize utility-related goods and services. Historical case law supports this representation within the context of Utilities Commission cases. The Attorney General's appeal does not present any authority indicating that his intervention powers extend beyond these proceedings. 

The statute also grants the Attorney General authority to 'institute and originate proceedings' and 'appear before agencies' affecting the public interest, but this particular case involves intervention in an ongoing action, rather than initiating one. Furthermore, the Attorney General seeks to intervene in a court, not before an agency. Even if the issue of class action attorneys' fees is deemed to be in the public interest, this does not provide carte blanche for the Attorney General to intrude into court matters.

To intervene, the North Carolina Rules of Civil Procedure require a timely application, which was not submitted by the Attorney General. The rules classify interventions as a matter of right, contingent upon a demonstrated interest in the action, or as permissive, based on statutory rights or common questions of law or fact. Regardless, the Attorney General must adhere to the procedural requirements outlined in the rules to qualify for intervention.

A motion to intervene must be served upon all affected parties and include the grounds for intervention and a pleading detailing the claim or defense sought. This procedure also applies when a statute grants a right to intervene, unless otherwise specified. The lack of a motion to intervene by the Attorney General or an order granting such a motion indicates that he is not a party in the current action regarding his role as 'defender of the public interest.' Consequently, the appropriateness of his appeal as a nonparty must be evaluated. 

To establish jurisdiction in the appellate courts, appellants must adhere to Rule 3 of the North Carolina Rules of Appellate Procedure, which is mandatory. Noncompliance with Rule 3 results in dismissal of the appeal. The rule stipulates that only a 'party aggrieved'—one whose rights are directly impacted by a court's action—can appeal a trial court’s order. Since the Attorney General is not recognized as a party in this case, no basis exists to permit his appeal, leading to its dismissal.

As alternatives, the Attorney General seeks to review the attorneys' fees issue through (1) a writ of certiorari under Rule 21, which allows review under specific circumstances, and (2) a request for supervisory jurisdiction under Rule 2. However, there are no interlocutory orders or motions for appropriate relief to consider for a certiorari review in this instance.

The Attorney General lacks the right to appeal, and thus cannot lose that right through inaction, eliminating the possibility for the Court to issue a writ of certiorari under Rule 21. The Attorney General requests the Court to consider his petition outside of Rule 21, invoking Rule 2 of the North Carolina Rules of Appellate Procedure, which allows the suspension of rules to prevent injustice or expedite public interest decisions. However, since the Attorney General is not a party to this case, the Court can only act on its own initiative, and suspension of the rules is not permissible for jurisdictional issues. Citing case law, including Bromhal v. Stott and Von Ramm v. Von Ramm, the Court asserts it cannot waive jurisdictional requirements even for good cause. Consequently, the Attorney General's appeal regarding the trial court's attorneys' fees award is dismissed, along with his petition for certiorari and any motion under Rule 2. Chief Justice Frye dissents, arguing that the Court should exercise its inherent supervisory authority to review the trial court's decision, citing exceptional circumstances due to the significant number of plaintiffs and the Attorney General's prior involvement in the matter.

In a series of decisions regarding the case Bailey v. State, the Court has ruled multiple times on various legal issues. Initially, in Bailey I (1991), the Court held that plaintiffs could not proceed due to noncompliance with statutory requirements. In Bailey II (1998), the Court reversed this stance, allowing plaintiffs to bypass those requirements. Bailey III (2000) addressed a legislative settlement issue, while Bailey IV (2000) clarified class membership disputes. Currently, in Bailey V, the Court is tasked with determining the reasonableness of substantial attorneys' fees awarded in a class action related to tax refunds. The trial judge permitted the Attorney General to participate due to the public interest, and the judge's decision on the attorney's fee was found to be reasonable, with no abuse of discretion noted, particularly since the General Assembly authorized fees exceeding those awarded. Justice Freeman dissents, acknowledging the Attorney General's rights under N.C.G.S. 62-20 to intervene in public interest matters. The excerpt also references the Court's past actions allowing nonparties to seek review in exceptional circumstances, noting that no such circumstances exist in the current case.