State Petitions Court to Drop Revenue Lawsuit

Twenty-four cities and counties sued N.C. Secretary of Revenue Norris Tolson, claiming that the state illegally withheld money appropriated to them by the N.C. General Assembly.

Gov. Mike Easley made the decision to block the money from the cities and counties, but Tolson was sued because he was ultimately responsible for withholding the funds.

N.C. law states that the secretary of revenue cannot withhold taxes collected from municipal utility companies, said Gene Boyce, the plaintiff's attorney.

"The governor cannot change the law," he said.

The state typically files motions to dismiss cases like these, claiming sovereign immunity and hoping to "bog the case down until it's dismissed," Boyce said.

The state has attempted to stop the suit before, said Coy Privette, the Cabarrus county commissioner who originated the lawsuit.

John Merritt, Easley's chief adviser, threatened to take away projects from counties if they did not drop the suit, he said. But Privette said the action boosts the plaintiffs' confidence. "(State officials) know they're going to lose," he said.

Easley's office could not be reached for comment Tuesday.

The state has 60 days to dismiss the case, but Boyce said the plaintiffs expect a hearing to start within a month, which would prevent a dismissal.

If the court decides to hear the case, it would be handled by a single judge -- Robert Farmer of Wake County -- expediting the process.

Boyce said that depending on the ruling to either dismiss or proceed, the plaintiffs can appeal or enter the discovery phase of the trial -- the time during which witnesses are called, the defendant's records are obtained and an admission of guilt is requested. He said the case can be heard by the N.C. Supreme Court no later than June 2003.

If a dismissal is not granted the state, the case likely will go to trial because state officials already refused an initial offer of settlement extended by the counties. "If the state would pay counties, cities and towns 80 percent of their funds, the case would not go to court," Privette said.

Despite initial refusal, Easley can still legally opt to settle out of court, an option Privette says the governor should take.

"He's lost case after case to Mr. Boyce ... and to save further political embarrassment, I'd settle the case out of court."

The State & National Editor can be reached at stntdesk@unc.edu.