NC Judge Dismisses Dell Incentives Suit; Appeal Promised

Published July 1, 2006

A North Carolina judge on May 10 dismissed a lawsuit challenging a nearly $280 million tax incentives package the state granted to Dell, Inc. to build a computer manufacturing plant worth $100 million. Superior Court Judge Robert Hobgood dismissed all of the plaintiffs’ claims.

Hobgood ruled the seven North Carolina plaintiffs did not have the right to challenge the various tax credits and direct grants that were given to Dell by North Carolina, the city of Winston-Salem, and Forsyth County, because they could not show the Dell incentives package had caused a direct injury to them.

The court also dismissed various claims alleging violations of the North Carolina Constitution and the U.S. Constitution, on the grounds that the complaint failed to state a claim upon which relief could be granted.

The plaintiffs are represented by former State Supreme Court Justice Robert Orr, who promised an appeal of the ruling.

Taxpayer Challenge Stymied

“This decision finding that plaintiffs did not have adequate legal standing to bring the suit because of a lack of alleged direct injury is particularly troubling,” said Orr, executive director of the North Carolina Institute for Constitutional Law. He said the ruling “shut the door” on the right of citizens and taxpayers to challenge government spending.

The Dell package passed the General Assembly in a one-day special session in November 2004. It is the largest single incentives package ever granted by the state, according to Orr. He noted local governments gave Dell additional grants worth more than $30 million.

In a statement issued on the day of the dismissal, Orr said, “This issue is not going away, either as a question of constitutional law or as a matter of public policy. All across the country and here in North Carolina citizens are questioning these rapidly escalating hand-outs to the largest and wealthiest international corporations at the expense of smaller businesses and individuals who have to pick up the tax burden for those who don’t pay their fair share.”

Steve Stanek ([email protected]) is managing editor of Budget & Tax News.

For more information …

Information on the lawsuit against North Carolina’s incentives for Dell, Inc., including a copy of the complaint and briefs to the trial court, is available at