Google’s Problems are now in China, not Caldwell County

            One week ago, Sandra Bullock won Best Actress for her portrayal of Leigh Anne Touhy in the movie “The Blind Side.”  One year ago, Apple Computer announced that its east coast “server farm” would be located in Catawba County in the small town of Maiden. N.C.

             Sandra Bullock, Apple Computer, the Town of Maiden and Google.  There are connections.

             The Town of Maiden has approximately 2,500 residents.  Prior to last year it was known for two things:  Friday night football and Halloween.  When the local high school plays autumn home games, plants shut down early in anticipation.  And it’s the only town on the east coast – that I know of – where children come from over a hundred miles away and trick or treaters literally double the town’s population.  Last October many of the local residents were happily able to drop apples into children’s bags.

             “The Blind Side” is a true story of a wealthy white couple’s adoption of a homeless black kid named Michael Oher, now the left tackle for the Baltimore Ravens.  The movie opens with Sandra Bullock’s narrated description of the career-ending compound fracture suffered by Redskin quarterback Joe Theisman when tackled from his blind side by Giants linebacker Lawrence Taylor:

            “Now, y’all would guess that more often than not, the highest paid player on an NFL team is the quarterback. And you’d be right. What you probably don’t know is that more often than not, the second highest paid player is, thanks to Lawrence Taylor, a left tackle. Because, as every housewife knows, the first check you write is for the mortgage, and the second is for the insurance. The left tackle’s job is to protect the quarterback from what he can’t see coming. To protect his blind side.”

             Last spring and summer it was my privilege to have represented the Town of Maiden in its negotiations with Apple Computer.  Before Apple could come we had to rewrite the town’s development ordinance, negotiate a development agreement, negotiate a sewer capacity agreement, and prepare for annexation, special use permits and a rezoning. 

             Throughout the process, my job was also to protect Maiden’s blind side – to make sure every “T” was crossed in the local ordinances and approvals in the event the town was sued by a town citizen who, for whatever reason, disagreed.

             It’s more than a coup for a town the size of Maiden to land a company like Apple Computer. It’s a bonanza.  At a time when every county and town in the state is struggling to meet its budget, Maiden is able to collect in property taxes – even after incentive arrangements – an amount that would make previously impossible town projects immediately feasible.

             But a pending lawsuit against Google was a Lawrence Taylor in the backfield that we had no way to block. 

             In 2006, the state of North Carolina amended General Statute Chapter 105 (the taxation chapter) to exempt “eligible internet data centers” from sales and use taxes.  The legislation was passed for one reason only.  Google – the Google – wanted to establish an internet data center in Caldwell County, but our state’s tax code was punitive.  But it was nothing that could not be fixed by those with the power to rewrite state laws.

             In 2007, three taxpayers represented by former Supreme Court Justice Bob Orr challenged the legislation as unconstitutional.  They claimed that the legislation enacted for Google was just that – just for Google.  It therefore violated the exclusive emoluments, public purpose, fair and equitable taxation, and uniformity of taxation provisions of the N.C. Constitution.  In other words, they claimed Google got favorable treatment that, in the words of Opie Taylor, “just ain’t fair, Pa.”

             The trial court disagreed on the issues of public emoluments and public purpose.  Any company that met all of the limited and exclusive criteria established by the General Assembly could also benefit from these changes in the tax code.  Apple Computer, for example.  And as to claims related to fair and equitable taxation, the trial judge concluded that the plaintiffs lacked standing.

             Standing is a simple concept.  It means that a citizen has been personally injured or harmed in some way that is sufficient to give them a right to summon a judge and jury to decide the case.

             On February 16, the Court of Appeals spoke, and it was a welcomed relief. 

             Economic incentives have been debated and litigated several times.  When properly done, our appellate courts have upheld various forms of incentives as being constitutionally allowed and statutorily supported.  This court’s decision was not noteworthy for its discussion on incentives, but its discussion of standing will be cited in the future for the nuanced distinctions it made between types of taxpayer standing for challenges based upon discrimination.

             Generally, citizens and taxpayers have the right to bring a lawsuit to restrain the unlawful use of public funds. In theory, even the slightest exemption of one person from the burden to be borne by all shifts more of the responsibility to other taxpayers, giving each of them a right to challenge the law.  However, “if a person is attacking a statute on the basis that the statute is discriminatory . . . the person has no standing for that purpose unless he belongs to the class which is prejudiced by the statute.”

             Even if the plaintiffs were correct that the legislation provided Google “unearned and undeserved state governmental favoritism,” the court concluded that “the mere fact that Plaintiffs pay North Carolina income and sales taxes, without more, does not give them standing to challenge the sales and use tax exemption afforded to eligible internet data centers.”  They weren’t members of a class that was adversely affected.

             Sandra Bullock, Apple Computer, the Town of Maiden and Google.  The connections remain. 

             Unless and until the North Carolina Supreme Court decides to hear plaintiffs’ appeal, Maiden’s blind side is covered, Apple may proceed, Google may shift its attention from Caldwell County to its problems in China, and Sandra Bullock’s portrayal of Leigh Anne Touhy remains one of the most memorable performances of 2009.

             [To read previous blog posts, continue to scroll down or click on a category of interest in the right hand column.  To subscribe, simply click the “sign me up!” button above and you’ll receive email notification of new posts.  If you learned something, please forward this link to others who also might benefit.]

Comments
One Response to “Google’s Problems are now in China, not Caldwell County”
  1. monroe pannell says:

    Tom- I have been reading your blogs for some months here in Catawba County. Loved this one but I see the Supreme Court may have second thoughts as I have heard they have granted a PDR on this case. Justice Orr may have one or two friends on the court and perhaps they were just being nice in granting the PDR but then again maybe not. Although I am in the anti-incentives camp (have been so since the late 80’s when Catawba County got in the game for the first time by buying land for Alcatel) I believe the public debate is over on that matter. By the way I have recommended you to some clients up this way but not sure they are so far down the road with their deal they require someone of your stature as of yet. Hope we can meet sometime.
    Monroe Pannell, Conover, NC

About Our Firm

Fox Rothschild LLP is a national law firm with 900 attorneys practicing in 27 offices coast to coast. We’ve been serving clients for more than a century, and we’ve been climbing the ranks of the nation’s largest firms for many years, according to both The Am Law 100 and The National Law Journal.
Read More