S. Envtl. Law Ctr. v. N.C. R.R. Co.
| Citation | 378 N.C. 202,861 S.E.2d 533 |
| Decision Date | 13 August 2021 |
| Docket Number | No. 453A20,453A20 |
| Court | North Carolina Supreme Court |
| Parties | SOUTHERN ENVIRONMENTAL LAW CENTER v. The NORTH CAROLINA RAILROAD COMPANY, and Michael Walters, Jacob F. Alexander III, William V. Bell, Martin Brackett, Liz Crabill, William H. Kincheloe, James E. Nance, John M. Pike, George Rountree III, Franklin Rouse, Nina Szlosberg-Landis, and Michael L. Weisel, in their official capacities as members of the Board of Directors of the North Carolina Railroad Company |
Kimberly Hunter, Ramona H. McGee, and Maia Hutt, for plaintiff-appellant.
James P. Cooney III, Charlotte, and Rebecca C. Fleishman, Raleigh, for defendant-appellees.
¶ 1 In this case, we are called upon to decide whether defendant North Carolina Railroad Company is an "agency" or "subdivision" of "North Carolina government" for purposes of the Public Records Act, N.C.G.S. § 132-1. In order to resolve this issue, we are required to interpret the pertinent provisions of the Public Records Act, in light of the totality of the circumstances, in order to determine whether the state government exercises such substantial control over the Railroad that it is necessarily an agency or subdivision of state government. After carefully weighing all of the relevant facts and circumstances, we determine that the Railroad has been an independent, private corporation since it was chartered in 1849 and that, while the State does exert a considerable degree of control over the Railroad, it primarily exercises this authority in its capacity as the Railroad's sole shareholder rather than in its capacity as a sovereign. As a result, we affirm the trial court's order.
¶ 2 The Railroad, which was chartered by an act of the General Assembly in 1849, An Act to incorporate the North Carolina Rail Road Company, ch. LXXXII, § 1, 1848–1849 N.C. Laws, 138, 139, is the oldest existing North Carolina corporation. Although interest in building a railroad in North Carolina surfaced as early as the 1820's and even though the construction of such a facility was delayed for over twenty years by high construction costs and the fact that "[p]rivate capital was inadequate," "the legislature long refused to tax the public for state aid." Trelease, Allen W., The North Carolina Railroad, 1849-1871, and the Modernization of North Carolina , 14 (1991). Throughout this period, the proponents of a railroad argued that the availability of such a facility was critical to the improvement of North Carolina's notoriously poor internal transportation system and expressed concern that, without a railroad, "North Carolina's ports would continue to languish while her neighbors waxed rich and powerful at her expense" and that the State "would remain what many of her citizens ruefully admitted her to be, a backwater, the Rip Van Winkle State." Id. ¶ 3 Although many people opposed the idea of State ownership of a business enterprise, the State's involvement in the development, construction, and operation of a railroad was "the product of state pride and economic necessity." Trelease, Allen W., The Passive Voice: The State and the North Carolina Railroad, 1849-1871 , 61 The North Carolina Historical Review 174, 175 (1984). In view of the fact that the proposed railroad had an estimated construction cost of three million dollars and the fact that "[n]o one believed that private investors in the state would or could subscribe that much money," railroad advocates believed that "[c]hief reliance would have to be placed on the public sector, primarily the state." Id. at 177. On the other hand, railroad critics "demanded most commonly that the state turn over control of the road to its private stockholders, whose enlightened self-interest would quickly maximize earnings and dividends." Id. at 175. According to the Railroad, "[t]he working model devised was a public-private entity structured as a private business corporation."
¶ 4 As an initial matter, the State pledged to contribute two million dollars to the cost of building the proposed railroad, with this amount to be paid once private investors had pledged the remaining one million dollars. Id. at 177. After construction of the railroad began, however, it became apparent that the completion of the project would require another one million dollars, with the State ultimately agreeing to provide the needed additional funds for the project. Id. at 178.
¶ 5 The Railroad's original charter allowed the Governor to appoint eight of the twelve members of the Railroad's board. Id. According to an amended charter that was approved by the board in 1855, the State held three-quarters of the Railroad's stock and an equivalent number of voting shares in corporate elections. Id. at 179. However, "[t]he state's power was exercised very lightly." Id. at 180. More specifically, "[a]lthough politics played a large role in directorship appointments, it almost never intruded on operational or financial matters," so that, as a general proposition, "[s]tate control was unobtrusive." Trelease, Allen W., A Southern Railroad at War: The North Carolina Railroad and the Confederacy , 164 Railroad History 5, 5 (1991).
¶ 6 In 1997, the General Assembly authorized the State to buy out the remaining privately held shares of Railroad stock. An Act to Make Appropriations for Current Operations and for Capital Improvements for State Departments, Institutions, and Agencies, and for Other Purposes [hereinafter 1997 Budget Appropriation], ch. 443 § 32.30, 1997 N.C. Sess. Laws 1344, 1842–44. In 1998, the State loaned the Railroad sixty-one million dollars to complete this stock purchase transaction. The Railroad repaid the principal amount of this loan to the State over a period of five years, during the first two of which it paid interest on the loan, after which the General Assembly enacted legislation which provided that interest would no longer accrue on the principal balance. As a result of the buyout, the State became the only holder of voting shares in the Railroad by 1998 and became the Railroad's sole shareholder in 2006.
¶ 7 After the approval of the purchase of the remaining privately held shares by the State in 1997, all of the Railroad's directors have been appointed by the State. Id. at 1843–44. At present, the Railroad's board consists of thirteen directors, seven of whom are appointed by the Governor, three of whom are appointed by the General Assembly upon the recommendation of the Speaker of the House of Representatives, and three of whom are appointed by the General Assembly upon the recommendation of the President Pro Tempore of the Senate. N.C.G.S. § 124-15(a) (2019). Of the seven gubernatorial appointees, one must be a member of the Board of Transportation and one must be either the Secretary of Commerce or the Secretary's designee. Id. The Railroad cannot sell, lease, mortgage, or otherwise encumber its property without board approval. Id. § 124-15(b).
¶ 8 Consistently with the requirements of Chapter 55 of the North Carolina General Statutes, the Railroad operates pursuant to a set of corporate bylaws. Although the Governor does appoint a majority of the members of the board, the board does not have to obtain approval from the Governor or any other state official before taking actions such as establishing a budget or selling property. In 2019, the Governor sent a letter to the Railroad asking to be provided with the information required by N.C.G.S. § 124-17, additional information relating to the actions that had been taken at board meetings, and the contents of trackage rights agreements and requesting that, "as the shareholders’ representative," "the Board refrain from engaging in any real estate transactions until further notice." Although the board complied with the Governor's request for information, it "continued to do business in [its] real estate transactions" while "ke[eping the Governor's office] abreast of the negotiations" relating to a specific real estate transaction in which the Governor had expressed interest. All of the members of the Railroad's board testified that they cast independent votes during board meetings and act independently of the will of the Governor or the General Assembly.1
¶ 9 At present, the Railroad owns approximately 317 miles of railroad trackage that runs from Charlotte to Morehead City. The Railroad holds this property in its own corporate name and pays property taxes to the sixteen counties through which its tracks run. The Railroad's revenue is derived from a trackage rights agreement that it has with Norfolk Southern, a private railroading entity that operates using the Railroad's property. In addition, the Railroad generates revenue through utility encroachment fees, the proceeds from leasing real property, and investment earnings. The Railroad's stated mission is to "develop the railroad's unique assets for the good of the people of North Carolina" "by enabling freight to grow business, expanding rail to move people and investing in North Carolina."
¶ 10 The General Assembly directed the Railroad to pay a one-time dividend of $15,500,000 to the State, in its capacity as the Railroad's sole shareholder, in 2013. An Act to Make Base Budget Appropriations for Current Operations of State Departments, Institutions, and Agencies, and for Other Purposes [hereinafter 2013 Budget Appropriation], S.L. 2013-360, § 34.14(f), 2013 N.C. Sess. Laws 995, 1340. In addition, the 2013 legislation required the Railroad to submit annual reports to the General Assembly that included information concerning its strategic and capital investment plans; its anticipated dividends for the next three fiscal years; and a description of its business and subsidiaries, the markets in which it operates, and the properties that it owns. Id. § 34.14(d) at 1339–40.
¶ 11 Although the Railroad pays property taxes to the counties in which it owns...
To continue reading
Request your trial