John Locke Update / Research Brief

Time for the General Assembly to put the brakes on collusive lawsuit settlements

posted on in Civil Society, Government Reform, Law & Regulation, Legal Update
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  • Courts have dealt with collusive lawsuit settlements throughout our nation’s history
  • The Executive Director of the North Carolina State Board of Elections used a collusive settlement to overturn election laws
  • North Carolina already has a law against using collusive settlements to overturn laws, but that law needs to be strengthened so that judges cannot cut legislative intervening defendants out of the loop on such settlements

In the upcoming session of the General Assembly, legislators will debate and pass laws concerning a host of issues. Executive agencies and the bureaucrats who work in them will be bound by those laws.

But what if executive agencies don’t want to be bound by those laws? What if they get sued by like-minded litigants and opt for a settlement to overturn those laws without even a trial in court?

That is not just a hypothetical question; such “collusive settlements” (also known as “sue and settle”) have long been with us. One such settlement affected how our election was conducted last fall.

While North Carolina has a law against such collusive settlements, it needs to be strengthened.

Collusive settlements: picking a friendly legal “opponent”

Collusive settlements are nothing new.

The US Supreme Court dismissed a collusive settlement in 1850 (Lord v. Veazie) and remanded the case back to the district federal court so that the colluding parties could be “dealt with as law and justice may require.” The court laid out that the problem is not with settlements, but with collusion:

The objection in the case before us is, not that the proceedings were amicable, but that there is no real conflict of interest between them; that the plaintiff and defendant have the same interest, and that interest adverse and in conflict with the interest of third persons, whose rights would be seriously affected if the question of law was decided in the manner that both of the parties to this suit desire it to be.

A judgment entered under such circumstances, and for such purposes, is a mere form. The whole proceeding was in contempt of the court, and highly reprehensible, and the learned district judge, who was then holding the Circuit Court, undoubtedly suffered the judgment pro forma to be entered under the impression that there was in fact a controversy between the plaintiff and defendant, and that they were proceeding to obtain a decision upon a disputed question of law, in which they had adverse interests. A judgment in form, thus procured, in the eye of the law is no judgment of the court.

So a settlement between two sides when there is “no real conflict between them” is “mere form,” especially if the settlement adversely affects a third party. This insight makes clear the problem with collusive settlements. By settling a “fight” with someone with whom they do not have a genuine conflict of interest, litigants in collusive settlements get a court to approve an agreement that benefits them but harms a third party who was not part of the settlement.

Perhaps more analogous to what has recently happened in North Carolina is the case of Chicago & Grand Trunk Railway Company v. Wellman (1892), in which the high court noted how collusive settlements could be used by individuals simply to win by judicial fiat what they could not get from their elected legislature:

Whenever, in pursuance of an honest and actual antagonistic assertion of rights by one individual against another, there is presented a question involving the validity of any act of any legislature, state or federal, and the decision necessarily rests on the competency of the legislature to so enact, the court must, in the exercise of its solemn duties, determine whether the act be constitutional or not; but such an exercise of power is the ultimate and supreme function of courts. It is legitimate only in the last resort, and as a necessity in the determination of real, earnest, and vital controversy between individuals. It never was the thought that by means of a friendly suit, a party beaten in the legislature could transfer to the courts an inquiry as to the constitutionality of the legislative act.

In the ruling, the court also noted that such collusive settlements result in changes in law “not upon the presentation of all the facts from the lips of witnesses, and a full inquiry into them, but upon an agreed statement which precludes inquiry into many things which necessarily largely enter into the determination of the matter in controversy.”

In our constitutional order (both nationally and in North Carolina), it is the role of the legislature to make laws. As pointed out in Chicago & Grand Trunk Railway Company v. Wellman, one danger with collusive settlements is that they create a means by which people can use the judiciary functionally to impose by court decree a law that they could not get enacted in the legislature.

A collusive settlement with the NC State Board of Elections

What evidence do we have that the North Carolina State Board of Elections (SBE) entered into a collusive settlement ahead of the 2020 election?

SBE Executive Director Karen Brinson Bell attempted several times in 2020 to use the coronavirus pandemic as a pretext to weaken laws protecting election integrity.

She first attempted a direct approach, asking in two memos (dated March 26 and April 22) for the General Assembly to make a host of changes to our election laws. While many of her requests were innocuous, she included several proposals that would have weakened election integrity, such as eliminating the witness requirement for absentee-by-mail ballots, ending protections from manipulation or ballot harvesting for those in assisted living facilities, and ending the requirement that all early voting locations in a county operate during the same hours.

In response, the General Assembly passed H1168 (Bipartisan Elections Act of 2020) by wide, bipartisan majorities. The act was signed into law by Gov. Roy Cooper on June 12, 2020. While with this law the General Assembly granted many of Bell’s requests and lowered the witness requirement from two witnesses to one, they rejected others, including her requests on early voting locations and assisted living facilities.

At the same time, Bell attempted to expand her emergency powers broadly by changing SBE regulations, including granting her the power to delay or modify “the deadline for receipt of postmarked absentee by-mail ballots” (page 6). The North Carolina Rules Review Commission (RRC), however, unanimously rejected her attempt on May 21. Commissioner Tommy Tucker noted that, if approved, the rules changes Bell requested would have circumvented election law:

“There is a gross misunderstanding of what the RRC purview is … or it is a devious stunt by the Board of Elections,” said Commissioner Tommy Tucker. “I’m concerned this is an end-run around the public, the General Assembly, and the courts.” [Ellipses in original.]

So, with many of her requested changes to election laws rejected by the General Assembly and her attempt to gain the power to change those laws by administrative fiat struck down by the RCC, Bell and the SBE would have no choice but to follow current election law, right?

Wrong.

In September, board members of the SBE authorized Bell to negotiate a settlement of a lawsuit brought by Democratic attorney Marc Elias. Soon after, two members of the board resigned in protest, saying that they had been misled by SBE staff and NC Department of Justice attorneys about the case. An additional problem is that Bell had already publicly supported many of the positions taken by Elias in the lawsuit to weaken election integrity laws passed by the General Assembly.

The resulting settlement between Bell and Elias was just the kind of agreement between two parties with “no real conflict between them” that the Supreme Court warned us against in Lord v. Veazie (noted above).

A need to strengthen the law against collusive settlements

There is good news and bad news about North Carolina’s ability to resist collusive settlements designed to get around North Carolina law.

The good news is that North Carolina law already contains a provision giving legislative leaders the right to become intervening defendants in cases involving a challenge to state statutes or the North Carolina Constitution. General Statute (G.S.) 1-72.2(b) states, in part:

The Speaker of the House of Representatives and the President Pro Tempore of the Senate, as agents of the State, by and through counsel of their choice, including private counsel, shall jointly have standing to intervene on behalf of the General Assembly as a party in any judicial proceeding challenging a North Carolina statute or provision of the North Carolina Constitution.

In keeping with that law, Senate President Pro Tempore Phil Berger and House Speaker Tim Moore joined the case as intervening defendants on behalf of the General Assembly to defend elections laws that they reasonably believed Bell would not.

Here is the bad news.

Judge Bryan Collins, who has a history of hostility towards the General Assembly, decided to cut the legislature out of the process:

But Collins said that because the pandemic is considered a natural disaster, the Board of Elections could make this change without legislative oversight. He added that the law did not require that Burchfield’s clients [Berger and Moore] be consulted on the settlement.

Of course, the settlement is about altering election laws enacted by the General Assembly, alterations that had been considered and rejected by the legislature. If Bell had the authority to make those changes to election law without legislative input, she would have already done so without a court order. Judge Collins essentially accepted the argument about Bell’s supposed expansive emergency powers that the RRC unanimously rejected last May.

Judge William Osteen Jr. of U.S. District Court for the Middle District of North Carolina made it clear in a subsequent ruling on the settlement that Bell’s attempt to grant herself the power to overrule elections laws “had been rejected explicitly because SBE lacked statutory authority to exercise its emergency powers” (page 84) and that the settlement, approved by Collins, violated the Equal Protection Clause of the Fourteenth Amendment (pages 57 and 59).

Osteen did not, however, strike the settlement because of Supreme Court dictum against federal courts altering election rules shortly before an election.

To protect us from similar collusive settlements designed to circumvent North Carolina laws, especially election laws, the General Assembly needs to strengthen and clarify G.S. 1-72.2(b) so that judges cannot cut legislative intervening defendants out of the loop on such settlements. While the particulars can be debated, adding something along these lines would probably be sufficient:

No executive branch official, department, agency, or board may settle in any judicial proceeding challenging a North Carolina statute or provision of the North Carolina Constitution without the consent of legislative intervenors.

Legislators, regardless of party, have an interest in making sure that the laws they pass are not dismantled through collusive lawsuit settlements between executive agencies and like-minded litigants.

Echoing Lord v. Veazie, the Bell-Elias settlement was between people with “no real conflict between them” and “in conflict with the interest of third persons, whose rights would be seriously affected if the question of law was decided in the manner that both of the parties to this suit desire it to be.” Such collusive settlements undermine the separation of powers in the North Carolina State Constitution by allowing executive agencies to use friendly lawsuits as a guise to change laws through judicial fiat.

The General Assembly has a constitutional obligation to put an end to the practice.

As Director of the Civitas Center for Public Integrity at the John Locke Foundation, Andy focuses on government compliance with the law and best practices, particularly regarding election policy and law. He researches and writes on public and election integrity,… ...

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