While many consider an oral agreement to be as binding as a legal contract, not everyone chooses to see it that way. Bruton Smith, owner of Speedway Motors Inc. (SMI) and Charlotte Motor Speedway, discovered this for himself regarding an agreement he made with Cabarrus County in North Carolina.
According to the lawsuit, Smith agreed to build a drag strip and make more than $200 million in upgrades to the Charlotte Motor Speedway. In return, Concord and Cabarrus county officials offered $80 million in tax breaks. The deal was announced in November 2007 but was never put into writing until the day after the zMax Dragway officially opened in August 2008, three weeks before its first scheduled race.
The contract stipulated that SMI was to spend its millions in infrastructure improvements within three years, but would be reimbursed through property tax breaks as improvements increased the value of the drag strip. Smith rejected the contract and SMI and Charlotte Motor Speedway sued the city in September 2009. Concord was dropped from the case after agreeing to pay $2.8 million and getting land easements. It is a common method used by North Carolina governments to encourage company investment.
SMI’s lawyers allege that local officials made a verbal promise in 2007 to provide $80 million in no more than six years. They also allege that the county had a financial motive and therefore cannot defend itself with a local law which protects municipalities from lawsuits.
Lawyers for Cabarrus County on the other hand, claim that the 2007 agreement was “an agreement to agree, which is not an agreement at all”. They also said that the fact that SMI built the drag strip and made other improvements before the deal was finalized is not the fault of the county.
The county’s lawyers further declare that it would be difficult for the county to come up with $80 million quickly because it is permitted to collect no more than $104 million in property taxes each year. According to the lawyers, that information is public knowledge and so SMI cannot claim that it was blindsided.
The dispute began when Smith gave the orders for workers to start grazing land on speedway property for the $60 million drag strip 20 miles north of Charlotte before obtaining the requisite permits to do so. When the area residents complained about the potential for increased noise, Smith dismissed the complaints. In a 2008 interview, he asked, “Do you have any friends that built a house close to a speedway that didn’t know there was a speedway here? Can you imagine? All of you knew there was a speedway here, right?”
When local officials delayed in granting the permits, Smith threatened to build the drag strip elsewhere and move the speedway, which helps to foster a motorsports industry with an estimated worth of $6 billion a year in North Carolina.
It is not clear whether SMI – which owns the track and seven others in Georgia, Tennessee, California, Kentucky, Nevada, New Hampshire and Texas – has yet received any of the $80 million it was allegedly promised.
A judge dismissed the lawsuit last year but Smith is now trying to resurrect it. A three-judge state Court of Appeals panel will hold a closed-door discussion to determine whether the lawsuit will be heard by a jury. They are expected to reach a decision within the next three months and, if they decide to allow the case to move forward, it could be appealed to the Supreme Court. If the lawsuit does not move forward, SMI may have to wait as long as 40 years to be reimbursed.
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