Watchdog loses again in challenge to slush fund

Octogenarian government watchdog Edward “Ned” Sloan Jr. has hit another roadblock in his legal battle against a Greenville County slush fund.

Sloan and his longtime attorney, James G. Carpenter, have argued since the mid-1990s that the county violated its own code by letting county councilors use money from an account for road repairs and other infrastructure projects in their districts without first obtaining consent from the council as a whole.

Now, the South Carolina Court of Appeals has denied their petition for rehearing after reversing a lower court ruling in their favor. In the wake of the Jan. 23 setback, Carpenter said that he and Sloan were considering whether they would ask the state Supreme Court to review the case.

“If this decision stands,” said Carpenter, who has an eponymous firm in Greenville, “then it would appear that Greenville County has carte blanche to continue unlawfully delegating legislative authority to individual council members.”

Sloan, a retired paving contractor who founded the S.C. Public Interest Foundation and has made a hobby out of suing the government, first went after the county over its slush fund in 1996. He lost a bench trial two years later but filed a second suit in 2006, again arguing that the fund was illegal.

And this time he prevailed – the circuit court found that the fund did, in fact, unlawfully give legislative authority to individual councilors and also awarded Sloan attorney’s fees, which Carpenter estimated at about $60,000.

But Sloan’s victory was short-lived. The S.C. Court of Appeals reversed the trial court’s order in August 2012 on the grounds that the suit was barred by the doctrine of res judicata, which says you can’t bring the same suit twice.

In his petition for rehearing, Sloan contended that the doctrine didn’t apply because the two slush fund suits focused on the county’s actions during different fiscal years. The circuit court allowed the second action to go forward based on the U.S. Supreme Court’s 1948 ruling in an income tax liability case, Commissioner of Internal Revenue v. Sunnen.

But in rejecting Sloan’s rehearing petition, the Court of Appeals said the lower court misapplied Sunnen since the holding “is not binding outside of the tax context.” Casting aside his assertion that different years give rise to different actions, the court concluded that Sloan’s claims remained the same in both of his suits.

“In the present action, [Sloan’s] complaint challenges the legality of the practice underlying these expenditures, i.e., use of the Council Reserves account as a delegation of legislative authority to individual Council members, a practice continuing from year to year since the 1994-1995 fiscal year,” Judge John D. Geathers wrote for the unanimous appellate panel.

Had the court sided with Sloan, its ruling would have significantly narrowed the scope of res judicata, said an attorney for the county, Boyd B. Nicholson Jr. of Greenville’s Haynsworth Sinkler Boyd.

“If all you need to have is a different year,” he said, “then res judicata would cease to exist as it relates to a governmental body for all practical purposes.”

The Court of Appeals did not address the legality of the county’s slush fund. However, after the trial court ruled in Sloan’s favor, the county stopped allowing councilors to withdraw money from discretionary spending accounts for infrastructure projects.

The 16-page decision is Sloan v. Greenville County (Lawyers Weekly No. 011-009).  The full text of the ruling can be found at sclawyersweekly.com.

OPINION BRIEF

Case name: Sloan v. Greenville County

Court: S.C. Court of Appeals

Judge: John D. Geathers, with Daniel F. Pieper and Jasper M. Cureton concurring

Attorneys for appellant: Boyd B. Nicholson Jr. and Bonnie A. Lynch (Greenville)

Attorneys for respondent: James G. Carpenter and Jennifer J. Miller (Greenville)

Issue: Did the trial court err in determining that the doctrine of res judicata did not bar a plaintiff’s second lawsuit alleging that Greenville County created an illegal slush fund?

Holding: Yes, because the plaintiff’s underlying claim was the same in both actions.

Potential effect: Multiple suits arising from different fiscal years can be barred by res judicata if the claims are redundant.