RALEIGH - An N.C. Court of Appeals panel was asked Wednesday to overturn a trial judge's ruling that allowed Strates Shows, a carnival operator, to sue former Agriculture Commissioner Meg Scott Phipps and the company that won the bribery-tainted bid for the 2002 State Fair.

Attorneys for Phipps, Amusements of America and other defendants asked the appeals court judges to order the trial court to dismiss the lawsuit against them.

The litigation stems from a public corruption scandal involving Phipps, who was released last month from a federal prison camp after being convicted of federal and state charges. Phipps took illegal campaign donations from representatives of Amusements of America, which was awarded the contract for the 2002 State Fair. She served more than three years in prison and is now under electronic monitoring until August.

Strates Shows first sued Amusements of America, Phipps and others in federal court, but a federal judge dismissed the lawsuit in 2005. Strates Shows then filed a lawsuit in state court, where a judge denied the defendants' request to dismiss it. The defendants appealed, and Judges Eric Levinson, Linda McGee and Barbara Jackson heard their oral arguments Wednesday.

Raleigh lawyer Shannon Joseph, who argued on behalf of Amusements of America and others, said that the state lawsuit should not proceed because a federal judge ruled that the corruption did not cause Strates' damages. As Joseph saw it, the federal judge's order settled the matter. "That being the law of the case, Strates cannot come to state court and try to prove it," Joseph said.

Strates Shows says the bribery scheme caused the company to lose the contract and spend money on its proposal and its legal fees challenging the bidding process.

Strates Shows' lawyer, Hardy Lewis of Raleigh, countered that the federal judge's ruling does not bind the state court. He argued that the federal judge ruled as to whether Strates Shows met its burden under federal law but did not rule on the company's state claims. "We are free to go and pursue those cases," Lewis said.

Lewis also argued that if the appeals court orders the trial judge to dismiss the lawsuit, then companies have no recourse in the courts when corruption in the public bidding process cheats them out of a fair shot at state contracts.