Huesman says Fund is not a governmental unit

The NMI Retirement Fund is not a governmental unit and therefore the federal court should deny the motion to dismiss the Fund’s Chapter 11 bankruptcy petition, according to the Fund’s counsel.

In the Fund’s response to the motions to dismiss, attorney Braddock J. Huesman said that the Fund is entitled to use the tools and remedies Congress intended to be available to financially distressed entities that not specifically excluded from bankruptcy eligibility.

“The importance of the determination as to the [Fund’s] eligibility for Chapter 11 relief cannot be overstated. The [Fund], primarily based on the Commonwealth’s own failure to remit amounts owed to the [it], finds itself on the precipice of collapse,” said Huesman in the Fund’s 41-page response.

The lawyer said the Fund is an independent, autonomous entity, the primary functions of which is to collect employee and government employer contributions from the Commonwealth and its autonomous agencies and public corporations.

Huesman said the Fund’s other functions are to invest and protect those funds, free from government interference and separate from the government’s treasury, for the benefit of Fund members.

He asserted that the Fund’s autonomy from the CNMI government is purposeful and designed to facilitate the collection and protection of such funds.

Huesman said the Bankruptcy Code defines the term “governmental unit” to include governments at all levels and their constituent units, including a “department, agency, or instrumentality” of the United States, a State, a Commonwealth, a District, a municipality, or a foreign state.

Huesman said Congress intended that entities classified as “governmental units” be limited to those that are actually carrying out governmental rather than private objectives.

The Fund lacks traditional government powers and does not perform “traditional governmental functions,” he said.

“When determining whether an entity is carrying out a governmental function or objective, courts consider whether the function being performed is a traditional governmental function, as well as whether such function furthers a governmental objective.”

Huesman said the government’s designation of the Fund as a “public corporation and autonomous agency” supports the conclusion that the Fund is not a governmental unit within the meaning of the Bankruptcy Code.

Unnamed clients of attorney Bruce Jorgensen first brought up the motion to dismiss on the grounds that the Fund’s structure and statutory existence makes it a “governmental unit” of the CNMI.

The U.S. Trustee followed Jorgensen’s group’s motion to dismiss on the same grounds.

Two retirees and members of the NMI Retirement Fund later joined the move to dismiss the Fund’s bankruptcy petition.

Former Tinian senator Esteven M. King, through counsel Juan T. Lizama, last week joined the U.S. Trustee’s motion to dismiss. The Fund owes King his retirement benefits.

Last week, the CNMI government, through assistant attorney general Teresita J. Sablan, also filed a motion to dismiss the Chapter 11 petition. Sablan echoed the position of the other parties in the case that the Fund is a government instrumentality and therefore not eligible to file for Chapter 11 bankruptcy.

On Friday, the Commonwealth Ports Authority joined the CNMI government’s motion to dismiss. Attorney Robert T. Torres, as counsel for CPA, cited that the CNMI in its motion to dismiss has emphasized the Fund’s enabling legislation and its duty as a fiscal and administrative agent of the government with respect to the pension system and its administration of the government’s life and health insurance programs.