Motion to dismiss Gaskins’ class action suit vs CUC nixed

Superior Court Associate Judge David A. Wiseman denied yesterday a joint motion filed by the Commonwealth Utilities Corp. and the CNMI government that seeks to dismiss a taxpayer and class action lawsuit filed by Carmen Castro Gaskins and others regarding the alleged overpayment by CUC customers for three months in 2006.

Wiseman denied CUC’s and the CNMI’s motion to dismiss the case and rejected their request for attorney’s fees and costs associated with the filing of the motion.

Wiseman specifically denied CUC’s motion to dismiss Gaskins’ and co-plaintiffs’ claims for breach of fiduciary duty, breach of contract, due process for deprivation of property, and claim for equal protection violation.

Gaskins, Milagros S. Palacios, Saipan Ice and Water Co. Inc., Jacques Kirby, Florence Kirsby, and Saipan Aquaculture filed a complaint in 2009, alleging a taxpayer and class action suit against CUC and the CNMI government. They later amended the complaint twice through their counsel, the O’Connor’s law firm.

CUC filed a motion to dismiss the lawsuit. CNMI also joined in CUC’s motion to dismiss the third amended complaint.

In 2011, Presiding Judge Robert Naraja recused himself from the case and it was reassigned to Associate Judge Joseph N. Camacho. Camacho, who also recused himself from the case. That’s how the case landed on Wiseman’s lap.

On Sept. 12, 2013, the motion was heard and taken under advisement.

The plaintiffs bring the following causes of action against CUC:

• A taxpayer suit for an illegal expenditure of public funds in breach of fiduciary duty;

• A breach of contract class action, seeking certification on behalf of a class of all persons residing within the CNMI who purchased CUC power from July 22, 2006, to Oct. 24, 2006;

• A class action for deprivation of property without due process of law in violation of the CNMI Constitution;

• A class action for breach of fiduciary duty.

In its motion to dismiss, CUC, through counsels Deborah Fisher and James S. Sirok, raised eight grounds for dismissal:

• Plaintiffs lack standing or a claim because none of them were or are customers of CUC;

• Plaintiffs have no claim because Public Law 17-3 retroactively gave CUC the legal authority to raise rates;

• The court lacks jurisdiction because plaintiffs failed to first exhaust administrative remedies;

• The Public Utilities Commission has jurisdiction over this matter because it is a utility refund case;

• Plaintiffs have failed to properly plead a taxpayer cause of action because no public funds were spent, there was no misuse and CUC owed no fiduciary duty to plaintiffs as arms-length customers;

• This cause of action is barred by the Government Liability Act and common law;

• Plaintiffs have failed to properly plead a valid common law contract or tort claim;

• Plaintiffs have failed to plead a valid constitutional claim because plaintiffs were given due process.

In a 24-page decision yesterday, Wiseman said the plaintiffs have certified their class action with at least Gaskins and Saipan Ice and Water Co. Inc. as class representatives, both of which are CUC customers now and at the time of the billing in dispute.

Thus, Wiseman said, evidence on whether the remaining parties named as class representatives were or are customers of CUC is not an issue, and will be determined later.

The judge assumed that despite CUC’s allegations, the remaining parties mentioned are or were customers of CUC—whether by actual name or by and through some representative—and thus are properly named as class representatives.

Wiseman also determined that plaintiffs have alleged enough facts to indicate that the funds spent were in fact public funds.

Wiseman found that plaintiffs have alleged facts indicating the funds collected were used in a way that constitutes an expenditure.

The judge said because the rate hikes in this matter were not legally authorized, the court finds that plaintiffs have alleged adequate facts to support a claim that the monies collected and then expended could not be for a public purpose.

On plaintiffs’ claim for breach of fiduciary duty, Wiseman said as the court previously found sufficient facts alleged to support a claim of an expenditure of public funds for a non-public purpose, defendants’ motion to dismiss as to this cause of action must be denied regardless of its holding on the alternative theory.

However, Wiseman said, the court does find sufficient facts alleged to support a claim for breach of fiduciary duty, and as such, defendants’ claims as to this cause of action are doubly denied.

On claim for breach of contract, Wiseman denied defendants’ motion to dismiss because plaintiffs fall into at least one exception to the exhaustion doctrine and likely cannot utilize the voluntary payments doctrine as an alternative legal theory.

On due process claim for deprivation of property, Wiseman said it is clear that plaintiffs have alleged adequate facts—which nearly mirror those pleaded in Torres vs CUC case—to support their claim that they also have a legitimate claim of entitlement to their money back.

The judgment in the Torres matter gave CUC customers in that case a legitimate claim of entitlement to a refund.

The Torres case refers to a lawsuit filed by then Rep. Stanley Torres and his then-staff Jack Angello, who both filed a CUC billing dispute. The case reached the CNMI Supreme Court. The high court eventually found that then-governor Benigno R. Fitial lacked the authority to create a new CUC and that the new rate schedules were illegal.

The high court held that Public Laws 15-35 and 15-40 cured the illegalities, but only prospectively, since there were no provisions that the laws applied retroactively.

Public Law 15-35 created and established the Public Utilities Commission as an independent executive regulatory agency.

Public Law 15-40 made certain amendments to Public Law 15-35.

On Government Liability Act issue, Wiseman said without making such a declaration that Public Law 17-3 is unconstitutional at this stage, the court recognizes amply sufficient factual and legal bases to deny the grounds for defendants’ motion to dismiss based upon the Government Liability Act and the operation of Public Law 17-3.

Public Law 17-3 that Fitial signed in 2010 adds express language clearly authorizing the CUC executive director to set rates, fees, charges and rents for utility services during the period of transition to the Public Utilities Commission control.

On the claim of equal protection violation, Wiseman said although plaintiffs have not specifically indicated that they are judgment creditors of the CNMI in connection with the Torres and Angello case, the court finds that plaintiffs have alleged sufficient factual bases to suggest that they may be entitled to recovery.