Judge: OAG doesn’t understand difference between ‘creature of state’ and ‘arm of state’

Superior Court Associate Judge Joseph N. Camacho Monday stated that the Office of the Attorney General does not understand the difference between the concepts of “creature of the state” and “arm of the state.”

Camacho said the CNMI government, through the OAG, argues that the Commonwealth Utilities Corp. is an arm of the state—a distinctive status that exists outside of the creature of the state doctrine.

Camacho said the government asserts that CUC, as an arm of the state, could not have entered into a contract with the government.

In illustrating the matter, the judge pointed out that the creature of the state doctrine explains the limits of a political subdivision’s proverbial sword; while the arm of the state doctrine explains the extents of a public entity’s proverbial shield.

Camacho ruled that the “arm of the state” doctrine allows a public entity to claim 11th Amendment sovereign immunity against a private litigant in federal court; not for the state to claim immunity against a public corporation in state court.

Camacho discussed the two doctrines in his order denying the government’s motion for summary judgment and an order denying the Commonwealth’s motion for reconsideration in connection with the Commonwealth Utilities Corp.’s lawsuit against the government for refusing to pay its $1.2 million debt.

According to court records, in December 2013, CUC filed the lawsuit alleging that the government was indebted to the utility company in the principal sum of $1,241,137.86, together with pre-judgment interest. CUC alleges that the government breached their utility contract.

The government then moved to dismiss the complaint. At the time, the government argued that CUC, a public utility corporation, lacked capacity to sue the state.

In his order issued on Sept. 3, 2014, Camacho denied the government’s motion, noting that the Commonwealth Code explicitly and unambiguously imposed liability on government utility consumers for breach of contract claims.

Camacho also noted that upon review of all of the state of emergency executive orders issued by the governor, none of the executive orders suspended CUC’s statutory-created ability to bill government utility consumers.

Third, Camacho ruled, that the government’s “creature of the state” argument was broadly a case of overgeneralization of the constitutional principle that a political subdivision cannot sue its creator, the state.

Camacho said the creature of the state doctrine, however, does not apply to public corporations, such as CUC; only as to political subdivisions, such as municipal corporations.

Accordingly, Camacho said, the law provides that if a contract exists between CUC and the government; then the government could be liable for breach of contract.

Three days after Camacho’s order denying the government’s motion to dismiss, the government petitioned the NMI Supreme Court for a writ of mandamus seeking to overturn the court’s order.

The NMI Supreme Court denied the government’s petition. The high court held that the government failed to demonstrate that the trial court’s ruling was in clear error.

The high court upheld Camacho’s ruling that CUC can sue the government.

Now, the government seeks a summary judgment in its favor based on the argument that CUC, being an arm of the state, has no capacity to enter into a contract with the state.

The government, through assistant attorney general David Lochabay, further argues that neither the Superior Court nor the NMI Supreme Court has addressed the issue to a sufficient conclusion.

CUC, through counsel Michael White, filed an opposition.

In his order Monday denying the government’s motion, Camacho said the arm of the state doctrine is a test to determine whether a public entity can claim Eleventh Amendment sovereign immunity against a private litigant in federal court—not as to whether the state can claim immunity against a public corporation for breach of contract in a state court.

Second, Camacho said, the government repeats its arguments from its denied motion to dismiss; which is, in effect, an untimely motion for reconsideration.

Camacho said even if a public entity was considered a creature of the state and was barred by the general prohibition to sue the state; it could still claim 11th Amendment sovereign immunity against a private litigant in federal court under the arm of the state doctrine.

Camacho said as this court previously held in its order denying the government’s motion to dismiss, the arm of the state doctrine is inapplicable to this case.

The government argues that arguments brought in its motion for summary judgment are entirely new because “the government cited only creature of the state and lack of capacity cases.

Camacho said the government’s motion for summary judgment is, in effect, a motion for reconsideration because all of the arguments brought by the government in the instant motion are the same arguments brought in its previously filed motion.

The judge said the law requires that motions for reconsideration are brought within 10 days of the entry of order.

Denying the motion for being untimely, Camacho cited that he issued an entry of the order denying the government’s motion to dismiss on Sept. 2, 2014, but the government filed the motion for summary judgment, which is, in effect, a motion for reconsideration, on Dec. 31, 2015.