Constitutionality of contribution law still up in the air—Govendo

Superior Court Associate Judge Kenneth L. Govendo remains in the balance about the constitutionality of Public Law 16-2, which has a provision that reduced the Commonwealth Utilities Corp.’s employer contribution rate for fiscal year 2008.

The court cannot at this time rule that P.L. 16-2 was unconstitutional, said Govendo in denying NMI Settlement Fund’s motion for a summary judgment in connection with its lawsuit against CUC for non-payment of employer contributions.

“There is simply not enough proof in this case to meet the high standard required for summary judgment,” Govendo said in the order.

He said CUC and the CNMI government have put forth enough facts to defend P.L. 16-2 and that the burden of proof is on the NMI Settlement Fund.

The judge said NMI Settlement Fund’s vague allegation that neither the government nor CUC can show the impairment is reasonable and necessary is not adequate to warrant summary judgment.

Govendo ordered that the pleadings in the Settlement Fund’s lawsuit be amended to include the updated information, arguments, and complaints.

Govendo also advised that the government be listed as a defendant in the new pleadings, as the court considers the government a necessary party.

The judge found that there are genuine disputes as to material facts and that the Settlement Fund has failed to identify the pleadings, depositions, affidavits, or other evidence it believes demonstrates the absence of a genuine issue of material fact.

The Settlement Fund filed the complaint against CUC in May 2011.

In its complaint, the Fund alleges that CUC is delinquent in its employer contributions. CUC is required by law to provide employee and employer contributions to the Fund for all CUC employees.

Pursuant to P.L. 16-2 Section 9, CUC is required to pay a penalty on its delinquent contributions.

In December 2011, the Fund filed a motion for partial summary judgment as to the constitutionality of P.L. 16-2 and CUC’s reduced employer contribution rate for fiscal year 2008.

The Fund asserts that CUC is severely delinquent in its employer contributions to the Commonwealth’s Defined Benefit Plan.

The Fund argues CUC has incurred, but not paid, penalties and interest, and is liable to the Fund for lost opportunity costs because of the Fund’s inability to invest the unremitted employer contributions.

The ultimate determination of the amount due in this case rests on the constitutionality of P.L. 16-2.

In its motion for summary judgment, the Fund argues that P.L. 16-2 is unconstitutional because it unlawfully diminishes and impairs the accrued benefits of the Fund in violation of Article II, Section 20(a) of the CNMI Constitution.

The CNMI Constitution provides that accrued pension benefits shall be neither diminished nor impaired.

The Fund asserts that P.L. 16-2 violates the contract’s clause of the U.S. and CNMI Constitutions.

In February 2012, CUC filed its opposition to the Fund’s motion for summary judgment. CUC denies that it owes the Fund the money it seeks and asserts that CUC was justified in relying on P.L. 16-2.

CUC alleges that P.L. 16-2 was the CNMI government’s response to address a CNMI-wide emergency that was necessary to ensure that CUC would be able to avert an economic, health, and welfare disaster.

Any harm created by this law, CUC claims, should be addressed to its creator, the CNMI government.

CUC requests, in the alternative, that if the court were to find P.L. 16-2 unconstitutional, that such finding be held non-retroactive, based on CUC’s justified reliance on the law and the Fund’s delay in the filing of this action and its subsequent motion.

Additionally, CUC complains there is nothing in the complaint that could have given CUC’s prior counsel notice that P.L. 16-2 would be attacked as unconstitutional.

In May 2012, the CNMI government entered the case as an intervenor, but in March 26, 2018, the government expressed its desire to pull out of the case. The Office of the Attorney General said the government no longer takes a position in the case.

Govendo heard the motion last March 26. Nicole M. Torres-Ripple represented the Settlement Fund. Joyce Tang, the trustee for the Settlement Fund, was also present.

James Sirok argued for CUC.

In his order issued Monday, Govendo said this case is not ripe for summary judgment.

First, Govendo noted that Settlement Fund’s original complaint alleged that as of April 29, 2011, CUC owed $4.4 million for deficient employer contributions, penalties, and economic damages.

However, Govendo said, at the March 26 hearing, the Settlement Fund’s counsel did not recognize this amount and instead referred to various charts detailing CUC’s delinquent fees.

Govendo said he understands that coming up with a number for damages is a complicated process that must be decided at a trial.

Second, the judge said, the complaint and motion for summary judgment were filed in 2011.

Govendo said as the court made clear in the March 26 hearing, the information contained in the pleadings are out-of-date and must be updated.

He also noted that P.L. 16-2 only limited the reduction in CUC’s payments to the Settlement Fund for a period of one year, and was in response to a state of emergency where residents of Saipan had limited access to basic utilities such as power and water.