OAG: Settlement Fund, not CNMI acting in bad faith

The Office of the Attorney General asserted last Thursday that it is the NMI Settlement Fund and not the CNMI government that is in breach of the settlement agreement in Betty Johnson’s class action by including the Commonwealth from the Fund’s lawsuit against the Commonwealth Utilities Corp.

Deputy attorney general Lillian A. Tenorio, counsel for defendants Gov. Ralph DLG Torres and the CNMI government, said the Settlement Fund contends that the Commonwealth is in “breach of the implied covenant of good faith and fair dealing” by injuring their right to receive unpaid pension obligations of CUC.

Tenorio said the Settlement Fund is under the assumption that the Commonwealth is liable for the claim against CUC in the Fund’s lawsuit against CUC.

“This assumption is erroneous,” said Tenorio in defendants’ reply to the Settlement Fund’s opposition to their (defendants) motion to enforce the final judgment in Johnson’s class action.

The deputy AG cited a section of the settlement agreement in Johnson’s class action that states, “the CNMI Fund shall assign to the CNMI all rights to collect employer contributions deficient as of Aug. 6, 2013 and related costs from the autonomous agencies…except with respect to rights and liabilities related to” the Fund’s suit in the Superior Court.

She said the settlement agreement was intended to be a full and final agreement where “each and every claim that has been alleged, or could have been alleged, in the Johnson action, shall be settled and compromised.”

Tenorio said the Settlement Fund disregarded the settlement agreement when it re-alleged these fully and finally settled claims against the Commonwealth in its Superior Court lawsuit.

Defendants Torres and the CNMI government request the U.S. District Court for the NMI to enjoin the Settlement Fund from prosecuting any further action against the Commonwealth in the Superior Court.

Tenorio cited another section of the settlement agreement that provides that “the CNMI Fund for themselves, their legal successors and assigns…do hereby absolutely, and forever release, waive, relinquish and discharge the CNMI” from any claims that could have been asserted in the Johnson’s class action.

Tenorio said despite the broad language of that section of the settlement agreement, on April 10, 2019, the Settlement Fund filed an amended complaint in Superior Court against the CNMI seeking, among other things, to recover unpaid pension obligations of CUC.

Tenorio said in the first cause of action of its first amended complaint, the Settlement Fund alleges that the “NMI government has breached its contractual obligations by paying government employer contribution at rates far below the actuarial rates.”

Tenorio said the Settlement Fund alleges that as a result “benefits of the retirement system have been diminished and impaired, resulting in damages owed to the Settlement Fund in an amount to be proven at trial.”

The deputy AG said the first amended complaint is a duplicative suit prohibited by the terms of the settlement agreement.

She said each and every one of the claims asserted against the Commonwealth has been fully and finally settled in the instant case with the approval of the settlement agreement by the District Court.

“If anyone is acting in bad faith, it is the Settlement Fund,” Tenorio pointed out.

Tenorio said the settlement agreement settled all liabilities of the Commonwealth and its agencies to the Settlement Fund as of Aug. 3, 2013.

She said although CUC is an agency of the Commonwealth, the settlement agreement specifically and narrowly carved out from the settlement agreement claims against CUC in the Superior Court case.

Tenorio said the District Court has already fully determined the Commonwealth’s liability for all claims for past deficient employer contributions as of the date of the settlement agreement.

She said it has been resolved that the Commonwealth will make annual contributions and other payments to the Settlement Fund under the settlement agreement.

Tenorio noted that the parties agreed to a judgment in the sum of $779 million, or the equivalent of the actuarial present value of the settlement class members’ benefits.

Tenorio said permitting the Settlement Fund to pursue claims against the Commonwealth for additional contributions constitutes a double recovery.

Most importantly, she said, the Settlement Fund has raised new claims in its first amended complaint that were not in existence as of the date of settlement.

She said that in its original complaint, the CNMI Fund (the Settlement Fund’s predecessor) alleged, among other things, that CUC (not the Commonwealth) was deficient in employer contributions.

To be clear, Tenorio said, the original claims in the CNMI Fund’s lawsuit in the Superior Court did not include any allegations against the Commonwealth at all.

Therefore, she said, the Settlement Fund cannot amend the lawsuit to add new claims against the Commonwealth because the settlement agreement waives and releases all claims arising out of deficient contributions, impairment of pension, impairment of constitution, or any other claims that Johnson, the settlement class, and the CNMI Fund could have brought against the Commonwealth prior to the date of final approval of the settlement agreement.

The NMI Settlement Fund, through counsel Nicole M. Torres-Ripple, recently filed in District Court an opposition to CNMI’s motion to enforce Johnson’s settlement agreement.

Torres-Ripple said the CNMI’s disavowing the settlement agreement in Johnson’s class action it made and refusing to recognize the Settlement Fund’s right to proceed on these claims against the government to recover unpaid employer contributions, is tantamount to bad faith.

According to court records, in 2011, the NMI Retirement Fund filed a lawsuit against CUC before the Superior Court to collect unpaid wages contributions. The NMI Retirement Fund sought a judgment in the total amount of $4.4 million calculated as of April 2011.

In 2013, the District Court gave final approval to the global settlement agreement in Johnson’s class action against the CNMI government and the NMI Retirement Fund.

With the final approval, all Retirement Fund assets were transferred to the Settlement Fund, administered by a court-appointed trustee.

In 2017, the Retirement Fund, CUC, CNMI, and Settlement Fund stipulated to the substitution of the Settlement Fund as the plaintiff in the Superior Court lawsuit pursuant to the Johnson’s settlement deal.

In April 2019, the Settlement Fund filed its first amended complaint in the Superior Court and added the CNMI as CUC’s co-defendant.

The Settlement Fund’s amended complaint charges the Commonwealth with breach of contract for not paying its pension obligations, violating the Commonwealth Constitution for not paying its pension obligations, violating a CNMI statute by not paying its pension obligations, violating the federal contracts clause by not paying its pension obligations, and for “void assignment of debt.”

CUC moved to dismiss the lawsuit, asserting that the CNMI government absorbed all liabilities owed to the NMI Settlement Fund as of Aug. 6, 2013 through Johnson’s settlement agreement.

Last June, the NMI Settlement Fund trustee asked the District Court to issue an order enforcing the Johnson settlement agreement and finding that the claims asserted in the Superior Court case were not resolved by that settlement deal.